Teradyne Reports Third Quarter Results
BOSTON--Oct. 1, 20034, 2003--Teradyne, Inc. reported sales of $329 million for the third quarter of 2003, and a net loss on a Generally Accepted Accounting Principles (GAAP) basis of $53.5 million, or $0.28 per share. The pro forma net loss for the third quarter of 2003 was $26.8 million, or $0.14 per share before special charges. Net orders increased 10% from the previous quarter, to $336 million."On balance, we are encouraged by our results in the quarter," said George Chamillard, Teradyne Chairman and CEO. "Our orders improved, and our new products are gaining momentum. The third quarter marked our eighth successive period of increasing orders and our book-to-bill ratio was greater than 1.0 for the first time in three years. In addition, we made progress lowering costs during the quarter, enabling us to continue on the path to profitability.
"Therefore, in the fourth quarter, we are projecting sales to be between $335 to $340 million, and break-even results, on a pro forma, operating basis."
Conference Call/Webcast
Teradyne will be conducting its conference call tomorrow, October 15, 2003, at 10:00 a.m. E.D.T. The call will be webcast at www.teradyne.com (click on "Investors"). A replay will be available via phone starting at Noon E.D.T. and continuing through October 29, 2003. The replay may be accessed by calling 1-800-642-1687 in the US and Canada, or 706-645-9291 outside the US and Canada, and providing conference code 3087243, or by visiting www.teradyne.com and clicking on "Investors" for a link to the replay. In our earnings release, conference call and webcast, we may use or discuss pro forma, or non-GAAP , financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed (if available) and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the Teradyne website at www.teradyne.com, by clicking on "Investors" and then selecting the GAAP Reconciliation link.
Pro Forma Results
In addition to disclosing results that are determined in accordance with GAAP, Teradyne also discloses pro forma or non-GAAP results of operations that exclude certain charges. Teradyne reports pro forma results in order to better assess and reflect operating performance. These results are provided as a complement to results provided in accordance with GAAP. Management believes the pro forma measure helps indicate underlying trends in Teradyne's business, and management uses pro forma measures to plan and forecast future periods, and to establish operational goals.
Earnings guidance is provided only on a pro forma basis due to the difficulty in forecasting and quantifying the amounts that would be required to be included in the GAAP measure. Although Teradyne expects certain known charges, such as some amount of severance due to workforce reductions, other additional charges excluded from the pro forma measure are dependent on numerous presently unknown factors. For example, further goodwill or real estate impairment charges are dependent upon future market conditions and valuations that are not presently determinable.
Pro forma information is not determined using GAAP and should not be considered superior to or as a substitute for GAAP measures or data prepared in accordance with GAAP.
About Teradyne
Teradyne is the world's largest supplier of Automatic Test Equipment, and a leading supplier of interconnection systems. The company's products deliver competitive advantage to the world's leading semiconductor, electronics, automotive and network systems companies. In 2002, Teradyne had sales of $1.22 billion, and currently employs about 6300 people worldwide. For more information, visit www.teradyne.com. Teradyne is a trademark of Teradyne, Inc. in the US and other countries.
Safe Harbor Statement
TERADYNE, INC. REPORT FOR THIRD FISCAL QUARTER OF 2003
CONDENSED CONSOLIDATED OPERATING STATEMENTS (GAAP)
(In thousands, except per share amounts)
Quarter Ended: Nine Months Ended:
09/28/03 09/29/02 09/28/03 09/29/02
Net Revenues $329,172 $330,732 $995,277 $888,638
Cost of Revenues 230,622 256,231 724,013 712,153
Engineering and Development 61,248 78,002 193,637 219,626
Selling and Administrative 60,062 74,318 188,976 224,757
Restructuring and Other
Charges 23,330 60,397 56,194 66,482
Goodwill Impairment - 78,486 - 78,486
Other and Interest 5,224 (174) 9,858 3,457
Net Expenses 380,486 547,260 1,172,678 1,304,961
Loss Before Income Taxes (51,314) (216,528) (177,401) (416,323)
Income Tax Expense (Benefit) 2,200 (49,695) 5,100 (121,621)
Net Loss $(53,514)$(166,833) $(182,501) $(294,702)
Net Loss per Common Share -
Basic and Diluted $(0.28) $(0.91) $(0.98) $(1.61)
Shares used in calculation of
Net Loss
per Common Share -
Basic and Diluted 189,479 183,063 186,611 182,776
Gross Orders $337,025 $247,210 $953,549 $757,489
Net Orders $336,304 $231,493 $929,926 $670,149
