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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2020

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, 2020 and 2019:

		December 31, 2020
		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		$	443,166			$	—			$	—			$	443,166
Cash equivalents			347,768				123,187				—				470,955
Available for sale securities:
U.S. Treasury securities			—				258,304				—				258,304
Commercial paper			—				254,413				—				254,413
Corporate debt securities			—				83,615				—				83,615
Debt mutual funds			8,565				—				—				8,565
U.S. government agency securities			—				4,339				—				4,339
Certificates of deposit and time deposits			—				979				—				979
Non-U.S. government securities			—				625				—				625
Equity securities:
Mutual funds			29,420				—				—				29,420
Total		$	828,919			$	725,462			$	—			$	1,554,381
Derivative assets			—				95				—				95
Total		$	828,919			$	725,557			$	—			$	1,554,476
Liabilities
Contingent consideration		$	—			$	—			$	7,227			$	7,227
Derivative liabilities			—				504				—				504
Total		$	—			$	504			$	7,227			$	7,731

Reported as follows:

		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	790,934			$	123,187			$	—			$	914,121
Marketable securities			—				522,280				—				522,280
Long-term marketable securities			37,985				79,995				—				117,980
Prepayments and other current assets			—				95				—				95
Total		$	828,919			$	725,557			$	—			$	1,554,476
Liabilities
Other current liabilities		$	—			$	504			$	—			$	504
Long-term contingent consideration			—				—				7,227				7,227
Total		$	—			$	504			$	7,227			$	7,731

		December 31, 2019
		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		$	311,975			$	—			$	—			$	311,975
Cash equivalents			410,285				51,664				—				461,949
Available for sale securities:
Corporate debt securities			—				97,307				—				97,307
Commercial paper			—				54,149				—				54,149
U.S. Treasury securities			—				42,382				—				42,382
U.S. government agency securities			—				9,952				—				9,952
Debt mutual funds			6,888				—				—				6,888
Certificates of deposit and time deposits			—				4,751				—				4,751
Non-U.S. government securities			—				592				—				592
Equity securities:
Mutual funds			25,772				—				—				25,772
Total		$	754,920			$	260,797			$	—			$	1,015,717
Derivative assets			—				528				—				528
Total		$	754,920			$	261,325			$	—			$	1,016,245
Liabilities
Contingent consideration		$	—			$	—			$	39,705			$	39,705
Derivative liabilities			—				203				—				203
Total		$	—			$	203			$	39,705			$	39,908

Reported as follows:

		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	722,260			$	51,664			$	—			$	773,924
Marketable securities			—				137,303				—				137,303
Long-term marketable securities			32,660				71,830				—				104,490
Prepayments and other current assets			—				528				—				528
Total		$	754,920			$	261,325			$	—			$	1,016,245
Liabilities
Other current liabilities		$	—			$	203			$	—			$	203
Contingent consideration			—				—				9,106				9,106
Long-term contingent consideration			—				—				30,599				30,599
Total		$	—			$	203			$	39,705			$	39,908

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, 2020 and 2019 were as follows:

		Contingent Consideration
		(in thousands)
Balance at December 31, 2018		$	70,543
Acquisition of AutoGuide			23,976
Foreign currency impact			(967	)
Payments (1)			(34,590	)
Fair value adjustment (2)			(19,257	)
Balance at December 31, 2019			39,705
Foreign currency impact			(355	)
Payments (3)			(8,852	)
Fair value adjustment (4)			(23,271	)
Balance at December 31, 2020		$	7,227

(1) During the year ended December 31, 2019, Teradyne paid $30.8 million and $3.8 million of contingent consideration for the earn-outs in connection with the acquisitions of MiR and Universal Robots A/S (“Universal Robots”), respectively.

(2) During the year ended December 31, 2019, the fair value of contingent consideration for the earn-out in connection with the acquisition of MiR was decreased by $22.2 million primarily due to a decrease in forecasted revenues partially offset by the impact from modification of the earn-out structure. During the year ended December 31, 2019, the fair value of contingent consideration for the earn-out in connection with the acquisition of AutoGuide was increased by $3.0 million primarily due to an increase in forecasted revenues

(3) During the year ended December 31, 2020, Teradyne paid $8.9 million of contingent consideration for the earn-out in connection with the acquisition of MiR.

