Important factors that could cause actual results, earnings per share, use of cash, dividend payments, repurchases of common stock, or payment of the senior convertible notes to differ materially from those presently expected include: conditions affecting the markets in which Teradyne operates; decreased or delayed product demand from one or more significant customers; development, delivery and acceptance of new products; the ability to grow the Industrial Automation business; increased research and development spending; deterioration of Teradyne’s financial condition; the impact of the COVID-19 outbreak and related government responses on the market and demand for Teradyne’s products, on its contract manufacturers and supply chain, and on its workforce; the consummation and success of any mergers or acquisitions; unexpected cash needs; insufficient cash flow to make required payments and pay the principal amount on the senior convertible notes; the business judgment of the board of directors that a declaration of a dividend or the repurchase of common stock is not in the company’s best interests; additional U.S. tax regulations or IRS guidance; the impact of any tariffs or export controls imposed in the U.S. or China; compliance with trade protection measures or export restrictions; the impact of U.S. Department of Commerce or other government agency regulations relating to Huawei and HiSilicon; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” sections of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2020. The forward-looking statements provided by Teradyne in this press release represent management’s views as of the date of this release. Teradyne anticipates that subsequent events and developments may cause management’s views to change. However, while Teradyne may elect to update these forward-looking statements at some point in the future, Teradyne specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Teradyne’s views as of any date subsequent to the date of this release.
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TERADYNE, INC. REPORT FOR SECOND FISCAL QUARTER OF 2020
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| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
| June 28, 2020 | March 29, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||||||||||
| Net revenues | $ | 838,661 | $ | 704,355 | $ | 564,178 | $ | 1,543,016 | $ | 1,058,277 | |||||||||||||||
| Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1) | 367,188 | 298,805 | 240,260 | 665,993 | 446,724 | ||||||||||||||||||||
| Gross profit | 471,473 | 405,550 | 323,918 | 877,023 | 611,553 | ||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||
| Selling and administrative | 113,259 | 111,388 | 108,811 | 224,647 | 210,824 | ||||||||||||||||||||
| Engineering and development | 94,102 | 85,159 | 81,434 | 179,261 | 158,225 | ||||||||||||||||||||
| Acquired intangible assets amortization | 8,941 | 9,891 | 10,083 | 18,832 | 20,717 | ||||||||||||||||||||
| Restructuring and other (2) | 37,222 | (7,606 | ) | (10,404 | ) | 29,616 | (5,292 | ) | |||||||||||||||||
| Operating expenses | 253,524 | 198,832 | 189,924 | 452,356 | 384,474 | ||||||||||||||||||||
| Income from operations | 217,949 | 206,718 | 133,994 | 424,667 | 227,079 | ||||||||||||||||||||
| Interest and other expense (3) | 658 | 9,649 | 2,817 | 10,308 | 1,923 | ||||||||||||||||||||
| Income before income taxes | 217,291 | 197,069 | 131,177 | 414,359 | 225,156 | ||||||||||||||||||||
| Income tax provision | 28,383 | 20,878 | 33,780 | 49,261 | 18,621 | ||||||||||||||||||||
| Net income | $ | 188,908 | $ | 176,191 | $ | 97,397 | $ | 365,098 | $ | 206,535 | |||||||||||||||
| Net income per common share: | |||||||||||||||||||||||||
| Basic | $ | 1.14 | $ | 1.06 | $ | 0.57 | $ | 2.20 | $ | 1.20 | |||||||||||||||
| Diluted | $ | 1.05 | $ | 0.97 | $ | 0.55 | $ | 2.02 | $ | 1.16 | |||||||||||||||
| Weighted average common shares - basic | 165,789 | 166,589 | 171,241 | 166,189 | 172,387 | ||||||||||||||||||||
| Weighted average common shares - diluted (4) | 180,257 | 180,736 | 178,590 | 180,497 | 177,781 | ||||||||||||||||||||
| Cash dividend declared per common share | $ | 0.10 | $ | 0.10 | $ | 0.09 | $ | 0.20 | $ | 0.18 | |||||||||||||||
| (1 | ) | Cost of revenues includes: | Quarter Ended | Six Months Ended | |||||||||||||||||||||
| June 28, 2020 | March 29, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||||||||||
| Provision for excess and obsolete inventory | $ | 5,580 | $ | 4,057 | $ | 3,402 | $ | 9,637 | $ | 5,799 | |||||||||||||||
