8-K
TERADYNE, INC false 0000097210 0000097210 2019-10-22 2019-10-22

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 22, 2019

 

TERADYNE, INC.

(Exact Name of Registrant as Specified in Charter)

 

Massachusetts

 

001-06462

 

04-2272148

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

600 Riverpark Drive, North Reading, MA

 

01864

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (978) 370-2700

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.125 per share

 

TER

 

Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 


Item 2.02 Results of Operations and Financial Condition.

On October 22, 2019, Teradyne, Inc. (“Teradyne”) issued a press release regarding its financial results for the third quarter ended September 29, 2019. Teradyne’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.


Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit

   

Description

         
 

99.1

   

Press Release dated October 22, 2019.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

TERADYNE, INC.

             

Dated: October 23, 2019

 

 

By:

 

/s/ SANJAY MEHTA

 

 

Name:

 

Sanjay Mehta

 

 

Title:

 

Vice President, Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

Teradyne Reports Third Quarter 2019 Results

 

   

Semiconductor Test demand for 5G infrastructure remained strong

 

   

Memory test shipments grew 23% sequentially on Flash demand

 

   

Industrial Automation revenue up 4% from Q3’18

 

   

Q3’19 GAAP earnings per share grew 19% and Non-GAAP earnings per share grew 8% from Q3’18

 

   

Full year GAAP earnings per share expected to grow 11% and Non-GAAP earnings per share to grow 16% from 2018 at mid-point of guidance

 

     Q3’19      Q3’18      Q2’19  

Revenue (mil)

   $ 582      $ 567      $ 564  

GAAP EPS

   $ 0.75      $ 0.63      $ 0.55  

Non-GAAP EPS

   $ 0.77      $ 0.71      $ 0.66  

==========================================

NORTH READING, Mass. – October 22, 2019 – Teradyne, Inc. (NASDAQ: TER) reported revenue of $582 million for the third quarter of 2019 of which $398 million was in Semiconductor Test, $73 million in System Test, $69 million in Industrial Automation and $42 million in Wireless Test. GAAP net income for the third quarter was $135.9 million or $0.75 per diluted share. On a non-GAAP basis, Teradyne’s net income in the third quarter was $133.4 million, or $0.77 per diluted share, which excluded acquired intangible asset amortization, restructuring and other, non-cash convertible debt interest, discrete income tax adjustments, and included the related tax impact on non-GAAP adjustments.

“Our Semiconductor Test business continued to deliver strong results in the quarter driving company sales and earnings above the July guidance ranges, despite Industrial Automation’s lower than expected revenue growth of 4% compared to last year’s Q3 level,” said Teradyne President and CEO Mark Jagiela. “Ongoing demand for 5G infrastructure and Flash memory test drove our Semiconductor Test performance in the quarter. In Industrial Automation, while mobile robot demand at MiR remained strong, and Universal Robots saw pockets of growth in Asia, overall demand at UR was lower than expected as weakness in the manufacturing sector impacted our business in the US and Europe.”

Guidance for the fourth quarter of 2019 is revenue of $590 million to $630 million, with GAAP net income of $0.63 to $0.74 per diluted share and non-GAAP net income of $0.73 to $0.84 per diluted share. Non-GAAP guidance excludes acquired intangible asset amortization, non-cash convertible debt interest and includes the related tax impact on non-GAAP adjustments.

“In Q4, our strong outlook is driven mainly by continued 5G and memory related Semiconductor Test demand and improved storage test shipments,” Jagiela commented. “For the full year, at the mid-point of our guidance, we expect our year-over-year sales to grow more than 7% to over $2.2 billion and non-GAAP earnings per share to grow 16%.”


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Webcast

A conference call to discuss the third quarter results, along with management’s business outlook, will follow at 10 a.m. ET, Wednesday, October 23. Interested investors should access the webcast at investors.teradyne.com/events-presentations at least five minutes before the call begins. Presentation materials will be available starting at 10 a.m. ET. A replay will be available on the Teradyne investor site at investors.teradyne.com.