RECONCILIATION OF GAAP TO PRO FORMA FINANCIAL
INFORMATION
The following is a reconciliation of
GAAP Net Loss to Pro Forma Net Loss:
Quarter Ended: Nine Months Ended:
09/28/03 09/29/02 09/28/03 09/29/02
GAAP Loss Before Income
Taxes $(51,314)$(216,528) $(177,401) $(416,323)
Pro Forma Adjustments:
Asset Impairments (1) $11,373 $3,780 $36,280 $4,604
Workforce Reductions (2) 10,162 12,222 19,725 17,483
Mortgage Prepayment and
Other (3) 5,015 (1,741) 5,015 (1,741)
Accelerated Depreciation (4) 1,456 - 10,208 -
Inventory Provision
Recovery (5) (1,318) - (1,318) -
Goodwill Impairment (6) - 78,486 - 78,486
Facility Closures (7) - 44,395 2,422 44,395
Product Line
Discontinuance (8) - 1,426 - 1,426
Pro Forma Loss Before
Income Taxes (24,626) (77,960) (105,069) (271,670)
Pro Forma Income Tax
Expense (Benefit) (9) 2,200 (28,066) 5,100 (97,801)
Pro Forma Net Loss $(26,826) $(49,894) $(110,169) $(173,869)
Pro Forma EPS $(0.14) $(0.27) $(0.59) $(0.95)
3rd Quarter Activity
(1) The asset impairment charge of $11.4 million, which is included in
the Restructuring and Other Charges line on the GAAP Operating
Statement, for the third quarter of 2003 consists of the
following:
- $11.2 million charge primarily for the sale and leaseback of
manufacturing assets at the Connection Systems Division; and
- $0.2 million for the impairment of manufacturing equipment
at the Circuit Board Test and Inspection Division.
The asset impairment charge of $3.8 million, which is included in
the Restructuring and Other Charges line on the GAAP Operating
Statement, for the third quarter of 2002 consists of the
following:
- $2.7 million for a Connection Systems Division held for sale
facility at Nashua, NH; and
- $1.1 million for a Corporate held for sale facility at
Stoughton, MA.
(2) The workforce reduction charge in the third quarter of 2003 of
$10.2 million was for approximately 340 people across all
functional groups and divisions. The workforce reduction charge in
the third quarter of 2002 of $12.2 million was for approximately
500 people across all functional groups and divisions. These
charges for workforce reduction are included in the Restructuring
and Other Charges line on the GAAP Operating Statement.
(3) The mortgage prepayment and other charge of $5.0 million for the
third quarter of 2003 consists of the following:
- $3.2 million of penalties related to the prepayment of our
mortgage at Corporate, which is included on the Other and
Interest line on the GAAP Operating Statement; and
- $1.8 million primarily for contractual penalties associated
with resizing our business at our Connection Systems Division,
which is included on the Restructuring and Other Charges line
on the GAAP Operating Statement.
The other gain of $1.7 million for the third quarter of 2002
consists of a $7.1 million gain from the repayment of a loan to a
divested entity previously valued at zero, offset to a lesser
extent by an other-than-temporary impairment of a common stock
investment of $3.1 million and a writedown of a mortgage loan to
an engineering services provider of $2.3 million. The gain is
included on the Other and Interest line on the GAAP Operating
Statement.
(4) The $1.5 million charge for accelerated depreciation in the third
quarter of 2003 relates to the incremental additional depreciation
over the normal depreciation expense for long-lived assets as a
result of the decision to consolidate data storage at Corporate
and therefore shorten the service period. In the GAAP Operating
Statement, the $1.5 million charge is classified as Selling and
Administrative.
(5) The $1.3 million inventory provision recovery in the third quarter
of 2003 relates to inventory sold which had been reserved for in
the fourth quarter of 2002 at Semiconductor Test Division. The
provision recovery is included in the Cost of Revenues line on the
GAAP Operating Statement.
(6) The $78.5 million charge in the third quarter of 2002 for goodwill
impairment at the Circuit Board Test and Inspection Division is
related to the writedown of goodwill from the GenRad acquisition.
The charge is included on the Goodwill Impairment line on the GAAP
Operating Statement.
(7) The facility closure charge of $44.4 million for the third quarter
of 2002 consists of the following:
- $27.3 million for the writedown of machinery and equipment,
building and construction-in-progress, and the accrual of
certain commitments related to the shutdown of a Connections
Systems Division printed circuit board facility in San Diego,
CA;
- $9.7 million for the writedown of Semiconductor Test
Division manufacturing facilities held for sale on the west
coast; and
- $6.2 million, $0.7 million, and $0.5 million at the Circuit
Board Test and Inspection Division, Semiconductor Test
Division, and Connection Systems Division, respectively, for
future lease commitments net of sublease income on vacated
space.
