Teradyne Reports Third Quarter 2017 Results

About Teradyne
Teradyne (NYSE: TER) is a leading supplier of automation equipment for test and industrial applications. Teradyne Automatic Test Equipment (ATE) is used to test semiconductors, wireless products, data storage and complex electronic systems, which serve consumer, communications, industrial and government customers. Our Industrial Automation products include collaborative robots used by global manufacturing and light industrial customers to improve quality and increase manufacturing efficiency. In 2016, Teradyne had revenue of $1.75 billion and currently employs approximately 4,400 people worldwide. For more information, visit www.teradyne.com. Teradyne^(R) is a registered trademark of Teradyne, Inc. in the U.S. and other countries.

Safe Harbor Statement
This release contains forward-looking statements regarding Teradyne’s future business prospects, results of operations, market conditions, earnings per share, the payment of a quarterly dividend, the repurchase of Teradyne common stock pursuant to a share repurchase program, use of proceeds and potential dilution from the senior convertible notes offering and potential borrowings under a senior secured credit facility. Such statements are based on the current assumptions and expectations of Teradyne’s management and are neither promises nor guarantees of future performance, events, earnings per share, use of cash, payment of dividends, repurchases of common stock, payment of the senior convertible notes or availability of, or borrowing under, the credit facility. There can be no assurance that management’s estimates of Teradyne’s future results or other forward-looking statements will be achieved. Additionally, the current dividend and share repurchase programs may be modified, suspended or discontinued at any time. Important factors that could cause actual results, earnings per share, use of cash, dividend payments, repurchases of common stock, payment of the senior convertible notes or borrowings under the credit facility 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 Universal Robots’ business; increased research and development spending; deterioration of Teradyne’s financial condition; 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, the repurchase of common stock or borrowing under the credit facility is not in the company’s best interests; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” section of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and the Quarterly Report on Form 10-Q for the period ended July 2, 2017. 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.


TERADYNE, INC. REPORT FOR THIRD FISCAL QUARTER OF 2017
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

			Quarter Ended									Nine Months Ended
			October 1, 2017			July 2, 2017			October 2, 2016			October 1, 2017			October 2, 2016

Net revenues			$	503,378		$	696,901		$	410,475		$	1,657,191		$	1,373,261

Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1) (2)				208,592			305,682			183,116			706,253			632,700

Gross profit				294,786			391,219			227,359			950,938			740,561

Operating expenses:
Selling and administrative (1)				86,244			89,131			78,794			260,282			239,393
Engineering and development (1)				77,190			81,728			71,400			235,101			220,973
Acquired intangible assets amortization				7,028			8,166			8,487			23,145			44,725
Restructuring and other (3)				(4,407	)		2,288			12,177			392			16,372
Goodwill impairment (4)				-			-			-			-			254,946
Acquired intangible assets impairment (4)				-			-			-			-			83,339
Operating expenses				166,055			181,313			170,858			518,920			859,748

Income (loss) from operations				128,731			209,906			56,501			432,018			(119,187	)

Interest and other (5)				(1,294	)		(3,029	)		3,180			(5,689	)		5,242

Income (loss) before income taxes				127,437			206,877			59,681			426,329			(113,945	)
Income tax provision (benefit)				24,017			31,901			(4,113	)		62,713			(4,178	)
Net income (loss)			$	103,420		$	174,976		$	63,794		$	363,616		$	(109,767	)

Net income (loss) per common share:
Basic			$	0.52		$	0.88		$	0.32		$	1.83		$	(0.54	)
Diluted			$	0.52		$	0.87		$	0.31		$	1.81		$	(0.54	)

Weighted average common shares - basic				197,485			198,774			202,211			198,755			203,167

Weighted average common shares - diluted				200,775			201,529			203,929			201,413			203,167


