Stock-Based Compensation

9 Months Ended

Sep. 29, 2013

Stock-Based Compensation

H. Stock-Based Compensation

Restricted stock unit awards granted to employees vest in equal installments over four years. A portion of restricted stock unit awards granted to executive officers is subject to time-based vesting and a portion is subject to performance-based vesting. The percentage level of performance satisfied for performance-based grants is assessed on or near the anniversary of the grant date and, in turn, that percentage level determines the number of performance-based restricted stock units available for vesting over the vesting period; portions of the performance-based grants not available for vesting will be forfeited. Stock options vest in equal installments over four years, and have a term of seven years from the date of grant.

During the nine months ended September 29, 2013, Teradyne granted 1.9 million of restricted stock unit awards to employees at a weighted average grant date fair value of $16.60 and 0.2 million of service-based stock options to executive officers at a weighted average grant date fair value of $6.09.

During the nine months ended September 30, 2012, Teradyne granted 1.7 million of restricted stock unit awards to employees at a weighted average grant date fair value of $16.73 and 0.2 million of service-based stock options to executive officers at a weighted average grant date fair value of $6.85.

The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:

	For the Nine Months Ended
	September 29, 2013			September 30, 2012
Expected life (years)		4.0			3.5
Interest rate		0.6	%		0.4	%
Volatility-historical		46.8	%		56.0	%
Dividend yield		0.0	%		0.0	%

Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free rate was determined using the U.S. Treasury yield curve in effect at the time of grant.

Effective January 1, 2013, the price paid by employees for Teradyne’s common stock purchased through the employee stock purchase plan is equal to 85% of the stock price on the last business day of the purchase period.

During 2012, the price paid by employees for Teradyne’s common stock purchased through the employee stock purchase plan was equal to 85% of the lower of the stock price on the first or last business day of the purchase period.

The weighted-average fair value of employee stock purchase rights granted in the nine months ended September 30, 2012 was $3.75. The fair value of the employees’ purchase rights granted in the nine months ended September 30, 2012 was estimated using the Black-Scholes option-pricing model with the following assumptions:

	For the Nine Months Ended September 30, 2012
Expected life (years)		0.5
Interest rate		0.11	%
Volatility-historical		42.7	%
Dividend yield		0.0	%