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2020
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MASSACHUSETTS | 04-2272148 | |
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(Address of Principal Executive Offices) | (Zip Code) |
Each Classeach class Each Exchangeeach exchange on Which Registeredwhich registeredCommon Stock, par value $0.125 per share TER Nasdaq Stock Market LLC Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405) is not contained herein, and will not be contained to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or in any amendment to this Form 10-K. ☐29, 201826, 2020 was approximately $6.4$10.6 billion based upon the closing price of the registrant’s Common Stock on the New YorkNasdaq Stock ExchangeMarket on that date.25, 2019173,629,283166,694,772 shares.20192021 annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.
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wireless test (“Wireless Test”) systems.
We have a customer base which includes integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”), original equipment manufacturers (“OEMs”), wafer foundries, fabless companies that design, but contract with others for the manufacture of integrated circuits (“ICs”), developers of wireless devices and consumer electronics, manufacturers of circuit boards, automotive suppliers, wireless product manufacturers, storage device manufacturers, aerospace and military contractors, and distributors that sell collaborative robots, autonomous mobile robots and wireless test systems.
The sales of
In 2015, we acquired UniversalMobile Industrial Robots A/S (“Universal Robots”), the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. The acquisition of Universal Robots provides a growth engine to our business. The total purchase price for Universal Robots was approximately $315 million, which included cash paid of approximately $284 million and $32 million in fair value of contingent consideration payable upon achievement of revenue and earnings targets through 2018. Contingent consideration for 2015 was $15 million and was paid in February 2016. Contingent consideration for the period from July 2015 to December 2017 was $24.6 million and was paid in March 2018. Contingent consideration for the period from July 2015 to December 2018 was $3.9 million and is expected to be paid in March 2019.
On February 26, 2018, we acquired Energid Technologies Corporation (“Energid”) for a total purchase price of approximately $27.6 million. Energid’s technology enables and simplifies the programming of complex robotic motions used in a wide variety of end markets, ranging from heavy industry to healthcare, utilizing both traditional robots and collaborative robots.
On April 25, 2018, we acquired Mobile Industrial Robots ApS (“MiR”), a Danish limited liability company. MiR is the leading maker of collaborative autonomous mobile robots (“AMRs”) for industrial applications.applications, in 2018 and AutoGuide, LLC (“AutoGuide”), a maker of high payload AMRs, in 2019. The total purchase pricemarket for our Industrial Automation products is dependent on the adoption of new automation technologies by large
Universal Robots, MiR and Energid are includedcontinued investment in our Industrial Automation segment.
businesses. We plan to execute on our strategy while balancing capital allocations between returning capital to our shareholders through dividends and stock repurchases and using capital for opportunistic acquisitions.
extended the J750 platform technology to create the IP750 Image Sensor™ Sensor
Storage Test
The Storage Test business unit addresses the high throughput, automated manufacturing test requirements of hard disk drive (“HDD”) and solid state disk (“SSD”) manufacturers and semiconductor manufacturers. Our products address the client and enterprise storage markets. The client market is driven by the needs of desktop, laptop, and external HDD and SSD storage products. The enterprise market is driven by the needs of data centers and cloud storage. During 2017, we developed a system level test product for the semiconductor production market, which shipped in 2017 and 2018. The business unit’s products lead in addressing customer requirements related to factory density, throughput and thermal performance.
Industrial Automation
Our Industrial Automation segment is comprised of three business units: Universal Robots, Mobile Industrial Robots and Energid.
Universal Robots
Universal Robots, which we acquired in June 2015, is the leading supplier of collaborative robots, which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Collaborative robots are designed to mimic the motion of a human arm and can be fitted with task specific grippers or fixtures to support a wide range of applications. Universal Robots offers three collaborative robot models, the UR3, UR5, and UR10, each with different weight carrying capacity and arm reach. All models are easily integrated into existing production environments. Universal Robots’ products are differentiated by their:
easy programming using a graphical interface which allows users to program the collaborative robot in a few hours;
flexibility and ease of use in allowing customers to change the task the collaborative robot is performing as their production demands dictate;
safe operations as collaborative robots can assist workers in side by side production environments requiring no special safety enclosures or shielding to protect workers; and
short payback period, on average less than 12 months.
In 2018, Universal Robots introduced its e-series collaborative robots which include technology advances that enable faster development of applications, greater precision and improved safety.
Cumulatively, Universal Robots has sold over 30,000 collaborative robots in diverse production environments and applications.
Mobile Industrial Robots
MiR, which was acquired in April 2018, is the leading supplier of collaborative autonomous mobile robots, which are low-cost, easy-to-deploy and simple-to-program mobile robots that increase manufacturing and warehouse efficiency and decrease costs. Collaborative autonomous mobile robots are designed to move material from point to point via autonomous navigation rather than the need for traditional mobile robot guidance infrastructure such as painted or magnetic strips, and are designed to navigate safely around obstacles and people. MiR offers three collaborative autonomous mobile robot models, the MiR100, MiR200, MiR500, each with different payload carrying capacity. All models are easily integrated into existing production environments. MiR’s products are differentiated by their:
easy programming using a graphical interface which allows users to program the collaborative robot in a few hours;
ease of use, speed of deployment and flexibility in allowing customers to change the task as their demands dictate;
reliable autonomous navigation over large manufacturing and warehouse areas; and
short payback period, on average less than 12 months.
Cumulatively, MiR has sold over 1,800 collaborative autonomous mobile robots in diverse production and warehouse environments and applications.
Energid
Energid, which was acquired in February 2018, is a leading supplier of real-time advanced robot motion control software, which automation suppliers use to coordinate the control of multiple automation axes for performing tasks. Motion control software performs the complex mathematics and functions needed to enable robot motion for tasks such as grasping and moving an object. Energid offers developer and run time licenses of its Actin software. Actin is integrated by customers into the customers’ robot and automation solutions. Actin products are differentiated by their:
highly flexible, adaptive, robot motion control; and
task optimized robotic path planning.
Cumulatively, Energid has sold over 500 Actin developer and run time licenses deployed in diverse automation applications.
An important component
tested on LitePoint’s
Competitors in our Wireless Test segment include, among others, Rohde & Schwarz GmbH & Co. KG, Anritsu Company, Keysight Technologies, Inc. and National Instruments Corporation.
Balyo.
| 2018 | 2017 (1) | |||||||
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Semiconductor Test | $ | 367.5 | $ | 464.2 | ||||
System Test | 149.5 | 111.9 | ||||||
Wireless Test | 32.0 | 35.5 | ||||||
Industrial Automation | 19.7 | 14.8 | ||||||
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| $ | 568.7 | $ | 626.4 | |||||
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Of the backlog at December 31, 2018, approximately 98% of the Semiconductor Test backlog, 89% of the System Test backlog, and 35% of the Industrial Automation backlog is expected to be delivered in 2019.
2020 | 2019 | |||||||
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Semiconductor Test | $ | 567.4 | $ | 543.2 | ||||
System Test | 290.6 | 206.0 | ||||||
Wireless Test | 41.6 | 42.9 | ||||||
Industrial Automation | 30.0 | 17.9 | ||||||
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| $ | 929.6 | $ | 810.0 | |||||
Employees
Environmental Affairs
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Mark E. Jagiela | Chief Executive Officer and President | Chief Executive Officer since February 2014; President of Teradyne since January 2013; President of Semiconductor Test from 2003 to February 2016; Vice President of Teradyne from 2001 to 2013. | ||||||
Sanjay Mehta | Vice President, Chief Financial Officer and Treasurer | Vice President, | ||||||
Charles J. Gray | Vice President, General Counsel and Secretary | Vice President, General Counsel and Secretary of Teradyne since April 2009. | ||||||
Bradford B. Robbins | President of Wireless Test | President of Wireless Test since August 2014; Chief Operating Officer of LitePoint Corporation from 2012 to 2014; Vice President of Teradyne since 2001. | ||||||
Gregory S. Smith | President of | President of Industrial Automation since October 2020; President of Semiconductor Test | ||||||
Richard J Burns | President of Semiconductor Test | President of Semiconductor Test since October 2020; Vice President, Semiconductor Test Engineering from February 2016 to September 2020. | ||||||
Walter G. Vahey | 56 | Executive Vice President, Business Development | Executive Vice President, Business Development since December 2017; President of System Test from July 2012 to December 2017; Vice President of Teradyne since 2008; General Manager of Storage Test from 2008 to December 2017; General Manager of Production Board Test from April 2013 to December 2017. | |||||
Item 1A: |
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Risks Associated with Our Business
within those industries. These cycles have resulted in periods of over-supply; a trend we believe will continue to occur for newer generations of electronic products.occur. Our business and results of operations depend, in significant part, upon capital expenditures of manufacturers of semiconductors electronics and other electronics,industrial products, which in turn depend upon the current and anticipated market demand for those products. Disruption or deterioration in economic conditions may reduce customer purchases of our products, thereby reducing our revenues and earnings. In addition, such adverse changes in economic conditions, and resulting slowdowns in the market for our products, may, among other things, result in increased price competition for our products, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts receivable from our customers, potential reserves for doubtful accounts and write-offs of accounts receivable, increased risk of restructuring charges, and higher operating costs as a percentage of revenues, which, in each case and together, adversely affect our
Our operating results
Our operating results are affected byour success. Successful product development or acquisition, introduction and acceptance depend upon a wide varietynumber of factors, that could materially adversely affect revenues or profitability. The following factors could impact future operations:
a worldwide economic slowdown or disruption in the global financial markets;
competitive pressures on selling prices;
our
changes in
the level of orders received which can be shipped in a quarter because of the tendency
engineering and development investments relating to new product introductions, and the expansion of manufacturing, outsourcing and engineering operations in Asia;
provisions for excess and obsolete inventory relating to the lack of demand for and the discontinuance of products;
impairment charges for certain long-lived and intangible assets, and goodwill;
an increase in the leasing of our products to customers;
our
parallel or multi-site testing could lead
the ability of our suppliers and subcontractors to meet product quality or delivery requirements needed to satisfy customer orders for our products, especially if consolidated revenues increase.
