Teradyne Reports Second Quarter 2019 Results
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TERADYNE, INC. REPORT FOR SECOND FISCAL QUARTER OF 2019 |
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| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (In thousands, except per share amounts) |
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Quarter Ended |
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Six Months Ended |
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June 30, 2019 |
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March 31, 2019 |
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July 1, 2018 |
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June 30, 2019 |
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July 1, 2018 |
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| Net revenues |
$ |
564,178 |
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$ |
494,099 |
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$ |
526,929 |
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$ |
1,058,277 |
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$ |
1,014,396 |
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Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1) |
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240,260 |
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206,464 |
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219,595 |
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446,724 |
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437,230 |
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| Gross profit |
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323,918 |
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287,635 |
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307,334 |
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611,553 |
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577,166 |
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| Operating expenses: |
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Selling and administrative |
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108,811 |
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102,013 |
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99,410 |
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210,824 |
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189,916 |
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Engineering and development |
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81,434 |
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76,791 |
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75,342 |
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158,225 |
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149,750 |
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Acquired intangible assets amortization |
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10,083 |
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10,634 |
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9,793 |
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20,717 |
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17,491 |
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Restructuring and other (2) |
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(10,404 |
) |
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5,112 |
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2,389 |
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(5,292 |
) |
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2,076 |
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Operating expenses |
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189,924 |
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194,550 |
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186,934 |
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384,474 |
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359,233 |
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| Income from operations |
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133,994 |
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93,085 |
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120,400 |
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227,079 |
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217,933 |
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Interest and other (income) expense (3) |
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2,817 |
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(894 |
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|
388 |
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1,923 |
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2,102 |
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| Income before income taxes |
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131,177 |
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93,979 |
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120,012 |
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225,156 |
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215,831 |
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Income tax provision (benefit) (4) |
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33,780 |
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(15,159 |
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18,975 |
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18,621 |
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27,821 |
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| Net income |
$ |
97,397 |
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$ |
109,138 |
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$ |
101,037 |
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$ |
206,535 |
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$ |
188,010 |
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| Net income per common share: |
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| Basic |
$ |
0.57 |
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$ |
0.63 |
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$ |
0.53 |
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$ |
1.20 |
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$ |
0.97 |
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| Diluted |
$ |
0.55 |
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$ |
0.62 |
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$ |
0.52 |
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$ |
1.16 |
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$ |
0.94 |
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| Weighted average common shares - basic |
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171,241 |
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173,532 |
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190,730 |
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172,387 |
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192,992 |
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| Weighted average common shares - diluted (5) |
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178,590 |
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176,972 |
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194,909 |
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177,781 |
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199,197 |
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| Cash dividend declared per common share |
$ |
0.09 |
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$ |
0.09 |
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$ |
0.09 |
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$ |
0.18 |
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$ |
0.18 |
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| (1) |
Cost of revenues includes: |
Quarter Ended |
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Six Months Ended |
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June 30, 2019 |
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March 31, 2019 |
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July 1, 2018 |
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June 30, 2019 |
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July 1, 2018 |
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Provision for excess and obsolete inventory |
$ |
3,402 |
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$ |
2,397 |
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$ |
2,653 |
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$ |
5,799 |
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$ |
6,175 |
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Sale of previously written down inventory |
