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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Income (Loss) Before Income Taxes and Provision (Benefit) for Income Taxes from Operations

The components of income (loss) before income taxes and the provision (benefit) for income taxes as shown in the consolidated statements of operations were as follows:

		2017				2016				2015
		(in thousands)
Income (loss) before income taxes:
U.S.		$	76,699			$	(341,018	)		$	56,270
Non-U.S.			447,713				285,958				196,854
		$	524,412			$	(55,060	)		$	253,124
Provision (benefit) for income taxes:
Current:
U.S. Federal		$	162,679			$	7,750			$	16,635
Non-U.S.			64,313				41,579				35,707
State			2,623				1,968				1,429
			229,615				51,297				53,771
Deferred:
U.S. Federal			43,687				(51,482	)			(574	)
Non-U.S.			(6,476	)			(9,240	)			(7,761	)
State			(106	)			(2,214	)			1,211
			37,105				(62,936	)			(7,124	)
Total provision (benefit) for income taxes:		$	266,720			$	(11,639	)		$	46,647

Reconciliation of Effective Tax Rate

A reconciliation of the effective tax rate for the years 2017, 2016, and 2015 is as follows:

		2017				2016				2015
U.S. statutory federal tax rate			35.0	%			35.0	%			35.0	%
U.S. transition tax			28.7				—				—
Impact of rate change on deferred tax			6.4				—				—
Uncertain tax positions			1.7				(2.6	)			2.2
Foreign taxes			(16.3	)			78.0				(13.8	)
Foreign tax credits			(2.2	)			49.1				(2.7	)
U.S. research and development credit			(1.6	)			15.8				(3.0	)
Equity compensation			(0.8	)			(2.7	)			0.6
Domestic production activities deduction			(0.3	)			2.3				(1.0	)
State income taxes, net of federal tax benefit			—				2.3				0.4
Goodwill impairment			—				(162.1	)			—
U.S. alternative minimum tax credit			—				3.7				—
Inventory cost capitalization			—				1.8				—
Other, net			0.3				0.5				0.7
			50.9	%			21.1	%			18.4	%

Deferred Tax Assets (Liabilities)

Significant components of Teradyne’s deferred tax assets (liabilities) as of December 31, 2017 and 2016 were as follows:

		2017				2016
		(in thousands)
Deferred tax assets:
Tax credits		$	76,083			$	57,313
Accruals			27,508				27,247
Pension liabilities			22,602				31,581
Inventory valuations			17,793				31,227
Deferred revenue			9,016				12,806
Equity compensation			6,861				9,922
Net operating loss carryforwards			5,440				5,244
Vacation accrual			4,747				7,874
Other			713				630
Gross deferred tax assets			170,763				183,844
Less: valuation allowance			(63,919	)			(48,369	)
Total deferred tax assets		$	106,844			$	135,475
Deferred tax liabilities:
Intangible assets		$	(16,120	)		$	(22,887	)
Depreciation			(12,293	)			(17,117	)
Marketable securities			(1,125	)			(210	)
Total deferred tax liabilities		$	(29,538	)		$	(40,214	)
Net deferred assets		$	77,306			$	95,261

Operating Loss Carryforwards

At December 31, 2017, Teradyne had operating loss carryforwards that expire in the following years:

		U.S. Federal Operating Loss Carryforwards				State Operating Loss Carryforwards				Foreign Operating  Loss Carryforwards
		(in thousands)
2018		$	—			$	9,943			$	—
2019			—				174				—
2020			—				130				—
2021			—				2,919				—
2022			—				6,362				—
2023-2027			—				12,296				—
2028-2032			—				34,963				—
Beyond 2032			—				4,516				130
Non-expiring			—				—				7,012
Total		$	—			$	71,303			$	7,142

Unrecognized Tax Benefits

Teradyne’s gross unrecognized tax benefits for the years ended December 31, 2017, 2016 and 2015 were as follows:

		2017				2016				2015
		(in thousands)
Beginning balance, as of January 1		$	38,958			$	36,792			$	30,418
Additions:
Tax positions for current year			8,208				9,766				6,626
Tax positions for prior years			199				187				792
Reductions:
Tax positions for prior years			(10,573	)			(1,960	)			(708	)
Expiration of statutes			(325	)			(3,532	)			—
Settlements with tax authorities			(204	)			(2,295	)			(336	)
Ending balance as of December 31		$	36,263			$	38,958			$	36,792

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