Financial Instruments (Tables)

6 Months Ended

Jul. 04, 2021

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 July 4, 2021 and December 31, 2020.

	July 4, 2021
	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	$	568,630	$	—	$	—	$	568,630
Cash equivalents		373,113		12,698		—		385,811
Available-for-sale securities:
Commercial paper		—		225,415		—		225,415
U.S. Treasury securities		—		102,316		—		102,316
Corporate debt securities		—		85,294		—		85,294
Debt mutual funds		8,030		—		—		8,030
U.S. government agency securities		—		4,508		—		4,508
Certificates of deposit and time deposits		—		1,344		—		1,344
Non-U.S. government securities		—		616		—		616
Equity securities:
Mutual funds		36,158		—		—		36,158
	$	985,931	$	432,191	$	—	$	1,418,122
Derivative assets		—		25		—		25
Total	$	985,931	$	432,216	$	—	$	1,418,147
Liabilities
Derivative liabilities		—		365		—		365
Total	$	—	$	365	$	—	$	365
Reported as follows:
	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	941,743	$	12,698	$	—	$	954,441
Marketable securities		—		282,121		—		282,121
Long-term marketable securities		44,188		137,372		—		181,560
Prepayments and other current assets		—		25		—		25
Total	$	985,931	$	432,216	$	—	$	1,418,147
Liabilities
Other current liabilities	$	—	$	365	$	—	$	365
Total	$	—	$	365	$	—	$	365

	December 31, 2020
	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	$	443,166	$	—	$	—	$	443,166
Cash equivalents		347,768		123,187		—		470,955
Available-for-sale securities:								—
U.S. Treasury securities		—		258,304		—		258,304
Commercial paper		—		254,413		—		254,413
Corporate debt securities		—		83,615		—		83,615
Debt mutual funds		8,565		—		—		8,565
U.S. government agency securities		—		4,339		—		4,339
Certificates of deposit and time deposits		—		979		—		979
Non-U.S. government securities		—		625		—		625
Equity securities:
Equity mutual funds		29,420		—		—		29,420
	$	828,919	$	725,462	$	—	$	1,554,381
Derivative assets		—		95		—		95
Total	$	828,919	$	725,557	$	—	$	1,554,476
Liabilities
Contingent consideration	$	—	$	—	$	7,227	$	7,227
Derivative liabilities		—		504		—		504
Total	$	—	$	504	$	7,227	$	7,731
Reported as follows:
	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	790,934	$	123,187	$	—	$	914,121
Marketable securities		—		522,280		—		522,280
Long-term marketable securities		37,985		79,995		—		117,980
Prepayments and other current assets		—		95		—		95
Total	$	828,919	$	725,557	$	—	$	1,554,476
Liabilities
Other accrued liabilities	$	—	$	504	$	—	$	504
Long-term contingent consideration		—		—		7,227		7,227
Total	$	—	$	504	$	7,227	$	7,731

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 July 4, 2021 and June 28, 2020 were as follows:

	For the Three Months Ended				For the Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021			June 28, 2020
	(in thousands)
Balance at beginning of period	$	—	$	20,472	$	7,227		$	39,705
Fair value adjustment (a)(b)		—		29,259		(7,227	)		19,239
Foreign currency impact		—		6		—			(355	)
Payments (c)		—		—		—			(8,852	)
Balance at end of period	$	—	$	49,737	$	—		$	49,737

(a) In the six months ended July 4, 2021, the fair value of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide was reduced to zero, which resulted in a benefit of $7.2 million, primarily due to a decrease in forecasted revenues and earnings before interest and taxes. As of July 4, 2021, the maximum amount of contingent consideration that could be paid in connection with the acquisition of AutoGuide is $100.2 million. The remaining earn-out periods end on December 31, 2021 and December 31, 2022. The sellers of AutoGuide have filed an arbitration claim against Teradyne related to allegations of non-compliance with its earn-out obligations. The ultimate amount of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide may be affected by the outcome of the arbitration (see Note R: “Commitments and Contingencies”). 

