-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EI7HW16sycWpzSgtJ4+jrryhbvuTZrLe73ZCRXwAqFHpqkLxaiLxVgxkt9s3z15b 0T2N3NFP4C5vgYEDSfVsJw== 0000097210-95-000013.txt : 19951218 0000097210-95-000013.hdr.sgml : 19951218 ACCESSION NUMBER: 0000097210-95-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951201 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951215 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERADYNE INC CENTRAL INDEX KEY: 0000097210 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 042272148 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06462 FILM NUMBER: 95601992 BUSINESS ADDRESS: STREET 1: 321 HARRISON AVE CITY: BOSTON STATE: MA ZIP: 02118 BUSINESS PHONE: 6174822700 MAIL ADDRESS: STREET 1: 321 HARRISON AVENUE STREET 2: H93 CITY: BOSTON STATE: MA ZIP: 02118 8-K 1 FORM 8-K CURRENT REPORT FOR TERADYNE, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): December 1, 1995 ---------------- Teradyne, Inc. ------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Massachusetts 1-6462 04-2272148 - ------------- ------ ---------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 321 Harrison Avenue, Boston, Massachusetts 02118 - --------------------------- -------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (617) 482-2700 --------------- Total number of sequentially numbered pages in this filing, including exhibits thereto: 38 -- Exhibit Index Located on Page 6 - 2 Item 2. Acquisition or Disposition of Assets. On December 1, 1995, Teradyne, Inc. ("Teradyne") completed the acquisition of Megatest Corporation, a Delaware corporation ("Megatest"), by means of a merger (the "Merger") of M Merger Corp., a Delaware corporation and wholly owned subsidiary of Teradyne ("Merger Sub"), with and into Megatest, pursuant to the Agreement and Plan of Merger and Reorganization, dated as of September 5, 1995, as amended (the "Merger Agreement"), by and among Teradyne, Merger Sub and Megatest. As a result of the Merger, Megatest became a wholly owned subsidiary of Teradyne. The Merger was effected by the filing of a Certificate of Merger with the Secretary of State of the State of Delaware on December 1, 1995. Teradyne manufactures automatic test equipment and connection systems for the electronics and telecommunications industries. Megatest manufactures several lines of semiconductor test systems. Pursuant to the terms of the Merger Agreement, upon the effective time of the Merger, each outstanding share of Megatest common stock, $.001 par value ("Megatest Common Stock"), was converted into the right to receive 0.9091 shares of Teradyne common stock, $.125 par value ("Teradyne Common Stock"), (subject to payment of cash in lieu of any fractional shares). As a result of the Merger, the former stockholders of Megatest will receive approximately 6.8 million shares of Teradyne Common Stock. Each holder of Megatest Common Stock who was otherwise entitled to a fraction of a share of Teradyne Common Stock will receive cash in lieu thereof, equal to such fraction multiplied by $29.11 (the "Final Teradyne Stock Price"), which is the average of the closing prices of Teradyne Common Stock for the twenty consecutive days on which Teradyne Common Stock was traded on The New York Stock Exchange ending on November 24, 1995. Also, pursuant to the terms of the Merger Agreement, upon the effective time of the Merger, Megatest's obligations under Megatest's existing option plans, whether vested or unvested, were assumed by Teradyne. The shares of Megatest Common Stock subject to the stock option plans were converted into shares of Teradyne Common Stock at the rate of 0.9091 shares of Teradyne Common Stock for each share of Megatest Common Stock. The terms of this transaction and the consideration received by Megatest's stockholders were the result of arm's-length negotiations between the representatives of Teradyne and Megatest and took into account various factors concerning the relative valuations of the businesses and the common stock of Teradyne and Megatest. The terms of the Merger and the exchange of Megatest Common Stock for Teradyne Common Stock are more fully described in the Merger Agreement. A copy of the Merger Agreement is filed as Exhibit 2.1 to this Report and is incorporated herein by reference. The acquisition of Megatest is intended to qualify a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended. Teradyne will account for the transaction as a pooling of interests. 3 Item 7. Financial Statements and Exhibits. (a) Financial Statements of Business Acquired. The following audited financial statements of Megatest, together with the reports thereon manually signed by Price Waterhouse LLP and Deloitte & Touche LLP, appear as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated herein by this reference: Consolidated Balance Sheets as of August 31, 1995 and 1994 Consolidated Statements of Operations for the fiscal years ended August 31, 1995, 1994 and 1993 Consolidated Statements of Stockholders' Equity for the fiscal years ended August 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows for the fiscal years ended August 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements (b) Pro Forma Financial Information. The following Teradyne and Megatest unaudited pro forma condensed combined financial statements appear as Exhibit 99.2 to this Current Report on Form 8-K and are incorporated herein by this reference: Unaudited Pro Forma Condensed Consolidated Balance Sheet as of October 1, 1995 Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended October 1, 1995 Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended October 2, 1994 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1994 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1993 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1992 Notes to Unaudited Pro Forma Condensed Combined Financial Statements (c) Exhibits. 4 Exhibit no. Description - ----------- ----------- 2.1 Agreement and Plan of Merger and Reorganization, dated as of September 5, 1995, as amended, by and among Teradyne, M Merger Corp. and Megatest Corporation (filed as Exhibit 2 to Teradyne's Registration Statement on Form S-4 (No. 33-63781) and incorporated herein by reference) 23.1 Consent of Price Waterhouse LLP 23.2 Consent of Deloitte & Touche LLP 99.1 The following audited financial statements of Megatest, together with the reports thereon manually signed by Price Waterhouse LLP and Deloitte & Touche LLP: Consolidated Balance Sheets as of August 31, 1995 and 1994 Consolidated Statements of Operations for the fiscal years ended August 31, 1995, 1994 and 1993 Consolidated Statements of Stockholders' Equity for the fiscal years ended August 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows for the fiscal years ended August 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements 99.2 The following Teradyne and Megatest unaudited pro forma condensed combined financial statements: Unaudited Pro Forma Condensed Consolidated Balance Sheet as of October 1, 1995 Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended October 1, 1995 Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended October 2, 1994 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1994 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1993 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1992 Notes to Unaudited Pro Forma Condensed Combined Financial Statements 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. Teradyne, Inc. -------------- (Registrant) Date: December 15, 1995 /s/ Owen W. Robbins ------------------- Owen W. Robbins Executive Vice President 6 EXHIBIT INDEX
