UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 4, 2010
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 001-06462
TERADYNE, INC.
(Exact name of registrant as specified in its charter)
Massachusetts | 04-2272148 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
|
600 Riverpark Drive, North Reading, Massachusetts | 01864 | |
(Address of Principal Executive Offices) | (Zip Code) |
978-370-2700
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes ¨ No ¨
* The registrant has not yet been phased into the interactive data requirements
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of the registrants only class of Common Stock as of May 10, 2010 was 180,240,078 shares.
TERADYNE, INC.
Page No. | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. |
Financial Statements (unaudited): |
|||
Condensed Consolidated Balance Sheets as of April 4, 2010 and December 31, 2009 |
3 | |||
4 | ||||
5 | ||||
6 | ||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
25 | ||
Item 3. |
34 | |||
Item 4. |
34 | |||
PART II. OTHER INFORMATION | ||||
Item 1. |
35 | |||
Item 1A. |
35 | |||
Item 2. |
35 | |||
Item 6. |
36 |
2
PART I
Item 1: | Financial Statements |
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 4,
2010 |
December 31,
2009 |
|||||||
(in thousands,
except per share amounts) |
||||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 342,012 | $ | 416,737 | ||||
Marketable securities |
118,461 | 46,933 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $3,763 and $3,770 at April 4, 2010 and December 31, 2009, respectively |
178,740 |
|
125,236 |
|
||||
Inventories: |
||||||||
Parts |
17,150 | 43,691 | ||||||
Assemblies in process |
55,452 | 37,161 | ||||||
Finished goods |
11,593 | 9,984 | ||||||
84,195 | 90,836 | |||||||
Deferred tax assets |
19,232 | 18,944 | ||||||
Prepayments and other current assets |
43,893 | 63,606 | ||||||
Total current assets |
786,533 | 762,292 | ||||||
Property, plant, and equipment, at cost |
778,401 | 782,407 | ||||||
Less: accumulated depreciation |
538,144 | 536,045 | ||||||
Net property, plant, and equipment |
240,257 | 246,362 | ||||||
Long-term marketable securities |
72,188 | 55,130 | ||||||
Intangible assets, net |
144,835 | 152,192 | ||||||
Other assets |
17,853 | 19,361 | ||||||
Total assets |
$ | 1,261,666 | $ | 1,235,337 | ||||
LIABILITIES | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 71,168 | $ | 66,765 | ||||
Accrued employees compensation and withholdings |
59,737 | 55,356 | ||||||
Deferred revenue and customer advances |
69,050 | 104,439 | ||||||
Other accrued liabilities |
54,140 | 54,640 | ||||||
Current debt |
2,133 | 2,157 | ||||||
Total current liabilities |
256,228 | 283,357 | ||||||
Retirement plans liabilities |
107,900 | 115,101 | ||||||
Deferred tax liabilities |
8,041 | 8,041 | ||||||
Long-term other accrued liabilities |
21,485 | 23,159 | ||||||
Long-term debt |
142,443 | 141,100 | ||||||
Total liabilities |
536,097 | 570,758 | ||||||
Commitments and contingencies (Note N) |
||||||||
SHAREHOLDERS EQUITY | ||||||||
Common stock, $0.125 par value, 1,000,000 shares authorized, 177,282 shares and 174,908 shares issued and outstanding at April 4, 2010 and December 31, 2009, respectively |
22,160 | 21,864 | ||||||
Additional paid-in capital |
1,210,631 | 1,202,426 | ||||||
Accumulated other comprehensive loss |
(135,717 | ) | (138,105 | ) | ||||
Accumulated deficit |
(371,505 | ) | (421,606 | ) | ||||
Total shareholders equity |
725,569 | 664,579 | ||||||
Total liabilities and shareholders equity |
$ | 1,261,666 | $ | 1,235,337 | ||||
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradynes
Annual Report on Form 10-K for the year ended December 31, 2009, are an integral part of the condensed
consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended |
||||||||
April 4,
2010 |
April 5,
2009 |
|||||||
(in thousands,
except per share amounts) |
||||||||
Net revenues: |
||||||||
Products |
$ | 268,204 | $ | 64,735 | ||||
Services |
61,419 | 55,873 | ||||||
Total net revenues |
329,623 | 120,608 | ||||||
Cost of revenues: |
||||||||
Cost of products |
123,696 | 56,160 | ||||||
Cost of services |
32,383 | 31,088 | ||||||
Total cost of revenues |
156,079 | 87,248 | ||||||
Gross profit |
173,544 | 33,360 | ||||||
Operating expenses: |
||||||||
Engineering and development |
49,052 | 47,198 | ||||||
Selling and administrative |
55,871 | 55,373 | ||||||
Acquired intangible asset amortization |
7,356 | 8,239 | ||||||
Restructuring and other, net |
1,264 | 15,965 | ||||||
Total operating expenses |
113,543 | 126,775 | ||||||
Income (loss) from operations |
60,001 | (93,415 | ) | |||||
Interest income |
842 | 777 | ||||||
Interest expense and other |
(5,913 | ) | (5,830 | ) | ||||
Income (loss) before income taxes |
54,930 | (98,468 | ) | |||||
Income tax provision (benefit) |
4,830 | (7,800 | ) | |||||
Net income (loss) |
$ | 50,100 | $ | (90,668 | ) | |||
Net income (loss) per common share: |
||||||||
Basic |
$ | 0.28 | $ | (0.53 | ) | |||
Diluted |
$ | 0.24 | $ | (0.53 | ) | |||
Weighted average common sharebasic |
176,867 | 172,130 | ||||||
Weighted average common sharediluted |
226,277 | 172,130 | ||||||
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradynes Annual Report on Form 10-K for the year ended December 31, 2009, are an integral part of the condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
Ended |
||||||||
April 4,
2010 |
April 5,
2009 |
|||||||
(in thousands) | ||||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | 50,100 | $ | (90,668 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: |
||||||||
Depreciation |
13,425 | 15,395 | ||||||
Amortization |
11,975 | 10,098 | ||||||
Stock-based compensation |
8,202 | 6,077 | ||||||
Provision for excess and obsolete inventory |
1,364 | 8,597 | ||||||
Loss on sale and impairment of marketable securities |
323 | 2,563 | ||||||
Non-cash charge for the sale of inventories revalued at the date of acquisition |
| 1,238 | ||||||
Other |
624 | (3,619 | ) | |||||
Changes in operating assets and liabilities, net of businesses acquired: |
||||||||
Accounts receivable |
(53,504 | ) | 42,412 | |||||
Inventories |
15,522 | (4,140 | ) | |||||
Other assets |
20,064 | (7,621 | ) | |||||
Accounts payable, deferred revenue and accrued expenses |
(34,749 | ) | (44,311 | ) | ||||
Retirement plan contributions |
(6,659 | ) | (1,604 | ) | ||||
Net cash provided by (used for) operating activities |
26,687 | (65,583 | ) | |||||
Cash flows from investing activities: |
||||||||
Purchases of property, plant and equipment |
(17,587 | ) | (6,087 | ) | ||||
Purchases of available-for-sale marketable securities |
(95,399 | ) | | |||||
Proceeds from sales of available-for-sale marketable securities |
7,069 | 9,045 | ||||||
Proceeds from sales of trading marketable securities |
150 | | ||||||
Proceeds from life insurance |
| 1,076 | ||||||
Net cash (used for) provided by investing activities |
(105,767 | ) | 4,034 | |||||
Cash flows from financing activities: |
||||||||
Proceeds from long-term debt |
| 10,070 | ||||||
Issuance of common stock under employee stock option and stock purchase plans |
6,079 | 7,453 | ||||||
Payments of long-term debt |
(1,123 | ) | | |||||
Net cash provided by financing activities |
4,956 | 17,523 | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(601 | ) | 378 | |||||
Decrease in cash and cash equivalents |
(74,725 | ) | (43,648 | ) | ||||
Cash and cash equivalents at beginning of period |
416,737 | 322,705 | ||||||
Cash and cash equivalents at end of period |
$ | 342,012 | $ | 279,057 | ||||
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradynes Annual Report on Form 10-K for the year ended December 31, 2009, are an integral part of the condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. The Company
Teradyne, Inc. (Teradyne) is a leading global supplier of automatic test equipment. Teradynes automatic test equipment products and services include:
|
semiconductor test (Semiconductor Test) systems; and |
|
military/aerospace (Mil/Aero) test instrumentation and systems, hard disk drive test (HDD) systems, circuit-board test and inspection (Commercial Board Test) systems, and automotive diagnostic and test (Diagnostic Solutions) systems (collectively these products represent Systems Test Group). |
B. Accounting Policies
Basis of Presentation
The condensed consolidated interim financial statements include the accounts of Teradyne and its subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of such interim financial statements. Certain prior years amounts were reclassified to conform to the current year presentation. The December 31, 2009 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradynes Annual Report on Form 10-K, filed with the SEC on March 1, 2010 for the year ended December 31, 2009.
Preparation of Financial Statements
The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates.
Revenue Recognition
In October 2009, the Financial Accounting Standards Board (FASB) amended the accounting standards for revenue recognition to remove tangible products containing non-software and software components that function together to deliver the products essential functionality from the scope of industry-specific software revenue recognition guidance. In October 2009, FASB also amended the accounting standards for arrangements with multiple deliverables. Teradyne elected to early adopt this accounting guidance at the beginning of its first quarter of 2010 on a prospective basis. Adoption had no material impact on Teradynes financial position or results of operations in the three months ended April 4, 2010.
Teradyne recognizes revenue when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to Teradynes customers upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass upon destination, acceptance or cash payment, Teradyne defers revenue recognition until such events occur.
Teradynes equipment has non-software and software components that function together to deliver the equipments essential functionality. Revenue is recognized upon shipment or at delivery destination point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require
6
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Teradyne to perform tests of the product to ensure that performance meets the published product specifications or customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. Teradyne also defers the portion of the sales price that is not due until acceptance, which represents deferred profit.
For multiple element arrangements, Teradyne allocates revenue to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of selling price (VSOE), (ii) third-party evidence of selling price (TPE), and (iii) best estimate of the selling price (BESP). For a delivered item to be considered a separate unit, the delivered item must have value to the customer on a standalone basis and the delivery or performance of the undelivered item must be considered probable and substantially in the control of Teradyne.
Teradynes post-shipment obligations include installation, training services, one-year standard warranties, and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or tools and can be performed by the customers or other vendors. Installation is typically provided within five days of product shipment and is completed within one to two days thereafter. Training services are optional and do not affect the customers ability to use the product. Teradyne defers revenue for the selling price of installation and training.
C. Recently Issued Accounting Pronouncements
In March 2010, FASB issued an Accounting Standards Update 2010-17, Milestone Method of Revenue Recognition , to Accounting Standards Codification (ASC) 605, Revenue Recognition. The guidance in this consensus allows the milestone method as an acceptable revenue recognition methodology when an arrangement includes substantive milestones. The guidance provides a definition of substantive milestone and should be applied regardless of whether the arrangement includes single or multiple deliverables or units of accounting. The scope of this consensus is limited to the transactions involving milestones relating to research and development deliverables. The guidance includes enhanced disclosure requirements about each arrangement, individual milestones and related contingent consideration, information about substantive milestones and factors considered in the determination. The consensus is effective prospectively to milestones achieved in fiscal years, and interim periods within those years, after June 15, 2010. Early application and retrospective application are permitted. Teradyne is currently evaluating this final consensus.
D. Financial Instruments and Derivatives
Financial Instruments
Teradyne uses the market and income approach to value its financial instruments and there was no change in valuation techniques used by Teradyne during the quarters ended April 4, 2010 and April 5, 2009. As defined in ASC 820-10, Fair Value Measurements and Disclosures , fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10 requires that assets and liabilities carried at fair value and be classified in one of the following three categories:
Level 1: Quoted prices in active markets for identical assets as of the reporting date.
Level 2: Inputs other than Level 1, that are observable either directly or indirectly as of the reporting date. For example, a common approach for valuing fixed income securities is the use of matrix pricing. Matrix pricing is a mathematical technique used to value securities by relying on the securities relationship to other benchmark quoted prices.
Level 3: Unobservable inputs that are not supported by market data. Unobservable inputs are developed based on the best information available, which might include Teradynes own data.
7
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
For the right to sell the auction rate securities, held by Teradyne, back to UBS (UBS Put), Teradyne elected fair value treatment under ASC 825-10, Financial Instruments. The UBS Put is the only instrument of this nature or type that Teradyne holds and for which Teradyne has elected the fair value option under ASC 825-10.
In January 2010, FASB issued Accounting Standards Update (ASU) 2010-6, Improving Disclosures about Fair Value Measurement, which requires interim disclosures regarding significant transfers in and out of Level 1 and Level 2 fair value measurements. Additionally, this ASU requires disclosure for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements. These disclosures are required for fair value measurements that fall in either Level 2 or Level 3. Further, the ASU requires separate presentation of Level 3 activity for the fair value measurements. Teradyne adopted the interim disclosure requirements under this ASU during the quarter ended April 4, 2010, with the exception of the separate presentation in the Level 3 activity rollforward, which is not effective until fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years.
During three months ended April 4, 2010, there were no significant transfers in and out of Level 1 and Level 2.
The following table sets forth by fair value hierarchy Teradynes financial assets and liabilities that were measured at fair value on a recurring basis as of April 4, 2010 and December 31, 2009.
