Teradyne Reports Fourth Quarter and Fiscal Year 2018 Results

  • Revenue of $520 million in Q4’18, organic growth of 5% from Q4’17
  • Record full year memory and analog test shipments
  • Record 60% quarterly and 58% full year gross margin
  • Expect to repurchase $500 million in shares in 2019
  • Quarterly dividend of $0.09 declared
  Q4’18 Q4’17 Q3’18 FY 2018 FY 2017  
Revenue (mil) $520 $479 $567 $2,101 $2,137  
GAAP EPS $0.79 ($0.54) $0.63 $2.35 $1.28  
Non-GAAP EPS $0.63 $0.46 $0.71 $2.37 $2.34  

NORTH READING, Mass., Jan. 23, 2019 (GLOBE NEWSWIRE) — Teradyne, Inc. (NASDAQ: TER) reported revenue of $520 million for the fourth quarter of 2018 of which $342 million was in Semiconductor Test, $84 million in Industrial Automation (IA), $54 million in System Test and $40 million in Wireless Test. GAAP net income for the fourth quarter was $143.8 million or $0.79 per share. On a non-GAAP basis, Teradyne’s net income in the fourth quarter was $113.0 million, or $0.63 per diluted share, which excluded restructuring and other charges, acquired intangible asset amortization, pension actuarial gains, non-cash convertible debt interest, discrete income tax adjustments, and included the related tax impact on non-GAAP adjustments.

“We finished 2018 with strong fourth quarter sales above the high end of our guidance driven by upside demand in our Semiconductor and Wireless test businesses,” said CEO and President Mark Jagiela. “For the full year, our Semiconductor Test group delivered record memory and analog revenues, which lessened the impact of lower mobility test shipments. Gross margin for the year was at a record level due mainly to continued Universal Robots manufacturing cost reductions and a favorable product mix overall. In IA, Universal Robots’ full year growth of 38%, while strong, was below our target due mainly to slowing demand in China and the automotive sector. MiR sales for the year more than doubled on a pro-forma basis.”

As part of the $1.5 billion authorization established in January 2018, Teradyne purchased $823 million of its common shares in 2018 and expects to repurchase $500 million of its common shares in 2019.

Teradyne’s Board of Directors declared a quarterly cash dividend of $0.09 per share, payable on March 22, 2019 to shareholders of record as of the close of business on February 22, 2019. 

Guidance for the first quarter of 2019 is revenue of $460 million to $490 million, with GAAP net income of $0.31 to $0.39 per diluted share and non-GAAP net income of $0.39 to $0.47 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.

Webcast
A conference call to discuss the fourth quarter results, along with management’s business outlook, will follow at 10:00 a.m. ET, Thursday, January 24. 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 10:00 a.m. ET. A replay will be available on the Teradyne website at teradyne.com/investors.

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 related to Mobile Industrial Robots, and restructuring and other, and includes 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 related to Mobile Industrial Robots. 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) is a leading supplier of automation equipment for test and industrial applications. Teradyne Automatic Test Equipment (ATE) is used to test semiconductors, wireless products, data storage and complex electronic systems, which serve consumer, communications, industrial and government customers. Our Industrial Automation products include collaborative robots, autonomous mobile robots and sensing and simulation software, used by global manufacturing and industrial customers to improve quality and increase manufacturing efficiency. In 2018, Teradyne had revenue of $2.1 billion and currently employs approximately 4,900 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, potential borrowings under a senior secured credit facility, 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, availability of, or borrowing under, the credit facility, 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. Important factors that could cause actual results, earnings per share, use of cash, dividend payments, repurchases of common stock, payment of the senior convertible notes or borrowings under the credit facility 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, the repurchase of common stock or borrowing under the credit facility 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; 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, 2017 and the Quarterly Report on Form 10-Q for the period ended September 30, 2018. 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 FOURTH FISCAL QUARTER OF 2018                      
                             
