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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

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 December 31, 2017 and 2016:

		December 31, 2017
		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		$	197,955			$	—			$	—			$	197,955
Cash equivalents			206,335				25,553				—				231,888
Available for sale securities:
U.S. Treasury securities			—				855,795				—				855,795
Commercial paper			—				282,840				—				282,840
Certificates of deposit and time deposits			—				167,342				—				167,342
Corporate debt securities			—				133,186				—				133,186
Equity and debt mutual funds			23,430				—				—				23,430
U.S. government agency securities			—				10,726				—				10,726
Non-U.S. government securities			—				586				—				586
		$	427,720			$	1,476,028			$	—			$	1,903,748
Derivative assets			—				389				—				389
Total		$	427,720			$	1,476,417			$	—			$	1,904,137
Liabilities
Contingent consideration		$	—			$	—			$	45,102			$	45,102
Derivative liabilities			—				446				—				446
Total		$	—			$	446			$	45,102			$	45,548

Reported as follows:

		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	404,290			$	25,553			$	—			$	429,843
Marketable securities			—				1,347,979				—				1,347,979
Long-term marketable securities			23,430				102,496				—				125,926
Prepayments			—				389				—				389
Total		$	427,720			$	1,476,417			$	—			$	1,904,137
Liabilities
Other current liabilities		$	—			$	446			$	—			$	446
Contingent consideration			—				—				24,497				24,497
Long-term contingent consideration			—				—				20,605				20,605
Total		$	—			$	446			$	45,102			$	45,548

		December 31, 2016
		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		$	214,722			$	—			$	—			$	214,722
Cash equivalents			37,458				55,704				—				93,162
Available for sale securities:
U.S. Treasury securities			—				902,800				—				902,800
Commercial paper			—				161,630				—				161,630
Corporate debt securities			—				100,153				—				100,153
Certificates of deposit and time deposits			—				82,133				—				82,133
U.S. government agency securities			—				39,252				—				39,252
Equity and debt mutual funds			18,171				—				—				18,171
Non-U.S. government securities			—				728				—				728
		$	270,351			$	1,342,400			$	—			$	1,612,751
Derivative assets			—				1				—				1
Total		$	270,351			$	1,342,401			$	—			$	1,612,752
Liabilities
Contingent consideration		$	—			$	—			$	38,332			$	38,332
Derivative liabilities			—				131				—				131
Total		$	—			$	131			$	38,332			$	38,463

Reported as follows:

		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	252,180			$	55,704			$	—			$	307,884
Marketable securities			—				871,024				—				871,024
Long-term marketable securities			18,171				415,672				—				433,843
Prepayments			—				1				—				1
Total		$	270,351			$	1,342,401			$	—			$	1,612,752
Liabilities
Other current liabilities		$	—			$	131			$	—			$	131
Contingent consideration			—				—				1,050				1,050
Long-term contingent consideration			—				—				37,282				37,282
Total		$	—			$	131			$	38,332			$	38,463

Schedule of Changes in Fair Value of Level 3 Contingent Consideration

Changes in the fair value of Level 3 contingent consideration for the years ended December 31, 2017 and 2016 were as follows:

		Contingent Consideration
		(in thousands)
Balance at December 31, 2015		$	37,436
Payments (1)			(15,000	)
Fair value adjustment of AIT (2)			550
Fair value adjustment of Universal Robots (2)			15,346
Balance at December 31, 2016			38,332
Payments (3)			(1,050	)
Fair value adjustment of Universal Robots (4)			7,820
Balance at December 31, 2017		$	45,102

(1) During the year ended December 31, 2016, based on Universal Robots’ calendar year 2015 EBITDA results, Teradyne paid $15 million or 100% of the eligible EBITDA contingent consideration amount.

(2) During the year ended December 31, 2016, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was increased by $15.3 million primarily due to an increase in forecasted revenues and a decrease in the discount rate. During the year ended 2016, the fair value of contingent consideration for the earn-out in connection with the acquisition of Avionics Interface Technologies, LLC (“AIT”) was increased by $0.6 million due to an increase in forecasted revenues.

(3) During the year ended December 31, 2017, Teradyne paid $1.1 million of contingent consideration for the earn-out in connection with the acquisition of AIT.

(4) During the year ended December 31, 2017, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was increased by $7.8 million primarily due to an increase in forecasted revenues and decrease in discount rate.

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 instrument:

Liability		December 31, 2017 Fair Value				Valuation Technique		Unobservable Inputs		Weighted Average
		(in thousands)
Contingent consideration (Universal Robots)		$	24,497	(1)
		$	20,605			Monte Carlo simulation		Revenue for the period July 1, 2015—December 31, 2018 volatility			11.2%
								Discount Rate			3.3%

(1) Contingent consideration of $24.5 million is expected to be paid in March 2018.

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of financial instruments at December 31, 2017 and 2016 were as follows:

		December 31, 2017								December 31, 2016
		Carrying Value				Fair Value				Carrying Value				Fair Value
		(in thousands)
Assets
Cash and cash equivalents		$	429,843			$	429,843			$	307,884			$	307,884
Marketable securities			1,473,905				1,473,905				1,304,867				1,304,867
Derivative assets			389				389				1				1
Liabilities
Contingent consideration			45,102				45,102				38,332				38,332
Derivative liabilities			446				446				131				131
Convertible debt (1)			365,987				659,525				352,669				486,754

(1) The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the convertible note which includes the equity conversion features.

