10-QPeriod: Q1 FY2008

TERADYNE, INC Quarterly Report for Q1 Ended Mar 30, 2008

Filed May 8, 2008For Securities:TER

Summary

Teradyne, Inc. reported a net profit of $2.4 million for the first quarter of 2008, a significant improvement from a net loss of $7.6 million in the same period last year. This turnaround was driven by a substantial increase in net revenues, up 17% year-over-year to $297.3 million, largely fueled by strong performance in the Semiconductor Test segment. The company also saw improved gross margins and controlled operating expenses. The company completed a significant acquisition of Nextest Systems Corporation in January 2008 for approximately $402.8 million, which is expected to strengthen its position in the flash memory test segment. While this acquisition and ongoing stock repurchase activities have reduced cash balances, Teradyne maintains a healthy cash position and believes it is sufficient to meet its foreseeable working capital and expenditure needs.

Key Highlights

  • 1Net income turned positive to $2.367 million in Q1 2008, compared to a net loss of $7.636 million in Q1 2007.
  • 2Net revenues increased by 17.2% year-over-year to $297.3 million, primarily driven by the Semiconductor Test segment.
  • 3Acquired Nextest Systems Corporation for $402.8 million, expanding its presence in the flash memory test market.
  • 4Gross profit margin improved to 46.6% from 44.7% in the prior year's quarter, aided by increased sales volume and favorable service margins.
  • 5Operating expenses, as a percentage of revenue, decreased to 46% from 52% in Q1 2007, despite an increase in R&D spending.
  • 6The company repurchased $33.0 million of its common stock in the quarter under a $400 million authorization.

Frequently Asked Questions

The acquisition of Nextest Systems Corporation, completed in January 2008 for $402.8 million, contributed $20.8 million in revenue to the Semiconductor Test segment in Q1 2008. It also resulted in $1.1 million in recognized in-process R&D charges and a $4.3 million inventory fair value adjustment, impacting gross margins. The acquisition is expected to enhance Teradyne's market position in flash memory testing.

Teradyne demonstrated a significant turnaround in profitability. Net income for the first quarter of 2008 was $2.4 million, a substantial improvement from a net loss of $7.6 million in the same period of 2007. This was driven by higher revenues and improved gross margins.

As of March 30, 2008, Teradyne's cash and cash equivalents and marketable securities totaled $440.7 million. This balance decreased from $944.9 million at the beginning of the quarter due to the Nextest acquisition and stock repurchases. The company believes its current cash balance is sufficient to meet its foreseeable working capital and expenditure needs.

Teradyne is involved in a securities fraud and breach of contract lawsuit related to a past acquisition, which is ongoing in federal court. Additionally, the company was designated a Potentially Responsible Party at a clean-up site, although it has never operated there. Teradyne believes it has meritorious defenses for these claims and does not expect them to have a material adverse effect on its consolidated financial position or liquidity, though they could be material to the results of operations in any single period.