Cash dividend declared per common share			$	0.07		$	0.07		$	0.06		$	0.21		$	0.18


Net orders			$	410,229		$	461,606		$	378,461		$	1,466,567		$	1,238,862


(1	)	Pension actuarial (gains) losses included in our operating results were as follows:
			Quarter Ended									Nine Months Ended
			October 1, 2017			July 2, 2017			October 2, 2016			October 1, 2017			October 2, 2016
		Cost of revenues	$	-		$	(664	)	$	364		$	(664	)	$	(250	)
		Selling and administrative		-			(1,094	)		192			(1,094	)		(441	)
		Engineering and development		-			(746	)		106			(746	)		(509	)
			$	-		$	(2,504	)	$	662		$	(2,504	)	$	(1,200	)


(2	)	Cost of revenues includes:	Quarter Ended									Nine Months Ended
			October 1, 2017			July 2, 2017			October 2, 2016			October 1, 2017			October 2, 2016
		Provision for excess and obsolete inventory	$	1,859		$	2,569		$	3,033		$	7,154		$	15,148
		Sale of previously written down inventory		(3,121	)		(2,149	)		(1,794	)		(6,404	)		(8,113	)
			$	(1,262	)	$	420		$	1,239		$	750		$	7,035


(3	)	Restructuring and other consists of:	Quarter Ended									Nine Months Ended
			October 1, 2017			July 2, 2017			October 2, 2016			October 1, 2017			October 2, 2016
		Employee severance	$	581		$	789		$	4,203		$	1,953		$	5,920
		Contingent consideration fair value adjustment		(286	)		1,499			7,974			1,847			10,452
		Facility related		(393	)		-			-			901			-
		Property insurance recovery		(5,064	)		-			-			(5,064	)		(5,051	)
		Expenses and impairment of fixed assets related to Japan earthquake		755			-			-			755			5,051
			$	(4,407	)	$	2,288		$	12,177		$	392		$	16,372


(4	)	Goodwill and acquired intangible assets impairment related to Teradyne's Wireless Test business segment.

(5	)	Interest and other includes:	Quarter Ended									Nine Months Ended
			October 1, 2017			July 2, 2017			October 2, 2016			October 1, 2017			October 2, 2016
		Non-cash convertible debt interest expense	$	3,127		$	3,088		$	-		$	9,265		$	-


CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

	October 1, 2017		December 31, 2016

Assets
Cash and cash equivalents	$	418,677	$	307,884
Marketable securities		1,217,830		871,024
Accounts receivable, net		268,068		192,444
Inventories, net		125,183		135,958
Prepayments		105,309		108,454
Other current assets		5,021		8,039
Total current assets		2,140,088		1,623,803

Property, plant and equipment, net		259,080		253,821
Marketable securities		211,943		433,843
Deferred tax assets		120,228		107,405
Other assets		12,028		12,165
Retirement plans assets		10,954		7,712
Acquired intangible assets, net		85,729		100,401
Goodwill		249,277		223,343
Total assets	$	3,089,327	$	2,762,493

Liabilities
Accounts payable	$	79,429	$	95,362
Accrued employees' compensation and withholdings		113,634		109,944
Deferred revenue and customer advances		111,506		84,478
Other accrued liabilities		62,611		51,382
Contingent consideration		21,818		1,050
Accrued income taxes		42,377		30,480
Total current liabilities		431,375		372,696

Retirement plans liabilities		114,316		106,938
Long-term deferred revenue and customer advances		31,686		23,463
Deferred tax liabilities		10,543		12,144
Long-term other accrued liabilities		11,604		28,642
Long-term contingent consideration		17,311		37,282
Long-term debt		362,595		352,669
Total liabilities		979,430		933,834

