-----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, PaNzHtbPjFeV/rrOt/ajACpJdMjK2FsESZ9GPUVHUe/DBTcwNsiWDTh3i8C/aI3/ k/IjJ6CbEyYbZZrcxUa6Ww== 0000097210-97-000005.txt : 19970814 0000097210-97-000005.hdr.sgml : 19970814 ACCESSION NUMBER: 0000097210-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970629 FILED AS OF DATE: 19970813 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06462 FILM NUMBER: 97658529 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 10-Q 1 SECOND QUARTER REPORT TERADYNE, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q ------------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ______________ Commission File No. 1-6462 TERADYNE, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-2272148 (State or Other Jurisdiction (I.R.S.Employer Incorporation or Organization) Identification No.) 321 Harrison Avenue, Boston, Massachusetts 02118 (Address of principal executive offices) (Zip Code) 617-482-2700 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes X No _ The number of shares outstanding of the registrant's only class of Common Stock as of July 25, 1997 was 83,223,773 shares. 1 TERADYNE, INC. INDEX Page No. --------
PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets - June 29, 1997 and December 31, 1996...........................................................3 Condensed Consolidated Statements of Income - Quarters and Six Months Ended June 29, 1997 and June 30, 1996.................................4 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 29, 1997 and June 30, 1996..............................................5 Notes to Condensed Consolidated Financial Statements...............................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................7-9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.................................................10
2 TERADYNE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
ASSETS June 29, 1997 December 31, 1996 ------------- ----------------- (Unaudited) Current assets: Cash and cash equivalents.................................................... $ 46,479 $ 201,452 Marketable securities........................................................ 140,050 48,266 Accounts receivable.......................................................... 250,887 178,430 Inventories: Parts.................................................................. 116,317 91,792 Assemblies in process.................................................. 68,759 47,162 ------------- ------------- 185,076 138,954 Deferred tax assets.......................................................... 32,340 32,340 Prepayments and other current assets......................................... 18,386 17,666 ------------- ------------- Total current assets................................................... 673,218 617,108 Property, plant, and equipment, at cost:........................................ 607,176 563,585 Less: Accumulated depreciation............................................ (323,524) (290,088) ------------- ------------- Net property, plant, and equipment..................................... 283,652 273,497 Long-term marketable securities................................................. 151,602 181,776 Other assets.................................................................... 23,665 24,435 ------------- ------------- Total assets........................................................... $1,132,137 $1,096,816 ============= ============= LIABILITIES Current liabilities: Notes payable - banks........................................................ $ 7,454 $ 7,316 Current portion of long-term debt............................................ 1,882 1,778 Accounts payable............................................................. 40,274 34,482 Accrued employees' compensation and withholdings............................. 57,237 58,696 Unearned service revenue and customer advances............................... 50,813 62,771 Other accrued liabilities.................................................... 48,564 53,537 Income taxes payable......................................................... 14,889 6,677 ------------ ------------ Total current liabilities.............................................. 221,113 225,257 Deferred tax liabilities........................................................ 13,843 13,898 Long-term debt.................................................................. 14,502 15,650 ------------ ------------ Total liabilities...................................................... 249,458 254,805 ------------ ------------ SHAREHOLDERS' EQUITY Common stock $0.125 par value; 250,000 shares authorized; 83,487 and 82,480 shares issued and outstanding after deduction of reacquired shares in 1997 and 1996, respectively........................................ 10,435 10,310 Additional paid-in capital...................................................... 353,957 355,576 Retained earnings............................................................... 518,287 476,125 ------------ ------------ Total shareholders' equity............................................. 882,679 842,011 ------------ ------------ Total liabilities and shareholders' equity............................. $1,132,137 $1,096,816 ============ ============ The accompanying notes, together with the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 are an integral part of the condensed consolidated financial statements.
3 TERADYNE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Quarters Ended For the Six Months Ended ---------------------- ------------------------ (In thousands, except per share amounts) June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996 ------------- ------------- ------------- ------------- Net sales................................... $289,541 $319,690 $537,843 $668,657 Expenses: Cost of sales.......................... 164,648 214,718 317,583 401,355 Engineering and development............ 42,635 38,426 75,943 75,166 Selling and administrative............. 47,449 42,556 88,232 89,485 ------ ------ ------ ------ 254,732 295,700 481,758 566,006 ------- ------- ------- ------- Income from operations...................... 34,809 23,990 56,085 102,651 Other income (expense): Interest income......................... 5,234 4,162 10,899 7,921 Interest expense........................ (565) (610) (1,106) (1,252) ---- ---- ------ ------ Income before income taxes.................. 39,478 27,542 65,878 109,320 Provision for income taxes.................. 14,476 9,640 23,716 38,263 ------ ----- ------ ------ Net income.................................. $25,002 $17,902 $42,162 $71,057 ======= ======= ======= ======= Net income per common share................. $0.29 $0.21 $0.49 $0.84 ===== ===== ===== ===== Shares used in calculations of net income per common share............. 86,283 85,001 86,047 84,986 ====== ====== ====== ====== The accompanying notes, together with the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 are an integral part of the condensed consolidated financial statements.