Page Number in Sequentially Exhibit No. Description Numbered Copy - ----------- ----------- -------------- 2.1 Agreement and Plan of Merger and Reorganization, dated as of September 5, 1995, as amended, by and among Teradyne, M Merger Corp. and Megatest Corporation (filed as Exhibit 2 to Teradyne's Registration Statement on Form S-4 (No. 33-63781) and incorporated herein by reference) --- 23.1 Consent of Price Waterhouse LLP 8 23.2 Consent of Deloitte & Touche LLP 10 99.1 The following audited financial statements of Megatest, together with the reports thereon manually signed by Price Waterhouse LLP and Deloitte & Touche LLP: 12 Consolidated Balance Sheets as of August 31, 1995 and 1994 Consolidated Statements of Operations for the fiscal years ended August 31, 1995, 1994 and 1993 Consolidated Statements of Stockholders' Equity for the fiscal years ended August 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows for the fiscal years ended August 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements 99.2 The following Teradyne and Megatest unaudited pro forma condensed combined financial statements: 30 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of October 1, 1995 Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended October 1, 1995 Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended October 2, 1994 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1994 7 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1993 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1992 Notes to Unaudited Pro Forma Condensed Combined Financial Statements
EX-23.1 2 CONSENT OF PRICE WATERHOUSE LLP 8 EXHIBIT 23.1 9 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the registration statements on Form S-8 (File Nos. 33-64683; 33-55123; 33-25868; 33-16077; 33-42352; and 33-38251) and to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (File No. 33-44347) of Teradyne, Inc. our report dated September 20, 1995 on our audits of the consolidated financial statements of Megatest Corporation and its subsidiaries as of August 31, 1995 and 1994, and for the years ended August 31, 1995 and 1994, which report is included in this Current Report on Form 8-K. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP San Jose, California December 13, 1995 EX-23.2 3 CONSENT OF DELOITTE & TOUCHE LLP 10 EXHIBIT 23.2 11 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Teradyne, Inc. on Form S-8 (File Nos. 33-64683; 33-55123; 33-25868; 33-16077; 33-42352; and 33-38251) and Form S-3 (File No. 33-44347) of our report dated September 21, 1993 on our audits of the consolidated financial statements of Megatest Corporation and its subsidiaries for the year ended August 31, 1993, appearing in this Current Report on Form 8-K of Teradyne, Inc. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP San Jose, California December 15, 1995 EX-99.1 4 MEGATEST CORPORATION AUDITED F/S 08/31/95 12 EXHIBIT 99.1 13 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Megatest Corporation: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Megatest Corporation and its subsidiaries at August 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for income taxes effective September 1, 1993. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP San Jose, California September 20, 1995 14 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Megatest Corporation: We have audited the accompanying consolidated statements of operations, stockholders' equity, and cash flows of Megatest Corporation and its subsidiaries for the year ended August 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects the results of operations and cash flows of Megatest Corporation and its subsidiaries for the year ended August 31, 1993 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP San Jose, California September 21, 1993 15 MEGATEST CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except for per share amount)
ASSETS August 31, ---------- 1995 1994 ---- ---- Current assets: Cash and cash equivalents $ 11,609 $ 19,404 Short-term investments -- 10,069 Accounts receivable, less allowances of $261 and $262 31,386 23,064 Inventories 38,116 23,531 Deferred taxes 3,852 3,532 Prepaid expenses and other current assets 1,618 668 ----- --- Total current assets 86,581 80,268 Property and equipment--net 28,882 12,122 Restricted investments -- 7,659 Other assets 3,395 1,034 ----- ----- $ 118,858 $ 101,083 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 10,000 $ -- Current portion of long-term obligations 1,657 66 Accounts payable and accrued liabilities 26,659 18,075 Income taxes payable 1,655 4,198 Customer advances and deferred revenues 1,751 2,083 ----- ----- Total current liabilities 41,722 24,422 ------ ------ Long-term obligations 11,728 414 ------ --- Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value: 5,000 shares authorized; -- -- no shares outstanding Common stock, $0.001 par value: 20,000 shares authorized; 7,422 and 7,171 shares outstanding 7 7 Additional paid-in capital 82,007 80,656 Accumulated deficit (16,606) (4,416) ------- ------ Total stockholders' equity 65,408 76,247 ------ ------ $ 118,858 $ 101,083 ========= ========= The accompanying notes are an integral part of these financial statements.
16 MEGATEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except for per share amounts)
Year ended August 31, --------------------- 1995 1994 1993 ---- ---- ---- Product sales $ 97,459 $ 99,441 $ 77,818 Development revenues -- 850 587 ------ --- --- Net revenues 97,459 100,291 78,405 ------ ------- ------ Cost of sales 59,537 56,196 44,065 Engineering and product development 20,158 15,878 12,205 Selling, general and administrative 21,364 18,069 16,032 Write-off of acquired in-process technology 8,837 -- -- ----- Total costs and expenses 109,896 90,143 72,302 ------- ------ ------ Income (loss) from operations (12,437) 10,148 6,103 Interest income 578 1,433 225 Interest expense (571) (118) (364) Other expense (174) -- -- ---- ------ ----- Income (loss) before income taxes and cumulative effect of accounting change (12,604) 11,463 5,964 (Provision) benefit for income taxes 414 (2,364) (685) --- ------ ---- Income (loss) before cumulative effect of accounting change (12,190) 9,099 5,279 Cumulative effect of change in accounting for income taxes -- 1,700 -- -------- ----- ----- Net income (loss) $ (12,190) $ 10,799 $ 5,279 ========== ========= ======== Per share data: Income (loss) before cumulative effect of accounting change $ (1.69) $ 1.26 $ 1.11 Cumulative effect of change in accounting for income taxes -- 0.24 -- ------ ---- ---- Net income (loss) $ (1.69) $ 1.50 $ 1.11 ========== ======== ======== Average common and common equivalent shares outstanding 7,230 7,204 4,752 ===== ===== ===== The accompanying notes are an integral part of these financial statements.
