XML 40 R21.htm IDEA: XBRL DOCUMENT v3.20.4
Goodwill and Intangible Assets
 12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets
L.    GOODWILL AND INTANGIBLE ASSETS
Goodwill
Teradyne performs its annual goodwill impairment test as required under the provisions of ASC 350-10, “
Intangibles—Goodwill and Other,
” on December 31 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value.
Teradyne has the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If Teradyne determines this is the case, Teradyne is required to perform a quantitative goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized. If Teradyne determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amounts, the quantitative goodwill impairment test is not required. In performing the quantitative goodwill impairment test, Teradyne determines the fair value of a reporting unit using the results derived from an income approach and a market approach, weighting the fair value determined under each approach to determine an estimated fair value for a reporting unit. The income approach is estimated through the discounted cash flows (“DCF”) analysis. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, perpetual growth rates, and the amount and timing of expected future cash flows. Discount rates are based on a weighted average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity, plus a risk premium. The WACC used to test goodwill is derived from a group of comparable companies. The cash flows employed in the DCF analysis are derived from internal forecasts and external market forecasts. The market approach estimates the fair value of the reporting unit by utilizing the market comparable method which is based on revenue and earnings multiples from comparable companies. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, then the goodwill is written down by the amount that carrying value exceeds the fair value of the reporting unit, but not below zero.
On September 15, 2020, Teradyne announced the appointment of Gregory Smith as President of Teradyne’s Industrial Automation reportable segment effective October 1, 2020. With the appointment of Gregory Smith, the Industrial Automation reportable segment, which includes UR, MiR and AutoGuide, is considered one operating segment and one reporting unit. Teradyne performed a goodwill impairment test at the time of the change in operating segments, which indicated the fair value of Teradyne’s reporting units exceeded their carrying values. In the fourth quarter of 2020, Teradyne performed the annual goodwill impairment test, completing a qualitative assessment for the Wireless Test, System Test, and Industrial Automation reporting units. There was no impairment as a result of the annual test performed in the fourth quarter of 2020. Key assumptions in the goodwill valuation model are forecasted revenues, discount rate, earnings before interest and taxes, and revenue multiples from comparable companies. A change in any of these key assumptions could result in the reporting unit being impaired in a future period.
Based on Teradyne’s December 31, 2019 goodwill impairment test, the MiR reporting unit’s estimated fair value exceeded its carrying value by 14%. The MiR goodwill amount is $123.6 million as of December 31, 2019. Key assumptions in the goodwill valuation model are forecasted revenues, discount rate, earnings before interest and taxes, and revenue multiples from comparable companies. A change in any of these key assumptions could result in the reporting unit being impaired in a future period.
In the fourth quarter of 2018, Teradyne performed the annual goodwill impairment test. Teradyne completed step one of the two-step impairment test for the Universal Robots reporting unit. Teradyne completed step zero for the Wireless Test and Defense/Aerospace, MiR, and Energid reporting units. There was no impairment as a result of the annual test performed in the fourth quarter of 2018.
The changes in the carrying amount of goodwill by reportable segments for the years ended December 31, 2020 and 2019 are as follows:
 
 
  
Industrial

Automation
 
 
Wireless

Test
 
 
Semiconductor

Test
 
 
System

Test
 
 
Total
 
 
  
(in thousands)
 
Balance at December 31, 2018:
  
      
 
      
 
      
 
      
 
      
Goodwill
  
$
363,358
 
 
$
361,819
 
 
$
260,540
 
 
$
158,699
 
 
$
1,144,416
 
Accumulated impairment losses
  
 
—  
 
 
 
(353,843
) 
 
 
(260,540
) 
 
 
(148,183
) 
 
 
(762,566
) 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
 
  
 
363,358
 
 
 
7,976
 
 
 
—  
 
 
 
10,516
 
 
 
381,850
 
Lemsys acquisition
  
 
—  
 
 
 
—  
 
 
 
1,428
 
 
 
—  
 
 
 
1,428
 
AutoGuide acquisition
  
 
41,372
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
41,372
 
Foreign currency translation adjustment
  
 
(8,247
) 
 