As a result of the foregoing and other factors, we have experienced and may continue to experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect our business, financial condition, operating results or stock price.
The implementation of tariffs and export controls on our products may have a material impact on our business.
Our business operations and supply chain are global and may be disrupted by the implementation of tariffs and export controls on our products.
On July 6, 2018 and August 23, 2018, the United States Trade Representative imposed a 25% tariff on two lists of products, including certain Teradyne products that are made in China and imported into the United States. We have submitted requests for exclusion of our products from the tariff, but there is no assurance that our requests will be approved. We have implemented operational changes that will mitigate the impact of the 25% tariff on the import of our impacted products into the United States. As a result, we do not expect that the tariff will have a material adverse effect on our business, financial condition or results of operations.
On September 24, 2018, the United States Trade Representative imposed a 10% tariff on many additional products made in China and imported into the United States. The tariff rate may increase
On June 29, 2018, the United States Department of Commerce announced that it has commenced a review of new export controls focusing on emerging and foundational technologies. While there is uncertainty as to the technologies that will be covered, the new export controls could cover technologies used in one or more Teradyne products and, therefore, could impact the sale of certain Teradyne products and have a material adverse effect on our business, financial condition or results of operations.
The United States Department of Commerce from time to time has taken action to restrict the access of U.S.-origin technologies to Chinese companies by adding them to the Entity List under U.S. Export Administration Regulations. The addition to the Entity List of Chinese companies who are customers or potential customers could impact the sale and/or support of certain Teradyne products to those customers or potential customers and, therefore, have a material adverse effect on our business, financial condition or results of operations.
In addition to the actions taken by the United States, China has implemented retaliatory tariffs on products made in the United States and imported into China, including certain Teradyne products. We plan to assess and implement, if appropriate, operational changes that would mitigate the impact of the retaliatory tariffs. However, notwithstanding our efforts, the retaliatory tariffs or other trade restrictions implemented by China could disrupt our business operations, sales and supply chain and, therefore, have a material adverse effect on our business, financial condition or results of operations.
If we fail to develop new technologies to adapt to our customers’ needs and if our customers fail to accept our new products, our revenues will be adversely affected.
We believe that our technological position depends primarily on the technical competence and creative ability of our engineers. In a rapidly evolving market, such as ours, the development or acquisition of new technologies, commercialization of those technologies into products and market acceptance and customer
demand for those products are critical to our success. Successful product development or acquisition, introduction and acceptance depend upon a number of factors, including:
new product selection;
ability to meet customer requirements;
development of competitive products by competitors;
timely and efficient completion of product design;
timely and efficient implementation of manufacturing and manufacturing processes;
timely remediation of product performance issues, if any, identified during testing;
assembly processes and product performance at customer locations;
differentiation of our products from our competitors’ products;
management of customer expectations concerning product capabilities and product life cycles;
transition of customers to new product platforms;
ability to attract and retain technical talent; and
innovation that does not infringe on the intellectual property rights of third parties.
We may be subject to product recalls and warranty and product liability claims.
We invest significant resources in the design, manufacture and testing of our products. However, we may discover design or manufacturing defects in our products after they have been shipped and, as a result, we may incur development and remediation costs and be required to settle warranty and product liability claims. In addition, if any of our products contain defects or have reliability, quality or safety issues, we may need to conduct a product recall which could result in significant repair or replacement costs and substantial delays in product shipments and may damage our reputation which could make it more difficult to sell our products. Any of these results could have a material adverse effect on our business, results of operations or financial condition.
If our suppliers do not meet product or delivery requirements, we could have reduced revenues and earnings.
Certain components, including semiconductor chips, may be in short supply from time to time because of high industry demand or the inability of some vendors to consistently meet our quality or delivery requirements. If any of our suppliers were to cancel contracts or commitments or fail to meet the quality or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders, have significantly decreased revenues and earnings and be subject to contractual penalties, which would have a material adverse effect on our business, results of operations and financial condition. In addition, we rely on contract manufacturers for certain subsystems used in our products, and our ability to meet customer orders for those products depends upon the timeliness and quality of the work performed by these subcontractors, over whom we do not exercise any control.
To a certain extent, we are dependent upon the ability of our suppliers and contractors to help meet increased product or delivery requirements. It may be difficult for certain suppliers to meet delivery requirements in a period of rapid growth, therefore impacting our ability to meet our customers’ demands.
We rely on the financial strength of our suppliers. There can be no assurance that the loss of suppliers either as a result of financial viability, bankruptcy or otherwise will not have a material adverse effect on our business, results of operations or financial condition.
Our operations may be adversely impacted if our outsourced contract manufacturers or service providers fail to perform.
We depend on Flex Ltd. (“Flex”) to manufacture and test our FLEX and J750 family of products from its facility in China and on other contract manufacturers to manufacture other products. If for any reason these contract manufacturers cannot provide us with these products in a timely fashion, or at all, we may not be able to sell these products to our customers until we enter a similar arrangement with an alternative contract manufacturer. If we experience a problem with our supply of products from Flex or our other contract manufacturers, it may take us significant time to either manufacture the product or find an alternate contract manufacturer, which could result in substantial expense and disruption to our business.
We have also outsourced certain general and administrative functions to reputable service providers, many of which are in foreign countries, sometimes impacting communication with them because of language and time differences. Their presence in foreign countries also increases the risk they could be exposed to political risk. Additionally, there may be difficulties encountered in coordinating the outsourced operations with existing functions and operations. If we fail in successfully coordinating and managing the outsourced service providers, it may cause an adverse effect on our operations which could have a material adverse effect on our business, results of operations or financial condition.
We may not fully realize the benefits of our acquisitions or strategic alliances.
and costs.
restrict our ability to expand facilities;
restrict our ability to ship certain products;
require us to modify our operations logistics;
require us to acquire costly equipment; or
require us to incur other significant costs and expenses.
Pursuant to present regulations and agreements, we are conducting groundwater and subsurface assessment and monitoring and are implementing remediation and corrective action plans for facilities located in Massachusetts and New Hampshire which are no longer conducting manufacturing operations. As of December 31, 2018, we have not incurred material costs as a result of the monitoring and remediation steps taken at the Massachusetts and New Hampshire sites.
On January 27, 2003, the European Union adopted the following directives: (i) the directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the “RoHS Directive”); and (ii) the directive on Waste Electrical and Electronic Equipment (the “WEEE Directive”). The WEEE Directive became effective August 13, 2005 and the RoHS Directive became effective on July 6, 2006. Both the RoHS Directive and the WEEE Directive alter the form and manner in which electronic equipment is imported, sold and handled in the European Union. Other jurisdictions, such as China, have followed the European Union’s lead in enacting legislation with respect to hazardous substances and waste removal. Ensuring compliance with the RoHS Directive, the WEEE Directive and similar legislation in other jurisdictions, and integrating compliance activities with our suppliers and customers could result in additional costs and disruption to operations and logistics and thus, could have a negative impact on our business, operations or financial condition.
We currently are, and in the future may be subject to litigationfurther taxation or regulatory proceedings that couldan increase in our effective tax rate which would adversely impact our financial results. In December 2015, we entered into an agreement with the Singapore Economic Development Board which extended, until December 31, 2020, our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2015. In November 2020, we entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31, 2025.
significant guarantees, indemnification, and customer confidentiality obligations.
