8-K
TERADYNE, INC false 0000097210 0000097210 2020-07-21 2020-07-21

 

 

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): July 21, 2020

 

 

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 July 21, 2020, Teradyne, Inc. (“Teradyne”) issued a press release regarding its financial results for the second quarter ended June 28, 2020. 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 July 21, 2020.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)


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: July 22, 2020     By:  

/S/ SANJAY MEHTA

    Name:   Sanjay Mehta
    Title:   Vice President, Chief Financial Officer and Treasurer
EX-99.1

Exhibit 99.1

Teradyne Reports Second Quarter 2020 Results

 

   

Revenue of $839 million in Q2’20 grew 49% from Q2’19

 

   

Q2’20 GAAP earnings per share grew 91% and Non-GAAP earnings per share grew 102% from Q2’19

 

   

Test revenue grew 59% from Q2’19 on Semiconductor Test strength

 

   

Industrial Automation revenue declined 21% from Q2’19 on global manufacturing weakness

 

   

Q3’20 Revenue guidance at mid-point represents 33% growth from Q3’19

 

     Q2’20      Q2’19      Q1’20      1H’20      1H’19  

Revenue (mil)

   $ 839      $ 564      $ 704      $ 1,543      $ 1,058  

GAAP EPS

   $ 1.05      $ 0.55      $ 0.97      $ 2.02      $ 1.16  

Non-GAAP EPS

   $ 1.33      $ 0.66      $ 1.00      $ 2.34      $ 1.20  

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

NORTH READING, Mass. – July 21, 2020 – Teradyne, Inc. (NASDAQ: TER) reported revenue of $839 million for the second quarter of 2020 of which $659 million was in Semiconductor Test, $72 million in System Test, $49 million in Wireless Test and $59 million in Industrial Automation (IA). GAAP net income for the second quarter was $188.9 million or $1.05 per diluted share. On a non-GAAP basis, Teradyne’s net income in the second quarter was $229.2 million, or $1.33 per diluted share, which excluded restructuring and other charges, acquired intangible asset amortization, non-cash convertible debt interest, discrete tax adjustments and included the related tax impact on non-GAAP adjustments.

“Stronger than expected System on a Chip (SOC) test shipments driven by accelerated demand for mobility related test capacity, combined with success in navigating supply constraints, led to revenue and profits above the high end of our guidance range in the second quarter,” said CEO and President Mark Jagiela. “Industrial Automation sales, while down from the year ago period due to the global slowdown in business activity, improved monthly through the quarter.

“Guidance for the third quarter reflects increased memory and storage test shipments along with production ramps of new product design wins in SOC test.”

Guidance for the third quarter of 2020 is revenue of $745 million to $805 million, with GAAP net income of $0.91 to $1.06 per diluted share and non-GAAP net income of $1.01 to $1.17 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.


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Webcast

A conference call to discuss the second quarter results, along with management’s business outlook, will follow at 8:30 a.m. ET, Wednesday, July 22. Interested investors should access the webcast at www.teradyne.com and click on “Investors” at least five minutes before the call begins. Presentation materials will be available starting at 8:30 a.m. ET. A replay will be available on the Teradyne website at www.teradyne.com/investors.

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 includes 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 “Investor Relations” and then selecting “Financials” and the “GAAP to Non-GAAP Reconciliation” link. The non-GAAP performance measures discussed in this press release may not be comparable to similarly titled 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.


Page 3

 

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 2019, Teradyne had revenue of $2.3 billion and today employs 5,500 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, the impact of the COVID-19 outbreak, 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, and the impact of U.S. 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, the impact of the COVID-19 outbreak, or the impact of U.S. 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 program 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 imposed 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 Teradyne’s products are not subject to the EAR and therefore not affected by the Entity List restrictions, some of its products are currently manufactured in the U.S. and thus subject to the Entity List restrictions. Compliance with the current Entity List restrictions has not significantly impacted Teradyne’s sales.

