Financial Instruments and Derivatives (Tables)

3 Months Ended

Apr. 03, 2016

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 April 3, 2016 and December 31, 2015.

	April 3, 2016
	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	$	227,046	$	—	$	—	$	227,046
Cash equivalents		92,010		302		—		92,312
Available-for-sale securities:
U.S. Treasury securities		—		399,277		—		399,277
Corporate debt securities		—		161,590		—		161,590
Commercial paper		—		36,592		—		36,592
U.S. government agency securities		—		26,160		—		26,160
Certificates of deposit and time deposits		—		15,653		—		15,653
Equity and debt mutual funds		16,369		—		—		16,369
Non-U.S. government securities		—		434		—		434
Total	$	335,425	$	640,008	$	—	$	975,433
Liabilities
Contingent consideration	$	—	$	—	$	23,609	$	23,609
Derivative liabilities		—		193		—		193
Total	$	—	$	193	$	23,609	$	23,802

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	319,056	$	302	$	—	$	319,358
Marketable securities		—		410,003		—		410,003
Long-term marketable securities		16,369		229,703		—		246,072
	$	335,425	$	640,008	$	—	$	975,433
Liabilities
Other current liabilities	$	—	$	193	$	—	$	193
Contingent consideration		—		—		500		500
Long-term contingent consideration		—		—		23,109		23,109
	$	—	$	193	$	23,609	$	23,802

	December 31, 2015
	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	$	213,336	$	—	$	—	$	213,336
Cash equivalents		49,241		2,128		—		51,369
Available for sale securities:
U.S. Treasury securities		—		419,958		—		419,958
Corporate debt securities		—		161,634		—		161,634
U.S. government agency securities		—		83,952		—		83,952
Certificates of deposit and time deposits		—		43,394		—		43,394
Commercial paper		—		20,308		—		20,308
Equity and debt mutual funds		13,954		—		—		13,954
Non-U.S. government securities		—		424		—		424
Total	$	276,531	$	731,798	$	—	$	1,008,329
Derivative assets		—		109		—		109
Total	$	276,531	$	731,907	$	—	$	1,008,438
Liabilities
Contingent consideration	$	—	$	—	$	37,436	$	37,436
Derivative liabilities		—		146		—		146
Total	$	—	$	146	$	37,436	$	37,582

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	262,577	$	2,128	$	—	$	264,705
Marketable securities		—		477,696		—		477,696
Long-term marketable securities		13,954		251,974		—		265,928
Prepayments		—		109		—		109
	$	276,531	$	731,907	$	—	$	1,008,438
Liabilities
Other current liabilities	$	—	$	146	$	—	$	146
Contingent consideration		—		—		15,500		15,500
Long-term contingent consideration		—		—		21,936		21,936
	$	—	$	146	$	37,436	$	37,582

Schedule of Changes in Fair Value of Level 3 Contingent Consideration

Changes in the fair value of Level 3 contingent consideration for the three months ended April 3, 2016 and April 5, 2015 were as follows:

	For the Three Months Ended
	April 3, 2016			April 5, 2015
	(in thousands)
Balance at beginning of period	$	37,436		$	3,350
Payments (a)		(15,000	)		—
Fair value adjustment (b)		1,173			—
Balance at end of period	$	23,609		$	3,350

(a) In the three months ended April 3, 2016, based on Universal Robots’ calendar year 2015 EBITDA results, Teradyne paid $15 million or 100% of the eligible EBITDA contingent consideration amount.

(b) In the three months ended April 3, 2016, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was increased by $1.2 million primarily due to a lower discount rate.

