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Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2018
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 30, 2018 and December 31, 2017.

 

     September 30, 2018  
     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

    $ 275,614      $ —        $ —        $ 275,614  

Cash equivalents

      477,869        60,536        —          538,405  

Available-for-sale securities:

            

U.S. Treasury securities

      —          363,414        —          363,414  

Commercial paper

      —          67,202        —          67,202  

Corporate debt securities

      —          40,271        —          40,271  

U.S. government agency securities

      —          9,004        —          9,004  

Debt mutual funds

      3,055        —          —          3,055  

Certificates of deposit and time deposits

      —          2,218        —          2,218  

Non-U.S. government securities

      —          543        —          543  

Equity securities:

            

Mutual Funds

      24,685        —          —          24,685  
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 781,223      $ 543,188      $ —        $ 1,324,411  

Derivative assets

      —          3        —          3  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 781,223      $ 543,191      $ —        $ 1,324,414  
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities

            

Contingent consideration

    $ —        $ —        $ 60,942      $ 60,942  

Derivative liabilities

      —          455        —          455  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ —        $ 455      $ 60,942      $ 61,397  
  

 

 

     

 

 

     

 

 

     

 

 

  

Reported as follows:

 

     (Level 1)      (Level 2)      (Level 3)      Total  
     (in thousands)  

Assets

            

Cash and cash equivalents

    $ 753,483      $ 60,536      $ —        $ 814,019  

Marketable securities

      —          418,410        —          418,410  

Long-term marketable securities

      27,740        64,242        —          91,982  

Prepayments

      —          3        —          3  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 781,223      $ 543,191      $ —        $ 1,324,414  
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities

            

Other current liabilities

    $ —        $ 455      $ —        $ 455  

Contingent consideration

      —          —          35,532        35,532  

Long-term contingent consideration

      —          —          25,410        25,410  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ —        $ 455      $ 60,942      $ 61,397  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

     December 31, 2017  
     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

    $ 197,955      $ —        $ —        $ 197,955  

Cash equivalents

      206,335        25,553        —          231,888  

Available for sale securities:

            

U.S. Treasury securities

      —          855,795        —          855,795  

Commercial paper

      —          282,840        —          282,840  

Certificates of deposit and time deposits

      —          167,342        —          167,342  

Corporate debt securities

      —          133,186        —          133,186  

Equity and debt mutual funds

      23,430        —          —          23,430  

U.S. government agency securities

      —          10,726        —          10,726  

Non-U.S. government securities

      —          586        —          586  
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 427,720      $ 1,476,028      $ —        $ 1,903,748  

Derivative assets

      —          389        —          389  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 427,720      $ 1,476,417      $ —        $ 1,904,137  
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities

            

Contingent consideration

    $ —        $ —        $ 45,102      $ 45,102  

Derivative liabilities

      —          446        —          446  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ —        $ 446      $ 45,102      $ 45,548  
  

 

 

     

 

 

     

 

 

     

 

 

  

Reported as follows:

 

     (Level 1)      (Level 2)      (Level 3)      Total  
     (in thousands)  

Assets

            

Cash and cash equivalents

    $ 404,290      $ 25,553      $ —        $ 429,843  

Marketable securities

      —          1,347,979        —          1,347,979  

Long-term marketable securities

      23,430        102,496        —          125,926  

Prepayments

      —          389        —          389  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 427,720      $ 1,476,417      $ —        $ 1,904,137  
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities

            

Other accrued liabilities

    $ —        $ 446      $ —        $ 446  

Contingent consideration

      —          —          24,497        24,497  

Long-term contingent consideration

      —          —          20,605        20,605  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ —        $ 446      $ 45,102      $ 45,548  
  

 

 

     

 

 

     

 

 

     

 

 

  
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 30, 2018 and October 1, 2017 were as follows:

 

     For the Three Months
Ended		      For the Nine Months
Ended		  
     September 30,      October 1,      September 30,      October 1,  
     2018      2017      2018      2017  
     (in thousands)  

Balance at beginning of period

    $ 60,914      $ 39,415      $ 45,102      $ 38,332  

Acquisition of MiR

      —          —          51,399        —    

Foreign currency impact

      796        —          (1,770 )       —    

Payments (a)

      —          —          (24,553 )       (1,050 ) 

Fair value adjustment (b)

      (768 )       (286 )       (9,236 )       1,847  
  

 

 

     

 

 

     

 

 

     

 

 

  

Balance at end of period

    $ 60,942      $ 39,129      $ 60,942      $ 39,129  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a)

In the nine months ended September 30, 2018, Teradyne paid $24.6 million of contingent consideration for the earn-out in connection with the acquisition of Universal Robots A/S (“Universal Robots”). In the nine months ended October 1, 2017, Teradyne paid $1.1 million of contingent consideration for the earn-out in connection with the acquisition of Avionics Interface Technology, LLC (“AIT”).
(b)

In the three and nine months ended September 30, 2018, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was decreased by $0.8 million and $9.2 million, respectively, primarily due to a decrease in forecasted revenue. In the nine months ended October 1, 2017, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was increased by $1.8 million due to an increase in forecasted revenue.
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            

    September 30,
2018 Fair
Value		    Valuation
Technique		   

Unobservable Inputs

    Weighted
Average
     (in thousands)               

Contingent consideration

(Universal Robots)

    $11,314    Monte Carlo

Simulation

    Revenue volatility    12.9%
         Discount Rate    3.7%

Contingent consideration

(Mobile Industrial Robots)

