Teradyne Reports Third Quarter 2020 Results

For more information, contact:
Andrew Blanchard
Investor Relations
Tel 978.370.2425
investorrelations@teradyne.com

          
TERADYNE, INC. REPORT FOR THIRD FISCAL QUARTER OF 2020         
           
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
           
   Quarter Ended  Nine Months Ended
   September 27,
2020
  June 28,
2020
  September 29,
2019
  September 27,
2020
  September 29,
2019
           
Net revenues$819,484  $838,661  $582,038  $2,362,500  $1,640,315 
 Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1) 360,556   367,188   237,000   1,026,549   683,724 
                    
Gross profit   458,928       471,473       345,038       1,335,951       956,591  
                     
Operating expenses:                  
  Selling and administrative (2)   115,840       113,259       109,166       340,488       319,990  
  Engineering and development   94,909       94,102       77,804       274,170       236,030  
  Acquired intangible assets amortization   6,219       8,941       9,647       25,052       30,363  
  Restructuring and other (3)   (27,701 )     37,222       (6,500 )     1,915       (11,792 )
  Operating expenses   189,267       253,524       190,117       641,625       574,591  
                     
Income from operations   269,661       217,949       154,921       694,326       382,000  
                     
  Interest and other expense (4)   5,930       658       3,188       16,237       5,111  
                     
Income before income taxes   263,731       217,291       151,733       678,089       376,889  
  Income tax provision   41,013       28,383       15,873       90,274       34,494  
Net income $ 222,718     $ 188,908     $ 135,860     $ 587,815     $ 342,395  
                     
Net income per common share:                  
Basic $ 1.34     $ 1.14     $ 0.80     $ 3.54     $ 2.00  
Diluted $ 1.21     $ 1.05     $ 0.75     $ 3.23     $ 1.92  
                     
Weighted average common shares - basic   166,014       165,789       169,641       166,131       171,471  
                     
Weighted average common shares - diluted (5)   184,338       180,257       180,494       181,777       178,685  
                     
                     
Cash dividend declared per common share $ 0.10     $ 0.10     $ 0.09     $ 0.30     $ 0.27  
                     
                     
                     
(1 ) Cost of revenues includes: Quarter Ended   Nine Months Ended
    September 27,
2020
  June 28,
2020
  September 29,
2019
  September 27,
2020
  September 29,
2019
  Provision for excess and obsolete inventory $ 3,479     $ 5,580     $ 3,049     $ 13,116     $ 8,848  
  Sale of previously written down inventory   (310 )     (337 )     (821 )     (1,722 )     (1,962 )
  Inventory step-up   121       121       -       360       383  
    $ 3,290     $ 5,364     $ 2,228     $ 11,754     $ 7,269  
                     
(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 27,
2020
  June 28,
2020
  September 29,
2019
  September 27,
2020
  September 29,
2019
  Contingent consideration fair value adjustment $ (27,206 )   $ 29,259     $ (7,759 )   $ (7,967 )   $ (16,460 )
  Acquisition related expenses and compensation   (1,086 )     3,145       451       3,418       2,258  
  Employee severance   456       36       808       1,220       2,410  
  Contract termination settlement fee   -       4,000       -       4,000       -  
  Other   135       782       -       1,244       -  
    $ (27,701 )   $ 37,222     $ (6,500 )   $ 1,915     $ (11,792 )
                     
(4 ) Interest and other includes: Quarter Ended   Nine Months Ended
    September 27,
2020
  June 28,
2020
  September 29,
2019
  September 27,
2020
  September 29,
2019
  Non-cash convertible debt interest $ 3,629     $ 3,584     $ 3,453     $ 10,752     $ 10,231  
  Pension actuarial losses (gains)   2,688       (99 )     -       2,589       448  
    $ 6,317     $ 3,485     $ 3,453     $ 13,341     $ 10,679  
                     
(5 ) Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the quarters ended September 27, 2020, June 28, 2020 and September 29, 2019, 9.2 million, 7.6 million and 5.8 million shares, respectively, have been included in diluted shares. For the nine months ended September 27, 2020 and September 29, 2019, 8.0 million and 4.1 million shares, respectively, have been included in diluted shares. For the quarters ended September 27, 2020, June 28, 2020 and September 29, 2019, diluted shares also included 7.8 million, 5.8 million and 3.6 million shares, respectively from the convertible note hedge transaction. For the nine months ended September 27, 2020 and September 29, 2019, diluted shares also included 6.4 million and 1.8 million shares, respectively, from the convertible note hedge transaction.
     
