Teradyne Reports Fourth Quarter and Fiscal Year 2022 Results

 
TERADYNE, INC. REPORT FOR FOURTH FISCAL QUARTER OF 2022
              
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    
              
      Quarter Ended  Twelve Months Ended
      December 31, 2022  October 2, 2022  December 31, 2021  December 31, 2022  December 31, 2021
              
Net revenues $731,836  $827,073  $885,047  $3,155,045  $3,702,881 
 Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)  311,387   341,694   357,998   1,287,894    1,496,225  
                           
Gross profit     420,449       485,379       527,049       1,867,151       2,206,656  
                           
Operating expenses:                    
  Selling and administrative     142,752       135,632       142,747       558,103       547,559  
  Engineering and development     108,810       111,715       109,965       440,591       427,609  
  Acquired intangible assets amortization     4,670       4,729       5,163       19,333       21,456  
  Restructuring and other (2)     (2,369 )     1,796       12,738       17,185       9,312  
      Operating expenses     253,863       253,872       270,613       1,035,212       1,005,936  
                           
Income from operations     166,586       231,507       256,436       831,939       1,200,720  
                           
  Interest and other (income) expense (3)     (28,651 )     5,310       1,256       (8,446 )     39,765  
                           
Income before income taxes     195,237       226,197       255,180       840,385       1,160,955  
  Income tax provision     22,936       42,712       31,140       124,884       146,366  
Net income   $ 172,301     $ 183,485     $ 224,040     $ 715,501     $ 1,014,589  
                           
Net income per common share:                    
Basic
  $ 1.11     $ 1.17     $ 1.38     $ 4.52     $ 6.15  
Diluted
  $ 1.04     $ 1.10     $ 1.26     $ 4.22     $ 5.53  
                           
Weighted average common shares - basic     155,762       156,364       162,769       158,434       164,960  
                           
Weighted average common shares - diluted (4)     165,468       166,733       178,020       169,734       183,625  
                           
                           
Cash dividend declared per common share   $ 0.11     $ 0.11     $ 0.10     $ 0.44     $ 0.40  
                           
                           
                           
(1) Cost of revenues includes:   Quarter Ended   Twelve Months Ended
          December 31, 2022   October 2, 2022   December 31, 2021   December 31, 2022   December 31, 2021
      Provision for excess and obsolete inventory   $ 11,787     $ 12,234     $ 3,700     $ 31,452     $ 15,475  
      Sale of previously written down inventory     (828 )     (269 )     (434 )     (1,808 )     (2,477 )
          $ 10,959     $ 11,965     $ 3,266     $ 29,644     $ 12,998  
                           
(2) Restructuring and other consists of:   Quarter Ended   Twelve Months Ended
          December 31, 2022   October 2, 2022   December 31, 2021   December 31, 2022   December 31, 2021
      Employee severance   $ 775     $ 1,215     $ 284     $ 2,924     $ 1,525  
      Gain on sale of asset     (3,410 )     -       -       (3,410 )     -  
      Litigation settlement     -       -       12,000       14,700       12,000  
      Contingent consideration fair value adjustment     -       -       -       -       (7,227 )
      Other     266       581       454       2,971       3,014  
          $ (2,369 )   $ 1,796     $ 12,738     $ 17,185     $ 9,312  
                           
(3) Interest and other includes:   Quarter Ended   Twelve Months Ended
          December 31, 2022   October 2, 2022   December 31, 2021   December 31, 2022   December 31, 2021
      Pension actuarial gains   $ (25,592 )   $ -     $ (1,590 )   $ (25,584 )   $ (2,217 )
      Loss on convertible debt conversions     -       -       3,431       -       28,828  
      Non-cash convertible debt interest     -       -       1,166       -       10,286  
          $ (25,592 )   $ -     $ 3,007     $ (25,584 )   $ 36,897  
                           
(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 December 31, 2022, October 2, 2022, and December 31, 2021, 1.2 million, 1.5 million and 3.4 million shares, respectively, have been included in diluted shares. For the twelve months ended December 31, 2022 and December 31, 2021, 1.8 million and 7.4 million shares, respectively, have been included in diluted shares. For the quarters ended December 31, 2022, October 2, 2022 and December 31, 2021, diluted shares also included 7.9 million, 8.3 million and 10.5 million shares, respectively, from the convertible note hedge transaction. For the twelve months ended December 31, 2022 and December 31, 2021, diluted shares included 8.8 million and 10.0 million shares, respectively, from the convertible note hedge transaction.
   
