Teradyne, Inc. (NYSE: TER):
           
Q2'15 Q2'14 Q 1'15
Orders (mil) $529 $627 $490
Revenue (mil) $513 $526 $342
Non-GAAP EPS $0.53 $0.54 $0.17
GAAP EPS $0.48 $0.47 $0.15
 

Teradyne, Inc. (NYSE: TER) reported revenue of $513 million for the second quarter of 2015 of which $400 million was in Semiconductor Test, $63 million in Wireless Test, $46 million in System Test and $4 million in Industrial Automation. Industrial Automation consists of Universal Robots' results from June 12 through July 5, 2015. On a non-GAAP basis, Teradyne's net income in the second quarter was $114.6 million, or $0.53 per diluted share, which excluded acquired intangible asset amortization and included the related tax impact on non-GAAP adjustments. GAAP net income for the second quarter was $102.9 million or $0.48 per share.

Orders in the second quarter of 2015 were $529 million of which $395 million were in Semiconductor Test, $84 million in Wireless Test, $45 million in System Test, and $5 million in Industrial Automation.

"We delivered strong sales and earnings growth in the second quarter driven by across the board strength in all business segments," said CEO and President Mark Jagiela. "Our alignment to the strongest segments of the semiconductor test market, improving storage test shipments and seasonally strong wireless test demand combined to deliver a 29% operating margin in the second quarter, the highest in three years. In addition to the strength of our core test businesses, we are especially excited to welcome Universal Robots (UR) to Teradyne. UR enables us to quickly bring the power of advanced automation to our system and wireless test customers while providing Teradyne a powerful, long term growth driver serving the emerging collaborative robot market."

"In line with our strategy to balance strong additions to Teradyne with direct capital returns, we paid $13 million in dividends and returned $82 million with the repurchase of 4.1 million shares in the second quarter," said Jagiela.

Guidance for the third quarter of 2015 is revenue of $450 million to $480 million, with non-GAAP net income of $0.35 to $0.41 per diluted share and GAAP net income of $0.27 to $0.33 per diluted share. Non-GAAP guidance excludes acquired intangible asset amortization and includes the related tax impact on non-GAAP adjustments.

Webcast

A conference call to discuss the second quarter results, along with management's business outlook, will follow at 10 a.m. ET, Thursday, July 30. 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 10 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 asset amortization, fair value inventory step-up related to Universal Robots, retired CEO equity charge, non-cash convertible debt interest, discrete income tax adjustments, restructuring and other, and a gain from the sale of an equity investment. 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 and non-GAAP net income as a percentage of revenue, and non-GAAP net income per share are non-GAAP 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 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 related to Universal Robots. GAAP requires that this item be included in determining gross margin. Non-GAAP gross margin dollar amount and percentage are non-GAAP 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. Prior to September 29, 2014, non-GAAP diluted shares included the impact of Teradyne's call option and warrant on its shares. Management believes each of these non-GAAP 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 "Investors" and then selecting the "GAAP to Non-GAAP Reconciliation" link. The non-GAAP financial 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.

About Teradyne

Teradyne (NYSE:TER) is a leading supplier of automation solutions for test and industrial applications. Teradyne Automatic Test Equipment (ATE) is used to test semiconductors, wireless products, data storage and complex electronic systems, which serve consumer, communications, industrial and government customers. Our Industrial Automation solutions include Collaborative Robots used by global manufacturing and light industrial customers to improve quality and increase manufacturing efficiency. In 2014, Teradyne had revenue of $1.65 billion and currently employs approximately 4,000 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. 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; market acceptance of new products; the ability to grow Universal Robots' business; 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 and the Quarterly Report on Form 10-Q for the period ended April 5, 2015. 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 2015
                             
CONDENSED CONSOLIDATED OPERATING STATEMENTS          
(In thousands, except per share amounts)                  
   

 
Quarter Ended Six Months Ended
July 5, 2015 April 5, 2015 June 29, 2014 July 5, 2015 June 29, 2014
 