We may incur higher tax rates than we expect and may have exposure to additional international tax liabilities and costs.
We are subject to paying income taxes in the United States and various other countries where we operate. Our effective tax rate is dependent on where our earnings are generated and the tax regulations and the interpretation and judgment of administrative tax or revenue entities in the United States and other countries. We have pursued a global tax strategy which could be adversely affected by the mix of earnings and tax rates in the countries where we operate, changes to tax laws, tax regulations or an adverse tax ruling by administrative entities. We are also subject to tax audits in the countries where we operate. Any material change in our tax liability resulting from changes in tax laws, tax regulations, administrative ruling or from an audit from an administrative tax or revenue entity could negatively affect our financial results.
As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both the United States and various foreign jurisdictions. In certain foreign jurisdictions, we qualify for tax incentives and tax holidays based on our ability to meet, on a continuing basis, various tests relating to our employment levels, research and development expenditures and other qualification requirements in a particular foreign jurisdiction. While we intend to operate in such a manner to maintain and maximize our tax incentives, no assurance can be given that we have so qualified or that we will so qualify for any particular year or jurisdiction. If we fail to qualify and to remain qualified for certain foreign tax incentives and tax holidays, we may be subject to further taxation or an increase in our effective tax rate which would adversely impact our financial results. In December 2015, we entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2015. The new tax holiday is scheduled to expire on December 31, 2020. The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2018, 2017 and 2016 were $11.9 million or $0.06 per diluted share, $24.8 million or $0.12 per diluted share and $17.0 million or $0.08 per diluted share, respectively. These tax savings may not be achievable in subsequent years due to changes in Singapore’s tax laws or the expiration of the tax holiday.
In addition, we may incur additional costs, including headcount expenses, in order to maintain or obtain a foreign tax incentive in a particular foreign jurisdiction.
We have significant guarantees, indemnification and customer confidentiality obligations.
From time to time, we make guarantees to customers regarding the delivery, price and performance of our products and guarantee certain indebtedness, performance obligations or lease commitments of our subsidiary and affiliate companies. We also have agreed to provide indemnification to our officers, directors, employees and agents, to the extent permitted by law, arising from certain events or occurrences while the officer, director, employee or agent, is or was serving at our request in such capacity. Additionally, we have confidentiality obligations to certain customers and if breached would require the payment of significant penalties. If we become liable under any of these obligations, it could materially and adversely affect our business, financial condition or operating results. For additional information see Note K: “Commitments and Contingencies—Guarantees and Indemnification Obligations” in Notes to Consolidated Financial Statements.
We may discontinue or reduce our quarterly cash dividend or share repurchase program.
In January 2014, our Board of Directors initiated a quarterly cash dividend of $0.06 per share. In January 2017, our Board of Directors increased our quarterly cash dividend to $0.07 per share and in January 2018, our Board of Directors increased our quarterly cash dividend to $0.09 per share. In January 2018, our Board of Directors approved a new $1.5 billion share repurchase authorization. In 2018 and 2017, we repurchased $823 million and $200 million of common stock, respectively. We intend to repurchase $500 million in 2019. Holders of our common stock are only entitled to receive dividends when and if they are declared by our Board of Directors. Future cash dividends and share repurchases are subject to the discretion of our Board of Directors
and will depend, among other things, upon our earnings, capital requirements and financial condition. While we have declared a quarterly cash dividend on our common stock and authorized a share repurchase program, we are not required to do either and may reduce or eliminate our cash dividend or share repurchase program in the future. The reduction or elimination of our cash dividend or our share repurchase program could adversely affect the market price of our common stock.
We have incurred indebtedness and may incur additional indebtedness.
On December 12, 2016, we completed a private offering of $460.0 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023 and received net proceeds, after issuance costs, of approximately $450.8 million, $33.0 million of which was used to pay the net cost, after being partially offset by proceeds from the sale of the warrants, of the convertible note hedge transactions and $50.1 million of which was used to repurchase 2 million shares of our common stock. Holders of the Notes may require us to repurchase the Notes upon the occurrence of certain fundamental changes involving us or the holders may elect to convert into shares of our common stock.
On April 27, 2015, we entered into a five-year, senior secured revolving credit facility of up to $350.0 million. Subject to customary conditions, we may seek to obtain from existing or new lenders incremental commitments under the credit facility in an aggregate principal amount not to exceed $150.0 million. We have not borrowed any funds under this credit facility. We could borrow funds under this credit facility at any time for general corporate purposes and working capital.
The issuance of the Notes and any additional indebtedness, among other things, could:
make it difficult to make payments on this indebtedness and our other obligations;
make it difficult to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;
require the dedication of a substantial portion of any cash flow from operations to service for indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures; and
limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we compete.
Our convertible note hedge and warrant transactions could impact the value of our stock.
Concurrent with the offering of the Notes, we entered into convertible note hedge transactions (the “Note Hedge Transactions”) with the initial purchasers or their affiliates (the “Option Counterparties”). The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that underlie the Notes, with a strike price equal to the conversion price of the Notes of $31.70. The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, approximately 14.5 million shares of our common stock.
Separately and concurrent with the pricing of the Notes, we entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which we sold net-share-settled (or, at our election subject to certain conditions, cash-settled) warrants to the Option Counterparties. The Warrant Transactions cover, subject to customary anti-dilution adjustments, approximately 14.5 million shares of our common stock. The strike price of the warrants is $39.78 per share. The Warrant Transactions could have a dilutive effect to our common stock to the extent that the market price per share of our common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.
The Note Hedge Transactions are expected to reduce the potential dilution to our common stock upon any conversion of the Notes. However, the Warrant Transactions could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the applicable strike price of the warrants. The net cost of the Note Hedge Transactions, after being partially offset by the proceeds from the sale of the warrants, was approximately $33.0 million.
In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, the Option Counterparties have entered into various derivative transactions with respect to our common stock and/or purchase shares of our common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivative transactions with respect to our common stock or by selling our common stock or other securities, including the Notes, in secondary market transactions (and may do so during any observation period related to the conversion of the Notes). These activities could adversely impact the value of our common stock and the Notes.
We may not be able to pay our debt and other obligations.
If our cash flow is inadequate to meet our obligations, we could face substantial liquidity problems. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the Notes or certain of our other obligations, we would be in default under the terms thereof, which would permit the holders of those obligations to accelerate their maturity and also could cause defaults under future indebtedness we may incur. Any such default could have a material adverse effect on our business, prospects, financial position and operating results. In addition, we cannot be certain that we would be able to repay amounts due on the Notes if those obligations were to be accelerated following the occurrence of any other event of default as defined in the instruments creating those obligations, or if the holders of the Notes require us to repurchase the Notes upon the occurrence of a fundamental change involving us. Moreover, we cannot be certain that we will have sufficient funds or will be able to arrange for financing to pay the principal amount due on the Notes at maturity.
Restrictive covenants in the agreement governing our senior secured revolving credit facility may restrict our ability to pursue business strategies.
The agreement governing our senior secured revolving credit facility limits our ability, among other things, to: incur additional secured indebtedness; sell, transfer, license or dispose of assets; consolidate or merge; enter into transactions with our affiliates; and incur liens. In addition, our senior secured revolving credit facility contains financial and other restrictive covenants that limit our ability to engage in activities that may be in our long term best interest, such as, subject to permitted exceptions, making capital expenditures in excess of certain thresholds, making investments, loans and other advances, and prepaying any additional indebtedness while our indebtedness under our senior secured revolving credit facility is outstanding. Our failure to comply with financial and other restrictive covenants could result in an event of default, which if not cured or waived, could result in the lenders requiring immediate payment of all outstanding borrowings or foreclosing on collateral pledged to them to secure the indebtedness.
Our business may suffer if we are unable to attract and retain key employees.
Competition for employees with skills we require is intense in the high technology industry. Our success will depend on our ability to attract and retain key technical employees. The loss of one or more key or other employees, a decrease in our ability to attract additional qualified employees, or the delay in hiring key personnel could each have a material adverse effect on our business, results of operations or financial condition.
Our operations, and the operations of our customers and suppliers, are subject to risks of natural catastrophic events, widespread health epidemics, acts of war, terrorist attacks and the threat of domestic and international terrorist attacks, any one of which could result in cancellation of orders, delays in deliveries or other business activities, or loss of customers and could negatively affect our business and results of operations.
