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Financial Instruments and Derivatives (Tables) | 3 Months Ended
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Apr. 05, 2015
Schedule of Fair Value of Financial Assets and Liabilities Measured on Recurring Basis | The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of April 5, 2015 and December 31, 2014.
|  | April 5, 2015 |
|  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total |
|  | (in thousands) |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 115,982 |  |  | $ | — |  |  | $ | — |  |  | $ | 115,982 |
Cash equivalents |  |  | 100,794 |  |  |  | 2,169 |  |  |  | — |  |  |  | 102,963 |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  |  | — |  |  |  | 427,119 |  |  |  | — |  |  |  | 427,119 |
U.S. government agency securities |  |  | — |  |  |  | 232,187 |  |  |  | — |  |  |  | 232,187 |
Corporate debt securities |  |  | — |  |  |  | 160,877 |  |  |  | — |  |  |  | 160,877 |
Commercial paper |  |  | — |  |  |  | 130,298 |  |  |  | — |  |  |  | 130,298 |
Certificates of deposit and time deposits |  |  | — |  |  |  | 87,052 |  |  |  | — |  |  |  | 87,052 |
Equity and debt mutual funds |  |  | 13,962 |  |  |  | — |  |  |  | — |  |  |  | 13,962 |
Non-U.S. government securities |  |  | — |  |  |  | 446 |  |  |  | — |  |  |  | 446 |
Total |  | $ | 230,738 |  |  | $ | 1,040,148 |  |  | $ | — |  |  | $ | 1,270,886 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration |  | $ | — |  |  | $ | — |  |  | $ | 3,350 |  |  | $ | 3,350 |
Derivatives |  |  | — |  |  |  | 19 |  |  |  | — |  |  |  | 19 |
Total |  | $ | — |  |  | $ | 19 |  |  | $ | 3,350 |  |  | $ | 3,369 |
Reported as follows:
|  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
|  | (in thousands) |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 216,776 |  |  | $ | 2,169 |  |  | $ | — |  |  | $ | 218,945 |
Marketable securities |  |  | — |  |  |  | 649,219 |  |  |  | — |  |  |  | 649,219 |
Long-term marketable securities |  |  | 13,962 |  |  |  | 388,760 |  |  |  | — |  |  |  | 402,722 |
|  | $ | 230,738 |  |  | $ | 1,040,148 |  |  | $ | — |  |  | $ | 1,270,886 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other accrued liabilities |  | $ | — |  |  | $ | 19 |  |  | $ | 3,350 |  |  | $ | 3,369 |
|  | $ | — |  |  | $ | 19 |  |  | $ | 3,350 |  |  | $ | 3,369 |
|  | December 31, 2014 |
|  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total |
|  | (in thousands) |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 111,471 |  |  | $ | — |  |  | $ | — |  |  | $ | 111,471 |
Cash equivalents |  |  | 160,218 |  |  |  | 22,567 |  |  |  | — |  |  |  | 182,785 |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  |  | — |  |  |  | 402,154 |  |  |  | — |  |  |  | 402,154 |
U.S. government agency securities |  |  | — |  |  |  | 258,502 |  |  |  | — |  |  |  | 258,502 |
Corporate debt securities |  |  | — |  |  |  | 141,467 |  |  |  | — |  |  |  | 141,467 |
Commercial paper |  |  | — |  |  |  | 140,638 |  |  |  | — |  |  |  | 140,638 |
Certificates of deposit and time deposits |  |  | — |  |  |  | 49,036 |  |  |  | — |  |  |  | 49,036 |
Equity and debt mutual funds |  |  | 12,333 |  |  |  | — |  |  |  | — |  |  |  | 12,333 |
Non-U.S. government securities |  |  | — |  |  |  | 446 |  |  |  | — |  |  |  | 446 |
Total |  | $ | 284,022 |  |  | $ | 1,014,810 |  |  | $ | — |  |  | $ | 1,298,832 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration |  | $ | — |  |  | $ | — |  |  | $ | 3,350 |  |  | $ | 3,350 |
Derivatives |  |  | — |  |  |  | 149 |  |  |  | — |  |  |  | 149 |
Total |  | $ | — |  |  | $ | 149 |  |  | $ | 3,350 |  |  | $ | 3,499 |
Reported as follows:
|  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
|  | (in thousands) |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 271,689 |  |  | $ | 22,567 |  |  | $ | — |  |  | $ | 294,256 |
Marketable securities |  |  | — |  |  |  | 533,787 |  |  |  | — |  |  |  | 533,787 |
Long-term marketable securities |  |  | 12,333 |  |  |  | 458,456 |  |  |  | — |  |  |  | 470,789 |
