UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 3, 2004
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 of Incorporation or Organization) |
(I.R.S. Employer 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of shares outstanding of the registrant’s only class of Common Stock as of October 31, 2004 was 194,182,873 shares.
TERADYNE, INC.
| Page No. | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements: |
|||
| Condensed Consolidated Balance Sheets as of October 3, 2004 and December 31, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 | ||
| Item 3. |
44 | |||
| Item 4. |
44 | |||
| PART II. OTHER INFORMATION | ||||
| Item 1. |
46 | |||
| Item 6. |
47 | |||
2
CONDENSED CONSOLIDATED BALANCE SHEETS
| October 3, 2004 |
December 31, 2003 |
|||||||
| (in thousands, except per share data) |
||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 264,019 | $ | 228,444 | ||||
| Marketable securities |
86,215 | 60,974 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $5,710 and $5,986 on October 3, 2004 and December 31, 2003, respectively |
255,519 | 229,532 | ||||||
| Inventories: |
||||||||
| Parts |
140,280 | 109,538 | ||||||
| Assemblies in process |
151,784 | 105,396 | ||||||
| 292,064 | 214,934 | |||||||
| Prepayments and other current assets |
33,914 | 35,393 | ||||||
| Total current assets |
931,731 | 769,277 | ||||||
| Property, plant, and equipment, at cost |
1,353,070 | 1,305,254 | ||||||
| Less: accumulated depreciation |
(806,244 | ) | (760,885 | ) | ||||
| Net property, plant, and equipment |
546,826 | 544,369 | ||||||
| Marketable securities |
325,385 | 296,618 | ||||||
| Goodwill |
116,176 | 118,203 | ||||||
| Other assets |
48,541 | 56,895 | ||||||
| Total assets |
$ | 1,968,659 | $ | 1,785,362 | ||||
| LIABILITIES | ||||||||
| Current liabilities: |
||||||||
| Notes payable—banks |
$ | 7,081 | $ | 7,272 | ||||
| Current portion of long-term debt |
302 | 310 | ||||||
| Accounts payable |
85,315 | 74,097 | ||||||
| Accrued employees’ compensation and withholdings |
93,589 | 91,244 | ||||||
| Deferred revenue and customer advances |
36,624 | 25,391 | ||||||
| Other accrued liabilities |
70,227 | 75,125 | ||||||
| Income taxes payable |
19,012 | 7,376 | ||||||
| Total current liabilities |
312,150 | 280,815 | ||||||
| Pension liability |
76,373 | 93,878 | ||||||
| Long-term other accrued liabilities |
47,437 | 53,441 | ||||||
| Convertible senior notes |
391,500 | 400,000 | ||||||
| Other long-term debt |
7,364 | 7,658 | ||||||
| Total liabilities |
834,824 | 835,792 | ||||||
| Commitments and contingencies (Note K) |
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| SHAREHOLDERS’ EQUITY | ||||||||
| Common stock, $0.125 par value, 1,000,000 shares authorized, 194,159 shares issued and outstanding at October 3, 2004, and 218,628 shares issued and 191,973 shares outstanding at December 31, 2003, respectively |
24,270 | 27,329 | ||||||
| Additional paid-in capital |
767,685 | 1,294,661 | ||||||
| Accumulated other comprehensive loss |
(56,492 | ) | (51,846 | ) | ||||
| Retained earnings |
398,372 | 236,483 | ||||||
| Treasury shares, at cost, 26,655 shares at December 31, 2003 |
— | (557,057 | ) | |||||
| Total shareholders’ equity |
1,133,835 | 949,570 | ||||||
| Total liabilities and shareholders’ equity |
$ | 1,968,659 | $ | 1,785,362 | ||||
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2003 are an integral part of the condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| October 3, 2004 |
September 28, 2003 |
October 3, 2004 |
September 28, 2003 |