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)               
                           
          December 31, 2022   December 31, 2021            
Assets
                   
  Cash and cash equivalents   $ 854,773     $ 1,122,199              
  Marketable securities     39,612       244,231              
  Accounts receivable, net     491,145       550,749              
  Inventories, net     325,019       243,330              
  Prepayments     532,962       406,266              
  Other current assets     14,404       9,452              
      Total current assets     2,257,915       2,576,227              
                           
  Property, plant and equipment, net     418,683       387,240              
  Operating lease right-of-use assets, net     73,734       68,807              
  Marketable securities     110,777       133,858              
  Deferred tax assets     142,784       102,428              
  Retirement plans assets     11,761       15,110              
  Other assets     28,925       24,096              
  Acquired intangible assets, net     53,478       75,635              
  Goodwill     403,195       426,024              
      Total assets   $ 3,501,252     $ 3,809,425              
                           
Liabilities
                   
  Accounts payable   $ 139,722     $ 153,133              
  Accrued employees' compensation and withholdings     212,266       253,667              
  Deferred revenue and customer advances     148,285       146,185              
  Other accrued liabilities     112,271       124,187              
  Operating lease liabilities     18,594       19,977              
  Income taxes payable     65,010       88,789              
  Current debt     50,115       19,182              
                           
      Total current liabilities     746,263       805,120              
                           
  Retirement plans liabilities     116,005       151,141              
  Long-term deferred revenue and customer advances     45,131       54,921              
  Long-term other accrued liabilities     15,981       15,497              
  Deferred tax liabilities     3,267       6,327              
  Long-term operating lease liabilities     64,176       56,178              
  Long-term income taxes payable     59,135       67,041              
  Debt
    -       89,244              
      Total liabilities     1,049,958       1,245,469              
                           
Mezzanine equity     -       1,512              
Shareholders' equity     2,451,294       2,562,444              
      Total liabilities, convertible common shares and shareholders’ equity   $ 3,501,252     $ 3,809,425              
                           
                           
                           
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)                    
                           
          Quarter Ended   Twelve Months Ended    
          December 31, 2022   December 31, 2021   December 31, 2022   December 31, 2021    
Cash flows from operating activities:                    
  Net income   $ 172,301     $ 224,040     $ 715,501     $ 1,014,589      
  Adjustments to reconcile net income to net cash provided by operating activities:                    
    Depreciation     22,861       23,207       90,763       91,073      
    Stock-based compensation     10,808       10,994       48,228       45,643      
    Provision for excess and obsolete inventory     11,787       3,700       31,452       15,475      
    Amortization     4,900       6,786       19,912       34,412      
    Retirement plans actuarial gains     (25,592 )     (1,590 )     (25,584 )     (2,217 )    
    Deferred taxes     (10,320 )     (6,573 )     (38,693 )     (17,305 )    
    Gains on sale of asset     (3,410 )     -       (3,410 )     -      
    (Gains) losses on investments     (1,451 )     (1,660 )     9,985       (6,410 )    
    Contingent consideration fair value adjustment     -       -       -       (7,227 )    
    Loss on convertible debt conversions     -       3,431       -       28,828      
    Other     1,621       28       2,353       271      
                           
    Changes in operating assets and liabilities                  
      Accounts receivable     46,380       45,521       50,628       (57,778 )    
      Inventories     (11,992 )     (15,448 )     (80,809 )     6,495      
      Prepayments and other assets     (46,382 )     (37,282 )     (140,713 )     (175,846 )    
      Accounts payable and other liabilities     11,911       64,435       (60,507 )     129,499      
      Deferred revenue and customer advances     (337 )     1,174       (6,233 )     9,873      
      Retirement plans contributions     (1,219 )     (1,282 )     (5,116 )     (5,405 )    
      Income taxes     1,536       11,802       (29,834 )     (5,604 )    
Net cash provided by operating activities     183,402       331,283       577,923       1,098,366      
                           
Cash flows from investing activities:                    
  Purchases of property, plant and equipment     (34,577 )     (29,310 )     (163,249 )     (132,472 )    
  Purchases of marketable securities     (20,234 )     (152,311 )     (287,409 )     (661,781 )    
  Proceeds from sales of marketable securities     8,858       57,029       268,058       266,466      
  Proceeds from maturities of marketable securities     40,849       88,871       222,941       660,148      
  Proceeds from sale of asset     3,410       -       3,410       -      
  Purchase of investment     -       -       -       (12,000 )    
Net cash (used for) provided by investing activities     (1,694 )     (35,721 )     43,751       120,361      
                           
Cash flows from financing activities:                    
  Dividend payments     (17,133 )     (16,266 )     (69,711 )     (65,977 )    
  Payments of convertible debt principal     (14,754 )     (40,993 )     (66,759 )     (342,990 )    
  Repurchase of common stock     (2,082 )     (193,820 )     (752,082 )     (600,000 )    
  Payments related to net settlement of employee stock compensation awards     (183 )     (258 )     (33,170 )     (32,303 )    
  Issuance of common stock under stock purchase and stock option plans     -       96       28,733       32,686      
Net cash used for financing activities     (34,152 )     (251,241 )     (892,989 )     (1,008,584 )    
                           
Effects of exchange rate changes on cash and cash equivalents     (3,529 )     (1,576 )     3,889       (2,065 )    
Increase (decrease) in cash and cash equivalents     144,027       42,745       (267,426 )     208,078      
Cash and cash equivalents at beginning of period     710,746       1,079,454       1,122,199       914,121      
Cash and cash equivalents at end of period   $ 854,773     $ 1,122,199     $ 854,773     $ 1,122,199      
                           

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