UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ______________
Commission File No. 1-6462
TERADYNE, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2272148
(State or Other Jurisdiction (I.R.S.Employer
Incorporation or Organization) Identification No.)
321 Harrison Avenue, Boston, Massachusetts 02118
(Address of principal executive offices)
(Zip Code)
617-482-2700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
Yes X No _
The number of shares outstanding of the registrant's only class of Common Stock
as of October 20, 1995 was 75,781,058 shares.
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TERADYNE, INC.
INDEX
Page No.
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Part I. Financial Information:
Condensed Consolidated Balance Sheets -
October 1, 1995 and December 31, 1994....................................................3
Condensed Consolidated Statements of Income -
Quarters and Nine Months Ended October 1, 1995 and October 2, 1994.......................4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended October 1, 1995 and October 2, 1994....................................5
Notes to Condensed Consolidated Financial Statements.....................................6
Management's Discussion and Analysis of
Financial Condition and Results of Operations...........................................7-8
Part II. Other Information:
Item 6(b). Reports on Form 8-K..............................................................9
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<CAPTION>
TERADYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
October 1, 1995 December 31, 1994
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 234,187 $ 182,811
Marketable securities.............................................. 19,920 19,766
Accounts receivable - trade........................................ 206,359 129,074
Inventories:
Parts......................................................... 81,219 49,216
Assemblies in progress........................................ 47,313 42,667
128,532 91,883
Refundable income taxes............................................ 1,064
Deferred tax assets................................................ 14,767 14,767
Prepayments and other current assets............................... 10,978 7,294
Total current assets.......................................... 614,743 446,659
Property, plant and equipment, at cost.................................. 452,980 417,765
Less accumulated depreciation...................................... (236,651) (227,319)
Net property, plant and 216,329 190,446
equipment................................................
Other assets ........................................................... 17,794 18,837
Total assets.................................................. $ 848,866 $ 655,942
LIABILITIES
Current liabilities:
Notes payable - banks.............................................. $ 8,455 $ 8,431
Current portion of long term debt.................................. 418 250
Accounts payable - trade........................................... 28,102 13,305
Accrued employees' compensation and withholdings................... 48,700 38,263
Unearned service revenue and customer advances..................... 50,653 46,386
Other accrued liabilities.......................................... 29,488 27,088
Income taxes payable............................................... 13,807 5,437
Total current liabilities..................................... 179,623 139,160
Deferred tax liabilities................................................ 14,722 14,722
Long-term debt.......................................................... 8,482 8,806
Total liabilities............................................. 202,827 162,688
SHAREHOLDERS' EQUITY
Common stock $0.125 par value, authorized 125,000,000 shares
(75,000,000 in 1994), issued and outstanding after deduction
of reacquired shares 75,747,638 (36,351,527 in 1994) .............. 9,467 4,544
Additional paid-in capital.............................................. 282,895 248,497
Retained earnings....................................................... 353,677 240,213
Total shareholders' equity.................................... 646,039 493,254
Total liabilities and shareholders' equity.................... $ 848,866 $ 655,942
<FN>
The accompanying notes, together with the Notes to Consolidated Financial
Statements included in the Company's Form 10-K for the year ended December 31,
1994 are an integral part of the condensed consolidated financial statements.
</FN>
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<CAPTION>
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Quarters Ended For the Nine Months Ended
(Dollars in thousands except per share amount)
Oct. 1, 1995 Oct. 2, 1994 Oct. 1, 1995 Oct. 2, 1994
<S> <C> <C> <C> <C>
Net sales.................................. $ 285,570 $ 178,840 $ 754,952 $ 487,349
Expenses:
Cost of sales......................... 149,651 99,964 402,482 272,968
Engineering and development........... 27,511 17,934 72,454 51,096
Selling and administrative............ 39,926 32,148 111,535 95,783
------- ------- ------- -------
217,088 150,046 586,471 419,847
------- ------- ------- -------
Income from operations..................... 68,482 28,794 168,481 67,502
Other income (expense):
Interest income........................ 3,687 1,708 10,090 4,033
Interest expense....................... (323) (413) (1,279) (1,282)
----- ----- ------- -------
Income before income taxes................. 71,846 30,089 177,292 70,253
Provision for income taxes................. 25,867 9,729 63,828 21,778
------ ------ ------- ------
Net income................................. $ 45,979 $ 20,360 $ 113,464 $ 48,475
------ ------ ------- ------
Net income per common share................
$0.59 $0.28 $1.47 $0.66
Shares used in calculations of net income
per common share ...................... 78,519,000 74,018,000 77,253,000 73,976,000
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<FN>
The accompanying notes, together with the Notes to Consolidated Financial
Statements included in the Company's Form 10-K for the year ended December 31,
1994 are an integral part of the condensed consolidated financial statements.