| Sale of previously written down inventory | (337 | ) | (1,077 | ) | (363 | ) | (1,414 | ) | (1,141 | ) | |||||||||||||||
| Inventory step-up | 121 | 118 | 383 | 239 | 383 | ||||||||||||||||||||
| $ | 5,364 | $ | 3,098 | $ | 3,422 | $ | 8,462 | $ | 5,041 | ||||||||||||||||
| (2 | ) | Restructuring and other consists of: | Quarter Ended | Six Months Ended | |||||||||||||||||||||
| June 28, 2020 | March 29, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||||||||||
| Contingent consideration fair value adjustment | $ | 29,259 | $ | (10,020 | ) | $ | (11,671 | ) | $ | 19,239 | $ | (8,701 | ) | ||||||||||||
| Contract termination settlement fee | 4,000 | - | - | 4,000 | - | ||||||||||||||||||||
| Acquisition related expenses and compensation | 3,145 | 1,358 | 464 | 4,503 | 1,807 | ||||||||||||||||||||
| Employee severance | 36 | 728 | 803 | 764 | 1,602 | ||||||||||||||||||||
| Other | 782 | 328 | - | 1,110 | - | ||||||||||||||||||||
| $ | 37,222 | $ | (7,606 | ) | $ | (10,404 | ) | $ | 29,616 | $ | (5,292 | ) | |||||||||||||
| (3 | ) | Interest and other includes: | Quarter Ended | Six Months Ended | |||||||||||||||||||||
| June 28, 2020 | March 29, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||||||||||
| Non-cash convertible debt interest | $ | 3,584 | $ | 3,540 | $ | 3,410 | $ | 7,124 | $ | 6,778 | |||||||||||||||
| Pension actuarial (gains) losses | (99 | ) | - | 448 | (99 | ) | 448 | ||||||||||||||||||
| $ | 3,485 | $ | 3,540 | $ | 3,858 | $ | 7,025 | $ | 7,226 | ||||||||||||||||
| (4 | ) | 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 quarters ended June 28, 2020, March 29, 2020 and June 30, 2019, 7.6 million, 7.3 million and 4.4 million shares, respectively, have been included in diluted shares. For the six months ended June 28, 2020 and June 30, 2019, 7.5 million and 3.3 million shares, respectively, have been included in diluted shares. For the quarters ended June 28, 2020, March 29, 2020 and June 30, 2019, diluted shares also included 5.8 million, 5.5 million and 1.8 million shares, respectively from the convertible note hedge transaction. For the six months ended June 28, 2020 and June 30, 2019, diluted shares also included 5.7 million and 0.9 million shares, respectively, from the convertible note hedge transaction. | |||||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) | |||||||||||||||||||||||||
| June 28, 2020 | December 31, 2019 | ||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||
| Cash and cash equivalents | $ | 728,306 | $ | 773,924 | |||||||||||||||||||||
| Marketable securities | 229,791 | 137,303 | |||||||||||||||||||||||
| Accounts receivable, net | 694,521 | 362,368 | |||||||||||||||||||||||
| Inventories, net | 206,088 | 196,691 | |||||||||||||||||||||||
| Prepayments and other current assets | 238,176 | 188,598 | |||||||||||||||||||||||
| Total current assets | 2,096,882 | 1,658,884 | |||||||||||||||||||||||
| Property, plant and equipment, net | 353,595 | 320,216 | |||||||||||||||||||||||
| Operating lease right-of-use assets, net | 56,172 | 57,539 | |||||||||||||||||||||||
| Marketable securities | 106,968 | 104,490 | |||||||||||||||||||||||
| Deferred tax assets | 79,210 | 75,185 | |||||||||||||||||||||||
| Retirement plans assets | 17,817 | 18,457 | |||||||||||||||||||||||
| Other assets | 11,854 | 10,332 | |||||||||||||||||||||||
| Acquired intangible assets, net | 107,563 | 125,480 | |||||||||||||||||||||||
| Goodwill | 422,003 | 416,431 | |||||||||||||||||||||||
| Total assets | $ | 3,252,064 | $ | 2,787,014 | |||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||
| Accounts payable | $ | 184,163 | $ | 126,617 | |||||||||||||||||||||
| Accrued employees' compensation and withholdings | 175,589 | 163,883 | |||||||||||||||||||||||
| Deferred revenue and customer advances | 124,224 | 104,876 | |||||||||||||||||||||||
| Other accrued liabilities | 122,607 | 70,871 | |||||||||||||||||||||||
| Operating lease liabilities | 20,000 | 19,476 | |||||||||||||||||||||||
| Contingent consideration | 16,789 | 9,106 | |||||||||||||||||||||||
| Income taxes payable | 89,216 | 44,200 | |||||||||||||||||||||||
| Total current liabilities | 732,588 | 539,029 | |||||||||||||||||||||||
| Retirement plans liabilities | 130,826 | 134,471 | |||||||||||||||||||||||
| Long-term deferred revenue and customer advances | 55,634 | 45,974 | |||||||||||||||||||||||
| Long-term contingent consideration | 32,948 | 30,599 | |||||||||||||||||||||||
| Long-term other accrued liabilities | 22,703 | 19,535 | |||||||||||||||||||||||