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(363 |
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(778 |
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(1,922 |
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(1,141 |
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(4,165 |
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Inventory step-up |
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383 |
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- |
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372 |
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383 |
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372 |
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$ |
3,422 |
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$ |
1,619 |
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$ |
1,103 |
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$ |
5,041 |
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$ |
2,382 |
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| (2) |
Restructuring and other consists of: |
Quarter Ended |
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Six Months Ended |
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June 30, 2019 |
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March 31, 2019 |
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July 1, 2018 |
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June 30, 2019 |
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July 1, 2018 |
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Contingent consideration fair value adjustment |
$ |
(11,671 |
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$ |
2,970 |
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$ |
(3,500 |
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$ |
(8,701 |
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$ |
(8,468 |
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Employee severance |
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803 |
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799 |
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2,398 |
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1,602 |
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6,279 |
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Acquisition related expenses and compensation |
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464 |
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1,343 |
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2,544 |
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1,807 |
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3,318 |
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Other |
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- |
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- |
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947 |
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- |
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947 |
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$ |
(10,404 |
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$ |
5,112 |
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$ |
2,389 |
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$ |
(5,292 |
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$ |
2,076 |
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| (3) |
Interest and other includes: |
Quarter Ended |
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Six Months Ended |
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June 30, 2019 |
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March 31, 2019 |
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July 1, 2018 |
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June 30, 2019 |
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July 1, 2018 |
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Non-cash convertible debt interest |
$ |
3,410 |
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$ |
3,368 |
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$ |
3,245 |
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$ |
6,778 |
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$ |
6,451 |
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Pension actuarial loss (gain) |
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448 |
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- |
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(71 |
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448 |
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(71 |
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$ |
3,858 |
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$ |
3,368 |
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$ |
3,174 |
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$ |
7,226 |
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$ |
6,380 |
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| (4) |
For the quarter ended June 30, 2019, income tax provision (benefit) includes a $15 million tax provision related to the finalization of our toll tax charge. For the quarter ended March 31, 2019, income tax provision (benefit) includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return. |
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| (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 June 30, 2019, March 31, 2019 and July 1, 2018, 4.4 million, 2.2 million and 2.6 million shares, respectively, have been included in diluted shares. For the six months ended June 30, 2019 and July 1, 2018, 3.3 million and 3.5 million shares, respectively, have been included in diluted shares. For the three months ended June 30, 2019, diluted shares also included 1.8 million shares from the convertible note hedge transaction. For the six months ended June 30, 2019 and July 1, 2018, diluted shares included 0.9 million shares from the convertible note hedge transaction. |
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| CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) |
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June 30, 2019 |
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December 31, 2018 |
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| Assets |
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Cash and cash equivalents |
$ |
495,107 |
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$ |
926,752 |
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Marketable securities |
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400,227 |
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|
190,096 |
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Accounts receivable, net |
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372,199 |
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291,267 |
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Inventories, net |
|
164,461 |
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|
153,541 |
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Prepayments and other current assets |
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184,832 |
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|
170,826 |
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Total current assets |
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1,616,826 |
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1,732,482 |
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Property, plant and equipment, net |
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295,895 |
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|
279,821 |
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Operating lease right-of-use assets, net |
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56,315 |
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- |
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Marketable securities |
|
99,001 |
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87,731 |
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Deferred tax assets |
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67,886 |
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|
70,848 |
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Other assets |
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25,712 |
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11,509 |
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Retirement plans assets |
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16,449 |
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|
16,883 |
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Acquired intangible assets, net |
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109,494 |
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|
125,482 |
