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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2019

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 December 31, 2019 and 2018:


	December 31, 2019
	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	$	311,975	$	—	$	—	$	311,975
Cash equivalents		410,285		51,664		—		461,949
Available for sale securities:
Corporate debt securities		—		97,307		—		97,307
Commercial paper		—		54,149		—		54,149
U.S. Treasury securities		—		42,382		—		42,382
U.S. government agency securities		—		9,952		—		9,952
Debt mutual funds		6,888		—		—		6,888
Certificates of deposit and time deposits		—		4,751		—		4,751
Non-U.S. government securities		—		592		—		592
Equity securities:
Equity mutual funds		25,772		—		—		25,772

Total	$	754,920	$	260,797	$	—	$	1,015,717

Derivative assets		—		528		—		528

Total	$	754,920	$	261,325	$	—	$	1,016,245

Liabilities
Contingent consideration	$	—	$	—	$	39,705	$	39,705
Derivative liabilities		—		203		—		203

Total	$	—	$	203	$	39,705	$	39,908

Reported as follows:


	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	722,260	$	51,664	$	—	$	773,924
Marketable securities		—		137,303		—		137,303
Long-term marketable securities		32,660		71,830		—		104,490
Prepayments		—		528		—		528

Total	$	754,920	$	261,325	$	—	$	1,016,245

Liabilities
Other current liabilities	$	—	$	203	$	—	$	203
Contingent consideration		—		—		9,106		9,106
Long-term contingent consideration		—		—		30,599		30,599

Total	$	—	$	203	$	39,705	$	39,908


	December 31, 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	$	312,512	$	—	$	—	$	312,512
Cash equivalents		253,525		360,715		—		614,240
Available for sale securities:
U.S. Treasury securities		—		109,721		—		109,721
Commercial paper		—		86,117		—		86,117
Corporate debt securities		—		40,020		—		40,020
U.S. government agency securities		—		9,611		—		9,611
Certificates of deposit and time deposits		—		7,604		—		7,604
Debt mutual funds		3,187		—		—		3,187
Non-U.S. government securities		—		376		—		376
Equity securities:
Equity mutual funds		21,191		—		—		21,191

	$	590,415	$	614,164	$	—	$	1,204,579

Derivative assets		—		79		—		79

Total	$	590,415	$	614,243	$	—	$	1,204,658

Liabilities
Contingent consideration	$	—	$	—	$	70,543	$	70,543
Derivative liabilities		—		514		—		514

Total	$	—	$	514	$	70,543	$	71,057

Reported as follows:


	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	566,037	$	360,715	$	—	$	926,752
Marketable securities		—		190,096		—		190,096
Long-term marketable securities		24,378		63,353		—		87,731
Prepayments		—		79		—		79

	$	590,415	$	614,243	$	—	$	1,204,658

Liabilities
Other current liabilities	$	—	$	514	$	—	$	514
Contingent consideration		—		—		34,865		34,865
Long-term contingent consideration		—		—		35,678		35,678

	$	—	$	514	$	70,543	$	71,057

Schedule of Changes in Fair Value of Level 3 Contingent Consideration

Changes in the fair value of Level 3 contingent consideration for the years ended December 31, 2019 and 2018 were as follows:


	Contingent Consideration
	(in thousands)
Balance at December 31, 2017	$	45,102
Acquisition of MiR		52,547
Foreign currency impact		(3,540	)
Payments ( 1 )		(24,553	)
Fair value adjustment ( 2 )		987

Balance at December 31, 2018		70,543
Acquisition of AutoGuide		23,976
Foreign currency impact		(967	)
Payments (3)		(34,590	)
Fair value adjustment (4)		(19,257	)

Balance at December 31, 2019	$	39,705

(1)	During the year ended December 31, 201 8 , Teradyne paid $ 24.6 million of contingent consideration for the earn-out in connection with the acquisition of Un iversal Robots.