17 MEGATEST CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands)
Convertible Preferred stock Common stock Additional --------------- ------------ paid-in Accumulated Shares Amount Shares Amount capital deficit Total ------ ------ ------ ------ ------- ------- ----- Balances, September 1, 1992 4,631 $5 2,605 $3 $ 43,018 $ (20,494) $ 22,532 Sale of common stock 2,216 2 23,914 23,916 Conversion of preferred stock into common stock (4,631) (5) 1,211 1 4 -- Exercise of stock options 101 -- 86 86 Net income 5,279 5,279 ------ --- ----- -- --------- ----------- ------ Balances, August 31, 1993 6,133 6 67,022 (15,215) 51,813 Sale of common stock 983 1 13,574 13,575 Exercise of stock options and warrant 55 -- 60 60 Net income 10,799 10,799 ------ --- ----- -- --------- ----------- ------ Balances, August 31, 1994 7,171 7 80,656 (4,416) 76,247 Employee Stock Purchase Plan 93 -- 491 491 Exercise of stock options 158 -- 272 272 Income tax benefit from exercise of stock options 588 588 Net loss (12,190) (12,190) ------ --- ----- -- --------- ----------- --------- Balances, August 31, 1995 -- $-- 7,422 $7 $ 82,007 $ (16,606) $ 65,408 ====== === ===== == ========= =========== ========== The accompanying notes are an integral part of these financial statements.
18 MEGATEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Year ended August 31, --------------------- 1995 1994 1993 ---- ---- ---- Cash flows from operating activities: Net income (loss) $ (12,190) $ 10,799 $ 5,279 Reconciliation to net cash provided by (used for) operating activities: Depreciation and amortization 4,612 3,142 2,258 Cumulative effect of change in accounting for income taxes -- (1,700) -- Provision for deferred income taxes 223 (2,375) -- Provision for bad debts (1) 112 -- Write-off of acquired in-process technology 8,837 -- -- Changes in: Accounts receivable (8,321) (4,885) (4,845) Inventories (8,924) (8,368) (304) Prepaid expenses and other current assets (950) (427) 52 Accounts payable and accrued liabilities 6,484 5,088 2,015 Income taxes payable (2,543) 3,570 392 Customer advances and deferred revenues (332) 679 367 Other -- (525) 110 -------- ------ ----- Net cash provided by (used for) operating activities (13,105) 5,110 5,324 -------- ------ ----- Cash flows from investing activities: Acquisition of tester product line and related technology (13,897) -- -- Property and equipment purchases (20,160) (6,750) (5,393) (Purchases) sales of restricted investments 7,659 (7,659) -- Purchases of short-term investments -- (27,975) (7,942) Proceeds from sale of short-term investments 10,069 25,848 -- Investment in equity securities (1,500) -- -- Other assets, net (456) (147) (1) -------- ------- -------- Net cash used for investing activities (18,285) (16,683) (13,336) -------- ------- -------- Cash flows from financing activities: Borrowings (repayments) under line of credit 10,000 -- (3,500) Additions to long-term obligations 12,350 145 1,420 Reductions in long-term obligations -- (81) (3,509) Sale of common stock 1,351 13,635 24,002 Debt issuance costs (106) -- -- ---- ------ ------ Net cash provided by financing activities 23,595 13,699 18,413 ------- ------ ------ Net increase in cash and cash equivalents (7,795) 2,126 10,401 Cash and cash equivalents: Beginning of period 19,404 17,278 6,877 --------- --------- --------- End of period $ 11,609 $ 19,404 $ 17,278 ========= ========= ========= Supplemental cash flow information: Net cash paid during the year for: Interest $ 474 $ 79 $ 405 Taxes 1,558 847 236 The accompanying notes are an integral part of these financial statements.
19 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) NOTE 1. SIGNIFICANT ACCOUNTING POLICIES: Line of business Megatest designs, manufactures, markets and services automatic test equipment for the integrated circuit ("IC") industry. Megatest currently offers four product lines, one for testing memory ICs and three for testing logic ICs. Principles of consolidation The consolidated financial statements include the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated. Fiscal period The Company uses a 52-53 week fiscal year ending on the last Saturday in August. The Company's fiscal years in the accompanying financial statements have been shown as ending on August 31. Fiscal years 1995, 1994 and 1993 each include 52 weeks. Cash equivalents and short-term investments The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Short-term investments at August 31, 1994 include commercial paper and T-bills purchased with a maturity of twelve months or less. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. Property and equipment Property and equipment are stated at cost. Depreciation on equipment, furniture and fixtures is computed using the straight-line method over the estimated useful lives of the assets, which is generally three to five years. Leasehold improvements are amortized over the shorter of the useful life or the lease term. The building is being depreciated over fifteen years. Revenue recognition Product sales are recognized upon shipment and are recorded net of related trade discounts and estimated allowances. The Company provides for installation and normal warranty costs at the time the sales are recognized and, if applicable, for any significant cost to enhance the functionality and reliability of the installed base when such need becomes known. Revenues from development contracts are recognized over the term of the contacts based on the relation of actual costs incurred to the total estimated cost for completion. Revenues from service contracts are recognized ratably over the service period. 20 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Income taxes Effective September 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes." FAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or income tax returns. In estimating future tax consequences, FAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. Previously, the Company used the FAS 96 asset and liability approach that gave no recognition to future events other than the recovery of assets and settlement of liabilities at their carrying amounts. The cumulative effect of adopting FAS 109 resulted in a one-time credit to net income of $1,700 or $0.24 per share and is reported separately in the consolidated statement of operations. Net income per share Net income per share is computed using the weighted average number of common shares plus common stock equivalent shares from dilutive stock options. Translation of foreign currency The Company's subsidiaries use the U.S. dollar as the functional currency. Accordingly, assets and liabilities are translated at year-end exchange rates, except for inventories and property and equipment, which are translated at historical rates. Revenues and expenses are translated at average exchange rates in effect during the year, except for costs related to those balance sheet items which are translated at historical rates. Foreign currency transaction gains and losses are included in income as they occur. Concentration of credit risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents and trade accounts receivable. The Company invests in a variety of financial instruments such as certificates of deposit, commercial paper, municipal debt and U.S. Government agency debt. The Company, by policy, limits the amount of credit exposures to any one financial institution or commercial issuer. The Company sells its systems to semiconductor manufacturers and manufacturers of computers and other electronic systems throughout the world. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company maintains an allowance for uncollectible accounts receivable based upon expected collectability of all accounts receivable. NOTE 2. INVENTORIES:
August 31, ---------------------------------------------------- 1995 1994 Purchased parts $ 11,812 $ 5,705 Assemblies in process 13,888 8,285 Finished goods 12,416 9,541 --------- --------- $ 38,116 $ 23,531 ========= =========
21 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3. PROPERTY AND EQUIPMENT:
August 31, ----------------------------------------------------- 1995 1994 Land and buildings $ 8,600 $ -- Computer and test equipment 26,966 18,064 Leasehold improvements 3,514 1,227 Furniture and fixtures 625 568 --- --- 39,705 19,859 Accumulated depreciation and amortization (10,823) (7,737) --------- --------- $ 28,882 $ 12,122 ========= =========
NOTE 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
August 31, ----------------------------------------------------- 1995 1994 Accounts payable $ 17,077 $ 9,037 Accrued salaries and benefits 4,759 3,972 Accrued installation and warranty costs 3,023 2,900 Other accrued liabilities 1,800 2,166 --------- --------- $ 26,659 $ 18,075 ========= =========
NOTE 5. PRODUCT LINE ACQUISITION: On November 22, 1994, the Company acquired the 1149 Tester product line and follow-on in-process technology (the "Voyager") of Micro Component Technology, Inc. ("MCT"). The assets acquired include substantially all of the equipment, inventory and intellectual property including the follow-on in-process technology, and the assumption of certain liabilities associated with the Voyager. Of the amount paid, $2,000 was placed in escrow (i) to indemnify the Company in the event of a breach of any of the representations and warranties made by MCT in the purchase agreement, (ii) to secure performance of MCT's obligations under the purchase agreement, and (iii) to insure against any shortfalls discovered in the equipment or inventory intended to be acquired through the Company's post-closing audit of the assets acquired. The acquisition of the Voyager has been accounted for as a purchase and, accordingly, the results of operations and cash flows of the Voyager have been included only from the date of acquisition. Excluding the one-time write-off of in-process technology of $8,837, the results of operations for the Voyager from the date of acquisition through August 31, 1995 increased Megatest's loss from operations by approximately $2,400. The total purchase price of the acquisition was as follows: Cash paid to MCT $ 12,800 Other acquisition costs 1,097 --------- $ 13,897 ========= 22 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The allocation of the Company's purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed is based on an independent appraisal. A final allocation of the purchase price will be determined when matters relating to the escrow deposit are settled. The preliminary purchase price allocation is summarized as follows: Inventories $ 5,661 Property and equipment 1,038 In-process technology 8,837 Goodwill 461 --- Assets acquired 15,997 ------ Accounts payable 1,903 Accrued warranty 197 --- Liabilities assumed 2,100 --------- Net assets acquired $ 13,897 ========= The in-process technology was charged to income during the quarter ended November 30, 1994. Unaudited proforma combined net revenues of the Company and the Voyager for the years ended August 31, 1995 and 1994 were $100,652 and $111,261, respectively. Proforma combined net income (loss) and proforma combined net income (loss) per share were not materially different from the amounts reported in the accompanying statement of operations. In addition, the Company purchased 315,790 shares of MCT's nonvoting Series A Preferred Stock at a price of $4.75 per share for a total of $1,500 cash on November 23, 1994. The investment in equity securities is recorded at fair market value, which approximates its cost, and is included in other assets at August 31, 1995. NOTE 6. NOTES PAYABLE: The Company maintains a $10,000 domestic bank line of credit which expires in January 1996. The line of credit agreement provides for borrowings up to the lesser of 80% of eligible domestic accounts receivable or the $10,000 committed credit amount. In addition, the Company maintains an additional $5,000 line of credit guaranteed by the Export-Import Bank of the United States to support export sales. This agreement provides for borrowings up to the lesser of 90% of eligible foreign accounts receivable plus 70% of eligible inventory to support such receivables, or the $5,000 committed credit amount. Borrowings under these lines bear interest at prime (8.75% at August 31, 1995) plus 1.0% and 0.5% for the domestic and export lines of credit, respectively, and are collateralized by a security interest in substantially all of the Company's previously unencumbered tangible and intangible assets. The terms of the credit agreements require, among other terms, quarterly profitability, minimum amounts of tangible net worth, a minimum ratio of current assets to current liabilities, and a maximum ratio of indebtedness to net worth. The credit agreements preclude the Company from taking certain actions without prior bank approval. Transactions subject to such prohibition include the declaration of cash dividends, certain significant asset acquisitions or dispositions, incurrence of certain additional indebtedness, and changing the nature of the Company's business. At August 31, 1995, the Company had borrowed $10,000 under these lines of credit. 23 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 7. LONG-TERM OBLIGATIONS:
Long-term obligations at August 31, 1995 and 1994 are as follows: August 31, ------------------------- 1995 1994 Mortgage on land and building $ 5,450 $ -- Notes payable 6,900 -- Other 1,035 480 --------- -------- 13,385 480 Less: current portion of long-term obligations (1,657) (66) -------- --------- Long-term obligations $ 11,728 $ 414 ========= ========= In conjunction with the Company's purchase of general operating facilities and land in San Jose, California in August 1995, the Company entered into a $5,450 mortgage agreement. The mortgage loan is secured by the property purchased. The mortgage loan bears interest at approximately 8.125% per annum and is payable in 59 monthly installments of approximately $50 with a $4,550 balloon payment due on August 31, 2000, the maturity date of the loan. During August 1995 the Company issued a $5,000 promissory note secured by certain capital equipment of the Company. The note is payable in 48 monthly installments including interest of approximately 9.5% per annum. In addition, in August 1995 the Company entered into a four-year $1,900 loan agreement secured by certain of the Company's testers used for customer demonstrations. The agreement bears interest at approximately 8% per annum and is payable in equal monthly installments of $39 and $380 balloon payment due on the maturity date of the loan. In connection with the above-noted borrowing arrangements, the Company must comply with certain financial covenants relating to profitability, liquidity, leverage and tangible net worth. Maturities of long-term obligations are as follows: August 31 --------- 1996 $ 1,657 1997 1,765 1998 1,902 1999 2,049 2000 6,012 ---- --------- Total $ 13,385 =========
24 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 8. INCOME TAXES:
Income before taxes and cumulative effect of accounting change has been primarily generated in the United States. The components of the provision for income taxes were as follows: Year ended August 31, ----------------------------------------------------- 1995 1994 1993 ---- ---- ---- Current: U.S. $ (1,291) $ 3,956 $ 333 Foreign 408 84 120 State 246 699 232 ----- ----- --- (637) 4,739 685 ----- ----- --- Deferred: U.S. 223 (2,308) -- Foreign -- -- -- State -- (67) -- -------- ---- ------- 223 (2,375) -- -------- -------- ------- Provision for income taxes $ (414) $ 2,364 $ 685 ======== ======== =======
The provision for income taxes differs from the amount computed by applying the statutory U.S. federal income tax rate as follows: Year ended August 31, ------------------------------------------------------- 1995 1994 1993 ---- ---- ---- Tax provision at U.S. statutory rate $ (4,285) $ 4,012 $ 2,028 State income taxes, net of federal benefit (267) 632 153 R&D credits (646) -- -- Increase in valuation allowance 4,671 -- -- Reduction in valuation allowance, including utilization of net operating loss carryforwards of $1,596 -- (3,356) -- Utilization of net operating loss carryforwards -- -- (1,560) Other 113 1,076 64 --------- -------- ------- Provision for income taxes $ (414) $ 2,364 $ 685 ========= ======== =======
The components of the net deferred income tax asset under FAS 109 are as follows: August 31, 1995 August 31, 1994 --------------- --------------- Inventory reserves $ 4,213 $ 2,950 Federal and state loss and credit carryforwards 5,074 4,840 In-process research and development 3,374 -- Other asset valuation reserves 264 214 Employee benefit accruals 455 389 Warranty and installation accruals 1,015 1,106 Other 322 422 --- --- Gross deferred tax assets 14,717 9,921 ------ ----- Depreciation (850) (713) -------- --------- Deferred tax assets valuation allowance (10,015) (5,133) -------- --------- $ 3,852 $ 4,075 ========= =========
25 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At August 31, 1995, the Company had net operating loss and credit carryforwards for federal income tax purposes of approximately $7,262 and $1,755, respectively, and net operating loss and credit carryforwards for state income tax purposes of $3,950 and $604, respectively. These carryforwards, if not utilized to offset future federal taxable income and income taxes payable, will expire in the years 1999 through 2005. In connection with adopting FAS 109, management fully reserved net deferred tax assets that may be realized beyond one year after the date of adoption because of the uncertainty regarding their realization. At the end of each quarter of fiscal 1995 and 1994, management again fully reserved deferred tax assets which may be realized beyond the ensuing twelve-month period because of the uncertainty regarding their realization. The change in the valuation allowance attributable to these quarterly reassessments regarding future taxable income aggregated $1,070 in fiscal 1995 and $1,534 in fiscal 1994. The deferred tax assets valuation allowance at August 31, 1995 and 1994 is attributed to U.S. federal and state deferred tax assets. The Company had $13,867 and $9,208 of net deferred tax assets in the U.S. at August 31, 1995 and 1994, respectively. Management believes sufficient uncertainty exists such that a valuation allowance of $10,015 and $5,133 against those net deferred tax assets is required at August 31, 1995 and 1994, respectively. When these reserved deferred tax assets are recognized, they will reduce the Company's federal and state tax provisions, except for approximately $1,135 related to the tax benefit of stock options, which will be credited directly to additional paid-in capital. Under Section 382 of the Internal Revenue Code and the Regulations issued thereunder, the Company's ability to use its net operating loss and tax credit carryforwards are limited to approximately $3,000 per year as a result of an "ownership change" in fiscal 1994. 26 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 9. STOCKHOLDERS' EQUITY In May and June 1993, the Company sold 2,216 shares of common stock in its initial public offerings with proceeds to the Company of $23,916, net of underwriting discounts and offering expenses of $2,681. In connection with such offering, all shares of convertible preferred stock converted into 1,211 shares of common stock. In October 1993, the Company sold an additional 983 shares in a second public offering with proceeds to the Company of $13,575 net of underwriting discounts and offering expenses of $1,409. Under the Company's stock option plans, options may be granted to employees, consultants and non-employee directors to purchase shares of common stock at prices not less than the fair market value at the date of grant. Options generally become exercisable as determined by the Board of Directors and expire up to ten years after the grant date. At August 31, 1995, options to purchase 126 shares of common stock were exercisable and 851 shares were available for future option grants. Additional information with respect to stock options follows: Number of shares Price per under options share ------------- ----- Outstanding, September 1, 1992 356 $0.04 - $8.00 Granted 34 4.00 - 21.25 Exercised (101) 0.04 - 4.00 Canceled (9) 0.04 - 4.00 ---- Outstanding, August 31, 1993 280 0.04 - 21.25 Granted 351 13.25 - 21.75 Exercised (53) 1.00 - 10.00 Canceled (39) 1.00 - 21.25 ---- Outstanding, August 31, 1994 539 0.04 - 21.25 Granted 460 6.25 - 20.50 Exercised (158) 0.04 - 15.00 Canceled (146) 0.04 - 21.75 ----- Outstanding, August 31, 1995 695 