Teradyne Announces Third Quarter Results
BOSTON--Oct. 1, 20058, 2005--Teradyne, Inc. reported sales of $386.7 million in the third quarter, up 21% compared to the second quarter, and an 11% sequential increase in orders to $387.9 million. The company had a net loss in the third quarter of $35.4 million or $0.18 per share. This loss included $52.8 million or $0.27 per share in charges, consisting of an inventory provision of $38.5 million in Semiconductor Test related to non-FLEX products, and net restructuring and other charges of $14.3 million. The net restructuring and other charges reflect progress towards the company's previously communicated plan of lowering its breakeven level. Excluding these charges, the company had pro forma net income per share of $0.09 in the third quarter. In the previous quarter, the company had a net loss of $45.5 million or $0.23 per share, which included $10.2 million or $0.05 per share in net restructuring and other charges."While total orders were up 11%, our semiconductor test orders grew 40% over the second quarter," said Michael Bradley, Teradyne president and CEO. "That increase was driven by an expansion of our FLEX (TM) System-On-a-Chip (SOC) family of testers across a broad range of device applications. FLEX also set another bookings record in the quarter. In the fourth quarter, we're projecting strong growth in our continuing operations of semiconductor test, assembly test, and broadband test. Our recent decision to divest our Connection Systems business will enable us to focus on and grow our core test businesses and stay more tightly connected to our customers."
On October 10, 2005, Teradyne announced it had signed an agreement, which is expected to close in the fourth quarter, to sell its Connection Systems division for $390 million in cash (subject to a post-closing net asset value adjustment). Provided that occurs, Connection Systems' fourth quarter financial results will be reported as discontinued operations in accordance with generally accepted accounting principles ("GAAP"). Therefore, Connection Systems' revenue and expenses for the fourth quarter will not be included in the company's continuing operations.
The company's continuing operations guidance for the fourth quarter is for sales to be between $330 and $350 million, with net income per share from continuing operations of between $0.42 and $0.45. This includes $0.26 per share of income consisting of: a one-time tax benefit of $0.23 per share and a gain from the anticipated sale of a building of $0.05 per share; offset to a lesser extent by net restructuring and other charges of $0.02 per share. Excluding these items, the fourth quarter guidance for pro forma net income per share from continuing operations is expected to be between $0.16 and $0.21.
The tax benefit referred to above of $0.23 per share is a direct result of the anticipated gain on the sale of Connection Systems and a corresponding tax provision is included in discontinued operations in conformity with GAAP. Net income for the quarter, including results of continuing operations, discontinued operations, and gain on disposal of discontinued operations is expected to be between $0.96 and $1.01 per share.
To facilitate a better understanding of the fourth quarter guidance which excludes Connection Systems operations, there are four exhibits attached that disclose and reconcile GAAP to pro forma results for the three and nine months ended October 2, 2005 and give effect to the divestiture of Connection Systems as of the beginning of 2005.
Conference Call/Webcast
Teradyne will be conducting its conference call tomorrow, October 19, 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 November 2. 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 9838283, or by visiting www.teradyne.com and clicking on "Investors" for a link to the replay. Pro Forma Results and Guidance
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. These results are provided as a complement to results provided in accordance with GAAP. Teradyne reports pro forma results in order to better assess and reflect operating performance. In addition, Teradyne also discloses pro forma or non-GAAP results of operations that give effect to the divestiture of Connection Systems as of January 1, 2005. Management believes these pro forma measures helps indicate underlying trends in Teradyne's business and in the immediate instance, illustrate the anticipated financial effect of the sale of the Connection Systems business and help facilitate a better understanding of the fourth quarter guidance, which excludes Connection Systems operations. Management also uses pro forma measures to plan and forecast future periods, and to establish operational goals. Accordingly, fourth quarter earnings guidance is disclosed on both a GAAP and non-GAAP basis, which excludes certain charges and anticipates the closing of the Connection Systems divestiture in the fourth quarter. A reconciliation of GAAP to pro forma financial information discussed in this press release is contained in the attached exhibits and on the company's website at www.teradyne.com by clicking on "Investors" and then selecting the "GAAP to Pro Forma Reconciliation" link. About Teradyne
Teradyne is a leading supplier of Automatic Test Equipment and interconnection systems. The company's products deliver competitive advantage to the world's leading semiconductor, electronics, automotive and network systems companies. In 2004, Teradyne had sales of $1.8 billion, and currently employs about 5,500 people worldwide. For more information, visit . Teradyne(R) is a registered trademark of Teradyne, Inc. in the US and other countries. All product names are trademarks of Teradyne, Inc. (including its subsidiaries) or their respective owners. Safe Harbor Statement
The forward-looking statements included in this release are made only as of the date of publication and Teradyne undertakes no obligation to update the information set forth in this release.
