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Financial Instruments
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Financial Instruments

H. FINANCIAL INSTRUMENTS

Cash Equivalents

Teradyne considers all highly liquid investments with maturities of 90 days or less at the date of acquisition to be cash equivalents.

Marketable Securities

Teradyne’s equity and debt mutual funds are classified as Level 1 and available-for-sale debt securities are classified as Level 2. The vast majority of Level 2 securities are fixed income securities priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.

During the three and six months ended June 30, 2024, and July 2, 2023, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.

Realized gains recorded in the three and six months ended June 30, 2024, were $0.3 million and $1.3 million, respectively. Realized gains recorded in the three and six months ended July 2, 2023, were $0.1 million and $0.4 million, respectively. Realized losses recorded in the three and six months ended June 30, 2024, were $0.1 million and $0.3 million, respectively. Realized losses recorded in the three and six months ended July 2, 2023, were $0.2 million. Realized gains and losses are included in 'Other (income) expense, net' in the consolidated statement of operations.

Unrealized gains on equity securities recorded in the three and six months ended June 30, 2024, were $0.6 million and $3.2 million, respectively. Unrealized gains on equity securities recorded in the three and six months ended July 2, 2023, were $2.6 million and $4.6 million, respectively. Unrealized gains and losses on equity securities are included in 'Other (income) expense, net' in the consolidated statement of operations.

Unrealized gains and losses on available-for-sale debt securities are included in 'Accumulated other comprehensive income (loss)' in the consolidated balance sheet.

The cost of securities sold is based on average cost.

The following tables set forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2024, and December 31, 2023.

 

 

 

June 30, 2024

 

 

 

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

 

$

199,227

 

 

$

—

 

 

$

—

 

 

$

199,227

 

Cash equivalents

 

 

219,666

 

 

 

3,011

 

 

 

—

 

 

 

222,677

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

—

 

 

 

40,563

 

 

 

—

 

 

 

40,563

 

Corporate debt securities

 

 

—

 

 

 

35,041

 

 

 

—

 

 

 

35,041

 

Certificates of deposit and time deposits

 

 

—

 

 

 

21,688

 

 

 

—

 

 

 

21,688

 

Debt mutual funds

 

 

8,704

 

 

 

—

 

 

 

—

 

 

 

8,704

 

U.S. government agency securities

 

 

—

 

 

 

3,905

 

 

 

—

 

 

 

3,905

 

Commercial paper

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Non-U.S. government securities

 

 

—

 

 

 

767

 

 

 

—

 

 

 

767

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

 

51,709

 

 

 

—

 

 

 

—

 

 

 

51,709

 

 

$

479,306

 

 

$

104,975

 

 

$

—

 

 

$

584,281

 

Derivative assets

 

 

—

 

 

 

2,067

 

 

 

—

 

 

 

2,067

 

Total

 

$

479,306

 

 

$

107,042

 

 

$

—

 

 

$

586,348

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

—

 

 

 

1,352

 

 

 

—

 

 

$

1,352

 

Total

 

$

—

 

 

$

1,352

 

 

$

—

 

 

$

1,352

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

418,893

 

 

$

3,011

 

 

$

—

 

 

$

421,904

 

Marketable securities

 

 

—

 

 

 

38,654

 

 

 

—

 

 

 

38,654

 

Long-term marketable securities

 

 

60,413

 

 

 

63,310

 

 

 

—

 

 

 

123,723

 

Prepayments

 

 

—

 

 

 

2,067

 

 

 

—

 

 

 

2,067

 

Total

 

$

479,306

 

 

$

107,042

 

 

$

—

 

 

$

586,348

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

—

 

 

$

1,352

 

 

$

—

 

 

$

1,352

 

     Total

 

$

—

 

 

$

1,352

 

 

$

—

 

 

$

1,352

 

 

 

 

 

December 31, 2023

 

 

 

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

 

$

298,156

 

 

$

—

 

 

$

—

 

 

$

298,156

 

Cash equivalents

 

 

453,298

 

 

 

6,117

 

 

 

—

 

 

 

459,415

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

—

 

 

 

52,734

 

 

 

—

 

 

 

52,734

 

U.S. Treasury securities

 

 

—

 

 

 

41,808

 

 

 

—

 

 

 

41,808

 

Certificates of deposit and time deposits

 

 

—

 

 

 

21,772

 

 

 

—

 

 

 

21,772

 

Debt mutual funds

 

 

8,773

 

 

 

—

 

 

 

—

 

 

 

8,773

 

U.S. government agency securities

 

 

—

 

 

 

4,892

 

 

 

—

 

