Financial Instruments and Derivatives (Tables)

9 Months Ended

Sep. 28, 2014

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 September 28, 2014 and December 31, 2013.

	September 28, 2014
	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	$	100,633	$	—	$	—	$	100,633
Cash equivalents		99,979		11,092		—		111,071
Available-for-sale securities:
U.S. Treasury securities		—		459,240		—		459,240
U.S. government agency securities		—		285,617		—		285,617
Commercial paper		—		99,774		—		99,774
Corporate debt securities		—		94,357		—		94,357
Certificates of deposit and time deposits		—		18,522		—		18,522
Equity and debt mutual funds		12,099		—		—		12,099
Total	$	212,711	$	968,602	$	—	$	1,181,313
Liabilities
Contingent consideration	$	—	$	—	$	1,600	$	1,600
Derivatives		—		546		—		546
Total	$	—	$	546	$	1,600	$	2,146

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	200,612	$	11,092	$	—	$	211,704
Marketable securities		—		594,801		—		594,801
Long-term marketable securities		12,099		362,709		—		374,808
	$	212,711	$	968,602	$	—	$	1,181,313
Liabilities
Other accrued liabilities	$	—	$	546	$	—	$	546
Long-term other accrued liabilities		—		—		1,600		1,600
	$	—	$	546	$	1,600	$	2,146

	December 31, 2013
	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	$	117,242	$	—	$	—	$	117,242
Cash equivalents		165,865		58,531		—		224,396
Available-for-sale securities:
U.S. Treasury securities		—		467,895		—		467,895
U.S. government agency securities		—		202,588		—		202,588
Commercial paper		—		105,598		—		105,598
Corporate debt securities		—		65,387		—		65,387
Equity and debt mutual funds		13,156		—		—		13,156
Certificates of deposit and time deposits		—		3,258		—		3,258
Non-U.S. government securities		—		78		—		78
Total		296,263		903,335		—		1,199,598
Derivatives		—		153		—		153
Total	$	296,263	$	903,488	$	—	$	1,199,751
Liabilities
Contingent consideration	$	—	$	—	$	2,230	$	2,230
Total	$	—	$	—	$	2,230	$	2,230

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	283,107	$	58,531	$	—	$	341,638
Marketable securities		—		586,882		—		586,882
Long-term marketable securities		13,156		257,922		—		271,078
Other current assets		—		153		—		153
	$	296,263	$	903,488	$	—	$	1,199,751
Liabilities
Long-term other accrued liabilities	$	—	$	—	$	2,230	$	2,230
	$	—	$	—	$	2,230	$	2,230

Schedule of Changes in Fair Value of Level 3 Contingent Consideration

Changes in the fair value of Level 3 contingent consideration for the three and nine months ended September 28, 2014 and September 29, 2013 were as follows:

Contingent consideration related to Teradyne’s acquisition of ZTEC in October 2013	For the Three and Nine Months Ended
	September 28, 2014
	(in thousands)
Balance at December 31, 2013	$	2,230
Contingent consideration payments		—
Balance at March 30, 2014		2,230
Contingent consideration payments		—
Balance at June 29, 2014		2,230
Fair value adjustment		(630	)
Balance at September 28, 2014	$	1,600

Contingent consideration related to Teradyne’s acquisition of LitePoint in October 2011	For the Three and Nine Months Ended
	September 29, 2013
	(in thousands)
Balance at December 31, 2012	$	388
Contingent consideration payments		(313	)
Balance at March 31, 2013		75
Contingent consideration payments		(75	)
Balance at June 30, 2013		—
Contingent consideration payments		—
Balance at September 29, 2013	$	—

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of Teradyne’s financial instruments at September 28, 2014 and December 31, 2013 were as follows:

	September 28, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Cash and cash equivalents	$	211,704	$	211,704	$	341,638	$	341,638
Marketable securities		969,609		969,609		857,960		857,960
Convertible debt(1)		—		—		185,708		611,433
Japan loan		—		—		955		955

(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 feature.

Schedule of Available-for-Sale Marketable Securities

The following tables summarize the composition of available-for-sale marketable securities at September 28, 2014 and December 31, 2013:

	September 28, 2014
	Available-for-Sale									Fair Market Value of Investments with Unrealized Losses
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value
	(in thousands)
U.S. Treasury securities	$	458,958	$	373	$	(91	)	$	459,240	$	64,267
U.S. government agency securities		285,528		195		(106	)		285,617		66,700
Commercial paper		99,767		11		(4	)		99,774		23,722
Corporate debt securities		92,883		1,734		(260	)		94,357		56,393
Certificates of deposit and time deposits		18,508		14		—			18,522		—
Equity and debt mutual funds		10,199		1,933		(33	)		12,099		1,074
	$	965,843	$	4,260	$	(494	)	$	969,609	$	212,156

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	594,500	$	319	$	(18	)	$	594,801	$	66,188
Long-term marketable securities		371,343		3,941		(476	)		374,808		145,968
	$	965,843	$	4,260	$	(494	)	$	969,609	$	212,156

	December 31, 2013
	Available-for-Sale									Fair Market Value of Investments with Unrealized Losses
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value
	(in thousands)
U.S. Treasury securities	$	468,084	$	94	$	(283	)	$	467,895	$	108,212
U.S. government agency securities		202,573		75		(60	)		202,588		84,498
Commercial paper		105,583		16		(1	)		105,598		7,993
Corporate debt securities		65,747		762		(1,122	)		65,387		40,355
Equity and debt mutual funds		10,463		2,742		(49	)		13,156		702
Certificates of deposit and time deposits		3,258		—		—			3,258		—
Non-U.S. government securities		78		—		—			78		—
	$	855,786	$	3,689	$	(1,515	)	$	857,960	$	241,760

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	586,818	$	85	$	(21	)	$	586,882	$	137,670
Long-term marketable securities		268,968		3,604		(1,494	)		271,078		104,090
	$	855,786	$	3,689	$	(1,515	)	$	857,960	$	241,760

Contractual Maturities of Investments Held

The contractual maturities of investments held at September 28, 2014 were as follows:

	September 28, 2014
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	594,500	$	594,801
Due after 1 year through 5 years		330,340		330,412
Due after 5 years through 10 years		5,772		5,859
Due after 10 years		25,032		26,438
Total	$	955,644	$	957,510

Schedule of Derivative Instruments in Statement of Financial Position at Fair Value

The following table summarizes the fair value of derivative instruments at September 28, 2014 and December 31, 2013:

	Balance Sheet Location	September 28, 2014		December 31, 2013
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other current assets	$	—	$	153
	Other accrued liabilities		546		—
		$	546	$	153

Schedule of Effect of Derivative Instruments on Statement of Operations Recognized

The following table summarizes the effect of derivative instruments recognized in the statement of operations during the three and nine months ended September 28, 2014 and September 29, 2013. The table does not reflect the corresponding gains (losses) from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the three and nine months ended September 28, 2014, (losses) gains from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $(0.4) million and $0.9 million, respectively. For the three and nine months ended September 29, 2013, losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $(0.4) million and $(5.0) million, respectively.

	Location of Gains (Losses) Recognized in Statement of Operations		For the Three Months Ended				For the Nine Months Ended
			September 28, 2014		September 29, 2013		September 28, 2014			September 29, 2013
			(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Interest expense and other	$	237	$	—	$	(1,632	)	$	4,068
			$	237	$	—	$	(1,632	)	$	4,068