Net revenues $ 512,739 $ 342,401 $ 525,567 $ 855,140 $ 846,577
 
Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)   214,171     149,978     235,154     364,149     389,117  
 
Gross profit 298,568 192,423 290,413 490,991 457,460
 
Operating expenses:
Engineering and development 75,832 71,450 73,414 147,282 140,499
Selling and administrative (2) 77,073 72,041 77,489 149,114 155,492
Acquired intangible asset amortization 15,258 13,808 18,271 29,066 36,542
Restructuring and other (3)   (385 )   -     572     (385 )   572  
Operating expenses 167,778 157,299 169,746 325,077 333,105
 
Income from operations 130,790 35,124 120,667 165,914 124,355
 
Interest and other (4)   1,346     7,314     725     8,660     (4,836 )
 
Income before income taxes 132,136 42,438 121,392 174,574 119,519
Income tax provision   29,257     9,651     20,187     38,908     17,385  
Net income $ 102,879   $ 32,787   $ 101,205   $ 135,666   $ 102,134  
 

Net income per common share:
Basic $ 0.48   $ 0.15   $ 0.52   $ 0.63   $ 0.53  
Diluted $ 0.48   $ 0.15   $ 0.47   $ 0.62   $ 0.45  
 
Weighted average common shares - basic   213,845     217,187     194,408     215,516     193,860  
 
Weighted average common shares - diluted (5)   215,496     218,812     216,568     217,154     226,526  
 
 
Cash dividend declared per common share $ 0.06   $ 0.06   $ -   $ 0.12   $ 0.06  
 
 
Net orders $ 528,693   $ 490,357   $ 627,088   $ 1,019,050   $ 1,076,914  
 
 
(1) Cost of revenues includes: Quarter Ended Six Months Ended
July 5, 2015 April 5, 2015 June 29, 2014 July 5, 2015 June 29, 2014
Provision for excess and obsolete inventory $ 14,441 $ 1,440 $ 5,032 $ 15,881 $ 15,071
Sale of previously written down inventory (2,745 ) (1,931 ) (2,014 ) (4,676 ) (3,394 )
Inventory step-up   595     -     -     595     -  
$ 12,291   $ (491 ) $ 3,018   $ 11,800   $ 11,677  
 
 
(2) For the six months ended June 29, 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.
 
(3) Restructuring and other consists of: Quarter Ended Six Months Ended
July 5, 2015 April 5, 2015 June 29, 2014 July 5, 2015 June 29, 2014
Acquisition costs (a) $ 960 $ - $ - $ 960 $ -
Employee severance 255 - 572 255 572
Contingent consideration fair value adjustment   (1,600 )   -     -     (1,600 )   -  
$ (385 ) $ -   $ 572     (385 ) $ 572  
 
(a) Costs related to Universal Robots acquisition. The results of Universal Robots are included in Teradyne's results starting June 12, 2015.
 
(4) Interest and other includes: Quarter Ended Six Months Ended
July 5, 2015 April 5, 2015 June 29, 2014 July 5, 2015 June 29, 2014
Gain from the sale of an equity investment $ (624 ) $ (4,782 ) $ - $ (5,406 ) $ -
Non-cash convertible debt interest expense   -     -     -     -     4,290  
$ (624 ) $ (4,782 ) $ -   $ (5,406 ) $ 4,290  
 
 
(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 six months ended June 29, 2014, 20.1 million shares have been included in diluted shares.
 