On May 15, 2020, the U.S. Department of Commerce published new regulations expanding the scope of the U.S. EAR to include additional products that would become subject to the Entity List restrictions relating to Huawei and the designated Huawei entities including HiSilicon. The comment period for the new regulations ended on July 14, 2020. These new regulations restrict the sale to Huawei and the designated Huawei entities of items, such as semiconductor devices, manufactured by Huawei’s contract manufacturers under specific, detailed conditions set forth in the new regulations. While the new regulations do not impose any new restrictions on Teradyne directly, the new regulations may impact Teradyne’s sales to third party contract manufacturers used by Huawei and HiSilicon to manufacture and test semiconductor and other electronic devices. Because the impact of these new regulations on Huawei’s business is both fluid


Page 4

 

and uncertain, at this time, Teradyne does not know the potential extent of the impact of the new regulations on its business with Huawei, HiSilicon and their contract manufacturers. However, it is possible that these new regulations and any other additional regulations that may be implemented by the U.S. Department of Commerce or other government agency could have a material impact on Teradyne’s business and financial results.

On April 28, 2020, the Department of Commerce published new export control regulations for certain U.S. products and technology sold to military and civilian end users in China. The regulations went into effect on June 29, 2020. Teradyne does not expect that compliance with the new export controls will significantly impact its ability to sell products to its customers in China or to manufacture products in China. The new export controls, however, could disrupt the Company’s supply chain, increase compliance costs and impact the demand for the Company’s products in China and, thus, have a material adverse impact on Teradyne’s business, financial condition or results of operations. In addition, while the Company maintains an export compliance program, its compliance controls could be circumvented, exposing the Company to legal liabilities. Teradyne will continue to assess the potential impact of the new export controls on its business and operations and take appropriate actions, including filing for licenses with the Department of Commerce, to minimize any disruption. However, Teradyne cannot be certain that the actions it takes will mitigate all of the risks associated with the new export controls that may impact its business.

The global outbreak of the recent novel strain of the coronavirus (COVID-19) has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns. These measures have impacted and may further impact Teradyne’s workforce and operations, the operations of its customers, and those of its contract manufacturers and suppliers. The COVID-19 pandemic has adversely impacted the Company’s results of operations, including increased costs company-wide and decreased sales in its industrial automation businesses. At this time, the Company cannot accurately estimate the amount of the impact for Teradyne’s 2020 financial results and to its future financial results. There is considerable uncertainty regarding the impact on Teradyne’s business from the measures in place and potential future measures, and restrictions on Teradyne’s access to its manufacturing facilities or on its support operations or workforce, or similar limitations for its contractor manufacturers and suppliers, and restrictions or disruptions of transportation, such as reduced availability of transportation and increased border controls or closures, could limit Teradyne’s capacity to meet customer demand and have a material adverse effect on its financial condition and results of operations. The COVID-19 outbreak has significantly increased economic and demand uncertainty in Teradyne’s markets. This uncertainty could result in a significant decrease in demand for Teradyne’s products for an uncertain period of time. The spread of COVID-19 has caused Teradyne to modify its business practices (including employee travel, employees working remotely, and cancellation of physical participation in meetings, events and conferences), and the Company may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, contract manufacturers and suppliers. There is uncertainty that


Page 5

 

such measures will be sufficient to mitigate the risks posed by the virus, and Teradyne’s ability to perform critical functions could be impacted. Due to the uncertainty regarding the length, severity and potential business impact of the COVID-19 pandemic, Teradyne has suspended its stock repurchase program announced in January 2020. At this time, Teradyne does not know whether or when it will continue its 2020 repurchase plan or authorize future stock repurchase programs. The degree to which COVID-19 impacts Teradyne’s results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and continued spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

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 impact of the COVID-19 outbreak and related government responses on the market and demand for Teradyne’s products, on its contract manufacturers and supply chain, and on its workforce; 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 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; the impact of U.S. Department of Commerce or other government agency regulations relating to Huawei and HiSilicon; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” sections of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2020. 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 SECOND FISCAL QUARTER OF 2020    

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 

 

     Quarter Ended     Six Months Ended  
     June 28,
2020
    March 29,
2020
    June 30,
2019
    June 28,
2020
    June 30,
2019
 

Net revenues

   $ 838,661     $ 704,355     $ 564,178     $ 1,543,016     $ 1,058,277  

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

     367,188       298,805       240,260       665,993       446,724  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     471,473       405,550       323,918       877,023       611,553  

Operating expenses:

          

Selling and administrative

     113,259       111,388       108,811       224,647       210,824  

Engineering and development

     94,102       85,159       81,434       179,261       158,225  

Acquired intangible assets amortization

     8,941       9,891       10,083       18,832       20,717  

Restructuring and other (2)

     37,222       (7,606     (10,404     29,616       (5,292
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     253,524       198,832       189,924       452,356       384,474  

Income from operations

     217,949       206,718       133,994       424,667       227,079  

Interest and other expense (3)