</FN>
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<TABLE>
<CAPTION>
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended
Oct. 1, 1995 Oct. 2, 1994
(Dollars in thousands)
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Cash flows from operating activities:
Net income........................................................ $ 113,464 $ 48,475
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................................... 25,858 23,584
Amortization................................................... 2,661 2,628
Other non-cash items, net...................................... 4,021 1,615
Changes in operating assets and liabilities:
Accounts receivable....................................... (77,285) (26,581)
Inventories............................................... (36,649) (12,227)
Refundable income taxes................................... 1,064 2,049
Other assets.............................................. (10,322) (13,036)
Accounts payable and accruals............................. 31,901 16,427
Income taxes payable...................................... 24,875 10,803
-------- --------
Net cash provided by operating activities............. 79,588 53,737
Cash flows from investing activities:
Additions to property............................................. (41,934) (16,158)
Increase in equipment manufactured by the Company................. (10,649) (4,189)
Maturities of marketable securities............................... 326,059
Purchases of marketable securities................................ (324,318) (19,475)
--------- --------
Net cash used in investing activities................. (50,842) (39,822)
Cash flows from financing activities:
Payments on long term debt........................................ (187) (1,584)
Issuance of common stock under employee stock
option and stock purchase plans............................... 22,817 13,230
Acquisition of treasury stock..................................... (24,597)
------ --------
Net cash flows provided by (used in) financing activities 22,630 (12,951)
Increase in cash and cash equivalents.................................. 51,376 964
Cash and cash equivalents at beginning of period....................... 182,811 143,578
------- -------
Cash and cash equivalents at end of period............................. $ 234,187 $ 144,542
------- -------
Supplementary disclosure of cash flow information: Cash paid during
the period for:
Interest................................................ $ 1,392 $ 1,266
Income taxes............................................ 37,273 8,926
<FN>
The accompanying notes, together with the Notes to Consolidated Financial
Statements included in the Company's Form 10-K for the year ended December 31,
1994 are an integral part of the condensed consolidated financial statements.
</FN>
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TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Financial Information
The accompanying condensed consolidated financial statements are unaudited.
However, in the opinion of management, all adjustments (consisting only of
normal recurring accrual entries) necessary for a fair presentation of such
information have been made.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
B. Common Stock Split
On July 24, 1995 the Company's Board of Directors authorized a two-for-one
stock split effected in the form of a 100% stock dividend distributed on
August 29, 1995 to shareholders of record as of August 8, 1995. As a result
of the stock split, the accompanying condensed consolidated financial
statements reflect an increase in the number of outstanding shares of
common stock and the transfer of the par value of these additional shares
from paid-in capital. All share and per share amounts have been restated to
reflect the retroactive effect of the stock split, except for the
capitalization of the Company at December 31, 1994.
C. Proposed Merger
On September 5, 1995, Teradyne, Inc. ("Teradyne") entered into an Agreement
and Plan of Merger and Reorganization (the "Merger Agreement") with M
Merger Corp., a Delaware corporation and wholly owned subsidiary of
Teradyne ("Merger Sub"), and Megatest Corporation, a Delaware corporation
("Megatest"). Pursuant to the Merger Agreement, and upon the satisfaction
of all closing conditions, Merger Sub will merge (the "Merger") with and
into Megatest, with Megatest as the surviving corporation.
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 adjustment (.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 then 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 purpose of approving the Merger.
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Management's Discussion and Analysis of Financial Condition
and Results of Operations
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<CAPTION>
SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Quarters Ended For the Nine Months Ended
---------------------- -------------------------
Oct. 1, 1995 Oct. 2, 1994 Oct. 1, 1995 Oct. 2, 1994
------------ ------------ ------------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net sales........................................... $ 285,570 $ 178,840 $ 754,952 $ 487,349
---------- ---------- ---------- ----------
Net income.......................................... $ 45,979 $ 20,360 $ 113,464 $ 48,475
---------- ---------- ---------- ----------
Percentage of net sales:
Net sales...................................... 100% 100% 100% 100%
Expenses:
Cost of sales............................. 52 56 53 56
Engineering and development............... 10 10 10 10
Selling and administrative................ 14 18 15 20
Interest, net............................. (1) (1) (1) 0
--- --- --- ---
75 83 77 86
Income before income taxes..................... 25 17 23 14
Provision for income taxes..................... 9 5 8 4
--- --- --- ---
Net income..................................... 16% 12% 15% 10%
--- --- --- ---
Provision for income taxes as a percentage
of income before income taxes.................. 36% 32% 36% 31%
--- --- --- ---
<FN>
Results of Operations:
- - ----------------------
Sales increased 60% to $285.6 million in the third quarter of 1995 compared to
the third quarter of 1994. In the first nine months of 1995, sales increased 55%
to $755.0 million compared to the first nine months of 1994. The growth in sales
in the third quarter occurred in each of the major product lines of the company.
Sales of semiconductor test systems were the major contributor to the Company's
overall increase in sales. This increase occurred as semiconductor manufacturers
added capacity in response to rising demand for their products.
Telecommunications sales increased with the growing installation of
telephone-line test equipment at the Deutsche Bundepost Telekom in Germany.
