XML 43 R28.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2021
Income Taxes | S. INCOME TAXES The components of income before income taxes and the provision (benefit) for income taxes as shown in the consolidated statements of operations were as follows:
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
Income before income taxes: |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 403,451 |  |  | $ | 312,153 |  |  | $ | 192,442 |
Non-U.S. |  |  | 757,504 |  |  |  | 588,862 |  |  |  | 333,330 |
|  | $ | 1,160,955 |  |  | $ | 901,015 |  |  | $ | 525,772 |
Provision (benefit) for income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 58,218 |  |  | $ | 58,678 |  |  | $ | 19,297 |
Non-U.S. |  |  | 105,153 |  |  |  | 75,193 |  |  |  | 52,810 |
State |  |  | 300 |  |  |  | (1,315 | ) |  |  | (4,347 | )
|  |  | 163,671 |  |  |  | 132,556 |  |  |  | 67,760 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  |  | (15,106 | ) |  |  | (12,604 | ) |  |  | (4,522 | )
Non-U.S. |  |  | (4,300 | ) |  |  | (5,127 | ) |  |  | (8,007 | )
State |  |  | 2,101 |  |  |  | 2,043 |  |  |  | 3,073 |
|  |  | (17,305 | ) |  |  | (15,688 | ) |  |  | (9,456 | )
Total provision for income taxes: |  | $ | 146,366 |  |  | $ | 116,868 |  |  | $ | 58,304 |
Income tax expense for 2021, 2020 and 2019 totaled $146.4 million, $116.9 million, and $58.3 million, respectively. The effective tax rate for 2021, 2020 and 2019 was 12.6%, 13.0% and 11.1%, respectively. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), making significant changes to the Internal Revenue Code. The Tax Reform Act has significant direct and indirect implications for accounting for income taxes under ASC 740, “Accounting for Income Taxes” some of which could not be calculated with precision until further clarification and guidance was made available from tax authorities, regulatory bodies or the FASB. In light of this uncertainty, on December 22, 2017 the SEC issued Staff Accounting Bulletin (“SAB”) No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” to address uncertainty in the application of U.S. GAAP when the registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. In accordance with SAB 118, Teradyne recorded $186.0 million of additional income tax expense in the fourth quarter of 2017 which represented Teradyne’s best estimate of the impact of the Tax Reform Act in accordance with Teradyne’s understanding of the Tax Reform Act and available guidance as of that date. The $186.0 million was primarily composed of expense of $161.0 million related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings, $33.6 million of expense related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, and a benefit of $10.3 million associated with the impact of correlative adjustments on uncertain tax positions. In accordance with the requirements of SAB 118, in the fourth quarter of 2018, Teradyne completed its analysis of the effect of the Tax Reform Act based on the application of the most recently available guidance as of December 31, 2018 and recorded $49.5 million of net income tax benefit. The net benefit consisted of $51.7 million of benefit resulting from a reduction in the estimate of the one-time transition tax on the mandatory deemed repatriation of foreign earnings and an expense of $2.2 million associated with the impact of correlative adjustments on uncertain tax positions. Teradyne will pay approximately $7.9 million related to the transition tax in 2022, $22.7 million in 1 to 3 years, and $44.3 million in 3 to 5 years. Teradyne has made an accounting policy election to account for global intangible low-taxed income (“GILTI”) as a component of tax expense in the period in which Teradyne is subject to the rules and therefore did not provide any deferred tax impacts of GILTI in its consolidated financial statements. On July 27, 2015, in Altera Corp. (“Altera”) v. Commissioner, the U.S. Tax Court issued an opinion invalidating the regulations relating to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision was issued by the Tax Court in December 2015. The IRS appealed the decision in June 2016. On July 24, 2018, the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) issued a decision that was subsequently withdrawn and a reconstituted panel conferred on the appeal. On June 7, 2019, the Ninth Circuit upheld the cost-sharing regulations. On November 12, 2019 the Ninth Circuit denied