Teradyne Reports 48% Sequential Growth in First Quarter 2015 Orders; Expects Sequential Revenue and Earnings Growth in Second Quarter

About Teradyne

Teradyne (NYSE: TER) is a leading supplier of Automatic Test Equipment used to test semiconductors, wireless products, data storage and complex electronic systems which serve consumer, communications, industrial and government customers. In 2014, Teradyne had revenue of $1.65 billion and currently employs approximately 3,800 people worldwide. For more information, visit www.teradyne.com. Teradyne (R) is a registered trademark of Teradyne, Inc. in the U.S. and other countries.

Safe Harbor Statement

This release contains forward-looking statements regarding future business prospects, Teradyne’s results of operations, market conditions, the payment of a quarterly dividend, the repurchase of Teradyne common stock pursuant to a share repurchase program and a senior secured credit facility. You can identify these forward-looking statements based on the context of the statements and by the fact that they use words such as “will,” “anticipate,” “expect,” “project,” “intend,” “plan,” “believe,” “target” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Such statements are based on the current assumptions and expectations of Teradyne’s management and are neither promises nor guarantees of future performance, future events, future payment of dividends, future repurchases of common stock or future availability of, or borrowing under, a credit facility. There can be no assurance that management’s estimates of Teradyne’s future results or other forward-looking statements will be achieved. Additionally, the current dividend and share repurchase programs may be modified, suspended or discontinued at any time. Important factors that could cause actual results, dividend payments, repurchases of common stock or borrowings under the credit facility to differ materially from those presently expected include: conditions affecting the markets in which Teradyne operates; decreased or delayed product demand; increased research and development spending; deterioration of Teradyne’s financial condition; the business judgment of the board of directors that a declaration of a dividend, the repurchase of common stock or debt under the credit facility is not in the company’s best interests; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” section of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. 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 FIRST FISCAL QUARTER OF 2015
                     
CONDENSED CONSOLIDATED OPERATING STATEMENTS      
(In thousands, except per share amounts)            
 
Quarter Ended
April 5, 2015 December 31, 2014 March 30, 2014
 
Net revenues $ 342,401 $ 323,236 $ 321,010
 
Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1) (2)   149,978     163,010     153,963  
 
Gross profit 192,423 160,226 167,047
 
Operating expenses:
Engineering and development (1) 71,450 79,188 67,085
Selling and administrative (1) (3) 72,041 91,157 78,003
Acquired intangible asset amortization 13,808 15,957 18,271
Goodwill impairment - 98,897 -
Restructuring and other (4)   -     1,198     -  
Operating expenses 157,299 286,397 163,359
 
Income (loss) from operations 35,124 (126,171 ) 3,688
 
Interest and other (5)   7,314     1,358     (5,561 )
 
Income (loss) before income taxes 42,438 (124,813 ) (1,873 )
Income tax provision (benefit)   9,651     (21,002 )   (2,802 )
Net income (loss) $ 32,787   $ (103,811 ) $ 929  
 

Net income (loss) per common share:

Basic $ 0.15   $ (0.48 ) $ 0.00  
Diluted $ 0.15   $ (0.48 ) $ 0.00  
 
Weighted average common shares - basic   217,187     216,532     193,311  
-
Weighted average common shares - diluted (6)   218,812     216,532     236,484  
 
 
Cash dividend declared per common share $ 0.06   $ 0.06   $ 0.06  
 
 
Net orders $ 490,357   $ 331,993   $ 449,826  
 
 
 
(1) Pension losses included in operating results: Quarter Ended
April 5, 2015 December 31, 2014   March 30, 2014
Cost of revenues $ - $ 12,713 $ -
Engineering and development - 12,223 -
Selling and administrative   -     21,628     -  
$ -   $ 46,564   $ -  
 
 
(2) Cost of revenues includes: Quarter Ended
April 5, 2015 December 31, 2014   March 30, 2014
Provision for excess and obsolete inventory $ 1,440 $ 688 $ 10,039
Sale of previously written down inventory   (1,931 )   (3,332 )   (1,380 )
$ (491 ) $ (2,644 ) $ 8,659  
 
 
(3) For the quarter ended March 30, 2014, selling and administrative expenses include an equity charge of $6,598 for the modification of Teradyne's retired CEO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his January 31, 2014 retirement.
 