    $49,628    Monte Carlo

Simulation

    Revenue volatility    18.0%
         Discount Rate    0.5%
Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of Teradyne’s financial instruments at September 30, 2018 and December 31, 2017 were as follows:

 

     September 30, 2018      December 31, 2017  
     Carrying Value      Fair Value      Carrying Value      Fair Value  
     (in thousands)  

Assets

            

Cash and cash equivalents

    $ 814,019      $ 814,019      $ 429,843      $ 429,843  

Marketable securities

      510,392        510,392        1,473,905        1,473,905  

Derivative assets

      3        3        389        389  

Liabilities

            

Contingent consideration

      60,942        60,942        45,102        45,102  

Derivative liabilities

      455        455        446        446  

Convertible debt (1)

      376,417        599,438        365,987        659,525  

 

(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 features.
Schedule of Available-for-Sale Marketable Securities

The following table summarizes the composition of available-for-sale marketable securities at September 30, 2018:

 

     September 30, 2018  
     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

    $ 365,701      $ —        $ (2,287 )    $ 363,414      $ 362,167  

Commercial paper

      67,208        7        (13 )      67,202        66,186  

Corporate debt securities

      40,669        537        (935 )      40,271        22,030  

U.S. government agency securities

      9,065        —          (61 )      9,004        9,004  

Debt mutual funds

      3,128        —          (73 )      3,055        1,786  

Certificates of deposit and time deposits

      2,218        —          —         2,218        —    

Non-U.S. government securities

      543        —          —         543        176  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  
   $ 488,532      $ 544      $ (3,369 )    $ 485,707      $ 461,349  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Reported as follows:

 

     Cost      Unrealized
Gain		      Unrealized
(Loss)		     Fair Market
Value		      Fair Market
Value of
Investments
with Unrealized
Losses		  
     (in thousands)  

Marketable securities

    $ 418,554      $ 52      $ (196 )    $ 418,410      $ 405,959  

Long-term marketable securities

      69,978        492        (3,173 )      67,297        55,390  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  
   $ 488,532      $ 544      $ (3,369 )    $ 485,707      $ 461,349  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

 

The following table summarizes the composition of available-for-sale marketable securities at December 31, 2017:

 

     December 31, 2017  
     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

    $ 858,258      $ 72      $ (2,535 )    $ 855,795      $ 850,163  

Commercial paper

      283,009        18        (187 )      282,840        258,933  

Certificates of deposit and time deposits

      167,523        6        (187 )      167,342        138,340  

Corporate debt securities

      131,179        2,380        (373 )      133,186        91,010  

Equity and debt mutual funds

      19,403        4,102        (75 )      23,430        1,723  

U.S. government agency securities

      10,775        —          (49 )      10,726        10,726  

Non-U.S. government securities

      582        4        —         586        —    
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  
   $ 1,470,729      $ 6,582      $ (3,406 )    $ 1,473,905      $ 1,350,896  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Reported as follows:

 

     Cost      Unrealized
Gain		      Unrealized
(Loss)		     Fair Market
Value		      Fair Market
Value of
Investments
with Unrealized
Losses		  
     (in thousands)  

Marketable securities

    $ 1,349,970      $ 38      $ (2,029 )    $ 1,347,979      $ 1,288,844  

Long-term marketable securities

      120,759        6,544        (1,377 )      125,926        62,052  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  
   $ 1,470,729      $ 6,582      $ (3,406 )    $ 1,473,905      $ 1,350,896  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  
Contractual Maturities of Investments in Debt Securities Held

The contractual maturities of investments in available-for-sale securities held at September 30, 2018 were as follows:

 

     September 30, 2018  
     Cost      Fair Market
Value		  
     (in thousands)  

Due within one year

    $ 418,554      $ 418,410  

Due after 1 year through 5 years

      11,477        11,368  

Due after 5 years through 10 years

      14,906        13,949  

Due after 10 years

      40,467        38,925  
  

 

 

     

 

 

  

Total

    $ 485,404      $ 482,652  
  

 

 

     

 

 

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

The following table summarizes the fair value of derivative instruments as of September 30, 2018 and December 31, 2017:

 

     Balance Sheet Location      September 30,
2018		     December 31,
2017		  
            (in thousands)  

Derivatives not designated as hedging instruments:

        

Foreign currency forward contracts assets

      Prepayments      $ 3     $ 389  

Foreign currency forward contracts liabilities

      Other current liabilities        (455 )      (446 ) 
     

 

 

    

 

 

  

Total derivatives

       $ (452 )    $ (57 ) 
     

 

 

    

 

 

  
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 for the three and nine months ended September 30, 2018 and October 1, 2017.

 

    Location of Losses (Gains)
Recognized in
Statement of Operations		     For the Three Months
Ended		     For the Nine Months
Ended		  
    September 30,
2018		     October 1,
2017		     September 30,
2018		     October 1,
2017		  
          (in thousands)  

Derivatives not designated as hedging instruments:

          

Foreign currency forward contracts

     Other (income) expense, net     $ (899 )    $ (939 )    $ 2,502     $ (1,514 ) 

 

(1)

The table does not reflect the corresponding gains and losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies.
(2)

For the three and nine months ended September 30, 2018, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $3.7 million and $1.2 million, respectively.
(3)

For the three and nine months ended October 1, 2017, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.4 million and $2.3 million, respectively.