Our business is international in nature, with our sales, service and administrative personnel and our customers and suppliers located in numerous countries throughout the world. Our operations, and those of our customers and suppliers, are subject to disruption for a variety of reasons, including work stoppages, acts of war, terrorism, health epidemics, fires, earthquakes, hurricanes, volcanic eruptions, energy shortages, telecommunication failures, tsunamis, flooding or other natural disasters. Such disruption could materially increase our costs and expenses as well as cause delays in, among other things, shipments of products to our customers, our ability to perform services requested by our customers, or the installation and acceptance of our products at customer sites. Any of these conditions could have a material adverse effect on our business, financial condition or results of operations.
A breach of our operational or security systems could negatively affect our business and results of operations.
We expect to continue to devote significant resources to the security of our information technology networks and systems.
Publicly traded companies have increasingly
Item 1B: |
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Item 2: |
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Location | Operating Segment | Major Activity (1) | Approximate Square Feet of Floor Space | |||||||
Properties owned: | ||||||||||
North Reading, Massachusetts | Semiconductor Test & System Test | 1-2-3-4-5 | 422,000 | |||||||
Agoura Hills, California | Semiconductor Test | 3-4 | 120,000 | |||||||
Kumamoto, Japan | Semiconductor Test | 2-3-4-5 | 60,300 | |||||||
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| 602,300 | ||||||||||
Properties leased: | ||||||||||
Odense, Denmark | Industrial Automation | 2-3-4-5 | 247,000 | |||||||
Cebu, Philippines | Semiconductor Test | 1-2-5 | 209,000 | |||||||
San Jose, California | Semiconductor Test & Wireless Test | 2-3-4-5 | 185,700 | |||||||
Shanghai, China | Semiconductor Test, System Test, Wireless Test & Industrial Automation | 3-4-5 | 103,000 | |||||||
Buffalo Grove, Illinois | Semiconductor Test | 2-3-4-5 | 95,000 | |||||||
Sunnyvale, California | Wireless Test & Semiconductor Test | 2-3-4-5 | 71,300 | |||||||
Heredia, Costa Rica | Semiconductor Test | 1-5 | 63,000 | |||||||
Hsinchu, Taiwan | Semiconductor Test & System Test | 4 | 43,000 | |||||||
Seoul, Korea | Semiconductor Test & Industrial Automation | 4 | 34,000 | |||||||
Singapore, Singapore | Semiconductor Test & Industrial Automation | 1-3-4 | 32,700 | |||||||
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| 1,083,700 | ||||||||||
Item 3: |
Legal Proceedings |
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Item 4: |
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Item 5: |
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stock.
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs | ||||||||||||
October 1, 2018 – October 28, 2018 | 3,115 | $ | 33.87 | 3,113 | $ | 832,309 | ||||||||||
October 29, 2018 – November 25, 2018 | 2,386 | $ | 34.54 | 2,383 | $ | 750,000 | ||||||||||
November 26, 2018 – December 31, 2018 | 2,300 | $ | 31.95 | 2,300 | $ | 676,522 | ||||||||||
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| 7,801 | (1) | $ | 33.51 | (1) | 7,796 | |||||||||||
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Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs | ||||||||||||
September 28, 2020 – October 25, 2020 | 1 | $ | 79.59 | — | $ | 911,535 | ||||||||||
October 26, 2020 – November 22, 2020 | 2 | $ | 89.70 | — | $ | 911,535 | ||||||||||
November 23, 2020 – December 31, 2020 | — | $ | 116.15 | — | $ | 911,535 | ||||||||||
| 3 | (1) | $ | 90.74 | (1) | — | |||||||||||
| (1) | Includes approximately |
Item 6: |
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| Years Ended December 31, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| (dollars in thousands, except per share amounts) | ||||||||||||||||||||
Consolidated Statement of Operations Data (1)(2)(3)(4)(5): | ||||||||||||||||||||
Revenues | $ | 2,100,802 | $ | 2,136,606 | $ | 1,753,250 | $ | 1,639,578 | $ | 1,647,824 | ||||||||||
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Net income (loss) | $ | 451,779 | $ | 257,692 | $ | (43,421 | ) | $ | 206,477 | $ | 81,272 | |||||||||
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Net income (loss) per common share-basic | $ | 2.41 | $ | 1.30 | $ | (0.21 | ) | $ | 0.98 | $ | 0.40 | |||||||||
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Net income (loss) per common share-diluted | $ | 2.35 | $ | 1.28 | $ | (0.21 | ) | $ | 0.97 | $ | 0.37 | |||||||||
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Cash dividend declared per common share | $ | 0.36 | $ | 0.28 | $ | 0.24 | $ | 0.24 | $ | 0.18 | ||||||||||
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Consolidated Balance Sheet Data: | ||||||||||||||||||||
Total assets | $ | 2,706,606 | $ | 3,109,545 | $ | 2,762,493 | $ | 2,548,674 | $ | 2,538,520 | ||||||||||
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Long-term debt obligations | $ | 379,981 | $ | 365,987 | $ | 352,669 | $ | — | $ | — | ||||||||||
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Item 7: |
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themany industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Our industrial automation products include collaborative robotic arms, autonomous mobile robots (“AMRs”) and advanced robotic control software used by global manufacturing, logistics and light industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Our automatic test equipment and industrial automation products and services include: systems, storage test (“Storage Test”) systems and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);
wireless test (“Wireless Test”) systems.
We have a customer base which includes integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”), original equipment manufacturers (“OEMs”), wafer foundries, fabless companies that design, but contract with others for the manufacture of integrated circuits (“ICs”), developers of wireless devices and consumer electronics, manufacturers of circuit boards, automotive suppliers, wireless product manufacturers, storage device manufacturers, aerospace and military contractors, and distributors that sell collaborative robots, autonomous mobile robots and wireless test systems.
The sales of
In 2015, we acquired UniversalMobile Industrial Robots A/S (“Universal Robots”), the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. The acquisition of Universal Robots provides a growth engine to our business. The total purchase price for Universal Robots was approximately $315 million, which included cash paid of approximately $284 million and $32 million in fair value of contingent consideration payable upon achievement of revenue and earnings targets through 2018. Contingent consideration for 2015 was $15 million and was paid in February 2016. Contingent consideration for the period from July 2015 to December 2017 was $24.6 million and was paid March 2018. Contingent consideration for the period from July 2015 to December 2018 was $3.9 million and it is expected to be paid in March 2019.
On February 26, 2018, we acquired Energid Technologies Corporation (“Energid”) for a total purchase price of approximately $27.6 million. Energid’s technology enables and simplifies the programming of complex robotic motions used in a wide variety of end markets, ranging from heavy industry to healthcare, utilizing both traditional robots and collaborative robots.
On April 25, 2018, we acquired Mobile Industrial Robots ApS (“MiR”), a Danish limited liability company. MiR is the leading maker of collaborative autonomous mobile robots (“AMRs”) for industrial applications.applications, in 2018 and AutoGuide, LLC (“AutoGuide”), a maker of high payload AMRs, in 2019. The total purchase pricemarket for our industrial automation products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (SMEs) throughout the world. In 2020, our Industrial Automation businesses were negatively impacted by the global industrial downturn as well as the
Universal Robots, MiR and Energid are includedcontinued investment in our Industrial Automation segment.
businesses. We plan to execute on our strategy while balancing capital allocations between returning capital to our shareholders through dividends and stock repurchases and using capital for with opportunistic acquisitions.
analysis, we believe our existing balances of cash and cash equivalents and our currently anticipated operating cash flows will be sufficient to meet our working capital needs and other capital and liquidity requirements for the next twelve months. However, due to the uncertainty related to the future impact of the
We adopted Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” on January 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for 2018 reflect the application of ASC 606 while the reported results for 2017 were prepared under the guidance of ASC 605,“Revenue Recognition,” which is also referred to herein as “Legacy GAAP” or the “previous guidance.” We recorded a net increase to retained earnings of $12.7 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of Teradyne’s hardware and services and will provide financial statement readers with enhanced disclosures.
In accordanceContracts with Customers” (“ASC 606,606”)
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
if it is more likely than not that some or all of the deferred tax assets will not be realized. We performed the required assessment of positive and negative evidence regarding the realization of the net deferred tax assets in accordance with ASC 740, “
In the second quarter of 2016, the Wireless Testat reporting unit (which is our Wireless Test operating and reportable segment) reduced headcount by 11% as a result of a sharp decline in projected demand attributable to an estimated smaller future wireless test market. The decrease in projected demand was due to lower forecasted buying from our largest Wireless Test segment customer (who had previously contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011) as a result of the customer’s numerous operational efficiencies; slower smartphone growth rates; and a slowdown of new wireless technology adoption. We considered the headcount reduction and sharp decline in projected demand to be a triggering event for an interim goodwill impairment test. Following the interim goodwill impairment test, we recorded a goodwill impairment charge of $254.9 million,units with approximately $8.0 million of goodwill remaining.
zero or negative carrying amounts. No goodwill impairment was identified in the fourth quarter of 2018, 2017,2020, 2019 and 2016, as part of the annual goodwill impairment test.