April 4, 2010 | ||||||||||||
Quoted Prices
in Active Markets for Identical Instruments (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Available for sale securities: |
||||||||||||
Money market funds |
$ | 255,577 | $ | | $ | | $ | 255,577 | ||||
U.S. government agency securities |
| 45,870 | | 45,870 | ||||||||
U.S. Treasury securities |
40,570 | | | 40,570 | ||||||||
Corporate debt securities |
| 41,517 | | 41,517 | ||||||||
Commercial paper |
| 20,791 | | 20,791 | ||||||||
Certificates of deposit and time deposits |
3,308 | 13,631 | | 16,939 | ||||||||
Equity and debt mutual funds |
7,604 | | | 7,604 | ||||||||
Municipal bonds |
| 4,031 | | 4,031 | ||||||||
Non-U.S. government securities |
275 | | | 275 | ||||||||
Total |
307,334 | 125,840 | | 433,174 | ||||||||
Trading securities: |
||||||||||||
Auction rate securities |
| | 23,697 | 23,697 | ||||||||
UBS Put |
| | 2,687 | 2,687 | ||||||||
Derivatives |
| 84 | | 84 | ||||||||
Total |
$ | 307,334 | $ | 125,924 | $ | 26,384 | $ | 459,642 | ||||
8
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Reported as follows:
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Cash equivalents |
$ | 255,577 | $ | 10,645 | $ | | $ | 266,222 | ||||
Short-term marketable securities |
31,792 | 86,669 | | 118,461 | ||||||||
Long-term marketable securities |
19,965 | 28,526 | 23,697 | 72,188 | ||||||||
Prepayments and other current assets |
| 84 | | 84 | ||||||||
Other assets |
| | 2,687 | 2,687 | ||||||||
$ | 307,334 | $ | 125,924 | $ | 26,384 | $ | 459,642 | |||||
December 31, 2009 | ||||||||||||
Quoted Prices
in Active Markets for Identical Instruments (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Available for sale securities: |
||||||||||||
Money market funds |
$ | 284,236 | $ | | $ | | $ | 284,236 | ||||
Corporate debt securities |
| 21,224 | | 21,224 | ||||||||
U.S. government agency securities |
| 16,418 | | 16,418 | ||||||||
Certificates of deposit and time deposits |
4,136 | 11,719 | | 15,855 | ||||||||
U.S. Treasury securities |
12,010 | | | 12,010 | ||||||||
Commercial paper |
| 8,245 | | 8,245 | ||||||||
Equity and debt mutual funds |
7,499 | | | 7,499 | ||||||||
Municipal bonds |
| 528 | | 528 | ||||||||
Non-U.S. government securities |
287 | | | 287 | ||||||||
Total |
308,168 | 58,134 | | 366,302 | ||||||||
Trading securities: |
||||||||||||
Auction rate securities |
| | 23,649 | 23,649 | ||||||||
UBS Put |
| | 2,830 | 2,830 | ||||||||
Total |
$ | 308,168 | $ | 58,134 | $ | 26,479 | $ | 392,781 | ||||
Liabilities |
||||||||||||
Derivatives |
$ | | $ | 143 | $ | | $ | 143 | ||||
Total |
$ | | $ | 143 | $ | | $ | 143 | ||||
9
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Reported as follows:
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Cash equivalents |
$ | 284,236 | $ | 3,652 | $ | | $ | 287,888 | ||||
Short-term marketable securities |
12,138 | 34,795 | | 46,933 | ||||||||
Long-term marketable securities |
11,794 | 19,687 | 23,649 | 55,130 | ||||||||
Other assets |
| 2,830 | 2,830 | |||||||||
$ | 308,168 | $ | 58,134 | $ | 26,479 | $ | 392,781 | |||||
Liabilities |
||||||||||||
Other accrued liabilities |
$ | | $ | 143 | $ | | $ | 143 | ||||
Changes in the fair value of Level 3 financial assets for the quarters ended April 4, 2010 and April 5, 2009 were as follows:
Level 3 Financial Assets | ||||||||
Long-Term Auction Rate
Securities |
UBS Put | |||||||
(in thousands) | ||||||||
Balance at December 31, 2009 |
$ | 23,649 | $ | 2,830 | ||||
Sale of auction rate securities |
(150 | ) | | |||||
Change in unrealized gain included in interest income |
198 | | ||||||
Change in unrealized loss included in interest expense and other |
| (143 | ) | |||||
Balance at April 4, 2010 |
$ | 23,697 | $ | 2,687 | ||||
Level 3 Financial Assets | ||||||||
Long-Term Auction Rate
Securities |
UBS Put | |||||||
(in thousands) | ||||||||
Balance at December 31, 2008 |
$ | 25,968 | $ | 3,330 | ||||
Change in unrealized loss included in interest expense and other |
(447 | ) | (53 | ) | ||||
Balance at April 5, 2009 |
$ | 25,521 | $ | 3,277 | ||||
During the quarters ended April 4, 2010 and April 5, 2009, Teradyne recorded a gain of $0.2 million and a loss of $0.4 million, respectively, for the change in the auction rate securities fair value, and $0.3 million and $1.9 million, respectively, for realized losses from sales of marketable securities. Other-than-temporary impairment losses, decreases in auction rate securities fair value and realized losses from sale of marketable securities are included in interest expense and other.
10
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The carrying amounts and fair values of financial instruments at April 4, 2010 and December 31, 2009 are as follows:
April 4, 2010 | December 31, 2009 | |||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||
(in thousands) | ||||||||||||
Cash equivalents |
$ | 266,222 | $ | 266,222 | $ | 287,888 | $ | 287,888 | ||||
Marketable securities |
190,649 | 190,649 | 102,063 | 102,063 | ||||||||
UBS Put |
2,687 | 2,687 | 2,830 | 2,830 | ||||||||
Convertible debt(1) |
136,047 | 415,863 | 133,554 | 392,113 | ||||||||
Japan loan |
8,529 | 8,529 | 9,703 | 9,703 |
(1) | The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the convertible note which includes the equity conversion feature. |
The fair values of cash, accounts receivable, net and accounts payable approximate the carrying amount due to the short term maturities of these instruments.
The following table summarizes available-for-sale marketable securities which are recorded at fair value:
April 4, 2010 | ||||||||||||||||
Available-for-Sale |
Fair Market
Value of Investments with Unrealized Losses |
|||||||||||||||
Cost |
Unrealized
Gain |
Unrealized
(Loss) |
Fair Market
Value |
|||||||||||||
(in thousands) | ||||||||||||||||
Money market funds |
$ | 255,577 | $ | | $ | | $ | 255,577 | $ | | ||||||
U.S. government agency securities |
45,885 | 9 | (24 | ) | 45,870 | 31,551 | ||||||||||
U.S. Treasury securities |
40,558 | 21 | (9 | ) | 40,570 | 26,027 | ||||||||||
Corporate debt securities |
41,486 | 63 | (32 | ) | 41,517 | 21,735 | ||||||||||
Commercial paper |
20,790 | 1 | | 20,791 | | |||||||||||
Certificates of deposit and time deposits |
16,939 | | | 16,939 | | |||||||||||
Equity and debt mutual funds |
6,891 | 800 | (87 | ) | 7,604 | 1,009 | ||||||||||
Municipal bonds |
4,031 | | | 4,031 | | |||||||||||
Non-U.S. government securities |
257 | 18 | | 275 | | |||||||||||
$ | 432,414 | $ | 912 | $ | (152 | ) | $ | 433,174 | $ | 80,322 | ||||||
Reported as follows :
Cost |
Unrealized
Gain |
Unrealized
(Loss) |
Fair Market
Value |
Fair Market
Value of Investments with Unrealized Losses |
||||||||||||
Cash equivalents |
$ | 266,222 | $ | | $ | | $ | 266,222 | $ | | ||||||
Short-term marketable securities |
118,481 | 16 | (36 | ) | 118,461 | 59,633 | ||||||||||
Long-term marketable securities |
47,711 | 896 | (116 | ) | 48,491 | 20,689 | ||||||||||
$ | 432,414 | $ | 912 | $ | (152 | ) | $ | 433,174 | $ | 80,322 | ||||||
11
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2009 | ||||||||||||||||
Available-for-Sale |
Fair Market
Value of Investments with Unrealized Losses |
|||||||||||||||
Cost |
Unrealized
Gain |
Unrealized
(Loss) |
Fair Market
Value |
|||||||||||||
(in thousands) | ||||||||||||||||
Money market funds |
$ | 284,236 | $ | | $ | | $ | 284,236 | $ | | ||||||
Corporate debt securities |
21,243 | 11 | (30 | ) | 21,224 | 11,091 | ||||||||||
U.S. government agency securities |
16,418 | 5 | (5 | ) | 16,418 | 6,155 | ||||||||||
Certificates of deposit and time deposits |
15,854 | 1 | | 15,855 | | |||||||||||
U.S. Treasury securities |
12,014 | | (4 | ) | 12,010 | 10,508 | ||||||||||
Commercial paper |
8,246 | | (1 | ) | 8,245 | 2,397 | ||||||||||
Equity and debt mutual funds |
7,430 | 622 | (553 | ) | 7,499 | 4,139 | ||||||||||
Municipal bonds |
532 | | (4 | ) | 528 | 528 | ||||||||||
Non-U.S. government securities |
269 | 18 | | 287 | | |||||||||||
$ | 366,242 | $ | 657 | $ | (597 | ) | $ | 366,302 | $ | 34,818 | ||||||
Reported as follows :
Cost |
Unrealized
Gain |
Unrealized
(Loss) |
Fair Market
Value |
Fair Market
Value of Investments with Unrealized Losses |
||||||||||||
Cash equivalents |
$ | 287,888 | $ | | $ | | $ | 287,888 | $ | | ||||||
Short-term marketable securities |
46,928 | 7 | (2 | ) | 46,933 | 16,425 | ||||||||||
Long-term marketable securities |
31,426 | 650 | (595 | ) | 31,481 | 18,393 | ||||||||||
$ | 366,242 | $ | 657 | $ | (597 | ) | $ | 366,302 | $ | 34,818 | ||||||
On a quarterly basis, Teradyne reviews its investments to identify and evaluate those that have an indication of a potential other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include:
|
The length of time and the extent to which the market value has been less than cost; |
|
The financial condition and near-term prospects of the issuer; and |
|
The intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. |
As of April 4, 2010 and December 31, 2009, the fair market value of investments with unrealized losses totaled $80.3 million and $34.8 million, respectively. Teradyne determined that the unrealized losses in the amount of $0.2 million and $0.6 million, respectively, related to these investments are temporary.
Derivatives
Teradyne conducts business in a number of foreign countries, with certain transactions denominated in local currencies. The purpose of Teradynes foreign currency management is to minimize the effect of exchange rate fluctuations on certain foreign denominated net monetary assets. Teradyne does not use derivative financial instruments for trading or speculative purposes.
12
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
To minimize the effect of exchange rate fluctuations associated with the remeasurement of net monetary assets denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings, and is used to offset the change in fair value of the net monetary assets denominated in foreign currencies.
The notional amount of foreign exchange contracts hedging monetary assets and liabilities denominated in foreign currencies was $53.3 million and $56.9 million at April 4, 2010 and December 31, 2009, respectively.
The following table summarizes the fair value of derivative instruments as of April 4, 2010 and December 31, 2009.
Derivatives |
||||||||
Balance Sheet Location |
April 4,
2010 |
December 31,
2009 |
||||||
(in thousands) | ||||||||
Derivatives not designated as hedging instruments: |
||||||||
Foreign exchange contracts |
Prepayments and other current assets | $ | 84 | |||||
Foreign exchange contracts |
Other accrued liabilities | $ | 143 | |||||
Total derivatives |
$ | 84 | $ | 143 | ||||
The following table summarizes the effect of derivative instruments in the statement of operations recognized during the three months ended April 4, 2010 and April 5, 2009. The table does not reflect the corresponding gain (loss) from the hedged balance sheet.
Location of (Losses)
Gains
|
For the Three Months
Ended |
|||||||||
April 4,
2010 |
April 5,
2009 |
|||||||||
(in thousands) | ||||||||||
Derivatives not designated as hedging instruments: |
||||||||||
Foreign exchange contracts |
Interest expense and other, net | $ | (725 | ) | $ | (1,960 | ) | |||
Total derivatives |
$ | (725 | ) | $ | (1,960 | ) | ||||
See Debt footnote E regarding derivatives related to convertible senior notes.
E. Debt
Loan Agreement
On March 31, 2009, Teradyne K. K., Teradynes wholly-owned subsidiary in Japan, entered into a loan agreement with a local bank in Japan to borrow approximately $10.0 million. The loan has a term of 5 years and a fixed interest rate of 1.4%. Approximately $6.0 million of the loan is collateralized by a real estate mortgage on Teradyne K.K.s building and land in Kumamoto, Japan and approximately $4.0 million is unsecured. Teradyne, Inc. has guaranteed payment of the loan obligation. The loan is amortized over the term of the loan with semiannual principal payments of approximately $1.0 million payable on September 30 and March 30 each year. At April 4, 2010, approximately $2.1 million of the outstanding loan principal is included in current debt and approximately $6.4 million is classified as longterm debt.