 

 

4,892

 

Commercial paper

 

 

—

 

 

 

1,667

 

 

 

—

 

 

 

1,667

 

Non-U.S. government securities

 

 

—

 

 

 

810

 

 

 

—

 

 

 

810

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds

 

 

47,132

 

 

 

—

 

 

 

—

 

 

 

47,132

 

 

$

807,359

 

 

$

129,800

 

 

$

—

 

 

$

937,159

 

Derivative assets

 

 

—

 

 

 

18,746

 

 

 

—

 

 

 

18,746

 

Total

 

$

807,359

 

 

$

148,546

 

 

$

—

 

 

$

955,905

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

—

 

 

 

2,545

 

 

 

—

 

 

 

2,545

 

Total

 

$

—

 

 

$

2,545

 

 

$

—

 

 

$

2,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

751,454

 

 

$

6,117

 

 

$

—

 

 

$

757,571

 

Marketable securities

 

 

—

 

 

 

62,154

 

 

 

—

 

 

 

62,154

 

Long-term marketable securities

 

 

55,905

 

 

 

61,529

 

 

 

—

 

 

 

117,434

 

Other current assets

 

 

—

 

 

 

18,746

 

 

 

—

 

 

 

18,746

 

Total

 

$

807,359

 

 

$

148,546

 

 

$

—

 

 

$

955,905

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

—

 

 

$

2,545

 

 

$

—

 

 

$

2,545

 

Total

 

$

—

 

 

$

2,545

 

 

$

—

 

 

$

2,545

 

 

The carrying amounts and fair values of Teradyne’s financial instruments at June 30, 2024, and December 31, 2023, were as follows:

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

421,904

 

 

$

421,904

 

 

$

757,571

 

 

$

757,571

 

Marketable securities

 

 

162,377

 

 

 

162,377

 

 

 

179,588

 

 

 

179,588

 

Derivative assets

 

 

2,067

 

 

 

2,067

 

 

 

18,746

 

 

 

18,746

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

1,352

 

 

 

1,352

 

 

 

2,545

 

 

 

2,545

 

 

The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.

The following table summarizes the composition of available-for-sale marketable securities at June 30, 2024:

 

 

 

June 30, 2024

 

 

 

Available-for-Sale

 

 

 

Cost

 

 

Unrealized
Gain

 

 

Unrealized
(Loss)

 

 

Fair
Market
Value

 

 

Fair Market
Value of
Investments
with Unrealized
Losses

 

 

 

(in thousands)

 

Corporate debt securities

 

$

39,750

 

 

$

58

 

 

$

(4,767

)

 

$

35,041

 

 

$

30,671

 

U.S. Treasury securities

 

 

45,305

 

 

 

—

 

 

 

(4,742

)

 

 

40,563

 

 

 

40,563

 

Certificates of deposit and time deposits

 

 

21,688

 

 

 

—

 

 

 

—

 

 

 

21,688

 

 

 

—

 

Debt mutual funds

 

 

9,060

 

 

 

—

 

 

 

(356

)

 

 

8,704

 

 

 

3,181

 

U.S. government agency securities

 

 

3,928

 

 

 

—

 

 

 

(23

)

 

 

3,905

 

 

 

3,905

 

Commercial paper

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Non-U.S. government securities

 

 

767

 

 

 

—

 

 

 

—

 

 

 

767

 

 

 

—

 

 

$

120,498

 

 

$

58

 

 

$

(9,888

)

 

$

110,668

 

 

$

78,320

 

 

Reported as follows:

 

 

 

Cost

 

 

Unrealized
Gain

 

 

Unrealized
(Loss)

 

 

Fair
Market
Value

 

 

Fair Market
Value of
Investments
with Unrealized
Losses

 

 

 

(in thousands)

 

Marketable securities

 

$

38,718

 

 

 

—

 

 

$

(64

)

 

$

38,654

 

 

$

16,966

 

Long-term marketable securities

 

 

81,780

 

 

 

58

 

 

 

(9,824

)

 

 

72,014

 

 

 

61,354

 

 

$

120,498

 

 

$

58

 

 

$

(9,888

)

 

$

110,668

 

 

$

78,320

 

 

The following table summarizes the composition of available-for-sale marketable securities at December 31, 2023:

 

 

 

December 31, 2023

 

 

 

Available-for-Sale

 

 

 

Cost

 

 

Unrealized
Gain

 

 

Unrealized
(Loss)

 

 

Fair
Market
Value

 

 

Fair Market
Value of
Investments
with Unrealized
Losses

 

 

 

(in thousands)

 

Corporate debt securities

 