Altera’s petition for rehearing of its case. Altera’s application for certiorari to the Supreme Court was declined on June 22, 2020. In the fourth quarter of 2020 and 2021, Teradyne recognized approximately $2.3 million of tax expense and $2.5 million of tax benefit in 2020 and 2021, respectively, related to the inclusion of stock-based compensation in its intercompany cost-sharing arrangement. The decrease in the effective tax rate from 2020 to 2021 is primarily attributable to a decrease in the expense from U.S. global low-taxed income partially offset by a decrease in the benefit from foreign tax credits and a shift in the geographic distribution of income, which increased the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions. The increase in the effective tax rate from 2019 to 2020 is primarily attributable to a reduction in the benefit from releases of reserves for uncertain tax positions, a reduction in benefit from foreign tax credits and an increase in the expense from U.S. global low-taxed income. These increases in expense were partially offset by a decrease in the transition tax on the mandatory deemed repatriation of foreign earnings and shift in the geographic distribution of income, which increases the income subject to taxation in lower tax rate jurisdictions relative to higher tax rate jurisdictions. A reconciliation of the effective tax rate for the years 2021, 2020 and 2019 is as follows:
|  | 2021 |  |  | 2020 |  |  | 2019 |
U.S. statutory federal tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
U.S. global intangible low-taxed income |  |  | 0.6 |  |  |  | 2.1 |  |  |  | 1.8 |
State income taxes, net of federal tax benefit |  |  | 0.2 |  |  |  | 0.3 |  |  |  | 0.5 |
Foreign taxes |  |  | (4.5 | ) |  |  | (5.6 | ) |  |  | (4.0 | )
U.S. foreign derived intangible income |  |  | (2.3 | ) |  |  | (2.2 | ) |  |  | (2.6 | )
U.S. research and development credit |  |  | (1.4 | ) |  |  | (1.3 | ) |  |  | (1.8 | )
Equity compensation |  |  | (0.9 | ) |  |  | (0.6 | ) |  |  | (0.7 | )
Foreign tax credits |  |  | (0.5 | ) |  |  | (1.2 | ) |  |  | (1.6 | )
Uncertain tax positions |  |  | (0.4 | ) |  |  | (0.1 | ) |  |  | (4.3 | )
U.S. transition tax |  |  | — |  |  |  | — |  |  |  | 1.9 |
Other, net |  |  | 0.8 |  |  |  | 0.6 |  |  |  | 0.9 |
|  |  | 12.6 | % |  |  | 13.0 | % |  |  | 11.1 | %
Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2021, 2020 and 2019 were $33.3 million or $0.18 per diluted share, $29.9 million or $0.16 per diluted share and $15.1 million or $0.08 per diluted share, respectively. In November 2020, Teradyne entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31, 2025 . Significant components of Teradyne’s deferred tax assets (liabilities) as of December 31, 2021 and 2020 were as follows:
|  | 2021 |  |  | 2020 |
|  | (in thousands) |
Deferred tax assets: |  |  |  |  |  |  |  |
Tax credits |  | $ | 98,378 |  |  | $ | 87,595 |
Accruals |  |  | 41,459 |  |  |  | 33,156 |
Pension liabilities |  |  | 28,722 |  |  |  | 28,348 |
Inventory valuations |  |  | 20,991 |  |  |  | 18,427 |
Lease liability |  |  | 16,484 |  |  |  | 12,627 |
Deferred revenue |  |  | 11,164 |  |  |  | 9,235 |
Equity compensation |  |  | 6,630 |  |  |  | 6,543 |
Vacation accrual |  |  | 6,050 |  |  |  | 5,890 |
Investment impairment |  |  | 3,292 |  |  |  | 3,292 |
Net operating loss carryforwards |  |  | 1,721 |  |  |  | 1,823 |
Other |  |  | 774 |  |  |  | 626 |
Gross deferred tax assets |  |  | 235,665 |  |  |  | 207,562 |
Less: valuation allowance |  |  | (97,170 | ) |  |  | (84,962 | )
Total deferred tax assets |  | $ | 138,495 |  |  | $ | 122,600 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Right of use assets |  | $ | (14,738 | ) |  | $ | (10,688 | )
Depreciation |  |  | (10,691 | ) |  |  | (14,525 | )
Intangible assets |  |  | (8,531 | ) |  |  | (12,726 | )
Contingent consideration |  |  | (5,214 | ) |  |  | (3,515 | )
Marketable securities |  |  | (3,220 | ) |  |  | (3,344 | )
Other |  |  | — |  |  |  | (710 | )
Total deferred tax liabilities |  | $ | (42,394 | ) |  | $ | (45,508 | )
Net deferred assets |  | $ | 96,101 |  |  | $ | 77,092 |
