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 our
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, 2020. Readers are cautioned not to place undue
reliance on these forward-looking statements which reflect management's analysis
only as of the date hereof. We assume 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
We are a leading global supplier of automation equipment for test and industrial
applications. We design, develop, manufacture and sell automatic test systems
used to test semiconductors, wireless products, data storage and complex
electronics systems in many industries including the consumer electronics,
wireless, automotive, industrial, computing, communications, and aerospace and
defense industries. Our industrial automation products include collaborative
robotic arms, autonomous mobile robots ("AMRs") and advanced robotic control
software used by global manufacturing, logistics and light industrial customers
to improve quality, increase manufacturing and material handling efficiency and
decrease manufacturing and logistics costs. Our automatic test equipment and
industrial automation products and services include:

  •   semiconductor test ("Semiconductor Test") systems;



         •   storage and system level test ("Storage Test") systems,
             defense/aerospace ("Defense/Aerospace") test instrumentation and
             systems and circuit-board test and inspection ("Production Board
             Test") systems (collectively these products represent "System Test");



  •   wireless test ("Wireless Test") systems; and



  •   industrial automation ("Industrial Automation") products.


The market for our test products is concentrated with a limited number of
significant customers accounting for a substantial portion of the purchases of
test equipment. A few customers drive significant demand for our test products
both through direct sales and sales to the customers' supply partners. We expect
that sales of our test products will continue to be concentrated with a limited
number of significant customers for the foreseeable future.
We have grown our Industrial Automation business through acquisitions, including
Mobile Industrial Robots A/S ("MiR"), a leading maker of AMRs for industrial
applications, in 2018 and AutoGuide, LLC ("AutoGuide"), a maker of high payload
AMRs, in 2019. The market for our industrial automation products is dependent on
the adoption of new automation technologies by large manufacturers as well as
small and medium enterprises (SMEs) throughout the world.
In Q1 2021, revenue in our test businesses exceeded our plan as a result of
Semiconductor Test demand in several market segments and continued strength in
our System Test businesses. In Q1 2021, our Industrial Automation recovered from
the impact of the global industry downturn and the
COVID-19
pandemic in 2020 and revenue was above our plan. In 2021, we expect strong
momentum in our test businesses and return to growth of our Industrial
Automation businesses.
Our strategy is to focus on profitably growing market share in our test
businesses, the introduction of differentiated products that target growth
segments, and accelerating growth through continued investment in our Industrial
Automation businesses. We plan to execute on our strategy while balancing
capital allocations between returning capital to our shareholders through
dividends and stock repurchases and using capital for opportunistic
acquisitions.
Impact of the
COVID-19
Pandemic on our Business
The novel coronavirus
(COVID-19)
pandemic has resulted in government authorities implementing numerous measures
in an effort to contain the spread of the virus, such as travel bans and
restrictions, limitations on gatherings or social distancing requirements,
quarantines,
shelter-in-place
orders, and business limitations and shutdowns. These measures have impacted our
day-to-day
operations and disrupted our business, workforce and operations, as well as the
operations of our customers, contract manufacturers and suppliers. We are
continuing to monitor the rapidly evolving situation regarding the
COVID-19
pandemic and the availability and impact of vaccinations. However, we are unable
to accurately predict the full impact of
COVID-19,
which will depend on future developments that are highly uncertain and cannot be
predicted with accuracy, including, but not limited to, any new surges in areas
where we do business, the availability of vaccinations, any further government
actions to contain the virus or treat its impact, and how quickly and to what
extent normal economic and operating conditions can resume.