1.00 - 21.75 ===== The Company has an employee stock purchase plan covering most U.S. employees. Under the plan, employees may contribute up to 10% of their compensation to purchase shares of the Company's common stock at 85% of the stock's fair market value at the beginning or end of each six-month offering period. During fiscal 1995, 93 shares were purchased under this plan. At August 31, 1995, the Company had reserved shares of common stock for issuance as follows: Issuance under stock option plans 1,546 Issuance under stock purchase plan 407 ----- 1,953 ===== NOTE 10. EMPLOYEE BENEFIT PLAN: Substantially all full-time employees are entitled to participate in the Company's Retirement Savings Plan (401(k) Plan). The Company is not required to contribute, nor has it contributed, to the Plan. 27 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 11. COMMITMENTS AND CONTINGENCIES: In August 1995, the Company terminated its lease for general operating facilities and land in San Jose, CA. As a result, certain restrictions were removed on $7,659 of investments which were previously used as collateral under the first-loss clause of the terminated leases. The Company leases certain facilities under operating leases for terms of up to five years. Rent is expenses on a straight line basis over the term of each lease. Future minimum commitments under all operating leases at August 31, 1995 are as follows: Fiscal year ending August 31: 1996 $ 618 1997 508 1998 380 1999 344 2000 239 ------ Total $2,089 ====== Rent expense was $960, $953 and $1,626 in fiscal 1995, 1994 and 1993, respectively. On March 27, 1995, Credence Systems Corporation ("Credence") named the Company as a defendant in a patent infringement lawsuit originally filed by Credence against MCT in the U.S. District Court for the Northern District of California (the "Court"). The suit alleges that the Company's manufacture and sale of certain Voyager assets acquired by the Company from MCT infringe a U.S. patent held by Credence. On April 24, 1995, the Company filed with the Court a counterclaim against Credence for a declaratory judgment that the Credence patent is invalid and unenforceable, and that the manufacture and sale of Voyager assets do not infringe the Credence patent. Although the outcome of any litigation is uncertain, the Company believes that the resolution of such matter will not have a material adverse effect on the Company's operating results or financial condition. As is typical in its industry, the Company has at times been notified of claims that it may be infringing patents issued to others. Historically, the Company has been able to negotiate licenses on terms which it believes are reasonable. No assurance can be given that infringement claims by third parties in the future will not materially and adversely affect the Company's business and operating results. NOTE 12. REVENUE INFORMATION: A significant portion of the Company's revenues are derived from sales to a limited number of large IC manufacturers. Three customers accounted for 25%, 19% and 14% (aggregating to 58%) of net revenues in fiscal 1995, four customers accounted for 34%, 15%, 11% and 11% (aggregating to 71%) of net revenues in fiscal 1994 and four customers accounted for 27%, 20%, 10% and 10% (aggregating to 67%) of net revenues in fiscal 1993. Accounts receivable from the major customers at August 31, 1995 and 1994 represented 57% and 55% of the total accounts receivable, respectively. Export sales were 58%, 52% and 42% of net revenues in fiscal 1995, 1994 and 1993, respectively, including sales to Europe (3%, 5% and 5%) and to the Far East (55%, 47% and 37%). 28 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 13. DEVELOPMENT ARRANGEMENTS: Beginning in fiscal 1988, the Company entered into a series of development contracts, primarily with IBM, for partial funding related to development of the Company's Polaris logic tester and certain customer-specific applications for this product. The Company recognized development revenues of $850 and $587 in fiscal 1994 and 1993, respectively, under these contracts. Related development costs were $185 and $197 in fiscal 1994 and 1993, respectively. such costs were included in engineering and product development expense. NOTE 14. SUBSEQUENT EVENT: On September 5, 1995, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") with Teradyne, Inc. ("Teradyne") and M Merger Corp., a Delaware corporation and wholly owned subsidiary of Teradyne ("Merger Sub"). Pursuant to the Merger Agreement, and upon the satisfaction of all closing conditions, Merger Sub will merge (the "Merger") with and into Megatest, and Megatest will become a wholly-owned subsidiary of Teradyne. Upon the closing of the Merger each outstanding share of Megatest common stock will be converted into the right to receive 0.9091 shares of Teradyne common stock, subject to the following adjustments (.9091 shares, as adjusted, the "Exchange Ratio"): (i) if the Final Teradyne Stock Price (as defined below) is equal to or less than $36.00 per share, no adjustment to the Exchange Ratio shall be made; (ii) if the Final Teradyne Stock Price is greater than $36.00 per share than the Exchange Ratio shall be adjusted pursuant to the following formula: Exchange Ratio = 1 ---------------------------------------- (Final Teradyne Stock Price x .02) + .38 but in no event will the Exchange Ratio be greater than .9091 or less than .8333. "Final Teradyne Stock Price" shall mean the average of the closing prices of Teradyne common stock for the twenty consecutive days on which Teradyne common stock is traded on The New York Stock Exchange ending on the fifth calendar day immediately preceding the Special Meeting of Megatest stockholders held for the purposes of approving the Merger. The closing of the transaction is subject to certain conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvement Act of of 1976, as amended, and approval by Megatest's stockholders. The transaction is expected to be accounted for as a pooling-of-interests. 29 MEGATEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 15. UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA:
Fiscal Quarter ---------------------------------------------------------------- Total First Second Third Fourth Year ----- ------ ----- ------ ----- 1995: Net revenues $ 12,202 $ 18,247 $ 28,941 $ 38,069 $ 97,459 Gross Profit 4,089 5,324 12,165 16,344 37,922 Net income (loss) (12,466) (3,628) 792 3,112 (12,190) Net income (loss) per share $ (1.74) $ (0.51) $ 0.11 $ 0.41 $ (1.69) 1994: Net revenues $ 22,447 $ 23,291 $ 27,009 $ 27,544 $100,291 Gross Profit 10,402 10,471 11,090 12,132 44,095 Income before cumulative effect of accounting change 1,778 2,091 2,531 2,699 9,099 Net income 3,478 2,091 2,531 2,699 10,799 Income before cumulative effect of accounting change per share $ 0.26 $ 0.29 $ 0.34 $ 0.37 $ 1.26 Net income per share $ 0.51 $ 0.29 $ 0.34 $ 0.37 $ 1.50