CONDENSED  CONSOLIDATED  STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)                  
                             
          Quarter Ended   Twelve Months Ended  
          December 31,
2018
  September 30,
2018
  December 31,
2017 (1)
  December 31,
2018
  December 31,
2017 (1)
 
                             
Net revenues   $   519,558     $   566,848     $   479,415     $   2,100,802     $   2,136,606    
                             
  Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (2)       210,022         233,155         208,485         880,408         915,153    
                             
Gross profit       309,536         333,693         270,930         1,220,394         1,221,453    
                             
Operating expenses:                      
  Selling and administrative       100,552         100,199         87,880         390,669         348,913    
  Engineering and development       74,706         77,049         72,070         301,505         307,305    
  Acquired intangible assets amortization       10,559         11,142         7,384         39,191         30,530    
  Restructuring and other (3)       11,446         1,710         8,970         15,232         9,362    
      Operating expenses       197,263         190,100         176,304         746,597         696,110    
                             
Income from operations       112,273         143,593         94,626         473,797         525,343    
                             
  Interest and other expense (income) (4)       1,144         2,749         (3,458 )       5,996         931    
                             
Income before income taxes        111,129         140,844         98,084         467,801         524,412    
  Income tax (benefit) provision (5)       (32,662 )       20,863         204,007         16,022         266,720    
Net income (loss)   $   143,791     $   119,981     $   (105,923 )   $   451,779     $   257,692    
                             
Net income (loss) per common share:                      
Basic       $   0.80     $   0.65     $   (0.54 )   $   2.41     $   1.30    
Diluted       $   0.79     $   0.63     $   (0.54 )   $   2.35     $   1.28    
                             
Weighted average common shares – basic       178,958         185,744         196,010         187,672         198,069    
                             
Weighted average common shares – diluted (6)       181,520         190,505         196,010         192,605         201,641    
                             
                             
Cash dividend declared per common share   $   0.09     $   0.09     $   0.07     $   0.36     $   0.28    
                             
                             
(1 ) Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs.   
                             
(2 ) Cost of revenues includes:   Quarter Ended   Twelve Months Ended  
          December 31,
2018
  September 30,
2018
  December 31,
2017
  December 31,
2018
  December 31,
2017
 
      Provision for excess and obsolete inventory   $   1,720     $   3,347     $   1,690     $   11,242     $   8,844    
      Sale of previously written down inventory       (1,501 )       (1,013 )       (1,048 )       (6,679 )       (7,451 )  
          $   219     $   2,334     $   642     $   4,563     $   1,393    
                             
(3 ) Restructuring and other consists of:   Quarter Ended   Twelve Months Ended  
          December 31,
2018
  September 30,
2018
  December 31,
2017
  December 31,
2018
  December 31,
2017
 
      Contingent consideration fair value adjustment   $   10,223     $   (768 )   $   5,973     $   987     $   7,820    
      Employee severance        768         1,667         1,801         8,714         3,754    
      Acquisition related expenses and compensation       455         811         –         4,584         –    
      Impairment of fixed assets       –         –         1,124         –         1,124    
      Other       –         –         72         947         973    
      Property insurance recovery, net       –         –         –         –         (4,309 )  
          $   11,446     $   1,710     $   8,970     $   15,232     $   9,362    
                             
                             
(4 ) Interest and other (income) expense, includes:   Quarter Ended   Twelve Months Ended  
          December 31,
2018
  September 30,
2018
  December 31,
2017
  December 31,
2018
  December 31,
2017
 
      Non-cash convertible debt interest   $   3,327     $   3,286     $   3,166     $   13,064     $   12,431    
      Pension actuarial (gain) loss       (3,512 )       267         (3,786 )       (3,316 )       (6,624 )  
          $   (185 )   $   3,553     $   (620 )   $   9,748     $   5,807    
                             
                             
(5 ) For the quarter and twelve months ended December 31, 2018 income tax (benefit) provision includes a $52 million tax benefit related to the finalization of our U.S. toll tax liability. For the quarter and twelve months ended December 31, 2017, income tax provision included an expense of $186 million related to the estimated impact of the U.S. Tax Reform Act.  
                             
