Teradyne Reports Third Quarter 2019 Results


  • Semiconductor Test demand for 5G infrastructure remained strong  
  • Memory test shipments grew 23% sequentially on Flash demand
  • Industrial Automation revenue up 4% from Q3’18
  • Q3’19 GAAP earnings per share grew 19% and Non-GAAP earnings per share grew 8% from Q3’18
  • Full year GAAP earnings per share expected to grow 11% and Non-GAAP earnings per share to grow 16% from 2018 at mid-point of guidance             
 Q3’19Q3’18Q2’19
Revenue (mil)$582$567 $564
GAAP EPS$0.75$0.63 $0.55
Non-GAAP EPS$0.77$0.71 $0.66

==========================================

NORTH READING, Mass., Oct. 22, 2019 (GLOBE NEWSWIRE) -- Teradyne, Inc. (NASDAQ: TER) reported revenue of $582 million for the third quarter of 2019 of which $398 million was in Semiconductor Test, $73 million in System Test, $69 million in Industrial Automation and $42 million in Wireless Test. GAAP net income for the third quarter was $135.9 million or $0.75 per diluted share. On a non-GAAP basis, Teradyne’s net income in the third quarter was $133.4 million, or $0.77 per diluted share, which excluded acquired intangible asset amortization, restructuring and other, non-cash convertible debt interest, discrete income tax adjustments, and included the related tax impact on non-GAAP adjustments.

“Our Semiconductor Test business continued to deliver strong results in the quarter driving company sales and earnings above the July guidance ranges, despite Industrial Automation’s lower than expected revenue growth of 4% compared to last year’s Q3 level,” said Teradyne President and CEO Mark Jagiela. “Ongoing demand for 5G infrastructure and Flash memory test drove our Semiconductor Test performance in the quarter. In Industrial Automation, while mobile robot demand at MiR remained strong, and Universal Robots saw pockets of growth in Asia, overall demand at UR was lower than expected as weakness in the manufacturing sector impacted our business in the US and Europe.”

Guidance for the fourth quarter of 2019 is revenue of $590 million to $630 million, with GAAP net income of $0.63 to $0.74 per diluted share and non-GAAP net income of $0.73 to $0.84 per diluted share. Non-GAAP guidance excludes acquired intangible asset amortization, non-cash convertible debt interest and includes the related tax impact on non-GAAP adjustments.

“In Q4, our strong outlook is driven mainly by continued 5G and memory related Semiconductor Test demand and improved storage test shipments,” Jagiela commented. “For the full year, at the mid-point of our guidance, we expect our year-over-year sales to grow more than 7% to over $2.2 billion and non-GAAP earnings per share to grow 16%.”

Webcast
A conference call to discuss the third quarter results, along with management's business outlook, will follow at 10 a.m. ET, Wednesday, October 23. Interested investors should access the webcast at investors.teradyne.com/events-presentations at least five minutes before the call begins. Presentation materials will be available starting at 10 a.m. ET. A replay will be available on the Teradyne investor site at investors.teradyne.com.

Non-GAAP Results
In addition to disclosing results that are determined in accordance with GAAP, Teradyne also discloses non-GAAP results of operations that exclude certain income items and charges. These results are provided as a complement to results provided in accordance with GAAP. Non-GAAP income from operations and non-GAAP net income exclude acquired intangible assets amortization, non-cash convertible debt interest, pension actuarial gains and losses, discrete income tax adjustments, fair value inventory step-up, and restructuring and other, and include the related tax impact on non-GAAP adjustments. GAAP requires that these items be included in determining income from operations and net income. Non-GAAP income from operations, non-GAAP net income, non-GAAP income from operations as a percentage of revenue, non-GAAP net income as a percentage of revenue, and non-GAAP net income per share are non-GAAP performance measures presented to provide meaningful supplemental information regarding Teradyne’s baseline performance before gains, losses or other charges that may not be indicative of Teradyne’s current core business or future outlook. These non-GAAP performance measures are used to make operational decisions, to determine employee compensation, to forecast future operational results, and for comparison with Teradyne’s business plan, historical operating results and the operating results of Teradyne’s competitors. Non-GAAP gross margin excludes fair value inventory step-up. GAAP requires that this item be included in determining gross margin. Non-GAAP gross margin dollar amount and percentage are non-GAAP performance measures that management believes provide useful supplemental information for management and the investor. Management uses non-GAAP gross margin as a performance measure for Teradyne’s current core business and future outlook and for comparison with Teradyne’s business plan, historical gross margin results and the gross margin results of Teradyne’s competitors. Non-GAAP diluted shares include the impact of Teradyne’s call option on its shares. Management believes each of these non-GAAP performance measures provides useful supplemental information for investors, allowing greater transparency to the information used by management in its operational decision making and in the review of Teradyne’s financial and operational performance, as well as facilitating meaningful comparisons of Teradyne’s results in the current period compared with those in prior and future periods. A reconciliation of each available GAAP to non-GAAP financial measure discussed in this press release is contained in the attached exhibits and on the Teradyne website at www.teradyne.com by clicking on “Investors” and then selecting the “GAAP to Non-GAAP Reconciliation” link. The non-GAAP performance measures discussed in this press release may not be comparable to similarly titled measures used by other companies. The presentation of non-GAAP measures is not meant to be considered in isolation, as a substitute for, or superior to, financial measures or information provided in accordance with GAAP.