$

56,458

 

 

$

201

 

 

$

(3,925

)

 

$

52,734

 

 

$

44,263

 

U.S. Treasury securities

 

 

45,725

 

 

 

14

 

 

 

(3,931

)

 

 

41,808

 

 

 

35,080

 

Certificates of deposit and time deposits

 

 

21,772

 

 

 

—

 

 

 

—

 

 

 

21,772

 

 

 

—

 

Debt mutual funds

 

 

9,081

 

 

 

—

 

 

 

(308

)

 

 

8,773

 

 

 

3,303

 

U.S. government agency securities

 

 

4,898

 

 

 

—

 

 

 

(6

)

 

 

4,892

 

 

 

4,892

 

Commercial paper

 

 

1,633

 

 

 

34

 

 

 

—

 

 

 

1,667

 

 

 

—

 

Non-U.S. government securities

 

 

810

 

 

 

—

 

 

 

—

 

 

 

810

 

 

 

—

 

 

$

140,377

 

 

$

249

 

 

$

(8,170

)

 

$

132,456

 

 

$

87,538

 

 

Reported as follows:

 

 

 

Cost

 

 

Unrealized
Gain

 

 

Unrealized
(Loss)

 

 

Fair
Market
Value

 

 

Fair Market
Value of
Investments
with Unrealized
Losses

 

 

 

(in thousands)

 

Marketable securities

 

$

62,385

 

 

$

36

 

 

$

(267

)

 

 

62,154

 

 

$

34,844

 

Long-term marketable securities

 

 

77,992

 

 

 

213

 

 

 

(7,903

)

 

 

70,302

 

 

 

52,694

 

 

$

140,377

 

 

$

249

 

 

$

(8,170

)

 

$

132,456

 

 

$

87,538

 

 

 

As of June 30, 2024, the fair market value of investments with unrealized losses less than one year and greater than one year totaled $34.5 million and $43.8 million, respectively. As of December 31, 2023, the fair market value of investments with unrealized losses for less than one year and greater than one year totaled $22.3 million and $65.2 million, respectively.

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments at June 30, 2024, and December 31, 2023, were not other than temporary.

The contractual maturities of investments in available-for-sale securities held at June 30, 2024, were as follows:

 

 

 

June 30, 2024

 

 

 

Cost

 

 

Fair Market
Value

 

 

 

(in thousands)

 

Due within one year

 

$

38,718

 

 

$

38,654

 

Due after 1 year through 5 years

 

 

27,821

 

 

 

27,285

 

Due after 5 years through 10 years

 

 

8,189

 

 

 

7,782

 

Due after 10 years

 

 

36,710

 

 

 

28,243

 

Total

 

$

111,438

 

 

$

101,964

 

 

Contractual maturities of investments in available-for-sale securities held at June 30, 2024, exclude debt mutual funds with a fair market value of $8.7 million as they do not have a contractual maturity date.

Derivatives

Teradyne conducts business in various foreign countries, with certain transactions denominated in local currencies. As a result, Teradyne is exposed to risks relating to changes in foreign currency exchange rates. Teradyne’s foreign currency risk management objective is to minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, and changes in its cash inflows attributable to the forecasted cash flows from certain foreign currency denominated revenues.

To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings and is used to offset the change in value of monetary assets and liabilities denominated in foreign currencies.

Teradyne also enters into foreign currency forward and option contracts designated as cash flow hedges to hedge the risk of changes in its cash inflows attributable to changes in foreign currency exchange rates. The cash flow hedges have maturities of less than six months and mature in the period of revenue recognition for certain products and services in backlog and forecasted to be recognized in a future period. Teradyne evaluates cash flow hedges for effectiveness at inception based on the critical terms match method. The hedges are not expected to incur any ineffectiveness however a quarterly qualitative assessment of effectiveness is done to determine if the critical terms match method remains appropriate to use. The change in fair value of the contracts is recorded in accumulated other comprehensive income (loss) and reclassified to earnings at maturity date.

Teradyne does not use derivative financial instruments for speculative purposes.