(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 December 31, 2018, September 30, 2018 and December 31, 2017, 0.9 million, 3.0 million and 3.3 million shares, respectively, have been included in diluted shares. For the twelve months ended December 31, 2018 and December 31, 2017, 2.7 million and 1.3 million shares, respectively, have been included in diluted shares.  For the twelve months ended December 31, 2018 and December 31, 2017, diluted shares also included 0.5 million shares and 0.1 million shares, respectively,  from the convertible note hedge transaction.   
                             
                             
                             
CONDENSED  CONSOLIDATED  BALANCE  SHEETS  (In thousands)                      
                             
          December 31,
2018
  December 31,
2017
             
                             
Assets                          
  Cash and cash equivalents   $   926,752     $   429,843                
  Marketable securities       190,096         1,347,979                
  Accounts receivable, net       291,267         272,783                
  Inventories, net       153,541         107,525                
  Prepayments and other current assets       170,817         112,151                
                                     
      Total current assets       1,732,473         2,270,281                
                             
  Property, plant and equipment, net       279,821         268,447                
  Marketable securities       87,731         125,926                
  Deferred tax assets       70,858         84,026                
  Other assets       11,508         12,275                
  Retirement plans assets       16,883         17,491                
  Acquired intangible assets, net       125,482         79,088                
  Goodwill       381,850         252,011                
                             
      Total assets   $   2,706,606     $   3,109,545                
                             
Liabilities                        
  Accounts payable   $   100,688     $   86,393                
  Accrued employees’ compensation and withholdings       148,566         141,694                
  Deferred revenue and customer advances       78,427         83,614                
  Other accrued liabilities       78,272         59,083                
  Contingent consideration       34,865         24,497                
  Income taxes payable       36,185         59,055                
                             
      Total current liabilities       477,003         454,336                
                             
  Retirement plans liabilities       117,456         119,776                
  Long-term deferred revenue and customer advances       32,033         30,127                
  Deferred tax liabilities       20,662         6,720                
  Long-term other accrued liabilities       37,548         10,273                
  Long-term contingent consideration       35,678         20,605                
  Long-term income taxes payable       83,891         148,075                
  Long-term debt       379,981         365,987                
                             
      Total liabilities       1,184,252         1,155,899                
                             
Shareholders’ equity       1,522,354         1,953,646                
                             
      Total liabilities and shareholders’ equity   $   2,706,606     $   3,109,545                
                         
                         
                         
CONDENSED  CONSOLIDATED  STATEMENTS OF CASH FLOWS (In thousands)                    
                           
          Quarter Ended   Twelve Months Ended      
          December 31,
2018
  December 31,
2017
  December 31,
2018
  December 31,
2017
     
Cash flows from operating activities:                       
  Net income (loss)   $   143,791     $   (105,923 )   $   451,779     $   257,692        
  Adjustments to reconcile net income to net cash provided by operating activities:                      
    Depreciation        17,485         16,879         67,415         66,122        
    Amortization        12,900         9,640         45,809         41,953        
    Stock-based compensation       8,250         8,477         33,577         34,097        
    Deferred taxes       3,898         37,784         28,340         37,105        
    Provision for excess and obsolete inventory        1,720         1,690         11,242         8,844        
    Contingent consideration fair value adjustment       10,223         5,973         987         7,820        
    Losses (gains) on investments       3,914         (953 )       3,494         (878 )      
    Retirement plan actuarial gains       (3,512 )       (3,786 )       (3,316 )       (6,624 )      
    Property insurance recovery, net       –         –         –         (4,309 )      
    Other        144         891         1,083         1,585        
    Changes in operating assets and liabilities, net of businesses acquired:                    
      Accounts receivable        59,869         (4,961 )       (17,938 )       (80,584 )      
      Inventories        4,619         21,190         (29,498 )       44,960        
      Prepayments and other assets        (29,683 )       (5,108 )       (58,402 )       2,254        
      Accounts payable and accrued expenses        (2,431 )       38,276         13,693         43,574        
      Deferred revenue and customer advances       3,556         (29,551 )       13,379         4,984        
      Retirement plans contributions        (1,090 )       (1,040 )       (4,334 )       (5,902 )      
      Income taxes       (47,277 )       157,994         (80,429 )       173,802        
Net cash provided by operating activities       186,376         147,472         476,881         626,495        
                             