13
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Convertible Senior Notes
On March 31, 2009, Teradyne entered into an underwriting agreement regarding a public offering of $175 million aggregate principal amount of 4.50% convertible senior notes due March 15, 2014 (the Notes). On April 1, 2009, the underwriters exercised their option to purchase an additional $15 million aggregate principal amount of the Notes for a total aggregate principal amount of $190 million. The Notes bear interest at a rate of 4.50% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2009. The Notes will mature on March 15, 2014, unless earlier repurchased by Teradyne or converted. The Notes are senior unsecured obligations and rank equally with all of Teradynes existing and future senior debt and senior to any of Teradynes subordinated debt.
The Notes may be converted, under certain circumstances and during certain periods, at an initial conversion rate of approximately 182.65 shares of Teradynes common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $5.48, a 25% conversion premium based on the last reported sale price of $4.38 per share of Teradynes common stock on March 31, 2009. The conversion rate is subject to adjustment in certain circumstances.
Holders may convert their Notes at their option prior to the close of business on the business day immediately preceding December 15, 2013, under the following circumstances: (1) during the five business-day period after any five consecutive trading day period (the measurement period) in which the price per Note for each day of that measurement period was less than 98% of the product of the last reported sale price of Teradynes common stock and the conversion rate for such date; (2) during any calendar quarter, if the last reported sale price of Teradynes common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; or (3) upon the occurrence of certain specified events. Additionally, the Notes are convertible during the last three months prior to the March 15, 2014 maturity date. Upon conversion, holders will receive, at Teradynes option, shares of Teradyne common stock, cash or a combination of cash and shares of Teradyne common stock, subject to Teradynes option to irrevocably elect to settle all future conversions in cash up to the principal amount of the Notes and shares of common stock for any excess.
During the three months ended April 4, 2010, the following circumstance that allows holders to convert their Notes at their option prior to December 15, 2013 occurred: the last reported sale price of Teradynes common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeded 130% of the conversion price in effect on the last trading day of the immediately preceding calendar quarter. As of May 14, 2010, no holders have exercised their option to convert their Notes.
Teradyne may not redeem the Notes prior to their maturity. Holders of the Notes may require Teradyne to purchase in cash all or a portion of their Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, upon the occurrence of certain fundamental changes involving Teradyne (which include, among others, the liquidation or dissolution of Teradyne, the acquisition of 50% or more of the total voting shares of Teradyne, certain mergers and consolidations, and the delisting of Teradynes stock).
Concurrently with the offering of the Notes, Teradyne entered into a convertible note hedge transaction with a strike price equal to the initial conversion price of the Notes, or approximately $5.48. The convertible note hedge allows Teradyne to receive shares of its common stock and/or cash related to the excess conversion value that it would pay to the holders of the Notes upon conversion. The convertible note hedges will cover, subject to customary antidilution adjustments, approximately 34,703,196 shares of Teradynes common stock. Teradyne paid approximately $64.6 million for the convertible note hedges.
14
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Separately, Teradyne entered into a warrant transaction with a strike price of approximately $7.67 per share, which is 75% higher than the closing price of Teradynes common stock on March 31, 2009. The warrants will be net share settled and will cover, subject to customary antidilution adjustments, approximately 34,703,196 shares of Teradynes common stock. Teradyne received approximately $43.0 million for the warrants.
The convertible notes hedge and warrant transaction will generally have the effect of increasing the conversion price of the Notes to approximately $7.67 per share of Teradynes common stock, representing a 75% conversion premium based upon the closing price of Teradynes common stock on March 31, 2009.
The notes are classified as long-term debt in the balance sheet at April 4, 2010 and December 31, 2009. The below tables represent the components of Teradynes convertible senior notes:
April 4,
2010 |
December 31,
2009 |
|||||
(in thousands) | ||||||
Debt principal |
$ | 190,000 | $ | 190,000 | ||
Unamortized debt discount |
53,953 | 56,446 | ||||
Net carrying amount of the convertible debt |
$ | 136,047 | $ | 133,554 | ||
For the Three Months
Ended |
|||
April 4,
2010 |
|||
(in thousands) | |||
Contractual interest expense on the coupon |
$ | 2,233 | |
Amortization of the discount component and debt issue fees recognized as interest expense |
2,697 | ||
Total interest expense on the convertible debt |
$ | 4,930 | |
As of April 4, 2010, the unamortized discount was $54.0 million, which will be amortized over approximately 4.0 years, and the carrying amount of the equity component was $63.4 million. As of April 4, 2010, the conversion rate was equal to the initial conversion price of approximately $5.48 per share and the if-converted value of the Notes was $390.1 million.
Revolving Credit Facility
On April 7, 2009, Teradyne terminated its revolving credit facility agreement. Teradyne used approximately $123.3 million of the net proceeds of the Notes offering to repay $122.5 million of principal and $0.8 million of accrued interest outstanding under the revolving credit facility agreement.
15
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
F. Deferred Revenue and Customer Advances
Deferred revenue and customer advances consist of:
April 4,
2010 |
December 31,
2009 |
|||||
(in thousands) | ||||||
Customer advances |
$ | 38,605 | $ | 72,569 | ||
Maintenance and training |
24,785 | 22,616 | ||||
Undelivered elements |
3,917 | 5,551 | ||||
Acceptance |
198 | 530 | ||||
Other |
1,545 | 3,173 | ||||
Total deferred revenue and customer advances |
$ | 69,050 | $ | 104,439 | ||
G. Product Warranty
Teradyne generally provides a one-year warranty on its products commencing upon installation or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities.
For the Three Months
Ended |
||||||||
April 4,
2010 |
April 5,
2009 |
|||||||
(in thousands) | ||||||||
Balance at beginning of period |
$ | 7,086 | $ | 8,372 | ||||
Accruals for warranties issued during the period |
3,698 | 1,364 | ||||||
Accruals related to pre-existing warranties |
578 | (752 | ) | |||||
Settlements made during the period |
(2,511 | ) | (2,971 | ) | ||||
Balance at end of period |
$ | 8,851 | $ | 6,013 | ||||
When Teradyne receives revenue for extended warranties beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The balance below is included in long-term other accrued liabilities.
For the Three Months
Ended |
||||||||
April 4,
2010 |
April 5,
2009 |
|||||||
(in thousands) | ||||||||
Balance at beginning of period |
$ | 4,055 | $ | 6,369 | ||||
Deferral of new extended warranty revenue |
1,634 | 277 | ||||||
Recognition of extended warranty deferred revenue |
(1,219 | ) | (1,329 | ) | ||||
Balance at end of period |
$ | 4,470 | $ | 5,317 | ||||
H. Stock-Based Compensation
During the three months ended April 4, 2010, Teradyne granted service-based restricted stock units to employees, and service-based stock options and service and performance-based restricted stock units to executive
16
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
officers. The total number of restricted stock units granted was 2.6 million at the weighted average grant date fair value of $9.34. Service-based restricted stock units granted to employees and executive officers vest in equal installments over four years. The percentage level of performance satisfied for performance-based grants is assessed on or near the anniversary of the grant date and, in turn, that percentage level determines the number of performance-based restricted stock units available for vesting over the vesting period; portions of the performance-based grants not available for vesting are forfeited. The total number of stock options granted to executive officers was 0.3 million at the weighted average grant date fair value of $4.10. These stock options vest in equal installments over four years, and have a term of seven years from the date of grant.
During the three months ended April 5, 2009, Teradyne granted service-based restricted stock units to employees, and service-based restricted stock units and stock options to executive officers. The total number of restricted stock units granted was 3.9 million at the weighted average grant date fair value of $4.81. The total number of stock options granted was 1.0 million at the weighted average grant date fair value of $1.91. Restricted stock units and stock options vest in equal installments over four years. These stock options have a term of seven years from the date of grant.
The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:
For the Three Months
Ended |
||||||
April 4,
2010 |
April 5,
2009 |
|||||
Expected life (years) |
4.75 | 4.75 | ||||
Interest rate |
2.4 | % | 1.6 | % | ||
Volatility-historical |
48.8 | % | 44.6 | % | ||
Dividend yield |
0.0 | % | 0.0 | % |
Teradyne determined the stock options expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free rate was determined using the U.S. Treasury yield curve in effect at the time of grant.
I. Other Comprehensive Income (Loss)
Other comprehensive income (loss) is calculated as follows:
For the Three Months
Ended |
||||||||
April 4,
2010 |
April 5,
2009 |
|||||||
(in thousands) | ||||||||
Net income (loss) |
$ | 50,100 | $ | (90,668 | ) | |||
Foreign currency translation adjustments |
(573 | ) | 379 | |||||
Change in unrealized gain on marketable securities, net of applicable tax of $0 |
697 | 1,695 | ||||||
Amortization of retirement plans net loss (gain), net of applicable tax of $230 and $219 |
2,141 | (7,863 | ) | |||||
Amortization of retirement plans prior service cost, net of applicable tax of $0 |
123 | 458 | ||||||
Other comprehensive income (loss) |
$ | 52,488 | $ | (95,999 | ) | |||
17
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
J. Intangible Assets
Amortizable intangible assets consist of the following and are included in intangible assets on the balance sheet:
April 4, 2010 | |||||||||||
Gross
Carrying Amount |
Accumulated
Amortization |
Net
Carrying Amount |
Weighted
Average Useful Life |
||||||||
(in thousands) | |||||||||||
Developed technology |
$ | 121,055 | $ | 52,255 | $ | 68,800 | 6.1 years | ||||
Customer relationships and service and software maintenance contracts |
91,271 | 24,827 | 66,444 | 8.6 years | |||||||
Tradenames and trademarks |
14,840 | 5,248 | 9,592 | 11.5 years | |||||||
Total intangible assets |
$ | 227,166 | $ | 82,330 | $ | 144,836 | 7.6 years | ||||
December 31, 2009 | |||||||||||
Gross
Carrying Amount |
Accumulated
Amortization |
Net
Carrying Amount |
Weighted
Average Useful Life |
||||||||
(in thousands) | |||||||||||
Developed technology |
$ | 121,055 | $ | 47,746 | $ | 73,309 | 6.1 years | ||||
Customer relationships and service and software maintenance contracts |
91,271 | 22,187 | 69,084 | 8.6 years | |||||||
Trade names and trademarks |
14,840 | 5,041 | 9,799 | 11.5 years | |||||||
Total intangible assets |
$ | 227,166 | $ | 74,974 | $ | 152,192 | 7.6 years | ||||
Aggregate intangible asset amortization expense was $7.4 million and $8.2 million for the three months ended April 4, 2010 and April 5, 2009, respectively. Estimated intangible asset amortization expense for each of the five succeeding fiscal years is as follows:
Year |
Amount
(in thousands) |
||
2010 (remainder) |
$ | 21,896 | |
2011 |
27,821 | ||
2012 |
25,732 | ||
2013 |
24,683 | ||
2014 |
21,598 |
18
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
K. Net Income (Loss) per Common Share
The following table sets forth the computation of basic and diluted net income (loss) per common share:
For the Three Months
Ended |
|||||||
April 4,
2010 |
April 5,
2009 |
||||||
(in thousands, except per
share amounts) |
|||||||
Net income (loss) for basic net income (loss) per share |
$ | 50,100 | $ | (90,668 | ) | ||
Income impact of assumed conversion of convertible notes |
4,387 | | |||||
Net income (loss) for diluted net income (loss) per share |
$ | 54,487 | $ | (90,668 | ) | ||
Shares used in net income (loss) per common share-basic |
176,867 | 172,130 | |||||
Effect of dilutive potential common shares: |
|||||||
Incremental shares from assumed conversion of convertible note |
34,703 | | |||||
Warrants |
9,123 | | |||||
Restricted stock units |
2,869 | | |||||
Stock options |
2,699 | | |||||
Stock purchase rights |
16 | | |||||
Dilutive potential common shares |
49,410 | | |||||
Shares used in net income (loss) per common share-diluted |
226,277 | 172,130 | |||||
Net income (loss) per common share-basic |
$ | 0.28 | $ | (0.53 | ) | ||
Net income (loss) per common share-diluted |
$ | 0.24 | $ | (0.53 | ) | ||
The computation of diluted net income per common share for the three months ended April 4, 2010 excludes the effect of the potential exercise of options to purchase approximately 7.0 million shares and restricted stock units of 0.3 million shares because the effect would have been anti-dilutive.
The computation of diluted net loss per common share for the three months ended April 5, 2009 excludes all outstanding stock options, restricted stock units and warrants because Teradyne had a net loss and inclusion would be anti-dilutive.
Teradynes call option on its common stock (convertible note hedge transaction) is excluded from the calculation of diluted shares because the effect would be anti-dilutive. See Debt footnote E regarding convertible note hedge transaction.
19
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
L. Restructuring and Other, Net
Restructuring
In response to a downturn in the industry, Teradyne initiated restructuring activities across all segments to reduce costs, principally through headcount reductions and facility consolidations. The tables below represent activity related to these actions. The remaining accrual for severance and benefits is reflected in the accrued employees compensation and withholdings account on the balance sheet and is expected to be paid by the end of the second quarter of 2010. The remaining accrual for lease payments on vacated facilities is reflected in the other accrued liabilities account and the long-term other accrued liabilities account and is expected to be paid over the lease terms, the latest of which expires in 2013. Teradyne expects to pay approximately $3.7 million against the lease accruals over the next twelve months. Teradynes future lease commitments are net of expected sublease income of $5.1 million as of April 4, 2010.