     658       9,649       2,817       10,308       1,923  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     217,291       197,069       131,177       414,359       225,156  

Income tax provision

     28,383       20,878       33,780       49,261       18,621  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 188,908     $ 176,191     $ 97,397     $ 365,098     $ 206,535  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Net income per common share:

          

Basic

   $ 1.14     $ 1.06     $ 0.57     $ 2.20     $ 1.20  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 1.05     $ 0.97     $ 0.55     $ 2.02     $ 1.16  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares — basic

     165,789       166,589       171,241       166,189       172,387  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares — diluted (4)

     180,257       180,736       178,590       180,497       177,781  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash dividend declared per common share

   $ 0.10     $ 0.10     $ 0.09     $ 0.20     $ 0.18  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(1)   Cost of revenues includes:    Quarter Ended     Six Months Ended  
     June 28,
2020
    March 29,
2020
    June 30,
2019
    June 28,
2020
    June 30,
2019
 

Provision for excess and obsolete inventory

   $ 5,580     $ 4,057     $ 3,402     $ 9,637     $ 5,799  

Sale of previously written down inventory

     (337     (1,077     (363     (1,414     (1,141

Inventory step-up

     121       118       383       239       383  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 5,364     $ 3,098     $ 3,422     $ 8,462     $ 5,041  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(2)   Restructuring and other consists of:    Quarter Ended     Six Months Ended  
     June 28,
2020
    March 29,
2020
    June 30,
2019
    June 28,
2020
    June 30,
2019
 

Contingent consideration fair value adjustment

   $ 29,259     $ (10,020   $ (11,671   $ 19,239     $ (8,701

Contract termination settlement fee

     4,000       —         —         4,000       —    

Acquisition related expenses and compensation

     3,145       1,358       464       4,503       1,807  

Employee severance

     36       728       803       764       1,602  

Other

     782       328       —         1,110       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 37,222     $ (7,606   $ (10,404   $ 29,616     $ (5,292
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(3)   Interest and other includes:    Quarter Ended     Six Months Ended  
     June 28,
2020
    March 29,
2020
    June 30,
2019
    June 28,
2020
    June 30,
2019
 

Non-cash convertible debt interest

   $ 3,584     $ 3,540     $ 3,410     $ 7,124     $ 6,778  

Pension actuarial (gains) losses

     (99     —         448       (99     448  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 3,485     $ 3,540     $ 3,858     $ 7,025     $ 7,226  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(4)

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 28, 2020, March 29, 2020 and June 30, 2019, 7.6 million, 7.3 million and 4.4 million shares, respectively, have been included in diluted shares. For the six months ended June 28, 2020 and June 30, 2019, 7.5 million and 3.3 million shares, respectively, have been included in diluted shares. For the quarters ended June 28, 2020, March 29, 2020 and June 30, 2019, diluted shares also included 5.8 million, 5.5 million and 1.8 million shares, respectively from the convertible note hedge transaction. For the six months ended June 28, 2020 and June 30, 2019, diluted shares also included 5.7 million and 0.9 million shares, respectively, from the convertible note hedge transaction.


CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

 

 

     June 28,
2020
     December 31,
2019
 

Assets

        

Cash and cash equivalents

   $ 728,306      $ 773,924  

Marketable securities

     229,791        137,303  

Accounts receivable, net

     694,521        362,368  

Inventories, net

     206,088        196,691  

Prepayments and other current assets

     238,176        188,598  
  

 

 

    

 

 

 

 

Total current assets

     2,096,882        1,658,884  

Property, plant and equipment, net

     353,595        320,216  

Operating lease right-of-use assets, net

     56,172        57,539  

Marketable securities

     106,968        104,490  

Deferred tax assets

     79,210        75,185  

Retirement plans assets

     17,817        18,457  

Other assets

     11,854        10,332  

Acquired intangible assets, net

     107,563        125,480  

Goodwill

     422,003        416,431  
  

 

 

    

 

 

 

Total assets

   $ 3,252,064      $ 2,787,014  
  

 

 

    

 

 

 

Liabilities

     

Accounts payable

   $ 184,163      $ 126,617  

Accrued employees’ compensation and withholdings

     175,589        163,883  

Deferred revenue and customer advances

     124,224        104,876  

Other accrued liabilities

     122,607        70,871  

Operating lease liabilities

     20,000        19,476  

Contingent consideration

     16,789        9,106  

Income taxes payable

     89,216        44,200  
  

 