TERADYNE, INC. REPORT FOR THIRD FISCAL QUARTER OF 2005
CONDENSED CONSOLIDATED OPERATING STATEMENTS
(In thousands, except per share amounts)
Quarter Ended:
------------------------------
October 2, July 3, October 3,
2005 2005 2004
---------- --------- ----------
Net Revenues $386,692 $320,172 $457,800
Cost of Revenues (1) 283,051 222,007 269,344
--------- --------- ---------
Gross Profit 103,641 98,165 188,456
Operating Expenses:
Engineering and Development 56,259 60,915 67,243
Selling and Administrative 65,309 67,542 70,270
Restructuring and Other Charges,
net (2) 14,337 10,195 (46)
--------- --------- ---------
Operating Expenses 135,905 138,652 137,467
(Loss)/Income From Operations (32,264) (40,487) 50,989
Interest Income 3,972 3,841 3,784
Interest Expense (4,059) (4,153) (4,696)
Other Income and Expense, Net - - -
--------- --------- ---------
(Loss)/Income Before Income Taxes (32,351) (40,799) 50,077
Income Tax Expense 3,027 4,665 8,928
--------- --------- ---------
Net (Loss)/Income $(35,378) $(45,464) $41,149
========= ========= =========
(Loss)/Income per Common Share -
Basic and Diluted:
--------------------------------------
Net (Loss)/Income per Common Share -
Basic $(0.18) $(0.23) $0.21
========= ========= =========
Shares used in calculation of Net
(Loss)/Income per Common Share -
Basic 196,835 195,757 194,128
========= ========= =========
Net (Loss)/Income per Common Share -
Diluted (3) $(0.18) $(0.23) $0.21
========= ========= =========
Shares used in calculation of Net
(Loss)/Income per Common Share -
Diluted 196,835 195,757 195,751
========= ========= =========
Gross Orders $389,203 $353,328 $294,512
========= ========= =========
Net Orders $387,933 $348,952 $284,060
========= ========= =========
Nine Months Ended:
-----------------------------
October October
2, 2005 3, 2004
-------------- --------------
Net Revenues $ 1,012,445 $ 1,414,866
Cost of Revenues (1) 721,499 823,807
------------ -------------
Gross Profit 290,946 591,059
Operating Expenses:
Engineering and Development 181,414 198,851
Selling and Administrative 198,166 206,503
Restructuring and Other Charges,
net (2) 35,160 (629)
------------ -------------
Operating Expenses 414,740 404,725
(Loss)/Income From Operations (123,794) 186,334
Interest Income 12,218 10,845
Interest Expense (12,646) (14,223)
Other Income and Expense, Net - 1,277
------------ -------------
(Loss)/Income Before Income Taxes (124,222) 184,233
Income Tax Expense 9,192 22,344
------------ -------------
Net (Loss)/Income $ (133,414) $ 161,889
============ =============
(Loss)/Income per Common Share -
Basic and Diluted:
----------------------------------------
Net (Loss)/Income per Common Share -
Basic $ (0.68) $ 0.83
============ =============
Shares used in calculation of Net
(Loss)/Income per Common Share - Basic 196,070 193,998
============ =============
Net (Loss)/Income per Common Share -
Diluted (3) $ (0.68) $ 0.81
============ =============
Shares used in calculation of Net
(Loss)/Income per Common Share -
Diluted 196,070 213,137
============ =============
Gross Orders $ 1,084,517 $ 1,403,913
============ =============
Net Orders $ 1,077,555 $ 1,393,244
============ =============
(1) Cost of revenues includes an inventory provision of $38.5 million
in the quarter ended October 2, 2005 for non-FLEX products in the
Semiconductor Test Division.