Severance
and Benefits |
Facility
Exit Costs |
Total | ||||||||||
Pre-2009 Activities: |
||||||||||||
Balance at December 31, 2008 |
$ | 82 | $ | 9,303 | $ | 9,385 | ||||||
Change in estimate |
| (417 | ) | (417 | ) | |||||||
Cash payments |
(82 | ) | (2,645 | ) | (2,727 | ) | ||||||
Balance at December 31, 2009 |
| 6,241 | 6,241 | |||||||||
Cash payments |
| (468 | ) | (468 | ) | |||||||
Balance at April 4, 2010 |
$ | | $ | 5,773 | $ | 5,773 | ||||||
Q1 2009 Activity: |
||||||||||||
Provision |
$ | 17,630 | $ | | $ | 17,630 | ||||||
Cash payments |
(17,630 | ) | | (17,630 | ) | |||||||
Balance at December 31, 2009 |
$ | | $ | | $ | | ||||||
Q2 2009 Activity: |
||||||||||||
Provision |
$ | 15,940 | $ | | $ | 15,940 | ||||||
Cash payments |
(13,035 | ) | | (13,035 | ) | |||||||
Balance at December 31, 2009 |
2,905 | | 2,905 | |||||||||
Change in estimate |
498 | | 498 | |||||||||
Cash payments |
(2,079 | ) | | (2,079 | ) | |||||||
Balance at April 4, 2010 |
$ | 1,324 | $ | | $ | 1,324 | ||||||
Q3 2009 Activity: |
||||||||||||
Provision |
$ | | $ | 4,420 | $ | 4,420 | ||||||
Cash payments |
| (285 | ) | (285 | ) | |||||||
Other |
| 100 | 100 | |||||||||
Balance at December 31, 2009 |
| 4,235 | 4,235 | |||||||||
Cash payments |
| (272 | ) | (272 | ) | |||||||
Balance at April 4, 2010 |
$ | | $ | 3,963 | $ | 3,963 | ||||||
Q1 2010 Activity: |
||||||||||||
Provision |
$ | 766 | $ | | $ | 766 | ||||||
Cash payments |
(573 | ) | | (573 | ) | |||||||
Balance at April 4, 2010 |
$ | 193 | $ | | $ | 193 | ||||||
Balance at April 4, 2010 |
$ | 1,517 | $ | 9,736 | $ | 11,253 | ||||||
20
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
During the three months ended April 4, 2010, Teradyne recorded restructuring charges related to ongoing efforts to lower expenses and its cost structure and an additional charge due to a change in estimated severance benefits related to a prior period activity. The restructuring charges consisted of the following activities:
Q1 2010 Activity:
|
$0.8 million of severance charges related to headcount reductions of approximately 14 people, of which $0.4 million and 4 people were in Semiconductor Test and $0.4 million and 10 people were in Systems Test Group. |
Q2 2009 Activity:
|
$0.5 million related to a change in the estimated severance benefits related to Q2 2009 headcount reduction activities across both segments. |
During the three months ended April 5, 2009, Teradyne recorded restructuring charges related to ongoing efforts to lower expenses and its cost structure in light of the industry wide decline in orders for semiconductor equipment. The restructuring charges consisted of the following activities:
Q1 2009 Activity:
|
$16.7 million of severance charges related to headcount reductions of approximately 518 people, of which $14.0 million and 456 people were in Semiconductor Test, $1.9 million and 37 people were in Systems Test Group, and $0.8 million and 16 people were in Corporate. |
Other
During the three months ended April 5, 2009, Teradyne recorded a credit of $0.7 million related to finalization of certain Eagle Test purchase accounting items.
M. Retirement Plans
Defined Benefit Pension Plans
Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain non-U.S. subsidiaries. Benefits under these plans are based on employees years of service and compensation. Teradynes funding policy is to make contributions to these plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of these plans consist primarily of equity and fixed income securities. In addition, Teradyne has an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act and the Internal Revenue Code, as well as unfunded foreign plans.
21
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Components of net periodic pension cost for all plans for the three months ended April 4, 2010 and April 5, 2009 are as follows:
For the Three Months
Ended |
||||||||
April 4,
2010 |
April 5,
2009 |
|||||||
(in thousands) | ||||||||
Service cost |
$ | 1,077 | $ | 1,118 | ||||
Interest cost |
4,585 | 4,488 | ||||||
Expected return on plan assets |
(4,868 | ) | (4,870 | ) | ||||
Amortization of unrecognized: |
||||||||
Prior service cost |
182 | 207 | ||||||
Net loss |
1,745 | 1,074 | ||||||
Curtailment gain |
| (111 | ) | |||||
Total net periodic pension cost |
$ | 2,721 | $ | 1,906 | ||||
In the three months ended April 4, 2010, Teradyne made a $5.0 million discretionary contribution to the U.S. Qualified Pension Plan.
Post-Retirement Benefit Plans
In addition to receiving pension benefits, U.S. Teradyne employees who meet early retirement eligibility requirements as of their termination dates may participate in Teradynes Welfare Plan, which includes death, and medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees survivors and are available to all retirees. Substantially all of Teradynes current U.S. employees (including executive officers) could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.
Components of net periodic post-retirement cost are as follows:
For the Three Months
Ended |
||||||||
April 4,
2010 |
April 5,
2009 |
|||||||
(in thousands) | ||||||||
Service cost |
$ | 20 | $ | 40 | ||||
Interest cost |
219 | 278 | ||||||
Amortization of unrecognized: |
||||||||
Prior service benefit |
(59 | ) | (58 | ) | ||||
Net loss |
54 | 55 | ||||||
Total net periodic post-retirement cost |
$ | 234 | $ | 315 | ||||
N. Commitments and Contingencies
Purchase Commitments
As of April 4, 2010, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments are for less than one year and aggregate to approximately $232.9 million.
22
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Legal Claims
Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on Teradynes results of operations, financial condition or cash flows.
O. Segment Information
Teradynes two reportable segments are Semiconductor Test and Systems Test Group. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The Systems Test Group segment includes operations related to the design, manufacturing and marketing of products and services for military/aerospace instrumentation test, hard disk drive test, circuit-board test and inspection, and automotive diagnostic and test.
Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income before income taxes. The accounting policies of the business segments are the same as those described in Note B: Accounting Policies in Teradynes Annual Report on Form 10-K for the year ended December 31, 2009. Segment information is as follows:
Semiconductor
Test |
Systems
Test Group |
Corporate
and Eliminations |
Consolidated | |||||||||||||
(in thousands) | ||||||||||||||||
Three months ended April 4, 2010: |
||||||||||||||||
Net revenues |
$ | 289,677 | $ | 39,946 | $ | | $ | 329,623 | ||||||||
Income (loss) before income taxes(1)(2) |
66,089 | (5,600 | ) | (5,559 | ) | 54,930 | ||||||||||
Three months ended April 5, 2009: |
||||||||||||||||
Net revenues |
$ | 78,527 | $ | 42,081 | $ | | $ | 120,608 | ||||||||
Loss before income taxes(1)(2) |
(86,942 | ) | (5,396 | ) | (6,130 | ) | (98,468 | ) |
(1) | Interest income and interest expense and other are included in Corporate and Eliminations. |
(2) | Included in the income before income taxes for each of the segments are charges for the three months ended April 4, 2010 and April 5, 2009 that include restructuring and other, net, inventory step-up amortization and provision for excess and obsolete inventory, as follows: |
Included in the Semiconductor Test segment are charges for the following:
For the Three Months
Ended |
||||||
April 4,
2010 |
April 5,
2009 |
|||||
(in thousands) | ||||||
Cost of revenuesprovision for excess and obsolete inventory |
$ | 492 | $ | 5,630 | ||
Cost of revenuesinventory step-up |
| 1,238 | ||||
Restructuring and other, net |
1,071 | 13,347 | ||||
Total |
$ | 1,563 | $ | 20,215 | ||
23
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Included in the Systems Test Group are charges for the following:
For the Three Months
Ended |
||||||
April 4,
2010 |
April 5,
2009 |
|||||
(in thousands) | ||||||
Cost of revenuesprovision for excess and obsolete inventory |
$ | 872 | $ | 2,967 | ||
Restructuring and other, net |
193 | 1,977 | ||||
Total |
$ | 1,065 | $ | 4,944 | ||
Included in the Corporate and Eliminations segment are charges for the following:
For the Three Months
Ended |
||||||
April 4,
2010 |
April 5,
2009 |
|||||
(in thousands) | ||||||
Restructuring and other, net |
$ | | $ | 641 | ||
Total |
$ | | $ | 641 | ||
24
Item 2: | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Statements in this Quarterly Report on Form 10-Q which are not historical facts, so called forward looking statements, are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in Teradynes filings with the Securities and Exchange Commission. See also Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect managements analysis only as of the date hereof. Teradyne assumes no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements, except as may be required by law.
Overview
Teradyne is a leading global supplier of automatic test equipment. We design, develop, manufacture, and sell automatic test systems and solutions used to test complex electronics in the consumer electronics, automotive, computing, telecommunications, and aerospace and defense industries. Our automatic test equipment products and services include:
|
semiconductor test (Semiconductor Test) systems; and |
|
military/aerospace (Mil/Aero) test instrumentation and systems, hard disk drive test (HDD) systems, circuit-board test and inspection (Commercial Board Test) systems, and automotive diagnostic and test (Diagnostic Solutions) systems (collectively these products represent Systems Test Group). |
We have a broad customer base which includes integrated device manufacturers (IDMs), outsourced sub-assembly and test providers (OSATs), wafer foundries, fabless companies that design, but contract with others for the manufacture of integrated circuits (ICs), manufacturers of circuit boards, automotive companies, HDD manufacturers, aerospace and military contractors as well as the United States Department of Defense.
The sales of our products and services are dependent, to a large degree, on customers who are subject to cyclical trends in the demand for their products. These cyclical periods have had, and will continue to have, a significant effect on our business since our customers often delay or accelerate purchases in reaction to changes in their businesses and to demand fluctuations in the semiconductor industry. Historically, these demand fluctuations have resulted in significant variations in our results of operations. This was particularly relevant beginning in the fourth quarter of fiscal year 2008 where we saw a significant decrease in revenue in our Semiconductor Test business which was impacted by the deteriorating global economy, which negatively impacted the entire semiconductor industry. The sharp swings in the semiconductor industry in recent years have generally affected the semiconductor test equipment and services industry more significantly than the overall capital equipment sector.
In response to the business downturn, we implemented significant permanent and temporary cost reduction measures. We reduced headcount worldwide, cut capital spending, and imposed temporary salary reductions and furloughs on our workforce. Due to the continued improvement in our business, we removed the temporary salary reductions and furloughs by the end of last year. We believe the permanent cost-cutting measures we took in the last two years will be of long term value. In the last two quarters, we have experienced improvement in our business, particularly in our semiconductor test business. We believe our acquisitions of Nextest and Eagle Test and our entry into the high speed memory and HDD markets have enhanced our opportunities for growth. We will continue to invest in our business in anticipation of a broader recovery in our markets and to expand further our addressable markets while tightly managing our costs. As the last two quarters have demonstrated, with our current cost structure, we can achieve significantly higher profitability than we achieved at comparable revenue levels in the past.
25
Critical Accounting Policies and Estimates
We have identified the policies which are critical to understanding our business and our results of operations. Except as stated below, management believes that there have been no significant changes during the three months ended April 4, 2010 to the items disclosed as our critical accounting policies and estimates in Managements Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
Revenue Recognition
In October 2009, the Financial Accounting Standards Board (FASB) amended the accounting standards for revenue recognition to remove tangible products containing non-software and software components that function together to deliver the products essential functionality from the scope of industry-specific software revenue recognition guidance. In October 2009, FASB also amended the accounting standards for arrangements with multiple deliverables. We elected to early adopt this accounting guidance at the beginning of its first quarter of 2010 on prospective basis. Adoption had no material impact on our financial position or results of operations in the three months ended April 4, 2010.
We recognize revenue when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass upon destination, acceptance or cash payment, we defer revenue recognition until such events occur.
Our equipment has non-software and software components that function together to deliver the equipments essential functionality. Revenue is recognized upon shipment or at delivery destination point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require us to perform tests of the product to ensure that performance meets the published product specifications or customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. We also defer the portion of the sales price that is not due until acceptance, which represents deferred profit.
For multiple element arrangements, we allocate revenue to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of selling price (VSOE), (ii) third-party evidence of selling price (TPE), and (iii) best estimate of the selling price (BESP). For a delivered item to be considered a separate unit, the delivered item must have value to the customer on a standalone basis and the delivery or performance of the undelivered item must be considered probable and substantially in our control.
Our post-shipment obligations include installation, training services, one-year standard warranties, and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or tools and can be performed by the customers or other vendors. Installation is typically provided within five days of product shipment and is completed within one to two days thereafter. Training services are optional and do not affect the customers ability to use the product. We defer revenue for the selling price of installation and training.