Shareholders' equity		2,109,897		1,828,659

Total liabilities and shareholders' equity	$	3,089,327	$	2,762,493


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

	Quarter Ended						Nine Months Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Cash flows from operating activities:
Net income (loss)	$	103,420		$	63,794		$	363,616		$	(109,767	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		16,769			16,269			49,243			48,437
Amortization		9,901			9,095			32,313			46,275
Stock-based compensation		8,308			7,555			25,620			23,012
Deferred taxes		2,884			(21,110	)		(679	)		(42,568	)
Provision for excess and obsolete inventory		1,859			3,033			7,154			15,148
Contingent consideration fair value adjustment		(286	)		7,974			1,847			10,452
Property insurance recovery		(4,309	)		-			(4,309	)		(5,051	)
Impairment of fixed assets		-			-			-			4,179
Retirement plans actuarial losses (gains)		-			662			(2,504	)		(1,200	)
Tax benefit related to employee stock compensation awards		-			(3,399	)		-			(3,399	)
Goodwill impairment		-			-			-			254,946
Acquired intangible assets impairment		-			-			-			83,339
Other		36			(426	)		429			151
Changes in operating assets and liabilities:
Accounts receivable		137,807			183,890			(75,623	)		45,660
Inventories		31,919			18,378			23,770			48,600
Prepayments and other assets		2,937			384			7,362			(13,273	)
Accounts payable and accrued expenses		(27,778	)		(32,672	)		5,298			(38,712	)
Deferred revenue and customer advances		29,223			(52,692	)		34,535			53,380
Retirement plans contributions		(2,875	)		(3,573	)		(4,858	)		(5,871	)
Income taxes		15			4,221			15,808			4,227
Net cash provided by operating activities		309,830			201,383			479,022			417,965

Cash flows from investing activities:
Purchases of property, plant and equipment		(27,280	)		(19,659	)		(73,247	)		(66,252	)
Purchases of available-for-sale marketable securities		(701,704	)		(438,526	)		(1,036,523	)		(875,837	)
Proceeds from sales of available-for-sale marketable securities		129,915			131,946			443,169			466,744
Proceeds from maturities of available-for-sale marketable securities		165,648			74,138			473,255			202,162
Proceeds from property insurance		5,064			-			5,064			5,051
Net cash used for investing activities		(428,357	)		(252,101	)		(188,282	)		(268,132	)

Cash flows from financing activities:
Issuance of common stock under stock purchase and stock option plans		9,247			2,189			24,462			20,085
Repurchase of common stock		(57,493	)		(28,309	)		(151,821	)		(85,092	)
Dividend payments		(13,805	)		(12,123	)		(41,730	)		(36,548	)
Tax benefit related to employee stock compensation awards		-			3,399			-			3,399
Payments related to net settlement of employee stock compensation awards		(146	)		(77	)		(12,584	)		(9,229	)
Payments of contingent consideration		-			-			(1,050	)		(11,697	)
Net cash used for financing activities		(62,197	)		(34,921	)		(182,723	)		(119,082	)

Effects of exchange rate changes on cash and cash equivalents		1,052			2,481			2,776			2,481

(Decrease) increase in cash and cash equivalents		(179,672	)		(83,158	)		110,793			33,232
Cash and cash equivalents at beginning of period		598,349			381,095			307,884			264,705
Cash and cash equivalents at end of period	$	418,677		$	297,937		$	418,677		$	297,937


GAAP to Non-GAAP Earnings Reconciliation
(In millions, except per share amounts)
			Quarter Ended
			October 1, 2017			% of Net Revenues										July 2, 2017			% of Net Revenues								October 2, 2016			% of Net Revenues

Net revenues			$	503.4												$	696.9										$	410.5

Gross profit - GAAP			$	294.8			58.6	%								$	391.2		56.1	%							$	227.4		55.4	%
Pension mark-to-market adjustment (1)				-			-										(0.7	)	-0.1	%								0.4		0.1	%
Gross profit - non-GAAP			$	294.8			58.6	%								$	390.5		56.0	%							$	227.8		55.5	%

Income from operations - GAAP			$	128.7			25.6	%								$	209.9		30.1	%							$	56.5		13.8	%
Acquired intangible assets amortization				7.0			1.4	%									8.2		1.2	%								8.5		2.1	%
Restructuring and other (2)				(4.4	)		-0.9	%									2.3		0.3	%								12.2		3.0	%
Pension mark-to-market adjustment (1)				-			-										(2.5	)	-0.4	%								0.7		0.2	%
Income from operations - non-GAAP			$	131.3			26.1	%								$	217.9		31.3	%							$	77.9		19.0	%