 
 
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
 
July 5, 2015 December 31, 2014
 
Assets
Cash and cash equivalents $ 300,685 $ 294,256
Marketable securities 452,040 533,787
Accounts receivable 296,654 151,034
Inventories, net 121,817 105,129
Deferred tax assets 58,345 57,239
Prepayments 80,249 95,819
Other current assets   6,596     6,582  
Total current assets 1,316,386 1,243,846
 
Net property, plant and equipment 291,929 329,038
Marketable securities 275,882 470,789
Deferred tax assets 6,836 7,494
Other assets 13,364 10,419
Retirement plans assets 13,850 12,896
Intangible assets, net 279,126 190,600
Goodwill   495,434     273,438  
Total assets $ 2,692,807   $ 2,538,520  
 
Liabilities
Accounts payable $ 86,463 $ 47,763
Accrued employees' compensation and withholdings 94,544 100,994
Deferred revenue and customer advances 77,347 71,603
Other accrued liabilities 85,470 48,647
Contingent consideration 15,947 3,350
Accrued income taxes   43,163     20,049  
Total current liabilities 402,934 292,406
 
Long-term deferred revenue and customer advances 25,354 19,929
Retirement plans liabilities 107,557 108,460
Deferred tax liabilities 38,624 23,315
Long-term other accrued liabilities 24,468 15,430
Long-term contingent consideration   19,648     -  
Total liabilities 618,585 459,540
 
Shareholders' equity 2,074,222 2,078,980
   
Total liabilities and shareholders' equity $ 2,692,807   $ 2,538,520  
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
 
Quarter Ended Six Months Ended
July 5, 2015 June 29, 2014 July 5, 2015 June 29, 2014
Cash flows from operating activities:
Net income $ 102,879 $ 101,205 $ 135,666 $ 102,134
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 16,885 18,526 36,230 33,785
Amortization 16,256 19,065 31,395 42,990
Stock-based compensation 7,442 8,297 15,405 23,530
Provision for excess and obsolete inventory 14,441 5,032 15,881 15,071
Gain from the sale of an equity investment (624 ) - (5,406 ) -
Deferred taxes (8,540 ) (8,753 ) (10,371 ) (5,697 )
Non cash charge for the sale of inventories revalued at the date of acquisition 595 - 595 -
Contingent consideration adjustment (1,600 ) - (1,600 ) -
Tax benefit related to stock options and restricted stock units (892 ) (1,671 ) (892 ) (1,671 )
Other 2,571 1,306 1,154 1,165
Changes in operating assets and liabilities, net of business acquired:
Accounts receivable (117,744 ) (84,243 ) (142,493 ) (143,125 )
Inventories 17,540 15,834 23,500 18,469
Prepayments and other assets 10,908 27,874 14,054 27,000
Accounts payable and accrued expenses 73,542 88,394 53,392 52,796
Deferred revenue and customer advances 4,647 4,168 5,685 13,800
Retirement plans contributions (980 ) (963 ) (1,999 ) (2,388 )
Accrued income taxes   18,599     15,104     23,261     5,495  
Net cash provided by operating activities 155,925 209,175 193,457 183,354
 
Cash flows from investing activities:
Purchases of property, plant and equipment (24,961 ) (60,192 ) (46,110 ) (91,389 )
Purchases of available-for-sale marketable securities (254,615 ) (266,046 ) (590,250 ) (523,306 )
Proceeds from maturities of available-for-sale marketable securities 91,194 97,114 231,416 377,436
Proceeds from sales of available-for-sale marketable securities 482,761 51,455 631,400 152,818
Acquisition of business, net of cash acquired (282,332 ) - (282,332 ) -
Proceeds from the sale of an equity investment 624 - 5,406 -
Proceeds from life insurance   -     -     1,098     4,391  
Net cash provided by (used for) investing activities 12,671 (177,669 ) (49,372 ) (80,050 )
 
Cash flows from financing activities:
Issuance of common stock under stock option and stock purchase plans 8,979 478 17,878 10,643
Repurchase of common stock (81,666 ) - (128,316 ) -
Tax benefit related to stock options and restricted stock units 892 1,671 892 1,671
Dividend payments (12,808 ) (11,656 ) (25,857 ) (11,656 )
Payment of debt issue costs (2,253 ) - (2,253 ) -
Payment of long-term debt   -     -     -     (190,975 )

Net cash used for financing activities
(86,856 ) (9,507 ) (137,656 ) (190,317 )
 
