Teradyne Reports Third Quarter 2019 Results


GAAP to Non-GAAP Earnings Reconciliation
                           
(In millions, except per share amounts)                       
             Quarter Ended            
     September 29,
2019
  % of Net Revenues      June 30,
2019
  % of Net Revenues      September 30,
2018
  % of Net Revenues    
                                    
Net revenues   $ 582.0                 $ 564.2                 $ 566.8              
                                                     
Gross profit GAAP $ 345.0       59.3 %           $ 323.9     57.4 %           $ 333.7     58.9 %        
  Inventory step-up   -       -               0.4     0.1 %             -     -          
Gross profit non-GAAP $ 345.0       59.3 %           $ 324.3     57.5 %           $ 333.7     58.9 %        
                                                     
Income from operations - GAAP $ 154.9       26.6 %           $ 134.0     23.8 %           $ 143.6     25.3 %        
  Acquired intangible assets amortization   9.6       1.6 %             10.1     1.8 %             11.1     2.0 %        
  Equity modification charge (1)   2.1       0.4 %             -     -               -     -          
  Restructuring and other (2)   (6.5 )     -1.1 %             (10.4 )   -1.8 %             1.7     0.3 %        
  Inventory step-up   -       -               0.4     0.1 %             -     -          
Income from operations - non-GAAP $ 160.1       27.5 %           $ 134.1     23.8 %           $ 156.4     27.6 %        
                                                     
                Net Income
per Common Share
          Net Income
per Common Share
          Net Income
per Common Share
        September 29,
2019
  % of Net Revenues   Basic   Diluted   June 30, 2019   % of Net Revenues   Basic   Diluted   September 30,
2018
  % of Net Revenues   Basic   Diluted
Net income - GAAP $ 135.9       23.4 %   $ 0.80     $ 0.75     $ 97.4     17.3 %   $ 0.57     $ 0.55     $ 120.0     21.2 %   $ 0.65     $ 0.63  
  Acquired intangible assets amortization   9.6       1.6 %     0.06       0.05       10.1     1.8 %     0.06       0.06       11.1     2.0 %     0.06       0.06  
  Interest and other (3)   3.5       0.6 %     0.02       0.02       3.4     0.6 %     0.02       0.02       3.3     0.6 %     0.02       0.02  
  Equity modification charge (1)   2.1       0.4 %     0.01       0.01       -     -       -       -       -     -       -       -  
  Restructuring and other (2)   (6.5 )     -1.1 %     (0.04 )     (0.04 )     (10.4 )   -1.8 %     (0.06 )     (0.06 )     1.7     0.3 %     0.01       0.01  
  Pension mark-to-market adjustment (3)   -       -       -       -       0.4     0.1 %     0.00       0.00       0.3     0.1 %     0.00       0.00  
  Inventory step-up   -       -       -       -       0.4     0.1 %     0.00       0.00       -     -       -       -  
  Exclude discrete tax adjustments (4)   (7.7 )     -1.3 %     (0.05 )     (0.04 )     13.9     2.5 %     0.08       0.08       0.3     0.1 %     0.00       0.00  
  Non-GAAP tax adjustments   (3.5 )     -0.6 %     (0.02 )     (0.02 )     (2.0 )   -0.4 %     (0.01 )     (0.01 )     (3.4 )   -0.6 %     (0.02 )     (0.02 )
  Convertible share adjustment   -       -       -       0.02       -     -       -       0.02       -     -       -       0.01  
Net income - non-GAAP $ 133.4       22.9 %   $ 0.79     $ 0.77     $ 113.2     20.1 %   $ 0.66     $ 0.66     $ 133.3     23.5 %   $ 0.72     $ 0.71  
                                                     
GAAP and non-GAAP weighted average common shares - basic   169.6                   171.2                   185.7              
GAAP weighted average common shares - diluted   180.5                   178.6                   190.5              
  Exclude dilutive shares related to convertible note transaction      (5.8 )                 (6.2 )                 (3.1 )            
Non-GAAP weighted average common shares - diluted   174.7                   172.4                   187.4              
                                                     
                                                     
(1)   For the quarter ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.
                                                     
(2) Restructuring and other consists of: 
        Quarter Ended              
        September 29,
2019
              June 30,
2019
              September 30,
2018
           
    Contingent consideration fair value adjustment $ (7.8 )               $ (11.7 )               $ (0.8 )            
    Acquisition related expenses and compensation   0.5                   0.5                   0.8              
    Employee severance   0.8                   0.8                   1.7              
        $ (6.5 )               $ (10.4 )               $ 1.7              
                                                     
(3) For the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended June 30, 2019 and September 30, 2018, adjustment to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.          
                                                     
(4) For the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, adjustment to exclude discrete income tax items. For the quarter ended June 30, 2019, GAAP income tax provision includes a $15 million tax provision related to the finalization of our toll tax charge.          
                         