Non-GAAP Results

In addition to disclosing results that are determined in accordance with GAAP, Teradyne also discloses non-GAAP results of operations that exclude certain income items and charges. These results are provided as a complement to results provided in accordance with GAAP. Non-GAAP income from operations and non-GAAP net income exclude acquired intangible assets amortization, non-cash convertible debt interest, pension actuarial gains and losses, discrete income tax adjustments, fair value inventory step-up, and restructuring and other, and include the related tax impact on non-GAAP adjustments. GAAP requires that these items be included in determining income from operations and net income. Non-GAAP income from operations, non-GAAP net income, non-GAAP income from operations as a percentage of revenue, non-GAAP net income as a percentage of revenue, and non-GAAP net income per share are non-GAAP performance measures presented to provide meaningful supplemental information regarding Teradyne’s baseline performance before gains, losses or other charges that may not be indicative of Teradyne’s current core business or future outlook. These non-GAAP performance measures are used to make operational decisions, to determine employee compensation, to forecast future operational results, and for comparison with Teradyne’s business plan, historical operating results and the operating results of Teradyne’s competitors. Non-GAAP gross margin excludes fair value inventory step-up. GAAP requires that this item be included in determining gross margin. Non-GAAP gross margin dollar amount and percentage are non-GAAP performance measures that management believes provide useful supplemental information for management and the investor. Management uses non-GAAP gross margin as a performance measure for Teradyne’s current core business and future outlook and for comparison with Teradyne’s business plan, historical gross margin results and the gross margin results of Teradyne’s competitors. Non-GAAP diluted shares include the impact of Teradyne’s call option on its shares. Management believes each of these non-GAAP performance measures provides useful supplemental information for investors, allowing greater transparency to the information used by management in its operational decision making and in the review of Teradyne’s financial and operational performance, as well as facilitating meaningful comparisons of Teradyne’s results in the current period compared with those in prior and future periods. A reconciliation of each available GAAP to non-GAAP financial measure discussed in this press release is contained in the attached exhibits and on the Teradyne website at www.teradyne.com by clicking on “Investors” and then selecting the “GAAP to Non-GAAP Reconciliation” link. The non-GAAP performance measures discussed in this press release may not be comparable to similarly titled


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measures used by other companies. The presentation of non-GAAP measures is not meant to be considered in isolation, as a substitute for, or superior to, financial measures or information provided in accordance with GAAP.

About Teradyne

Teradyne (NASDAQ:TER) brings high-quality innovations such as smart devices, life-saving medical equipment and data storage systems to market, faster. Its advanced test solutions for semiconductors, electronic systems, wireless devices and more ensure that products perform as they were designed. Its Industrial Automation offerings include collaborative and mobile robots that help manufacturers of all sizes improve productivity and lower costs. In 2018, Teradyne had revenue of $2.1 billion and today employs 5,300 people worldwide. For more information, visit teradyne.com. Teradyne® 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 the impact of the U.S. tax reform, export and tariff laws. 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 the impact of the U.S. tax reform, export and tariff laws. 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. On May 16, 2019, Huawei and 68 of its affiliates, including HiSilicon, were added to the U.S. Department of Commerce Entity List under U.S. Export Administration Regulations (the “EAR”). This action by the U.S. Department of Commerce imposes new export licensing requirements on exports, re-exports, and in-country transfers of all U.S.—regulated products, software and technology to the designated Huawei entities. While most of our products are not subject to the EAR and therefore not affected by the Entity List restrictions, certain of our products are currently manufactured in the U.S. and thus subject to the Entity List restrictions. Compliance with the Entity List restrictions has not significantly impacted our sales, but could limit sales in the future. 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 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


Page 4

 

