Teradyne Reports Fourth Quarter and Fiscal Year 2015 Results

(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 twelve months ended December 31, 2014, 5.0 million shares have been included in diluted shares.

   
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)        
 

December 31,
2015

December 31,
2014

 
Assets
Cash and cash equivalents $ 264,705 $ 294,256
Marketable securities 477,696 533,787
Accounts receivable 211,293 151,034
Inventories, net 153,588 105,129
Deferred tax assets 54,973 57,239
Prepayments 91,519 95,819
Other current assets   6,194   6,582

Total current assets

1,259,968 1,243,846
 
Net property, plant and equipment 273,414 329,038
Marketable securities 265,928 470,789
Deferred tax assets 7,404 7,494
Other assets 13,080 10,419
Retirement plans assets 636 12,896
Intangible assets, net 239,831 190,600
Goodwill   488,413   273,438
Total assets $ 2,548,674 $ 2,538,520
 
Liabilities
Accounts payable $ 92,358 $ 47,763
Accrued employees' compensation and withholdings 113,994 100,994
Deferred revenue and customer advances 85,527 71,603
Other accrued liabilities 43,727 50,247
Contingent consideration 15,500 895
Accrued income taxes   21,751   20,049
Total current liabilities 372,857 291,551
 
Long-term deferred revenue and customer advances 25,745 19,929
Retirement plans liabilities 103,531 108,460
Deferred tax liabilities 26,663 23,315
Long-term other accrued liabilities 32,156 13,830
Long-term contingent consideration   21,936   2,455
Total liabilities 582,888 459,540
 
Shareholders' equity 1,965,786 2,078,980
   
Total liabilities and shareholders' equity $ 2,548,674 $ 2,538,520
 
       
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)                
 
Quarter Ended Twelve Months Ended

December 31,
2015

December 31,
2014

December 31,
2015

December 31,
2014

Cash flows from operating activities:
Net (loss) income $ (641 ) $ (103,811 ) $ 206,477 $ 81,272
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation 15,649 20,558 68,180 73,390
Amortization 20,433 17,032 72,592 79,154
Stock-based compensation 7,372 8,434 30,452 40,307
Provision for excess and obsolete inventory 2,393 688 21,332 22,193
Retirement plans actuarial losses 17,755 46,564 17,755 46,564
Deferred taxes (6,736 ) 4,336 (20,709 ) (4,411 )
Contingent consideration adjustment 5,089 - 2,489 (630 )
Tax benefit related to employee stock compensation awards (1,107 ) 1,191 (4,320 ) (535 )
Non-cash charge for the sale of inventories revalued at the date of acquisition - - 1,567 -
Gain from the sale of an equity investment - - (5,406 ) -
Goodwill impairment - 98,897 - 98,897
Other (1,194 ) 1,395 1,329 3,505
Changes in operating assets and liabilities, net of business acquired:
Accounts receivable 33,940 171,730 (57,177 ) 8,060
Inventories (22,517 ) 12,905 10,859 51,172
Prepayments and other assets (6,257 ) (6,247 ) 9,272 41,537
Accounts payable and other accrued expenses (4,502 ) (74,539 ) 48,161 (45,430 )
Deferred revenue and customer advances 10,225 7,767 16,976 22,033
Retirement plans contributions (9,097 ) (30,635 ) (12,095 ) (33,916 )
Accrued income taxes   (20,077 )   (1,308 )   5,600     8,900  
Net cash provided by operating activities 40,728 174,957 413,334 492,062
 
Cash flows from investing activities:
Purchases of property, plant and equipment (23,151 ) (22,630 ) (89,878 ) (168,982 )
Purchases of available-for-sale marketable securities (466,396 ) (734,687 ) (1,424,002 ) (1,578,743 )
Proceeds from maturities of available-for-sale marketable securities 29,901 74,793 360,264 570,358
Proceeds from sales of available-for-sale marketable securities 472,397 623,669 1,316,131 859,729
Acquisition of business, net of cash acquired - (19,419 ) (282,741 ) (19,419 )
Proceeds from the sale of an equity investment - - 5,406 -
(Purchase of) proceeds from life insurance   -     (207 )   1,098     4,184  
Net cash provided by (used for) investing activities 12,751 (78,481 ) (113,722 ) (332,873 )
 
Cash flows from financing activities:
Issuance of common stock under employee stock purchase and stock option plans 1,287 261 19,432 21,291
Repurchase of common stock (73,106 ) - (299,949 ) -
Tax benefit related to employee stock compensation awards 1,107 (1,191 ) 4,320 535
Dividend payments (12,279 ) (12,994 ) (50,713 ) (37,425 )
Payment of revolving credit facility costs - - (2,253 ) -
Payments of long-term debt   -     -     -     (190,972 )
Net cash used for financing activities (82,991 ) (13,924 ) (329,163 ) (206,571 )
 
