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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

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:

		2018				2017				2016
		(in thousands)
Income (loss) before income taxes:
U.S.		$	189,691			$	76,699			$	(341,018	)
Non-U.S.			278,110				447,713				285,958
		$	467,801			$	524,412			$	(55,060	)
Provision (benefit) for income taxes:
Current:
U.S. Federal		$	(59,122	)		$	162,679			$	7,750
Non-U.S.			45,083				64,313				41,579
State			1,721				2,623				1,968
			(12,318	)			229,615				51,297
Deferred:
U.S. Federal			29,252				43,687				(51,482	)
Non-U.S.			(1,243	)			(6,476	)			(9,240	)
State			331				(106	)			(2,214	)
			28,340				37,105				(62,936	)
Total provision (benefit) for income taxes:		$	16,022			$	266,720			$	(11,639	)

Reconciliation of Effective Tax Rate

A reconciliation of the effective tax rate for the years 2018, 2017, and 2016 is as follows:

		2018				2017				2016
U.S. statutory federal tax rate			21.0	%			35.0	%			35.0	%
U.S. transition tax			(10.5	)			28.7				—
U.S. foreign derived intangible income			(1.8	)			—				—
Impact of rate change on deferred tax			0.3				6.9				—
Uncertain tax positions			1.0				1.7				(2.6	)
Foreign taxes			(2.0	)			(16.3	)			78.0
Foreign tax credits			(2.2	)			(2.2	)			49.1
U.S. research and development credit			(2.2	)			(1.6	)			15.8
Equity compensation			(1.2	)			(0.8	)			(2.7	)
State income taxes, net of federal tax benefit			0.1				(0.4	)			2.3
Domestic production activities deduction			—				(0.3	)			2.3
Goodwill impairment			—				—				(162.1	)
U.S. alternative minimum tax credit			—				—				3.7
Inventory cost capitalization			—				—				1.8
Other, net			0.9				0.2				0.5
			3.4	%			50.9	%			21.1	%

Deferred Tax Assets (Liabilities)

Significant components of Teradyne’s deferred tax assets (liabilities) as of December 31, 2018 and 2017 were as follows:

		2018				2017
		(in thousands)
Deferred tax assets:
Tax credits		$	69,091			$	76,083
Accruals			23,449				27,508
Pension liabilities			20,826				22,602
Inventory valuations			18,514				17,793
Deferred revenue			9,130				9,016
Equity compensation			7,190				6,861
Vacation accrual			4,772				4,747
Net operating loss carryforwards			3,658				5,440
Marketable securities			962				—
Other			685				713
Gross deferred tax assets			158,277				170,763
Less: valuation allowance			(69,852	)			(63,919	)
Total deferred tax assets		$	88,425			$	106,844
Deferred tax liabilities:
Intangible assets		$	(24,211	)		$	(16,120	)
Depreciation			(14,028	)			(12,293	)
Marketable securities			—				(1,125	)
Total deferred tax liabilities		$	(38,239	)		$	(29,538	)
Net deferred assets		$	50,186			$	77,306

Operating Loss Carryforwards

At December 31, 2018, Teradyne had operating loss carryforwards that expire in the following years:

		State Operating Loss Carryforwards				Foreign Operating Loss Carryforwards
	(in thousands)
2019		$	258			$	—
2020			269				—
2021			2,977				—
2022			5,749				—
2023			6,241				—
2024-2028			4,672				—
2029-2033			22,724				44
Beyond 2033			5,305				72
Non-expiring			—				4,389
Total		$	48,195			$	4,505

Unrecognized Tax Benefits

Teradyne’s gross unrecognized tax benefits for the years ended December 31, 2018, 2017, and 2016 were as follows:

		2018				2017				2016
		(in thousands)
Beginning balance, as of January 1		$	36,263			$	38,958			$	36,792
Additions:
Tax positions for current year			4,716				8,208				9,766
Tax positions for prior years			2,626				199				187
Reductions:
Tax positions for prior years			(153	)			(10,573	)			(1,960	)
Expiration of statutes			(57	)			(325	)			(3,532	)
Settlements with tax authorities			—				(204	)			(2,295	)
Ending balance as of December 31		$	43,395			$	36,263			$	38,958

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