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, including the addition of Huawei and HiSilicon to the U.S. Department of Commerce Entity List; 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, 2018 and the Quarterly Report on Form 10-Q for the period ended June 30, 2019. 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 2019

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 

 

     Quarter Ended     Nine Months Ended  
     September 29,
2019
    June 30,
2019
    September 30,
2018
    September 29,
2019
    September 30,
2018
 

Net revenues

   $ 582,038     $ 564,178     $ 566,848     $ 1,640,315     $ 1,581,244  

Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)

     237,000       240,260       233,155       683,724       670,385  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     345,038       323,918       333,693       956,591       910,859  

Operating expenses:

          

Selling and administrative (2)

     109,166       108,811       100,199       319,990       290,115  

Engineering and development

     77,804       81,434       77,049       236,030       226,799  

Acquired intangible assets amortization

     9,647       10,083       11,142       30,363       28,633  

Restructuring and other (3)

     (6,500     (10,404     1,710       (11,792     3,785  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     190,117       189,924       190,100       574,591       549,332  

Income from operations

     154,921       133,994       143,593       382,000       361,527  

Interest and other expense (4)

     3,188       2,817       2,749       5,111       4,852  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     151,733       131,177       140,844       376,889       356,675  

Income tax provision (5)

     15,873       33,780       20,863       34,494       48,684  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 135,860     $ 97,397     $ 119,981     $ 342,395     $ 307,991  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Net income per common share:

          

 

Basic

   $ 0.80     $ 0.57     $ 0.65     $ 2.00     $ 1.62  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.75     $ 0.55     $ 0.63     $ 1.92     $ 1.57  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Weighted average common shares — basic

     169,641       171,241       185,744       171,471       190,576  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Weighted average common shares — diluted (6)

     180,494       178,590       190,505       178,685       196,300  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Cash dividend declared per common share

   $ 0.09     $ 0.09     $ 0.09     $ 0.27     $ 0.27  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(1)   Cost of revenues includes:    Quarter Ended     Nine Months Ended  
     September 29,
2019
    June 30,
2019
    September 30,
2018
    September 29,
2019
    September 30,
2018
 

Provision for excess and obsolete inventory

   $ 3,049     $ 3,402     $ 3,347     $ 8,848     $ 9,522  

Sale of previously written down inventory

     (821     (363     (1,013     (1,962     (5,178

Inventory step-up

     —         383       —         383       372  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 2,228     $ 3,422     $ 2,334     $ 7,269     $ 4,716  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(2)   For the quarter and nine months ended September 29, 2019, selling and administrative expenses include an equity charge of $2,109 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     Nine Months Ended  
     September 29,
2019
    June 30,
2019
    September 30,
2018
    September 29,
2019
    September 30,
2018
 

Contingent consideration fair value adjustment

   $ (7,759   $ (11,671   $ (768   $ (16,460   $ (9,236

Employee severance

     808       803       1,667       2,410       7,945  

Acquisition related expenses and compensation

     451       464       811       2,258       4,129  

Other

     —         —         —         —         947  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ (6,500   $ (10,404   $ 1,710     $ (11,792   $ 3,785  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(4)   Interest and other includes:    Quarter Ended     Nine Months Ended  
     September 29,
2019
    June 30,
2019
    September 30,
2018
    September 29,
2019
    September 30,
2018
 

Non-cash convertible debt interest

   $ 3,453     $ 3,410     $ 3,286     $ 10,231     $ 9,737  

Pension actuarial loss

     —         448       267       448       196  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 3,453     $ 3,858     $ 3,553     $ 10,679     $ 9,933  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(5)

For the quarter ended June 30, 2019, income tax provision includes a $15 million tax provision related to the finalization of our toll tax charge. For the nine months ended September 29, 2019, income tax provision 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 and a $15 million tax provision related to the finalization of our toll tax charge.