     
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)              
                     
    September 27,
2020
  December 31,
2019
           
Assets                  
  Cash and cash equivalents $ 945,180     $ 773,924              
  Marketable securities   287,789       137,303              
  Accounts receivable, net   587,243       362,368              
  Inventories, net   191,317       196,691              
  Prepayments and other current assets   232,103       188,598              
  Total current assets   2,243,632       1,658,884              
                     
  Property, plant and equipment, net   386,170       320,216              
  Operating lease right-of-use assets, net   54,724       57,539              
  Marketable securities   108,254       104,490              
  Deferred tax assets   78,243       75,185              
  Retirement plans assets   14,915       18,457              
  Other assets   11,650       10,332              
  Acquired intangible assets, net   103,672       125,480              
  Goodwill   435,252       416,431              
                     
  Total assets $ 3,436,512     $ 2,787,014              
                     
Liabilities                  
  Accounts payable $ 150,427     $ 126,617              
  Accrued employees' compensation and withholdings   175,286       163,883              
  Deferred revenue and customer advances   129,438       104,876              
  Other accrued liabilities   117,108       70,871              
  Operating lease liabilities   20,311       19,476              
  Contingent consideration   -       9,106              
  Income taxes payable   79,270       44,200              
                     
  Total current liabilities   671,840       539,029              
                     
  Retirement plans liabilities   134,650       134,471              
  Long-term deferred revenue and customer advances   59,099       45,974              
  Long-term contingent consideration   22,531       30,599              
  Long-term other accrued liabilities   20,141       19,535              
  Deferred tax liabilities   11,462       14,070              
  Long-term operating lease liabilities   42,137       45,849              
  Long-term income taxes payable   74,930       82,642              
  Debt   406,178       394,687              
                     
  Total liabilities   1,442,968       1,306,856              
                     
Shareholders' equity   1,993,544       1,480,158              
                     
  Total liabilities and shareholders' equity $ 3,436,512     $ 2,787,014              
                     
                     
                     
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)          
                     
    Quarter Ended   Nine Months Ended    
    September 27,
2020
  September 29,
2019
  September 27,
2020
  September 29,
2019
   
Cash flows from operating activities:                  
  Net income $ 222,718     $ 135,860     $ 587,815     $ 342,395      
  Adjustments to reconcile net income to net cash provided by operating activities:                  
  Depreciation   19,806       17,626       58,111       51,508      
  Amortization   10,343       11,873       36,577       36,849      
  Stock-based compensation   11,661       10,713       33,028       28,822      
  Provision for excess and obsolete inventory   3,479       3,049       13,116       8,848      
  Retirement plan actuarial losses   2,688       -       2,589       448      
  Contingent consideration fair value adjustment   (27,206 )     (7,759 )     (7,967 )     (16,460 )    
  Gains on investments   (3,046 )     (417 )     (3,515 )     (4,158 )    
  Deferred taxes   2,616       (3,492 )     (4,547 )     (2,977 )    
  Other   225       181       750       610      
                     
  Changes in operating assets and liabilities, net of businesses acquired:                  
  Accounts receivable   109,025       12,689       (222,015 )     (66,789 )    
  Inventories   20,726       (11,696 )     16,998       (14,143 )    
  Prepayments and other assets   8,728       949       (40,751 )     (16,118 )    
  Accounts payable and other liabilities   (32,020 )     35,231       81,557       20,807      
  Deferred revenue and customer advances   7,934       11,953       36,589       27,779      
  Retirement plans contributions   (1,383 )     (1,361 )     (3,884 )     (3,775 )    
  Income taxes   (13,782 )     (16,251 )     24,060       (31,224 )    
Net cash provided by operating activities   342,512       199,148       608,511       362,422      
                     
Cash flows from investing activities:                  
  Purchases of property, plant and equipment   (62,858 )     (37,092 )     (146,872 )     (96,048 )    
  Purchases of marketable securities   (188,880 )     (121,358 )     (488,428 )     (605,539 )    
  Proceeds from maturities of marketable securities   126,423       160,279       309,407       393,472      
  Proceeds from sales of marketable securities   5,950       17,820       32,611       60,274      
  Proceeds from life insurance   -       2,639       546       2,912      
  Purchase of investments and acquisition of businesses, net of cash acquired   -       -       149       (21,970 )    
Net cash (used for) provided by investing activities   (119,365 )     22,288       (292,587 )     (266,899 )    
                     
Cash flows from financing activities:                  
  Issuance of common stock under stock purchase and stock option plans   13,771       14,191       26,528       29,280      
  Dividend payments   (16,604 )     (15,250 )     (49,870 )     (46,269 )    
  Payments related to net settlement of employee stock compensation awards   (216 )     (104 )     (22,735 )     (14,550 )    
  Repurchase of common stock   -       (121,560 )     (88,465 )     (368,782 )    
  Payments of contingent consideration   -       -       (8,852 )     (27,615 )    
Net cash used for financing activities   (3,049 )     (122,723 )     (143,394 )     (427,936 )    
                     
Effects of exchange rate changes on cash and cash equivalents   (349 )     119       (1,274 )     (400 )    
Increase (decrease) in cash and cash equivalents   219,749       98,832       171,256       (332,813 )    
Cash and cash equivalents at beginning of period   725,431       495,107       773,924       926,752      
Cash and cash equivalents at end of period $ 945,180     $ 593,939     $ 945,180     $ 593,939      
                     

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