26
SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Three Months
Ended |
||||||
April 4,
2010 |
April 5,
2009 |
|||||
Percentage of total net revenues |
||||||
Net revenue: |
||||||
Products |
81 | % | 54 | % | ||
Services |
19 | 46 | ||||
Total net revenues |
100 | 100 | ||||
Cost of revenues: |
||||||
Cost of products |
38 | 46 | ||||
Cost of services |
10 | 26 | ||||
Total cost of revenues |
47 | 72 | ||||
Gross profit |
53 | 28 | ||||
Operating expenses: |
||||||
Engineering and development |
15 | 39 | ||||
Selling and administrative |
17 | 46 | ||||
Acquired intangible asset amortization |
2 | 7 | ||||
Restructuring and other, net |
0 | 13 | ||||
Total operating expenses |
34 | 105 | ||||
Income (loss) from operations |
18 | (77 | ) | |||
Interest & other |
(2 | ) | (5 | ) | ||
Income (loss) before income taxes |
17 | (82 | ) | |||
Provision (benefit) for income taxes |
1 | (7 | ) | |||
Net income (loss) |
15 | % | (75 | )% | ||
Provision/benefit for income taxes as percentage of income (loss) before income taxes |
9 | % | 8 | % | ||
Results of Operations
First Quarter 2010 Compared to First Quarter 2009
Book to Bill Ratio
Book to bill ratio is calculated as net bookings divided by net sales. Book to bill ratio by reportable segment was as follows:
For the Three Months
Ended |
||||
April 4,
2010 |
April 5,
2009 |
|||
Semiconductor Test |
1.6 | 0.8 | ||
Systems Test Group |
1.8 | 1.7 | ||
Total Company |
1.6 | 1.1 |
27
Revenue
Net revenues for our two reportable segments were as follows:
For the Three Months
Ended |
Dollar
Change |
|||||||||
April 4,
2010 |
April 5,
2009 |
|||||||||
(in millions) | ||||||||||
Semiconductor Test |
$ | 289.7 | $ | 78.5 | $ | 211.2 | ||||
Systems Test Group |
39.9 | 42.1 | (2.2 | ) | ||||||
$ | 329.6 | $ | 120.6 | $ | 209.0 | |||||
Semiconductor Test revenue increased $211.2 million or 269% primarily due to higher sales across all System on a Chip products with power management, microcontroller and wireless being the strongest.
Our revenues by region as a percentage of total net revenue were as follows:
For the Three Months
Ended |
||||||
April 4,
2010 |
April 5,
2009 |
|||||
Taiwan |
24 | % | 9 | % | ||
United States |
18 | 39 | ||||
Singapore |
12 | 5 | ||||
Philippines |
11 | 2 | ||||
South Asia |
9 | 11 | ||||
Europe |
8 | 16 | ||||
Malaysia |
7 | 5 | ||||
Thailand |
6 | 1 | ||||
Japan |
4 | 11 | ||||
Rest of World |
1 | 1 | ||||
100 | % | 100 | % | |||
Gross Profit
Our gross profit was as follows:
For the Three Months
Ended |
Dollar/Point
Change |
||||||||||
April 4,
2010 |
April 5,
2009 |
||||||||||
(in millions) | |||||||||||
Gross Profit |
$ | 173.5 | $ | 33.4 | $ | 140.1 | |||||
Percent of Total Revenue |
52.6 | % | 27.7 | % | 24.9 |
Gross profit as a percentage of revenue increased 24.9 percentage points. This increase in gross profit is the result of an increase of 19.9 points from higher sales volume, an increase of 4.5 points related to mix and an increase of 2.2 points from lower inventory provisions. These increases were partially offset by a decrease of 1.6 points primarily due to higher variable compensation.
We assess the carrying value of our inventory on a quarterly basis by estimating future demand and comparing that demand against on-hand and on-order inventory positions. Forecasted revenue information is
28
obtained from the sales and marketing groups and incorporates factors such as backlog and future revenue demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next four quarters, is written-down to estimated net realizable value.
During the three months ended April 4, 2010, we recorded an inventory provision of $1.4 million included in cost of revenues. Of the $1.4 million of total excess and obsolete provisions recorded in the three months ended April 4, 2010, $0.9 million was related to Systems Test Group, and $0.5 million was related to Semiconductor Test.
During the three months ended April 5, 2009, we recorded an inventory provision of $8.6 million included in cost of revenues, due to the following factors:
|
Downward revisions to previously forecasted demand levels as a result of worsening economic conditions experienced in the semiconductor and automotive industries in the first quarter of 2009 resulted in an inventory provision of $5.9 million for inventory not expected to be consumed; and |
|
During late 2008, we introduced the next versions of our Nextest Magnum memory test product. At that time, it was anticipated that demand would continue for the existing version of the product within its installed base of customers. An overall decline in the memory market combined with a portion of our customers accelerating their purchasing of the newer version of the product resulted in an inventory provision of $2.7 million. |
During the three months ended April 4, 2010 and April 5,
2009, we scrapped $1.0 million and $1.1 million of inventory, respectively. As of April 4, 2010, we had inventory related reserves for amounts which had been written-down or written-off totaling $131.9 million. We have no pre-determined
Engineering and Development
Engineering and development expenses were as follows:
For the Three Months
Ended |
Dollar
Change |
||||||||||
April 4,
2010 |
April 5,
2009 |
||||||||||
(in millions) | |||||||||||
Engineering and Development |
$ | 49.1 | $ | 47.2 | $ | 1.9 | |||||
Percent of Total Revenue |
14.9 | % | 39.1 | % |
The increase of $1.9 million in engineering and development expenses is due primarily to a $6.2 million increase in variable compensation spending, partially offset by a $4.3 million reduction in project spending.
Selling and Administrative
Selling and administrative expenses were as follows:
For the Three Months
Ended |
Dollar
Change |
||||||||||
April 4,
2010 |
April 5,
2009 |
||||||||||
(in millions) | |||||||||||
Selling and Administrative |
$ | 55.9 | $ | 55.4 | $ | 0.5 | |||||
Percent of Total Revenue |
17.0 | % | 45.9 | % |
The increase of $0.5 million in selling and administrative expenses is due primarily to a $5.5 million increase in variable compensation, partially offset by a $5.0 million decrease in other spending related to workforce reductions and other cost reduction initiatives taken in 2009.
29
Restructuring and Other, Net
Restructuring
In response to a downturn in the industry, we initiated restructuring activities across all segments to reduce costs, principally through headcount reductions and facility consolidations. The table below represents activity related to these actions. The remaining accrual for severance and benefits is reflected in the accrued employees compensation and withholdings account on the balance sheet and is expected to be paid by the end of the second quarter of 2010. The remaining accrual for lease payments on vacated facilities is reflected in the other accrued liabilities account and the long-term other accrued liabilities account and is expected to be paid over the lease terms, the latest of which expires in 2013. We expect to pay approximately $3.7 million against the lease accruals over the next twelve months. Our future lease commitments are net of expected sublease income of $5.1 million as of April 4, 2010.
Severance
and Benefits |
Facility
Exit Costs |
Total | ||||||||||
Pre-2009 Activities: |
||||||||||||
Balance at December 31, 2008 |
$ | 82 | $ | 9,303 | $ | 9,385 | ||||||
Change in estimate |
| (417 | ) | (417 | ) | |||||||
Cash payments |
(82 | ) | (2,645 | ) | (2,727 | ) | ||||||
Balance at December 31, 2009 |
| 6,241 | 6,241 | |||||||||
Cash payments |
| (468 | ) | (468 | ) | |||||||
Balance at April 4, 2010 |
$ | | $ | 5,773 | $ | 5,773 | ||||||
Q1 2009 Activity: |
||||||||||||
Provision |
$ | 17,630 | $ | | $ | 17,630 | ||||||
Cash payments |
(17,630 | ) | | (17,630 | ) | |||||||
Balance at December 31, 2009 |
$ | | $ | | $ | | ||||||
Q2 2009 Activity: |
||||||||||||
Provision |
$ | 15,940 | $ | | $ | 15,940 | ||||||
Cash payments |
(13,035 | ) | | (13,035 | ) | |||||||
Balance at December 31, 2009 |
2,905 | | 2,905 | |||||||||
Change in estimate |
498 | | 498 | |||||||||
Cash payments |
(2,079 | ) | | (2,079 | ) | |||||||
Balance at April 4, 2010 |
$ | 1,324 | $ | | $ | 1,324 | ||||||
Q3 2009 Activity: |
||||||||||||
Provision |
$ | | $ | 4,420 | $ | 4,420 | ||||||
Cash payments |
| (285 | ) | (285 | ) | |||||||
Other |
| 100 | 100 | |||||||||
Balance at December 31, 2009 |
| 4,235 | 4,235 | |||||||||
Cash payments |
| (272 | ) | (272 | ) | |||||||
Balance at April 4, 2010 |
$ | | $ | 3,963 | $ | 3,963 | ||||||
Q1 2010 Activity: |
||||||||||||
Provision |
$ | 766 | $ | | $ | 766 | ||||||
Cash payments |
(573 | ) | | (573 | ) | |||||||
Balance at April 4, 2010 |
$ | 193 | $ | | $ | 193 | ||||||
Balance at April 4, 2010 |
$ | 1,517 | $ | 9,736 | $ | 11,253 | ||||||
30
During the three months ended April 4, 2010, we recorded restructuring charges related to ongoing efforts to lower expenses and our cost structure and an additional charge due to a change in estimated severance benefits related to a prior period activity. The restructuring charges consisted of the following activities:
Q1 2010 Activity:
|
$0.8 million of severance charges related to headcount reductions of approximately 14 people, of which $0.4 million and 4 people were in Semiconductor Test and $0.4 million and 10 people were in Systems Test Group. |
Q2 2009 Activity:
|
$0.5 million related to a change in the estimated severance benefits related to Q2 2009 headcount reduction activities across both segments. |
During the three months ended April 5, 2009, we recorded restructuring charges related to ongoing efforts to lower expenses and our cost structure in light of the industry wide decline in orders for semiconductor equipment. The restructuring charges consisted of the following activities:
Q1 2009 Activity:
|
$16.7 million of severance charges related to headcount reductions of approximately 518 people, of which $14.0 million and 456 people were in Semiconductor Test, $1.9 million and 37 people were in Systems Test Group, and $0.8 million and 16 people were in Corporate. |
Other
During the three months ended April 5, 2009, we recorded a credit of $0.7 million related to finalization of certain Eagle Test purchase accounting items.
Interest and Other
Interest income increased by $0.1 million from the first quarter of 2009 to 2010 due primarily to higher cash balances. Interest expense and other increased by $0.1 million from the first quarter of 2009 to 2010 due primarily to $4.9 million of interest expense related to our convertible note, partially offset by a decrease of $1.8 million in losses on our marketable securities, and a $1.0 million decrease in foreign exchange losses. In addition, the first quarter of 2009 included $2.0 million of interest expense related to our revolving credit facility.
Income Taxes
For the three months ended April 4, 2010, we recorded a tax provision of $4.8 million, which consisted primarily of foreign taxes. For the three months ended April 5, 2009, we recorded a tax benefit of $7.8 million primarily due to benefiting operating losses in foreign jurisdictions. Due to the continued uncertainty of realization, we have maintained our valuation allowance at April 4, 2010 for deferred tax assets in the U.S. and Singapore. We do not expect to significantly reduce our valuation allowance until sufficient positive evidence exists, including sustained profitability, that realization is more likely than not.
31
Contractual Obligations
The following table reflects our contractual obligations as of April 4, 2010:
Payments Due by Period |
Purchase
Commitments |
Non-cancelable
Lease Commitments(1) |
Debt |
Interest
on Debt |
Pension
Contributions |
Total | ||||||||||||
2010 |
$ | 232,877 | $ | 14,564 | $ | 1,066 | $ | 4,335 | $ | 3,175 | $ | 256,017 | ||||||
2011 |
| 16,317 | 2,132 | 8,646 | | 27,095 | ||||||||||||
2012 |
| 12,629 | 2,132 | 8,617 | | 23,378 | ||||||||||||
2013 |
| 7,395 | 2,132 | 8,587 | | 18,114 | ||||||||||||
2014 |
| 5,171 | 191,066 | 4,306 | | 200,543 | ||||||||||||
Beyond 2014 |
| 5,672 | | | | 5,672 | ||||||||||||
Total |
$ | 232,877 | $ | 61,748 | $ | 198,528 | $ | 34,491 | $ | 3,175 | $ | 530,819 | ||||||
(1) | Non-cancelable lease payments have not been reduced by sublease income of $5.1 million due in the future under non-cancelable sublease agreements. |
Liquidity and Capital Resources
Our cash, cash equivalents and marketable securities balance increased $13.9 million in the first three months of 2010 to $532.7 million. Cash activity for the first three months of 2010 and 2009 was as follows:
For the Three Months
Ended |
||||||||
April 4,
2010 |
April 5,
2009 |
|||||||
(in millions) | ||||||||
Cash provided by (used for) operating activities: |
||||||||
Net income (loss), adjusted for non-cash items |
$ | 86.0 | $ | (50.3 | ) | |||
Change in operating assets and liabilities, net of businesses acquired |
(59.3 | ) | (15.3 | ) | ||||
Total cash provided by (used for) operating activities |
26.7 | (65.6 | ) | |||||
Total cash (used for) provided by investing activities |
(105.8 | ) | 4.1 | |||||
Total cash provided by financing activities |
5.0 | 17.5 | ||||||
Effects on exchange rate changes on cash and cash equivalents |
(0.6 | ) | 0.4 | |||||
Decrease in cash and cash equivalents |
$ | (74.7 | ) | $ | (43.6 | ) | ||
In the three months ended April 4, 2010, changes in operating assets and liabilities, net of businesses acquired, used cash of $59.3 million. This was due primarily to a $35.4 million decrease in deferred revenue due to shipments of systems prepaid by customers in 2009, a $6.7 million decrease in pension liabilities due to pension contributions, a $4.3 million decrease in other accrued expenses due to convertible note interest payment, and an increase in accounts receivable of $53.5 million, partially offset by a decrease in inventories of $15.5 million due to increased shipments, a decrease in other current assets of $20.1 million, and an increase in accounts payable of $4.4 due to increased sales volume.