 

(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 quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, 5.8 million, 4.4 million and 3.0 million shares, respectively, have been included in diluted shares. For the nine months ended September 29, 2019 and September 30, 2018, 4.1 million and 3.4 million shares, respectively, have been included in diluted shares. For the three months ended September 29, 2019, June 30, 2019 and September 30, 2018, diluted shares also included 3.6 million, 1.8 million and 0.1 million shares, respectively, from the convertible note hedge transaction. For the nine months ended September 29, 2019 and September 30, 2018, diluted shares included 1.8 million and 0.6 million shares, respectively, from the convertible note hedge transaction.


CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

 

 

     September 29,
2019
     December 31,
2018
 

Assets

     

Cash and cash equivalents

   $ 593,939      $ 926,752  

Marketable securities

     342,538        190,096  

Accounts receivable, net

     357,886        291,267  

Inventories, net

     178,203        153,541  

Prepayments and other current assets

     182,013        170,826  
  

 

 

    

 

 

 

 

Total current assets

     1,654,579        1,732,482  

Property, plant and equipment, net

     307,567        279,821  

Operating lease right-of-use assets, net

     57,595        —    

Marketable securities

     103,558        87,731  

Deferred tax assets

     69,120        70,848  

Other assets

     22,724        11,509  

Retirement plans assets

     16,358        16,883  

Acquired intangible assets, net

     96,573        125,482  

Goodwill

     370,717        381,850  
  

 

 

    

 

 

 

Total assets

   $ 2,698,791      $ 2,706,606  
  

 

 

    

 

 

 

 

Liabilities

     

Accounts payable

   $ 117,936      $ 100,688  

Accrued employees’ compensation and withholdings

     127,912        148,566  

Deferred revenue and customer advances

     95,936        77,711  

Other accrued liabilities

     93,736        78,272  

Operating lease liabilities

     18,386        —    

Contingent consideration

     6,297        34,865  

Income taxes payable

     33,508        36,185  
  

 

 

    

 

 

 

 

Total current liabilities

     493,711        476,287  

Retirement plans liabilities

     121,340        117,456  

Long-term deferred revenue and customer advances

     42,592        32,750  

Deferred tax liabilities

     15,390        20,662  

Long-term other accrued liabilities

     9,803        37,547  

Long-term contingent consideration

     11,783        35,678  

Long-term operating lease liabilities

     46,813        —    

Long-term income taxes payable

     83,782        83,891  

Debt

     390,942        379,981  
  

 

 

    

 

 

 

Total liabilities

     1,216,156        1,184,252  

 

Shareholders’ equity

     1,482,635        1,522,354  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 2,698,791      $ 2,706,606  
  

 

 

    

 

 

 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

 

 

     Quarter Ended     Nine Months Ended  
     September 29,
2019
    September 30,
2018
    September 29,
2019
    September 30,
2018
 

Cash flows from operating activities:

        

Net income

   $ 135,860     $ 119,981     $ 342,395     $ 307,991  

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation

     17,626       16,774       51,508       49,930  

Amortization

     11,873       12,732       36,849       32,909  

Deferred taxes

     (3,492     7,130       (2,977     24,442  

Stock-based compensation

     10,713       7,702       28,822       25,327  

Provision for excess and obsolete inventory

     3,049       3,347       8,848       9,522  

Contingent consideration fair value adjustment

     (7,759     (768     (16,460     (9,236

Retirement plan actuarial loss

     —         267       448       196  

Gains on marketable securities

     (417     (1,182     (4,158     (420

Other

     181       530       610       936  

Changes in operating assets and liabilities, net of businesses acquired:

        

Accounts receivable

     12,689       101,596       (66,789     (77,807

Inventories

     (11,696     (12,834     (14,143     (34,117

Prepayments and other assets

     949       (30,360     (16,118     (28,719

Accounts payable and other liabilities

     35,231       24,279       20,807       16,124  

Deferred revenue and customer advances

     11,953       (695     27,779       9,823  

Retirement plans contributions

     (1,361     (1,071     (3,775     (3,244

Income taxes

     (16,251     (6,844     (31,224     (33,152
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     199,148       240,584       362,422       290,505  