(4) Restructuring and other consists of: Quarter Ended
April 5, 2015 December 31, 2014   March 30, 2014
Employee severance $ - $ 826 $ -
Acquisition costs   -     372     -  
$ -   $ 1,198   $ -  
 
(5) Interest and other includes: Quarter Ended        
April 5, 2015 December 31, 2014   March 30, 2014
Gain from the sale of an equity investment $ (4,782 ) $ - $ -
Non-cash convertible debt interest expense   -     -     4,290  
$ (4,782 ) $ -   $ 4,290  
 
(6) Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the quarter ended March 30, 2014, 20.1 million shares have been included in diluted shares.
 
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
 
April 5, 2015 December 31, 2014
 
Assets
Cash and cash equivalents $ 218,945 $ 294,256
Marketable securities 649,219 533,787
Accounts receivable, net 175,783 151,034
Inventories, net 121,051 105,129
Deferred tax assets 56,715 57,239
Prepayments 92,484 95,819
Other current assets   6,959     6,582  
Total current assets 1,321,156 1,243,846
 
Net property, plant and equipment 308,264 329,038
Marketable securities 402,722 470,789
Deferred tax assets 6,683 7,494
Other assets 10,280 10,419
Retirement plans assets 12,847 12,896
Intangible assets, net 176,792 190,600
Goodwill   273,438     273,438  
Total assets $ 2,512,182   $ 2,538,520  
 
Liabilities
Accounts payable $ 59,831 $ 47,763
Accrued employees' compensation and withholdings 65,396 100,994
Deferred revenue and customer advances 74,252 71,603
Other accrued liabilities 68,943 51,997
Accrued income taxes   24,711     20,049  
Total current liabilities 293,133 292,406
 
Long-term deferred revenue and customer advances 18,318 19,929
Retirement plans liabilities 106,224 108,460
Deferred tax liabilities 20,149 23,315
Long-term other accrued liabilities   17,136     15,430  
Total liabilities 454,960 459,540
 
Shareholders' equity 2,057,222 2,078,980
   
Total liabilities and shareholders' equity $ 2,512,182   $ 2,538,520  
 
         
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
 
Quarter Ended
April 5, 2015 March 30, 2014
Cash flows from operating activities:
Net income $ 32,787 $ 929
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation 19,345 15,259
Amortization 15,139 23,925
Stock-based compensation 7,963 15,233
Provision for excess and obsolete inventory 1,440 10,039
Gain from the sale of an equity investment (4,782 ) -
Deferred taxes (1,831 ) 12,699
Other (319 ) (141 )
Changes in operating assets and liabilities:
Accounts receivable (24,749 ) (58,882 )
Inventories 5,960 2,635
Prepayments and other assets 2,048 (628 )
Accounts payable and other accrued expenses (20,150 ) (45,487 )
Deferred revenue and customer advances 1,038 9,632
Retirement plans contributions (1,019 ) (1,425 )
Accrued income taxes   4,662     (9,609 )
Net cash provided by (used for) operating activities 37,532 (25,821 )
 
Cash flows from investing activities:
Purchases of property, plant and equipment (21,149 ) (31,197 )
Purchases of available-for-sale marketable securities (335,635 ) (257,260 )
Proceeds from maturities of available-for-sale marketable securities 140,222 280,322
Proceeds from sales of available-for-sale marketable securities 148,639 101,363
Proceeds from the sale of an equity investment 4,782 -
Proceeds from life insurance   1,098     4,391  
Net cash (used for) provided by investing activities (62,043 ) 97,619
 
Cash flows from financing activities:
Issuance of common stock under stock purchase and stock option plans 8,899 10,165
Repurchase of common stock (46,650 ) -
Dividend payment (13,049 ) -
Payments of long-term debt   -     (190,975 )
Net cash used for financing activities (50,800 ) (180,810 )
 
Decrease in cash and cash equivalents (75,311 ) (109,012 )
Cash and cash equivalents at beginning of period   294,256     341,638  
Cash and cash equivalents at end of period $ 218,945   $ 232,626  
 
GAAP to Non-GAAP Earnings Reconciliation
                                                     
(In millions, except per share amounts)
                            Quarter Ended                                          
April 5, 2015    

% of Net
Revenues

December 31,
2014

   

% of Net
Revenues

  March 30, 2014    

% of Net
Revenues

 
Net revenues $ 342.4 $ 323.2 $ 321.0
 
Gross profit - GAAP $ 192.4 56.2 % $ 160.2 49.6 % $ 167.0 52.0 %
Pension mark-to-market adjustments (1)   -     -     12.7   3.9 %   -   -  
Gross profit - non-GAAP $ 192.4 56.2 % $ 172.9 53.5 % $ 167.0 52.0 %
 
