Segment Information

9 Months Ended

Oct. 04, 2015

Segment Information

R. Segment Information

Teradyne has four operating segments (Semiconductor Test, Wireless Test, System Test and Industrial Automation), which are its reportable segments. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products and services for defense/aerospace instrumentation test, storage test and circuit-board test. The Industrial Automation segment includes operations related to the design, manufacturing and marketing of collaborative robots. Each operating segment has a segment manager who is directly accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts, and plans for the segment.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income before income taxes. The accounting policies of the business segments in effect are described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2014, unless updated in this form 10-Q, where applicable.

Segment information for the three and nine months ended October 4, 2015 and September 28, 2014 is as follows:

	Semiconductor Test		Wireless Test			System Test		Industrial Automation			Corporate and Eliminations			Consolidated
	(in thousands)
Three months ended October 4, 2015:
Revenues	$	325,516	$	55,359		$	69,062	$	16,057		$	—		$	465,994
Income (loss) before income taxes (1)(2)		73,957		2,997			13,751		(4,847	)		1,550			87,408
Total assets (3)		591,445		447,461			109,078		360,068			1,153,832			2,661,884
Three months ended September 28, 2014:
Revenues	$	380,083	$	54,838		$	43,089	$	—		$	—		$	478,010
Income before income taxes (1)(2)		91,900		2,379			5,779		—			612			100,670
Total assets (3)		748,499		614,911			83,769		—			1,247,828			2,695,007
Nine months ended October 4, 2015:
Revenues	$	996,748	$	152,285		$	152,320	$	19,780		$	—		$	1,321,133
Income (loss) before income taxes (1)(2)		246,627		(603	)		10,423		(6,547	)		12,081			261,981
Total assets (3)		591,445		447,461			109,078		360,068			1,153,832			2,661,884
Nine months ended September 28, 2014:
Revenues	$	1,063,254	$	144,747		$	116,586	$	—		$	—		$	1,324,587
Income (loss) before income taxes (1)(2)		233,770		(8,477	)		5,512		—			(10,616	)		220,189
Total assets (3)		748,499		614,911			83,769		—			1,247,828			2,695,007

(1) Interest income, interest expense, and other (income) expense, net are included in Corporate and Eliminations.

(2) Included in the income (loss) before income taxes for each of the segments are charges related to inventory and other.

(3) Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets.

Included in the Semiconductor Test segment are charges in the following line items in the statements of operations:

	For the Three Months Ended				For the Nine Months Ended
	October 4,  2015		September 28,  2014		October 4,  2015		September 28,  2014
	(in thousands)
Cost of revenues—inventory charge	$	1,697	$	4,404	$	8,637	$	14,322
Restructuring and other		194		—		499		—
Total	$	1,891	$	4,404	$	9,136	$	14,322

Included in the Wireless Test segment are charges in the following line items in the statements of operations:

	For the Three Months Ended				For the Nine Months Ended
	October 4, 2015		September 28, 2014		October 4, 2015		September 28, 2014
	(in thousands)
Cost of revenues—inventory charge	$	901	$	1,267	$	2,077	$	5,239
Restructuring and other		—		—		—		426
Total	$	901	$	1,267	$	2,077	$	5,665

Included in the System Test segment are charges in the following line items in the statements of operations:

	For the Three Months Ended				For the Nine Months Ended
	October 4, 2015		September 28, 2014		October 4, 2015		September 28, 2014
	(in thousands)
Cost of revenues—inventory charge	$	460	$	763	$	8,225	$	1,944
Restructuring and other		923		225		923		371
Total	$	1,383	$	988	$	9,148	$	2,315

Included in the Industrial Automation segment are charges in the following line item in the statements of operations:

	For the Three Months Ended				For the Nine Months Ended
	October 4, 2015		September 28, 2014		October 4, 2015		September 28, 2014
	(in thousands)
Cost of revenues—inventory step-up (1)	$	972	$	—	$	1,567	$	—
Total	$	972	$	—	$	1,567	$	—

Included in Corporate and Eliminations are charges and credits in the following line items in the statements of operations:

	For the Three Months Ended						For the Nine Months Ended
	October 4, 2015			September 28, 2014			October 4, 2015			September 28, 2014
	(in thousands)
Restructuring and other—AIT contingent consideration adjustment	$	(1,000	)	$	—		$	(1,000	)	$	—
Restructuring and other—Universal Robots acquisition costs		144			—			1,104			—
Restructuring and other—ZTEC contingent consideration adjustment		—			(630	)		(1,600	)		(630	)
Other (income) expense, net—gain from the sale of an equity investment		—			—			(5,406	)		—
Selling and administrative—stock based compensation expense (2)		—			—			—			6,598
Total	$	(856	)	$	(630	)	$	(6,902	)	$	5,968

(1) Included in the cost of revenues for the three and nine months ended October 4, 2015 is the cost for purchase accounting inventory step-up.

(2) Expense related to the January 2014 retirement of Teradyne’s former chief executive officer; see Note J: “Stock-Based Compensation.”