Teradyne Reports Third Quarter, 2007 Results

Teradyne, Inc. reported sales of $299 million in the third quarter of 2007. Net income was $41 million, or $0.22 per diluted share. Income from continuing operations in the quarter was $35 million, or $0.19 per diluted share on a GAAP basis, and $32 million, or $0.17 per diluted share on a non-GAAP basis. Bookings for the third quarter were $273 million. "We continue to make solid progress in new design wins, despite the third quarter decline in semiconductor test bookings,” said Michael Bradley, Teradyne president and CEO. "Although tester utilization levels remained very high in the quarter, customers continue to be cautious about adding capacity in the short term.” Guidance for the fourth quarter of 2007 is for sales between $250 million and $275 million, with earnings between $0.04 and $0.10 per diluted share. As of October 17, 2007, Teradyne completed its authorized stock repurchase program. Since the inception of the program in the third quarter of 2006, Teradyne has repurchased 27,947,230 shares at an average price of $14.31. Webcast A webcast to discuss third quarter 2007 results, along with management's outlook, will be held on Thursday, October 18, 2007 at 10 a.m. EDT. Interested investors should access the webcast at www.teradyne.com and click on "Investors" at least five minutes before the call begins. A replay will be available approximately two hours after the completion of the call. The replay number in the U.S. & Canada is 1-800-642-1687. The replay number outside the U.S. & Canada is 1-706-645-9291. The pass code for both numbers is 20095692. A replay will also be available on the Teradyne Web site www.teradyne.com. Click on "Investors" for a link to the replay. The replay will be available via phone and through the Web site until November 1, 2007. About Teradyne, Inc. Teradyne (NYSE:TER) is a leading supplier of Automatic Test Equipment used to test complex electronics used in the consumer electronics, automotive, computing, telecommunications, and aerospace and defense industries. In 2006, Teradyne had sales of $1.36 billion from continuing operations, and currently employs about 3,600 people worldwide. For more information, visit www.teradyne.com. Teradyne (R) is a registered trademark of Teradyne, Inc. in the U.S. and other countries. All product names are trademarks of Teradyne, Inc. (including its subsidiaries). Safe Harbor Statement The forward-looking statements included in this release are made only as of the date of publication and Teradyne undertakes no obligation to update the information set forth in this release. This release contains forward-looking statements regarding expected future revenues and earnings, future market conditions and business prospects. Such statements are based on the current assumptions and expectations of Teradyne’s management and are neither promises nor guarantees. You can generally identify these forward-looking statements based on the context of the statements and by the fact that they use words such as "will,” "anticipate,” "expect,” "project,” "intend,” "plan,” "believe,” "target” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. There can be no assurance that management’s estimates of our future results will be achieved. Important factors that could cause actual results to differ materially from those presently expected include: adverse changes in general economic or market conditions (including market demand for electronics and downturns in the semiconductor industry); the decision by customers to cancel or defer orders that previously had been accepted; reductions or delays in capital investment by our customers; competitive pressures (including pricing and gross margin pressures); the risks of operating internationally, disruptions, delays or an inadequate supply of raw materials, components or internal and external