Income (loss) from operations - GAAP $ 35.1 10.3 % $ (126.2 ) -39.0 % $ 3.7 1.2 %
Acquired intangible asset amortization 13.8 4.0 % 16.0 5.0 % 18.3 5.7 %
Goodwill impairment (2) - - 98.9 30.6 % - -
Restructuring and other (3) - - 1.2 0.4 % - -
Pension mark-to-market adjustments (1) - - 46.6 14.4 % - -
Equity modification charge (4)   -     -     -   -     6.6   2.1 %
Income from operations - non-GAAP $ 48.9     14.3 % $ 36.5   11.3 % $ 28.6   8.9 %
 

Net Income
per Common Share

Net Income
per Common Share

Net Income
per Common Share

April 5, 2015    

% of Net
Revenues

      Basic     Diluted

December 31,
2014

   

% of Net
Revenues

        Basic     Diluted March 30, 2014    

% of Net
Revenues

    Basic     Diluted
Net income (loss) - GAAP $ 32.8 9.6 % $ 0.15 $ 0.15 $ (103.8 ) -32.1 % $ (0.48 ) $ (0.48 ) $ 0.9 0.3 % $ 0.00 $ 0.00
Acquired intangible asset amortization 13.8 4.0 % 0.06 0.06 16.0 5.0 % 0.07 0.07 18.3 5.7 % 0.09 0.08
Interest and other (5) (4.8 ) -1.4 % (0.02 ) (0.02 ) - - - - 4.3 1.3 % 0.02 0.02
Goodwill impairment (2) - - - - 98.9 30.6 % 0.46 0.45 - - - -
Restructuring and other (3) - - - - 1.2 0.4 % 0.01 0.01 - - - -
Pension mark-to-market adjustments (1) - - - - 46.6 14.4 % 0.22 0.21 - - - -
Equity modification charge (4) - - - - - - - - 6.6 2.1 % 0.03 0.03
Exclude discrete tax adjustments (6) (1.8 ) -0.5 % (0.01 ) (0.01 ) 1.5

0.5

%

0.01 0.01 (2.4 ) -0.7 % (0.01 ) (0.01 )
Tax effect of non-GAAP adjustments (2.4 ) -0.7 % (0.01 ) (0.01 ) (29.3 ) -9.1 % (0.14 ) (0.13 ) (5.3 ) -1.6 % (0.03 ) (0.02 )
Convertible share adjustment (7)   -     -     -     -     -   -     -     -     -   -     -     0.01  
Net income - non-GAAP $ 37.6     11.0 % $ 0.17   $ 0.17   $ 31.1   9.6 % $ 0.14   $ 0.14   $ 22.4   7.0 % $ 0.12   $ 0.11  
 
GAAP and non-GAAP weighted average common shares - basic 217.2 216.5 193.3
GAAP weighted average common shares - diluted 218.8 216.5 236.5
Include GAAP dilutive shares - 2.3 -
Exclude dilutive shares from convertible note   -     -     (20.1 )
Non-GAAP weighted average common shares - diluted (7)   218.8     218.8     216.4  
 
 
(1) Actuarial (gains) losses recognized under GAAP in accordance with the Company's mark-to-market pension accounting.
 
(2) Goodwill impairment related to Teradyne's Wireless Test business segment.
 
(3) Restructuring and other consists of:
Quarter Ended  
April 5, 2015

December 31,
2014

March 30, 2014
Employee severance $ - $ 0.8 $ -
Acquisition costs   -     0.4     -  
$ -   $ 1.2   $ -  
 
 
(4) For the quarter ended March 30, 2014, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CEO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his January 31, 2014 retirement.
 
(5)

For the quarter ended April 5, 2015, interest and other included a gain from the sale of an equity investment. For the quarter ended March 30, 2014, interest and other included non-cash convertible debt interest expense.

 
(6) For the quarters ended April 5, 2015, December 31, 2014 and March 30, 2014, adjustment to exclude discrete income tax items.
 
(7) For the quarter ended March 30, 2014. the calculation of non-GAAP diluted earnings per share gives benefit to the Company's call option on its stock for 34.7 million shares at $5.48. As a result 20.9 million shares have been included in non-GAAP diluted shares and net interest expense of $2.0 million has been added back to non-GAAP net income for the non-GAAP diluted earnings per share calculation.
 
 
 
GAAP to Non-GAAP Reconciliation of Second Quarter 2015 guidance:
 
GAAP and non-GAAP second quarter revenue guidance: $470 million to $500 million
GAAP net income per diluted share $ 0.37 $ 0.43
Exclude acquired intangible asset amortization 0.06 0.06
Tax effect of non-GAAP adjustment   (0.02 )   (0.02 )
Non-GAAP net income per diluted share $ 0.42 $ 0.48
 

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