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Goodwill |
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383,936 |
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381,850 |
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Total assets |
$ |
2,671,514 |
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$ |
2,706,606 |
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| Liabilities |
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Accounts payable |
$ |
103,449 |
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$ |
100,688 |
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Accrued employees' compensation and withholdings |
|
121,940 |
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|
148,566 |
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Deferred revenue and customer advances |
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89,837 |
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77,711 |
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Other accrued liabilities |
|
77,053 |
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|
78,272 |
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Operating lease liabilities |
|
18,041 |
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- |
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Contingent consideration |
|
11,753 |
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|
34,865 |
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Income taxes payable |
|
44,927 |
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|
36,185 |
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Total current liabilities |
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467,000 |
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|
476,287 |
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Retirement plans liabilities |
|
122,596 |
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|
117,456 |
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Long-term deferred revenue and customer advances |
|
37,365 |
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|
32,750 |
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Deferred tax liabilities |
|
17,800 |
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|
20,662 |
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Long-term other accrued liabilities |
|
9,660 |
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|
37,547 |
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Long-term contingent consideration |
|
15,094 |
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|
35,678 |
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Long-term operating lease liabilities |
|
46,460 |
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- |
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Long-term income taxes payable |
|
88,884 |
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|
83,891 |
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Long-term debt |
|
387,243 |
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|
379,981 |
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Total liabilities |
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1,192,102 |
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|
1,184,252 |
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| Shareholders' equity |
|
1,479,412 |
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|
1,522,354 |
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| |
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Total liabilities and shareholders' equity |
$ |
2,671,514 |
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$ |
2,706,606 |
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| |
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| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) |
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|
Quarter Ended |
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Six Months Ended |
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| |
|
June 30, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
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| Cash flows from operating activities: |
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| |
Net income |
$ |
97,397 |
|
|
$ |
101,037 |
|
|
$ |
206,535 |
|
|
$ |
188,010 |
|
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| |
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Adjustments to reconcile net income to net cash provided by operating activities: |
|
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| |
Depreciation |
|
17,231 |
|
|
|
16,820 |
|
|
|
33,882 |
|
|
|
33,156 |
|
|
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| |
Amortization |
|
12,034 |
|
|
|
10,973 |
|
|
|
24,976 |
|
|
|
20,177 |
|
|
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| |
Deferred taxes |
|
(691 |
) |
|
|
8,616 |
|
|
|
515 |
|
|
|
17,312 |
|
|
|
| |
Stock-based compensation |
|
8,635 |
|
|
|
8,081 |
|
|
|
18,109 |
|
|
|
17,625 |
|
|
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| |
Provision for excess and obsolete inventory |
|
3,402 |
|
|
|
2,653 |
|
|
|
5,799 |
|
|
|
6,175 |
|
|
|
| |
Contingent consideration fair value adjustment |
|
(11,671 |
) |
|
|
(3,500 |
) |
|
|
(8,701 |
) |
|
|
(8,468 |
) |
|
|
| |
Retirement plan actuarial loss (gain) |
|
448 |
|
|
|
(71 |
) |
|
|
448 |
|
|
|
(71 |
) |
|
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| |
(Gains) losses on marketable securities |
|
(913 |
) |
|
|
(479 |
) |
|
|
(3,741 |
) |
|
|
762 |
|
|
|
| |
Other |
|
210 |
|
|
|
254 |
|
|
|
429 |
|
|
|
406 |
|
|
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| |
Changes in operating assets and liabilities, net of businesses acquired: |
|
|
|
|
|
|
|
|
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| |
Accounts receivable |
|
(37,772 |
) |
|
|
(40,332 |
) |
|
|
(79,478 |
) |
|
|
(179,403 |
) |
|
|
| |
Inventories |
|
470 |
|
|
|
(266 |
) |
|
|
(2,447 |
) |
|
|
(21,283 |
) |
|
|
| |
Prepayments and other assets |
|
1,581 |
|
|
|
2,320 |
|
|
|
(17,067 |
) |
|
|
1,641 |
|
|
|
| |
Accounts payable and accrued expenses |
|
38,887 |
|
|
|
38,551 |
|
|
|
(14,436 |
) |
|
|
(8,155 |
) |
|
|
| |
Deferred revenue and customer advances |
|
9,371 |
|
|
|
874 |
|
|
|
15,826 |
|
|
|
10,518 |
|
|
|
| |
Retirement plans contributions |
|
(1,204 |
) |
|
|
(1,153 |
) |
|
|
(2,414 |
) |
|
|
(2,173 |
) |
|
|
| |
Income taxes |
|
7,831 |
|
|
|
(14,203 |
) |
|
|
(14,973 |
) |
|
|
(26,308 |
) |
|
|
| Net cash provided by operating activities |
|
145,246 |
|
|
|
130,175 |
|
|
|
163,262 |
|
|
|
49,921 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
| |
Purchases of property, plant and equipment |
|
(33,245 |
) |
|
|
(27,866 |
) |
|
|
(58,956 |
) |
|
|
(62,663 |
) |
|
|
| |
Purchases of marketable securities |
|
(108,997 |
) |
|
|
(156,747 |
) |
|
|
(484,181 |
) |
|
|
(647,071 |
) |
|
|
| |
Proceeds from sales of marketable securities |
|
37,014 |
|
|
|
28,382 |
|
|
|
42,454 |
|
|
|
829,053 |
|
|
|
| |
Proceeds from maturities of marketable securities |
|
91,992 |
|
|
|
257,164 |
|
|
|
233,193 |
|
|
|
469,862 |
|
|
|
| |
Proceeds from life insurance |
|
- |
|
|
|
- |
|
|
|
273 |
|
|
|
- |
|
|
|
| |
Purchase of investments and acquisition of businesses, net of cash acquired |
|
(15,000 |
) |
|
|
(145,276 |
) |
|
|
(21,970 |
) |
|
|
(170,632 |
) |
|
|
| Net cash (used for) provided by investing activities |
|
(28,236 |
) |
|
|
(44,343 |
) |
|
|
(289,187 |
) |
|
|
418,549 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
| |
Issuance of common stock under stock purchase and stock option plans |
|
833 |
|
|
|
27 |
|
|
|
15,101 |
|
|
|
10,681 |
|
|
|
| |
Repurchase of common stock |
|
(90,754 |
) |
|
|
(226,519 |
) |
|
|
(247,222 |
) |
|
|
(360,795 |
) |
|
|
| |
Dividend payments |
|
(15,392 |
) |
|
|
(17,094 |
) |
|
|
(31,019 |
) |
|
|
(34,682 |
) |
|
|
| |
Payment related to net settlement of employee stock compensation awards |
|
(128 |
) |
|
|
(122 |
) |
|
|
(14,446 |
) |
|
|
(19,751 |
) |
|
|
| |
Payment of contingent consideration |
|
- |
|
|
|
- |
|
|
|
(27,615 |
) |
|
|
(13,571 |
) |
|
|
| Net cash used for financing activities |
|
(105,441 |
) |
|
|
(243,708 |
) |
|
|
(305,201 |
) |
|
|
(418,118 |
) |
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Effects of exchange rate changes on cash and cash equivalents |
|
(190 |
) |
|
|
387 |
|
|
|
(519 |
) |
|
|
189 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Increase (decrease) in cash and cash equivalents |
|
11,379 |
|
|
|
(157,489 |
) |
|
|
(431,645 |
) |
|
|
50,541 |
|
|
|
| Cash and cash equivalents at beginning of period |
|
483,728 |
|
|
|
637,873 |
|
|
|
926,752 |
|
|
|
429,843 |
|
|
|
| Cash and cash equivalents at end of period |
$ |
495,107 |
|
|
$ |
480,384 |
|
|
$ |
495,107 |
|
|
$ |
480,384 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
