Teradyne Reports Third Quarter 2018 Results


GAAP to Non-GAAP Earnings Reconciliation                       
                           
(In millions, except per share amounts)                       
                    Quarter Ended                     
     September 30,
2018
  % of Net Revenues      July 1,
2018
  % of Net Revenues      October 1,
2017 (1)
  % of Net Revenues    
                           
Net revenues $566.8        $526.9        $503.4              
                                                     
Gross profit GAAP $ 333.7       58.9 %           $ 307.3     58.3 %           $ 294.8     58.6 %        
  Inventory step-up   -       -               0.4     0.1 %             -     -          
Gross profit non-GAAP $ 333.7       58.9 %           $ 307.7     58.4 %           $ 294.8     58.6 %        
                                                     
Income from operations - GAAP $ 143.6       25.3 %           $ 120.4     22.9 %           $ 129.1     25.6 %        
  Acquired intangible assets amortization   11.1       2.0 %             9.8     1.9 %             7.0     1.4 %        
  Restructuring and other (2)   1.7       0.3 %             2.4     0.5 %             (4.4 )   -0.9 %        
  Inventory step-up   -       -               0.4     0.1 %             -     -          
Income from operations - non-GAAP $ 156.4       27.6 %           $ 133.0     25.2 %           $ 131.7     26.2 %        
                                                     
                Net Income
per Common Share
          Net Income
per Common Share
          Net Income
per Common Share
        September 30,
2018
  % of Net Revenues   Basic   Diluted   July 1,
2018
  % of Net Revenues   Basic   Diluted   October 1,
2017
  % of Net Revenues   Basic   Diluted
Net income - GAAP $ 120.0       21.2 %   $ 0.65     $ 0.63     $ 101.0     19.2 %   $ 0.53     $ 0.52     $ 103.4     20.5 %   $ 0.52     $ 0.51  
  Acquired intangible assets amortization   11.1       2.0 %     0.06       0.06       9.8     1.9 %     0.05       0.05       7.0     1.4 %     0.04       0.03  
  Interest and other (3)   3.3       0.6 %     0.02       0.02       3.2     0.6 %     0.02       0.02       3.1     0.6 %     0.02       0.02  
  Restructuring and other (2)   1.7       0.3 %     0.01       0.01       2.4     0.5 %     0.01       0.01       (4.4 )   -0.9 %     (0.02 )     (0.02 )
  Pension mark-to-market adjustment (3)   0.3       0.1 %     0.00       0.00       (0.1 )   0.0 %     (0.00 )     (0.00 )     -     -       -       -  
  Inventory step-up   -       -       -       -       0.4     0.1 %     0.00       0.00       -     -       -       -  
  Exclude discrete tax adjustments (4)   0.3       0.1 %     0.00       0.00       (0.5 )   -0.1 %     (0.00 )     (0.00 )     0.3     0.1 %     0.00       0.00  
  Non-GAAP tax adjustments   (3.4 )     -0.6 %     (0.02 )     (0.02 )     (3.4 )   -0.6 %     (0.02 )     (0.02 )     (1.7 )   -0.3 %     (0.01 )     (0.01 )
  Convertible share adjustment   -       -       -       0.01       -     -       -       0.01       -     -       -       -  
Net income - non-GAAP $ 133.3       23.5 %   $ 0.72     $ 0.71     $ 112.8     21.4 %   $ 0.59     $ 0.59     $ 107.7     21.4 %   $ 0.55     $ 0.54  
                                                     
GAAP and non-GAAP weighted average common shares - basic   185.7                   190.7                   197.5              
GAAP weighted average common shares - diluted   190.5                   194.9                   200.8              
  Exclude dilutive shares related to convertible note transaction   (3.1 )                 (2.6 )                 (1.1 )            
Non-GAAP weighted average common shares - diluted   187.4                   192.3                   199.7              
                                                     
                                                     
(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) Restructuring and other consists of: 
        Quarter Ended            
        September 30,
2018
              July 1,
2018
              October 1,
2017
           
    Employee severance $ 1.7                 $ 2.4                 $ 0.6              
    Acquisition related expenses and compensation   0.8                   2.5                   -              
    Contingent consideration fair value adjustment   (0.8 )                 (3.5 )                 (0.3 )            
    Other     -                   0.9                   0.4              
    Property insurance recovery   -                   -                   (5.1 )            
        $ 1.7                 $ 2.4                 $ (4.4 )            
                                                     
(3)

For the quarters ended September 30, 2018, July 1, 2018 and October 1, 2017, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended September 30, 2018 and July 1, 2018, adjustments to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting policy.
                                                     
(4) For the quarters ended September 30, 2018, July 1, 2018 and October 1, 2017, adjustment to exclude discrete income tax items.          
             