About Teradyne
Teradyne (NASDAQ:TER) brings high-quality innovations such as smart devices, life-saving medical equipment and data storage systems to market, faster. Its advanced test solutions for semiconductors, electronic systems, wireless devices and more ensure that products perform as they were designed. Its Industrial Automation offerings include collaborative and mobile robots that help manufacturers of all sizes improve productivity and lower costs. In 2018, Teradyne had revenue of $2.1 billion and today employs 5,300 people worldwide. For more information, visit teradyne.com. Teradyne® is a registered trademark of Teradyne, Inc. in the U.S. and other countries.

Safe Harbor Statement
This release contains forward-looking statements regarding Teradyne’s future business prospects, results of operations, market conditions, earnings per share, the payment of a quarterly dividend, the repurchase of Teradyne common stock pursuant to a share repurchase program, use of proceeds and potential dilution from the senior convertible notes offering, and the impact of the U.S. tax reform, export and tariff laws. Such statements are based on the current assumptions and expectations of Teradyne’s management and are neither promises nor guarantees of future performance, events, earnings per share, use of cash, payment of dividends, repurchases of common stock, payment of the senior convertible notes, or the impact of the U.S. tax reform, export and tariff laws. There can be no assurance that management’s estimates of Teradyne’s future results or other forward-looking statements will be achieved. Additionally, the current dividend and share repurchase programs may be modified, suspended or discontinued at any time. On May 16, 2019, Huawei and 68 of its affiliates, including HiSilicon, were added to the U.S. Department of Commerce Entity List under U.S. Export Administration Regulations (the “EAR”). This action by the U.S. Department of Commerce imposes new export licensing requirements on exports, re-exports, and in-country transfers of all U.S. - regulated products, software and technology to the designated Huawei entities.  While most of our products are not subject to the EAR and therefore not affected by the Entity List restrictions, certain of our products are currently manufactured in the U.S. and thus subject to the Entity List restrictions.  Compliance with the Entity List restrictions has not significantly impacted our sales, but could limit sales in the future.  Important factors that could cause actual results, earnings per share, use of cash, dividend payments, repurchases of common stock, or payment of the senior convertible notes to differ materially from those presently expected include: conditions affecting the markets in which Teradyne operates; decreased or delayed product demand from one or more significant customers; development, delivery and acceptance of new products; the ability to grow the Industrial Automation business; increased research and development spending; deterioration of Teradyne’s financial condition; the consummation and success of any mergers or acquisitions; unexpected cash needs; insufficient cash flow to make required payments and pay the principal amount on the senior convertible notes; the business judgment of the board of directors that a declaration of a dividend or the repurchase of common stock is not in the company’s best interests; additional U.S. tax regulations or IRS guidance; the impact of any tariffs or export controls imposed in the U.S. or China; compliance with trade protection measures or export restrictions, including the addition of Huawei and HiSilicon to the U.S. Department of Commerce Entity List; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” section of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and the Quarterly Report on Form 10-Q for the period ended June 30, 2019. The forward-looking statements provided by Teradyne in this press release represent management’s views as of the date of this release. Teradyne anticipates that subsequent events and developments may cause management’s views to change. However, while Teradyne may elect to update these forward-looking statements at some point in the future, Teradyne specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Teradyne’s views as of any date subsequent to the date of this release.