(2) Restructuring and Other Charges, net consists of:
Quarter Ended:
October 2, July 3, October 3,
2005 2005 2004
----------------------- -----------
Severance $ 12,479 $ 4,624 $ 66
Facility Related (121) 896 -
Long-Lived Asset Impairment - 9,157 562
Gain on Sale of Real Estate - (4,445) -
Gain on Sale of Business - (612) -
Divestiture-Related Fees 1,596 1,482 -
Other 383 (907) (674)
---------- ---------- ---------
$ 14,337 $ 10,195 $ (46)
========== ========== =========
Nine Months Ended:
October 2, October 3,
2005 2004
------------- ------------
Severance $ 24,186 $ (694)
Facility Related 3,311 2,136
Long-Lived Asset Impairment 9,752 (41)
Gain on Sale of Real Estate (4,445) -
Gain on Sale of Business (612) (865)
Divestiture-Related Fees 3,078 -
Other (110) (1,165)
----------- -----------
$ 35,160 $ (629)
=========== ===========
(3) Under GAAP, when calculating diluted earnings per share,
convertible debentures must be assumed to have converted if the
effect on EPS would be dilutive. For Teradyne, dilution occurs
when earnings are greater than $0.24 per share per quarter.
Accordingly, for the quarter ended October 3, 2004, diluted shares
do not assume the conversion of the convertible debentures as the
effect would be anti-dilutive. Diluted shares for the nine months
ended October 3, 2004 assumes the conversion of the convertible
debentures, as the effect of the conversion on EPS would be
dilutive. Accordingly, 15.2 million shares have been included in
diluted shares and net interest expense of $11.1 million has been
added back to net income for the diluted earnings per share
calculation.
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
October 2, December 31,
2005 2004
---------------------------
Assets
Cash and Cash Equivalents $ 225,392 $ 209,147
Marketable Securities 91,291 75,431
Accounts Receivable 269,283 223,491
Inventories 222,190 262,996
Other Current Assets 32,675 34,761
------------ -----------
840,831 805,826
Net Property, Plant and Equipment 513,949 547,075
Long-term Marketable Securities 249,150 406,615
Goodwill 116,176 116,176
Intangible and Other Assets 40,450 46,870
------------ -----------
$ 1,760,556 $ 1,922,562
============ ===========
Liabilities
Notes Payable - Banks $ 2,657 $ 4,826
Current Portion of Long-term Debt 294 321
Accounts Payable 89,746 62,006
Accrued Employees' Compensation and
Withholdings 78,416 106,298
Deferred Revenue and Customer Advances 29,032 30,399
Other Accrued Liabilities 57,247 60,970
Income Taxes Payable 7,891 11,738
------------ -----------
265,283 276,558
Pension Liability 41,755 69,187
Other Long-term Liabilities 45,527 44,321
Convertible Senior Notes 371,500 391,500
Other Long-term Debt 7,012 7,432
------------ -----------
731,077 788,998
Shareholders' Equity 1,029,479 1,133,564
------------ -----------
$ 1,760,556 $ 1,922,562
============ ===========
For press releases and other information of interest to investors,
please visit Teradyne's homepage on the World Wide Web at
http://www.teradyne.com.
GAAP to Pro Forma Earnings Guidance Reconciliation
Earnings guidance for the fourth quarter of 2005 is being provided on
a GAAP and pro forma basis. 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.