										Net Income per Common Share											Net Income per Common Share											Net Income per Common Share
			October 1, 2017			% of Net Revenues				Basic			Diluted			July 2, 2017			% of Net Revenues		Basic			Diluted			October 2, 2016			% of Net Revenues		Basic			Diluted
Net income - GAAP			$	103.4			20.5	%		$	0.52		$	0.52		$	175.0		25.1	%	$	0.88		$	0.87		$	63.8		15.5	%	$	0.32		$	0.31
Acquired intangible assets amortization				7.0			1.4	%			0.04			0.04			8.2		1.2	%		0.04			0.04			8.5		2.1	%		0.04			0.04
Interest and other (3)				3.1			0.6	%			0.02			0.02			3.1		0.4	%		0.02			0.02			-		-			-			-
Restructuring and other (2)				(4.4	)		-0.9	%			(0.02	)		(0.02	)		2.3		0.3	%		0.01			0.01			12.2		3.0	%		0.06			0.06
Pension mark-to-market adjustment (1)				-			-				-			-			(2.5	)	-0.4	%		(0.01	)		(0.01	)		0.7		0.2	%		0.00			0.00
Exclude discrete tax adjustments (4)				0.3			0.1	%			0.00			0.00			0.5		0.1	%		0.00			0.00			(10.7	)	-2.6	%		(0.05	)		(0.05	)
Non-GAAP tax adjustments (5)				(1.7	)		-0.3	%			(0.01	)		(0.01	)		(5.1	)	-0.7	%		(0.03	)		(0.03	)		(6.8	)	-1.7	%		(0.03	)		(0.03	)
Net income - non-GAAP			$	107.7			21.4	%		$	0.55		$	0.54		$	181.5		26.0	%	$	0.91		$	0.90		$	67.7		16.5	%	$	0.33		$	0.33

GAAP and non-GAAP weighted average common shares - basic				197.5													198.8											202.2
GAAP weighted average common shares - diluted				200.8													201.5											203.9
Exclude dilutive shares from convertible note				(1.1	)												(0.7	)										-
Non-GAAP weighted average common shares - diluted				199.7													200.8											203.9


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

(2	)	Restructuring and other consists of:
			Quarter Ended
			October 1, 2017													July 2, 2017											October 2, 2016
		Employee severance	$	0.6												$	0.8										$	4.2
		Contingent consideration fair value adjustment		(0.3	)												1.5											8.0
		Facility related		(0.4	)												-											-
		Property insurance recovery		(5.1	)												-											-
		Expenses and Impairment of fixed assets related to Japan earthquake		0.8													-											-
			$	(4.4	)											$	2.3										$	12.2

(3	)	For the quarters ended October 1, 2017 and July 2, 2017, interest and other included non-cash convertible debt interest expense.

(4	)	For the quarters ended October 1, 2017, July 2, 2017 and October 2, 2016 adjustment to exclude discrete income tax items.

(5	)	For periods after December 31, 2016, the non-GAAP annual effective tax rate is based on a with and without calculation with respect to non-GAAP reconciling items.


			Nine Months Ended
			October 1, 2017			% of Net Revenues										October 2, 2016			% of Net Revenues

Net Revenues			$	1,657.2												$	1,373.3

Gross profit - GAAP			$	950.9			57.4	%								$	740.6		53.9	%
		Pension mark-to-market adjustment (1)		(0.7	)		0.0	%									(0.3	)	0.0	%
Gross profit - non-GAAP			$	950.2			57.3	%								$	740.3		53.9	%

