TerrAscend Annual Report 2008

Plain-text annual report

2008 Shareholders’ Letter Mike Bradley, Chief Executive Ofﬁ cer Fellow Shareholders, Few investors, and few of the world’s best-prepared companies, were ready for the economic meltdown that started in 2008. As a leading supplier of testing technology to factories producing semiconductor chips and electronics products around the globe, we took our lumps, as the unfolding ﬁ nancial crisis triggered the sharpest capital equipment pull-back in the history of the semiconductor industry. The market numbers weren’t pretty. Orders for recovery are being pushed out daily. So we’ve continued semiconductor capital equipment fell approximately 41 to sharpen our focus on new products, customer support percent in the second half of the year. Integrated Circuits and cost reductions… all with the intent to be leaner and (IC) inventories grew to levels not seen since 2001. And stronger when the markets recover. wafer fabrication equipment utilization rates plummeted below 50 percent as the year ended. While most of the business headlines reviewing 2008 will A combination of market share gains, productivity and businesses alike, let me underscore our progress improvements and cost-cutting enabled us to weather our toward being one of the most relied upon business partners undoubtedly dwell on the negatives endured by consumers own 42 percent decline in orders for the second half of the in semiconductor and electronics test. year. But while we were in the black for the full year on a non-GAAP operating basis, our fourth quarter non-GAAP Solid Progress on Many Fronts operating results showed red ink. We’ve set out in the last few years to accomplish three things. First, to solidify our position as the leading test At this writing, the pressure hasn’t subsided. World equipment supplier for System-On-a-Chip (SOC) technology. markets continue to tumble… and expectations for a Second, to expand our served market through entry into Financial Highlights (Results and sales from continuing operations • In millions except earnings per share) Net Sales (Loss)/Income Non-GAAP (Loss)/Income (Loss)/Income per Common Share-Diluted Non-GAAP (Loss)/Income per Common Share-Diluted 2005 2006 2007 2008 $ 1,045 $ (63.7) $ ( 11.8) $ (0.32) $ (0.06) $ 1,356 $ 208.2 $ 175.6 $ 1.06 $ 0.90 $ 1,102 $ 71.9 $ 83.2 $ 0.39 $ 0.45 $ 1,107 $ (398.6) $ 32.4 $ (2.34) $ 0.19 In November 2005, Teradyne sold its Connection Systems Division (TCS), and in August 2007, Teradyne sold its Broadband Test Division (BTD). BTD and TCS are classiﬁ ed as discontinued operations and their results are excluded from these numbers. In 2007, the difference between the GAAP and non-GAAP results relates mainly to an in-process research and development charge related to acquired technology. In 2008, the difference between the GAAP and non-GAAP results relates mainly to a $333 million goodwill impairment charge and restructuring charges. memory device testing. And third, to establish a business Corporation, the up-and-coming player in the ﬂ ash memory model that delivers industry leading over-the-cycle test market. ﬁ nancial performance. This acquisition proved to be well-timed as the Nextest® We made headway on all three fronts in 2008. Magnum I and Magnum II products bucked the memory test market contraction in 2008, gaining ﬁ ve points of share in In the SOC test space, our FLEX® and J750™ systems the overall memory market. At year-end, multiple Magnum are ﬁ rmly entrenched as market-leading test platforms. II units were testing some of the industry’s most complex Nearly 5,000 of these testers were operating on test multi-chip (DRAM and ﬂ ash) memory packages. ﬂ oors throughout the world by year-end. That meant that consumers around the globe could rely upon the silicon So we’ve grown through a combination of acquisitions and technology of products like cell phones, PDAs, medical organic share gains, providing a balance between the cost electronics and gaming systems because our testers efﬁ ciency of developing products on our own and the time- veriﬁ ed that technology. to-market advantages that come through acquisitions. In 2008, we added The Eagle Test Systems’, Inc. product Financial Strength for the Future line to our stable of SOC products. Eagle Test technology The strength of our future starts with solid product is the established standard in analog SOC testing of devices offerings in every market we serve. As the leading test like power ICs and audio ampliﬁ ers. With the addition equipment supplier in our core semiconductor test market, of Eagle Test Systems, we now offer a full array of test we further strengthened our position in 2008 through the solutions for every segment of the SOC device spectrum, launch of ﬁ ve new products that delivered nearly $150 further expanding our total available market and providing million of new business in the year. us with an even greater opportunity to expand our market share lead. In 2008, Teradyne grew its System-On-a-Chip (SOC) Test market share from 34 percent to 42 percent. Our Defense & Aerospace business also delivered strong results and bucked the trends seen in nearly every other electronics segment. This was fueled by the selection of Teradyne test instruments for the new Air Force Versatile Depot Automatic Test Station (VDATS), plus strong program buying from the Army and Navy. We continued to post share gains within the in-circuit test market with TestStation in storage and networking applications, and as a major supplier into Tier One subcontract manufacturers in Asia. And automotive test products from our Diagnostic Solutions unit showed resilience through the year’s end, *Includes Nextest and Eagle Eagle Test Systems Source: Teradyne and industry data even as that industry experienced a worldwide shock wave. With more than 40 percent of the SOC test market on tied to the completion of manufacturing transfers to our Teradyne products, we also set our sights on expanding into Asia manufacturing partner, and the streamlining of our memory device test in 2008. A major step in this initiative cost structure, some of which was connected to synergies came early in the year when we acquired Nextest Systems from our two acquisitions. In fact, our cost focus allowed Other elements of our ﬁ nancial model improvement were us to add these two new businesses at the same time smaller, customers will lean toward suppliers who have the that we lowered our ﬁ xed costs and breakeven… a major technology and scale to advance through these vicious accomplishment achieved by the across-the-board efforts market cycles. of our combined workforce. Operating Expenses Total company expenses declined even after adding two new businesses. We are radically changed from the Teradyne of just a few years ago. Today, we offer more products to more markets with more technology leverage… fully integrated and outsourced manufacturing… and low cost offshore repair. But, at our core, we are still the same. Our culture and values remain intact. We continue to focus on providing world-class products and superior customer service. And we believe in the fundamental need for silicon-based innovation in electronic products to improve the quality of life and expand information across cultures. We know that test will always be an essential component of that innovation and that, to continue to be an industry Change is Constant, but Testing Still Matters leader, we must remain faithful to our enduring pledge to We obviously have much ahead of us. We must continue consumers that they can rely on the electronics critical to to weather the storm of the economic meltdown; keep their everyday lives. the pipeline of new products ﬂ owing; and focus on tightening costs, all while we show customers the kind Challenging times? Without a doubt. But we at Teradyne of responsiveness and support they’ve come to expect. are up to those challenges. Because, as always, we believe We will be operating in an economic landscape that is in a present, and a future, where testing matters. fundamentally changed. As the number of companies that can afford the R&D stakes of this industry gets Mike Bradley Chief Executive Ofﬁ cer Teradyne, Inc. Teradyne, Inc. 600 Riverpark Drive North Reading, MA 01864 978.370.2700 www.teradyne.com 2009 Teradyne, Inc.• All rights reserved • Printed in U.S.A. Teradyne is a registered trademark of Teradyne, Inc. All brands and product names are trademarks or registered trademarks of Teradyne Inc., including its subsidiaries.

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