At June 30, 2024, and December 31, 2023, 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:

 

 

 

Net Notional Value

 

 

 

June 30,
2024

 

 

December 31,
2023

 

 

 

(in millions)

 

Currency Hedged (Buy/Sell)

 

 

 

 

 

 

U.S. dollar/Japanese yen

 

 

42.8

 

 

 

11.0

 

U.S. dollar/Taiwan dollar

 

 

33.6

 

 

 

42.7

 

U.S. dollar/Danish krone

 

 

32.1

 

 

 

36.0

 

U.S. dollar/Korean won

 

 

8.9

 

 

 

7.2

 

U.S. dollar/British pound sterling

 

 

0.3

 

 

 

1.5

 

Euro/U.S. dollar

 

 

24.1

 

 

 

25.3

 

Singapore dollar/U.S. dollar

 

 

18.8

 

 

 

16.6

 

Philippine peso/U.S. dollar

 

 

9.5

 

 

 

10.1

 

Chinese yuan/U.S. dollar

 

 

1.3

 

 

 

1.0

 

Danish krone/U.S. dollar

 

 

0.6

 

 

 

0.7

 

Total

 

$

172.0

 

 

$

152.1

 

 

The fair value of the outstanding contracts was a net gain of $0.7 million and a net loss of $1.8 million at June 30, 2024, and December 31, 2023, respectively.

Unrealized gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in 'Other (income) expense, net' in the consolidated statement of operations.

At December 31, 2023, Teradyne had the following cash flow hedge contracts to buy and sell non-U.S. currencies for U.S. dollars with the following notional amounts:

 

 

 

Net Notional Value

 

 

 

June 30,
2024

 

 

December 31,
2023

 

 

 

(in millions)

 

Currency Hedged (Buy/Sell)

 

 

 

 

 

 

U.S. dollar/Japanese yen

 

$

—

 

 

$

35.5

 

Total

 

$

—

 

 

$

35.5

 

 

There were no outstanding cash flow hedge contracts at June 30, 2024. The fair value of the outstanding cash flow hedge contracts was a gain of $0.6 million at December 31, 2023.

Unrealized gains and losses on foreign currency cash flow hedge contracts are included in accumulated other comprehensive income (loss). At maturity, the gains or losses associated with cash flow hedge contracts are recorded to revenue.

On November 7, 2023, in connection with Teradyne's agreement to acquire 10% investment in Technoprobe S.p.A, Teradyne purchased a call option to buy 481.0 million Euros. The expiration date of the option was April 26, 2024. On April 12, 2024, Teradyne entered into a forward to buy 481.0 million Euros which expired on May 23, 2024. At December 31, 2023, the fair value of the outstanding contract was $17.4 million. For the three and six months ended June 30, 2024, a realized gain of $4.2 million and a realized loss of $9.8 million was recorded in 'Other (income) expense, net' in the consolidated statement of operations, respectively.

The following table summarizes the fair value of derivative instruments as of June 30, 2024, and December 31, 2023:

 

 

 

Balance Sheet Location

 

June 30,
2024

 

 

December 31,
2023

 

 

 

 

 

(in thousands)

 

Derivatives not designated as hedging instruments:

 

Foreign exchange forward contracts

 

Other current assets

 

 

2,067

 

 

 

733

 

Foreign exchange forward contracts

 

Other current liabilities

 

 

(1,352

)

 

 

(2,545

)

Foreign exchange option contracts

 

Other current assets

 

 

—

 

 

 

17,364

 

Derivatives designated as hedging instruments:

 

Foreign exchange forward contracts

 

Other current assets

 

 

—

 

 

 

648

 

Total derivatives

 

 

 

$

715

 

 

$

16,200

 

 

The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three and six months ended June 30, 2024, and July 2, 2023:

 

 

 

 

 

For the Three Months
 Ended

 

 

For the Six Months
 Ended

 

 

 

Location of (Gains) Losses
Recognized in Statement
of Operations

 

June 30,
2024

 

 

July 2,
2023

 

 

June 30,
2024

 

 

July 2,
2023

 

 

 

 

 

(in thousands)

 

 

(in thousands)

 

Derivatives not designated as hedging instruments:

 

Foreign exchange forward contracts
   (1)

 

Other (income) expense, net

 

$

(2,444

)

 

$

(4,040

)

 

$

(4,144

)

 

$

(2,781

)

Foreign exchange option contracts

 

Other (income) expense, net

 

 

(4,154

)

 

 

—

 

 

 

9,764

 

 

 

—

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

Foreign exchange forward and option
   contracts

 

Revenue

 

 

—

 

 

 

414

 

 

 

(2,280

)

 

 

1,952

 

Total Derivatives

 

 

 

$

(6,598

)

 

$

(3,626

)

 

$

3,340

 

 

$

(829

)

 

(1)
The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the three and six months ended June 30, 2024, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $3.3 million and $6.0 million, respectively. For the three and six months ended July 2, 2023, net losses from remeasurement of monetary assets and liabilities denominated in foreign currencies were $6.7 million and $7.0 million, respectively.

See Note I: “Debt” regarding derivatives related to the convertible senior notes.