As of December 31, 2021 and 2020, Teradyne evaluated the likelihood that it would realize deferred income taxes to offset future taxable income and concluded that it is more likely than not that a substantial majority of its deferred tax assets will be realized through consideration of both the positive and negative evidence. At December 31, 2021 and 2020, Teradyne maintained a valuation allowance for certain deferred tax assets of $ 97.0 million and $ 85 .0 million, respectively, primarily related to state net operating losses and state tax credit carryforwards, due to the uncertainty regarding their realization. Adjustments could be required in the future if Teradyne estimates that the amount of deferred tax assets to be realized is more or less than the net amount recorded. At December 31, 2021, Teradyne had tax effected operating loss carryforwards that expire in the following years:
|  | State Operating Loss Carryforwards |  |  | Foreign Operating Loss Carryforwards |
|  | (in thousands) |
2022 |  | $ | 144 |  |  | $ | 53 |
2023 |  |  | 208 |  |  |  | — |
2024 |  |  | 51 |  |  |  | — |
2025 |  |  | 4 |  |  |  | — |
2026 |  |  | — |  |  |  | — |
2027-2031 |  |  | 361 |  |  |  | 173 |
2032-2036 |  |  | 58 |  |  |  | 13 |
Beyond 2036 |  |  | 22 |  |  |  | — |
Non-expiring |  |  | 13 |  |  |  | 621 |
Total |  | $ | 861 |  |  | $ | 860 |
Teradyne has approximately $128.9 million of tax credit carryforwards including federal business tax credits of approximately $1.9 million which expire in 2028 through 2031, and state tax credits of $127.1 million, of which $68.7 million do not expire and the remainder expires in the years 2022 through 2041. Teradyne’s gross unrecognize d tax benefits for the years ended December 31, 2021, 2020 and 2019 were as follows:
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
Beginning balance as of January 1 |  | $ | 17,903 |  |  | $ | 21,180 |  |  | $ | 43,395 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |
Tax positions for current year |  |  | 1,417 |  |  |  | 1,082 |  |  |  | 1,322 |
Tax positions for prior years |  |  | 30 |  |  |  | 66 |  |  |  | 8,043 |
Reductions: |  |  |  |  |  |  |  |  |  |  |  |
Tax positions for prior years |  |  | (1,639 | ) |  |  | (2,989 | ) |  |  | (31,397 | )
Expiration of statutes |  |  | (3,246 | ) |  |  | (1,436 | ) |  |  | (183 | )
Ending balance as of December 31 |  | $ | 14,465 |  |  | $ | 17,903 |  |  | $ | 21,180 |
Current year additions relate to federal and state research credits. Prior year additions relate to state research credits. Prior year reductions are composed of federal reserves related to transfer pricing and research credits which resulted from the expiration of statute for 2017 U.S. federal tax return in the fourth quarter of 2021 and state research credits. Of the $14.5 million of unrecognized tax benefits as of December 31, 2021, $9.5 million would impact the consolidated income tax rate if ultimately recognized. The remaining $4.9 million would impact deferred taxes if recognized. As of December 31, 2021, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $3.0 million in the next twelve months as a result of a lapse of statutes of limitation. The estimated decrease relates to loss carryforwards, research credits and U.S. manufacturing activities deductions. Teradyne records all interest and penalties related to income taxes as a component of income tax expense. Accrued interest and penalties related to income tax items at December 31, 2021 and 2020 amounted to $0.3 million and $1.2 million, respectively. For the years ended December 31, 2021, 2020 and 2019, benefit of $0.9 million, expense of $0.2 million and benefit of $1.1 million, respectively, was recorded for interest and penalties related to income tax items. Teradyne is subject to U.S. federal income tax, as well as income tax in multiple state, local and foreign jurisdictions. As of December 31, 2021, all material state and local income tax matters have been concluded through 2016, all material federal income tax matters have been concluded through 2017 and all material foreign income tax matters have been concluded through 2013. However, in some jurisdictions, including the United States, operating losses and tax credits may be subject to adjustment until such time as they are utilized and the year of utilization is closed to adjustment. As of December 31, 2021, Teradyne is not permanently reinvested with respect to the unremitted earnings of non-U.S. subsidiaries to the extent that those earnings exceed local statutory and operational requirements. Remittance of those earnings is not expected to result in material income tax.

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration