Teradyne Reports Third Quarter 2018 Results

TERADYNE, INC. REPORT FOR THIRD FISCAL QUARTER OF 2018           
  
CONDENSED  CONSOLIDATED  STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)         
               
      Quarter Ended  Nine Months Ended 
      September 30,
2018
  July 1,
2018
  October 1,
2017 (1)
  September 30,
2018
  October 1,
2017 (1)
 
               
Net revenues $566,848  $526,929  $503,378  $1,581,244  $1,657,191  
               
 Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (2)  233,155   219,595   208,509   670,385    706,667    
                             
Gross profit     333,693       307,334       294,869       910,859       950,524    
                             
Operating expenses:                      
  Selling and administrative     100,199       99,410       86,130       290,115       261,034    
  Engineering and development     77,049       75,342       76,986       226,799       235,235    
  Acquired intangible assets amortization     11,142       9,793       7,028       28,633       23,145    
  Restructuring and other (3)     1,710       2,389       (4,407 )     3,785       392    
      Operating expenses     190,100       186,934       165,737       549,332       519,806    
                             
Income from operations     143,593       120,400       129,132       361,527       430,718    
                             
  Interest and other (4)     (2,749 )     (388 )     (1,695 )     (4,852 )     (4,389 )  
                             
Income before income taxes     140,844       120,012       127,437       356,675       426,329    
  Income tax provision     20,863       18,975       24,017       48,684       62,713    
Net income   $ 119,981     $ 101,037     $ 103,420     $ 307,991     $ 363,616    
                             
Net income per common share:                      
Basic       $ 0.65     $ 0.53     $ 0.52     $ 1.62     $ 1.83    
Diluted       $ 0.63     $ 0.52     $ 0.52     $ 1.57     $ 1.81    
                             
Weighted average common shares - basic     185,744       190,730       197,485       190,576       198,755    
                             
Weighted average common shares - diluted (5)     190,505       194,909       200,775       196,300       201,413    
                             
                             
Cash dividend declared per common share   $ 0.09     $ 0.09     $ 0.07     $ 0.27     $ 0.21    
                             
                             
(1) Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs.  
                             
(2) Cost of revenues includes:   Quarter Ended   Nine Months Ended  
          September 30,
2018
  July 1,
2018
  October 1,
2017
  September 30,
2018
  October 1,
2017
 
      Provision for excess and obsolete inventory   $ 3,347     $ 2,653     $ 1,859     $ 9,522     $ 7,154    
      Sale of previously written down inventory     (1,013 )     (1,922 )     (3,121 )     (5,178 )     (6,404 )  
          $ 2,334     $ 731     $ (1,262 )   $ 4,344     $ 750    
                             
(3) Restructuring and other consists of:   Quarter Ended   Nine Months Ended  
          September 30,
2018
  July 1,
2018
  October 1,
2017
  September 30,
2018
  October 1,
2017
 
      Employee severance   $ 1,667     $ 2,398     $ 581     $ 7,945     $ 1,953    
      Acquisition related expenses and compensation     811       2,544       -       4,129       -    
      Contingent consideration fair value adjustment     (768 )     (3,500 )     (286 )     (9,236 )     1,847    
      Other     -       947       362       947       1,656    
      Property insurance recovery     -       -       (5,064 )     -       (5,064 )  
          $ 1,710     $ 2,389     $ (4,407 )   $ 3,785     $ 392    
                             
                             
(4)  Interest and other includes:   Quarter Ended   Nine Months Ended  
          September 30,
2018
  July 1,
2018
  October 1,
2017
  September 30,
2018
  October 1,
2017
 
      Non-cash convertible debt interest   $ 3,286     $ 3,245     $ 3,127     $ 9,737     $ 9,265    
      Pension actuarial loss (gain)     267       (71 )     -       196       (2,504 )  
          $ 3,553     $ 3,174     $ 3,127     $ 9,933     $ 6,761    
                             
(5)



Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the quarters ended September 30, 2018, July 1, 2018 and October 1, 2017, 3.0 million, 2.6 million and 1.1 million shares, respectively, have been included in diluted shares. For the nine months ended September 30, 2018 and October 1, 2017, 3.4 million and 0.6 million shares, respectively, have been included in diluted shares. For the quarter ended September 30, 2018 and the nine months ended September 30, 2018, diluted shares also included 0.1 million and 0.6 million shares, respectively, from the convertible note hedge transaction.  
                             

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