 

    

 

 

 

 

Total current liabilities

     732,588        539,029  

Retirement plans liabilities

     130,826        134,471  

Long-term deferred revenue and customer advances

     55,634        45,974  

Long-term contingent consideration

     32,948        30,599  

Long-term other accrued liabilities

     22,703        19,535  

Deferred tax liabilities

     11,997        14,070  

Long-term operating lease liabilities

     43,582        45,849  

Long-term income taxes payable

     74,930        82,642  

Debt

     402,305        394,687  
  

 

 

    

 

 

 

Total liabilities

     1,507,513        1,306,856  
  

 

 

    

 

 

 

Shareholders’ equity

     1,744,551        1,480,158  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,252,064      $ 2,787,014  
  

 

 

    

 

 

 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

 

 

     Quarter Ended     Six Months Ended  
     June 28,
2020
    June 30,
2019
    June 28,
2020
    June 30,
2019
 

Cash flows from operating activities:

        

Net income

   $ 188,908     $ 97,397     $ 365,098     $ 206,535  

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

        

Contingent consideration fair value adjustment

     29,259       (11,671     19,239       (8,701

Depreciation

     19,816       17,231       38,305       33,882  

Amortization

     12,843       12,034       26,234       24,976  

Stock-based compensation

     10,907       8,635       21,367       18,109  

Provision for excess and obsolete inventory

     5,580       3,402       9,637       5,799  

Gains on investments

     (5,126     (913     (469     (3,741

Deferred taxes

     (5,338     (691     (7,163     515  

Retirement plan actuarial (gains) losses

     (99     448       (99     448  

Other

     19       210       523       429  

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

 

     

Accounts receivable

     (204,261     (37,772     (331,040     (79,478

Inventories

     (19,546     470       (3,728     (2,447

Prepayments and other assets

     (9,859     1,581       (49,479     (17,067

Accounts payable and other liabilities

     151,776       38,887       116,453       (14,424

Deferred revenue and customer advances

     29,568       9,371       28,655       15,826  

Retirement plans contributions

     (1,239     (1,204     (2,501     (2,414

Income taxes

     22,564       7,831       37,842       (14,973
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     225,772       145,246       268,874       163,274  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

        

Purchases of property, plant and equipment

     (47,314     (33,245     (84,014     (58,956

Purchases of marketable securities

     (112,429     (108,997     (299,548     (484,181

Proceeds from maturities of marketable securities

     84,527       91,992       182,984       233,193  

Proceeds from sales of marketable securities

     11,656       37,014       26,661       42,454  

Proceeds from life insurance

     546       —         546       273  

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

     —         (15,000     149       (21,970
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (63,014     (28,236     (173,222     (289,187
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

        

Issuance of common stock under stock purchase and stock option plans

     5       833       12,757       15,089  

Repurchase of common stock

     (9,426     (90,754     (88,465     (247,222

Dividend payments

     (16,580     (15,392     (33,266     (31,019

Payments related to net settlement of employee stock compensation awards

     (449     (128     (22,519     (14,446

Payments of contingent consideration

     —         —         (8,852     (27,615
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

     (26,450     (105,441     (140,345     (305,213
  

 

 

   

 

 

   

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     (1,496     (190     (925     (519
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     134,812       11,379       (45,618     (431,645

Cash and cash equivalents at beginning of period

     593,494       483,728       773,924       926,752  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 728,306     $ 495,107     $ 728,306     $ 495,107  
  

 

 

   

 

 

   

 

 

   

 

 

 


GAAP to Non-GAAP Earnings Reconciliation    

(In millions, except per share amounts)    

 

    Quarter Ended  
    June 28,
2020
    % of Net
Revenues
                March 29,
2020
    % of Net
Revenues
                June 30,
2019
    % of Net
Revenues
             

Net revenues

  $ 838.7           $ 704.4           $ 564.2        

Gross profit GAAP

  $ 471.5       56.2       $ 405.6       57.6       $ 323.9       57.4    

Inventory step-up

    0.1       0.0         0.1       0.0         0.4       0.1    
 

 

 

   

 

 

       

 

 

   

 

 

       

 

 

   

 

 

     

Gross profit non-GAAP

  $ 471.6       56.2       $ 405.7       57.6       $ 324.3       57.5    

Income from operations — GAAP

  $ 217.9       26.0       $ 206.7       29.3       $ 134.0       23.8    

Restructuring and other (1)