Cash flows from investing activities:

        

Purchases of property, plant and equipment

     (37,092     (25,606     (96,048     (88,269

Proceeds from government subsidy for property, plant and equipment

     —         7,920       —         7,920  

Purchases of marketable securities

     (121,358     (162,450     (605,539     (809,521

Proceeds from sales of marketable securities

     17,820       14,111       60,274       843,164  

Proceeds from maturities of marketable securities

     160,279       464,238       393,472       934,100  

Proceeds from life insurance

     2,639       1,126       2,912       1,126  

Purchase of investments and acquisition of businesses, net of cash acquired

     —         1,158       (21,970     (169,474
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) investing activities

     22,288       300,497       (266,899     719,046  

Cash flows from financing activities:

        

Issuance of common stock under stock purchase and stock option plans

     14,191       10,278       29,280       20,959  

Repurchase of common stock

     (121,560     (201,468     (368,782     (562,263

Dividend payments

     (15,250     (16,638     (46,269     (51,320

Payments related to net settlement of employee stock compensation awards

     (104     (90     (14,550     (19,841

Payments of contingent consideration

     —         —         (27,615     (13,571
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

     (122,723     (207,918     (427,936     (626,036

Effects of exchange rate changes on cash and cash equivalents

     119       472       (400     661  

Increase (decrease) in cash and cash equivalents

     98,832       333,635       (332,813     384,176  

Cash and cash equivalents at beginning of period

     495,107       480,384       926,752       429,843  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 593,939     $ 814,019     $ 593,939     $ 814,019  
  

 

 

   

 

 

   

 

 

   

 

 

 


GAAP to Non-GAAP Earnings Reconciliation

(In millions, except per share amounts)

 

     Quarter Ended  
     September 29,
2019
    % of Net
Revenues
                June 30,
2019
    % of Net
Revenues
                September 30,
2018
    % of Net
Revenues
             

Net revenues

   $ 582.0           $ 564.2           $ 566.8        

Gross profit GAAP

   $ 345.0       59.3       $ 323.9       57.4       $ 333.7       58.9    

Inventory step-up

     —         —             0.4       0.1         —         —        
  

 

 

   

 

 

       

 

 

   

 

 

       

 

 

   

 

 

     

Gross profit non-GAAP

   $ 345.0       59.3       $ 324.3       57.5       $ 333.7       58.9    

Income from operations — GAAP

   $ 154.9       26.6       $ 134.0       23.8       $ 143.6       25.3    

Acquired intangible assets amortization

     9.6       1.6         10.1       1.8         11.1       2.0    

Equity modification charge (1)

     2.1       0.4         —         —             —         —        

Restructuring and other (2)

     (6.5     -1.1         (10.4     -1.8         1.7       0.3    

Inventory step-up

     —         —             0.4       0.1         —         —        
  

 

 

   

 

 

       

 

 

   

 

 

       

 

 

   

 

 

     

Income from operations — non-GAAP

   $ 160.1       27.5       $ 134.1       23.8       $ 156.4       27.6    
  

 

 

   

 

 

       

 

 

   

 

 

       

 

 

   

 

 

     
                 Net Income
per Common
Share
                Net Income
per Common
Share
                Net Income
per Common
Share
 
     September 29,
2019
    % of Net
Revenues
    Basic     Diluted     June 30,
2019
    % of Net
Revenues
    Basic     Diluted     September 30,
2018
    % of Net
Revenues
    Basic     Diluted  

Net income — GAAP

   $ 135.9       23.4   $ 0.80     $ 0.75     $ 97.4       17.3   $ 0.57     $ 0.55     $ 120.0       21.2   $ 0.65     $ 0.63  

Acquired intangible assets amortization

     9.6       1.6     0.06       0.05       10.1       1.8     0.06       0.06       11.1       2.0     0.06       0.06  