"Low" Forecast for "High" Forecast for
Three Months Ended Three Months Ended
----------------------- -----------------------
December 31, 2005 December 31, 2005
Unaudited
(in millions, except per share data)
Pro Pro
GAAP % Forma % GAAP % Forma %
----------- ----------- ----------- -----------
Net Revenues $330.0 100% $330.0 100% $350.0 100% $350.0 100%
Cost of
Revenues 181.0 55 181.0 55 190.0 54 190.0 54
----------- ----------- ----------- -----------
Gross Profit 149.0 45 149.0 45 160.0 46 160.0 46
Operating Expenses:
Engineering and
Development 52.0 16 52.0 16 53.0 15 53.0 15
Selling and
Administrative 61.0 18 61.0 18 61.0 17 61.0 17
Restructuring
and Other
Charges, net (6.0) (2) - - (6.0) (2) - -
----------- ----------- ----------- -----------
Operating
Expenses 107.0 32 113.0 34 108.0 31 114.0 33
Income from Continuing
Operations 42.0 13 36.0 11 52.0 15 46.0 13
Net Interest
Income 1.0 0 1.0 0 1.0 0 1.0 0
----------- ----------- ----------- -----------
Income from Continuing
Operations Before
Income Taxes 43.0 13 37.0 11 53.0 15 47.0 13
Tax Benefit
from gain on
disposal of
TCS (47.0)(14) - - (44.0)(13) - -
Income Tax
Expense 5.0 1 5.0 1 5.0 1 5.0 1
----------- ----------- ----------- -----------
Net Income from
Continuing Operations $85.0 26 % $32.0 10 % $92.0 26 % $42.0 12 %
=========== =========== =========== ===========
Income per common
share - basic and
diluted:
----------------------
Net Income per Common
Share - Basic $0.43 $0.16 $0.47 $0.21
======= ======= ======= =======
Shares used in
calculation of Net
Income per Common
Share - Basic 196.8 196.8 196.8 196.8
Net Income per Common
Share - Diluted (1) $0.42 $0.16 $0.45 $0.21
======= ======= ======= =======
Shares used in
calculation of Net
Income per Common
Share - Diluted 212.4 198.1 212.4 198.1
Pro forma adjustments:
Restructuring and
Other Charges, net
(2) $(6) $(6)
Tax benefit from gain
on disposal of TCS
(3) (47) (44)
------- -------
Total pro forma
adjustments $(53) $(50)
======= =======
(1) Under GAAP, when calculating diluted earnings per share,
convertible debentures must be assumed to have converted if the
effect on EPS would be dilutive. For Teradyne, dilution occurs
when earnings are greater than $0.24 per share per quarter.
Accordingly, for GAAP net income from continuing operations for
the quarter ended December 31, 2005, diluted shares assume the
conversion of the convertible debentures as the effect would
dilutive. Diluted shares for the for Pro Forma net income from
continuing operations for the quarter ended December 31, 2005 does
not assume the conversion of the convertible debentures, as the
effect of the conversion on EPS would be anti-dilutive.
Accordingly, 14.3 million shares have been included in diluted
shares and net interest expense of $3.4 million has been added
back to net income for the diluted earnings per share calculation.
(2) Restructuring and Other Charges, net consists of:
Gain on Sale of Real
Estate $(10)
Severance 4
-------
$(6)
=======
(3) Under GAAP, there will be a tax benefit recorded in continuing
operations for a portion of the net operating loss carryforwards
used as a result of the sale of TCS. There will be an offsetting
tax provision included in the gain on the sale of TCS included in
discontinued operations.
GAAP to Pro Forma Statement of Operations Reconciliation
In addition to disclosing results that are determined in accordance
with Generally Accepted Accounting Principles (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.
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.
Three Months Ended
----------------------------
Unaudited
(in millions,
except per share data)
October 2, 2005
Pro
GAAP % Forma %
------------- -------------
Net Revenues $386.7 100.0% $386.7 100.0
Cost of Revenues 283.1 73.2 244.6 63.3
------------- -------------
Gross
Profit 103.6 26.8 142.1 36.7
Operating Expenses:
Engineering and Development 56.3 14.6 56.3 14.6