As a result
Results of Operations
SEC on March 2, 2020. This information is incorporated by reference herein.
| Years Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Percentage of revenues: | ||||||||||||
Revenues: | ||||||||||||
Products | 82.3 | % | 83.5 | % | 82.9 | % | ||||||
Services | 17.7 | 16.5 | 17.1 | |||||||||
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Total revenues | 100.0 | 100.0 | 100.0 | |||||||||
Cost of revenues: | ||||||||||||
Cost of products | 34.6 | 35.6 | 37.6 | |||||||||
Cost of services | 7.3 | 7.2 | 7.7 | |||||||||
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Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 41.9 | 42.8 | 45.3 | |||||||||
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Gross profit | 58.1 | 57.2 | 54.7 | |||||||||
Operating expenses: | ||||||||||||
Selling and administrative | 18.6 | 16.3 | 18.1 | |||||||||
Engineering and development | 14.4 | 14.4 | 16.7 | |||||||||
Acquired intangible assets amortization | 1.9 | 1.4 | 3.0 | |||||||||
Restructuring and other | 0.7 | 0.4 | 1.3 | |||||||||
Goodwill impairment | — | — | 14.5 | |||||||||
Acquired intangible assets impairment | — | — | 4.8 | |||||||||
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Total operating expenses | 35.5 | 32.6 | 58.3 | |||||||||
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Income (loss) from operations | 22.6 | 24.6 | (3.6 | ) | ||||||||
Non-operating (income) expenses: | ||||||||||||
Interest income | (1.3 | ) | (0.8 | ) | (0.5 | ) | ||||||
Interest expense | 1.5 | 1.0 | 0.2 | |||||||||
Other (income) expense, net | 0.1 | (0.1 | ) | (0.1 | ) | |||||||
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Income (loss) before income taxes | 22.3 | 24.5 | (3.1 | ) | ||||||||
Income tax provision (benefit) | 0.8 | 12.5 | (0.7 | ) | ||||||||
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Net income (loss) | 21.5 | % | 12.1 | % | (2.5 | )% | ||||||
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Years Ended December 31, | ||||||||
2020 | 2019 | |||||||
Percentage of revenues: | ||||||||
Revenues: | ||||||||
Products | 86.2 | % | 82.3 | % | ||||
Services | 13.8 | 17.7 | ||||||
Total revenues | 100.0 | 100.0 | ||||||
Cost of revenues: | ||||||||
Cost of products | 37.1 | 34.1 | ||||||
Cost of services | 5.7 | 7.5 | ||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 42.8 | 41.6 | ||||||
Gross profit | 57.2 | 58.4 | ||||||
Operating expenses: | ||||||||
Selling and administrative | 14.9 | 19.0 | ||||||
Engineering and development | 12.0 | 14.1 | ||||||
Acquired intangible assets amortization | 1.0 | 1.7 | ||||||
Restructuring and other | (0.4 | ) | (0.6 | ) | ||||
Total operating expenses | 27.5 | 34.3 | ||||||
Income from operations | 29.7 | 24.1 | ||||||
Non-operating (income) expenses: | ||||||||
Interest income | (0.2 | ) | (0.7 | ) | ||||
Interest expense | 0.8 | 1.0 | ||||||
Other (income) expense, net | 0.3 | 1.0 | ||||||
Income before income taxes | 28.9 | 22.9 | ||||||
Income tax provision | 3.7 | 2.5 | ||||||
Net income | 25.1 | % | 20.4 | % | ||||
| 2018 | 2017 | 2016 | 2017-2018 Dollar Change | 2016-2017 Dollar Change | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
Semiconductor Test | $ | 1,492.4 | $ | 1,662.5 | $ | 1,368.2 | $ | (170.1 | ) | $ | 294.3 | |||||||||
Industrial Automation | 261.5 | 170.1 | 99.0 | 91.4 | 71.1 | |||||||||||||||
System Test | 216.1 | 192.1 | 189.8 | 24.0 | 2.3 | |||||||||||||||
Wireless Test | 132.0 | 111.9 | 96.2 | 20.1 | 15.7 | |||||||||||||||
Corporate and Other | (1.2 | ) | — | — | (1.2 | ) | — | |||||||||||||
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| $ | 2,100.8 | $ | 2,136.6 | $ | 1,753.3 | $ | (35.8 | ) | $ | 383.3 | ||||||||||
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The decrease in Semiconductor Test revenues of $170.1 million, or 10%, from 2017 to 2018 was driven primarily by a decrease in sales in the mobility and microcontroller test segments, partially offset by increased sales in memory and analog test segments and an increase in service revenues.
2020 | 2019 | 2019-2020 Dollar Change | ||||||||||
(in millions) | ||||||||||||
Semiconductor Test | $ | 2,259.6 | $ | 1,552.6 | $ | 707.0 | ||||||
System Test | 409.7 | 287.5 | 122.2 | |||||||||
Industrial Automation | 279.7 | 298.1 | (18.4 | ) | ||||||||
Wireless Test | 173.0 | 157.3 | 15.7 | |||||||||
Corporate and Other | (0.6 | ) | (0.5 | ) | (0.1 | ) | ||||||
| $ | 3,121.5 | $ | 2,295.0 | $ | 826.5 | |||||||
The increase in Industrial Automation revenuesmemory test sales of $91.4 million, or 54%, from 2017 to 2018 was due to higher demand for collaborative robotic armsflash and the acquisition of MiR, completed in April 2018. MiR added revenues of $24.1 million in 2018. The increase in Industrial Automation revenues of $71.1 million, or 72%, from 2016 to 2017 was due to higher demand for collaborative robotic arms.
DRAM testers. The increase in System Test revenues of $24.0$122.2 million, or 12%42.5%, from 2017 to 2018 was primarily due to higher sales in Storage Test of system level and hard disk drive testers, and higher sales in Defense/Aerospace test instrumentation and systems, partially offset by lower sales in Production Board Test and higher sales of 3.5” hard disk drive and system level testersdue to lower automotive electronics demand. The decrease in Storage Test. The increase in System TestIndustrial Automation revenues of $2.3$18.4 million, or 1%6.2%, from 2016 to 2017 was primarily due to higher service revenue in Defense/Aerospace test instrumentation and systems.
The increase in Wireless Test revenues of $20.1 million, or 18%, from 2017 to 2018 was primarily due to higherlower demand for next generation wireless products. collaborative robotic arms in the automotive and manufacturing markets amplified by the impacts of
WiFi 6E testers.
| 2018 | 2017 | 2016 | ||||||||||
Semiconductor Test | 71 | % | 78 | % | 78 | % | ||||||
Industrial Automation | 12 | 8 | 6 | |||||||||
System Test | 10 | 9 | 11 | |||||||||
Wireless Test | 6 | 5 | 5 | |||||||||
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| 100 | % | 100 | % | 100 | % | |||||||
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2020 | 2019 | |||||||
Semiconductor Test | 72 | % | 68 | % | ||||
System Test | 13 | 13 | ||||||
Industrial Automation | 9 | 13 | ||||||
Wireless Test | 6 | 7 | ||||||
| 100 | % | 100 | % | |||||
| 2018 | 2017 | 2016 | ||||||||||
Taiwan | 25 | % | 32 | % | 37 | % | ||||||
China | 17 | 12 | 10 | |||||||||
United States | 13 | 12 | 13 | |||||||||
Europe | 11 | 8 | 7 | |||||||||
Korea | 8 | 10 | 8 | |||||||||
Japan | 8 | 8 | 8 | |||||||||
Malaysia | 6 | 6 | 6 | |||||||||
Singapore | 5 | 5 | 4 | |||||||||
Philippines | 4 | 5 | 3 | |||||||||
Thailand | 3 | 1 | 3 | |||||||||
Rest of the World | – | 1 | 1 | |||||||||
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| 100 | % | 100 | % | 100 | % | |||||||
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2020 | 2019 | |||||||
Taiwan | 38 | % | 21 | % | ||||
China | 15 | 22 | ||||||
Korea | 13 | 10 | ||||||
United States | 10 | 15 | ||||||
Europe | 7 | 10 | ||||||
Japan | 5 | 8 | ||||||
Thailand | 4 | 4 | ||||||
Singapore | 2 | 4 | ||||||
Malaysia | 2 | 3 | ||||||
Philippines | 2 | 2 | ||||||
Rest of the World | 2 | 2 | ||||||
| 100 | % | 100 | % | |||||
| (1) | Revenues attributable to a country are based on the location of the customer site. |
| 2018 | 2017 | 2016 | 2017-2018 Dollar Change | 2016-2017 Dollar Change | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
Product revenues | $ | 1,729.6 | $ | 1,784.7 | $ | 1,453.2 | $ | (55.1 | ) | $ | 331.5 | |||||||||
Service revenues | 371.2 | 351.9 | 300.0 | 19.3 | 51.9 | |||||||||||||||
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| $ | 2,100.8 | $ | 2,136.6 | $ | 1,753.3 | $ | (35.8 | ) | $ | 383.3 | ||||||||||
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2020 | 2019 | 2019-2020 Dollar Change | ||||||||||
(in millions) | ||||||||||||
Product revenues | $ | 2,690.9 | $ | 1,887.7 | $ | 803.2 | ||||||
Service revenues | 430.6 | 407.3 | 23.3 | |||||||||
| $ | 3,121.5 | $ | 2,295.0 | $ | 826.5 | |||||||
Our product revenues increased $331.5 million, or 23%, in 2017 from 2016 primarily due to higher sales across all Semiconductor Test products and higher sales in Industrial Automation. Service revenues which are derivedincreased $23.3 million or 5.7%.