Quantitative Information Associated With Fair Value Measurement of Level 3 Financial Instrument

The following table provides quantitative information associated with the fair value measurement of Teradyne’s Level 3 financial instruments:

Liability	April 3, 2016 Fair Value	Valuation Technique	Unobservable Inputs	Weighted Average
	(in thousands)
Contingent consideration (Universal Robots)	$16,349	Monte Carlo Simulation	Revenue for the period July 1, 2015—December 31, 2017 volatility		15.4	%
			Discount Rate		4.7	%
	$6,760	Monte Carlo Simulation	Revenue for the period July 1, 2015—December 31, 2018 volatility		15.4	%
			Discount Rate		4.7	%
Contingent consideration (AIT)	$500	Income approach- discounted cash flow	Revenue for calendar year 2016 probability Discount rate		48 4.7	%  %

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of Teradyne’s financial instruments at April 3, 2016 and December 31, 2015 were as follows:

	April 3, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	319,358	$	319,358	$	264,705	$	264,705
Marketable securities		656,075		656,075		743,624		743,624
Derivative assets		—		—		109		109
Liabilities
Contingent consideration		23,609		23,609		37,436		37,436
Derivative liabilities		193		193		146		146

Schedule of Available-for-Sale Marketable Securities

The following tables summarize the composition of available-for-sale marketable securities at April 3, 2016 and December 31, 2015:

	April 3, 2016
	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	$	398,832	$	620	$	(175	)	$	399,277	$	204,136
Corporate debt securities		161,005		1,861		(1,276	)		161,590		73,165
Commercial paper		36,563		29		—			36,592		6,475
U.S. government agency securities		26,107		57		(4	)		26,160		9,747
Equity and debt mutual funds		15,110		1,328		(69	)		16,369		746
Certificates of deposit and time deposits		15,651		2		—			15,653		—
Non-U.S. government securities		434		—		—			434		—
	$	653,702	$	3,897	$	(1,524	)	$	656,075	$	294,269

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	409,971	$	146	$	(114	)	$	410,003	$	204,024
Long-term marketable securities		243,731		3,751		(1,410	)		246,072		90,245
	$	653,702	$	3,897	$	(1,524	)	$	656,075	$	294,269

	December 31, 2015
	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	$	421,060	$	65	$	(1,167	)	$	419,958	$	379,434
Corporate debt securities		163,297		902		(2,565	)		161,634		145,373
U.S. government agency securities		84,032		42		(122	)		83,952		55,120
Certificates of deposit and time deposits		43,391		6		(3	)		43,394		10,527
Commercial paper		20,298		11		(1	)		20,308		8,646
Equity and debt mutual funds		12,996		1,119		(161	)		13,954		2,560
Non-U.S. government securities		424		—		—			424		—
	$	745,498	$	2,145	$	(4,019	)	$	743,624	$	601,660

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	478,306	$	38	$	(648	)	$	477,696	$	374,785
Long-term marketable securities		267,192		2,107		(3,371	)		265,928		226,875
	$	745,498	$	2,145	$	(4,019	)	$	743,624	$	601,660

Contractual Maturities of Investments Held

The contractual maturities of investments held at April 3, 2016 were as follows:

	April 3, 2016
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	409,971	$	410,003
Due after 1 year through 5 years		184,645		184,852
Due after 5 years through 10 years		4,432		4,546
Due after 10 years		39,544		40,305
Total	$	638,592	$	639,706

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

The following table summarizes the fair value of derivative instruments at April 3, 2016 and December 31, 2015:

	Balance Sheet Location	April 3, 2016			December 31, 2015
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts assets	Prepayments	$	—		$	109
Foreign exchange contracts liabilities	Other current liabilities		(193	)		(146	)
Total derivatives		$	(193	)	$	(37	)

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 months ended April 3, 2016 and April 5, 2015. The table does not reflect the corresponding gains and losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies. For the three months ended April 3, 2016 and April 5, 2015, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $3.4 million and $4.3 million, respectively.

	Location of (Gains) Losses Recognized in Statement of Operations	For the Three Months     Ended
		April 3, 2016		April 5, 2015
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other (income) expense, net	$	3,298	$	3,425
Total Derivatives		$	3,298	$	3,425