Teradyne Reports Fourth Quarter and Fiscal Year 2020 Results


TERADYNE, INC. REPORT FOR FOURTH FISCAL QUARTER OF 2020

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

					Quarter Ended									Twelve Months Ended
					December 31, 2020			September 27, 2020			December 31, 2019			December 31, 2020			December 31, 2019

Net revenues					$	758,968		$	819,484		$	654,650		$	3,121,469		$	2,294,965
		Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)				309,179			360,556			271,412			1,335,728			955,136

Gross profit						449,789			458,928			383,238			1,785,741			1,339,829

Operating expenses:
		Selling and administrative (2)				124,279			115,840			117,092			464,769			437,084
		Engineering and development				100,795			94,909			86,794			374,964			322,824
		Acquired intangible assets amortization				5,752			6,219			9,784			30,803			40,147
		Restructuring and other (3)				(15,117	)		(27,701	)		(2,088	)		(13,202	)		(13,880	)
				Operating expenses		215,709			189,267			211,582			857,334			786,175

Income from operations						234,080			269,661			171,656			928,407			553,654

		Interest and other expense (4)				11,155			5,930			22,770			27,392			27,882

Income before income taxes						222,925			263,731			148,886			901,015			525,772
		Income tax provision				26,595			41,013			23,811			116,868			58,304
Net income					$	196,330		$	222,718		$	125,075		$	784,147		$	467,468

Net income per common share:
Basic					$	1.18		$	1.34		$	0.75		$	4.72		$	2.74
Diluted					$	1.05		$	1.21		$	0.69		$	4.28		$	2.60

Weighted average common shares - basic						166,085			166,014			167,286			166,120			170,425

Weighted average common shares - diluted (5)						186,837			184,338			181,780			183,042			179,459


Cash dividend declared per common share					$	0.10		$	0.10		$	0.09		$	0.40		$	0.36



(1	)	Cost of revenues includes:			Quarter Ended									Twelve Months Ended
					December 31, 2020			September 27, 2020			December 31, 2019			December 31, 2020			December 31, 2019
				Provision for excess and obsolete inventory	$	4,418		$	3,479		$	6,396		$	17,534		$	15,244
				Sale of previously written down inventory		(593	)		(310	)		(1,222	)		(2,315	)		(3,184	)
				Inventory step-up		17			121			64			376			447
					$	3,842		$	3,290		$	5,238		$	15,595		$	12,507

(2	)	For the twelve months ended December 31, 2019, selling and administrative expenses include an equity charge of $2.1 million for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.

(3	)	Restructuring and other consists of:			Quarter Ended									Twelve Months Ended
					December 31, 2020			September 27, 2020			December 31, 2019			December 31, 2020			December 31, 2019
				Contingent consideration fair value adjustment	$	(15,304	)	$	(27,206	)	$	(2,796	)	$	(23,271	)	$	(19,257	)
				Acquisition related expenses and compensation		(902	)		(1,086	)		248			2,516			2,506
				Employee severance		1,089			456			460			2,309			2,871
				Contract termination settlement fee		-			-			-			4,000			-
				Other		-			135			-			1,244			-
					$	(15,117	)	$	(27,701	)	$	(2,088	)	$	(13,202	)	$	(13,880	)

(4	)	Interest and other includes:			Quarter Ended									Twelve Months Ended
					December 31, 2020			September 27, 2020			December 31, 2019			December 31, 2020			December 31, 2019
				Non-cash convertible debt interest	$	3,674		$	3,629		$	3,496		$	14,426		$	13,728
				Pension actuarial losses		7,694			2,688			7,727			10,284			8,176
				Investment impairment		-			-			15,000			-			15,000
					$	11,368		$	6,317		$	26,223		$	24,710		$	36,904

(5	)	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 December 31, 2020, September 27, 2020 and December 31, 2019, 10.0 million, 9.2 million and 7.3 million shares, respectively, have been included in diluted shares. For the twelve months ended December 31, 2020 and December 31, 2019, 8.5 million and 4.9 million shares, respectively, have been included in diluted shares. For the quarters ended December 31, 2020, September 27, 2020 and December 31, 2019, diluted shares also included 8.9 million, 7.8 million and 5.4 million shares, respectively from the convertible note hedge transaction. For the twelve months ended December 31, 2020 and December 31, 2019, diluted shares also included 7.0 million and 2.7 million shares, respectively, from the convertible note hedge transaction.