    37.2       4.4         (7.6     -1.1         (10.4     -1.8    

Acquired intangible assets amortization

    8.9       1.1         9.9       1.4         10.1       1.8    

Inventory step-up

    0.1       0.0         0.1       0.0         0.4       0.1    
 

 

 

   

 

 

       

 

 

   

 

 

       

 

 

   

 

 

     

Income from operations — non-GAAP

  $ 264.1       31.5       $ 209.1       29.7       $ 134.1       23.8    
 

 

 

   

 

 

       

 

 

   

 

 

       

 

 

   

 

 

     
                Net Income
per Common
Share
                Net Income
per Common
Share
                Net Income
per Common
Share
 
    June 28,
2020
    % of Net
Revenues
    Basic     Diluted     March 29,
2020
    % of Net
Revenues
    Basic     Diluted     June 30,
2019
    % of Net
Revenues
    Basic     Diluted  

Net income — GAAP

  $ 188.9       22.5   $ 1.14     $ 1.05     $ 176.2       25.0   $ 1.06     $ 0.97     $ 97.4       17.3   $ 0.57     $ 0.55  

Restructuring and other (1)

    37.2       4.4     0.22       0.21       (7.6     -1.1     (0.05     (0.04     (10.4     -1.8     (0.06     (0.06

Acquired intangible assets amortization

    8.9       1.1     0.05       0.05       9.9       1.4     0.06       0.05       10.1       1.8     0.06       0.06  

Interest and other (2)

    3.6       0.4     0.02       0.02       3.5       0.5     0.02       0.02       3.4       0.6     0.02       0.02  

Inventory step-up

    0.1       0.0     0.00       0.00       0.1       0.0     0.00       0.00       0.4       0.1     0.00       0.00  

Pension mark-to-market adjustment (2)

    (0.1     0.0     (0.00     (0.00     —         —         —         —         0.4       0.1     0.00       0.00  

Exclude discrete tax adjustments (3)

    (1.1     -0.1     (0.01     (0.01     (7.7     -1.1     (0.05     (0.04     13.9       2.5     0.08       0.08  

Non-GAAP tax adjustments

    (8.3     -1.0     (0.05     (0.05     (1.9     -0.3     (0.01     (0.01     (2.0     -0.4     (0.01     (0.01

Convertible share adjustment (4)

    —         —         —         0.06       —         —         —         0.04       —         —         —         0.02  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income — non-GAAP

  $ 229.2       27.3   $ 1.38     $ 1.33     $ 172.5       24.5   $ 1.04     $ 1.00     $ 113.2       20.1   $ 0.66     $ 0.66  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP and non-GAAP weighted average common shares — basic

    165.8             166.6             171.2        

GAAP weighted average common shares — diluted

    180.3             180.7             178.6        

Exclude dilutive shares related to convertible note transaction

    (7.6           (7.3           (6.2      
 

 

 

         

 

 

         

 

 

       

Non-GAAP weighted average common shares — diluted

    172.7             173.4             172.4        
 

 

 

         

 

 

         

 

 

       

(1)   Restructuring and other consists of:

    

 
    Quarter Ended                    
    June 28,
2020
                      March 29,
2020
                      June 30,
2019
                   

Contingent consideration fair value adjustment

  $ 29.3           $ (10.0         $ (11.7      

Contract termination settlement fee

    4.0             —               —          

Acquisition related expenses and compensation

    3.1             1.4             0.5        

Employee severance

    —               0.7             0.8        

Other

    0.8             0.3             —          
 

 

 

         

 

 

         

 

 

       
  $ 37.2           $ (7.6         $ (10.4      
 

 

 

         

 

 

         

 

 

       

 

(2)

For the quarters ended June 28, 2020, March 29, 2020, and June 30, 2019, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended June 28, 2020 and June 30, 2019, adjustment to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting.

 

(3)

For the quarters ended June 28, 2020, March 29, 2020, and June 30, 2019, adjustment to exclude discrete income tax items. For the quarter ended June 30, 2019, income tax (benefit) provision includes a $15 million tax provision related to the finalization of our toll tax charge.

 

(4)

For the quarters ended June 28, 2020 and March 29, 2020, the non-GAAP diluted EPS calculation adds back $1.3 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 5.8 million and 5.5 million shares, respectively, related to the convertible debt hedge transaction.


