-----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, MiiMaAH9FqMMiu/7woH3g6NYAZ7c5/nFQBalW2KnkRBJ3nL358r0d9GisHmbNUUc aTDiYUWc+Yvps/7l3k7q7A== 0000097210-96-000008.txt : 19961120 0000097210-96-000008.hdr.sgml : 19961120 ACCESSION NUMBER: 0000097210-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960929 FILED AS OF DATE: 19961115 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: 96667746 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 THIRD 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 September 29, 1996 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 October 25, 1996 was 82,962,219 shares. 1 TERADYNE, INC. INDEX Page No. --------
PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets - September 29, 1996 and December 31, 1995......................................................3 Condensed Consolidated Statements of Income - Quarters and Nine Months Ended September 29, 1996 and October 1, 1995.........................4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 29, 1996 and October 1, 1995......................................5 Notes to Condensed Consolidated Financial Statements...............................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................7-9
2 TERADYNE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
ASSETS September 29, 1996 December 31, 1995 ------------------ ----------------- (Unaudited) Current assets: Cash and cash equivalents.................................................... $ 291,559 $ 182,165 Marketable securities........................................................ 59,352 93,662 Accounts receivable.......................................................... 190,143 254,820 Inventories: Parts.................................................................. 91,941 120,011 Assemblies in process.................................................. 63,911 56,840 ------------- ------------ 155,852 176,851 Deferred tax assets.......................................................... 17,902 19,546 Prepayments and other current assets......................................... 16,896 13,101 ------------- ------------ Total current assets................................................... 731,704 740,145 Property, plant, and equipment, at cost:........................................ 554,758 512,986 Less: accumulated depreciation............................................ (281,634) (255,968) ------------- ------------ Net property, plant, and equipment..................................... 273,124 257,018 Marketable securities........................................................... 61,889 0 Other assets.................................................................... 21,855 26,668 ------------- ------------ Total assets........................................................... $ 1,088,572 $ 1,023,831 ============= ============ LIABILITIES Current liabilities: Notes payable - banks........................................................ $ 7,662 $ 8,141 Current portion of long-term debt............................................ 1,731 2,082 Accounts payable............................................................. 28,985 42,229 Accrued employees' compensation and withholdings............................. 46,720 66,000 Unearned service revenue and customer advances............................... 59,415 53,587 Other accrued liabilities.................................................... 61,684 41,395 Income taxes payable......................................................... 2,665 16,157 ------------- ------------ Total current liabilities.............................................. 208,862 229,591 Deferred tax liabilities........................................................ 11,614 15,711 Long-term debt.................................................................. 15,807 18,679 ------------- ------------ Total liabilities...................................................... 236,283 263,981 ------------- ------------ SHAREHOLDERS' EQUITY Common stock $0.125 par value, authorized 250,000 shares (125,000 in 1995), issued and outstanding after deduction of reacquired shares, 82,924 in 1996 and 82,634 in 1995.................................... 10,364 10,329 Additional paid-in capital...................................................... 368,748 366,970 Retained earnings............................................................... 473,177 382,551 ------------- ------------ Total shareholders' equity............................................. 852,289 759,850 ------------- ------------ Total liabilities and shareholders' equity............................. $ 1,088,572 $ 1,023,831 ============= ============ 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, 1995 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 Nine Months Ended (In thousands, except per share amounts) September 29, 1996 October 1, 1995 September 29, 1996 October 1, 1995 ------------------ --------------- ------------------ --------------- Net sales................................. $ 261,671 $ 322,658 $ 930,328 $ 839,665 Expenses: Cost of products sold................ 163,747 172,316 531,002 456,624 Product line consolidation........... 0 0 34,100 0 ---------- ---------- ---------- ---------- Cost of sales................... 163,747 172,316 565,102 456,624 ---------- ---------- ---------- ---------- Engineering and development.......... 35,022 32,966 110,188 88,747 Selling and administrative........... 41,535 45,353 131,020 126,987 ---------- ---------- ---------- ---------- 240,304 250,635 806,310 672,358 ---------- ---------- ---------- ---------- Income from operations.................... 21,367 72,023 124,018 167,307 Other income (expense): Interest income....................... 5,089 3,670 13,010 10,302 Interest expense...................... (513) (715) (1,765) (1,978) ---------- ---------- ---------- ---------- Income before income taxes................ 25,943 74,978 135,263 175,631 Provision for income taxes................ 6,374 26,756 44,637 64,128 ---------- ---------- ---------- ---------- Net income................................ $ 19,569 $ 48,222 $ 90,626 $ 111,503 ========== ========== ========== =========== Net income per common share............... $ 0.23 $ 0.57 $ 1.07 $ 1.33 ========== ========== ========== =========== Shares used in calculations of net income per common share........... 84,948 85,250 84,973 83,891 ========== ========== ========== =========== 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, 1995 are an integral part of the condensed consolidated financial statements.