| Deferred tax liabilities | 11,997 | 14,070 | |||||||||||||||||||||||
| Long-term operating lease liabilities | 43,582 | 45,849 | |||||||||||||||||||||||
| Long-term income taxes payable | 74,930 | 82,642 | |||||||||||||||||||||||
| Debt | 402,305 | 394,687 | |||||||||||||||||||||||
| Total liabilities | 1,507,513 | 1,306,856 | |||||||||||||||||||||||
| Shareholders' equity | 1,744,551 | 1,480,158 | |||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 3,252,064 | $ | 2,787,014 | |||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) | |||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
| June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | ||||||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||||||
| Net income | $ | 188,908 | $ | 97,397 | $ | 365,098 | $ | 206,535 | |||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||||||||
| Contingent consideration fair value adjustment | 29,259 | (11,671 | ) | 19,239 | (8,701 | ) | |||||||||||||||||||
| Depreciation | 19,816 | 17,231 | 38,305 | 33,882 | |||||||||||||||||||||
| Amortization | 12,843 | 12,034 | 26,234 | 24,976 | |||||||||||||||||||||
| Stock-based compensation | 10,907 | 8,635 | 21,367 | 18,109 | |||||||||||||||||||||
| Provision for excess and obsolete inventory | 5,580 | 3,402 | 9,637 | 5,799 | |||||||||||||||||||||
| Gains on investments | (5,126 | ) | (913 | ) | (469 | ) | (3,741 | ) | |||||||||||||||||
| Deferred taxes | (5,338 | ) | (691 | ) | (7,163 | ) | 515 | ||||||||||||||||||
| Retirement plan actuarial (gains) losses | (99 | ) | 448 | (99 | ) | 448 | |||||||||||||||||||
| Other | 19 | 210 | 523 | 429 | |||||||||||||||||||||
| Changes in operating assets and liabilities, net of businesses acquired: | |||||||||||||||||||||||||
| Accounts receivable | (204,261 | ) | (37,772 | ) | (331,040 | ) | (79,478 | ) | |||||||||||||||||
| Inventories | (19,546 | ) | 470 | (3,728 | ) | (2,447 | ) | ||||||||||||||||||
| Prepayments and other assets | (9,859 | ) | 1,581 | (49,479 | ) | (17,067 | ) | ||||||||||||||||||
| Accounts payable and other liabilities | 151,776 | 38,887 | 116,453 | (14,424 | ) | ||||||||||||||||||||
| Deferred revenue and customer advances | 29,568 | 9,371 | 28,655 | 15,826 | |||||||||||||||||||||
| Retirement plans contributions | (1,239 | ) | (1,204 | ) | (2,501 | ) | (2,414 | ) | |||||||||||||||||
| Income taxes | 22,564 | 7,831 | 37,842 | (14,973 | ) | ||||||||||||||||||||
| Net cash provided by operating activities | 225,772 | 145,246 | 268,874 | 163,274 | |||||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||||
| Purchases of property, plant and equipment | (47,314 | ) | (33,245 | ) | (84,014 | ) | (58,956 | ) | |||||||||||||||||
| Purchases of marketable securities | (112,429 | ) | (108,997 | ) | (299,548 | ) | (484,181 | ) | |||||||||||||||||
| Proceeds from maturities of marketable securities | 84,527 | 91,992 | 182,984 | 233,193 | |||||||||||||||||||||
| Proceeds from sales of marketable securities | 11,656 | 37,014 | 26,661 | 42,454 | |||||||||||||||||||||
| Proceeds from life insurance | 546 | - | 546 | 273 | |||||||||||||||||||||
| Purchase of investments and acquisition of businesses, net of cash acquired | - | (15,000 | ) | 149 | (21,970 | ) | |||||||||||||||||||
| Net cash used for investing activities | (63,014 | ) | (28,236 | ) | (173,222 | ) | (289,187 | ) | |||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||||
| Issuance of common stock under stock purchase and stock option plans | 5 | 833 | 12,757 | 15,089 | |||||||||||||||||||||
| Repurchase of common stock | (9,426 | ) | (90,754 | ) | (88,465 | ) | (247,222 | ) | |||||||||||||||||
| Dividend payments | (16,580 | ) | (15,392 | ) | (33,266 | ) | (31,019 | ) | |||||||||||||||||
| Payments related to net settlement of employee stock compensation awards | (449 | ) | (128 | ) | (22,519 | ) | (14,446 | ) | |||||||||||||||||
| Payments of contingent consideration | - | - | (8,852 | ) | (27,615 | ) | |||||||||||||||||||
| Net cash used for financing activities | (26,450 | ) | (105,441 | ) | (140,345 | ) | (305,213 | ) | |||||||||||||||||
| Effects of exchange rate changes on cash and cash equivalents | (1,496 | ) | (190 | ) | (925 | ) | (519 | ) | |||||||||||||||||
| Increase (decrease) in cash and cash equivalents | - | 134,812 | 11,379 | (45,618 | ) | (431,645 | ) | ||||||||||||||||||
| Cash and cash equivalents at beginning of period | 593,494 | 483,728 | 773,924 | 926,752 | |||||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 728,306 | $ | 495,107 | $ | 728,306 | $ | 495,107 | |||||||||||||||||