        Nine Months Ended                  
        September 29,
2019
  % of Net Revenues           September 30,
2018
  % of Net Revenues                        
                                                     
Net Revenues   $ 1,640.3                 $ 1,581.2                              
                                                     
Gross profit GAAP $ 956.6       58.3 %           $ 910.9     57.6 %                        
  Inventory step-up   0.4       0.0 %             0.4     0.0 %                        
Gross profit non-GAAP $ 957.0       58.3 %           $ 911.3     57.6 %                        
                                                     
Income from operations - GAAP $ 382.0       23.3 %           $ 361.5     22.9 %                        
  Acquired intangible assets amortization   30.4       1.9 %             28.6     1.8 %                        
  Equity modification charge (1)   2.1       0.1 %             -     -                          
  Restructuring and other (2)   (11.8 )     -0.7 %             3.8     0.2 %                        
  Inventory step-up   0.4       0.0 %             0.4     0.0 %                        
Income from operations - non-GAAP $ 403.1       24.6 %           $ 394.3     24.9 %                        
                                                     
                Net Income
per Common Share
          Net Income
per Common Share
               
        September 29,
2019
  % of Net Revenues   Basic   Diluted   September 30, 2018   % of Net Revenues   Basic   Diluted                
Net income - GAAP $ 342.4       20.9 %   $ 2.00     $ 1.92     $ 308.0     19.5 %   $ 1.62     $ 1.57                  
  Acquired intangible assets amortization   30.4       1.9 %     0.18       0.17       28.6     1.8 %     0.15       0.15                  
  Interest and other (3)   10.2       0.6 %     0.06       0.06       9.7     0.6 %     0.05       0.05                  
  Equity modification charge (1)   2.1       0.1 %     0.01       0.01       -     -       -       -                  
  Restructuring and other (2)   (11.8 )     -0.7 %     (0.07 )     (0.07 )     3.8     0.2 %     0.02       0.02                  
  Inventory step-up   0.4       0.0 %     0.00       0.00       0.4     0.0 %     0.00       0.00                  
  Pension mark-to-market adjustment (3)   0.4       0.0 %     0.00       0.00       0.2     0.0 %     0.00       0.00                  
  Exclude discrete tax adjustments (4)   (23.9 )     -1.5 %     (0.14 )     (0.13 )     (6.5 )   -0.4 %     (0.03 )     (0.03 )                
  Non-GAAP tax adjustments   (9.0 )     -0.5 %     (0.05 )     (0.05 )     (8.7 )   -0.6 %     (0.05 )     (0.04 )                
  Convertible share adjustment   -       -       -       0.06       -     -       -       0.03                  
Net income - non-GAAP $ 341.2       20.8 %   $ 1.99     $ 1.97     $ 335.5     21.2 %   $ 1.76     $ 1.74                  
                                                     
GAAP and non-GAAP weighted average common shares - basic   171.5                   190.6                              
GAAP weighted average common shares - diluted   178.7                   196.3                              
  Exclude dilutive shares from convertible note   (5.9 )                 (4.0 )                            
Non-GAAP weighted average common shares - diluted   172.8                   192.3                              
                                                     
(1)   For the nine months ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.
                                                     
(2) Restructuring and other consists of:     
        Nine Months Ended
                           
        September 29,
2019
              September 30,
2018
                           
    Contingent consideration fair value adjustment $ (16.5 )               $ (9.2 )                            
    Acquisition related expenses and compensation   2.3                   4.1                              
    Employee severance   2.4                   7.9                              
    Other     -                   0.9                                  
        $ (11.8 )               $ 3.8                              
                                                     
(3) For the nine months ended September 29, 2019 and September 30, 2018, interest and other included non-cash convertible debt interest expense. For the nine months ended September 29, 2019 and September 30, 2018, adjustments to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.                    
                                                     
(4) For the nine months ended September 29, 2019 and September 30, 2018, adjustment to exclude discrete income tax items. For the nine months ended September 29, 2019, GAAP income tax provision includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return and includes a $15 million tax provision related to the finalization of our toll tax charge.                
                                                     
GAAP to Non-GAAP Reconciliation of Fourth Quarter 2019 guidance:      
                                                     
GAAP and non-GAAP fourth quarter revenue guidance:     $590 million to $630 million                                    
GAAP net income per diluted share     $ 0.63     $ 0.74                                      
  Exclude acquired intangible assets amortization       0.06       0.06                                      
  Exclude non-cash convertible debt interest       0.02       0.02                                      
  Tax effect of non-GAAP adjustments       (0.01 )     (0.01 )                                    
  Convertible share adjustment       0.03       0.03                                      
Non-GAAP net income per diluted share     $ 0.73     $ 0.84                                      
                                                     
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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