          
          
TERADYNE, INC. REPORT FOR THIRD FISCAL QUARTER OF 2019         
                 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)         
                 
       Quarter Ended Nine Months Ended 
       September 29, 2019 June 30,
2019
 September 30, 2018 September 29, 2019 September 30, 2018 
                 
Net revenues $582,038 $564,178 $566,848 $1,640,315 $1,581,244 
                 
 Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1) 237,000 240,260 233,155 683,724 670,385 
                 
Gross profit 345,038 323,918 333,693 956,591 910,859 
                 
Operating expenses:           
 Selling and administrative (2) 109,166 108,811 100,199 319,990 290,115 
 Engineering and development 77,804 81,434 77,049 236,030 226,799 
 Acquired intangible assets amortization 9,647 10,083 11,142 30,363 28,633 
  Restructuring and other (3) (6,500) (10,404) 1,710 (11,792) 3,785 
   Operating expenses 190,117 189,924 190,100 574,591 549,332 
                 
Income from operations 154,921 133,994 143,593 382,000 361,527 
                 
 Interest and other expense (4) 3,188 2,817 2,749 5,111 4,852 
                 
Income before income taxes 151,733 131,177 140,844 376,889 356,675 
 Income tax provision (5) 15,873 33,780 20,863 34,494 48,684 
Net income $135,860 $97,397 $119,981 $342,395 $307,991 
                 
Net income per common share:           
Basic   $0.80 $0.57 $0.65 $2.00 $1.62 
Diluted   $0.75 $0.55 $0.63 $1.92 $1.57 
                 
Weighted average common shares - basic 169,641 171,241 185,744 171,471 190,576 
                 
Weighted average common shares - diluted (6) 180,494 178,590 190,505 178,685 196,300 
                 
                 
Cash dividend declared per common share $0.09 $0.09 $0.09 $0.27 $0.27 
                 
                 
                 
(1)Cost of revenues includes: Quarter Ended Nine Months Ended 
       September 29, 2019 June 30,
2019
 September 30, 2018 September 29, 2019 September 30, 2018 
   Provision for excess and obsolete inventory$3,049 $3,402 $3,347 $8,848 $9,522 
   Sale of previously written down inventory (821) (363) (1,013) (1,962) (5,178) 
   Inventory step-up - 383 - 383 372 
       $2,228 $3,422 $2,334 $7,269 $4,716 
      
(2)For the quarter and nine months ended September 29, 2019, selling and administrative expenses include an equity charge of $2,109 for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement. 
                 
(3)Restructuring and other consists of: Quarter Ended Nine Months Ended 
       September 29, 2019 June 30,
2019
 September 30, 2018 September 29, 2019 September 30, 2018 
   Contingent consideration fair value adjustment $(7,759) $(11,671) $(768) $(16,460) $(9,236) 
   Employee severance 808 803 1,667 2,410 7,945 
   Acquisition related expenses and compensation 451 464 811 2,258 4,129 
   Other - - - - 947 
       $(6,500) $(10,404) $1,710 $(11,792) $3,785 
                 
                 
(4)Interest and other includes: Quarter Ended Nine Months Ended 
       September 29, 2019 June 30,
2019
 September 30, 2018 September 29, 2019 September 30, 2018 
   Non-cash convertible debt interest $3,453 $3,410 $3,286 $10,231 $9,737 
   Pension actuarial loss - 448 267 448 196 
       $3,453 $3,858 $3,553 $10,679 $9,933 
                 
(5)For the quarter ended June 30, 2019, income tax provision includes a $15 million tax provision related to the finalization of our toll tax charge. For the nine months ended September 29, 2019, income tax provision includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return and a $15 million tax provision related to the finalization of our toll tax charge. 
                 
 (6)Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, 5.8 million, 4.4 million and 3.0 million shares, respectively, have been included in diluted shares. For the nine months ended September 29, 2019 and September 30, 2018, 4.1 million and 3.4 million shares, respectively, have been included in diluted shares. For the three months ended September 29, 2019, June 30, 2019 and September 30, 2018, diluted shares also included 3.6 million, 1.8 million and 0.1 million shares, respectively, from the convertible note hedge transaction. For the nine months ended September 29, 2019 and September 30, 2018, diluted shares included 1.8 million and 0.6 million shares, respectively, from the convertible note hedge transaction. 
                 