4 TERADYNE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 29, 1996 October 1, 1995 (In thousands) Cash flows from operating activities: Net income........................................................ $ 90,626 $ 111,503 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................. 37,552 31,251 Deferred income taxes.......................................... (2,453) 1,802 Product line consolidation..................................... 34,100 0 Other non-cash items, net...................................... (242) 4,021 Changes in operating assets and liabilities: Accounts receivable....................................... 63,277 (91,248) Inventories............................................... 1,449 (38,398) Other assets.............................................. (435) (9,733) Accounts payable and accruals............................. (13,108) 34,083 Income taxes payable...................................... (11,622) 22,999 --------- ---------- Net cash provided by operating activities............. 199,144 66,280 --------- ---------- Cash flows from investing activities: Additions to property, plant and equipment........................ (48,861) (62,354) Increase in equipment manufactured by the Company................. (10,257) (10,947) Purchases of marketable securities................................ (215,198) (97,299) Maturities of marketable securities............................... 187,619 106,699 --------- --------- Net cash used in investing activities................. (86,697) (63,901) --------- --------- Cash flows from financing activities: Net borrowings under short-term borrowing agreements.............. 0 5,900 Payments of long term debt........................................ (2,997) (365) Additions to long-term debt....................................... 0 12,500 Acquisition of treasury stock..................................... (9,766) 0 Issuance of common stock under employee stock option and stock purchase plans............................... 9,710 24,186 --------- --------- Net cash flows provided (used) by financing activities (3,053) 42,221 --------- --------- Increase in cash and cash equivalents.................................. 109,394 44,600 Cash and cash equivalents at beginning of period....................... 182,165 191,869 --------- --------- Cash and cash equivalents at end of period............................. $ 291,559 $ 236,469 ========= ========== Supplementary disclosure of cash flow information: Cash paid during the period for: Interest................................................ $ 1,832 $ 2,093 Income taxes............................................ 59,395 38,498 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, 1995 are an integral part of the condensed consolidated financial statements.
5 TERADYNE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) A. Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Teradyne, Inc. (the "Company") and its subsidiaries. All significant intercompany balances and transactions are eliminated. Certain prior years' amounts have been reclassified to conform to the current year presentation. On December 1, 1995, the Company completed its acquisition of Megatest Corporation ("Megatest"), by means of a merger of M Merger Corp., a wholly owned subsidiary of the Company, with and into Megatest. As a result of the merger, Megatest became a wholly owned subsidiary of the Company. The Megatest combination has been accounted for as a pooling of interests. The accompanying condensed consolidated financial statements of the Company as of and for the nine months ended October 1, 1995 have been restated to include the financial position and results of operations of the combined companies. 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. B. Product Line Consolidation During the second quarter of 1996, the Company announced a plan to consolidate the VLSI product lines of Megatest and Teradyne. In connection with this plan, the Company provided $34.1 million in charges, which included a $26.0 million write-down of inventory to net realizable value and $6.7 million for the cost of identified customer obligations on VLSI systems. 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 Nine Months Ended ---------------------- ------------------------- September 29, 1996 October 1, 1995 September 29, 1996 October 1, 1995 ------------------ --------------- ------------------ --------------- (In thousands) Net sales...................................... $ 261,671 $ 322,658 $ 930,328 $ 839,665 ============= ========== ============= ============= Net income..................................... 19,569 $ 48,222 $ 90,626 $ 111,503 ============= ========== ============= ============= Percentage of net sales: Net sales................................. 100.0% 100.0% 100.0% 100.0% Expenses: Cost of products sold................ 62.6 53.4 57.1 54.4 Product line consolidation........... 0.0 0.0 3.7 0.0 ------------- ------------ -------------- ------------- Cost of sales................... 62.6 53.4 60.8 54.4 ------------- ------------ -------------- ------------- Engineering and development.......... 13.4 10.2 11.8 10.6 Selling and administrative........... 15.9 14.1 14.1 15.1 Interest, net........................ (1.8) (0.9) (1.2) (1.0) ------------- ------------ -------------- ------------- 90.1 76.8 85.5 79.1 Income before income taxes................ 9.9 23.2 14.5 20.9 Provision for income taxes................ 2.4 8.3 4.8 7.6 ------------- ------------ -------------- ------------- Net income................................ 7.5% 14.9% 9.7% 13.3% ============= ============ -------------- ------------- Provision for income taxes as a percentage of income before income taxes............. 24.6% 35.7% 33.0% 36.5% ============= ============ ============== ============= Results of Operations - --------------------- Sales decreased 18.9% to $261.7 million in the third quarter of 1996 compared to the third quarter of 1995. Semiconductor test systems sales and telecommunications test systems sales decreased 30.4% and 29.7%, respectively, while circuit-board test systems sales increased 24.0% and sales of backplane connection systems increased 18.0%. In the first nine months of 1996, sales increased 10.8% to $930.3 million. Net income before income taxes declined to $25.9 million in the third quarter compared to $75.0 million in the same period last year due to the reduction in sales. In the nine months of 1996, net income decreased $20.9 million compared to the first nine months of 1995. 