Selling and Administrative 65.3 16.9 65.3 16.9
Restructuring and Other Charges 14.3 3.7 - -
------------- -------------
Operating Expenses 135.9 35.1 121.6 31.4
(Loss)/Income from Operations (32.3) (8.4) 20.5 5.3
Interest
Income 4.0 1.0 4.0 1.0
Interest Expense (4.1) (1.1) (4.1) (1.1)
Other Income and Expense, net - - - -
------------- -------------
(Loss)/Income Before Income Taxes (32.4) (8.4) 20.4 5.3
Income Tax Expense 3.0 0.8 3.0 0.8
------------- -------------
Net (Loss)/Income $(35.4) (9.2)% $17.4 4.5%
============= =============
(Loss)/Income per common share - basic and
diluted:
------------------------------------------
Net (Loss)/Income per Common Share - Basic$(0.18) $0.09
======= =======
Shares used in calculation of Net
(Loss)/Income per Common Share - Basic 196.8 196.8
Net (Loss)/Income per Common Share -
Diluted (1) $(0.18) $0.09
======= =======
Shares used in calculation of Net
(Loss)/Income per Common Share - Diluted 196.8 198.1
Pro forma adjustments:
Cost of Revenues (2) $38.5
Restructuring and Other Charges (3) 14.3
-------
Total pro forma adjustments $52.8
=======
July 3, 2005
Pro
GAAP % Forma %
------------- -------------
Net Revenues $320.2 100.0% $320.2 100.0%
Cost of Revenues 222.0 69.3 222.0 69.3
------------- -------------
Gross
Profit 98.2 30.7 98.2 30.7
Operating
Expenses:
Engineering and Development 60.9 19.0 60.9 19.0
Selling and Administrative 67.5 21.1 67.5 21.1
Restructuring and Other Charges 10.2 3.2 - -
------------- -------------
Operating Expenses 138.6 43.3 128.4 40.1
(Loss)/Income from Operations (40.4)(12.6) (30.2) (9.4)
Interest
Income 3.8 1.2 3.8 1.2
Interest Expense (4.2) (1.3) (4.2) (1.3)
Other Income and Expense, net - - - -
------------- -------------
(Loss)/Income Before Income Taxes (40.8)(12.7) (30.6) (9.6)
Income Tax Expense 4.7 1.5 4.7 1.5
------------- -------------
Net
(Loss)/Income (45.5)(14.2)%$(35.3)(11.0)%
============= =============
(Loss)/Income per common share - basic and
diluted:
------------------------------------------
Net (Loss)/Income per Common Share - Basic $(0.23) $(0.18)
======= =======
Shares used in calculation of Net
(Loss)/Income per Common Share - Basic 195.8 195.8
Net (Loss)/Income per Common Share -
Diluted (1) $(0.23) $(0.18)
======= =======
Shares used in calculation of Net
(Loss)/Income per Common Share - Diluted 195.8 195.8
Pro forma adjustments:
Cost of Revenues (2) $-
Restructuring and Other Charges (3) 10.2
-------
Total pro forma adjustments $10.2
=======
October 3, 2004
Pro
GAAP % Forma %
------------- -------------
Net Revenues $457.8 100.0% $457.8 100.0%
Cost of Revenues 269.3 58.8 269.3 58.8
------------- -------------
Gross Profit 188.5 41.2 188.5 41.2
Operating Expenses:
Engineering and Development 67.2 14.7 67.2 14.7
Selling and Administrative 70.4 15.4 70.4 15.4
Restructuring and Other Charges (0.1) (0.0) - -
------------- -------------
Operating Expenses 137.5 30.0 137.6 30.1
(Loss)/Income from Operations 51.0 11.1 50.9 11.1
Interest Income 3.8 0.8 3.8 0.8
Interest Expense (4.7) (1.0) (4.7) (1.0)
Other Income and Expense, net - - - -
------------- -------------
(Loss)/Income Before Income Taxes 50.1 10.9 50.0 10.9
Income Tax Expense 8.9 1.9 8.9 1.9
------------- -------------
Net (Loss)/Income $41.2 9.0% $41.1 9.0%
============= =============
(Loss)/Income per common share - basic and
diluted:
------------------------------------------
Net (Loss)/Income per Common Share - Basic $0.21 $0.21
======= =======
Shares used in calculation of Net
(Loss)/Income per Common Share - Basic 194.1 194.1
Net (Loss)/Income per Common Share -
Diluted (1) $0.21 $0.21
======= =======
Shares used in calculation of Net
(Loss)/Income per Common Share - Diluted 195.8 195.8
Pro forma adjustments:
Cost of Revenues (2) $-
Restructuring and Other Charges (3) (0.1)
-------
Total pro forma adjustments $(0.1)
=======
Nine Months Ended
-------------------------------
Unaudited
(in millions, except per share
