10-QPeriod: Q2 FY2013

TERADYNE, INC Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 9, 2013For Securities:TER

Summary

Teradyne, Inc. reported a decrease in net revenues for both the three and six-month periods ended June 30, 2013, compared to the prior year, driven primarily by declines in its Semiconductor Test and Systems Test segments. This revenue contraction, particularly in Storage Test systems due to lower PC demand, led to a decrease in income from operations. Despite lower revenues, gross profit margin remained relatively stable for the three-month period, but improved for the six-month period due to a more favorable product mix and lower Storage Test system sales. The company also benefited from a lower effective tax rate in the current periods, primarily due to U.S. federal research and development tax credits. Management expressed confidence in the company's liquidity, with cash, cash equivalents, and marketable securities remaining strong.

Financial Highlights

49 data points
Beta

Revenue

$428.89M

56.2% Gross Margin

Net Income

$66.56M

15.5% Net Margin

EPS (Diluted)

$0.28

Total Assets

$2.51B

Cash & Equivalents

$227.60M

Free Cash Flow

$77.22M

Financial Statements
Beta
Revenue$428.89M
Cost of Revenue$187.66M
Gross Profit$241.23M
SG&A Expenses$69.23M
Operating Expenses$155.32M
Operating Income$85.91M
Interest Expense$6.43M
Net Income$66.56M
EPS (Basic)$0.35
EPS (Diluted)$0.28
Shares Outstanding (Basic)190.57M
Shares Outstanding (Diluted)234.91M

Key Highlights

  • 1Net revenues decreased by 20% and 22% year-over-year for the three and six months ended June 30, 2013, respectively.
  • 2The Semiconductor Test segment experienced a significant revenue decline of 20% and 20% for the three and six-month periods, respectively.
  • 3Systems Test revenue saw a substantial decrease of 48% and 57% for the three and six-month periods, attributed to lower Storage Test system sales.
  • 4Gross profit margin remained stable at 56.2% for the three-month period, but improved to 55.6% for the six-month period compared to 53.0% in the prior year, aided by product mix and reduced Storage Test sales.
  • 5Operating expenses, specifically Selling and Administrative, decreased in the three-month period due to lower variable compensation.
  • 6The effective tax rate decreased significantly to 17% and 7% for the three and six months ended June 30, 2013, respectively, compared to 27% and 25% in the prior year, largely due to R&D tax credits.
  • 7The company reported a book-to-bill ratio of 1.1 for both the three and six-month periods, indicating orders received were in line with or slightly exceeded sales.

Frequently Asked Questions

The decline in revenues is primarily attributed to decreased sales in the Semiconductor Test segment, particularly in system-on-a-chip (SOC) test product sales, and a significant drop in the Systems Test segment due to lower product volume in Storage Test systems, influenced by reduced demand for hard disk drives from lower PC shipments. The Wireless Test segment also saw a decrease due to lower volume.

While revenues declined, the gross profit margin remained relatively stable for the three-month period and improved for the six-month period. This resilience is due to a more favorable product mix and the impact of lower Storage Test system sales on overall costs. Operating expenses, such as selling and administrative costs, were managed effectively, contributing to a lower effective tax rate which boosted net income.

Teradyne maintains a strong liquidity position. Cash, cash equivalents, and marketable securities stood at approximately $1.032 billion as of June 30, 2013. The company believes this balance will be sufficient to meet its working capital and expenditure needs for at least the next twelve months.

Teradyne is involved in a lawsuit filed by Boston Semi Equipment (BSE) alleging antitrust violations and unfair business practices. Teradyne believes it has strong defenses and is vigorously contesting the claim. While the company believes potential losses are unlikely to materially affect its financial position, they could potentially impact results of operations or cash flows in any single period. Additionally, the risk factors detailed in their annual report remain applicable, including potential negative impacts from breaches of operational or security systems.