EX-99.2 5 TERADYNE AND MEGATEST UNAUDITED PRO FORMA F/S 30 EXHIBIT 99.2 31 TERADYNE AND MEGATEST UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following unaudited pro forma condensed combined financial statements assume a business combination between Teradyne and Megatest accounted for on a pooling of interests basis and are based on the respective historical financial statements and the notes thereto. The unaudited pro forma condensed combined balance sheet gives effect to the Merger as if it had occurred on October 1, 1995, combining the balance sheets of Teradyne and Megatest at October 1, 1995 and August 31, 1995, respectively. The unaudited pro forma condensed combined statements of operations give effect to the Merger as if it had occurred at the beginning of each of the periods presented combining Teradyne's historical results for the nine month periods ended October 1, 1995 and October 2, 1994 and each of the three years ended December 31, 1994, 1993 and 1992 with corresponding Megatest results for the nine month periods ended August 31, 1995 and 1994 and the twelve month periods ended November 30, 1994, 1993 and 1992, respectively. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger had been consummated at the beginning of the earliest period presented, nor is it necessarily indicative of future operating results or financial position. These unaudited pro forma condensed combined financial statements are based on, and should be read in conjunction with, the historical consolidated financial statements and the related notes thereto of Teradyne and Megatest. 32 TERADYNE AND MEGATEST UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT OCTOBER 1, 1995 (amounts in thousands)
Historical Pro Forma ---------- --------- Teradyne Megatest Adjustments Combined -------- -------- ----------- -------- Current assets: Cash and cash equivalents.......................... $234,187 $ 11,609 $245,796 Marketable securities.............................. 19,920 19,920 Accounts receivable, net........................... 206,359 31,386 237,745 Inventories........................................ 128,532 38,116 166,648 Deferred tax assets................................ 14,767 3,852 18,619 Prepayments and other current assets............... 10,978 1,618 12,596 ------ ----- ------ Total current assets............................ 614,743 86,581 701,324 Property and equipment, net........................... 216,329 28,882 245,211 Other assets.......................................... 17,794 3,395 21,189 ------ ----- ------ Total assets.................................... $848,866 $118,858 $967,724 ======== ======== ======== Current liabilities: Notes payable - banks.............................. $8,455 $10,000 $18,455 Current portion of long term debt.................. 418 1,657 2,075 Accounts payable - trade and accrued liabilities... 106,290 26,659 132,949 Unearned service revenue and customer advances..... 50,653 1,751 52,404 Income taxes payable............................... 13,807 1,655 15,462 ------ ----- ------ Total current liabilities....................... 179,623 41,722 221,345 Deferred tax liabilities.............................. 14,722 14,722 Long-term debt........................................ 8,482 11,728 20,210 ----- ------ ------ Total liabilities............................... 202,827 53,450 256,277 ------- ------ ------- Shareholders' equity: Common stock (Note 2)................................. 9,467 7 836 10,310 Additional paid-in capital (Note 2)................... 282,895 82,007 (836) 364,066 Retained earnings (deficit)........................... 353,677 (16,606) 337,071 ------- -------- ----- ------- Total shareholders' equity...................... 646,039 65,408 711,447 ------- ------ ----- ------- Total liabilities and shareholders' equity...... $848,866 $118,858 $967,724 ======== ======== ===== ======== See accompanying notes to unaudited pro forma condensed combined financial statements.
33 TERADYNE AND MEGATEST UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 1, 1995 (in thousands, except per share amounts)
Historical ---------- Pro Forma Teradyne Megatest Combined -------- -------- -------- Net sales.............................................. $754,952 $85,257 $840,209 Expenses: Cost of sales....................................... 402,482 51,424 453,906 Engineering and development......................... 72,454 15,738 88,192 Selling and administrative.......................... 111,535 16,884 128,419 ------- ------ ------- 586,471 84,046 670,517 ------- ------ ------- Income from operations................................. 168,481 1,211 169,692 Other income (expense)................................. 8,811 (501) 8,310 ----- ----- ----- Income before income taxes............................. 177,292 710 178,002 Provision for income taxes............................. 63,828 434 64,262 ------ --- ------ Income from continuing operations...................... $113,464 $ 276 $113,740 ======== ===== ======== Income from continuing operations per common share (Notes 2 and 3)..................................... $ 1.47 $ 0.04 $ 1.35 ======== ======= ======== Shares used in calculations of income per common share (000's) (Notes 2 and 3)....................... 77,253 7,403 83,983 ====== ===== ====== See accompanying notes to unaudited pro forma condensed combined financial statements.
34 TERADYNE AND MEGATEST UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 2, 1994 (in thousands, except per share amounts)
Historical ---------- Pro Forma Teradyne Megatest Combined -------- -------- -------- Net sales................................................. $487,349 $ 77,844 $565,193 Expenses: Cost of sales.......................................... 272,968 44,151 317,119 Engineering and development............................ 51,096 12,121 63,217 Selling and administrative............................. 95,783 13,661 109,444 ------ ------ ------- 419,847 69,933 489,780 ------- ------ ------- Income from operations.................................... 67,502 7,911 75,413 Other income ............................................. 2,751 1,181 3,932 ----- ----- ----- Income before income taxes................................ 70,253 9,092 79,345 Provision for income taxes................................ 21,778 1,771 23,549 ------ ----- ------ Income from continuing operations......................... $ 48,475 $ 7,321 $ 55,796 ======== ======== ======== Income from continuing operations per common share (Notes 2 and 3)........................................ $ 0.66 $ 1.00 $ 0.69 ======== ======== ======== Shares used in calculations of income per common share (000's) (Notes 2 and 3)................................ 73,976 7,340 80,649 ====== ===== ====== See accompanying notes to unaudited pro forma condensed combined financial statements.