     Six Months Ended  
     June 28,
2020
    % of Net
Revenues
                June 30,
2019
    % of Net
Revenues
             

Net Revenues

   $ 1,543.0           $ 1,058.3        

Gross profit GAAP

   $ 877.0       56.8       $ 611.6       57.8    

Inventory step-up

     0.2       0.0         0.4       0.0    
  

 

 

   

 

 

       

 

 

   

 

 

     

Gross profit non-GAAP

   $ 877.2       56.9       $ 612.0       57.8    

Income from operations — GAAP

   $ 424.7       27.5       $ 227.1       21.5    

Restructuring and other (1)

     29.6       1.9         (5.3     -0.5    

Acquired intangible assets amortization

     18.8       1.2         20.7       2.0    

Inventory step-up

     0.2       0.0         0.4       0.0    
  

 

 

   

 

 

       

 

 

   

 

 

     

Income from operations — non-GAAP

   $ 473.3       30.7       $ 242.9       23.0    
  

 

 

   

 

 

       

 

 

   

 

 

     
                 Net Income
per Common
Share
                Net Income
per Common
Share
 
     June 28,
2020
    % of Net
Revenues
    Basic     Diluted     June 30,
2019
    % of Net
Revenues
    Basic     Diluted  

Net income — GAAP

   $ 365.1       23.7   $ 2.20     $ 2.02     $ 206.5       19.5   $ 1.20     $ 1.16  

Restructuring and other (1)

     29.6       1.9     0.18       0.16       (5.3     -0.5     (0.03     (0.03

Acquired intangible assets amortization

     18.8       1.2     0.11       0.10       20.7       2.0     0.12       0.12  

Interest and other (2)

     7.1       0.5     0.04       0.04       6.8       0.6     0.04       0.04  

Inventory step-up

     0.2       0.0     0.00       0.00       0.4       0.0     0.00       0.00  

Pension mark-to-market adjustment (2)

     (0.1     0.0     (0.00     (0.00     0.4       0.0     0.00       0.00  

Exclude discrete tax adjustments (3)

     (8.7     -0.6     (0.05     (0.05     (16.2     -1.5     (0.09     (0.09

Non-GAAP tax adjustments

     (10.1     -0.7     (0.06     (0.06     (5.5     -0.5     (0.03     (0.03

Convertible share adjustment(4)

     —         —         —         0.10       —         —         —         0.03  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income — non-GAAP

   $ 401.9       26.0   $ 2.42     $ 2.34     $ 207.8       19.6   $ 1.21     $ 1.20  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP and non-GAAP weighted average common shares — basic

     166.2             172.4        

GAAP weighted average common shares — diluted

     180.5             177.8        

Exclude dilutive shares from convertible note

     (7.5           (4.2      
  

 

 

         

 

 

       

Non-GAAP weighted average common shares — diluted

     173.0             173.6        
  

 

 

         

 

 

       

(1)   Restructuring and other consists of:

    

     Six Months Ended                    
     June 28,
2020
                      June 30,
2019
                   

Contingent consideration fair value adjustment

   $ 19.2           $ (8.7      

Acquisition related expenses and compensation

     4.5             1.8        

Contract termination settlement fee

     4.0             —          

Employee severance

     0.8             1.6        

Other

     1.1             —          
  

 

 

         

 

 

       
   $ 29.6           $ (5.3      
  

 

 

         

 

 

       

 

(2)

For the six months ended June 28, 2020 and June 30, 2019, Interest and other included non-cash convertible debt interest expense. For the six months ended June 28, 2020 and June 30, 2019, adjustments to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting.

 

(3)

For the six months ended June 28, 2020 and June 30, 2019, adjustment to exclude discrete income tax items. For the six months ended June 30, 2019, income tax (benefit) 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.

 

(4)

For the six months ended June 28, 2020, the non-GAAP diluted EPS calculation adds back $2.6 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 5.7 million shares related to the convertible debt hedge transaction.

 

GAAP to Non-GAAP Reconciliation of Third Quarter 2020 guidance:

 

GAAP and non-GAAP third quarter revenue guidance:

   $ 745 million        to      $ 805 million  

GAAP net income per diluted share

   $ 0.91         $ 1.06  

Exclude acquired intangible assets amortization

     0.03           0.03  

Exclude non-cash convertible debt interest

     0.02           0.02  

Tax effect of non-GAAP adjustments

     0.01           0.01  

Convertible share adjustment

     0.04           0.04  
  

 

 

       

 

 

 

Non-GAAP net income per diluted share

   $ 1.01         $ 1.17  

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