(2)

During the year ended December 31, 2018, the fair value of contingent consideration for the earn-out in connection with the acquisition of MiR was increased by $17.7 million primarily due to an increase in forecasted revenues. During the year ended December 31, 2018,

the fair value of contingent consideration for the

earn-out

in connection with the acquisition of Universal Robots was

creased by $

16.7

million primarily due to

crease in forecasted revenues.

(3)	During the year ended December 31, 201 9 , Teradyne paid $ 30.8 million and $3.8 million of contingent consideration for the earn-out s in connection with the acquisition s of MiR a n d Universal Robots , respectively .

(4)

During the year ended December 31, 201

, the fair value of contingent consideration for the

earn-out

in connection with the acquisition of MiR was

creased by $

22.2

million primarily due to a

crease in forecasted revenues

partially offset by the impact from modification of the earn-out structure.

During the year ended December 31, 201

, the fair value of contingent consideration for the

earn-out

in connection with the acquisition of

Auto

uide

was

creased by $

3.0

million primarily due to a

rease

in forecasted

revenues

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 instrument:

Liability

December 31,

2019

Fair Value

Valuation

Technique

Unobservable Inputs

Weighted

Average

(in thousands)

Contingent

onsideration

(AutoGuide)

26,952

Monte Carlo simulation

Revenue Volatility

11.5

Discount Rate

2.6

Contingent

onsideration

(MiR)

12,753

(1)

Monte Carlo simulation

Revenue Volatility

14.0

Discount Rate

0.2

(1)	Contingent consideration related to MiR of $ 9.1 million is expected to be paid in March 20 20 .

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of Teradyne’s financial instruments at December 31, 2019 and 2018 were as follows:


	December 31, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	773,924	$	773,924	$	926,752	$	926,752
Marketable securities		241,793		241,793		277,827		277,827
Derivative assets		528		528		79		79
Liabilities
Contingent consideration		39,705		39,705		70,543		70,543
Derivative liabilities		203		203		514		514
Convertible debt (1)		394,687		1,010,275		379,981		547,113

(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 tables summarize the composition of

available-for-sale

marketable securities at December 31, 2019 and 2018:


	December 31, 2019
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Corporate debt securities	$	93,267	$	4,081	$	(41	)	$	97,307	$	2,009
Commercial paper		54,124		26		(1	)		54,149		1,391
U.S. Treasury securities		42,167		431		(216	)		42,382		17,556
U.S. government agency securities		9,942		14		(4	)		9,952		3,043
Debt mutual funds		6,753		135		—			6,888		—
Certificates of deposit and time deposits		4,751		—		—			4,751		—
Non-U.S. government securities		592		—		—			592		—

	$	211,596	$	4,687	$	(262	)	$	216,021	$	23,999

Reported as follows:


	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	137,144	$	160	$	(1	)	$	137,303	$	2,922
Long-term marketable securities		74,452		4,527		(261	)		78,718		21,077

	$	211,596	$	4,687	$	(262	)	$	216,021	$	23,999


	December 31, 2018
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	110,969	$	112	$	(1,360	)	$	109,721	$	75,040
Commercial paper		86,130		13		(26	)		86,117		85,094
Corporate debt securities		41,133		432		(1,545	)		40,020		24,767
U.S. government agency securities		9,646		1		(36	)		9,611		7,077
Certificates of deposit and time deposits		7,604		—		—			7,604		—
Debt mutual funds		3,153		34		—			3,187		—
Non-U.S. government securities		376		—		—			376		—

	$	259,011	$	592	$	(2,967	)	$	256,636	$	191,978

Reported as follows:


	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	190,100	$	88	$	(92	)	$	190,096	$	140,262
Long-term marketable securities		68,911		504		(2,875	)		66,540		51,716

	$	259,011	$	592	$	(2,967	)	$	256,636	$	191,978

Contractual Maturities of Investments Held

The

contractual

maturities of investments in

available-for-sale

marketable securities held at December 31, 2019 were as follows:


	Cost		Fair Value
	(in thousands)
Due within one year	$	137,144	$	137,303
Due after 1 year through 5 years		15,264		15,351
Due after 5 years through 10 years		14,436		14,576
Due after 10 years		37,999		41,903

Total	$	204,843	$	209,133

Contractual maturities of investments in available-for-sale marketable securities held at December 31, 2019 exclude $6.9 million of debt mutual funds as they do not have a contractual maturity date.