Increase (decrease) in cash and cash equivalents 81,740 21,999 6,429 (87,013 )
Cash and cash equivalents at beginning of period   218,945     232,626     294,256     341,638  
Cash and cash equivalents at end of period $ 300,685   $ 254,625   $ 300,685   $ 254,625  
 
GAAP to Non-GAAP Earnings Reconciliation                          
     
(In millions, except per share amounts)
Quarter Ended

July 5, 2015
 

% of Net Revenues

April 5, 2015
 

% of Net Revenues

June 29, 2014
 

% of Net Revenues
 
Net revenues $ 512.7 $ 342.4 $ 525.6
 
Gross profit - GAAP $ 298.6 58.2 % $ 192.4 56.2 % $ 290.4 55.3 %
Inventory Step-Up   0.6     0.1 %   -   -     -   -  
Gross profit - non-GAAP $ 299.2 58.4 % $ 192.4 56.2 % $ 290.4 55.3 %
 
Income from operations - GAAP $ 130.8 25.5 % $ 35.1 10.3 % $ 120.7 23.0 %
Acquired intangible asset amortization 15.3 3.0 % 13.8 4.0 % 18.3 3.5 %
Restructuring and other (1) (0.4 ) -0.1 % - - 0.6 0.1 %
Inventory step-up   0.6     0.1 %   -   -     -   -  
Income from operations - non-GAAP $ 146.3     28.5 % $ 48.9   14.3 % $ 139.6   26.6 %
 

Net Income per Common Share

Net Income per Common Share

Net Income per Common Share

July 5, 2015
 

% of Net Revenues
      Basic   Diluted

April 5, 2015
 

% of Net Revenues
  Basic   Diluted

June 29, 2014
 

% of Net Revenues
  Basic   Diluted
Net income - GAAP $ 102.9 20.1 % $ 0.48 $ 0.48 $ 32.8 9.6 % $ 0.15 $ 0.15 $ 101.2 19.3 % $ 0.52 $ 0.47
Acquired intangible asset amortization 15.3 3.0 % 0.07 0.07 13.8 4.0 % 0.06 0.06 18.3 3.5 % 0.09 0.08
Interest and other (2) (0.6 ) -0.1 % (0.00 ) (0.00 ) (4.8 ) -1.4 % (0.02 ) (0.02 ) - - - -
Restructuring and other (1) (0.4 ) -0.1 % (0.00 ) (0.00 ) - - - - 0.6 0.1 % 0.00 0.00
Inventory step-up 0.6 0.1 % 0.00 0.00 - - - - - - - -
Exclude discrete tax adjustments (3) 0.2 0.0 % 0.00 0.00 (1.8 ) -0.5 % (0.01 ) (0.01 ) (0.5 ) -0.1 % (0.00 ) (0.00 )
Tax effect of non-GAAP adjustments   (3.4 )   -0.7 %   (0.02 )   (0.02 )   (2.4 ) -0.7 %   (0.01 )   (0.01 )   (3.2 ) -0.6 %   (0.02 )   (0.01 )
Net income - non-GAAP $ 114.6     22.4 % $ 0.54   $ 0.53   $ 37.6   11.0 % $ 0.17   $ 0.17   $ 116.4   22.1 % $ 0.60   $ 0.54  
 
GAAP and non-GAAP weighted average common shares - basic 213.8 217.2 194.4
GAAP and non-GAAP weighted average common shares - diluted 215.5 218.8 216.6
 
 
 
(1) Restructuring and other consists of:
Quarter Ended

July 5, 2015

April 5, 2015

June 29, 2014
Acquisition costs $ 1.0 $ - $ -
Employee severance 0.2 - 0.6
Contingent consideration fair value adjustment   (1.6 )   -     -  
$ (0.4 ) $ -   $ 0.6  
 
 
 
(2) For the quarters ended July 5, 2015 and April 5, 2015, Interest and other included a gain from the sale of an equity investment.
 
(3) For the quarters ended July 5, 2015, April 5, 2015 and June 29, 2014, adjustment to exclude discrete income tax items.
 