manufacturing capability; the operational effectiveness of our outsourced manufacturing activities, and other events, factors and risks previously and from time to time disclosed in our filings with the Securities and Exchange Commission, including, but not limited to, our annual report on Form 10-K for the fiscal year ended December 31, 2006, and; our periodic reports on Forms 10-Q and 8-K. TERADYNE, INC. REPORT FOR THIRD FISCAL QUARTER OF 2007                       CONDENSED CONSOLIDATED OPERATING STATEMENTS (In thousands, except per share amounts)           Quarter Ended: Nine Months Ended: September 30, 2007   July 1, 2007 October 1, 2006 September 30, 2007   October 1, 2006   Net Revenues $ 299,461 $ 288,710 $ 354,717 $ 841,864 $ 1,097,565   Cost of Revenues (1)(2)   155,215       151,490     180,332       447,001       565,471     Gross Profit 144,246 137,220 174,385 394,863 532,094   Operating Expenses: Engineering and Development (1) 52,245 52,417 51,791 153,924 154,193 Selling and Administrative (1) 62,870 62,760 70,452 188,642 214,789 In-process Research and Development (3) - - - 16,700 - Restructuring and Other, net (4)   (3,119 )     568     (15,112 )     (304 )     (36,806 ) Operating Expenses 111,996 115,745 107,131 358,962 332,176   Income from Operations 32,250 21,475 67,254 35,901 199,918   Interest Income 7,784 9,299 12,453 27,182 33,595 Interest Expense (119 ) (74 ) (3,518 ) (629 ) (10,359 ) Other Income (5)   -       -     -       1,832       -     Income from Continuing Operations Before Income Taxes 39,915 30,700 76,189 64,286 223,154 Income Tax Provision   4,717       3,454     9,866       9,556       27,874   Income from Continuing Operations 35,198 27,246 66,323 54,730 195,280   Income/(Loss) from Discontinued Operations (6) 6,084 618 (1,908 ) 6,795 (3,623 ) Income Tax Provision   293       210     3,850       518       3,774   Income/(Loss) from Discontinued Operations   5,791       408     (5,758 )     6,277       (7,397 )   Net Income $ 40,989     $ 27,654   $ 60,565       61,007     $ 187,883     Income per Common Share from Continuing Operations: Basic $ 0.19     $ 0.14   $ 0.34     $ 0.29     $ 0.99   Diluted (7) $ 0.19     $ 0.14   $ 0.34     $ 0.29     $ 0.97     Net Income per Common Share: Basic $ 0.22     $ 0.15   $ 0.31     $ 0.33     $ 0.96   Diluted (7) $ 0.22     $ 0.14   $ 0.31     $ 0.32     $ 0.94       Weighted Average Common Shares - Basic   183,566       189,391     193,563       187,527       196,608     Weighted Average Common Shares - Diluted (7)   185,298       191,405     204,551       189,222       208,585     Net Orders $ 273,332     $ 306,553   $ 238,147     $ 825,860     $ 999,314     (1) Includes the following amounts related to stock-based compensation: September 30, 2007   July 1, 2007 October 1, 2006   September 30, 2007   October 1, 2006 Cost of Revenues $ 1,059 $ 1,289 $ 1,110 $ 3,732 $ 3,343 Engineering and Development 1,729 2,103 1,813 $ 6,091 5,456 Selling and Administrative   2,789       3,391     2,923       9,822       8,799   $ 5,577     $ 6,783   $ 5,846     $ 19,645     $ 17,598     (2) Cost of revenues includes an inventory provision of $8.0 million in the nine months ended October 1, 2006 for non-FLEX products in the Semiconductor Test Division. For the quarter ended July 1, 2007, and nine months ended September 30, 2007, $0.5 million was recorded as a credit related to previously written off inventory in the Semiconductor Test Division.   (3) In-process research and development charge from the acquisition of enabling test technology from MOSAID Technologies during the first quarter of 2007 for the Semiconductor Test Division.   (4) Restructuring and Other, net consists of: Quarter Ended: Nine Months Ended: September 30, 2007   July 1, 2007 October 1, 2006 September 30, 2007   October 1, 2006 Severance $ 2,291 $ 1,505 $ 1,044 $ 5,997 $ 2,638 Facility related - (52 ) 447 (16 ) (821 ) Loss/(gain) on sale of real estate (3,628 ) 21 (16,583 ) (3,597 ) (38,319 ) Insurance gain from Taiwan fire (1,782 ) - - (1,782 ) - Gain on sale of product lines - (906 ) (20 ) (906 ) (406 ) Long-lived asset impairment - - - - 50 Other   -     -     -     -     52   $ (3,119 ) $ 568   $ (15,112 ) $ (304 ) $ (36,806 )   (5) Recognition of fair value of an asset related to an equity investment.   (6) On August 1, 2007 Teradyne completed the sale of its Broadband Test Systems Division with Tollgrade Communications, Inc. for a gain of $6,282   The results for discontinued businesses have been included within discontinued operations for all periods presented.   (7) Teradyne had convertible debentures that matured in the fourth quarter of 2006. Under GAAP, when calculating diluted earnings per share, convertible debentures must be assumed to have converted if the effect on EPS would be dilutive. For Teradyne, dilution occurred when earnings were greater than $0.24 per share per quarter.   Quarter Ended:   Nine Months Ended: September 30, 2007   July 1, 2007 October 1, 2006   September 30, 2007   October 1, 2006 Shares included in diluted shares - - 10.4 - 10.9 Net interest expense added back to net income $ - $ - $ 2.6 $ - $ 7.9 CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)     September 30, 2007   December 31, 2006   Assets Cash and Cash Equivalents $ 429,078 $ 568,025 Marketable Securities 187,176 47,766 Accounts Receivable 231,561 155,770 Inventories 91,852 92,813 Other Current Assets 31,345 21,527 Current Assets from Discontinued Operations (1)   -   3,509 971,012 889,410   Net Property, Plant and Equipment 351,712 365,521 Long-term Marketable Securities 131,409 328,827 Goodwill 69,147 69,147 Intangible and Other Assets 36,622 35,819 Retirement Plans Assets 36,400 31,503 Long-term Assets from Discontinued Operations (1)   -   828 $ 1,596,302 $ 1,721,055   Liabilities Accounts Payable 64,515 39,918 Accrued Employees' Compensation and Withholdings 65,188 87,811 Deferred Revenue and Customer Advances 38,711 44,053 Other Accrued Liabilities 48,375 47,023 Income Taxes Payable 5,262 36,052 Current Liabilities from Discontinued Operations (1)   -   4,859 222,051 259,716   Retirement Plans Liabilities 83,736 81,121 Other Long-term Liabilities 21,071 18,352 Long-term Liabilities from Discontinued Operations (1)   -   679 326,858 359,868   Shareholders' Equity   1,269,444   1,361,187   $ 1,596,302 $ 1,721,055   (1) On August 1, 2007 Teradyne completed the sale of its Broadband Test Systems Division with Tollgrade Communications, Inc. The division's assets and liabilities have been included within discontinued operations. GAAP to Non-GAAP Earnings Reconciliation References by the Company to non-GAAP income and non-GAAP income per share refer to income from continuing operations or income per common share from continuing operations excluding in-process research and development, restructuring and other, net, certain inventory provisions, certain other income and certain tax related items, as well as adjustments to profit sharing and taxes due to these exclusions. GAAP requires that these items be included in determining income from continuing operations. Non-GAAP income from continuing operations (which is the basis for non-GAAP income per share) gives an indication of Teradyne's baseline performance before gains, losses or other charges that are considered by management to be outside the Company's ongoing operating results. The Company believes these non-GAAP measures will aid investors' overall understanding of the Company's results by providing a higher degree of transparency for certain expenses and credits, through providing a level of disclosure that will help investors understand how the Company plans and measures its own business. However, the presentation of non-GAAP measures is not meant to be considered in isolation or as a substitute for, or superior to, financial information provided in accordance with GAAP.         