data)
October 2, 2005
GAAP % Pro Forma %
--------------- ---------------
Net Revenues $1,012.4 100.0% $1,012.4 100.0%
Cost of Revenues 721.5 71.3 683.0 67.5
--------------- ---------------
Gross Profit 290.9 28.7 329.4 32.5
Operating Expenses:
Engineering and Development 181.4 17.9 181.4 17.9
Selling and Administrative 198.1 19.6 198.1 19.6
Restructuring and Other
Charges 35.2 3.5 - -
--------------- ---------------
Operating Expenses 414.7 41.0 379.5 37.5
(Loss)/Income from Operations (123.8)(12.2) (50.1) (4.9)
Interest Income 12.2 1.2 12.2 1.2
Interest Expense (12.6) (1.2) (12.6) (1.2)
Other Income and Expense,
net - - - -
--------------- ---------------
(Loss)/Income Before Income Taxes (124.2)(12.3) (50.5) (5.0)
Income Tax Expense 9.2 0.9 9.2 0.9
--------------- ---------------
Net (Loss)/Income $(133.4)(13.2)% $(59.7)(5.9)%
=============== ===============
(Loss)/Income per common share - basic
and diluted:
--------------------------------------
Net (Loss)/Income per Common Share -
Basic $(0.68) $(0.30)
========= =========
Shares used in calculation of Net
(Loss)/Income per Common Share -
Basic 196.1 196.1
Net (Loss)/Income per Common Share -
Diluted (1) $(0.68) $(0.30)
========= =========
Shares used in calculation of Net
(Loss)/Income per Common Share -
Diluted 196.1 196.1
Pro forma adjustments:
Cost of Revenues (2) $38.5
Restructuring and Other Charges (3) 35.2
---------
Total pro forma adjustments $73.7
=========
October 3, 2004
GAAP % Pro Forma %
--------------- ---------------
Net
Revenues $1,414.9 100.0% $1,414.9 100.0%
Cost of Revenues 823.8 58.2 823.8 58.2
--------------- ---------------
Gross
Profit 591.1 41.8 591.1 41.8
Operating
Expenses:
Engineering and Development 198.9 14.1 198.9 14.1
Selling and Administrative 206.5 14.6 206.5 14.6
Restructuring and Other Charges (0.6) (0.0) - -
--------------- ---------------
Operating Expenses 404.8 28.6 405.4 28.7
(Loss)/Income from Operations 186.3 13.2 185.7 13.1
Interest
Income 10.8 0.8 10.8 0.8
Interest Expense (14.2) (1.0) (14.2) (1.0)
Other Income and Expense, net 1.3 0.1 1.3 0.1
--------------- ---------------
(Loss)/Income Before Income Taxes 184.2 13.0 183.6 13.0
Income Tax Expense 22.3 1.6 22.3 1.6
--------------- ---------------
Net
(Loss)/Income $161.9 11.4% $161.3 11.4%
=============== ===============
(Loss)/Income per common share -
basic and diluted:
-------------------------------------
Net (Loss)/Income per Common Share -
Basic $0.83 $0.83
========= =========
Shares used in calculation of Net
(Loss)/Income per Common Share -
Basic 194.0 194.0
Net (Loss)/Income per Common Share -
Diluted (1) $0.81 $0.81
=============== =========
Shares used in calculation of Net
(Loss)/Income per Common Share -
Diluted 213.1 213.1
Pro forma
adjustments:
Cost of
Revenues (2) $-
Restructuring and Other Charges (3) (0.6)
---------
Total pro forma adjustments $(0.6)
=========
(1) Under GAAP, when calculating diluted earnings per share,
convertible debentures must be assumed to have converted if the
effect on EPS would be dilutive. For Teradyne, dilution occurs
when earnings are greater than $0.24 per share per quarter.
Accordingly, for the three months ended October 2, 2005, July 3,
2005 and October 3, 2004, and for the nine months ended October 2,
2005, diluted shares do not assume the conversion of the
convertible debentures as the effect would be anti-dilutive.
Diluted shares for the nine months ended October 3, 2004 assumes
the conversion of the convertible debentures, as the effect of the
conversion on EPS would be dilutive. Accordingly, 15.2 million
shares have been included in diluted shares and net interest
expense of $11.1 million has been added back to net income for the
diluted earnings per share calculation.
(2) During the three and nine months ended October 2, 2005, Teradyne
recorded an inventory provision of $38.5 million for non-FLEX
products in the Semiconductor Test Division.