The charges are included in the Restructuring and Other Charges
line on the GAAP Operating Statement.
(8) The $1.4 million charge in the third quarter of 2002 for product
line discontinuance relates to a $1.0 million provision for excess
inventory of a discontinued product line at the Circuit Board Test
and Inspection Division and $0.4 million for excess inventory
related to the shutdown of a printed circuit board facility at the
Connection Systems Division in San Diego, CA. This charge is
included on the Cost of Revenue line on the GAAP Operating
Statement.
(9) In the fourth quarter of 2002, Teradyne recorded a tax provision
to establish a full valuation allowance against its net deferred
tax assets. The third quarter of 2003 tax expense relates
primarily to a tax provision for foreign taxes and as a result of
the full valuation allowance there is no difference between the
GAAP and pro forma tax expense. In the third quarter of 2002,
prior to establishing a full valuation allowance, Teradyne was
recording tax benefits for losses. The third quarter of 2002 pro
forma tax benefit reflects a 36% effective tax rate.
Nine Month Activity
(1) The asset impairment charge of $36.3 million, of which $32.3
million is included in the Restructuring and Other Charges line,
$2.6 million is included in the Other and Interest line, and $1.4
million is included in the Cost of Revenues line on the GAAP
Operating Statement, for the first nine months of 2003 consists of
the following:
- $12.1 million for the impairment of long-lived and other
assets at the Circuit Board Test and Inspection Division,
Connection Systems Division, Diagnostic Solutions Division,
and Semiconductor Test Division resulting from abandonments
and product line divestitures;
- $11.2 million charge primarily for the sale and leaseback of
manufacturing assets at the Connection Systems Division;
- $10.4 million charge for a reduction in the fair value of
properties held for sale, of which $8.0 million represents
revised estimates of fair value for certain properties
currently held for sale at the Semiconductor Test Division and
the Connection Systems Division and $2.4 million relates to
the decision to sell a Connection Systems Division facility in
Laverne, CA; and
- $2.6 million charge for the writedown of a common stock
investment at Corporate.
The asset impairment charge of $4.6 million, which is included in
the Restructuring and Other Charges line on the GAAP Operating
Statement, in the first nine months of 2002 consists of the
following:
- $2.7 million for a Connection Systems Division held for sale
facility at Nashua, NH;
- $1.1 million for a Corporate held for sale facility at
Stoughton, MA; and
- $0.8 million for excess manufacturing equipment held for
sale at the Semiconductor Test Division.
(2) The workforce reduction charge in the first nine months of 2003 of
$19.7 million was for approximately 800 people across all
functional groups and divisions. The workforce reduction charge in
the first nine months of 2002 of $17.5 million was for
approximately 742 people across all functional groups and
divisions. These charges for workforce reductions are included in
the Restructuring and Other Charges line on the GAAP Operating
Statement.
(3) The mortgage prepayment and other charge of $5.0 million in the
first nine months of 2003 consists of the following:
- $3.2 million of penalties related to the prepayment of our
mortgage at Corporate, which is included on the Other and
Interest line on the GAAP Operating Statement; and
- $1.8 million primarily for contractual penalties associated
with resizing our business at our Connection Systems Division,
which is included on the Restructuring and Other Charges line
on the GAAP Operating Statement.
The other gain of $1.7 million for the first nine months of 2002
consists of a $7.1 million gain from the repayment of a loan to a
divested entity previously valued at zero, offset to a lesser
extent by an other-than-temporary impairment of a common stock
investment of $3.1 million and a writedown of a mortgage loan to
an engineering services provider of $2.3 million. The gain is
included on the Other and Interest line on the GAAP Operating
Statement.
(4) The $10.2 million charge for Accelerated Depreciation in the first
nine months of 2003 relates to the incremental additional
depreciation over the normal depreciation expense for long-lived
assets as a result of the decision to consolidate locations and
data storage and therefore shorten the service period. The charge
consists of the following:
- $5.7 million at the Circuit Board Test and Inspection
Division related to the Westford, MA facility move to North
Reading, MA facility;
- $1.8 million at the Connection Systems Division related to
the Hudson, NH and Cavan, Ireland facilities;
- $1.4 million at Corporate related to data storage
consolidation;
- $0.7 million at the Semiconductor Test Division related to
the Bedford, MA facility; and
- $0.6 million at Corporate related to a Boston facility.
