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Acquisitions | 12 Months Ended
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Dec. 31, 2015
Acquisitions | D. ACQUISITIONS Business Universal Robots On June 11, 2015, Teradyne acquired all of the outstanding equity of Universal Robots located in Odense, Denmark. Universal Robots is the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Universal Robots is a separate operating and reportable segment, Industrial Automation. The total purchase price of $315.4 million consisted of $283.8 million of cash paid and $31.6 million of contingent consideration, measured at fair value. The contingent consideration was valued using a Monte Carlo simulation based on the following key inputs: (1) forecasted revenue (2) forecasted EBITDA (3) revenue volatility (4) EBITDA volatility; and (5) discount rate. The contingent consideration is payable upon the achievement of certain thresholds and targets for earnings before income taxes, depreciation and amortization (“EBITDA”) for calendar year 2015, revenue for the period from July 1, 2015 to December 31, 2017 and revenue for the period from July 1, 2015 to December 31, 2018. The maximum amount of contingent consideration that could be paid is $65 million. Based on Universal Robots’ calendar 2015 EBITDA results, Teradyne will pay, in the first quarter of 2016, $15 million or 100% of the eligible EBITDA contingent consideration amount. In the fourth quarter of 2015, Teradyne finalized the valuation and purchase price allocation for the acquisition which resulted in a $5.4 million decrease in goodwill as a result of a $2.2 million decrease in the fair value of contingent consideration, a $1.6 million increase in intangible assets and a $1.6 million decrease in acquired liabilities. The Universal Robots acquisition was accounted for as a business combination and, accordingly, the results have been included in Teradyne’s consolidated results of operations from the date of acquisition. The allocation of the total purchase price to Universal Robots’ net tangible liabilities and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible assets and net tangible liabilities in the amount of $221.1 million was allocated to goodwill, which is not deductible for tax purposes. The following table represents the final allocation of the purchase price:
|  | Purchase Price Allocation |
|  | (in thousands) |
Goodwill |  | $ | 221,128 |
Intangible assets |  |  | 121,590 |
Tangible assets acquired and liabilities assumed: |  |  |  |
Current assets |  |  | 10,853 |
Non-current assets |  |  | 3,415 |
Accounts payable and current liabilities |  |  | (11,976 | )
Long-term deferred tax liabilities |  |  | (26,653 | )
Long-term other liabilities |  |  | (2,920 | )
Total purchase price |  | $ | 315,437 |
Teradyne estimated the fair value of intangible assets using the income and cost approaches. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. Components of these intangible assets and their estimated useful lives at the acquisition date are as follows:
|  | Fair Value |  |  | Estimated Useful Life |
|  | (in thousands) |  |  | (in years) |
Developed technology |  | $ | 89,240 |  |  |  | 4.9 |
Trademarks and tradenames |  |  | 22,920 |  |  |  | 10.0 |
Customer relationships |  |  | 9,430 |  |  |  | 2.0 |
Total intangible assets |  | $ | 121,590 |  |  |  | 5.6 |
For the period from June 12, 2015 to December 31, 2015, Universal Robots contributed $41.9 million of revenues and had a $7.6 million loss before income taxes. The following unaudited pro forma information gives effect to the acquisition of Universal Robots as if the acquisition occurred on January 1, 2014. The unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented:
|  | For the Years Ended |
|  | December 31, 2015 |  |  | December 31, 2014 |
|  | (in thousands, except per share amounts) |
Revenue |  | $ | 1,657,626 |  |  | $ | 1,686,689 |
Net income |  |  | 199,784 |  |  |  | 61,078 |
Net income per common share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.94 |  |  | $ | 0.30 |
Diluted |  | $ | 0.94 |  |  | $ | 0.27 |
Pro forma results for the year ended December 31, 2015 were adjusted to exclude $1.6 million of non-recurring expense related to the fair value adjustment to acquisition-date inventory and $1.0 million of acquisition related costs incurred in 2015. Pro forma results for the year ended December 31, 2014, were adjusted to include $1.6 million of non-recurring expense related to the fair value adjustment to acquisition-date inventory and $1.0 million of acquisition related costs. Avionics Interface Technologies, LLC. On October 31, 2014, Teradyne acquired all of the assets and liabilities of Avionics Interface Technologies, LLC (“AIT”) located in Omaha, Nebraska and Dayton, Ohio. AIT is a supplier of equipment for testing state-of-the-art data communication buses. The acquisition of AIT complements Teradyne’s Defense/Aerospace line of bus test instrumentation for commercial and defense avionics systems. AIT is included in Teradyne’s System Test segment. The total purchase price of $21.2 million consisted of $19.4 million of cash paid to acquire AIT’s assets and liabilities and $1.8 million in fair value of contingent consideration payable upon the achievement of certain revenue and gross margin targets in 2015 and 2016. No contingent consideration was paid for 2015. The maximum remaining contingent consideration that could be paid is $1.1 million. The valuation of the contingent consideration utilized the following assumptions: (1) probability of meeting each target; (2) expected timing of meeting each target; and (3) discount rate reflecting the risk associated with the expected payments. The probabilities and timing for each target were estimated based on a review of the historical and projected results. A discount rate of 4.7 percent was selected based on the cost of debt for the business. A significant portion of the risk in achieving the contingent consideration was captured in the probabilities assigned to meeting each target. The AIT acquisition was accounted for as a business combination and, accordingly, the results have been included in Teradyne’s consolidated results of operations from the date of acquisition. The allocation of the total purchase price of AIT’s net tangible and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible and net tangible assets in the amount of $10.5 million was allocated to goodwill, which is deductible for tax purposes. The following represents the final allocation of the purchase price:
|  | Purchase Price Allocation |
|  | (in thousands) |
Goodwill |  | $ | 10,516 |
Intangible assets |  |  | 9,080 |
Tangible assets acquired and liabilities assumed: |  |  |  |
Current assets |  |  | 2,452 |
Non-current assets |  |  | 359 |
Accounts payable and current liabilities |  |  | (1,164 | )
Total purchase price |  | $ | 21,243 |
Teradyne estimated the fair value of intangible assets using the income approach. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. Components of these intangible assets and their estimated useful lives at the acquisition date are as follows:
|  | Fair Value |  |  | Estimated Useful Life |
|  | (in thousands) |  |  | (in years) |
Customer relationships |  | $ | 5,630 |  |  |  | 5.0 |
Developed technology |  |  | 2,580 |  |  |  | 4.8 |
Trademarks and tradenames |  |  | 380 |  |  |  | 5.0 |
Non-compete agreement |  |  | 320 |  |  |  | 4.0 |
Customer order backlog |  |  | 170 |  |  |  | 0.3 |
Total intangible assets |  | $ | 9,080 |  |  |  | 4.8 |
For the period from October 31, 2014 to December 31, 2014, AIT contributed $0.6 million of revenues and had a $0.8 million loss before income taxes. The following unaudited pro forma information gives effect to the acquisition of AIT as if the acquisition occurred on January 1, 2013. The unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented:
|  | For the Year Ended |
| December 31, 2014 |  |  | December 31, 2013 |
|  | (in thousands, except per share amounts) |
Revenues |  | $ | 1,655,038 |  |  | $ | 1,434,699 |
Net income |  | $ | 82,169 |  |  | $ | 164,087 |
Income per common share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.40 |  |  | $ | 0.86 |
Diluted |  | $ | 0.37 |  |  | $ | 0.70 |
ZTEC Instruments, Inc. On October 25, 2013, Teradyne acquired all of the outstanding equity of ZTEC Instruments, Inc. (“ZTEC”) located in Albuquerque, New Mexico. ZTEC is a supplier of modular wireless test instruments. The acquisition of ZTEC expands Teradyne’s Wireless Test segment into the design verification test of wireless components and chipsets. The total purchase price of $17.3 million consisted of $15.1 million of cash paid to acquire the outstanding common and preferred stock of ZTEC and $2.2 million in fair value of contingent consideration payable upon achievement of certain customer order and revenue targets through 2015. The maximum amount of contingent consideration that could have been paid was $5.0 million. None of the contingent consideration was paid. The ZTEC acquisition was accounted for as a business combination and, accordingly, the results have been included in Teradyne’s consolidated results of operation from the date of acquisition. The allocation of the total purchase price of ZTEC’s net tangible and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible and net tangible assets in the amount of $12.5 million was allocated to goodwill, which is not deductible for tax purposes. The following represents the final allocation of the purchase price:
|  | Purchase Price Allocation |
|  | (in thousands) |
Goodwill |  | $ | 12,520 |
Intangible assets |  |  | 4,870 |
Tangible assets acquired and liabilities assumed: |  |  |  |
Cash |  |  | 79 |
Other current assets |  |  | 1,612 |
Non-current assets |  |  | 1,757 |
Accounts payable and current liabilities |  |  | (1,811 | )
Long-term deferred tax liabilities |  |  | (1,719 | )
Total purchase price |  | $ | 17,308 |
Teradyne estimated the fair value of intangible assets using the income approach. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. Components of these intangible assets and their estimated useful lives at the acquisition date are as follows:
|  | Fair Value |  |  | Estimated Useful Life |
|  | (in thousands) |  |  | (in years) |
Developed technology |  | $ | 3,500 |  |  |  | 5.0 |
Customer relationships |  |  | 1,370 |  |  |  | 6.0 |
Total intangible assets |  | $ | 4,870 |  |  |  | 5.3 |
For the period from October 25, 2013 to December 31, 2013, ZTEC contributed $0.4 million of revenues and had a $0.8 million loss before income taxes. The following unaudited pro forma information gives effect to the acquisition of ZTEC as if the acquisition occurred on January 1, 2013. The unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented:
|  | For the Year Ended |
| December 31, 2013 |
|  | (in thousands, except per share amounts) |
Revenues |  | $ | 1,431,270 |
Net income |  | $ | 163,394 |
Income per common share: |  |  |  |
Basic |  | $ | 0.86 |
Diluted |  | $ | 0.69 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1500-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1524-128463 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4922-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4934-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4926-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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