Teradyne Reports Revenue and Earnings Growth in First Quarter 2018

TERADYNE, INC. REPORT FOR FIRST FISCAL QUARTER OF 2018

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

				Quarter Ended
				April 1, 2018			December 31, 2017 (1)			April 2, 2017 (1)

Net revenues				$	487,467		$	479,415		$	456,913

	Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (2)				217,635			208,485			191,897

Gross profit					269,832			270,930			265,016

Operating expenses:
	Selling and administrative				90,505			87,880			84,792
	Engineering and development				74,408			72,070			75,978
	Acquired intangible assets amortization				7,698			7,384			7,952
	Restructuring and other (3)				(313	)		8,970			2,511
			Operating expenses		172,298			176,304			171,233

Income from operations					97,534			94,626			93,783

	Interest and other (4)				(1,714	)		3,458			(1,767	)

Income before income taxes					95,820			98,084			92,016
	Income tax provision (5)				8,846			204,007			6,795
Net income (loss)				$	86,974		$	(105,923	)	$	85,221

Net income (loss) per common share:
Basic				$	0.45		$	(0.54	)	$	0.43
Diluted				$	0.43		$	(0.54	)	$	0.42

Weighted average common shares - basic					195,255			196,010			200,005

Weighted average common shares - diluted (6)					203,484			196,010			201,936


Cash dividend declared per common share				$	0.09		$	0.07		$	0.07


(1)	Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs.

(2)	Cost of revenues includes:			Quarter Ended
				April 1, 2018			December 31, 2017			April 2, 2017
			Provision for excess and obsolete inventory	$	3,522		$	1,690		$	2,726
			Sale of previously written down inventory		(2,243	)		(1,048	)		(1,134	)
				$	1,279		$	642		$	1,592

(3)	Restructuring and other consists of:			Quarter Ended
				April 1, 2018			December 31, 2017			April 2, 2017
			Employee severance	$	3,881		$	1,801		$	583
			Acquisition costs		774			-			-
			Contingent consideration fair value adjustment		(4,968	)		5,973			634
			Impairment of fixed assets		-			1,124			-
			Facility related		-			72			1,294
				$	(313	)	$	8,970		$	2,511


(4)	Interest and other includes:			Quarter Ended
				April 1, 2018			December 31, 2017			April 2, 2017
			Non-cash convertible debt interest expense	$	3,206		$	3,166		$	3,050
			Pension actuarial (gains) losses		-			(3,786	)		-
				$	3,206		$	(620	)	$	3,050

(5)	For the quarter ended December 31, 2017, income tax provision includes an expense of $186 million related to the estimated impact of U.S. tax law changes.

(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 quarter ended April 1, 2018, 4.4 million shares have been included in diluted shares. For the quarter ended April 1, 2018, diluted shares also included 1.8 million shares from the convertible note hedge transaction.

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

				April 1, 2018			December 31, 2017

Assets
	Cash and cash equivalents			$	637,873		$	429,843
	Marketable securities				860,526			1,347,979
	Accounts receivable, net				413,978			272,783
	Inventories, net				131,857			107,525
	Prepayments and other current assets				112,191			112,151
			Total current assets		2,156,425			2,270,281

	Property, plant and equipment, net				281,284			268,447
	Marketable securities				89,259			125,926
	Deferred tax assets				77,705			84,026
	Other assets				12,479			12,275
	Retirement plans assets				17,928			17,491
	Acquired intangible assets, net				84,413			79,088
	Goodwill				275,700			252,011

			Total assets	$	2,995,193		$	3,109,545

Liabilities
	Accounts payable			$	103,950		$	86,393
	Accrued employees' compensation and withholdings				86,292			141,694
	Deferred revenue and customer advances				85,892			83,614
	Other accrued liabilities				58,387			59,083
	Contingent consideration				15,581			24,497
	Income taxes payable				34,828			59,055

			Total current liabilities		384,930			454,336

	Retirement plans liabilities				124,689			119,776
	Long-term deferred revenue and customer advances				21,726			30,127
	Deferred tax liabilities				6,185			6,720
	Long-term other accrued liabilities				16,683			10,273
	Long-term contingent consideration				-			20,605
	Long-term income taxes payable				160,181			148,075
	Long-term debt				369,421			365,987

			Total liabilities		1,083,815			1,155,899

Shareholders' equity					1,911,378			1,953,646

			Total liabilities and shareholders' equity	$	2,995,193		$	3,109,545

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

				Quarter Ended
				April 1, 2018			April 2, 2017
Cash flows from operating activities:
	Net income			$	86,974		$	85,221
	Adjustments to reconcile net income to net cash used for operating activities:
		Depreciation			16,336			16,143
		Amortization			9,204			11,070
		Stock-based compensation			9,544			8,945
		Provision for excess and obsolete inventory			3,522			2,726
		Contingent consideration fair value adjustment			(4,968	)		634
		Deferred taxes			8,696			(3,477	)
		Other			1,393			2
		Changes in operating assets and liabilities, net of business acquired:
			Accounts receivable		(140,747	)		(123,792	)
			Inventories		(21,017	)		(62,152	)
			Prepayments and other assets		(679	)		1,104
			Accounts payable and accrued expenses		(46,706	)		(7,553	)
			Deferred revenue and customer advances		9,644			(3,333	)
			Retirement plans contributions		(1,020	)		(947	)
			Income taxes		(12,106	)		14,288
Net cash used for operating activities					(81,930	)		(61,121	)

Cash flows from investing activities:
	Purchases of property, plant and equipment				(34,797	)		(22,066	)
	Purchases of available-for-sale marketable securities				(490,324	)		(153,317	)
	Proceeds from sales of available-for-sale marketable securities				800,671			213,593
	Proceeds from maturities of available-for-sale marketable securities				212,698			88,184
	Acquisition of business, net of cash acquired				(25,356	)		-
Net cash provided by investing activities					462,892			126,394

Cash flows from financing activities:
	Issuance of common stock under stock purchase and stock option plans				10,654			15,084
	Repurchase of common stock				(134,276	)		(37,730	)
	Dividend payments				(17,588	)		(14,021	)
	Payment related to net settlement of employee stock compensation awards				(19,629	)		(12,289	)
	Payment of contingent consideration				(13,571	)		(1,050	)
Net cash used for financing activities					(174,410	)		(50,006	)

Effects of exchange rate changes on cash and cash equivalents					1,478			1,595

Increase in cash and cash equivalents					208,030			16,862
Cash and cash equivalents at beginning of period					429,843			307,884
Cash and cash equivalents at end of period				$	637,873		$	324,746

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