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| (in thousands, except per share amounts) | ||||||||||||||||
| Net revenues: |
||||||||||||||||
| Products |
$ | 397,438 | $ | 276,404 | $ | 1,238,207 | $ | 834,063 | ||||||||
| Services |
60,362 | 52,768 | 176,659 | 161,214 | ||||||||||||
| Net revenues |
457,800 | 329,172 | 1,414,866 | 995,277 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| Cost of products |
227,613 | 191,519 | 702,515 | 606,227 | ||||||||||||
| Cost of services |
41,731 | 39,103 | 121,292 | 117,786 | ||||||||||||
| Gross profit |
188,456 | 98,550 | 591,059 | 271,264 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Engineering and development |
67,243 | 61,248 | 198,851 | 193,637 | ||||||||||||
| Selling and administrative |
70,270 | 60,062 | 206,503 | 188,976 | ||||||||||||
| Restructuring and other charges |
(46 | ) | 23,330 | 236 | 56,194 | |||||||||||
| Gain on sale of business |
— | — | (865 | ) | — | |||||||||||
| Operating expenses |
137,467 | 144,640 | 404,725 | 438,807 | ||||||||||||
| Income (loss) from operations |
50,989 | (46,090 | ) | 186,334 | (167,543 | ) | ||||||||||
| Interest income |
3,784 | 3,510 | 10,845 | 10,988 | ||||||||||||
| Interest expense |
(4,696 | ) | (5,502 | ) | (14,223 | ) | (16,315 | ) | ||||||||
| Other income and expense, net |
— | (3,232 | ) | 1,277 | (4,531 | ) | ||||||||||
| Income (loss) before income taxes |
50,077 | (51,314 | ) | 184,233 | (177,401 | ) | ||||||||||
| Income tax expense |
8,928 | 2,200 | 22,344 | 5,100 | ||||||||||||
| Net income (loss) |
$ | 41,149 | $ | (53,514 | ) | $ | 161,889 | $ | (182,501 | ) | ||||||
| Net income (loss) per common share—basic |
$ | 0.21 | $ | (0.28 | ) | $ | 0.83 | $ | (0.98 | ) | ||||||
| Shares used in calculations of net income (loss) per common share—basic |
194,128 | 189,479 | 193,998 | 186,611 | ||||||||||||
| Net income (loss) per common share—diluted |
$ | 0.21 | $ | (0.28 | ) | $ | 0.81 | $ | (0.98 | ) | ||||||
| Shares used in calculations of net income (loss) per common share—diluted |
195,751 | 189,479 | 213,137 | 186,611 | ||||||||||||
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2003 are an integral part of the condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended |
||||||||
| October 3, 2004 |
September 28, 2003 |
|||||||
| (in thousands) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 161,889 | $ | (182,501 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: |
||||||||
| Depreciation |
92,103 | 111,642 | ||||||
| Amortization |
4,371 | 5,470 | ||||||
| Impairment of long-lived assets |
— | 25,361 | ||||||
| (Gain) loss on sale of product lines |
(1,914 | ) | 8,048 | |||||
| Provision for inventory |
9,032 | 9,099 | ||||||
| Provision for doubtful accounts |
— | 842 | ||||||
| Other non-cash items, net |
(361 | ) | 5,120 | |||||
| Changes in operating assets and liabilities, net of product lines sold: |
||||||||
| Accounts receivable |
(25,987 | ) | (53,933 | ) | ||||
| Inventories |
(55,251 | ) | 45,107 | |||||
| Other assets |
4,846 | (6,120 | ) | |||||
| Accounts payable, deferred revenue and accrued expenses |
(3,234 | ) | 33,830 | |||||
| Accrued income taxes |
11,636 | (2,959 | ) | |||||
| Net cash provided by (used for) operating activities |
197,130 | (994 | ) | |||||
| Cash flows from investing activities: |
||||||||
| Additions to property, plant and equipment |
(35,213 | ) | (22,266 | ) | ||||
| Increase in test equipment manufactured by Teradyne |
(90,861 | ) | (35,015 | ) | ||||
| Proceeds from asset disposal |
— | 15,770 | ||||||
| Proceeds from sale of product lines |
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