7 Incoming orders were $215.2 million in the third quarter of 1996 compared to $312.7 million in the third quarter of 1995. The decrease in orders was primarily driven by a slowing of semiconductor test systems orders, which reflects current industry conditions. Circuit-board test systems orders declined by a lesser amount. Orders for backplane connection systems rose as did telecommunications test systems. The Company expects shipments and net income to continue to decline in the fourth quarter of 1996 as a result of the reduction in semiconductor test systems orders. The Company's backlog was $454.3 million at the end of the third quarter of 1996 (adjusted for $16.2 million in order cancellations) compared to $681.0 million at the end of the third quarter of 1995. Cost of products sold as a percentage of sales increased from 53.4% in the third quarter of 1995 to 62.6% in the third quarter of 1996. The increased cost of sales percentage was due to the following factors. First, as semiconductor test sales have fallen, the Company has not reduced the fixed and semi-variable components of overhead costs. A significant proportion of the overhead costs are supporting the introduction of new products. Additionally, there was an unfavorable change in mix as sales of semiconductor test systems declined and sales of lower margin products under government contracts and lower margin backplane connection systems increased. In the first nine months of 1996, cost of products sold increased to 57.1% of sales from 54.4% in the first nine months of 1995. As a result of the slowing of semiconductor test systems orders, the Company in the second quarter of 1996, decided to accelerate the consolidation of the VLSI product lines of Megatest and Teradyne. In connection with this consolidation, the Company provided $34.1 million in charges, which included a $26.0 million write-down of inventory to net realizable value and $6.7 million for the cost of identified customer obligations on VLSI systems. Due to continuing uncertainty in the semiconductor industry, the Company announced voluntary early retirement and workforce reduction programs during the third quarter of 1996. Engineering and development spending was $35.0 million in the third quarter of 1996 compared to $33.0 million in the third quarter of 1995 increasing from 10.2% of sales to 13.4% of sales. These expenses grew $2.0 million primarily as a result of maintaining investment in new product development of semiconductor test systems. The Company has recently announced major new products in each of the three semiconductor test markets in which it participates. Shipments of these new products are scheduled to begin in the first half of 1997. As a percentage of sales, engineering and development expenses were 10.6% in the first nine months of 1995 and 11.8% in the first nine months of 1996. Selling and administrative expenses were 15.9% of sales in the third quarter of 1996 and 14.1% of sales in the first nine months of 1996 compared with 14.1% of sales in the third quarter of 1995 and 15.1% of sales in the first nine months of 1995. Although the Company has been able to reduce the dollar amount of these expenses during the third quarter of 1996 by 8.4%, the sales volume has decreased by 18.9%. Interest income increased in the third quarter of 1996 to $5.1 million from $3.7 million in the third quarter of 1995 due to an increase in the Company's average invested balances. Interest expense decreased from $0.7 million in the third quarter of 1995 to $0.5 million in the third quarter of 1996. The Company's effective income tax rate was 33.0% in the first nine months of 1996 (which is the current estimate for the fiscal year) compared with 36.3% for the twelve months ended 1995. The 1995 effective tax rate was driven above the federal statutory rate of 35.0% due primarily to non-deductible merger expenses incurred in connection with the Megatest acquisition. In 1996, the Company expects to benefit , at an increased rate over 1995, from state and federal business tax credits and foreign sales corporation benefits. Liquidity and Capital Resources - ------------------------------- The Company's cash, cash equivalents and marketable securities balance grew $137.0 million in the first nine months of 1996. Cash flow generated from operations was $199.1 million while $9.7 million was generated from the sale of stock to employees under the Company's stock option and stock purchase plans. Cash was used to fund additions to property, plant and equipment of $59.1 million in the first nine months of 1996, a decrease of $14.2 million compared to $73.3 million in additions in the first nine months of 1995. During the third quarter of 1996 the Company adopted a Stock Repurchase Program which authorizes the purchase, in the open market, of up to 5,000,000 shares of its common stock to offset shares issued under the Company's stock options plans. $9.8 million in cash was used to acquire 635,000 shares of treasury stock in the third quarter of 1996. In addition, $3.0 million was used in the first nine months of 1996 to repay long-term debt obligations. The Company believes its cash and cash equivalents balance of $291.6 million, together with other sources of funds, including marketable securities of $121.2 million, cash flow generated from operations, and the available borrowing capacity of $120.0 million under its line of credit agreement, will be sufficient to meet working capital, planned capital expenditure, and stock repurchase 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 Company's shipment level and profitability and the sufficiency of capital to meet working capital, planned capital expenditure, and stock repurchase 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. Historically, 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. 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; the level of orders received which can be shipped in a quarter; and the timing of investments in engineering and development. 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
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 OWEN W.ROBBINS ------------------------ Owen W. Robbins Executive Vice President November 15, 1996
10 EX-27 2 FDS TERADYNE, INC
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 29, 1996 AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STAEMENTS. 0000097210 TERADYNE, INC. 1,000 U.S. DOLLARS 9-MOS SEP-29-1996 JAN-01-1996 SEP-29-1996 1.00 291,559 59,352 193,478 3,335 155,852 731,704 554,758 281,634 1,088,572 208,862 15,807 10,364 0 0 841,925 1,088,572 930,328 930,328 565,102 806,310 0 0 1,765 135,263 44,637 90,626 0 0 0 90,626 1.07 1.07
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