Cash flows from investing activities:                      
  Purchases of property, plant and equipment       (26,110 )       (32,128 )       (114,379 )       (105,375 )      
  Proceeds from government subsidy for property, plant and equipment       –         –         7,920         –        
  Purchases of marketable securities       (109,223 )       (355,394 )       (918,744 )       (1,391,917 )      
  Proceeds from sales of marketable securities       2,958         84,577         846,122         527,746        
  Proceeds from maturities of marketable securities       336,339         228,426         1,270,439         701,681        
  Proceeds from property insurance       –         –         –         5,064        
  Proceeds from life insurance       –         –         1,126         –        
  Acquisition of businesses, net of cash acquired       –         –         (169,474 )       –        
Net cash provided by (used for) investing activities       203,964         (74,519 )       923,010         (262,801 )      
                             
Cash flows from financing activities:                       
  Issuance of common stock under stock purchase and stock option plans       14         31         20,973         24,493        
  Repurchase of common stock       (261,215 )       (48,482 )       (823,478 )       (200,304 )      
  Dividend payments       (16,002 )       (13,717 )       (67,322 )       (55,447 )      
  Payment related to net settlement of employee stock compensation awards       (182 )       (297 )       (20,023 )       (12,881 )      
  Payment of contingent consideration       –          –          (13,571 )       (1,050 )      
Net cash used for financing activities        (277,385 )       (62,465 )       (903,421 )       (245,189 )      
                             
Effects of exchange rate changes on cash and cash equivalents       (222 )       678         439         3,454        
                             
Increase in cash and cash equivalents        112,733         11,166         496,909         121,959        
Cash and cash equivalents at beginning of period        814,019         418,677         429,843         307,884        
Cash and cash equivalents at end of period    $   926,752     $   429,843     $   926,752     $   429,843        
                             

GAAP to Non-GAAP Earnings Reconciliation                                                
                                                       
(In millions, except per share amounts)                                                
                        Quarter Ended                          
        December 31,
2018
  % of Net Revenues           September 30,
2018
  % of Net Revenues           December 31,
2017 (1)
  % of Net Revenues          
                                                       
Net revenues   $   519.6                 $   566.8                 $   479.4                
                                                       
Gross profit GAAP and non-GAAP $   309.5       59.6 %           $   333.7     58.9 %           $   270.9     56.5 %          
                                                       
Income from operations – GAAP $   112.3       21.6 %           $   143.6     25.3 %           $   94.6     19.7 %          
  Acquired intangible assets amortization     10.6       2.0 %               11.1     2.0 %               7.4     1.5 %          
  Restructuring and other (2)     11.4       2.2 %               1.7     0.3 %               9.0     1.9 %          
Income from operations – non-GAAP $   134.3       25.8 %           $   156.4     27.6 %           $   111.0     23.2 %          
                                                       