Quarter Ended:   Nine Months Ended: September 30, 2007   July 1, 2007   October 1, 2006   September 30, 2007   October 1, 2006 (in millions, except per share data)             Gross Margin - GAAP $ 144.2 48.2% $ 137.2 47.5% $ 174.4 49.2% $ 394.9 46.9% $ 532.1 48.5% Inventory provision / (reversal) (1) - (0.5) - (0.5) 8.0 Gross Margin - non-GAAP $ 144.2 48.2% $ 136.7 47.3% $ 174.4 49.2% $ 394.4 46.8% $ 524.1 47.8%   Income from Continuing Operations - GAAP $ 35.2 11.8% $ 27.2 9.4% $ 66.3 18.7% $ 54.7 6.5% $ 195.3 17.8% Inventory provision / (reversal) (1) - (0.5) - (0.5) 8.0 In-process research and development (2) - - - 16.7 - Restructuring and other, net (3) (3.1) 0.5 (15.1) (0.3) (36.8) Other income (4) - - - (1.8) - Profit sharing adjustment (5) 0.0 - 0.2 (1.6) (0.4) Income tax adjustment (6) (0.4) - 0.3 (0.3) 0.5 Tax benefit from gain on disposal of TCS (7) - - (3.9) - (3.9) Income from Continuing Operations - non-GAAP $ 31.7 10.6% $ 27.2 9.4% $ 47.8 13.5% $ 66.9 7.9% $ 162.7 14.8%   GAAP Income per Common Share from Continuing Operations- Basic $ 0.19 $ 0.14 $ 0.34 $ 0.29 $ 0.99 Non-GAAP Income per Common Share from Continuing Operations - Basic $ 0.17 $ 0.14 $ 0.25 $ 0.36 $ 0.83   GAAP Weighted Average Common Shares - Basic 183.6 189.4 193.6 187.5 196.6   GAAP Income per Common Share from Continuing Operations - Diluted (8) $ 0.19 $ 0.14 $ 0.34 $ 0.29 $ 0.97 Non-GAAP Income per Common Share from Continuing Operations - Diluted (8) $ 0.17 $ 0.14 $ 0.25 $ 0.35 $ 0.82     GAAP Weighted Average Common Shares - Diluted (8) 185.3 191.4 204.6 189.2 208.6   (1) Cost of revenues includes an inventory provision reversal of $0.5 million in the quarter ended July 1, 2007 and nine months ended September 30, 2007 and an inventory provision of $8.0 million for the nine months ended October 1, 2006 for non-FLEX products in the Semiconductor Test Division.   (2) In-process research and development charge from the acquisition of enabling test technology from MOSAID Technologies during the first quarter of 2007 for the Semiconductor Test Division.     Quarter Ended:     Nine Months Ended: September 30, 2007   July 1, 2007   October 1, 2006 September 30, 2007   October 1, 2006 (3) Restructuring and other, net consists of (in millions):   Employee severance $ 2.3 $ 1.5 $ 1.0 $ 6.0 $ 2.6 Facility related - (0.1) 0.4 (0.0) (0.8) Gain on sale of real estate (3.6) 0.0 (16.5) (3.6) (38.4) Insurance gain from Taiwan fire (1.8) - - (1.8) - Gain on sale of product lines - (0.9) (0.0) (0.9) (0.4) Long-lived asset impairment - - - - 0.1 Other - - - - 0.1 $ (3.1) $ 0.5 $ (15.1) $ (0.3) $ (36.8)   (4) Recognition of fair value of an asset related to an equity investment.   (5) To adjust the profit sharing calculation in accordance with the profit sharing plan for the non-GAAP items.   (6) To adjust the tax provision for the non-GAAP items.   (7) Under GAAP, there was a tax benefit recorded in continuing operations for finalization of the 2005 U.S. tax losses, with an offsetting tax provision in the gain on sale of TCS included in discontinued operations.   (8) Teradyne had convertible debentures that matured in the fourth quarter of 2006. Under GAAP, when calculating diluted earnings per share, convertible debentures must be assumed to have converted if the effect on EPS would be dilutive. For Teradyne, dilution occurred when earnings were greater than $0.24 per share per quarter.   Quarter Ended: Nine Months Ended: September 30, 2007 July 1, 2007 October 1, 2006 September 30, 2007 October 1, 2006 Shares included in diluted shares - - 10.4 - 10.9 Net interest expense added back to net income $ - $ - $ 2.6 $ - $ 7.9 For press releases and other information of interest to investors, please visit Teradyne's homepage on the World Wide Web at http://www.teradyne.com.