Schedule of Available-for-Sale Marketable Securities

The following tables summarize the composition of available for sale marketable securities at December 31, 2017 and 2016:

		December 31, 2017
		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		$	858,258			$	72			$	(2,535	)		$	855,795			$	850,163
Commercial paper			283,009				18				(187	)			282,840				258,933
Certificates of deposit and time deposits			167,523				6				(187	)			167,342				138,340
Corporate debt securities			131,179				2,380				(373	)			133,186				91,010
Equity and debt mutual funds			19,403				4,102				(75	)			23,430				1,723
U.S. government agency securities			10,775				—				(49	)			10,726				10,726
Non-U.S. government securities			582				4				—				586				—
		$	1,470,729			$	6,582			$	(3,406	)		$	1,473,905			$	1,350,896

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of  Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	1,349,970			$	38			$	(2,029	)		$	1,347,979			$	1,288,844
Long-term marketable securities			120,759				6,544				(1,377	)			125,926				62,052
		$	1,470,729			$	6,582			$	(3,406	)		$	1,473,905			$	1,350,896

		December 31, 2016
		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		$	904,737			$	97			$	(2,034	)		$	902,800			$	572,284
Commercial paper			161,672				24				(66	)			161,630				84,034
Corporate debt securities			99,708				1,065				(620	)			100,153				53,642
Certificates of deposit and time deposits			82,080				54				(1	)			82,133				7,760
U.S. government agency securities			39,264				7				(19	)			39,252				13,461
Equity and debt mutual funds			16,505				1,724				(58	)			18,171				1,661
Non-U.S. government securities			745				6				(23	)			728				137
		$	1,304,711			$	2,977			$	(2,821	)		$	1,304,867			$	732,979

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of  Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	871,321			$	134			$	(431	)		$	871,024			$	423,128
Long-term marketable securities			433,390				2,843				(2,390	)			433,843				309,851
		$	1,304,711			$	2,977			$	(2,821	)		$	1,304,867			$	732,979

Contractual Maturities of Investments Held

The contractual maturities of investments held at December 31, 2017 were as follows:

		Cost				Fair Value
		(in thousands)
Due within one year		$	1,349,970			$	1,347,979
Due after 1 year through 5 years			48,796				48,599
Due after 5 years through 10 years			13,916				13,489
Due after 10 years			38,644				40,408
Total		$	1,451,326			$	1,450,475

Non-Financial Assets Measured at Fair Value on Non-Recurring Basis

The following table sets forth by fair value hierarchy Teradyne’s non-financial assets that were measured at fair value on a non-recurring basis as of July 3, 2016:

						July 3, 2016
		Quoted Prices in Active Markets  for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Other Unobservable Inputs (Level 3)				Total				Total Losses
		(in thousands)
Assets
Goodwill		$	—			$	—			$	7,976			$	7,976			$	254,946
Definite lived intangible assets			—				—				5,750				5,750				83,339
		$	—			$	—			$	13,726			$	13,726			$	338,285

(1) In accordance with the provisions of ASC 350-20, “Goodwill”, goodwill in the Wireless Test reporting unit with a carrying amount of $262.9 million was written down in the second quarter of 2016 to its implied fair value of $8.0 million, resulting in an impairment charge of $254.9 million. See Note J: “Goodwill and Intangible Assets” regarding goodwill impairment.

(2) In accordance with the provisions of ASC 360-10, “Property, Plant and Equipment”, definite lived intangible assets in the Wireless Test reporting unit with a carrying amount of $89.2 million were written down in the second quarter of 2016 to their implied fair value of $5.8 million, resulting in an impairment charge of $83.3 million. See Note J: “Goodwill and Intangible Assets” regarding definite lived intangible assets impairment.

Schedule of Notional Amount of Derivatives

At December 31, 2017 and 2016, Teradyne had the following contracts to buy and sell non-U.S. currencies for U.S. dollars and other non-U.S. currencies with the following notional amounts:

		December 31, 2017												December 31, 2016
		Buy Position				Sell Position				Net Total				Buy Position				Sell Position				Net Total
		(in millions)
Japanese Yen		$	(35.7	)		$	—			$	(35.7	)		$	(17.7	)		$	—			$	(17.7	)
Taiwan Dollar			(9.9	)			—				(9.9	)			(6.9	)			—				(6.9	)
Korean Won			(8.9	)			—				(8.9	)			(8.8	)			—				(8.8	)
British Pound Sterling			(1.4	)			—				(1.4	)			(1.3	)			—				(1.3	)
Singapore Dollar			—				33.5				33.5				—				24.0				24.0
Euro			—				27.4				27.4				—				25.2				25.2
Total		$	(55.9	)		$	60.9			$	5.0			$	(34.7	)		$	49.2			$	14.5

Schedule of Derivative Instruments in Statement of Financial Position at Fair Value

The following table summarizes the fair value of derivative instruments as of December 31, 2017 and 2016:

		Balance Sheet Location		2017				2016
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Prepayments		$	389			$	1
Foreign exchange contracts		Other current liabilities			(446	)			(131	)
Total derivatives				$	(57	)		$	(130	)

Schedule of Effect of Derivative Instruments on Statement of Operations Recognized

The following table summarizes the effect of derivative instruments in the statements of operations recognized for the years ended December 31, 2017, 2016, and 2015.

		Location of (Gains) Losses Recognized in Statement of Operations		2017				2016				2015
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Other (income) expense, net		$	(1,133	)		$	8,671			$	3,047

(1) The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies.

(2) For the year ended December 31, 2017, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $2.9 million.

(3) For the years ended December 31, 2016, and 2015, net gains from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $8.0 million and $2.5 million, respectively.

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X

- Definition

Tabular disclosure of the notional amounts of outstanding derivative positions.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=84234895&loc=SL5579245-113959

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