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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

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, 2018 and 2017:

		December 31, 2018
		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		$	312,512			$	—			$	—			$	312,512
Cash equivalents			253,525				360,715				—				614,240
Available for sale securities:
U.S. Treasury securities			—				109,721				—				109,721
Commercial paper			—				86,117				—				86,117
Corporate debt securities			—				40,020				—				40,020
U.S. government agency securities			—				9,611				—				9,611
Certificates of deposit and time deposits			—				7,604				—				7,604
Debt mutual funds			3,187				—				—				3,187
Non-U.S. government securities			—				376				—				376
Equity securities:
Mutual funds			21,191				—				—				21,191
			590,415				614,164				—				1,204,579
Derivative assets			—				79				—				79
Total		$	590,415			$	614,243			$	—			$	1,204,658
Liabilities
Contingent consideration		$	—			$	—			$	70,543			$	70,543
Derivative liabilities			—				514				—				514
Total		$	—			$	514			$	70,543			$	71,057

Reported as follows:

		Level 1				Level 2				Level 3				Total
		(in thousands)
Assets
Cash and cash equivalents		$	566,037			$	360,715			$	—			$	926,752
Marketable securities			—				190,096				—				190,096
Long-term marketable securities			24,378				63,353				—				87,731
Prepayments			—				79				—				79
Total		$	590,415			$	614,243			$	—			$	1,204,658
Liabilities
Other current liabilities		$	—			$	514			$	—			$	514
Contingent consideration			—				—				34,865				34,865
Long-term contingent consideration			—				—				35,678				35,678
Total		$	—			$	514			$	70,543			$	71,057

		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
		$	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
		$	—			$	446			$	45,102			$	45,548

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, 2018 and 2017 were as follows:

		Contingent Consideration
		(in thousands)
Balance at December 31, 2016		$	38,332
Payments (1)			(1,050	)
Fair value adjustment (2)			7,820
Balance at December 31, 2017			45,102
Acquisition of MiR			52,547
Foreign currency impact			(3,540	)
Payments (3)			(24,553	)
Fair value adjustment (4)			987
Balance at December 31, 2018		$	70,543

(1) 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 Avionics Interface Technologies, LLC (“AIT”).

(2) 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.

(3) During the year ended December 31, 2018, Teradyne paid $24.6 million of contingent consideration for the earn-out in connection with the acquisition of Universal Robots.

(4) During the year ended December 31, 2018, the fair value of contingent consideration for the earn-out in connection with the acquisition of MiR was increased by $17.7 million primarily due to an increase in forecasted revenues. During the year ended December 31, 2018, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was decreased by $16.7 million primarily due to a decrease in forecasted revenues.

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, 2018 Fair Value				Valuation Technique				Unobservable Inputs			Weighted Average
		(in thousands)
Contingent consideration (MiR)		$	66,672	(1)			Monte Carlo simulation			Revenue volatility				18.0	%
										Discount rate				1.1	%
Contingent consideration (Universal Robots)		$	3,871	(1)

(1) Contingent consideration related to MiR and Universal Robots acquisitions of $31.0 million and $3.9 million, respectively, is expected to be paid in March 2019.

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of Teradyne’s financial instruments at December 31, 2018 and 2017 were as follows:

		December 31, 2018								December 31, 2017
		Carrying Value				Fair Value				Carrying Value				Fair Value
		(in thousands)
Assets
Cash and cash equivalents		$	926,752			$	926,752			$	429,843			$	429,843
Marketable securities			277,827				277,827				1,473,905				1,473,905
Derivative assets			79				79				389				389
Liabilities
Contingent consideration			70,543				70,543				45,102				45,102
Derivative liabilities			514				514				446				446
Convertible debt (1)			379,981				547,113				365,987				659,525

(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, 2018 and 2017:

		December 31, 2018
		Available-for-Sale																Fair Market
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Value of Investments with Unrealized Losses
		(in thousands)
U.S. Treasury securities		$	110,969			$	112			$	(1,360	)		$	109,721			$	75,040
Commercial paper			86,130				13				(26	)			86,117				85,094
Corporate debt securities			41,133				432				(1,545	)			40,020				24,767
U.S. government agency securities			9,646				1				(36	)			9,611				7,077
Certificates of deposit and time deposits			7,604				—				—				7,604				—
Debt mutual funds			3,153				34				—				3,187				—
Non-U.S. government securities			376				—				—				376				—
		$	259,011			$	592			$	(2,967	)		$	256,636			$	191,978

Reported as follows: 

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	190,100			$	88			$	(92	)		$	190,096			$	140,262
Long-term marketable securities			68,911				504				(2,875	)			66,540				51,716
		$	259,011			$	592			$	(2,967	)		$	256,636			$	191,978

		December 31, 2017
		Available-for-Sale
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(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				10,727
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

Contractual Maturities of Investments Held

The contractual maturities of investments in available-for-sale marketable securities held at December 31, 2018 were as follows:

		Cost				Fair Value
		(in thousands)
Due within one year		$	190,100			$	190,096
Due after 1 year through 5 years			9,199				9,144
Due after 5 years through 10 years			14,081				13,405
Due after 10 years			42,478				40,804
Total		$	255,858			$	253,449

Schedule of Notional Amount of Derivatives

At December 31, 2018 and 2017, 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, 2018															December 31, 2017
		Buy Position					Sell Position					Net Total					Buy Position					Sell Position					Net Total
		(in millions)
Japanese Yen		$	(35.0	)			$	—				$	(35.0	)			$	(35.7	)			$	—				$	(35.7	)
Taiwan Dollar			(11.2	)				—					(11.2	)				(9.9	)				—					(9.9	)
Korean Won			(9.6	)				—					(9.6	)				(8.9	)				—					(8.9	)
British Pound Sterling			(1.4	)				—					(1.4	)				(1.4	)				—					(1.4	)
Euro			—					82.2					82.2					—					27.4					27.4
Singapore Dollar			—					15.7					15.7					—					33.5					33.5
Philippine Peso			—					5.2					5.2					—					—					—
Chinese Yuan			—					2.8					2.8					—					—					—
Total		$	(57.2	)			$	105.9				$	48.7				$	(55.9	)			$	60.9				$	5.0

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, 2018 and 2017:

		Balance Sheet Location				December 31, 2018				December 31, 2017
						(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Prepayments				$	79			$	389
Foreign exchange contracts		Other current liabilities					(514	)			(446	)
Total derivatives						$	(435	)		$	(57	)

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, 2018, 2017, and 2016.

		Location of (Gains) Losses Recognized in Statement of Operations				2018				2017				2016
						(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Other (income) expense, net				$	7,257			$	(1,133	)		$	8,671

(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 years ended December 31, 2018 and 2016, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $2.4 million and $8.0 million, respectively.

(3) 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.

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