Derivatives

Teradyne conducts business in a number of foreign countries, with certain transactions denominated in local currencies. The purpose of Teradyne’s foreign currency management is to minimize the effect of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities. Teradyne does not use derivative financial instruments for trading or speculative purposes.

To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings, and is used to offset the change in value of the monetary assets and liabilities denominated in foreign currencies.

At December 31, 2019 and 2018, Teradyne had the following contracts to buy and sell

non-U.S.

currencies for U.S. dollars and other

non-U.S.

currencies with the following notional amounts:


	December 31, 2019								December 31, 2018
	Buy Position			Sell Position		Net Total			Buy Position			Sell Position		Net Total
	(in millions)
Japanese Yen	$	(29.3	)	$	—	$	(29.3	)	$	(35.0	)	$	—	$	(35.0	)
Taiwan Dollar		(18.4	)		—		(18.4	)		(11.2	)		—		(11.2	)
Korean Won		(10.7	)		—		(10.7	)		(9.6	)		—		(9.6	)
British Pound Sterling		(3.8	)		—		(3.8	)		(1.4	)		—		(1.4	)
Euro		—			47.8		47.8			—			82.2		82.2
Singapore Dollar		—			25.3		25.3			—			15.7		15.7
Philippine Peso		—			5.2		5.2			—			5.2		5.2
Chinese Yuan		—			4.4		4.4			—			2.8		2.8

Total	$	(62.2	)	$	82.7	$	20.5		$	(57.2	)	$	105.9	$	48.7

Schedule of Notional Amount of Derivatives

At December 31, 2019 and 2018, Teradyne had the following contracts to buy and sell

non-U.S.

currencies for U.S. dollars and other

non-U.S.

currencies with the following notional amounts:


	December 31, 2019								December 31, 2018
	Buy Position			Sell Position		Net Total			Buy Position			Sell Position		Net Total
	(in millions)
Japanese Yen	$	(29.3	)	$	—	$	(29.3	)	$	(35.0	)	$	—	$	(35.0	)
Taiwan Dollar		(18.4	)		—		(18.4	)		(11.2	)		—		(11.2	)
Korean Won		(10.7	)		—		(10.7	)		(9.6	)		—		(9.6	)
British Pound Sterling		(3.8	)		—		(3.8	)		(1.4	)		—		(1.4	)
Euro		—			47.8		47.8			—			82.2		82.2
Singapore Dollar		—			25.3		25.3			—			15.7		15.7
Philippine Peso		—			5.2		5.2			—			5.2		5.2
Chinese Yuan		—			4.4		4.4			—			2.8		2.8

Total	$	(62.2	)	$	82.7	$	20.5		$	(57.2	)	$	105.9	$	48.7

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

The following table summarizes the fair value of derivative instruments as of December 31, 2019 and 2018:


	Balance Sheet Location	December 31, 2019			December 31, 2018
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Prepayments	$	528		$	79
Foreign exchange contracts	Other current liabilities		(203	)		(514	)

Total		$	325		$	(435	)

Schedule of Effect of Derivative Instruments on Statement of Operations Recognized

The following table summarizes the effect of derivative instruments in the statements of operations recognized for the years ended December 31, 2019, 2018, and 2017.


	Location of (Gains) Losses Recognized in Statement of Operations		December 31, 2019		December 31, 2018		December 31, 2017
			(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Other (income) expense, net	$	5,960	$	7,386	$	(1,133	)

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

(2)	For the years ended December 31, 2019 and 2018, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $ 1.6 million and $ 2.5 million, respectively.

(3)	For the year ended December 31, 2017, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $ 2.9 million.