our consolidated revenues. In 2018,2019, no single direct customer accounted for more than 10% of our consolidated revenues. In 20172020 and 2016, revenues from one customer accounted for 13% and 12%, respectively, of our consolidated revenues. In 2016, a different customer accounted for 12% of our consolidated revenues. In each of the years, 2018, 2017, and 2016,2019, our five largest direct customers in aggregate accounted for 27%, 32%,36% and 36%, respectively,27% of our consolidated revenues. revenues, respectively.
We estimate consolidated revenues driven by Huawei Technologies Co. Ltd. (“Huawei”), combining direct sales to that customer with sales to the customer’s OSATs, accounted for approximately 3% and 11% of our consolidated revenues in 2020 and 2019, respectively.
| 2018 | 2017 | 2016 | 2017-2018 Dollar / Point Change | 2016-2017 Dollar / Point Change | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
Gross profit | $ | 1,220.4 | $ | 1,221.5 | $ | 958.6 | $ | (1.1 | ) | $ | 262.9 | |||||||||
Percent of total revenues | 58.1 | % | 57.2 | % | 54.7 | % | 0.9 | 2.5 | ||||||||||||
2020 | 2019 | 2019-2020 Dollar / Point Change | ||||||||||
(dollars in millions) | ||||||||||||
Gross profit | $ | 1,785.7 | $ | 1,339.8 | $ | 445.9 | ||||||
Percent of total revenues | 57.2 | % | 58.4 | % | (1.2 | ) | ||||||
Gross profit as a percent of total revenues increased from 2016 to 2017 by 2.5 points, as a result of a 1.5 point increase related to favorable product mix in Semiconductor Test and a 1.0 point increase due to higher sales primarily in Semiconductor Test and Industrial Automation.
Test.
| 2018 | 2017 | 2016 | 2017-2018 Dollar / Point Change | 2016-2017 Dollar / Point Change | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
Product gross profit | $ | 1,002.5 | $ | 1,023.7 | $ | 793.2 | $ | (21.2 | ) | $ | 230.5 | |||||||||
Percent of product revenues | 58.0 | % | 57.4 | % | 54.6 | % | 0.6 | 2.8 | ||||||||||||
Service gross profit | $ | 217.9 | $ | 197.7 | $ | 165.4 | $ | 20.2 | $ | 32.3 | ||||||||||
Percent of service revenues | 58.7 | % | 56.2 | % | 55.1 | % | 2.5 | 1.1 | ||||||||||||
2020 | 2019 | 2019-2020 Dollar / Point Change | ||||||||||
(dollars in millions) | ||||||||||||
Product gross profit | $ | 1,533.4 | $ | 1,105.6 | $ | 427.8 | ||||||
Percent of product revenues | 57.0 | % | 58.6 | % | (1.6 | ) | ||||||
Service gross profit | $ | 252.3 | $ | 234.2 | $ | 18.1 | ||||||
Percent of service revenues | 58.6 | % | 57.5 | % | 1.1 | |||||||
During the year ended December 31, 2017, we recorded an inventory provision of $8.8 million included in cost of revenues, primarily due to downward revisions to previously forecasted demand levels for certain products. Of the $8.8 million of total excess and obsolete provisions, $4.6 million was related to Semiconductor Test, $2.2 million was related to Wireless Test, and $1.9 million was related to System Test.
During the year ended December 31, 2016,2020, we recorded an inventory provision of $17.5 million included in cost of revenues, primarily due to downward revisions to previously forecasted demand levels.levels for certain products. Of the $17.5 million of total excess and obsolete provisions, $9.7$11.0 million was related to Semiconductor Test, $7.2$4.8 million was related to Wireless Test, and $0.6$0.9 million was related to System Test.
Test, and $0.8 million was related to Industrial Automation.
| 2018 | 2017 | 2016 | 2017-2018 Change | 2016-2017 Change | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
Selling and administrative | $ | 390.7 | $ | 348.9 | $ | 316.5 | $ | 41.8 | $ | 32.4 | ||||||||||
Percent of total revenues | 18.6 | % | 16.3 | % | 18.1 | % | ||||||||||||||
2020 | 2019 | 2019-2020 Change | ||||||||||
(dollars in millions) | ||||||||||||
Selling and administrative | $ | 464.8 | $ | 437.1 | $ | 27.7 | ||||||
Percent of total revenues | 14.9 | % | 19.0 | % | ||||||||
The increase of $32.4 million in selling and administrative expenses from 2016 to 2017 was due primarily to higher variable compensation across all segments and higher spending in Universal Robots, partially offset by lower spending in Wireless Test.
compensation.
| 2018 | 2017 | 2016 | 2017-2018 Change | 2016-2017 Change | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
Engineering and development | $ | 301.5 | $ | 307.3 | $ | 292.2 | $ | (5.8 | ) | $ | 15.1 | |||||||||
Percent of total revenues | 14.4 | % | 14.4 | % | 16.7 | % | ||||||||||||||
2020 | 2019 | 2019-2020 Change | ||||||||||
(dollars in millions) | ||||||||||||
Engineering and development | $ | 375.0 | $ | 322.8 | $ | 52.1 | ||||||
Percent of total revenues | 12.0 | % | 14.1 | % | ||||||||
The increase of $15.1 million in engineering and development expenses from 2016 to 2017 was due primarily to higher variable compensation across all segments and higher spending in System Test and Industrial Automation, partially offset by lower spending in Wireless Test and Semiconductor Test.
Acquired Intangible Assets Amortization
Acquired intangible assets amortization expense was as follows:
| 2018 | 2017 | 2016 | 2017-2018 Change | 2016-2017 Change | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
Acquired intangible assets amortization | $ | 39.2 | $ | 30.5 | $ | 52.6 | $ | 8.7 | $ | (22.1 | ) | |||||||||
Percent of total revenues | 1.9 | % | 1.4 | % | 3.0 | % | ||||||||||||||
Acquired intangible assets amortization expense increased from 2017 to 2018 primarily due to Industrial Automation segment acquisitions of MiR and Energid in 2018.
Acquired intangible assets amortization expense decreased from 2016 to 2017 primarily in the Wireless Test segment due to the impairment of acquired intangible assets in the second quarter of 2016 and in the Industrial Automation segment due to intangible assets that became fully amortized in June 2017.
Goodwill Impairment
We assess goodwill for impairment at least annually, in the fourth quarter, as of December 31, or on an interim basis between annual tests when events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. In the second quarter of 2016, the Wireless Test reporting unit (which is our Wireless Test operating and reportable segment) reduced headcount by 11% as a result of a sharp decline in projected demand attributable to an estimated smaller future wireless test market. The decrease in projected demand was due to lower forecasted buying from our largest Wireless Test segment customer (which had contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011 through 2015) as a result of the customer’s numerous operational efficiencies; slower smartphone growth rates; and a slowdown of new wireless technology adoption. We considered the headcount reduction and sharp decline in projected demand to be a triggering event for an interim goodwill impairment test. Following the interim goodwill impairment test, we recorded a goodwill impairment charge of $254.9 million in the second quarter of 2016. The fourth quarter 2018, 2017 and 2016 goodwill impairment tests did not identify any goodwill impairments.