(4) During the year ended December 31, 2020, the fair value of contingent consideration for the earn-out in connection with the acquisition of AutoGuide was decreased by $19.7 million primarily due to a decrease in forecasted revenues and earnings before interest and taxes. Teradyne has received a letter from the sellers of AutoGuide alleging non-compliance with the earn-out provisions of the AutoGuide acquisition agreement. Teradyne disputes the allegation of non-compliance. The ultimate amount of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide may be affected by the outcome of the dispute. During the year ended December 31, 2020, the fair value of contingent consideration for the earn-out in connection with the acquisition of MiR was decreased by $3.5 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, 2020 Fair Value

Valuation Technique

Unobservable Inputs

Weighted Average

(in thousands)

Contingent consideration (AutoGuide)

$

7,227

Monte Carlo simulation

Revenue Volatility

16.5%

Discount Rate

1.0%

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of Teradyne’s financial instruments at December 31, 2020 and 2019 were as follows:

		December 31, 2020								December 31, 2019
		Carrying Value				Fair Value				Carrying Value				Fair Value
		(in thousands)
Assets
Cash and cash equivalents		$	914,121			$	914,121			$	773,924			$	773,924
Marketable securities			640,260				640,260				241,793				241,793
Derivative assets			95				95				528				528
Liabilities
Contingent consideration			7,227				7,227				39,705				39,705
Derivative liabilities			504				504				203				203
Convertible debt (1)			410,111				1,739,553				394,687				1,010,275

(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, 2020 and 2019:

		December 31, 2020
		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		$	257,132			$	1,330			$	(158	)		$	258,304			$	17,243
Commercial paper			254,404				10				(1	)			254,413				12,173
Corporate debt securities			76,129				7,539				(53	)			83,615				39,896
Debt mutual funds			8,413				152				—				8,565				—
U.S. government agency securities			4,294				46				(1	)			4,339				1,106
Certificates of deposit and time deposits			979				—				—				979				—
Non-U.S. government securities			625				—				—				625				—
		$	601,976			$	9,077			$	(213	)		$	610,840			$	70,418

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	522,228			$	92			$	(40	)		$	522,280			$	61,806
Long-term marketable securities			79,748				8,985				(173	)			88,560				8,612
		$	601,976			$	9,077			$	(213	)		$	610,840			$	70,418

		December 31, 2019
		Available-for-Sale
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Corporate debt securities		$	93,267			$	4,081			$	(41	)		$	97,307			$	2,009
Commercial paper			54,124				26				(1	)			54,149				1,391
U.S. Treasury securities			42,167				431				(216	)			42,382				17,556
U.S. government agency securities			9,942				14				(4	)			9,952				3,043
Debt mutual funds			6,753				135				—				6,888				—
Certificates of deposit and time deposits			4,751				—				—				4,751				—
Non-U.S. government securities			592				—				—				592				—
		$	211,596			$	4,687			$	(262	)		$	216,021			$	23,999

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	137,144			$	160			$	(1	)		$	137,303			$	2,922
Long-term marketable securities			74,452				4,527				(261	)			78,718				21,077
		$	211,596			$	4,687			$	(262	)		$	216,021			$	23,999

Contractual Maturities of Investments Held

The contractual maturities of investments in available-for-sale marketable securities held at December 31, 2020 were as follows:

		Cost				Fair Value
		(in thousands)
Due within one year		$	522,228			$	522,280
Due after 1 year through 5 years			24,829				25,245
Due after 5 years through 10 years			13,030				14,183
Due after 10 years			33,476				40,567
Total		$	593,563			$	602,275

Schedule of Notional Amount of Derivatives

At December 31, 2020 and 2019, 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, 2020												December 31, 2019
		Buy Position				Sell Position				Net Total				Buy Position				Sell Position				Net Total
		(in millions)
Japanese Yen		$	(14.1	)		$	—			$	(14.1	)		$	(29.3	)		$	—			$	(29.3	)
Taiwan Dollar			(27.9	)			—				(27.9	)			(18.4	)			—				(18.4	)
Korean Won			(5.3	)			—				(5.3	)			(10.7	)			—				(10.7	)
British Pound Sterling			(1.0	)			—				(1.0	)			(3.8	)			—				(3.8	)
Singapore Dollar			—				52.3				52.3				—				25.3				25.3
Euro			—				43.9				43.9				—				47.8				47.8
Philippine Peso			—				5.0				5.0				—				5.2				5.2
Chinese Yuan			—				3.4				3.4				—				4.4				4.4
Total		$	(48.3	)		$	104.6			$	56.3			$	(62.2	)		$	82.7			$	20.5

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, 2020 and 2019:

		Balance Sheet Location		December 31, 2020				December 31, 2019
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Prepayments		$	95			$	528
Foreign exchange contracts		Other current liabilities			(504	)			(203	)
Total derivatives				$	(409	)		$	325

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, 2020, 2019, and 2018.

		Location of (Gains) Losses Recognized in Statement of Operations		December 31, 2020				December 31, 2019				December 31, 2018
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Other (income) expense, net		$	3,515			$	5,960			$	7,386

(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, 2020, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $2.6 million.

(3) For the year ended December 31, 2019 and 2018, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.6 million and $2.5 million, respectively.

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