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)         
                 
       September 29, 2019 December 31, 2018       
                 
Assets             
 Cash and cash equivalents $593,939 $926,752       
 Marketable securities 342,538 190,096       
 Accounts receivable, net 357,886 291,267       
 Inventories, net 178,203 153,541       
 Prepayments and other current assets 182,013 170,826       
   Total current assets 1,654,579 1,732,482       
                 
 Property, plant and equipment, net 307,567 279,821       
 Operating lease right-of-use assets, net 57,595 -       
 Marketable securities 103,558 87,731       
 Deferred tax assets 69,120 70,848       
 Other assets 22,724 11,509       
 Retirement plans assets 16,358 16,883       
 Acquired intangible assets, net 96,573 125,482       
 Goodwill 370,717 381,850       
                 
   Total assets $2,698,791 $2,706,606       
                 
Liabilities            
 Accounts payable $117,936 $100,688       
 Accrued employees' compensation and withholdings 127,912 148,566       
 Deferred revenue and customer advances 95,936 77,711       
 Other accrued liabilities 93,736 78,272       
 Operating lease liabilities 18,386 -       
 Contingent consideration 6,297 34,865       
 Income taxes payable 33,508 36,185       
                 
   Total current liabilities 493,711 476,287       
                 
 Retirement plans liabilities 121,340 117,456       
 Long-term deferred revenue and customer advances 42,592 32,750       
 Deferred tax liabilities 15,390 20,662       
 Long-term other accrued liabilities 9,803 37,547       
 Long-term contingent consideration 11,783 35,678       
 Long-term operating lease liabilities 46,813 -       
 Long-term income taxes payable 83,782 83,891       
 Debt 390,942 379,981       
                 
   Total liabilities 1,216,156 1,184,252       
                 
Shareholders' equity 1,482,635 1,522,354       
                 
   Total liabilities and shareholders' equity $2,698,791 $2,706,606       
                 
                 
                 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)       
                 
       Quarter Ended Nine Months Ended   
       September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018   
Cash flows from operating activities:           
 Net income $135,860 $119,981 $342,395 $307,991   
 Adjustments to reconcile net income to net cash provided by operating activities:           
   Depreciation 17,626 16,774 51,508 49,930   
   Amortization 11,873 12,732 36,849 32,909   
   Deferred taxes (3,492) 7,130 (2,977) 24,442   
   Stock-based compensation 10,713 7,702 28,822 25,327   
   Provision for excess and obsolete inventory 3,049 3,347 8,848 9,522   
   Contingent consideration fair value adjustment(7,759) (768) (16,460) (9,236)   
   Retirement plans actuarial loss - 267 448 196   
   Gains on marketable securities (417) (1,182) (4,158) (420)   
   Other 181 530 610 936   
   Changes in operating assets and liabilities, net of businesses acquired:          
     Accounts receivable 12,689 101,596 (66,789) (77,807)   
     Inventories (11,696) (12,834) (14,143) (34,117)   
     Prepayments and other assets 949 (30,360) (16,118) (28,719)   
     Accounts payable and other liabilities 35,231 24,279 20,807 16,124   
     Deferred revenue and customer advances 11,953 (695) 27,779 9,823   
     Retirement plans contributions (1,361) (1,071) (3,775) (3,244)   
     Income taxes (16,251) (6,844) (31,224) (33,152)   
Net cash provided by operating activities 199,148 240,584 362,422 290,505   
                 
Cash flows from investing activities:           
 Purchases of property, plant and equipment (37,092) (25,606) (96,048) (88,269)   
 Proceeds from government subsidy for property, plant and equipment - 7,920 - 7,920   
 Purchases of marketable securities (121,358) (162,450) (605,539) (809,521)   
 Proceeds from sales of marketable securities 17,820 14,111 60,274 843,164   
 Proceeds from maturities of marketable securities 160,279 464,238 393,472 934,100   
 Proceeds from life insurance 2,639 1,126 2,912 1,126   
 Purchase of investments and acquisition of businesses, net of cash acquired - 1,158 (21,970) (169,474)   
Net cash provided by (used for) investing activities 22,288 300,497 (266,899) 719,046   
                 
Cash flows from financing activities:           
 Issuance of common stock under stock purchase and stock option plans 14,191 10,278 29,280 20,959   
 Repurchase of common stock (121,560) (201,468) (368,782) (562,263)   
 Dividend payments (15,250) (16,638) (46,269) (51,320)   
 Payments related to net settlement of employee stock compensation awards (104) (90) (14,550) (19,841)   
 Payments of contingent consideration - - (27,615) (13,571)   
Net cash used for financing activities (122,723) (207,918) (427,936) (626,036)   
                 
Effects of exchange rate changes on cash and cash equivalents
 119 472 (400) 661   
                 
Increase (decrease) in cash and cash equivalents 98,832 333,635 (332,813) 384,176   
Cash and cash equivalents at beginning of period 495,107 480,384 926,752 429,843   
Cash and cash equivalents at end of period $593,939 $814,019 $593,939 $814,019   
                 


GAAP to Non-GAAP Earnings Reconciliation
                           
(In millions, except per share amounts)                       
            Quarter Ended            
    September 29,
2019
 % of Net Revenues     June 30,
2019
 % of Net Revenues     September 30,
2018
 % of Net Revenues    
                           
Net revenues $582.0        $564.2        $566.8       
                           
Gross profit GAAP$345.0   59.3%     $323.9  57.4%     $333.7  58.9%    
 Inventory step-up -   -       0.4  0.1%      -  -     
Gross profit non-GAAP$345.0   59.3%     $324.3  57.5%     $333.7  58.9%    
                           
Income from operations - GAAP$154.9   26.6%     $134.0  23.8%     $143.6  25.3%    
 Acquired intangible assets amortization 9.6   1.6%      10.1  1.8%      11.1  2.0%    
 Equity modification charge (1) 2.1   0.4%      -  -       -  -     
 Restructuring and other (2) (6.5)  -1.1%      (10.4) -1.8%      1.7  0.3%    
 Inventory step-up -   -       0.4  0.1%      -  -     
Income from operations - non-GAAP$160.1   27.5%     $134.1  23.8%     $156.4  27.6%    
                           
        Net Income
per Common Share
     Net Income
per Common Share
     Net Income
per Common Share
    September 29,
2019
 % of Net Revenues Basic  Diluted June 30, 2019 % of Net Revenues Basic  Diluted September 30,
2018
 % of Net Revenues Basic  Diluted
Net income - GAAP$135.9   23.4% $0.80  $0.75  $97.4  17.3% $0.57  $0.55  $120.0  21.2% $0.65  $0.63 
 Acquired intangible assets amortization 9.6   1.6%  0.06   0.05   10.1  1.8%  0.06   0.06   11.1  2.0%  0.06   0.06 
 Interest and other (3) 3.5   0.6%  0.02   0.02   3.4  0.6%  0.02   0.02   3.3  0.6%  0.02   0.02 
 Equity modification charge (1) 2.1   0.4%  0.01   0.01   -  -   -   -   -  -   -   - 
 Restructuring and other (2) (6.5)  -1.1%  (0.04)  (0.04)  (10.4) -1.8%  (0.06)  (0.06)  1.7  0.3%  0.01   0.01 
 Pension mark-to-market adjustment (3) -   -   -   -   0.4  0.1%  0.00   0.00   0.3  0.1%  0.00   0.00 
 Inventory step-up -   -   -   -   0.4  0.1%  0.00   0.00   -  -   -   - 
 Exclude discrete tax adjustments (4) (7.7)  -1.3%  (0.05)  (0.04)  13.9  2.5%  0.08   0.08   0.3  0.1%  0.00   0.00 
 Non-GAAP tax adjustments (3.5)  -0.6%  (0.02)  (0.02)  (2.0) -0.4%  (0.01)  (0.01)  (3.4) -0.6%  (0.02)  (0.02)
 Convertible share adjustment -   -   -   0.02   -  -   -   0.02   -  -   -   0.01 
Net income - non-GAAP$133.4   22.9% $0.79  $0.77  $113.2  20.1% $0.66  $0.66  $133.3  23.5% $0.72  $0.71 
                           
GAAP and non-GAAP weighted average common shares - basic 169.6         171.2         185.7       
GAAP weighted average common shares - diluted 180.5         178.6         190.5       
 Exclude dilutive shares related to convertible note transaction   (5.8)        (6.2)        (3.1)      
Non-GAAP weighted average common shares - diluted 174.7         172.4         187.4       
                           
                           
(1) For the quarter ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.
                           
(2)Restructuring and other consists of: 
    Quarter Ended       
    September 29,
2019
       June 30,
2019
       September 30,
2018
      
  Contingent consideration fair value adjustment$(7.8)       $(11.7)       $(0.8)      
  Acquisition related expenses and compensation 0.5         0.5         0.8       
  Employee severance 0.8         0.8         1.7       
    $(6.5)       $(10.4)       $1.7       
                           
(3)For the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended June 30, 2019 and September 30, 2018, adjustment to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.     
                           
(4)For the quarters ended September 29, 2019, June 30, 2019 and September 30, 2018, adjustment to exclude discrete income tax items. For the quarter ended June 30, 2019, GAAP income tax provision includes a $15 million tax provision related to the finalization of our toll tax charge.     
             
    Nine Months Ended         
    September 29,
2019
 % of Net Revenues     September 30,
2018
 % of Net Revenues            
                           
Net Revenues $1,640.3        $1,581.2               
                           
Gross profit GAAP$956.6   58.3%     $910.9  57.6%            
 Inventory step-up 0.4   0.0%      0.4  0.0%            
Gross profit non-GAAP$957.0   58.3%     $911.3  57.6%            
                           
Income from operations - GAAP$382.0   23.3%     $361.5  22.9%            
 Acquired intangible assets amortization 30.4   1.9%      28.6  1.8%            
 Equity modification charge (1) 2.1   0.1%      -  -             
 Restructuring and other (2) (11.8)  -0.7%      3.8  0.2%            
 Inventory step-up 0.4   0.0%      0.4  0.0%            
Income from operations - non-GAAP$403.1   24.6%     $394.3  24.9%            
                           
        Net Income
per Common Share
     Net Income
per Common Share
        
    September 29,
2019
 % of Net Revenues Basic  Diluted September 30, 2018 % of Net Revenues Basic  Diluted        
Net income - GAAP$342.4   20.9% $2.00  $1.92  $308.0  19.5% $1.62  $1.57         
 Acquired intangible assets amortization 30.4   1.9%  0.18   0.17   28.6  1.8%  0.15   0.15         
 Interest and other (3) 10.2   0.6%  0.06   0.06   9.7  0.6%  0.05   0.05         
 Equity modification charge (1) 2.1   0.1%  0.01   0.01   -  -   -   -         
 Restructuring and other (2) (11.8)  -0.7%  (0.07)  (0.07)  3.8  0.2%  0.02   0.02         
 Inventory step-up 0.4   0.0%  0.00   0.00   0.4  0.0%  0.00   0.00         
 Pension mark-to-market adjustment (3) 0.4   0.0%  0.00   0.00   0.2  0.0%  0.00   0.00         
 Exclude discrete tax adjustments (4) (23.9)  -1.5%  (0.14)  (0.13)  (6.5) -0.4%  (0.03)  (0.03)        
 Non-GAAP tax adjustments (9.0)  -0.5%  (0.05)  (0.05)  (8.7) -0.6%  (0.05)  (0.04)        
 Convertible share adjustment -   -   -   0.06   -  -   -   0.03         
Net income - non-GAAP$341.2   20.8% $1.99  $1.97  $335.5  21.2% $1.76  $1.74         
                           
GAAP and non-GAAP weighted average common shares - basic 171.5         190.6               
GAAP weighted average common shares - diluted 178.7         196.3               
 Exclude dilutive shares from convertible note (5.9)        (4.0)              
Non-GAAP weighted average common shares - diluted 172.8         192.3               
                           
(1) For the nine months ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.
                           
(2)Restructuring and other consists of:   
    Nine Months Ended
              
    September 29,
2019
       September 30,
2018
              
  Contingent consideration fair value adjustment$(16.5)       $(9.2)              
  Acquisition related expenses and compensation 2.3         4.1               
  Employee severance 2.4         7.9               
  Other  -         0.9                 
    $(11.8)       $3.8               
                           
(3)For the nine months ended September 29, 2019 and September 30, 2018, interest and other included non-cash convertible debt interest expense. For the nine months ended September 29, 2019 and September 30, 2018, adjustments to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.          
                           
(4)For the nine months ended September 29, 2019 and September 30, 2018, adjustment to exclude discrete income tax items. For the nine months ended September 29, 2019, GAAP income tax provision includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return and includes a $15 million tax provision related to the finalization of our toll tax charge.        
                           
GAAP to Non-GAAP Reconciliation of Fourth Quarter 2019 guidance:   
                           
GAAP and non-GAAP fourth quarter revenue guidance:  $590 millionto$630 million                  
GAAP net income per diluted share  $0.63  $0.74                   
 Exclude acquired intangible assets amortization   0.06   0.06                   
 Exclude non-cash convertible debt interest   0.02   0.02                   
 Tax effect of non-GAAP adjustments   (0.01)  (0.01)                  
 Convertible share adjustment   0.03   0.03                   
Non-GAAP net income per diluted share  $0.73  $0.84                   
                           
For press releases and other information of interest to investors, please visit Teradyne's homepage at http://www.teradyne.com.
 Contact: Teradyne, Inc.                       
 Andy Blanchard 978-370-2425                       
 Vice President of Corporate Relations                       
                           

Teradyne, Inc.