Acquired Intangible Assets Impairment
We review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. If undiscounted cash flows for the asset are less than the carrying amount, the asset is written down to its estimated fair value based on a discounted cash flow analysis. The cash flow estimates used to determine the impairment contain management’s best estimates using appropriate assumptions and projections at that time. As a result of the Wireless Test segment goodwill impairment charge in the second quarter of 2016, we performed an impairment test of the Wireless Test segment’s intangible and long-lived assets based on a comparison of the estimated undiscounted cash flows to the recorded value of the assets. As a result of the analysis, we recorded an $83.3 million impairment charge in the second quarter of 2016 in acquired intangible assets impairment on the statements of operations.
During the year ended December 31, 2017, we recorded an expense of $7.8 million for the increase in the fair value of the Universal Robots contingent consideration liability, $3.8 million of severance charges related to headcount reductions primarily in Semiconductor Test, $1.1 million for an impairment of fixed assets in Semiconductor Test, $1.0 million for a lease impairment of a Wireless Test facility in Sunnyvale, CA, which was terminated in September 2017, and $0.8 million of expenses related to an earthquake in Kumamoto, Japan, partially offset by $5.1 million of property insurance recovery related to the Japan earthquake.
During the year ended December 31, 2016, we recorded an expense of $15.9 million for the increase in the fair value of the contingent consideration liability, of which $15.3 million was related to Universal Robots and $0.6 million was related to Avionics Interface Technologies, LLC (“AIT”), $6.0 million of severance charges related to headcount reductions primarily in Wireless Test, $4.2 million for an impairment of fixed assets, and $0.9 million for expenses related to an earthquake in Kumamoto, Japan, partially offset by $5.1 million of property insurance recovery related to the Japan earthquake.
March 2021.
| 2018 | 2017 | 2016 | 2017-2018 Change | 2016-2017 Change | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
Interest income | $ | (26.7 | ) | $ | (17.8 | ) | $ | (9.3 | ) | $ | (8.9 | ) | $ | (8.5 | ) | |||||
Interest expense | 31.3 | 21.7 | 3.6 | 9.6 | 18.1 | |||||||||||||||
Other (income) expense, net | 1.4 | (2.9 | ) | (2.3 | ) | 4.3 | (0.6 | ) | ||||||||||||
2020 | 2019 | 2019-2020 Change | ||||||||||
(in millions) | ||||||||||||
Interest income | $ | (6.0 | ) | $ | (17.0 | ) | $ | 11.0 | ||||
Interest expense | 24.2 | 22.2 | 2.0 | |||||||||
Other (income) expense, net | 9.2 | 22.6 | (13.5 | ) | ||||||||
2019. Interest expense increased by $9.6$2.0 million from 2017 to 2018primarily due primarily to recognizing unrealized losses on equity marketable securities, and by $18.1 million from 2016 to 2017 due primarily to interest expense related to our convertible senior notes.
Other (income) expense, net changed by $4.3 million, from $2.9 million income in 2017 to $1.4 million expense in 2018 due primarily to lower pension actuarial gains in 2018,notes and higher foreign exchange losses, partially offset by lower non service pensionrevolving credit facility costs. Other (income) expense, net decreased by $0.6$13.5 million from 2016primarily due to 2017 due primarily toa $15.0 million charge for the impairment of the investment in RealWear in 2019, partially offset by a $2.1 million increase in pension actuarial gains.
losses from $8.2 million losses in 2019 to $10.3 million losses in 2020.
| 2018 | 2017 | 2016 | 2017-2018 Change | 2016-2017 Change | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
Semiconductor Test | $ | 397.6 | $ | 491.4 | $ | 311.9 | $ | (93.8 | ) | $ | 179.5 | |||||||||
System Test | 48.9 | 10.3 | 28.9 | 38.6 | (18.6 | ) | ||||||||||||||
Wireless Test | 29.1 | 17.4 | (371.4 | ) | 11.7 | 388.8 | ||||||||||||||
Industrial Automation | 7.7 | 8.8 | (16.8 | ) | (1.1 | ) | 25.6 | |||||||||||||
Corporate and Other (1) | (15.4 | ) | (3.4 | ) | (7.7 | ) | (12.1 | ) | 4.4 | |||||||||||
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| |||||||||||
| $ | 467.8 | $ | 524.4 | $ | (55.1 | ) | $ | (56.6 | ) | $ | 579.5 | |||||||||
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| |||||||||||
2020 | 2019 | 2019-2020 Change | ||||||||||
(in millions) | ||||||||||||
Semiconductor Test | $ | 739.7 | $ | 417.0 | $ | 322.7 | ||||||
System Test | 152.1 | 93.5 | 58.6 | |||||||||
Wireless Test | 42.0 | 35.6 | 6.4 | |||||||||
Industrial Automation | (24.0 | ) | (5.9 | ) | (18.1 | ) | ||||||
Corporate and Other (1) | (8.7 | ) | (14.4 | ) | 5.7 | |||||||
| $ | 901.0 | $ | 525.8 | $ | 375.3 | |||||||
| (1) | Included in Corporate and Other |
The increase in income before income taxes in Semiconductor Test from 2016 to 2017 was driven primarily by increased sales and higher gross margin due to favorable product mix. The increase in income before income taxes in Wireless Test from 2016 to 2017 was primarily due to goodwill and intangible assets impairment charges in 2016, lower intangible assets amortization, lower operating expenses, higher demand for connectivity test systems and higher service revenue in 2017. The decrease in income before income taxes in System Test from 2016 to 2017 was primarily due to lower sales in Storage Test of 3.5” hard disk drive testers for cloud storage and increased spending for new product development. The increase in income before income taxes in Industrial Automation was due primarily to higher demand for collaborative robots.
robotic arms in the automotive and manufacturing markets amplified by the impacts of
Werate jurisdictions relative to higher tax rate jurisdictions.
The change in the effective rate from 2016 to 2017 was also impacted by the U.S. non-deductible goodwill impairment charge recorded in 2016, a shift in the geographic distribution of income which increased income subject to taxation in the U.S. relative to lower tax rate jurisdictions, decreases in the discrete benefits from tax reserve releases, increases in discrete expense from non-taxable foreign exchange gains and losses and an increase in the discrete benefit from stock-based compensation.
foreign tax credits and the benefit from a net reduction in reserves for uncertain tax positions.
| Payments Due by Period | ||||||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Other | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Convertible debt | $ | 460,000 | $ | — | $ | — | $ | 460,000 | $ | — | $ | — | ||||||||||||
Purchase obligations | 242,052 | 232,533 | 9,519 | — | — | — | ||||||||||||||||||
Retirement plans contributions | 122,294 | 4,919 | 10,455 | 10,136 | 96,784 | — | ||||||||||||||||||
Transition tax payable (1) | 91,186 | 7,295 | 14,590 | 14,590 | 54,711 | |||||||||||||||||||
Operating lease obligations | 76,055 | 19,570 | 31,871 | 15,142 | 9,472 | — | ||||||||||||||||||
Interest on long term debt | 28,750 | 5,750 | 11,500 | 11,500 | — | — | ||||||||||||||||||
Fair value of contingent consideration | 70,543 | 34,865 | 35,678 | — | — | — | ||||||||||||||||||
Other long-term liabilities reflected on the balance sheet under GAAP (2) | 90,959 | — | 27,631 | 5,119 | — | 58,209 | ||||||||||||||||||
|
|
|
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|
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|
| |||||||||||||
Total | $ | 1,181,839 | $ | 304,932 | $ | 141,244 | $ | 516,487 | $ | 160,967 | $ | 58,209 | ||||||||||||
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| |||||||||||||
Payments Due by Period | ||||||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Other | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Purchase obligations | $ | 603,464 | $ | 592,058 | $ | 11,406 | $ | — | $ | — | $ | — | ||||||||||||
Convertible debt | 459,971 | 37,397 | 422,574 | — | — | — | ||||||||||||||||||
Retirement plans contributions | 156,592 | 5,551 | 10,598 | 10,426 | 130,017 | — | ||||||||||||||||||
Transition tax payable (1) | 82,820 | 7,889 | 15,795 | 34,540 | 24,596 | — | ||||||||||||||||||
Operating lease obligations | 71,457 | 22,631 | 27,371 | 13,839 | 7,616 | — | ||||||||||||||||||
Interest on long term debt | 15,928 | 5,364 | 10,564 | — | — | — | ||||||||||||||||||
Fair value of contingent consideration | 7,227 | — | 7,227 | — | — | — | ||||||||||||||||||
Other long-term liabilities reflected on the balance sheet under GAAP (2) | 88,532 | — | 51,165 | 6,787 | 407 | 30,173 | ||||||||||||||||||
Total | $ | 1,485,991 | $ | 670,890 | $ | 556,700 | $ | 65,592 | $ | 162,636 | $ | 30,173 | ||||||||||||
| (1) | Represents the transition tax liability associated with our accumulated foreign earnings as a result of enactment of the Tax Reform Act on December 22, 2017. |
| (2) | Included in other long-term liabilities are liabilities for customer advances, extended warranty, uncertain tax positions, deferred tax liabilities and other obligations. For certain long-term obligations, we are unable to provide a reasonably reliable estimate of the timing of future payments relating to these obligations and therefore we included these amounts in the column marked “Other.” |
