TERADYNE INC - 10-Q Quarterly Report

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 April 3, 2005

¨	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 April 29, 2005 was 195,798,217 shares.

TERADYNE, INC.

INDEX


		Page No.

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets as of April 3, 2005 and December 31, 2004	3

	Condensed Consolidated Statements of Operations for the Three Months Ended April 3, 2005 and April 4, 2004	4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 3, 2005 and April 4, 2004	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33

Item 4.	Controls and Procedures	33

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 6.	Exhibits	35

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	April 3, 2005			December 31, 2004
	(in thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	190,012		$	209,147
Marketable securities		47,455			75,431
Accounts receivable, net of allowance for doubtful accounts of $5,674 and $5,737 on April 3, 2005 and December 31, 2004, respectively		218,635			223,491
Inventories:
Parts		140,277			140,094
Assemblies in process		116,301			122,902

		256,578			262,996
Prepayments and other current assets		40,412			34,761

Total current assets		753,092			805,826
Property, plant, and equipment, at cost		1,374,362			1,349,497
Less: accumulated depreciation		(821,868	)		(802,422	)

Net property, plant, and equipment		552,494			547,075
Marketable securities		349,485			406,615
Goodwill		116,176			116,176
Other assets		44,368			46,870

Total assets	$	1,815,615		$	1,922,562


LIABILITIES
Current liabilities:
Notes payable—banks	$	2,800		$	4,826
Current portion of long-term debt		310			321
Accounts payable		72,297			62,006
Accrued employees’ compensation and withholdings		59,382			106,298
Deferred revenue and customer advances		29,671			30,399
Other accrued liabilities		63,056			60,970
Income taxes payable		6,456			11,738

Total current liabilities		233,972			276,558
Pension liability		60,341			69,187
Long-term other accrued liabilities		46,732			44,321
Convertible senior notes		371,500			391,500
Other long-term debt		7,310			7,432

Total liabilities		719,855			788,998

Commitments and contingencies (Note K)

SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized, 195,649 shares issued and outstanding at April 3, 2005, and 194,253 shares issued and outstanding at December 31, 2004		24,456			24,282
Additional paid-in capital		788,754			768,875
Accumulated other comprehensive loss		(66,598	)		(61,313	)
Retained earnings		349,148			401,720

Total shareholders’ equity		1,095,760			1,133,564

Total liabilities and shareholders’ equity	$	1,815,615		$	1,922,562

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, 2004 are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Three Months Ended
	April 3, 2005			April 4, 2004
	(in thousands, except per share data)
Net revenues:
Products	$	256,063		$	364,496
Services		49,518			66,107

Net revenues		305,581			430,603
Cost of revenues:
Cost of products		173,901			215,402
Cost of services		42,540			39,226

Gross profit		89,140			175,975
Operating expenses:
Engineering and development		64,240			64,694
Selling and administrative		65,315			66,242
Restructuring and other charges		10,628			130

Operating expenses		140,183			131,066

(Loss) income from operations		(51,043	)		44,909
Interest income		4,405			3,591
Interest expense		(4,434	)		(4,632	)
Other income and expense, net		—			851

(Loss) income before income taxes		(51,072	)		44,719
Income tax expense		1,500			4,472

Net (loss) income	$	(52,572	)	$	40,247

Net (loss) income per common share—basic	$	(0.27	)	$	0.21

Shares used in calculations of net (loss) income per common share—basic		195,619			193,852

Net (loss) income per common share—diluted	$	(0.27	)	$	0.20

Shares used in calculations of net (loss) income per common share—diluted		195,619			199,893

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Three Months Ended
	April 3, 2005			April 4, 2004
	(in thousands)
Cash flows from operating activities:
Net (loss) income	$	(52,572	)	$	40,247
Adjustments to reconcile net (loss) income to net cash (used for) provided by operating activities:
Depreciation		26,767			29,537
Amortization		1,535			1,580
Impairment of long-lived assets		595			377
Provision for inventory		2,678			4,259
Other non-cash items, net		(764	)		722
Changes in operating assets and liabilities:
Accounts receivable		4,849			(25,714	)
Inventories		13,484			(26,024	)
Other assets		(5,099	)		4,944
Accounts payable, deferred revenue and accrued expenses		(41,703	)		11,121
Accrued income taxes		(5,282	)		(63	)

Net cash (used for) provided by operating activities		(55,512	)		40,986

Cash flows from investing activities:
Investments in property, plant and equipment		(42,526	)		(39,470	)
Proceeds from sale of product lines		414			—
Purchases of available-for-sale marketable securities		(15,487	)		(65,318	)
Proceeds from sale and maturities of available-for-sale marketable securities		95,908			32,087

Net cash provided by (used for) investing activities		38,309			(72,701	)

Cash flows from financing activities:
Payments of long term debt and notes payable		(21,985	)		(75	)
Issuance of common stock under employee stock option and stock purchase plans		20,053			26,316

Net cash flows (used for) provided by financing activities		(1,932	)		26,241

Decrease in cash and cash equivalents		(19,135	)		(5,474	)
Cash and cash equivalents at beginning of period		209,147			228,444

Cash and cash equivalents at end of period	$	190,012		$	222,970

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. The Company

Teradyne, Inc. is a leading supplier of automatic test equipment and a leading provider of high performance interconnection systems.

Teradyne’s automatic test equipment products include systems that:

•

test semiconductors (“Semiconductor Test Systems”);

•

test and inspect circuit-boards (“Assembly Test Systems”);

•

diagnose, program and test automotive electronics systems (“Diagnostic Solutions”); and

•

test voice and broadband access networks (“Broadband Test Systems”).

Teradyne’s interconnection systems products (“Connection Systems”) include:

•

high bandwidth backplane assemblies; and

•

high density connectors.

Broadband Test Systems and Diagnostic Solutions have been combined into “Other Test Systems” for purposes of Teradyne’s segment reporting.

Statements in this Quarterly Report on Form 10-Q which are not historical facts, so called “forward looking statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in Teradyne’s filings with the Securities and Exchange Commission. See also “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors That May Affect Future Results.”

B. Accounting Policies

Basis of Presentation

The condensed consolidated interim financial statements include the accounts of Teradyne and its subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior years’ amounts were reclassified to conform to the current year presentation. The year-end condensed consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles.

The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission on March 16, 2005 for the year ended December 31, 2004.

Preparation of Financial Statements

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates.

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Product Warranty

Teradyne generally provides a one year warranty on its products commencing upon installation or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities (in thousands).


	For the Three Months Ended
	April 3, 2005			April 4, 2004
Balance at beginning of period	$	13,075		$	11,436
Accruals for warranties issued during the period		520			4,348
Settlements made during the period		(3,621	)		(3,329	)

Balance at end of period	$	9,974

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