In the GAAP Operating Statement, the $10.2 million charge is
classified as:
- $4.8 million in Cost of Revenues;
- $3.9 million in Selling and Administrative; and
- $1.5 million in Engineering and Development.
(5) The $1.3 million inventory provision recovery in the first nine
months of 2003 relates to inventory sold which had been reserved
for in the fourth quarter of 2002 at the Semiconductor Test
Division. The provision recovery is included in the Cost of
Revenues line on the GAAP Operating Statement.
(6) The $78.5 million charge in the first nine months of 2002 for
goodwill impairment at the Circuit Board Test and Inspection
Division is related to the writedown of goodwill from the GenRad
acquisition. The charge is included on the Goodwill Impairment
line on the GAAP Operating Statement.
(7) The facility closure charge of $2.4 million in the first nine
months of 2003 consists primarily of revised estimates of losses
due to changes in the assumed amount and timing of sublease income
on facilities that have been exited prior to the end of the lease
term for the Semiconductor Test Division, Circuit Board Test and
Inspection Division, and Connection Systems Division. The charge
is included in the Restructuring and Other Charges line on the
GAAP Operating Statement. The facility closure charge of $44.4
million in the first nine months of 2002 consists of the
following:
- $27.3 million for the writedown of machinery and equipment,
building and construction-in-progress, and the accrual of
certain commitments related to the shutdown of a Connection
Systems Division printed circuit board facility in San Diego,
CA;
- $9.7 million for the writedown of Semiconductor Test
Division manufacturing facilities held for sale on the west
coast; and
- $6.2 million, $0.7 million, and $0.5 million at the Circuit
Board Test and Inspection Division, Semiconductor Test
Division, and Connection Systems Division, respectively, for
future lease commitments net of sublease income on vacated
space.
The first nine months of 2002 charges are included in the
Restructuring and Other Charges line on the GAAP Operating
Statement.
(8) The $1.4 million charge in the first nine months of 2002 for
product line discontinuance relates to a $1.0 million provision
for excess inventory of a discontinued product line at the Circuit
Board Test and Inspection Division and $0.4 million for excess
inventory related to the shutdown of a printed circuit board
facility at the Connection Systems Division in San Diego, CA. This
charge is included on the Cost of Revenue line on the GAAP
Operating Statement.
(9) In the fourth quarter of 2002, Teradyne recorded a tax provision
to establish a full valuation allowance against its net deferred
tax assets. The first nine months of 2003 tax expense relates
primarily to a tax provision for foreign taxes and as a result of
the full valuation allowance there is no difference between the
GAAP and pro forma tax expense. In the first nine months of 2002,
prior to establishing a full valuation allowance, Teradyne was
recording tax benefits for losses. The first nine months of 2002
pro forma tax benefit reflects a 36% effective tax rate.
CONDENSED CONSOLIDATED BALANCE SHEETS (GAAP)
(In thousands)
09/28/03 12/31/02
Assets
Cash, Cash Equivalents and
Marketable Securities $239,206 $325,354
Accounts Receivable 225,366 174,838
Inventories 220,808 279,550
Other Current Assets 30,822 29,531
Total Current Assets 716,202 809,273
Net Property, Plant and
Equipment 587,625 685,266
Long-term Marketable
Securities 302,880 215,703
Goodwill 118,203 118,203
Intangible and Other Assets 73,642 76,620
Total Assets $1,798,552 $1,905,065
Liabilities
Notes Payable - Banks $6,986 $6,704
Current Portion of Long-term Debt 298 1,365
Accounts Payable 86,338 63,328
Accrued Employees' Compensation
and Withholdings 91,317 96,848
Deferred Revenue and Customer Advances 25,488 27,615
Other Accrued Liabilities 84,027 73,918
Income Taxes Payable 6,628 9,587
Total Current Liabilities 301,082 279,365
Pension Liability 107,530 106,390
Long-term Other Liabilities 46,993 40,276
Convertible Senior Notes 400,000 400,000
Other Long-term Debt 7,655 50,561
Total Liabilities 863,260 876,592
Shareholders' Equity
Common Stock 27,247 26,231
Additional Paid-In Capital 1,282,592 1,195,246
Accumulated Other Comprehensive Loss (65,465) (66,423)
Retained Earnings 247,975 430,476
Treasury Stock (557,057) (557,057)
Total Shareholders' Equity 935,292 1,028,473
Total Liabilities and Shareholders' Equity $1,798,552 $1,905,065