01—Abstract
Summary
Summary of the 10-K filed February 28, 2014. Cited figures are marked; the original filing is the authoritative source.
Teradyne, Inc. reported consolidated net revenues of $1.43 billiona for the fiscal year ended December 31, 2013, a decrease of approximately 14% from $1.66 billion in 2012.
This decline was primarily driven by weaker performance in the Semiconductor Test segment, which saw a 9%b revenue drop due to lower demand for application processors, and a significant 37% decrease in the System Test segment, largely attributed to reduced hard disk drive demand. The Wireless Test segment also experienced a 12% revenue decline, though this was partly offset by the recent acquisition of ZTEC Instruments Inc. The company highlighted increased investment in R&D, with expenses rising to 18.5% of revenue, reflecting a strategic focus on innovation. Despite the revenue challenges, Teradyne initiated a quarterly cash dividend program in January 2014, signaling confidence in future cash flows.
The company's financial position remains solid, with a substantial cash balance and manageable debt. Investors should note the company's reliance on a few significant customers, which contributed 26%c of aggregate net revenues in 2013, and the ongoing competitive pressures in its core markets. The report also disclosed the maturity of convertible senior notes in March 2014 and the potential for dilution from related warrant exercises.
02—Key points
Key Highlights
- Consolidated net revenues decreased by 14% to $1.43 billion in 2013 from $1.66 billion in 2012.
- Semiconductor Test revenue declined 9% due to a softer application processor market, while System Test revenue fell 37% due to lower hard disk drive demand.
- The Wireless Test segment, bolstered by the ZTEC acquisition, experienced a 12% revenue decrease.
- Engineering and development expenses increased to 18.5% of revenue, indicating a commitment to innovation.
- Teradyne initiated a quarterly dividend of $0.06 per share in January 2014.
- The company reported a gain of $34.2 million from the sale of an equity investment in 2013.
- Concentration of revenue from top customers remains a key factor, with the top three accounting for 26% of total net revenues in 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Teradyne, Inc kept $0.12.
- Revenue$1.43B100.0%
- Cost of revenue−$619.1M43.4%
- Gross profit$808.8M56.6%
- Operating costs−$618.1M43.3%
- Operating income$190.7M13.4%
- Interest, other & tax−$25.7M1.8%
- Net income$164.9M11.6%
Where FY2013 revenue went
$1.43B- Cost of revenue: $619.1M, 43% of revenue
- Other operating costs: $338.6M, 24% of revenue
- SG&A: $279.6M, 20% of revenue
- Net income: $164.9M, 12% of revenue
- Interest, other & tax: $25.7M, 1.8% of revenue
Kept 12% as net incomeNet income $164.9M · 12%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 28, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $1.43B$1.66B | −13.8% |
| Cost of Revenue | $619.13M$770.71M | −19.7% |
| Gross Profit | $808.80M$886.04M | −8.7% |
| SG&A Expenses | $279.56M$277.02M | +0.9% |
| Operating Expenses | $618.14M$598.67M | +3.3% |
| Operating Income | $190.66M$287.37M | −33.7% |
| Interest Expense | $26.10M$24.53M | +6.4% |
| Net Income | $164.95M$217.05M | −24.0% |
| EPS (Basic) | $0.86$1.16 | −25.9% |
| EPS (Diluted) | $0.70$0.94 | −25.5% |
| Shares Outstanding (Basic) | 190.77M186.88M | +2.1% |
| Shares Outstanding (Diluted) | 235.60M230.25M | +2.3% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Teradyne's revenue decline in 2013?
Teradyne's revenue decline in 2013 was primarily driven by a downturn in its key end markets, particularly the semiconductor industry which experienced lower demand for application processors. Additionally, a significant decrease in hard disk drive demand impacted the System Test segment. The Wireless Test segment also saw a decline, although strategic acquisitions aimed to strengthen its position.
How is Teradyne addressing the cyclicality and competition in its markets?
Teradyne is addressing cyclicality through cost control measures and strategic investments in research and development to maintain a competitive technological edge. The company also focuses on expanding its product portfolio and market reach, as evidenced by acquisitions like ZTEC Instruments Inc. to bolster its Wireless Test segment.
What is Teradyne's outlook on customer concentration?
Teradyne acknowledges a significant concentration of revenue from its top customers, with the top three accounting for 26% of consolidated net revenues in 2013. The company stated that sales are expected to remain concentrated with a limited number of significant customers in the foreseeable future and that the loss of or reduction in orders from these customers could materially affect its business.
What is the significance of the convertible senior notes maturing in March 2014?
The convertible senior notes were due to mature in March 2014. The filing indicates that upon maturity, these notes would be 'net share settled,' meaning holders would receive cash and a number of Teradyne's common shares. This settlement process and the associated warrant exercises could potentially lead to dilution for existing shareholders, impacting the stock's value.
06—Continue