32
In the three months ended April 4, 2010, investing activities used cash of $105.8 million, due to $95.4 million of purchases of marketable securities and $17.6 million of purchases of property, plant and equipment, partially offset by proceeds from sales of marketable securities that provided cash of $7.1 million.
During the three months ended April 4, 2010, financing activities provided cash of $5.0 million due to $6.1 million from the issuance of common stock under stock option and stock purchase plans, partially offset by a payment on long-term debt related to a loan in Japan, of $1.1 million.
In the three months ended April 5, 2009, changes in operating assets and liabilities, net of businesses acquired, used cash of $15.3 million. This was due primarily to a decrease in accounts payable, deferred revenue and accrued expenses of $44.3 million due to on-going cost reduction initiatives, an increase in other current assets of $7.6 million, an increase in inventories of $4.1 million, and retirement plan contributions of $1.6 million, partially offset by a decrease in accounts receivable of $42.4 million due to lower sales volume.
In the three months ended April 5, 2009, investing activities provided cash of $4.0 million due to sales of marketable securities that provided cash of $9.0 million, proceeds from life insurance policies that provided cash of $1.1 million, partially offset by investments in property, plant and equipment of $6.1 million.
During the three months ended April 5, 2009, financing activities provided cash of $17.5 million due to $10 million of long-term debt proceeds from a loan in Japan and $7.5 million from the issuance of common stock under stock option and stock purchase plans.
We believe our cash, cash equivalents and marketable securities balance of $532.7 million will be sufficient to meet working capital and expenditure needs for at least the next twelve months. Inflation has not had a significant long-term impact on earnings.
Equity Compensation Plans
As discussed in Note N: Stock Based Compensation in our 2009 Form 10-K, we have a 1996 Employee Stock Purchase Plan and a 2006 Equity and Cash Compensation Incentive Plan (the 2006 Equity Plan).
The purpose of the 1996 Employee Stock Purchase Plan is to encourage stock ownership by all eligible employees of Teradyne. The purpose of the 2006 Equity Plan is to provide equity ownership and compensation opportunities in Teradyne to our employees, officers, directors, consultants and/or advisors. Both plans were approved by our shareholders.
Recently Issued Accounting Pronouncements
In March 2010, FASB issued an Accounting Standards Update 2010-17, Milestone Method of Revenue Recognition , to Accounting Standards Codification 605, Revenue Recognition. The guidance in this consensus allows the milestone method as an acceptable revenue recognition methodology when an arrangement includes substantive milestones. The guidance provides a definition of substantive milestone and should be applied regardless of whether the arrangement includes single or multiple deliverables or units of accounting. The scope of this consensus is limited to the transactions involving milestones relating to research and development deliverables. The guidance includes enhanced disclosure requirements about each arrangement, individual milestones and related contingent consideration, information about substantive milestones and factors considered in the determination. The consensus is effective prospectively to milestones achieved in fiscal years, and interim periods within those years, after June 15, 2010. Early application and retrospective application are permitted. We are currently evaluating this final consensus.
33
Item 3: | Quantitative and Qualitative Disclosures about Market Risk |
For Quantitative and Qualitative Disclosures about Market Risk affecting Teradyne, see Item 7a. Quantitative and Qualitative Disclosures about Market Risks, in our Annual Report on Form 10-K filed with the SEC on March 1, 2010. There were no material changes in our exposure to market risk from those set forth in our Annual Report for the fiscal year ended December 31, 2009.
Item 4: | Controls and Procedures |
As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
34
PART II. OTHER INFORMATION
Item 1: | Legal Proceedings |
We are subject to various legal proceedings and claims which have arisen in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our results of operations, financial condition or cash flows.
Item 1A: | Risk Factors |
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A: Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009, which could materially affect our business, financial condition or future results. The risk factors described in our Annual Report on Form 10-K remain applicable to our business. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds |
In November 2007, Teradynes Board of Directors (the Board) authorized a $400 million stock repurchase program. During the three months ended April 4, 2010, Teradyne did not repurchase any shares of common stock. The cumulative repurchases as of April 4, 2010 total 8.5 million shares of common stock for $102.6 million at an average price of $12.14 per share. As of November 4, 2008, the Board suspended stock repurchase program.
The following table includes information with respect to repurchases we made of our common stock during the quarter ended April 4, 2010 (in thousands):
Period |
(a) Total
Number of Shares (or units) Purchased |
(b) Average
Price Paid per Share (or Unit) |
(c) Total Number of
Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum Number
(or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs |
||||||
January 1, 2010 January 31, 2010 |
| $ | | | $ | 297,375 | ||||
February 1, 2010 February 28, 2010 |
| $ | | | $ | 297,375 | ||||
March 1, 2010 April 4, 2010 |
| $ | | | $ | 297,375 |
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Item 6: | Exhibits |
Exhibit
|
Description |
|
10.1 | Employment Agreement dated July 24, 2009 between Teradyne and Charles J. Gray (filed herewith) | |
10.2 | Executive Officer Change in Control Agreement dated May 26, 2009 between Teradyne and Charles J. Gray (filed herewith) | |
31.1 | Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | |
31.2 | Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | |
32.1 | Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) | |
32.2 | Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) |
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TERADYNE, INC. |
Registrant |
/s/ G REGORY R. B EECHER |
Gregory R. Beecher Vice President, Chief Financial Officer and Treasurer
(Duly Authorized Officer
|
May 14, 2010 |
37
Exhibit 10.1
EMPLOYMENT AGREEMENT
In consideration of my at-will employment by Teradyne, Inc., a corporation of the Commonwealth of Massachusetts (herein referred to as the Company), and the payments made to me as consequence thereof, I agree that I will promptly report to an officer of the Company or to such other individual as may from time to time be designated, all inventions and new ideas which I, alone or with others, have conceived or reduced to practice since the time of entering the employment of the Company in respect to any subject matter relating to the business in which the Company is engaging as of the date of conception or reduction to practice of each such invention or new idea. This obligation ceases with termination of my employment with the Company.
I further agree to assign to the Company the entire interest throughout the world in all inventions and new ideas referred to in the proceeding paragraph, whether or not reported by me, and to execute all papers and do anything necessary and reasonable to secure to the Company title therein and Letters Patent pertaining thereto including the giving of testimony in any suit if called so to do during or after my employment but all at the expense of the Company. I also waive all claims to moral rights in any Inventions.
All inventions and new ideas that would fall within the scope of this Agreement, but for the fact that they were conceived prior to my employment by the Company, may be excluded from this Agreement only if I can establish, under applicable inventorship law, a date of conception prior to my entering the employment of the Company.
I further agree that I will make a written record of all inventions and new ideas falling within the scope of this Agreement in the form of notes, sketches, drawing, or reports relating thereto, which records shall be and remain the property of and available to the Company at all times.
I further agree that I will not, during or after the period of my employment with the Company, divulge to any unauthorized persons confidential information concerning the Companys business, technology, and activities that I learn during the period of my employment, or use any such information except on the Companys behalf.
I further agree that I will observe all rules and regulations laid down by the Government agencies relating to the safeguarding of classified information that may be disclosed or entrusted to me in connection with any contract between the Company and the Government or any contractor with the Government.
I further agree that during the period of my employment by the Company, I will not directly or indirectly enter the employment of, or render any professional services, including but not limited to as an independent contractor, consultant, director, partner, owner or otherwise, except such as are rendered at the request of the Company, to any individual, partnership, association or corporation who or which is a competitor of the Company without the prior permission in writing of
the Company. Competitor includes, but is not limited to, any business or enterprise that develops, designs, produces, markets, sells or renders any product or service or intends to do so that is competitive with any product or service developed, produced, marketed, sold or rendered by the Company, including actual or demonstrably anticipated research or development. I further agree that I will notify the Company of any outside employment in which I am engaged during the period of my employment with the Company .
I further agree that during the period of my employment with the Company, and for a period of one year after my employment ceases as a result of my voluntary resignation, I will not (except on the Companys behalf) solicit (for the purpose of providing a product or service that is competitive with the Company) any customer or prospective customer of the Company that was contacted, solicited or served by me within the five-year period immediately preceding the termination of my employment with the Company.
I further agree that during the period of my employment with the Company, and for a period of one year after my employment ceases as a result of my voluntary resignation, I will not recruit, solicit, hire, or engage as an employee or an independent contractor, any employee or former employee of the Company, excluding former employees whose employment with the Company has been terminated for a period of six months or longer.
Due to the global market in which the Company operates, the geographic scope of this Agreement shall extend to anywhere the Company or its subsidiaries do business, have done business or have plans to do business.
This Agreement supersedes all previous agreements between me and the Company relating to the subject matter hereof, and may not be modified on behalf of the Company in whole or in part except by a statement in writing signed by an authorized officer of the Company.
I further agree that if any one or more provisions in this Agreement are deemed unenforceable, they will be reformed to the extent necessary to make them enforceable, and the remaining provisions of this Agreement will continue in full force and effect.
I further agree that this Agreement shall be governed by and construed as a sealed instrument under and in accordance with the laws of the Commonwealth of Massachusetts without regard to conflict of laws provisions. Any action, suit or other legal proceeding that is commenced to resolve any matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, federal court located within Massachusetts), and I consent to the jurisdiction of such a court.
I acknowledge that I have carefully read this Agreement and understand and agree to all the provisions in this Agreement.
Signed at North Reading, MA, this 24 th day of July, 2009
Employee Signature: | /s/ Charles J. Gray | Teradyne Signature: | /s/ Steve Fagerquist |
Standard Employment Agreement (non-CA)
Exhibit 10.2
EXECUTIVE OFFICER CHANGE IN CONTROL AGREEMENT
EXECUTIVE OFFICER CHANGE IN CONTROL AGREEMENT entered into this 26th day of May, 2009 by and between Teradyne, Inc., a Massachusetts corporation ( Teradyne ), and the undersigned executive officer of Teradyne ( Employee ).
WITNESSETH:
WHEREAS, Teradyne and Employee desire to set forth certain terms and conditions relating to the termination of Employees employment upon the occurrence of a Change in Control (as hereinafter defined) of Teradyne.
NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Entitlements Upon a Termination Event . If, within twenty-four (24) months following a Change in Control or in contemplation of a Change in Control, there is a Termination Event, and subject to the conditions set forth herein and the performance by Employee of the undertakings and duties set forth herein, Employee shall be entitled to the rights, payments and other benefits set forth below:
(a) Treatment of Awards . Equity Awards that are not subject to Performance Criteria shall be governed by Section 1(b) below, and Cash Awards and Equity Awards that are subject to Performance Criteria shall be governed by Section 1(c) below. The parties hereto acknowledge that, except as otherwise provided herein, the terms of this Agreement are intended to modify the terms of Employees existing Cash Award and Equity Award agreements and to be a supplement to Cash Award and Equity Award agreements granted on or subsequent to the date hereof.
(b) Acceleration of Equity Awards . All of Employees unvested or unexercisable Equity Awards or Equity Awards subject to restrictions on transfer imposed by Teradyne or repurchase rights in favor of Teradyne, as applicable, granted prior to, on, or after the date hereof (but only (I) such Equity Awards as have been granted to Employee by Teradyne as of the date of the Change in Control or (II) such Equity Awards as have been assumed by an acquiring company at the time of a Change in Control or such new cash and equity awards that have been substituted by an acquiring company for Equity Awards existing at the time of a Change in Control, each pursuant to the terms of any Teradyne incentive plan) shall automatically become fully vested, exercisable or free of restrictions on transfer imposed by Teradyne or repurchase rights in favor of Teradyne, as applicable, as of the date of such Termination Event, and all Equity Awards granted on or after the date hereof shall, to the extent applicable, remain exercisable for the remainder of the generally applicable term of such Equity Award.
(c) Satisfaction of Performance Criteria . All of Employees Cash Awards and Equity Awards that are subject to Performance Criteria shall be settled and paid in the following manner: Employee shall be deemed to have satisfied the necessary percentage of the Performance Criteria to which such Cash Awards and Equity Awards are subject as of the date of the Termination Event, that will provide Employee with the target level of such Cash Awards and Equity Awards; and Employee shall be entitled to receive that portion of each Cash Award and Equity Award payable, at the target level. For purposes of the Cash Awards, the payment shall be multiplied by a fraction, the numerator of which shall be the number of calendar months that have passed during the period in which the Performance Criteria are to be measured (treating the month in which the Termination Event occurs as a full calendar month) and the denominator of which shall be the total number of calendar months in such period. For purposes of this Agreement, target level is that percentage of the Performance Criteria established at the beginning of the calendar year in order for the Employee to achieve Model Compensation. Unless otherwise required under Section 1(e) below, such Cash Awards and Equity Awards shall be paid to Employee or the restrictions on transfer removed not later than 10 days following the Termination Event.
(d) Salary Continuation . Unless otherwise required under Section 1 (e) below, Teradyne shall pay Employee monthly an amount equal to 1/12 th of Employees current annual Model Compensation as of the Termination Event for a period of 24 months following the date of the Termination Event (the Salary Continuation Period). In the event a Termination Event constitutes termination for Good Reason on account of a material reduction in Model Compensation, the payment obligation pursuant to this Section 1(d) shall be calculated without giving effect to any such reductions in Model Compensation. All such continued payments shall be made in accordance with Teradynes customary pay practices.
(e) Deferred Compensation/Section 409A.
(i) Notwithstanding any other provision of this Agreement, if the Employee is a specified employee at the time of the Employees separation from service as defined in Section 409A of the Code , all payments, benefits, or removal of restrictions on the transfer of equity under this Agreement with respect to the Employees separation from service that constitute compensation deferred under a nonqualified deferred compensation plan as defined in Section 409A of the Code to which such specified employee would otherwise be entitled during the first six months following the date of separation from service shall be made on the first day of the seventh month after the date of separation from service (or, if earlier, the date of death of the Employee).
(ii) For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Section 409A, and any payments that are due within the short term deferral period as defined in Section 409A or payments that are made under separation pay plans as described in Treasury Regulation Section 1.409A-1(b)(9)(ii), (iii) or (iv), shall not be treated as deferred compensation unless applicable law requires otherwise. Neither Teradyne nor the Employee shall have the right to accelerate or defer the delivery of any payments or benefits under this Agreement except to the extent specifically permitted or required by Section 409A.
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(iii) This Agreement is intended to comply with the provisions of Section 409A and the Agreement shall, to the extent practicable, be construed in accordance therewith. Terms defined in the Agreement shall have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A. In any event, Teradyne makes no representations or warranty and shall have no liability to Employee or any other person if any provisions of or payments under this Agreement are determined to constitute deferred compensation subject to Code Section 409A but not to satisfy the conditions of that section.
(iv) If any amount is payable under the provisions of paragraph (f), below, as a reimbursement of Employees expenses, under the provisions of Section 2 and 13, or any other provision of this Agreement that constitutes a reimbursement of expenses under Section 409A then, notwithstanding the other provisions of this Agreement with respect to the payment of such reimbursement, the following limitations shall apply; (A) the expenses eligible for reimbursement may not affect the expenses eligible for reimbursement in any other taxable year; (B) such reimbursement must be made on or before the last day of the year following the year in which the expenses are incurred; (C) the right to reimbursement is not subject to liquidation or exchange for another benefit; and (D) in connection with reimbursements under Section 13 the period during which such expenses can be incurred extends to the end of the period permitted for such claims under the applicable statute of limitations.
(f) Benefit Continuation . During the Salary Continuation Period, Teradyne shall arrange or provide for continued health, dental and vision insurance plan coverage for the Employee at the same levels of coverage in existence prior to the Termination Event subject to Teradyne and Employee each contributing to the applicable insurance premium payments on the same basis and in the same proportions as in existence at the date of the Termination Event. If the Employee is not eligible for continued health, dental and vision insurance plan coverage for any portion of the twenty-four (24) month period defined herein, Teradyne shall provide or reimburse Employee for comparable individual insurance and, if such provision or reimbursement constitutes taxable income to the Employee, such additional amount as is necessary to place the Employee in substantially the same after tax position as he was while an employee of Teradyne with respect to such insurance plan coverages. All other benefits, including but not limited to flex/vacation time accrual, short and long term disability insurance, life insurance, contributions (including company matches) into savings plan and savings plan plus, profit sharing payments and participation in the Employee stock purchase plan shall cease as of the date of the Termination Event.
To the extent that amounts paid by Teradyne to provide the benefits under this paragraph (f) are deemed to be deferred compensation subject to Section 409A, then such payments shall be made monthly and any payment to preserve the Employees after tax position shall be made within 60 days after the end of each calendar year in which the taxable provision or reimbursement occurs.
(g) Release . Notwithstanding any other provision of this Agreement to the contrary, no payment , benefit or removal of restriction on the transfer of equity provided for under or by virtue of the provisions of this Agreement shall be paid or otherwise made available unless Teradyne shall have first received from Employee a valid, binding and irrevocable general release, in the form of Attachment A to this Agreement within twenty-one (21) days of
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the date of the Termination Event; provided further that Teradyne shall be permitted to defer any payment, benefit or removal of restriction on the transfer of equity provided for in this Agreement, whether pursuant to Section 1(e), 1(f) or otherwise, until the tenth day after the later of its receipt of such release and the time at which the release has become valid, binding and irrevocable; provided that if the last day on which Teradyne would be permitted to commence payments, benefits, or removal of restrictions under this Agreement in accordance with this provision falls in the taxable year following the taxable year in which the date of the Termination Event occurs, then all benefits, payments, or removal of restrictions shall be made beginning in that taxable year. Employee shall sign such release within twenty-one (21) days of a Termination Event subsequent to a Change in Control. Teradyne agrees to provide Employee an estimate relating to payments to be made under this Agreement upon Employees written request.
(h) Certain Definitions . For purposes of this Agreement, the following terms shall have the following meanings:
Cash Awards shall mean any cash-based bonus, cash incentive or other cash awards provided by Teradyne to Employee pursuant to incentive plans that Teradyne maintains, including but not limited to its 2006 Equity and Cash Compensation Incentive Plan.
Cause shall mean conduct involving one or more of the following: (i) the substantial and continuing failure of Employee to render services to Teradyne in accordance with the terms or requirements of his or her employment; (ii) Employees disloyalty, gross negligence, willful misconduct, dishonesty, fraud or breach of fiduciary duty to Teradyne, each in connection with Employees employment by Teradyne; (iii) Employees deliberate disregard of the rules or policies of, or breach of an agreement with, Teradyne which results in direct or indirect material loss, damage or injury to Teradyne; (iv) the intentional unauthorized disclosure by Employee of any trade secret or confidential information of Teradyne; (v) the commission by Employee of an act which constitutes unfair competition with Teradyne; or (vi) the conviction of, or the entry of a plea of guilty or nolo contendere by the Employee, to any crime involving moral turpitude or any felony. In the event that the Company determines that Cause may exist pursuant to clauses (i), (iii) and (v) above, the Company shall give Employee written notice of the facts constituting such Cause and Employee shall have 30 days following receipt of such notice to remedy such Cause.
A Change in Control shall be deemed to have occurred upon the occurrence of any of the following events: (i) any consolidation, cash tender offer, reorganization, recapitalization, merger or plan of share exchange following which the capital stock of Teradyne outstanding immediately prior to such transaction constitutes less than a majority of the combined voting power of the then-outstanding securities of the combined corporation or person immediately after such transaction; (ii) any sale, lease, exchange or other transfer of all or substantially all of Teradynes assets; (iii) the adoption by the Board of Directors of Teradyne of any plan or proposal for the liquidation or dissolution of Teradyne; (iv) a change in the majority of the Board of Directors of Teradyne through one or more contested elections occurring within a three-year period; or (v) any person (as that term is used in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes beneficial owner of 30% or more of the combined voting power of Teradynes outstanding voting securities, other than (A) as a result of a consolidation, reorganization, recapitalization, merger or plan of share exchange
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following which the capital stock of Teradyne outstanding immediately prior to such transaction constitutes at least a majority of the combined voting power of the then-outstanding securities of the combined corporation or person immediately after such transaction, (B) by any trustee or other fiduciary holding securities under an employee benefit plan of Teradyne, or (C) by a person temporarily acquiring beneficial ownership in its capacity as an underwriter (as defined pursuant to Section 2(a)(11) of the Securities Act of 1933, as amended) in connection with a public offering of Teradynes securities.
Equity Awards shall mean the equity ownership, participation or appreciation opportunities provided by Teradyne to Employee pursuant to incentive plans that Teradyne maintains, including but not limited to its 2006 Equity and Cash Compensation Incentive Plan, the Teradyne, Inc. 1991 Employee Stock Option Plan and the Teradyne, Inc. 1997 Employee Stock Option Plan, and any stock options, restricted stock units, restricted stock, stock appreciation rights, phantom stock and other stock-based awards granted thereunder.
Good Reason shall mean any one or more of the following: (i) any material reduction of Employees responsibilities (other than for Cause or as a result of death or disability) as they shall exist on the date of the consummation of the Change in Control; (ii) any material reduction in Employees Model Compensation as in effect on the date of the consummation of the Change in Control, or as the same may be increased from time to time, or any failure by Teradyne to pay to Employee any bonus accrued, but not yet paid, upon written notice by Employee to Teradyne, within 45 days; (iii) a material reduction in the value of Employees benefit package from the value of Employees benefit package on the date of the consummation of the Change in Control; or (iv) a requirement that Employee be based at an office that is greater than 50 miles from the location of Employees office immediately prior to the Change in Control except for required travel on Teradynes business to an extent substantially consistent with the business travel obligations which Employee undertook on behalf of Teradyne prior to the date of the consummation of the Change in Control. In the event of a Termination Event in contemplation of a Change of Control, the applicable baseline measurement date shall be six months prior to such Termination Event and not the date of the consummation of the Change in Control.
Model Compensation shall mean Employees annual Model Compensation as determined by Teradynes Compensation Committee or Board of Directors, which consists of (i) a fixed annual salary and (ii) a target annual variable amount.
Performance Criteria shall have the meaning ascribed to that term in the Teradyne, Inc. 2006 Equity and Cash Compensation Incentive Plan.
Termination Event shall mean (i) any termination of Employee by Teradyne without Cause or (ii) any voluntary termination by Employee for Good Reason; provided, that it shall not be a Termination Event merely because Employee ceases to be employed by Teradyne and becomes employed by a successor to Teradyne involved in the Change in Control that assumes or is otherwise bound by this Agreement as provided in Section 7(a). It is expressly understood that no Termination Event shall be deemed to have occurred merely because, upon
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the occurrence of a Change in Control, Employee ceases to be employed by Teradyne and does not become employed by a successor to Teradyne after the Change in Control if the successor makes an offer to employ Employee on terms and conditions which, if imposed by Teradyne, would not give Employee a basis on which to terminate employment for Good Reason.
(i) Termination in Contemplation of a Change in Control . For purposes of this Agreement, including without limitation, this Section 1, a Termination Event occurring in contemplation of a Change in Control means a Termination Event occurring within 3 months prior to an actual Change in Control at the request or direction of a person who enters or has entered into an agreement the consummation of which would cause a Change in Control or who conditions entry into such an agreement on the Employees termination whether or not such person actually enters into such an agreement. A termination by the Employee for Good Reason shall constitute a Termination Event in contemplation of a Change in Control if the actions constituting Good Reason were taken at the request or direction of a person who has entered into an agreement the consummation of which would cause a Change in Control.
2. Reduction of Payments
(a) Notwithstanding any other provision of this Agreement, in the event that the Company undergoes a Change in Ownership or Control (as defined below), the Company shall not be obligated to provide to the Executive a portion of any Contingent Compensation Payments (as defined below) that the Executive would otherwise be entitled to receive to the extent necessary to eliminate any excess parachute payments (as defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the Code)) for the Executive. For purposes of this Section 2, the Contingent Compensation Payments so eliminated shall be referred to as the Eliminated Payments and the aggregate amount (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the Contingent Compensation Payments so eliminated shall be referred to as the Eliminated Amount.
(b) For purposes of this Section 2, the following terms shall have the following respective meanings:
(i) | Change in Ownership or Control shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code. |
(ii) | Contingent Compensation Payment shall mean any payment (or benefit) in the nature of compensation that is made or made available (under this Agreement or otherwise) to a disqualified individual (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company. |
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(c) If and to the extent that any Contingent Compensation Payments are required to be treated as Eliminated Payments pursuant to this Section 2, then the Payments shall be reduced or eliminated, as determined by the Company, in the following order (i) any cash payments, (ii) any taxable benefits, (iii) any nontaxable benefits and (iv) any vesting of equity awards, in each case in reverse order beginning with the payments or benefits that are to be paid the farthest in time from the date that triggers the applicability of the excise tax, to the extent necessary to maximize the Eliminated Payments.
3. (a) Non-Competition and Non-Solicitation . From the Termination Event through the end of the Salary Continuation Period, Employee shall not directly or indirectly:
(i) | Engage in any business or enterprise (whether as an owner, partner, officer, employee, director, investor, lender, consultant, independent contractor or otherwise, except as the holder of not more than 1% of the combined voting power of the outstanding stock of a publicly held company) that is competitive with Teradyne (including but not limited to, any business or enterprise that develops, designs, produces, markets, sells or renders any product or service competitive with any product or service developed, produced, marketed, sold or rendered by Teradyne while Employee was employed by Teradyne); |
(ii) | Either alone or in association with others, recruit, solicit, hire or engage as an independent contractor, any person who was employed by Teradyne at any time during the period of Employees employment with Teradyne, except for an individual whose employment with Teradyne has been terminated for a period of six months or longer; and |
(iii) | Either alone or in association with others, solicit, divert or take away, or attempt to divert or to take away, the business or patronage of any client or customer or entity that was a prospective client or customer of Teradyne during the Employees employment. |
(b) If any restriction set forth in this Section 3 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
(c) Employee acknowledges that the restrictions contained in this Section 3 are necessary for the protection of the business and goodwill of Teradyne and are considered by Employee to be reasonable for such purpose. Employee agrees that any breach of this Section 3 will cause Teradyne irreparable harm and therefore, in the event of any such breach, in addition to such other remedies that may be available, Teradyne shall have the right to seek equitable and/or injunctive relief.