4 TERADYNE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended ------------------------ June 29, 1997 June 30, 1996 ------------- ------------- (In thousands) Cash flows from operating activities: Net income........................................................ $42,162 $71,057 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation................................................... 28,669 24,150 Amortization................................................... 664 657 Deferred income taxes ......................................... (55) (3,867) Product line consolidation..................................... 34,100 Other non-cash items, net...................................... 355 (389) Changes in operating assets and liabilities: Accounts receivable....................................... (72,457) 30,826 Inventories............................................... (44,596) (14,297) Other assets.............................................. (614) (1,874) Accounts payable and accruals............................. (12,598) (9,313) Income taxes payable...................................... 21,639 (1,651) ------ ------ Net cash provided (used) by operating activities...... (36,831) 129,399 -------- ------- Cash flows from investing activities: Additions to property, plant and equipment........................ (34,801) (38,658) Increase in equipment manufactured by the Company................. (5,500) (10,430) Purchases of available-for-sale marketable securities............. (88,420) Maturities of available-for-sale marketable securities............ 46,927 Purchases of held-to-maturity marketable securities............... (111,033) (184,204) Maturities of held-to-maturity marketable securities.............. 90,916 118,136 ------ ------- Net cash used in investing activities................. (101,911) (115,156) --------- --------- Cash flows from financing activities: Payments of long term debt........................................ (1,309) (980) Acquisition of treasury stock..................................... (45,692) Issuance of common stock under employee stock option and stock purchase plans............................... 30,770 8,926 ------ ----- Net cash flows provided (used) by financing activities (16,231) 7,946 ------- ----- Increase (decrease) in cash and cash equivalents....................... (154,973) 22,189 Cash and cash equivalents at beginning of period....................... 201,452 182,165 ------- ------- Cash and cash equivalents at end of period............................. $46,479 $204,354 ======= ======== Supplementary disclosure of cash flow information: Cash paid during the period for: Interest................................................ $1,203 $1,318 Income taxes............................................ 7,683 44,665 The accompanying notes, together with the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 are an integral part of the condensed consolidated financial statements.
5 TERADYNE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) A. The Company - -------------- Teradyne, Inc. (the "Company") designs, manufactures, markets, and services electronic test systems and related software used by component manufacturers in the design and testing of their products and by electronic equipment manufacturers for the design and testing of circuit boards and other assemblies. Manufacturers use such systems and software to increase product performance, to improve product quality, to shorten time to market, to enhance manufacturability, to conserve labor costs, and to increase production yields. The Company's electronic systems are also used by telephone operating companies for the testing and maintenance of their subscriber telephone lines and related equipment. The Company also manufactures backplane connection systems, principally for the computer, telecommunications, and military/aerospace industries. A backplane is a panel that supports the circuit boards in an electronic assembly and carries the wiring that connects the boards to each other and to other elements of a system. B. Accounting Policies - ---------------------- Basis of Presentation --------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain prior years' amounts were reclassified to conform to the current year presentation. The year-end condensed balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles. Preparation of Financial Statements ----------------------------------- The accompanying condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accrual entries) necessary for a fair presentation of such information have been made. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. C. Recently Issued Accounting Standard - -- ----------------------------------- In February 1997, The Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 128, Earnings per Share, which specifies the computation, presentation, and disclosure requirements for earnings per share. The statement is effective for periods ending after December 15, 1997, including interim periods. The adoption of this statement will not have a material impact on reported net income per common share. 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters Ended For the Six Months Ended ---------------------- ------------------------ June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996 ------------- ------------- ------------- ------------- (In thousands) Net sales...................................... $289,541 $319,690 $537,843 $668,657 ======== ======== ======== ======== Net income..................................... $25,002 $17,902 $42,162 $71,057 ======= ======= ======= ======= Percentage of net sales: Net sales................................. 100% 100% 100% 100% Expenses: Cost of products sold 57 56 59 55 Product line consolidation 11 5 -- -- -- -- Cost of sales................... 57 67 59 60 -- -- -- -- Engineering and development.......... 15 12 14 11 Selling and administrative........... 16 13 16 13 Interest, net........................ (2) (1) (2) (1) -- -- -- -- 86 91 87 83 -- -- -- -- Income before income taxes................ 14 9 13 17 Provision for income taxes................ 5 3 5 6 - - - - Net income................................ 9% 6% 8% 11% = = = == Provision for income taxes as a percentage of income before income taxes............. 37% 35% 36% 35% == == == == Results of Operations - --------------------- Sales of $289.5 million in the second quarter of 1997 were $30.1 million or 9% below those of the second quarter of 1996. The year to year decline in sales was primarily due to a decrease in incoming orders of semiconductor test systems during the second and third quarters of 1996. Sales increased 17% in the second quarter of 1997 over the first quarter of 1997 due to an increase in incoming orders of semiconductor test systems during the fourth quarter of 1996 and the first quarter of 1997. As a result of lower sales in the second quarter of 1997 compared to 1996, income before income taxes (excluding the effect of a pre-tax nonrecurring product line consolidation charge of $34.1 million taken in the second quarter of 1996) decreased $22.2 million to $39.5 million. For the first six months of 1997, income before income taxes (excluding the product line consolidation charge) decreased $77.5 million to $65.9 million. 7 Incoming orders were $357.6 million in the second quarter of 1997 compared to $220.8 million in the second quarter of 1996. All product lines contributed to the significant increase in incoming orders, led by an 85% increase in semiconductor test systems orders. The Company's backlog was $671.8 million at the end of the second quarter of 1997 compared with $517.0 million at the end of the second quarter of 1996. Cost of products sold as a percentage of sales (excluding the product line consolidation charge), increased from 55% in the first six months of 1996 to 59% in the first six months of 1997. The increase was due to the relationship of fixed costs of manufacturing to a lower sales volume and the higher costs associated with new product introductions. In addition, there was an unfavorable change in mix as a greater percentage of total Company sales were for backplane connection systems whose product margins are generally lower than semiconductor test systems. Cost of products sold as a percentage of sales (excluding the product line consolidation charge), was comparable in the second quarter of 1997 and the second quarter of 1996. Included in cost of sales in the second quarter of 1996 is a $34.1 million charge in connection with the consolidation of the VLSI product lines of Megatest and Teradyne. Engineering and development spending grew to $42.6 million in the second quarter of 1997 from $38.4 million in the second quarter of 1996. Included in the two periods were pre-tax nonrecurring charges of $5.0 million and $4.0 million, respectively for the purchase of in-process technology related to the acquisitions of Softbridge, Inc. and Midnight Networks, Inc.. The expenses before nonrecurring charges grew $3.2 million primarily as a result of increased investment in new product development of semiconductor and software test systems. As a percentage of sales, engineering and development expenses increased from 11% in the first six months of 1996 to 14% in the first six months of 1997. Excluding pre-tax nonrecurring charges engineering and development spending over the first six months of 1997 and 1996 was flat. Selling and administrative expenses were 16% of sales in the second quarter and the first six months of 1997 compared with 13% of sales in the second quarter and the first six months of 1996. The dollar amount of selling and administrative expenses increased $4.9 million in the second quarter of 1997 over the same period in 1996. This increase is attributed to increased marketing costs associated with new semiconductor test systems, and the selling and administrative expenses of acquired software test companies. Interest income increased in the second quarter of 1997 to $5.2 million from $4.2 million in the second quarter of 1996 due to an increase in the Company's average invested balances and interest yields. The Company's effective income tax rate for the first six months of 1997 increased to 36% as the charge for in-process technology is non-deductible for income tax purposes. The Company's effective income tax rate was 35% through the first six months of 1996. The 1996 effective tax rate was adjusted downward in subsequent quarters to 33% due to the increased utilization of domestic export sales corporation benefits and certain research and development tax credits. Liquidity and Capital Resources - ------------------------------- The Company's cash, cash equivalents, and marketable securities balance decreased $93.4 million in the first six months of 1997. Contributing to the decrease in cash, cash equivalents, and marketable securities was cash flow used in operations of $36.8 million, the expenditure of $40.3 million to fund additions to property, plant and equipment, the use of $45.7 million to acquire 1.4 million shares of the Company's common stock, and the use of $1.3 million for principal debt payments. The Company generated cash of $30.8 million from the sale of stock to employees under the Company's stock option and stock purchase plans in the first six months of 1997. Accounts receivable as a percentage of annualized quarterly revenues increased from 18.5% at December 31, 1996, to 21.7% at June 29, 1997, due to unusually high shipments in the last month of the second quarter of 1997. Inventories as a percentage of annualized quarterly revenues increased from 14.4% at December 31, 1996, to 16.0% at June 29, 1997, as the Company expanded material purchases to support the shipment of new products. Property, plant and equipment expenditures relate primarily to the expansion of production capacity to accommodate higher volumes and the introduction of new products. The Company believes its cash, cash equivalents and marketable securities balance of $338.1 million, together with other sources of funds, including the available borrowing capacity of $120.0 million under its line of credit agreement, will be sufficient to meet working capital and capital expenditure requirements over the next twelve months. 