Interest and other (3)

     3.5       0.6     0.02       0.02       3.4       0.6     0.02       0.02       3.3       0.6     0.02       0.02  

Equity modification charge (1)

     2.1       0.4     0.01       0.01       —         —         —         —         —         —         —         —    

Restructuring and other (2)

     (6.5     -1.1     (0.04     (0.04     (10.4     -1.8     (0.06     (0.06     1.7       0.3     0.01       0.01  

Pension mark-to-market adjustment (3)

     —         —         —         —         0.4       0.1     0.00       0.00       0.3       0.1     0.00       0.00  

Inventory step-up

     —         —         —         —         0.4       0.1     0.00       0.00       —         —         —         —    

Exclude discrete tax adjustments (4)

     (7.7     -1.3     (0.05     (0.04     13.9       2.5     0.08       0.08       0.3       0.1     0.00       0.00  

Non-GAAP tax adjustments

     (3.5     -0.6     (0.02     (0.02     (2.0     -0.4     (0.01     (0.01     (3.4     -0.6     (0.02     (0.02

Convertible share adjustment

     —         —         —         0.02       —         —         —         0.02       —         —         —         0.01  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income — non-GAAP

   $ 133.4       22.9   $ 0.79     $ 0.77     $ 113.2       20.1   $ 0.66     $ 0.66     $ 133.3       23.5   $ 0.72     $ 0.71  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP and non-GAAP weighted average common shares — basic

     169.6             171.2             185.7        

GAAP weighted average common shares — diluted

     180.5             178.6             190.5        

Exclude dilutive shares related to convertible note transaction

     (5.8           (6.2           (3.1      
  

 

 

         

 

 

         

 

 

       

Non-GAAP weighted average common shares — diluted

     174.7             172.4             187.4        
  

 

 

         

 

 

         

 

 

       

 

(1)   For the quarter ended September 29, 2019, selling and administrative expenses include an equity charge 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.

    

 

(2)   Restructuring and other consists of:

    

 
     Quarter Ended                    
     September 29,
2019
                      June 30,
2019
                      September 30,
2018
                   

Contingent consideration fair value adjustment

   $ (7.8         $ (11.7         $ (0.8      

Acquisition related expenses and compensation

     0.5             0.5             0.8        

Employee severance

     0.8             0.8             1.7        
  

 

 

         

 

 

         

 

 

       
   $ (6.5         $ (10.4         $ 1.7        
  

 

 

         

 

 

         

 

 

       

 

(3)

For the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended June 30, 2019 and September 30, 2018, adjustment to exclude actuarial losses recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting.

 

(4)

For the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, adjustment to exclude discrete income tax items. For the quarter ended June 30, 2019, GAAP income tax provision includes a $15 million tax provision related to the finalization of our toll tax charge.


     Nine Months Ended  
     September 29,
2019
    % of Net
Revenues
                September 30,
2018
    % of Net
Revenues
             

Net Revenues

   $ 1,640.3           $ 1,581.2        

Gross profit GAAP

   $ 956.6       58.3       $ 910.9       57.6    

Inventory step-up

     0.4       0.0         0.4       0.0    
  

 

 

   

 

 

       

 

 

   

 

 

     

Gross profit non-GAAP

   $ 957.0       58.3       $ 911.3       57.6    

Income from operations — GAAP

   $ 382.0       23.3       $ 361.5       22.9    

Acquired intangible assets amortization

     30.4       1.9         28.6       1.8    

Equity modification charge (1)

     2.1       0.1         —         —        

Restructuring and other (2)

     (11.8     -0.7         3.8       0.2    

Inventory step-up

     0.4       0.0         0.4       0.0    
  

 

 

   

 

 

       

 

 

   

 

 

     

Income from operations — non-GAAP

   $ 403.1       24.6       $ 394.3       24.9    
  

 

 