                Net Income per Common Share           Net Income per Common Share           Net Income (Loss) per Common Share  
        December 31,
2018
  % of Net Revenues   Basic    Diluted   September 30,
2018
  % of Net Revenues   Basic    Diluted   December 31,
2017
  % of Net Revenues   Basic    Diluted  
Net income (loss) – GAAP $   143.8       27.7 %   $   0.80     $   0.79     $   120.0     21.2 %   $   0.65     $   0.63     $   (105.9 )   -22.1 %   $   (0.54 )   $   (0.54 )  
  Acquired intangible assets amortization     10.6       2.0 %       0.06         0.06         11.1     2.0 %       0.06         0.06         7.4     1.5 %       0.04         0.04    
  Interest and other (3)     3.3       0.6 %       0.02         0.02         3.3     0.6 %       0.02         0.02         3.2     0.7 %       0.02         0.02    
  Restructuring and other (2)     11.4       2.2 %       0.06         0.06         1.7     0.3 %       0.01         0.01         9.0     1.9 %       0.05         0.05    
  Pension mark-to-market adjustment (3)     (3.5 )     -0.7 %       (0.02 )       (0.02 )       0.3     0.1 %       0.00         0.00         (3.8 )   -0.8 %       (0.02 )       (0.02 )  
  Exclude discrete tax adjustments (4)     (52.9 )     -10.2 %       (0.30 )       (0.29 )       0.3     0.1 %       0.00         0.00         184.4     38.5 %       0.94         0.94    
  Non-GAAP tax adjustments     0.3       0.1 %       0.00         0.00         (3.4 )   -0.6 %       (0.02 )       (0.02 )       (2.9 )   -0.6 %       (0.01 )       (0.01 )  
  Convertible share adjustment     –                    –          –          –                  –          0.01         –                  –          –     
Net income – non-GAAP $   113.0       21.7 %   $   0.63     $   0.63     $   133.3     23.5 %   $   0.72     $   0.71     $   91.4     19.1 %   $   0.47     $   0.46    
                                                       
GAAP and non-GAAP weighted average common shares – basic     179.0                     185.7                     196.0                
GAAP weighted average common shares – diluted     181.5                     190.5                     196.0                
  Include dilutive shares     –                      –                      3.0                
  Exclude dilutive shares related to convertible note transaction     (0.9 )                   (3.1 )                   –                 
Non-GAAP weighted average common shares – diluted     180.6                     187.4                     199.0                
                                                       
                                                       
(1 Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs. 
                                                       
(2 ) Restructuring and other consists of:                                       
        Quarter Ended              
        December 31,
2018
              September 30,
2018
              December 31,
2017
             
    Contingent consideration fair value adjustment $   10.2                 $   (0.8 )               $   6.0                
    Employee severance      0.8                     1.7                     1.8                
    Acquisition related expenses and compensation     0.5                     0.8                     –                 
    Impairment of fixed assets     –                      –                      1.1                
    Other       –                      –                      0.1                
        $   11.4                 $   1.7                 $   9.0                
                                                       
(3 ) For the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017,  adjustment to exclude non-cash convertible debt interest expense and adjustment to exclude actuarial (gains)losses recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting. 
                                                       
(4 ) For the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, adjustment to exclude discrete income tax items. For the quarter ended December 31, 2018, adjustment to treat the $52 million tax benefit related to the finalization of our U.S. toll tax liability as a discrete item. For the quarter ended December 31, 2017, adjustment to treat the $186 million expense related to the estimated impact of the U.S. Tax Reform Act, as a discrete item.
     
        Twelve Months Ended                  
        December 31,
2018
  % of Net Revenues           December 31,
2017 (1)
  % of Net Revenues                          
                                                       
Net Revenues   $   2,100.8                 $   2,136.6                                
                                               
Gross profit GAAP $   1,220.4       58.1 %           $   1,221.5     57.2 %                          
  Inventory step-up     0.4       0.0 %               –                                     
Gross profit non-GAAP $   1,220.8       58.1 %           $   1,221.5     57.2 %                          
                                               
Income from operations – GAAP $   473.8       22.6 %           $   525.3     24.6 %                  
  Acquired intangible assets amortization     39.2       1.9 %               30.5     1.4 %                  
  Restructuring and other (2)     15.2       0.7 %               9.4     0.4 %                  
  Inventory step-up     0.4       0.0 %               –                             
Income from operations – non-GAAP $   528.6       25.2 %           $   565.2     26.5 %                  
                                               