 
 
Six Months Ended

July 5, 2015

% of Net Revenues

June 29, 2014

% of Net Revenues
 
Net Revenues $ 855.1 $ 846.6
 
Gross profit - GAAP $ 491.0 57.4 % $ 457.5 54.0 %
Inventory step-up   0.6     0.1 %   -   -  
Gross profit - non-GAAP $ 491.6 57.5 % $ 457.5 54.0 %
 
Income from operations - GAAP $ 165.9 19.4 % $ 124.4 14.7 %
Acquired intangible asset amortization 29.1 3.4 % 36.5 4.3 %
Restructuring and other (1) (0.4 ) 0.0 % 0.6 0.1 %
Inventory step-up 0.6 0.1 % - -
Equity modification charge (2)   -     -     6.6   0.8 %
Income from operations - non-GAAP $ 195.2     22.8 % $ 168.1   19.9 %
 

Net Income per Common Share

Net Income per Common Share

July 5, 2015

% of Net Revenues
Basic   Diluted

June 29, 2014

% of Net Revenues
Basic Diluted

Net income - GAAP
$ 135.7 15.9 % $ 0.63 $ 0.62 $ 102.1 12.1 % $ 0.53 $ 0.45
Acquired intangible asset amortization 29.1 3.4 % 0.14 0.13 36.5 4.3 % 0.19 0.16
Interest and other (3) (5.4 ) -0.6 % (0.03 ) (0.02 ) 4.3 0.5 % 0.02 0.02
Restructuring and other (1) (0.4 ) 0.0 % (0.00 ) (0.00 ) 0.6 0.1 % 0.00 0.00
Inventory step-up 0.6 0.1 % 0.00 0.00 - - - -
Equity modification charge (2) - - - - 6.6 0.8 % 0.03 0.03
Exclude discrete tax adjustments (4) (1.6 ) -0.2 % (0.01 ) (0.01 ) (2.9 ) -0.3 % (0.01 ) (0.01 )
Tax effect of non-GAAP adjustments (5.8 ) -0.7 % (0.03 ) (0.03 ) (8.5 ) -1.0 % (0.04 ) (0.04 )
Convertible share adjustment (5)   -     -     -     -     -   -     -     0.04  
Net income - non-GAAP $ 152.2     17.8 % $ 0.71   $ 0.70   $ 138.7   16.4 % $ 0.72   $ 0.65  
 
GAAP and non-GAAP weighted average common shares - basic 215.5 193.9
GAAP weighted average common shares - diluted 217.2 226.5
Exclude dilutive shares from convertible note   -     (10.0 )
Non-GAAP weighted average common shares - diluted (5)   217.2     216.5  
 
 
(1) Restructuring and other consists of:
Six Months Ended

July 5, 2015

June 29, 2014
Acquisition costs $ 1.0 $ -
Employee severance 0.2 0.6
Contingent consideration fair value adjustment   (1.6 )   -  
$ (0.4 ) $ 0.6  
 
(2) For the six months ended June 29, 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.
 
 
(3) For the six months ended July 5, 2015, Interest and other included a gain from the sale of an equity investment. For the six months ended June 29, 2014, Interest and other included non-cash convertible debt interest expense.
 
(4) For the six months ended July 5, 2015 and June 29, 2014, adjustment to exclude discrete income tax items.
 
(5) For the six months ended June 29, 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, 10.0 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 Third Quarter 2015 guidance:
 
GAAP and non-GAAP third quarter revenue guidance: $450 million to $480 million
GAAP net income per diluted share $ 0.27 $ 0.33
Exclude acquired intangible asset amortization 0.09 0.09
Exclude inventory step-up amortization 0.00 0.00
Tax effect of non-GAAP adjustment   (0.02 )   (0.02 )
Non-GAAP net income per diluted share $ 0.35 $ 0.41
 

For press releases and other information of interest to investors, please visit Teradyne's homepage at http://www.teradyne.com.

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