   

 

 

       

 

 

   

 

 

     
                 Net Income
per Common
Share
                Net Income
per Common
Share
 
     September 29,
2019
    % of Net
Revenues
    Basic     Diluted     September 30,
2018
    % of Net
Revenues
    Basic     Diluted  

Net income — GAAP

   $ 342.4       20.9   $ 2.00     $ 1.92     $ 308.0       19.5   $ 1.62     $ 1.57  

Acquired intangible assets amortization

     30.4       1.9     0.18       0.17       28.6       1.8     0.15       0.15  

Interest and other (3)

     10.2       0.6     0.06       0.06       9.7       0.6     0.05       0.05  

Equity modification charge (1)

     2.1       0.1     0.01       0.01       —         —         —         —    

Restructuring and other (2)

     (11.8     -0.7     (0.07     (0.07     3.8       0.2     0.02       0.02  

Inventory step-up

     0.4       0.0     0.00       0.00       0.4       0.0     0.00       0.00  

Pension mark-to-market adjustment (3)

     0.4       0.0     0.00       0.00       0.2       0.0     0.00       0.00  

Exclude discrete tax adjustments (4)

     (23.9     -1.5     (0.14     (0.13     (6.5     -0.4     (0.03     (0.03

Non-GAAP tax adjustments

     (9.0     -0.5     (0.05     (0.05     (8.7     -0.6     (0.05     (0.04

Convertible share adjustment

     —         —         —         0.06       —         —         —         0.03  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income — non-GAAP

   $ 341.2       20.8   $ 1.99     $ 1.97     $ 335.5       21.2   $ 1.76     $ 1.74  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP and non-GAAP weighted average common shares — basic

     171.5             190.6        

GAAP weighted average common shares — diluted

     178.7             196.3        

Exclude dilutive shares from convertible note

     (5.9           (4.0      
  

 

 

         

 

 

       

Non-GAAP weighted average common shares — diluted

     172.8             192.3        
  

 

 

         

 

 

       

 

(1)   For the nine months ended September 29, 2019, selling and administrative expenses include an equity charge 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.

    

(2)   Restructuring and other consists of:

    

     Nine Months Ended                    
     September 29,
2019
                      September 30,
2018
                   

Contingent consideration fair value adjustment

   $ (16.5         $ (9.2      

Acquisition related expenses and compensation

     2.3             4.1        

Employee severance

     2.4             7.9        

Other

     —               0.9        
  

 

 

         

 

 

       
   $ (11.8         $ 3.8        
  

 

 

         

 

 

       

(3)   For the nine months ended September 29, 2019 and September 30, 2018, Interest and other included non-cash convertible debt interest expense. For the nine months ended September 29, 2019 and September 30, 2018, adjustments to exclude actuarial losses recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting.

    

(4)   For the nine months ended September 29, 2019 and September 30, 2018, adjustment to exclude discrete income tax items. For the nine months ended September 29, 2019, GAAP income tax provision 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 and includes a $15 million tax provision related to the finalization of our toll tax charge.

    

 

GAAP to Non-GAAP Reconciliation of Fourth Quarter 2019 guidance:

 

GAAP and non-GAAP fourth quarter revenue guidance:

   $ 590 million       to      $ 630 million  

GAAP net income per diluted share

   $ 0.63        $ 0.74  

Exclude acquired intangible assets amortization

     0.06          0.06  

Exclude non-cash convertible debt interest

     0.02          0.02  

Tax effect of non-GAAP adjustments

     (0.01        (0.01

Convertible share adjustment

     0.03          0.03  
  

 

 

      

 

 

 

Non-GAAP net income per diluted share

   $ 0.73        $ 0.84  
For press releases and other information of interest to investors, please visit Teradyne’s homepage at http://www.teradyne.com.

 

Contact: Teradyne, Inc.

 

Andy Blanchard 978-370-2425

 

Vice President of Corporate Relations