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