(b) In the three and six months ended June 28, 2020, the fair value of contingent consideration for the earn-outs in connection with the acquisition of Mobile Industrial Robots (“MiR”) decreased by $0.6 million and $3.6 million, respectively, due to lower forecasted results. In the three and six months ended June 28, 2020, the fair value of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide increased by $29.9 million and $22.8 million, respectively, due to higher forecasted results.

(c) In the six months ended June 28, 2020, Teradyne paid $8.9 million of contingent consideration for the earn-out in connection with the acquisition of MiR.

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of Teradyne’s financial instruments at July 4, 2021 and December 31, 2020 were as follows:

	July 4, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	954,441	$	954,441	$	914,121	$	914,121
Marketable securities		463,681		463,681		640,260		640,260
Derivative assets		25		25		95		95
Liabilities
Contingent consideration		—		—		7,227		7,227
Derivative liabilities		365		365		504		504
Convertible debt (1)		357,379		1,595,912		410,111		1,739,553

(1) The carrying value represents the bifurcated debt component only, while the level 2 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 July 4, 2021:

	July 4, 2021
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Commercial paper	$	225,409	$	7	$	(1	)	$	225,415	$	19,194
U.S. Treasury securities		102,068		767		(519	)		102,316		72,750
Corporate debt securities		79,586		5,814		(106	)		85,294		38,694
Debt mutual funds		7,956		74		—			8,030		—
U.S. government agency securities		4,490		22		(4	)		4,508		1,308
Certificates of deposit and time deposits		1,344		—		—			1,344		—
Non-U.S. government securities		616		—		—			616		—
	$	421,469	$	6,684	$	(630	)	$	427,523	$	131,946

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	282,061	$	93	$	(33	)	$	282,121	$	59,990
Long-term marketable securities		139,408		6,591		(597	)		145,402		71,956
	$	421,469	$	6,684	$	(630	)	$	427,523	$	131,946

The following table summarizes the composition of available-for-sale marketable securities at December 31, 2020:

	December 31, 2020
	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	$	257,132	$	1,330	$	(158	)	$	258,304	$	17,243
Commercial paper		254,404		10		(1	)		254,413		12,173
Corporate debt securities		76,129		7,539		(53	)		83,615		39,896
Debt mutual funds		8,413		152		—			8,565		—
U.S. government agency securities		4,294		46		(1	)		4,339		1,106
Certificates of deposit and time deposits		979		—		—			979		—
Non-U.S. government securities		625		—		—			625		—
	$	601,976	$	9,077	$	(213	)	$	610,840	$	70,418

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	522,228	$	92	$	(40	)	$	522,280	$	61,806
Long-term marketable securities		79,748		8,985		(173	)		88,560		8,612
	$	601,976	$	9,077	$	(213	)	$	610,840	$	70,418

Contractual Maturities of Investments Held

The contractual maturities of investments in available-for-sale securities held at July 4, 2021 were as follows:

	July 4, 2021
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	282,061	$	282,121
Due after 1 year through 5 years		90,625		90,940
Due after 5 years through 10 years		6,089		6,585
Due after 10 years		34,738		39,847
Total	$	413,513	$	419,493

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

The following table summarizes the fair value of derivative instruments as of July 4, 2021 and December 31, 2020:

	Balance Sheet Location		July 4, 2021			December 31, 2020
			(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Prepayments	$	25		$	95
Foreign exchange contracts		Other current liabilities		(365	)		(504	)
Total derivatives			$	(340	)	$	(409	)

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 six months ended July 4, 2021 and June 28, 2020:

	Location of Losses (Gains) Recognized in Statement of Operations		For the Three Months Ended				For the Six Months Ended
			July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
			(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Other (income) expense, net	$	1,531	$	470	$	3,650	$	4,481

(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 three and six months ended July 4, 2021, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $0.1 million and $0.3 million, respectively.

(3) For the three months ended June 28, 2020, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $0.4 million. For the six months ended June 28, 2020, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.6 million.