(3) Restructuring and Other Charges, net consists of:
For the three For the nine
months ended months ended
----------------------- ---------------
October July October October October
2, 2, 3, 2, 3,
2005 2005 2004 2005 2004
------- ------ ------- ------- -------
Severance $12.5 $4.6 $0.1 $24.1 $(0.7)
Facility Related (0.1) 0.9 - 3.3 2.1
Long-Lived Asset Impairment - 9.2 0.5 9.8 -
Gain on Sale of Real Estate - (4.4) - (4.4) -
Gain on Sale of Business - (0.6) - (0.6) (0.8)
Divestiture-Related Fees 1.6 1.5 - 3.1 -
Other 0.3 (0.9) (0.7) (0.1) (1.2)
------ ------ ------ ------ ------
$14.3 $10.3 $(0.1) $35.2 $(0.6)
====== ====== ====== ====== ======
GAAP to Pro Forma Reconciliation - Connection Systems Divestiture
The accompanying GAAP and pro forma statements of operations for the
quarter and nine months ended October 2, 2005 reflect the disposition
of Connection Systems ("TCS") as if it had occurred as of January 1,
2005. The pro forma adjustments are based on the operations of TCS
during the periods presented, the impact from the sale of the TCS
business and other transactions associated with the disposition. They
have been made to illustrate the anticipated financial effect of the
sale of the TCS business and are based on presently available
information. Consequently, the pro forma financial information
presented is not necessarily indicative of the results that would have
been reported had the transaction actually occurred as of January 1,
2005.
For the quarter ended October 2, 2005
--------------------------------------------
GAAP TCS GAAP Pro Forma Pro Forma
Teradyne Segment Adjustments Teradyne
Results
----------- --------- ----------- ----------
Net Revenues $386,692 $93,119 $- $293,573
Cost of Revenues 244,586 74,893 (148)A 169,545
Cost of Revenues -
provision for
non-FLEX
Semiconductor
Test products 38,465 - - 38,465
----------- --------- ----------- ----------
Gross Profit 103,641 18,226 148 85,563
Operating Expenses:
Engineering and
Development 56,259 2,490 (70)A 53,699
Selling and
Administrative 65,309 9,339 (172)A
3,090 B
(1,400)C 57,488
Restructuring and
Other Charges, net 14,337 542 - 13,795
----------- --------- ----------- ----------
Operating
Expenses 135,905 12,371 1,448 124,982
(Loss)/Income From
Operations (32,264) 5,855 (1,300) (39,419)
Interest Income 3,972 - 3,931 D 7,903
Interest Expense (4,059) - - (4,059)
----------- --------- ----------- ----------
(Loss)/Income Before
Income Taxes $(32,351) $5,855 $2,631 $(35,575)
=========== ========= =========== ==========
For the nine months ended October 2, 2005
--------------------------------------------
GAAP TCS GAAP Pro Forma Pro Forma
Teradyne Segment Adjustments Teradyne
Results
----------- --------- ----------- ----------
Net Revenues $1,012,445 $282,364 $- $730,081
Cost of Revenues 683,034 229,104 (445)A 453,485
Cost of Revenues-
Provision for
non-FLEX
Semiconductor
Test products 38,465 - - 38, 465
----------- --------- ----------- ----------
Gross Profit 290,946 53,260 445 238,131
Operating Expenses:
Engineering and
Development 181,414 7,959 (211)A 173,244
Selling and
Administrative 198,166 29,124 (515)A
9,184 B
(4,200)C 173,511
Restructuring and
Other Charges, net 35,160 7,124 - 28,036
----------- --------- ----------- ----------
Operating
Expenses 414,740 44,207 4,259 374,791
(Loss)/Income From
Operations (123,794) 9,053 (3,814) (136,660)
Interest Income 12,218 - 11,794 D 24,012
Interest Expense (12,646) - - (12,646)
----------- --------- ----------- ----------
(Loss)/Income Before
Income Taxes $(124,222) $9,053 $7,980 $(125,294)
=========== ========= =========== ==========
A To remove Connection Systems variable compensation expense which
has historically been recorded in the Corporate and
Eliminations segment.
B To add back the corporate allocation of G&A expenses
historically allocated to Connection Systems which are not
expected to be eliminated as a result of the divestiture of
Connection Systems.
C Assumed G&A savings not directly related to the divestiture,
which are expected to be realized by Q1 of 2006.
D Interest income on assumed net proceeds of $370 million at an
assumed annual rate of 4.25%.