 
—  
 
 
 
28
 
 
 
—  
 
 
 
(8,219
) 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Balance at December 31, 2019:
  
      
 
      
 
      
 
      
 
      
Goodwill
  
 
396,483
 
 
 
361,819
 
 
 
261,996
 
 
 
158,699
 
 
 
1,178,997
 
Accumulated impairment losses
  
 
—  
 
 
 
(353,843
) 
 
 
(260,540
) 
 
 
(148,183
) 
 
 
(762,566
) 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
 
  
 
396,483
 
 
 
7,976
 
 
 
1,456
 
 
 
10,516
 
 
 
416,431
 
AutoGuide acquisition
  
 
(149
) 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(149
) 
Foreign currency translation adjustment
  
 
37,418
 
 
 
—  
 
 
 
159
 
 
 
—  
 
 
 
37,577
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Balance at December 31, 2020:
  
      
 
      
 
      
 
      
 
      
Goodwill
  
 
433,752
 
 
 
361,819
 
 
 
262,155
 
 
 
158,699
 
 
 
1,216,425
 
Accumulated impairment losses
  
 
—  
 
 
 
(353,843
) 
 
 
(260,540
) 
 
 
(148,183
) 
 
 
(762,566
) 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
 
  
$
433,752
 
 
$
7,976
 
 
$
1,615
 
 
$
10,516
 
 
$
453,859
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Intangible Assets
Teradyne reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.
There were no events or circumstances indicating that the carrying value of intangible and long-lived assets may not be recoverable in 2020, 2019 and 2018.
Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheets:
 
 
  
December 31, 2020
 
 
  
Gross

Carrying

Amount
 
(1)
 
  
Accumulated

Amortization (1)
 
 
Foreign
Currency
Translation
Adjustment
 
 
Net

Carrying

Amount
 
 
  
(in thousands)
 
Developed technology
  
$
272,547
 
  
$
(210,479
) 
 
$
(1,610
) 
 
$
60,458
 
Customer relationships
  
 
66,239
 
  
 
(54,524
) 
 
 
305
 
 
 
12,020
 
Tradenames and trademarks
  
 
70,120
 
  
 
(42,344
) 
 
 
685
 
 
 
28,461
 
    
 
 
     
 
 
    
 
 
    
 
 
  
Total intangible assets
  
$
408,906
 
  
$
(307,347
) 
 
$
(620
) 
 
$
100,939
 
    
 
 
     
 
 
    
 
 
    
 
 
  
 
  
December 31, 2019
 
 
  
Gross

Carrying

Amount
 
  
Accumulated

Amortization
 
 
Foreign
Currency
Translation
Adjustment
 
 
Net

Carrying

Amount
 
 
  
(in thousands)
 
Developed technology
  
$
361,787
 
  
$
(279,000
) 
 
$
(5,709
) 
 
$
77,078
 
Customer relationships
  
 
75,669
 
  
 
(59,077
) 
 
 
(455
) 
 
 
16,137
 
Tradenames and trademarks
  
 
70,120
 
  
 
(36,671
) 
 
 
(1,184
) 
 
 
32,265
 
Backlog
  
 
260
 
  
 
(260
) 
 
 
—  
 
 
 
—  
 
    
 
 
     
 
 
    
 
 
    
 
 
  
Total intangible assets
  
$
507,836
 
  
$
(375,008
) 
 
$
(7,348
) 
 
$
125,480
 
    
 
 
     
 
 
    
 
 
    
 
 
  
 
(1)
In 2020, $98.9 million of amortizable intangible assets became fully amortized and have been eliminated from the gross carrying amount and accumulated amortization.
Aggregate intangible assets amortization expense for the years ended December 31, 2020, 2019, and 2018, was $30.8 million, $40.1 million, and $39.2 million, respectively. Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:
 
Year
  
Amortization Expense
 
 
  
(in thousands)
 
2021
  
$
21,893
 
2022
  
 
21,000
 
2023
  
 
20,504
 
2024
  
 
20,192
 
2025
  
 
11,922
 
Thereafter
  
 
5,428