8 Certain Factors That May Affect Future Results - ---------------------------------------------- From time to time, information provided by the Company, statements made by its employees or information included in its filings with the Securities and Exchange Commission (including this Form 10-Q, the Company's Annual Report on Form 10-K, and the Company's Annual Report to Shareholders) may contain statements which are not historical facts, so-called "forward looking statements," which involve risks and uncertainties. In particular, statements in "Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations" relating to the sufficiency of capital to meet working capital and planned capital expenditure requirements may be forward looking statements. The Company's actual future results may differ significantly from those stated in any forward looking statements. Factors that may cause such differences include, but are not limited to, the factors discussed below. Each of these factors, and others, are discussed from time to time in the Company's filings with the Securities and Exchange Commission. The Company's future results are subject to substantial risks and uncertainties. The Company's business and results of operations depend in significant part upon capital expenditures of manufacturers of semiconductors, which in turn depend upon the current and anticipated market demand for semiconductors and products incorporating semiconductors. The semiconductor industry has been highly cyclical with recurring periods of over supply, which often have had a severe effect on the semiconductor industry's demand for test equipment, including systems manufactured and marketed by the Company. The Company believes that the markets for newer generations of semiconductors will also be subject to similar fluctuations. The most recent downturn experienced during 1996 contributed to a 37% decline in semiconductor test systems orders. There can be no assurance that any increase in semiconductor test systems bookings for a calendar quarter will be sustained in subsequent quarters. In addition, any factor adversely affecting the semiconductor industry or particular segments within the semiconductor industry may adversely affect the Company's business, financial condition and operating results. The Company's quarterly and annual operating results are affected by a wide variety of factors that could materially adversely affect revenues and profitability, including: competitive pressures on selling prices; the timing and cancellation of customer orders; changes in product mix; the Company's ability to introduce new products and technologies on a timely basis; introduction of products and technologies by the Company's competitors; market acceptance of the Company's and its competitors' products; potential retrofit costs; the level of orders received which can be shipped in a quarter; and the timing of investments in engineering and development. In particular, the Company has introduced a significant number of new, complex test systems in 1996 and 1997, and there can be no assurance that the Company will not experience delays in shipment of such products or that such products will achieve customer acceptance. As a result of the foregoing and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect its business, financial condition, operating results and stock price.
9 Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of security holders of the Company was held May 15, 1997 The following were elected as Directors:
Total Vote Total Vote Withheld Nominee For Each Nominee For Each Nominee - ------- ---------------- ---------------- Albert Carnesale 72,637,180 254,199 George W. Chamillard 72,635,861 255,518 Dwight H. Hibbard 72,609,481 281,898 James A. Prestridge 72,625,795 265,584 The Term of office for the following directors continued after the meeting: Alexander V. d'Arbeloff, Owen W. Robbins, James W. Bagley, Daniel S. Gregory, John P. Mulroney, Richard J. Testa, and Patricia S. Wolpert. Edwin L. Artzt resigned from the Board of Directors effective May 15, 1997.
In addition, the following proposals were approved: (A) an amendment to the Registrant's Restated Articles of Organization, to increase the amount of the Registrant's authorized Common Stock, par value $0.125 per share, from 125,000,000 to 250,000,000, was approved, with 63,652,370 shares voting in favor, 7,683,480 shares voting against, and 116,968 shares abstaining. (B) to approve the adoption of the 1996 Non-Employee Director Stock Option Plan, with 50,945,233 shares voting in favor, 21,757,731 shares voting against, and 188,415 shares abstaining. (C) to ratify the selection of the firm Coopers & Lybrand L.L.P. as auditors for the fiscal year ending December 31, 1997, with 72,739,039 shares voting in favor, 69,913 shares voting against, and 82,427 shares abstaining. 10
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 thereunto duly authorized. TERADYNE, INC. ------------------------ Registrant JEFFREY R. HOTCHKISS ------------------------ Jeffrey R. Hotchkiss Vice President and Chief Financial Officer August 13, 1997
11 EX-27.0 2 FDS TERADYNE, INC 06/29/97 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 29, 1997 AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STAEMENTS. 0000097210 TERADYNE, INC. 1,000 U.S. DOLLARS 6-MOS DEC-31-1997 JAN-01-1996 JUN-29-1997 1.00 46,479 140,050 252,825 1,938 185,076 673,218 607,176 323,524 1,132,137 221,113 14,502 10,435 0 0 872,244 1,132,137 537,843 537,843 317,583 481,758 0 0 1,106 65,878 23,716 42,162 0 0 0 42,162 0.49 0.49
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