35 TERADYNE AND MEGATEST UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994 (in thousands, except per share amounts)
Historical ---------- Pro Forma Teradyne Megatest Combined -------- -------- -------- Net sales.................................................... $677,440 $ 90,046 $767,486 Expenses: Cost of sales............................................. 378,933 52,264 431,197 Engineering and development............................... 70,442 16,541 86,983 Selling and administrative................................ 129,935 18,141 148,076 Write-off of acquired in-process technology............... 8,837 8,837 ------- ----- ----- 579,310 95,783 675,093 ------- ------ ------- Income (loss) from operations................................ 98,130 (5,737) 92,393 Other income................................................. 4,682 1,515 6,197 ----- ----- ----- Income (loss) before income taxes............................ 102,812 (4,222) 98,590 Provision for income taxes................................... 31,871 923 32,794 ------ --- ------ Income (loss) from continuing operations..................... $ 70,941 $ (5,145) $ 65,796 ======== ========= ======== Income (loss) from continuing operations per common share (Notes 2 and 3) $ 0.96 $ (0.72) $ 0.82 ======== ======== ======== Shares used in calculations of income per common share (000's) (Notes 2 and 3).................................. 74,190 7,160 80,699 ====== ===== ====== See accompanying notes to unaudited pro forma condensed combined financial statements.
36 TERADYNE AND MEGATEST UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993 (in thousands, except per share amounts)
Historical ---------- Pro Forma Teradyne Megatest Combined -------- -------- -------- Net sales................................................. $554,734 $ 81,731 $636,465 Expenses: Cost of sales........................................ 314,596 43,838 358,434 Engineering and development.......................... 62,356 13,330 75,686 Selling and administrative........................... 126,508 16,888 143,396 ------- ------ ------- 503,460 74,056 577,516 ------- ------ ------- Income from operations.................................... 51,274 7,675 58,949 Other income.............................................. 45 64 109 -- -- --- Income before income taxes, extraordinary item and cumulative effect of adopting new accounting principle 51,319 7,739 59,058 Provision for income taxes................................ 15,396 1,187 16,583 ------ ----- ------ Income from continuing operations......................... $ 35,923 $ 6,552 $ 42,475 ======== ======== ======== Income from continuing operations per common share (Notes 2 and 3)........................................ $ 0.50 $ 1.21 $ 0.55 ======== ======== ======== Shares used in calculations of income per common share (000's) (Notes 2 and 3)............................... 71,664 5,407 76,580 ====== ===== ====== See accompanying notes to unaudited pro forma condensed combined financial statements.
37 TERADYNE AND MEGATEST UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1992 (in thousands, except per share amounts)
Historical ---------- Pro Forma Teradyne Megatest Combined -------- -------- -------- Net sales................................................. $529,581 $ 69,391 $598,972 Expenses: Cost of sales........................................ 312,478 39,443 351,921 Engineering and development.......................... 62,023 10,874 72,897 Selling and administrative........................... 127,427 14,305 141,732 ------- ------ ------- 501,928 64,622 566,550 ------- ------ ------- Income from operations.................................... 27,653 4,769 32,422 Other expense............................................. 1,585 465 2,050 ----- --- ----- Income before income taxes................................ 26,068 4,304 30,372 Provision for income taxes................................ 3,520 336 3,856 ----- --- ----- Income from continuing operations......................... $ 22,548 $ 3,968 $ 26,516 ======== ======== ======== Income from continuing operations per common share (Notes 2 and 3)........................................ $ 0.33 $ 0.97 $ 0.37 ======== ======== ======== Shares used in calculations of income per common share (000's) (Notes 2 and 3)............................... 67,700 4,072 71,402 ====== ===== ====== See accompanying notes to unaudited pro forma condensed combined financial statements.
38 TERADYNE AND MEGATEST Notes to Unaudited Pro Forma Condensed Combined Financial Statements 1. The unaudited pro forma condensed combined financial statements of Teradyne and Megatest give retroactive effect to the Merger which is being accounted for as a pooling of interests and, as a result, such statements are presented as if the combining companies had been combined for all periods presented. The unaudited pro forma condensed combined financial statements reflect the issuance of 0.9091 (Exchange Ratio) of a share of Teradyne Common Stock for each share of Megatest Common Stock to effect the Merger. The Exchange Ratio was calculated using the average of the closing prices of Teradyne Common Stock for the twenty consecutive days ending on October 23, 1995. The actual number of shares of Teradyne Common Stock to be issued will be determined at the effective time of the Merger based on the Exchange Ratio and the number of shares of Megatest Common Stock then outstanding. 2. For purposes of the unaudited pro forma condensed combined financial statements, the pro forma condensed combined net income per share is based on the combined weighted average number of Common Stock and Common Stock Equivalents of Teradyne and Megatest for each period, based upon an effective Exchange Ratio of 0.9091 shares of Teradyne Common Stock for each share of Megatest Common Stock. The unaudited pro forma condensed combined balance sheet reflects the issuance of 6,747,000 shares of Teradyne Common Stock ($0.125 par value) in exchange for all of the shares of Megatest Common Stock outstanding at August 31, 1995. The pro forma adjustments were calculated as follows: Elimination of Megatest Common Stock................... $ (7) Issuance of Teradyne Common Stock...................... 843 --- Total adjustments......................................... $ 836 ===== 3. On July 24, 1995, Teradyne's Board of Directors approved a 2-for-1 stock split of its $0.125 par value common stock effected in the form of a 100% stock dividend distributed on August 29, 1995 to shareholders of record as of August 8, 1995. The rights of the holders of these securities were not otherwise modified. All per share amounts and shares used in calculations of net income per common share have been restated to reflect the retroactive effect of the stock split. 4. The unaudited pro forma financial data combines Teradyne's financial data for the nine months ended October 1, 1995 and October 2, 1994 and the three years ended December 31, 1994, 1993 and 1992 with Megatest's financial data for the nine months ended August 31, 1995 and 1994 and the twelve month periods ended November 30, 1994, 1993 and 1992, respectively. 5. The unaudited pro forma condensed combined financial statements do not include adjustments to conform the accounting policies of Megatest to those followed by Teradyne. The nature and extent of such adjustments, if any, will be based upon further study and analysis and are not expected to be material. 6. Estimated merger expenses to be incurred by Teradyne and Megatest are approximately $5,500,000. These expenses will be charged against net income in the periods subsequent to the unaudited pro forma condensed combined financial statements. Accordingly, the effects of these expenses have not been reflected in these unaudited pro forma condensed combined financial statements. -----END PRIVACY-ENHANCED MESSAGE-----