How much did Teradyne's revenue and earnings grow in 1995?

Net sales grew 53% to $1.19 billion, and net income rose to $159.3 million, or $1.89 per share, from $76.4 million, or $0.95 per share, in 1994. Both figures are restated to include Megatest under pooling-of-interests accounting.

What is driving Teradyne's growth, and how concentrated is it?

Growth is driven mainly by semiconductor test systems, which represented 69% of 1995 sales and grew 70% as chipmakers expanded capacity. The company is therefore heavily exposed to the semiconductor capital equipment cycle, which the filing notes has historically been highly cyclical with periodic oversupply.

How strong is the company's order backlog and near-term visibility?

Backlog grew 58% to $659.3 million at December 31, 1995, and orders rose 59% to $1.4 billion. About 92% of the electronic test backlog and 94% of the backplane backlog are expected to ship in 1996, though some orders may be cancelled and $40.2 million of Navy CASS orders are unfunded and deliverable in 1997 or later.

Is Teradyne's balance sheet and liquidity position sound?

Yes. At year-end 1995 the company held $182.2 million in cash and $93.7 million in marketable securities, had only $18.7 million in long-term debt, and had total shareholders' equity of $759.9 million. It also had an undrawn $120 million revolving credit line, which management believes is sufficient for 1996 needs.

What key risks should investors consider?

Key risks include the cyclicality of the semiconductor industry, intensifying price competition from competitors with greater resources, reliance on sole-source suppliers, significant international sales exposure (52% of 1995 sales), and the possibility that new products or competitor technologies could reduce demand. The company also notes that intellectual property protection may be difficult to enforce.

TER 10-K FY1995 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 26, 1996. Cited figures are marked; the original filing is the authoritative source.

Teradyne, Inc. (TER) reported a banner 1995 for its fiscal year ended December 31, 1995.

Net sales rose 53% to $1.19 billion^a (from $777.7 million in 1994), and net income reached $159.3 million, or $1.89 per share, up from $76.4 million, or $0.95 per share. Growth was driven by semiconductor test systems, which grew 70% and represented 69% of consolidated sales, along with a 84% increase in telecommunications test systems tied to Deutsche Telekom. Incoming orders rose 59% to $1.4 billion, and the backlog grew 58% to $659.3 million, providing strong visibility into 1996.

Note that these figures are restated for the December 1995 pooling-of-interests merger with Megatest and the two-for-one stock split in August 1995. Margin performance improved as cost of sales fell to 54% of sales from 56%, and selling and administrative expenses dropped to 15% of sales from 19%, reflecting strong operating leverage. Operating income climbed to $244.4 million^b from $108.0 million.

The company ended 1995 with $182.2 million^c in cash, $93.7 million in marketable securities, and total shareholders' equity of $759.9 million, with long-term debt of only $18.7 million and an undrawn $120 million revolving credit line (expanded in January 1996). Management expects the effective tax rate to return to roughly the 35% statutory rate in 1996. Investors should weigh the company's heavy dependence on the cyclical semiconductor capital equipment market, which management explicitly warns could reverse after the current capacity build-out.

Risks also include intensifying price competition, international exposure (52% of sales were export or foreign), and a $40.2 million^d unfunded U.S. Navy CASS order included in backlog that is not scheduled for delivery until 1997 or later. Engineering spending rose to $123.5 million, reflecting continued investment in new products.

02—Key points

Key Highlights

Net sales rose 53% to $1,191.0 million in 1995, versus $777.7 million in 1994, with all major product lines contributing to growth.
Net income more than doubled to $159.3 million ($1.89 per share), up from $76.4 million ($0.95 per share) in 1994.
Semiconductor test systems accounted for 69% of 1995 net sales, with orders for that segment up 73%.
Backlog grew 58% to $659.3 million at year-end 1995, with about 92% of electronic test backlog expected to ship in 1996; $40.2 million of backlog is unfunded U.S. Navy orders for 1997 and beyond.
Operating margins improved sharply as cost of sales fell to 54% of sales and selling and administrative expenses fell to 15% of sales.
Balance sheet remains strong, with $182.2 million in cash, $93.7 million in marketable securities, $18.7 million in long-term debt, and $759.9 million in shareholders' equity.
Megatest merger (pooling of interests, completed December 1, 1995) added $131.6 million in 1995 sales and a $5.6 million one-time merger charge; the company has never paid cash dividends and plans to retain earnings.

03—Questions

Frequently Asked Questions

How much did Teradyne's revenue and earnings grow in 1995?
Net sales grew 53% to $1.19 billion, and net income rose to $159.3 million, or $1.89 per share, from $76.4 million, or $0.95 per share, in 1994. Both figures are restated to include Megatest under pooling-of-interests accounting.
What is driving Teradyne's growth, and how concentrated is it?
Growth is driven mainly by semiconductor test systems, which represented 69% of 1995 sales and grew 70% as chipmakers expanded capacity. The company is therefore heavily exposed to the semiconductor capital equipment cycle, which the filing notes has historically been highly cyclical with periodic oversupply.
How strong is the company's order backlog and near-term visibility?
Backlog grew 58% to $659.3 million at December 31, 1995, and orders rose 59% to $1.4 billion. About 92% of the electronic test backlog and 94% of the backplane backlog are expected to ship in 1996, though some orders may be cancelled and $40.2 million of Navy CASS orders are unfunded and deliverable in 1997 or later.
Is Teradyne's balance sheet and liquidity position sound?
Yes. At year-end 1995 the company held $182.2 million in cash and $93.7 million in marketable securities, had only $18.7 million in long-term debt, and had total shareholders' equity of $759.9 million. It also had an undrawn $120 million revolving credit line, which management believes is sufficient for 1996 needs.
What key risks should investors consider?
Key risks include the cyclicality of the semiconductor industry, intensifying price competition from competitors with greater resources, reliance on sole-source suppliers, significant international sales exposure (52% of 1995 sales), and the possibility that new products or competitor technologies could reduce demand. The company also notes that intellectual property protection may be difficult to enforce.

04—Continue

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