                Net Income
per Common Share
          Net Income
per Common Share
         
        December 31,
2018
  % of Net Revenues   Basic    Diluted   December 31,
2017
  % of Net Revenues   Basic    Diluted          
Net income – GAAP $   451.8       21.5 %   $   2.41     $   2.35     $   257.7     12.1 %   $   1.30     $   1.28            
  Acquired intangible assets amortization     39.2       1.9 %       0.21         0.20         30.5     1.4 %       0.15         0.15            
  Interest and other (3)     13.1       0.6 %       0.07         0.07         12.4     0.6 %       0.06         0.06            
  Restructuring and other (2)     15.2       0.7 %       0.08         0.08         9.4     0.4 %       0.05         0.05            
  Inventory step-up     0.4       0.0 %       0.00         0.00         –                  –          –                     
  Pension mark-to-market adjustment (3)     (3.3 )     -0.2 %       (0.02 )       (0.02 )       (6.3 )   -0.3 %       (0.03 )       (0.03 )          
  Exclude discrete tax adjustments (4)      (59.4 )     -2.8 %       (0.32 )       (0.31 )       178.3     8.3 %       0.90         0.88            
  Non-GAAP tax adjustments     (8.4 )     -0.4 %       (0.04 )       (0.04 )       (12.8 )   -0.6 %       (0.06 )       (0.06 )          
  Convertible share adjustment     –                    –          0.04         –                  –          0.01            
Net income – non-GAAP $   448.6       21.4 %   $   2.39     $   2.37     $   469.2     22.0 %   $   2.37     $   2.34            
                                               
GAAP and non-GAAP weighted average common shares – basic     187.7                     198.1                        
GAAP weighted average common shares – diluted     192.6                     201.6                        
  Exclude dilutive shares from convertible note     (3.2 )                   (1.3 )                      
Non-GAAP weighted average common shares – diluted     189.4                     200.3                        
                                               
(1 ) Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs. 
                                               
(2 ) Restructuring and other consists of: 
        Twelve Months Ended                      
        December 31,
2018
              December 31,
2017
                     
    Employee severance  $   8.7                 $   3.8                        
    Acquisition related expenses and compensation     4.6                     –                         
    Contingent consideration fair value adjustment     1.0                     7.8                        
    Other       0.9                     1.0                     –                 
    Impairment of fixed assets     –                      1.1                        
    Property insurance recovery, net     –                      (4.3 )                      
        $   15.2                 $   9.4                        
                                               
(3 ) For the twelve months ended December 31, 2018 and December 31, 2017, interest and other included non-cash convertible debt interest expense. For the twelve months ended December 31, 2018 and December 31, 2017, adjustments to exclude actuarial gains recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting. 
                                               
(4 ) For the twelve months ended December 31, 2018 and December 31, 2017, adjustment to exclude discrete income tax items. For the twelve months ended December 31, 2018, adjustment to treat the $52 million tax benefit related to the finalization of our U.S. toll tax liability as a discrete item. For the twelve months ended December 31, 2017, adjustment to treat the $186 million expense related to the estimated impact of the U.S. Tax Reform Act, as a discrete item.
                                               
                                               
GAAP to Non-GAAP Reconciliation of First Quarter 2019 guidance:
                                       
GAAP and non-GAAP first quarter revenue guidance:    $460 million  to $490 million                      
GAAP net income per diluted share     $   0.31     $   0.39                        
  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         (0.02 )       (0.02 )                      
  Convertible share adjustment         0.01         0.01                        
Non-GAAP net income per diluted share     $   0.39     $   0.47                        
                                       

For press releases and other information of interest to investors, please visit Teradyne’s homepage at teradyne.com.

CONTACT: Contact: Teradyne, Inc.
Andy Blanchard 978-370-2425
Vice President of Corporate Relations