Income (loss) from operations - GAAP			$	432.0			26.1	%								$	(119.2	)	-8.7	%
		Acquired intangible assets amortization		23.1			1.4	%									44.7		3.3	%
		Restructuring and other (2)		0.4			0.0	%									16.4		1.2	%
		Pension mark-to-market adjustment (1)		(2.5	)		-0.2	%									(1.2	)	-0.1	%
		Goodwill impairment (3)		-			-										254.9		18.6	%
		Acquired intangible assets impairment (3)		-			-										83.3		6.1	%
Income from operations - non-GAAP			$	453.0			27.3	%								$	278.9		20.3	%

										Net Income per Common Share											Net (Loss) Income per Common Share
			October 1, 2017			% of Net Revenues				Basic			Diluted			October 2, 2016			% of Net Revenues		Basic			Diluted
Net income (loss) - GAAP			$	363.6			21.9	%		$	1.83		$	1.81		$	(109.8	)	-8.0	%	$	(0.54	)	$	(0.54	)
		Acquired intangible assets amortization		23.1			1.4	%			0.12			0.12			44.7		3.3	%		0.22			0.22
		Interest and other (4)		9.3			0.6	%			0.05			0.05			-		-			-			-
		Restructuring and other (2)		0.4			0.0	%			0.00			0.00			16.4		1.2	%		0.08			0.08
		Pension mark-to-market adjustment (1)		(2.5	)		-0.2	%			(0.01	)		(0.01	)		(1.2	)	-0.1	%		(0.01	)		(0.01	)
		Goodwill impairment (3)		-			-				-			-			254.9		18.6	%		1.25			1.24
		Acquired intangible assets impairment (3)		-			-				-			-			83.3		6.1	%		0.41			0.41
		Exclude discrete tax adjustments (5)		(6.1	)		-0.4	%			(0.03	)		(0.03	)		11.8		0.9	%		0.06			0.06
		Non-GAAP tax adjustments (6)		(9.9	)		-0.6	%			(0.05	)		(0.05	)		(55.7	)	-4.1	%		(0.27	)		(0.27	)
Net income - non-GAAP			$	377.9			22.8	%		$	1.90		$	1.88		$	244.4		17.8	%	$	1.20		$	1.19

GAAP and non-GAAP weighted average common shares - basic				198.8													203.2
GAAP weighted average common shares - diluted				201.4													203.2
		Exclude dilutive shares from convertible note		(0.6	)												-
		Include dilutive shares		-													1.7
Non-GAAP weighted average common shares - diluted				200.8													204.9

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

(2	)	Restructuring and other consists of:
			Nine Months Ended
			October 1, 2017													October 2, 2016
		Employee severance	$	2.0												$	5.9
		Contingent consideration fair value adjustment		1.8													10.5
		Facility related		0.9													-
		Expenses and impairment of fixed assets related to Japan earthquake		0.8													5.1
		Property insurance recovery		(5.1	)												(5.1	)
			$	0.4												$	16.4

(3	)	Goodwill and acquired intangible assets impairment related to Teradyne's Wireless Test business segment.

(4	)	For the nine months ended October 1, 2017, Interest and other included non-cash convertible debt interest expense.

(5	)	For the nine months ended October 1, 2017 and October 2, 2016, adjustment to exclude discrete income tax items. For the nine months ended October 2, 2016, adjustment to treat Wireless Test business segment goodwill and intangible assets impairments as discrete tax items.

(6	)	For periods after December 31, 2016, the non-GAAP annual effective tax rate is based on a with and without calculation with respect to non-GAAP reconciling items.

GAAP to Non-GAAP Reconciliation of Fourth Quarter 2017 guidance:

GAAP and non-GAAP fourth quarter revenue guidance:						$420 million			to	$450 million
GAAP net income per diluted share						$	0.27			$	0.33
		Exclude acquired intangible assets amortization					0.04				0.04
		Exclude non-cash convertible debt interest					0.02				0.02
		Non-GAAP tax adjustment					(0.01	)			(0.01	)
Non-GAAP net income per diluted share						$	0.31			$	0.37

« Previous Page 1 | 2 | 3 Next Page »