|  | $ | 284,022 |  |  | $ | 1,014,810 |  |  | $ | — |  |  | $ | 1,298,832 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other current liabilities |  | $ | — |  |  | $ | 149 |  |  | $ | 1,750 |  |  | $ | 1,899 |
Long-term other accrued liabilities |  |  | — |  |  |  | — |  |  |  | 1,600 |  |  |  | 1,600 |
|  | $ | — |  |  | $ | 149 |  |  | $ | 3,350 |  |  | $ | 3,499 |
Schedule of Changes in Fair Value of Level 3 Contingent Consideration | Changes in the fair value of Level 3 contingent consideration for the three months ended April 5, 2015 and March 30, 2014 were as follows:
|  | Contingent Consideration |
|  | (in thousands) |
Balance at December 31, 2013 |  | $ | 2,230 |
Payments |  |  | — |
Balance at March 30, 2014 |  |  | 2,230 |
Payments |  |  | — |
Balance at June 29, 2014 |  |  | 2,230 |
Fair value adjustment |  |  | (630 | )
Balance at September 28, 2014 |  |  | 1,600 |
Acquisition of AIT |  |  | 1,750 |
Balance at December 31, 2014 |  |  | 3,350 |
Payments |  |  | — |
Balance at April 5, 2015 |  | $ | 3,350 |
Quantitative Information Associated With Fair Value Measurement of Level 3 Financial Instrument | The following table provides quantitative information associated with the fair value measurement of Teradyne’s Level 3 financial instruments:
Liability |  | April 5, 2015 Fair Value |  |  | Valuation Technique |  | Unobservable Inputs |  | Weighted Average |
|  | (in thousands) |  |  |  |  |  |  |  |
Contingent consideration (ZTEC) |  | $ | 1,600 |  |  | Income approach- discounted cash flow |  | Revenue earn-out-probability for calendar year 2015 revenue |  |  | 0 | %
|  |  |  |  |  |  |  | Customer orders-probability of achievement during earn-out period (acquisition date through December 31, 2015) |  |  | 40 | %
|  |  |  |  |  |  |  | Discount rate for revenue earn-out |  |  | N/A |
|  |  |  |  |  |  |  | Discount rate for customer orders |  |  | 5.2 | %
Contingent consideration (AIT) |  | $ | 1,750 |  |  | Income approach- discounted cash flow |  | Revenue earn-out-probability for calendar year 2015 and 2016 |  |  | 90 | %
|  |  |  |  |  |  |  | Discount rate for revenue earn-out |  |  | 4.7 | %
Schedule of Carrying Amounts and Fair Values of Financial Instruments | The carrying amounts and fair values of Teradyne’s financial instruments at April 5, 2015 and December 31, 2014 were as follows:
|  | April 5, 2015 |  |  | December 31, 2014 |
|  | Carrying Value |  |  | Fair Value |  |  | Carrying Value |  |  | Fair Value |
|  | (in thousands) |
Cash and cash equivalents |  | $ | 218,945 |  |  | $ | 218,945 |  |  | $ | 294,256 |  |  | $ | 294,256 |
Marketable securities |  |  | 1,051,941 |  |  |  | 1,051,941 |  |  |  | 1,004,576 |  |  |  | 1,004,576 |
Contingent consideration |  |  | 3,350 |  |  |  | 3,350 |  |  |  | 3,350 |  |  |  | 3,350 |
Derivatives |  |  | 19 |  |  |  | 19 |  |  |  | 149 |  |  |  | 149 |
Schedule of Available-for-Sale Marketable Securities | The following tables summarize the composition of available-for-sale marketable securities at April 5, 2015 and December 31, 2014:
|  | April 5, 2015 |
|  | Available-for-Sale |  |  | Fair Market Value of Investments with Unrealized Losses |
|  | Cost |  |  | Unrealized Gain |  |  | Unrealized (Loss) |  |  | Fair Market Value |  |
|  | (in thousands) |
U.S. Treasury securities |  | $ | 426,637 |  |  | $ | 625 |  |  | $ | (143 | ) |  | $ | 427,119 |  |  | $ | 217,722 |
U.S. government agency securities |  |  | 231,747 |  |  |  | 443 |  |  |  | (3 | ) |  |  | 232,187 |  |  |  | 15,032 |
Corporate debt securities |  |  | 158,051 |  |  |  | 2,986 |  |  |  | (160 | ) |  |  | 160,877 |  |  |  | 51,495 |
Commercial paper |  |  | 130,227 |  |  |  | 72 |  |  |  | (1 | ) |  |  | 130,298 |  |  |  | 8,945 |
Certificates of deposit and time deposits |  |  | 87,043 |  |  |  | 24 |  |  |  | (15 | ) |  |  | 87,052 |  |  |  | 25,705 |
Equity and debt mutual funds |  |  | 11,823 |  |  |  | 2,147 |  |  |  | (8 | ) |  |  | 13,962 |  |  |  | 161 |
Non-U.S. government securities |  |  | 446 |  |  |  | — |  |  |  | — |  |  |  | 446 |  |  |  | — |
|  | $ | 1,045,974 |  |  | $ | 6,297 |  |  | $ | (330 | ) |  | $ | 1,051,941 |  |  | $ | 319,060 |