Sales of backplane connection systems increased as a result of greater
penetration into the Company's high technology commercial customer base. As a
result of the increase in sales, income before income taxes increased $41.8
million in the third quarter and $107.0 million in the nine months ending
October 1, 1995, compared to the same periods in 1994.
Incoming orders were $283 million in the third quarter of 1995 compared to $180
million in the third quarter of 1994. Backlog at the end of the third quarter of
1995 was $641 million compared to $324 million at the end of the third quarter
of 1994.
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Cost of sales decreased from 56% of sales in the third quarter of 1994 to 52% in
the third quarter of 1995. In the first nine months of 1995, cost of sales
decreased to 53% of sales from 56% in the same period of 1994. The Company has
implemented an aggressive program with its vendors to lower the cost of incoming
materials in order to offset reduced sales prices for its products.
Additionally, cost of sales reduction comes as a result of sales volume
increasing while certain overhead components of cost of sales remain fixed.
Engineering and development expenses approximated 10% of sales in the third
quarter and the first nine months of 1995 and 1994 as the growth in the
Company's investment in new products kept pace with the growth in sales. This
increase was for support of new product development efforts in semiconductor
test systems, and also included, in the nine months of 1995, a non-recurring
charge of approximately $3 million related to the acquisition of incomplete
technology.
Selling and administrative expenses decreased from 18% of sales to 14% of sales
in the third quarter of 1995 compared to the third quarter of 1994 and from 20%
of sales to 15% in the first nine months of 1995 as compared to the first nine
months of 1994. The dollar increase of these expenses has not kept pace with the
increase in the Company's sales.
In the first nine months of 1995, the Company had net interest income of $8.8
million compared to net interest income of $2.8 million in the first nine months
of 1994. This change was due to higher levels of invested cash in the first nine
months of 1995 compared to the first nine months of 1994.
During the third quarter of 1995, the Company maintained an effective tax rate
of 36% of pre-tax income on a year to date basis. The 1994 effective tax rate
was 31% as the Company utilized tax credit carryforward and foreign loss
carryforward amounts. In 1995, these carryforwards are essentially no longer
available.
In September 1995, the Company entered into an agreement to merge with Megatest
Corporation of San Jose, California. Megatest makes several lines of test
equipment for the semiconductor industry. The Company believes the merger will
enhance its position as a leading supplier of automatic test equipment to the
semiconductor industry. The closing of this merger is subject to approval by
Megatest's stockholders.
For further information, refer to the Company's Current Report on Form 8-K dated
September 5, 1995 filed with the Securities and Exchange Commission.
Liquidity and Capital Resources
- - -------------------------------
During the first nine months of 1995, cash and marketable securities increased
$51.5 million to a balance of $254.1 million. Cash flow provided by operations
was $79.6 million. Additionally, the Company generated cash of $22.8 million
under the Company's employee stock option and stock purchase plans. The Company
used $52.5 million to fund property and equipment additions during the nine
month period. While capital spending outpaced depreciation expense, the net
growth in investment in property, plant and equipment was less than the growth
in sales. From the end of the year 1994, accounts receivable and inventories
have increased at approximately the same rate as the increase in sales.
</FN>
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<PAGE>
Item 6(b). Reports on Form 8-K
- - -------------------------------
A Current Report on Form 8-K dated August 29, 1995, has been filed with the
Securities and Exchange Commission relating to the declaration of a two-for-one
stock split effected in the form of a 100% stock dividend distributed on August
29, 1995 to shareholders of record on August 8, 1995.
A Current Report on Form 8-K dated September 5, 1995, has been filed with
the Securities and Exchange Commission relatingto the execution by Teradyne,
Inc., of an Agreement and Plan of Merger and Reorganization with M Merger Corp.,
a wholly-owned subsidiary of Teradyne, Inc., and Megatest Corporation.
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SIGNATURES
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Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TERADYNE, INC.
------------------------
Registrant
OWEN W. ROBBINS
------------------------
Owen W. Robbins
Executive Vice President
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October 26, 1995
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<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> OCT-01-1995
<EXCHANGE-RATE> 1.00
<CASH> 234,187
<SECURITIES> 19,920
<RECEIVABLES> 206,359
<ALLOWANCES> 0
<INVENTORY> 128,532
<CURRENT-ASSETS> 614,743
<PP&E> 452,980
<DEPRECIATION> 236,651
<TOTAL-ASSETS> 848,866
<CURRENT-LIABILITIES> 179,623
<BONDS> 0
<COMMON> 9,467
0
0
<OTHER-SE> 636,572
<TOTAL-LIABILITY-AND-EQUITY> 848,866
<SALES> 754,952
<TOTAL-REVENUES> 754,952
<CGS> 402,482
<TOTAL-COSTS> 586,471
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,279
<INCOME-PRETAX> 177,292
<INCOME-TAX> 63,828
<INCOME-CONTINUING> 113,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,464
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
</TABLE>