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

					December 31, 2020			December 31, 2019
Assets
		Cash and cash equivalents			$	914,121		$	773,924
		Marketable securities				522,280			137,303
		Accounts receivable, net				497,506			362,368
		Inventories, net				222,189			196,691
		Prepayments and other current assets				259,338			188,598
				Total current assets		2,415,434			1,658,884

		Property, plant and equipment, net				394,800			320,216
		Operating lease right-of-use assets, net				54,569			57,539
		Marketable securities				117,980			104,490
		Deferred tax assets				87,913			75,185
		Retirement plans assets				17,468			18,457
		Other assets				9,384			10,332
		Acquired intangible assets, net				100,939			125,480
		Goodwill				453,859			416,431

				Total assets	$	3,652,346		$	2,787,014

Liabilities
		Accounts payable			$	133,663		$	126,617
		Accrued employees' compensation and withholdings				220,321			163,883
		Deferred revenue and customer advances				134,662			104,876
		Other accrued liabilities				77,581			70,871
		Operating lease liabilities				20,573			19,476
		Contingent consideration				-			9,106
		Income taxes payable				80,728			44,200
		Current debt				33,343			-

				Total current liabilities		700,871			539,029

		Retirement plans liabilities				151,140			134,471
		Long-term deferred revenue and customer advances				58,359			45,974
		Long-term contingent consideration				7,227			30,599
		Long-term other accrued liabilities				19,352			19,535
		Deferred tax liabilities				10,821			14,070
		Long-term operating lease liabilities				42,073			45,849
		Long-term income taxes payable				74,930			82,642
		Debt				376,768			394,687

				Total liabilities		1,441,541			1,306,856

Mezzanine equity						3,787			-

Shareholders' equity						2,207,018			1,480,158

				Total liabilities and equity	$	3,652,346		$	2,787,014



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

					Quarter Ended						Twelve Months Ended
					December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019
Cash flows from operating activities:
		Net income			$	196,330		$	125,075		$	784,147		$	467,468
		Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation			22,008			19,326			80,119			70,834
			Amortization			10,047			12,972			46,624			49,821
			Stock-based compensation			11,878			9,075			44,906			37,897
			Provision for excess and obsolete inventory			4,418			6,396			17,534			15,244
			Retirement plan actuarial losses			7,694			7,727			10,284			8,176
			Investment impairment			-			15,000			-			15,000
			Contingent consideration fair value adjustment			(15,304	)		(2,796	)		(23,271	)		(19,257	)
			Deferred taxes			(11,141	)		(6,478	)		(15,688	)		(9,456	)
			Gains on investments			(4,383	)		(1,875	)		(7,898	)		(6,033	)
			Other			810			153			1,557			766

			Changes in operating assets and liabilities, net of businesses acquired:
				Accounts receivable		92,564			(3,651	)		(129,451	)		(70,440	)
				Inventories		(25,436	)		(13,265	)		(8,438	)		(27,408	)
				Prepayments and other assets		(23,667	)		(7,666	)		(64,418	)		(23,784	)
				Accounts payable and other liabilities		(8,390	)		28,472			73,167			49,279
				Deferred revenue and customer advances		3,385			11,534			39,974			39,313
				Retirement plans contributions		(1,498	)		(1,311	)		(5,382	)		(5,086	)
				Income taxes		1,109			17,640			25,169			(13,584	)
Net cash provided by operating activities						260,424			216,328			868,935			578,750

Cash flows from investing activities:
		Purchases of property, plant and equipment				(38,105	)		(38,594	)		(184,977	)		(134,642	)
		Purchases of marketable securities				(411,768	)		(57,162	)		(900,196	)		(662,701	)
		Proceeds from maturities of marketable securities				170,271			218,455			479,678			611,927
		Proceeds from sales of marketable securities				2,395			45,312			35,006			105,586
		Proceeds from life insurance				-			-			546			2,912
		Purchase of investment and acquisition of businesses, net of cash acquired				-			(57,772	)		149			(79,742	)
Net cash (used for) provided by investing activities						(277,207	)		110,239			(569,794	)		(156,660	)

Cash flows from financing activities:
		Issuance of common stock under stock purchase and stock option plans				1,999			33			28,527			29,312
		Dividend payments				(16,612	)		(15,036	)		(66,482	)		(61,305	)
		Payments related to net settlement of employee stock compensation awards				(279	)		(192	)		(23,014	)		(14,741	)
		Repurchase of common stock				-			(131,218	)		(88,465	)		(500,000	)
		Payments of contingent consideration				-			-			(8,852	)		(27,615	)
Net cash used for financing activities						(14,892	)		(146,413	)		(158,286	)		(574,349	)

Effects of exchange rate changes on cash and cash equivalents						616			(169	)		(658	)		(569	)
(Decrease) increase in cash and cash equivalents						(31,059	)		179,985			140,197			(152,828	)
Cash and cash equivalents at beginning of period						945,180			593,939			773,924			926,752
Cash and cash equivalents at end of period					$	914,121		$	773,924		$	914,121		$	773,924

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