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Health and Safety
In response to the
COVID-19
pandemic, we have taken proactive, aggressive action to protect the health and
safety of our employees, customers, contract manufacturers and suppliers and we
have complied with all government orders around the globe. The spread of
COVID-19
has caused us to modify our business practices, including implementing social
distancing protocols, suspending employee travel, requiring most employees to
work remotely, cancelling physical participation in meetings, and extensively
and frequently disinfecting our workspaces. Around the world, the majority of
our employees are working from home. However, some of our engineering,
operations, supply line and customer support teams must be
on-site
at our or our customers' facilities. We are providing those
on-site
employees with the necessary protective resources and procedures to minimize
their exposure risk. We may take further actions as may be required or
recommended by government authorities or that we determine are in the best
interests of our employees, customers, contract manufacturers and suppliers.
Operations
We believe the
COVID-19
pandemic, and the numerous measures implemented by authorities in response, has
adversely impacted our results of operations, including by increasing costs, but
we cannot accurately estimate the amount of the impact to our first quarter of
2021 financial results or to our future financial results. In addition, the
pandemic has disrupted our contract manufacturers and suppliers, and has
resulted in some instances in short-term cost increases to meet customer demand.
While the duration and severity of the pandemic may further impact our workforce
and operations, as well as those of our customers, contract manufacturers and
suppliers, we expect that our manufacturing facilities will remain operational,
at sufficient capacity to support production demand. We are monitoring our
operations closely in an effort to avoid any potential productivity loss caused
by responses to the
COVID-19
pandemic.
Supply
We have not experienced any significant impacts or interruptions to our supply
chain as a result of the
COVID-19
pandemic. However, our suppliers have faced and may continue to face
difficulties maintaining operations in light of government-ordered restrictions,
including social distancing requirements and
shelter-in-place
mandates. Our supply chain team, and our suppliers, overcame numerous supply,
production, and logistics obstacles in 2020, but there is no assurance we or
they will be able to do so in the future. Although we regularly monitor the
financial health of companies in our supply chain, financial hardship on our
suppliers or
sub-suppliers
caused by the
COVID-19
pandemic could disrupt our ability to obtain components required to manufacture
our products, adversely affecting our operations and in some instances result in
higher costs and delays, both for obtaining components and shipping finished
goods to customers, which could harm our profitability, make our products less
competitive, or cause our customers to seek alternative suppliers.
Demand
The
COVID-19
pandemic has significantly increased economic uncertainty in our markets. Demand
for our Test products was strong throughout 2020 and in the first quarter of
2021. Our Industrial Automation business, however, experienced a significant
decline in demand through the first half of 2020 due to
COVID-19
related shutdowns affecting global manufacturing but demand recovered in the
second half of 2020 from the low point in the second quarter and continued to
recover in the first quarter of 2021. The
COVID-19
pandemic could cause further global economic disruption that could cause demand
for our products to decline, which would adversely affect our business.
Liquidity
Although there is continued uncertainty related to the impact of the
COVID-19
pandemic on our future results, we believe our business model and our current
cash reserves leave us well-positioned to manage our business through this
crisis. We have a strong balance sheet as well as an operating model that we
believe is capable of flexing up and down with extreme demand swings while still
remaining profitable. Based on our analysis, we believe our existing balances of
cash and cash equivalents and our currently anticipated operating cash flows
will be sufficient to meet our working capital needs and other capital and
liquidity requirements for the next twelve months. However, due to the
uncertainty related to the future impact of the
COVID-19
pandemic, in order to bolster our liquidity position, on May 1, 2020 we entered
into a credit agreement providing for a three-year, senior secured revolving
credit facility of $400 million as further described in Note G: "Debt." As of
May 7, 2021, we have not borrowed any funds under the credit facility.
We are continuing to monitor the evolving situation regarding the
COVID-19
pandemic, the availability of vaccinations where we do business and guidance
from government authorities around the world. In these circumstances, there may
be developments outside our control requiring us to adjust our operating plan.
As a result, given the uncertain nature of this situation, we are not able to
accurately predict the full extent of the impact of
COVID-19
on our business, financial condition, results of operations, liquidity, or cash
flows in the future. In addition, see Part II-Item 1A, "Risk Factors," included
in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020 for our risk factors regarding risks
associated with the
COVID-19
pandemic.

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Critical Accounting Policies and Estimates
We have identified the policies which are critical to understanding our business
and our results of operations. There have been no significant changes during the
three months ended April 4, 2021 to the items disclosed as our critical
accounting policies and estimates in Management's Discussion and Analysis of
Financial Condition and Results of Operations in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020, except as noted below.
Due to the
COVID-19
pandemic, there has been uncertainty and disruption in the global economy and
our markets. We are not aware of any specific event or circumstance that would
require an update to our estimates or judgments or a revision of the carrying
value of our assets or liabilities as of May 7, 2021, the date of issuance of
this Quarterly Report on Form
10-Q.
These estimates may change, as new events occur and additional information is
obtained. Actual results could differ significantly from these estimates under
different assumptions or conditions.
Preparation of Financial Statements and Use of Estimates
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 under
different assumptions or conditions.

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