(Decrease) increase in cash and cash equivalents (29,512 ) 82,552 (29,551 ) (47,382 )
Cash and cash equivalents at beginning of period   294,217     211,704     294,256     341,638  
Cash and cash equivalents at end of period $ 264,705   $ 294,256   $ 264,705   $ 294,256  
 
GAAP to Non-GAAP Earnings Reconciliation                        
 
(In millions, except per share amounts)
Quarter Ended

December 31,
2015

 

% of Net
Revenues

October 4,
2015

 

% of Net
Revenues

December 31,
2014

 

% of Net
Revenues

 
Net revenues $ 318.4 $ 466.0 $ 323.2
 
Gross profit - GAAP $ 166.0 52.1 % $ 258.6 55.5 % $ 160.2 49.6 %
Pension mark-to-market adjustments (1) 8.3 2.6 % - - 12.7 3.9 %
Inventory step-up   -   -     1.0   0.2 %   -   -  
Gross profit - non-GAAP $ 174.3 54.7 % $ 259.6 55.7 % $ 172.9 53.5 %
 
(Loss) income from operations - GAAP $ (9.7 ) -3.0 % $ 86.8 18.6 % $ (126.2 ) -39.0 %
Acquired intangible assets amortization 19.9 6.3 % 20.1 4.3 % 16.0 5.0 %
Goodwill impairment (2) - - - - 98.9 30.6 %
Restructuring and other (3) 5.2 1.6 % 0.3 0.1 % 1.2 0.4 %
Pension mark-to-market adjustments (1) 17.8 5.6 % - - 46.6 14.4 %
Inventory step-up   -   -     1.0   0.2 %   -   -  
Income from operations - non-GAAP $ 33.2   10.4 % $ 108.2   23.2 % $ 36.5   11.3 %
 
 

Net Income
per Common Share

 

Net Income
per Common Share

 

Net Income
per Common Share

December 31,
2015

 

% of Net
Revenues

  Basic   Diluted

October 4,
2015

 

% of Net
Revenues

  Basic   Diluted

December 31,
2014

 

% of Net
Revenues

  Basic   Diluted
Net (loss) income- GAAP $ (0.6 ) -0.2 % $ (0.00 ) $ (0.00 ) $ 71.5 15.3 % $ 0.34 $ 0.34 $ (103.8 ) -32.1 % $ (0.48 ) $ (0.48 )
Acquired intangible assets amortization 19.9 6.3 % 0.10 0.10 20.1 4.3 % 0.10 0.09 16.0 5.0 % 0.07 0.07
Goodwill impairment (2) - - - - - - - - 98.9 30.6 % 0.46 0.45
Inventory step-up - - - - 1.0 0.2 % 0.00 0.00 - - - -
Pension mark-to-market adjustments (1) 17.8 5.6 % 0.09 0.09 - - - - 46.6 14.4 % 0.22 0.21
Restructuring and other (3) 5.2 1.6 % 0.03 0.03 0.3 0.1 % 0.00 0.00 1.2 0.4 % 0.01 0.01
Exclude discrete tax items (4) (6.3 ) -2.0 % (0.03 ) (0.03 ) (3.3 ) -0.7 % (0.02 ) (0.02 ) 1.5 0.5 % 0.01 0.01
Tax effect of non-GAAP adjustments   (9.9 ) -3.1 %   (0.05 )   (0.05 )   (4.7 ) -1.0 %   (0.02 )   (0.02 )   (29.3 ) -9.1 %   (0.14 )   (0.13 )
Net income - non-GAAP $ 26.1   8.2 % $ 0.13   $ 0.13   $ 84.9   18.2 % $ 0.40   $ 0.40   $ 31.1   9.6 % $ 0.14   $ 0.14  
 
GAAP and non-GAAP weighted average common shares - basic 205.1 210.0 216.5
GAAP weighted average common shares - diluted 205.1 211.7 216.5
Include dilutive shares   2.1     -     2.3  
Non-GAAP weighted average common shares - diluted   207.2     211.7     218.8  
 
(1)Actuarial losses recognized under GAAP in accordance with Teradyne'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

December 31,
2015

October 4,
2015

December 31,
2014

Employee severance $ 0.1 $ 1.2 $ 0.8
Acquisition costs - 0.1 0.4
Contingent consideration fair value adjustment   5.1     (1.0 )   -  
$ 5.2   $ 0.3   $ 1.2  
 

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