Financial Instruments and Derivatives (Tables)

3 Months Ended

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

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

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- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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