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(d) The geographic scope of this Section 3 shall extend to anywhere Teradyne or any of its subsidiaries is doing business, has done business or has plans to do business.
(e) Employee agrees that during the Salary Continuation Period, he/she will make reasonable good faith efforts to give verbal notice to Teradyne of each new business activity he/she plans to undertake, at least (5) business days prior to beginning any such activity.
(f) If Employee violates the provisions of this Section 3, Teradyne shall be entitled to suspend and recoup any salary continuation payment made per Section 1 (d) above and Employee shall continue to be bound by the restrictions set forth in this Section 3 for an additional period of time equal to the duration of the violation, such additional period not to exceed 24 months.
3A. No Obligation of Employment . Employee understands that the employment relationship between Employee and Teradyne will be at will and Employee understands that, prior to any Change in Control, Teradyne may terminate Employee with or without Cause at any time, including in contemplation of a Change in Control. Following any Change in Control, Teradyne may also terminate Employee with or without Cause at any time subject to Employees rights and Teradynes obligations specified in this Agreement.
4. Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts and this Agreement shall be deemed to be performable in Massachusetts.
5. Severability . In case any one or more of the provisions contained in this Agreement for any reason shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement and this Agreement shall be construed to the maximum extent permitted by law.
6. Waivers and Modifications . This Agreement may be modified, and the rights, remedies and obligations contained in any provision hereof may be waived, only in accordance with this Section 6. No waiver by either party of any breach by the other or any provision hereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of this Agreement. This Agreement may not be waived, changed, discharged or terminated orally or by any course of dealing between the parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought.
7. Assignment . (a) Teradyne shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of Teradyne expressly to assume and agree to perform under the terms of this Agreement in the same manner and to the same extent that Teradyne and its affiliates would be required to perform it if no such succession had taken place (provided that such a requirement to perform which arises by operation of law shall be deemed to satisfy the requirements for such an express assumption and agreement), and in such event Teradyne (as constituted prior to such succession)
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shall have no further obligation under or with respect to this Agreement. Failure of Teradyne to obtain such assumption and agreement with respect to Employee prior to the effectiveness of any such succession shall be a breach of the terms of this Agreement with respect to Employee and shall entitle Employee to compensation from Teradyne (as constituted prior to such succession) in the same amount and on the same terms as Employee would be entitled to hereunder were Employees employment terminated for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date of the Termination Event. As used in this Agreement, Teradyne shall mean Teradyne as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees (or is otherwise required) to perform this Agreement. Nothing in this Section 7(a) shall be deemed to cause any event or condition which would otherwise constitute a Change in Control not to constitute a Change in Control.
(b) Notwithstanding Section 7(a), Teradyne shall remain liable to Employee upon a Termination Event after a Change in Control if Employee is not offered continuing employment by a successor to Teradyne or is offered continuing employment by a successor to Teradyne only on a basis which would constitute Good Reason for termination of employment hereunder.
(c) This Agreement, and Employees and Teradynes rights and obligations hereunder, may not be assigned by Employee or, except as provided in Section 7(a), Teradyne, respectively; any purported assignment by Employee or Teradyne in violation hereof shall be null and void.
(d) The terms of this Agreement shall inure to the benefit of and be enforceable by the personal or legal representatives, executors, administrators, permitted successors, heirs, distributees, devisees and legatees of Employee. If Employee shall die while an amount would still be payable to Employee hereunder if they had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employees devisee, legatee or other designee or, if there is no such designee, Employees estate.
8. Entire Agreement . This Agreement constitutes the entire understanding of the parties relating to the subject matter hereof and supersedes and cancels all agreements, written or oral, made prior to the date hereof between Employee and Teradyne relating to the subject matter hereof; provided, however, that Employees existing Cash Award and Equity Award agreements, as modified hereby, shall remain in effect. This Agreement shall not limit any right of Employee to receive any payments or benefits under an employee benefit or Employee compensation plan of Teradyne, initially adopted as of or after the date hereof, which are expressly contingent thereunder upon the occurrence of a Change in Control (including, but not limited to, the acceleration of any rights or benefits thereunder); provided that in no event shall Employee be entitled to any payment or benefit under this Agreement which duplicates a payment or benefit received or receivable by Employee under any severance or similar plan or policy of Teradyne, and in any such case Employee shall only be entitled to receive the greater of the two payments.
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9. Notices . All notices hereunder shall be in writing and shall be delivered in person or mailed by certified or registered mail, return receipt requested, addressed as follows:
If to Teradyne, to: | Teradyne, Inc. | |
600 Riverpark Drive | ||
MS NR600-2-2 (Legal Department) | ||
North Reading, MA 01864 | ||
Attention: Associate General Counsel |
If to Employee, at Employees address set forth on the signature page hereto.
10. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
11. Section Headings . The descriptive section headings herein have been inserted for convenience only and shall not be deemed to define, limit, or otherwise affect the construction of any provision hereof.
12. Term . The term of this Agreement (the Term ) shall commence upon the date hereof and terminate upon the earlier of (i) twenty-four (24) months following any Change in Control of Teradyne, (ii) the date prior to any Change in Control of Teradyne that Employee for any reason ceases to be an employee of Teradyne (other than a Termination Event in contemplation of a Change in Control) and (iii) the date following any Change in Control of Teradyne that Employee is terminated for Cause or voluntary terminates his employment (other than for Good Reason).
13. Expenses . All reasonable legal fees and expenses incurred in a legal proceeding by Employee in seeking to obtain or enforce any right or benefit provided by this Agreement against a successor to Teradyne shall be the responsibility of and paid for by the successor to Teradyne (but not Teradyne as constituted prior to such succession). Such payments are to be made within twenty (20) days after Employees request for payment accompanied with such evidence of fees and expenses incurred as Teradynes successor reasonably may require; provided that if Employee institutes a proceeding and the judge or other decision-maker presiding over the proceeding affirmatively finds that Employee has failed to prevail substantially, Employee shall pay Employees own costs and expenses (and, if applicable, return any amounts theretofore paid on Employees behalf under this Section 13).
14. Payments . Any payments hereunder shall be made out of the general assets of Teradyne. The Employee shall have the status of general unsecured creditor of Teradyne, and this Agreement constitutes a mere promise by Teradyne to make payments under this Agreement in the future as and to the extent provided herein. Unless otherwise determined by Teradyne in an applicable plan or arrangement, no amounts payable hereunder upon a Termination Event shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of Teradyne for the benefit of its employees. Teradyne shall be entitled to withhold from any payments or deemed payments any amount of tax withholding required by law.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
TERADYNE, INC. | ||||
By: | /s/ Michael A. Bradley | |||
Name: | Michael A. Bradley | |||
Title: | CEO & President |
EMPLOYEE | ||||
/s/ Charles J. Gray | ||||
Name: | Charles J. Gray |
ATTACHMENT A
Release
In consideration of the payments and benefits described in the Amended and Restated Executive Officer Change in Control Agreement dated [ , 2009] between me and Teradyne, Inc. (the Company), all of which I acknowledge I would not otherwise be entitled to receive, I hereby fully, forever, irrevocably and unconditionally release, remise and discharge the Company, its successors and assigns and their respective officers, directors, stockholders, corporate affiliates, subsidiaries, parent companies, agents and employees (each in their individual and corporate capacities) (hereinafter, the Released Parties) from any and all claims, charges, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys fees and costs), of every kind and nature which I ever had or now have against the Released Parties arising out of my employment with and/or termination or separation from the Company or relating to my relationship as an officer or in any other capacity for the Company, including, but not limited to, all employment discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Americans With Disabilities Act of 1990, 42 U.S.C., §12101 et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq., and the Massachusetts Fair Employment Practices Act., M.G.L. c.151B, §1 et seq., all as amended; all claims arising out of the Fair Credit Reporting Act, 15 U.S.C. §1681 et seq., the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §1001 et seq., the Massachusetts Civil Rights Act, M.G.L. c.12 §§11H and 11I, the Massachusetts Equal Rights Act, M.G.L. c.93, §102 and M.G.L. c.214, §1C, the Massachusetts Labor and Industries Act, M.G.L. c.149, §1 et seq., the Massachusetts Privacy Act, M.G.L. c. 214, §1B, and the Massachusetts Maternity Leave Act, M.G.L. c. 149, §105(d), all as amended; all common law claims including, but not limited to, actions in tort, defamation and breach of contract; all claims to any non-vested ownership interest in the Company, contractual or otherwise, including but not limited to claims to stock or stock options; and any claim or damage arising out of my employment with, termination or separation from the Company (including a claim for retaliation) under any common law theory or any federal, state or local statute or ordinance not expressly referenced above; provided, however, that notwithstanding the foregoing, the Company agrees and hereby acknowledges that this Release Agreement is not intended to and does not (i) apply to any claims Executive may bring to enforce the terms of the Amended and Restated Executive Officer Change in Control Agreement, (ii) release the Company of any obligation it may have pursuant to a written agreement, the Companys articles of organization or bylaws, or as mandated by statute to indemnify me as an officer of the Company; and (iii) release the Company of any obligation to provide and/or pay benefits to me or my estate, conservator or designated beneficiary(ies) under and in accordance with the terms of any applicable Company benefit plan and/or program; provided further, that nothing in this Release Agreement prevents me from filing, cooperating with, or participating in any proceeding before the EEOC or a state Fair Employment Practices Agency (except that I acknowledge that I may not be able to recover any monetary benefits in connection with any such claim, charge or proceeding).
Waiver of Rights and Claims Under the Age Discrimination in Employment Act of 1967: Since I am 40 years of age or older, I have been informed that I have or may have specific rights and/or claims under the Age Discrimination in Employment Act of 1967 (ADEA) and I agree that:
in consideration for the payments and benefits described in the Amended and Restated Executive Officer Change in Control Agreement, which I am not otherwise entitled to receive, I specifically and voluntarily waive such rights and/or claims under the ADEA I might have against the Released Parties to the extent such rights and/or claims arose prior to the date this Release Agreement was executed;
I understand that rights or claims under the ADEA which may arise after the date this Release Agreement is executed are not waived by me;
I was advised that I have at least 21 days within which to consider the terms of this Release Agreement and to consult with or seek advice from an attorney of my choice or any other person of your choosing prior to executing this Release Agreement;
I have carefully read and fully understand all of the provisions of this Release Agreement, and I knowingly and voluntarily agree to all of the terms set forth in this Release Agreement; and
in entering into this Release Agreement I am not relying on any representation, promise or inducement made by the Company or its attorneys with the exception of those promises described in this document.
Period for Review and Consideration of Agreement:
I acknowledge that I was informed and understand that I have twenty-one (21) days to review this Release Agreement and consider its terms before signing it.
The 21-day review period will not be affected or extended by any revisions, whether material or immaterial, that might be made to this Agreement.
Accord and Satisfaction: The amounts set forth in the Amended and Restated Executive Officer Change in Control Agreement shall be complete and unconditional payment, settlement, accord and/or satisfaction with respect to all obligations and liabilities of the Released Parties to me, including, without limitation, all claims for back wages, salary, vacation pay, draws, incentive pay, bonuses, cash awards, equity awards, commissions, severance pay, reimbursement of expenses, any and all other forms of compensation or benefits, attorneys fees, or other costs or sums.
Revocation Period: I may revoke this Release Agreement at any time during the seven-day period immediately following my execution hereof. As a result, this Release Agreement shall not become effective or enforceable and the Company shall have no obligation to make any payments or provide any benefits described herein until the seven-day revocation period has expired.
Name: | Date | |||
Witness | Date |
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IF YOU DO NOT WISH TO USE THE 21-DAY PERIOD,
PLEASE CAREFULLY REVIEW AND SIGN THIS DOCUMENT
I, , acknowledge that I was informed and understand that I have 21 days within which to consider the attached Release Agreement, have been advised of my right to consult with an attorney regarding such Agreement and have considered carefully every provision of the Agreement, and that after having engaged in those actions, I prefer to and have requested that I enter into the Agreement prior to the expiration of the 21 day period.
Dated: | ||||||||
Name: | ||||||||
Dated: | ||||||||
Witness |
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Exhibit 31.1
CERTIFICATIONS
I, Michael A. Bradley, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Teradyne, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: May 14, 2010 |
||
By: |
/s/ M ICHAEL A. B RADLEY |
|
Michael A. Bradley Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS
I, Gregory R. Beecher, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Teradyne, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: May 14, 2010 |
||
By: |
/s/ G REGORY R. B EECHER |
|
Gregory R. Beecher Chief Financial Officer and Treasurer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Teradyne, Inc. (the Company) on Form 10-Q for the period ending April 4, 2010 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Michael A. Bradley, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C (S) 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
/s/ M ICHAEL A. B RADLEY |
Michael A. Bradley Chief Executive Officer May 14, 2010 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Teradyne, Inc. (the Company) on Form 10-Q for the period ending April 4, 2010 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Gregory R. Beecher, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C (S)1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
/s/ G REGORY R. B EECHER |
Gregory R. Beecher Chief Financial Officer and Treasurer May 14, 2010 |