Reported as follows:
|  | Cost |  |  | Unrealized Gain |  |  | Unrealized (Loss) |  |  | Fair Market Value |  |  | Fair Market Value of Investments with Unrealized Losses |
|  | (in thousands) |
Marketable securities |  | $ | 649,066 |  |  | $ | 224 |  |  | $ | (71 | ) |  | $ | 649,219 |  |  | $ | 223,414 |
Long-term marketable securities |  |  | 396,908 |  |  |  | 6,073 |  |  |  | (259 | ) |  |  | 402,722 |  |  |  | 95,646 |
|  | $ | 1,045,974 |  |  | $ | 6,297 |  |  | $ | (330 | ) |  | $ | 1,051,941 |  |  | $ | 319,060 |
|  | December 31, 2014 |
|  | Available-for-Sale |  |  | Fair Market Value of Investments with Unrealized Losses |
|  | Cost |  |  | Unrealized Gain |  |  | Unrealized (Loss) |  |  | Fair Market Value |  |
|  | (in thousands) |
U.S. Treasury securities |  | $ | 402,197 |  |  | $ | 362 |  |  | $ | (405 | ) |  | $ | 402,154 |  |  | $ | 317,771 |
U.S. government agency securities |  |  | 258,452 |  |  |  | 135 |  |  |  | (85 | ) |  |  | 258,502 |  |  |  | 104,642 |
Corporate debt securities |  |  | 139,374 |  |  |  | 2,414 |  |  |  | (321 | ) |  |  | 141,467 |  |  |  | 96,998 |
Commercial paper |  |  | 140,616 |  |  |  | 26 |  |  |  | (4 | ) |  |  | 140,638 |  |  |  | 41,747 |
Certificates of deposit and time deposits |  |  | 49,048 |  |  |  | 11 |  |  |  | (23 | ) |  |  | 49,036 |  |  |  | 20,684 |
Equity and debt mutual funds |  |  | 10,492 |  |  |  | 1,870 |  |  |  | (29 | ) |  |  | 12,333 |  |  |  | 1,234 |
Non-U.S. government securities |  |  | 446 |  |  |  | — |  |  |  | — |  |  |  | 446 |  |  |  | — |
|  | $ | 1,000,625 |  |  | $ | 4,818 |  |  | $ | (867 | ) |  | $ | 1,004,576 |  |  | $ | 583,076 |
Reported as follows:
|  | Cost |  |  | Unrealized Gain |  |  | Unrealized (Loss) |  |  | Fair Market Value |  |  | Fair Market Value of Investments with Unrealized Losses |
|  | (in thousands) |
Marketable securities |  | $ | 533,833 |  |  | $ | 99 |  |  | $ | (145 | ) |  | $ | 533,787 |  |  | $ | 240,234 |
Long-term marketable securities |  |  | 466,792 |  |  |  | 4,719 |  |  |  | (722 | ) |  |  | 470,789 |  |  |  | 342,842 |
|  | $ | 1,000,625 |  |  | $ | 4,818 |  |  | $ | (867 | ) |  | $ | 1,004,576 |  |  | $ | 583,076 |
Contractual Maturities of Investments Held | The contractual maturities of investments held at April 5, 2015 were as follows:
|  | April 5, 2015 |
|  | Cost |  |  | Fair Market Value |
|  | (in thousands) |
Due within one year |  | $ | 649,066 |  |  | $ | 649,219 |
Due after 1 year through 5 years |  |  | 343,120 |  |  |  | 343,744 |
Due after 5 years through 10 years |  |  | 5,663 |  |  |  | 5,952 |
Due after 10 years |  |  | 36,302 |  |  |  | 39,064 |
Total |  | $ | 1,034,151 |  |  | $ | 1,037,979 |
Schedule of Derivative Instruments in Statement of Financial Position at Fair Value | The following table summarizes the fair value of derivative instruments at April 5, 2015 and December 31, 2014:
|  | Balance Sheet Location |  | April 5, 2015 |  |  | December 31, 2014 |
|  |  |  | (in thousands) |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | Other current liabilities |  | $ | 19 |  |  | $ | 149 |
Total derivatives |  |  |  | $ | 19 |  |  | $ | 149 |
Schedule of Effect of Derivative Instruments on Statement of Operations Recognized | The following table summarizes the effect of derivative instruments recognized in the statement of operations during the three months ended April 5, 2015 and March 30, 2014. The table does not reflect the corresponding gains from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the three months ended April 5, 2015 and March 30, 2014, gains from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $4.3 million and $0.6 million, respectively.
|  |  |  | For the Three Months Ended |
| Location of Losses (Gains) Recognized in Statements of Operations |  | April 5, 2015 |  |  | March 30, 2014 |
|  |  |  | (in thousands) |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | Other (income) expense, net |  | $ | 3,425 |  |  | $ | 747 |
Total derivatives |  |  |  | $ | 3,425 |  |  | $ | 747 |

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