        Nine Months Ended                
        September 30,
2018
  % of Net Revenues           October 1,
2017 (1)
  % of Net Revenues                        
                                                     
Net Revenues
$ 1,581.2                 $ 1,657.2                              
                                                     
Gross profit GAAP $ 910.9       57.6 %           $ 950.5     57.4 %                        
  Inventory step-up   0.4       0.0 %             -     -                          
Gross profit non-GAAP $ 911.3       57.6 %           $ 950.5     57.4 %                        
                                                     
Income from operations - GAAP $ 361.5       22.9 %           $ 430.7     26.0 %                        
  Acquired intangible assets amortization   28.6       1.8 %             23.1     1.4 %                        
  Restructuring and other (2)   3.8       0.2 %             0.4     0.0 %                        
  Inventory step-up   0.4       0.0 %             -     -                          
Income from operations - non-GAAP $ 394.3       24.9 %           $ 454.2     27.4 %                        
                                                     
                Net Income
per Common Share
          Net Income
per Common Share
               
        September 30,
2018
  % of Net Revenues   Basic   Diluted   October 1,
2017
  % of Net Revenues   Basic   Diluted                
Net income - GAAP $ 308.0       19.5   $ 1.62     $ 1.57     $ 363.6     21.9 %   $ 1.83     $ 1.81                  
  Acquired intangible assets amortization   28.6       1.8 %     0.15       0.15       23.1     1.4 %     0.12       0.11                  
  Interest and other (3)   9.7       0.6 %     0.05       0.05       9.3     0.6 %     0.05       0.05                  
  Restructuring and other (2)   3.8       0.2 %     0.02       0.02       0.4     0.0 %     0.00       0.00                  
  Inventory step-up   0.4       0.0 %     0.00       0.00       -     -       -       -                  
  Pension mark-to-market adjustment (3)   0.2       0.0 %     0.00       0.00       (2.5 )   -0.2 %     (0.01 )     (0.01 )                
  Exclude discrete tax adjustments (4)   (6.5 )     -0.4 %     (0.03 )     (0.03 )     (6.1 )   -0.4 %     (0.03 )     (0.03 )                
  Non-GAAP tax adjustments   (8.7 )     -0.6 %     (0.05 )     (0.04 )     (9.9 )   -0.6 %     (0.05 )     (0.05 )                
  Convertible share adjustment   -       -       -       0.03       -           -       -                  
Net income - non-GAAP $ 335.5       21.2 %   $ 1.76     $ 1.74     $ 377.9     22.8 %   $ 1.90     $ 1.88                  
                                                     
GAAP and non-GAAP weighted average common shares - basic   190.6                   198.8                              
GAAP weighted average common shares - diluted   196.3                   201.4                              
  Exclude dilutive shares from convertible note   (4.0 )                 (0.6 )                            
Non-GAAP weighted average common shares - diluted   192.3                   200.8                              
                                                     
(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) Restructuring and other consists of: 
        Nine Months Ended                            
        September 30,
2018
              October 1,
2017
                           
    Employee severance $ 7.9                 $ 2.0                              
    Acquisition related expenses and compensation   4.1                   -                              
    Other     0.9                   1.7                                  
    Contingent consideration fair value adjustment   (9.2 )                 1.8                              
    Property insurance recovery   -                   (5.1 )                            
        $ 3.8                 $ 0.4                              
                                                     
(3)

For the nine months ended September 30, 2018 and October 1, 2017, Interest and other included non-cash convertible debt interest expense. For the nine months ended September 30, 2018 and October 1, 2017, adjustments to exclude actuarial gains recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting policy.
                                                     
(4) For the nine months ended September 30, 2018 and October 1, 2017, adjustment to exclude discrete income tax items. 
                                                     
GAAP to Non-GAAP Reconciliation of Fourth Quarter 2018 guidance:  
                                                     
GAAP and non-GAAP fourth quarter revenue guidance:     $480 million to $510 million                                    
GAAP net income per diluted share     $ 0.39     $ 0.46                                      
  Exclude acquired intangible assets amortization       0.06       0.06                                      
  Exclude non-cash convertible debt interest       0.02       0.02                                      
  Exclude restructuring and other       0.01       0.01                                      
  Tax effect of non-GAAP adjustments       (0.02 )     (0.02 )                                    
  Convertible share adjustment       0.01       0.01                                      
Non-GAAP net income per diluted share     $ 0.46     $ 0.54                                      
                                                     
For press releases and other information of interest to investors, please visit Teradyne's homepage at http://www.teradyne.com .                    
  Contact: Teradyne, Inc.                                              
    Andy Blanchard 978-370-2425                                            
    Vice President of Corporate Relations                                            
                                                     

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