inventories, and a $64.4 million increase in prepayments and other assets. a $40.0 million increase in deferred revenue and customer advance payments, a $25.2 million increase in income taxes, a $12.8 million increase in other accrued liabilities, and a $5.7 million increase in accounts payable, partially offset by $5.4 million of retirement plan contributions.decreasedincreased by $699$539 million from 2017in 2020 to 2018 to $1,205$1,554 million.20182020 provided cash of $476.9$868.9 million. Changes in operating assets and liabilities used cash of $163.5$69.4 million. This was due to a $105.8$202.3 million increase in operating assets and a $57.7$132.9 million decreaseincrease in operating liabilities.$58.4 million increase in prepayments and other assets due primarily to payments to our contract manufacturers, a $29.5 million increase in inventories, and a $17.9$129.5 million increase in accounts receivable due to higherincreased sales, an $8.4 million increase in the fourth quarter of 2018 comparing to 2017.decreaseincrease in operating liabilities was due to a $80.4 million decrease in income taxes, primarily related to a decrease in our transitional tax liability associated with our accumulated foreign earnings under the U.S. Tax Reform Act, a $5.5 million decrease in other accrued liabilities and $4.3 million of retirement plans contributions, partially offset by a $13.4 million increase in customer advance payments and deferred revenue, a $12.9 million increase in accounts payable, and a $6.3$54.7 million increase in accrued employee compensation, due primarily to variable compensation.2018 provided2020 used cash of $923.0$569.8 million, due to $1,270.4$900.2 million used for purchases of marketable securities, and $185.0 million used for purchases of property, plant and equipment, partially offset by $480.0 million and $846.1$35.0 million in proceeds from maturities and sales of marketable securities, respectively, proceeds from a government subsidy of $7.9 million for property, plant and equipment, and proceeds from life insurance of $1.1$0.5 million related to the cash surrender value from the cancellation of a Teradyne owned life insurance policy, partially offset by $918.7 million used for purchase of marketable securities, $169.5 million used for acquisition of MiR and Energid, and $114.4 million used for purchases of property, plant and equipment.policy.20182020 used cash of $903.4$158.3 million, due to $823.5$88.5 million used for the repurchase of 21.61.5 million shares of common stock at an average price of $38.06$58.33 per share, $67.3$66.5 million used for dividend payments, $20.0$23.0 million used for payments related to net settlement of employee stock compensation awards, and $13.6$8.9 million used for a payment related to Universal RobotsMiR acquisition contingent consideration, partially offset by $21.0$28.5 million from the issuance of common stock under employee stock purchase and stock option plans.
cash surrender value from the cancellation of Teradyne owned life insurance policies.
Operating activities during 2016, provided
The decrease in operating assets was due to an $18.3 million decrease in accounts receivable due to increased collections and a $34.3 million decrease in inventories, partially offset by a $19.2 million increase in prepayments and other assets.
The increase in operating liabilities was due to an $18.4 million increase in income taxes, a $3.9 million increase in accounts payable, and a $6.7 million increase in other accrued liabilities, partially offset by a $3.8 million decrease in accrued employee compensation due primarily to variable compensation, $6.0 million of retirement plans contributions and a $3.6 million decrease in customer advance payments and deferred revenue.
Investing activities during 2016 used cash of $640.5 million, due to $1,656.3 million used for purchases of marketable securities and $85.3 million used for purchases of property, plant and equipment, partially offset by proceeds from maturities and sales of marketable securities of $243.2 million and $852.8 million, respectively, and proceeds from property insurance of $5.1 million related to the Japan earthquake.
Financing activities during 2016 provided cash of $228.4 million, due to $450.8 million of proceeds from the issuance of senior convertible notes, net of issuance costs, $67.9 million of proceeds from the issuance of
warrants, $20.5 million from the issuance of common stock under employee stock purchase and stock option plans, and $6.2 million from the tax benefit related to employee stock compensation awards, partially offset by $146.3 million used for the repurchase of 6.8 million shares of common stock at an average price of $21.39$0.10 per share, $100.8 million used for the purchase of convertible note hedges, $48.6 million used forshare. Total dividend payments $11.7 million used for a payment related to the Universal Robots acquisition contingent consideration and $9.4 million used for payments related to net settlement of employee stock compensation awards.
in 2020 were $66.5 million.
In January 2016, May 2016, August 2016 and November 2016, our Board of Directors declared a quarterly cash dividend of $0.06 per share. Total dividend payments in 2016 were $48.6 million.
In January 2019, our Board of Directors declared a quarterly cash dividend of $0.09$0.10 per share to be paid on March 22, 201919, 2021 to shareholders of record as of February 22, 2019.19, 2021. Payment of future cash dividends are subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition.
$58.33. In December 2016, our Board of Directors cancelled the January 2015 stock repurchase program and approved a new $500 million share repurchase authorization which commenced on January 1, 2017. The cumulative repurchases as of December 31, 2017 totaled 5.82019, we repurchased 10.9 million shares of common stock for $200.3$500.0 million at an average price per share of $34.30.
In January 2018, our Board of Directors cancelled the December 2016 stock repurchase program and authorized a new stock repurchase program for up to $1.5 billion of common stock.$45.89. The cumulative repurchases as of December 31, 2019, for the 2018 stock repurchase program, totaled 21.632.5 million shares of common stock for $823.5$1,323.0 million at an average price per share of $38.06.$40.68. In January 2021, our Board of Directors cancelled the January 2020 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. Unless terminated by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the share repurchase program. We intend to repurchase $500a minimum of $600 million in 2019.
2021.
At this time, the
We performed a sensitivity analysis, which expresses the potential U.S. Plan (income) expense for the year ending December 31, 2019, which would result from changes to either the discount rate or the expected return on plan assets. The below estimates exclude the impact of any potential actuarial gains or losses. It is difficult to reliably forecast or predict whether there will be any actuarial gains or losses in 2019 as they are primarily driven by events and circumstances beyond our control, such as changes in interest rates and the performance of the financial markets.
| Discount Rate | ||||||||||||
Return on Plan Assets | 3.65% | 4.15% | 4.65% | |||||||||
| (in millions) | ||||||||||||
3.75% | $ | 0.9 | $ | 1.1 | $ | 1.2 | ||||||
4.25% | 0.2 | 0.4 | 0.5 | |||||||||
4.75% | (0.5 | ) | (0.3 | ) | (0.2 | ) | ||||||
cost.
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column one) | |||||||||
Equity plans approved by shareholders | 2,785 | (1) | $ | 27.82 | 10,377 | (2) | ||||||
Equity plans not approved by shareholders (3) | 175 | 2.49 | — | |||||||||
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Total | 2,960 | 19.06 | 10,377 | |||||||||
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| |||||||
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column one) | |||||||||
Equity plans approved by shareholders | 1,943 | (1) | $ | 37.31 | 7,563 | (2) | ||||||
Equity plans not approved by shareholders (3) | 6 | 3.77 | — | |||||||||
Total | 1,949 | 37.21 | 7,563 | |||||||||
| (1) | Includes |
| (2) | Consists of |
| (3) | In connection with the 2011 acquisition of LitePoint Corporation (the “LitePoint Acquisition”), we assumed the options granted under the LitePoint Corporation 2002 Stock Plan (the “LitePoint Plan”). Upon the consummation of the LitePoint Acquisition, these options were converted automatically into options to purchase an aggregate of 2,828,344 shares of our common stock. No additional awards were granted under the LitePoint Plan. As of December 31, |
measured by reference to performance criteria chosen by the Compensation Committee of the Board of Directors, which administers the 2006 Equity Plan. Awards may be made to any employee, officer, consultant and advisor of Teradyne and our subsidiaries, as well as, to our directors. The maximum number of shares of stock-based awards that may be granted to one participant during any one fiscal year is 2,000,000 shares of common stock.
This is the last year that we will compare ourselves to the NYSE Composite Index. Going forward, we will compare ourselves to (i) Standard & Poor’s 500 Index, as a result of Teradyne being added, on September 21, 2020, to the Standard & Poor’s 500 Index, and (ii) the Morningstar Semiconductor Equipment & Materials Industry Group (compiled by Morningstar, Inc.)
On January 26, 2017,
In February 2016, the FASB issued ASU 2016-02,“Leases (Topic 842).” The guidance in this ASU supersedes the lease recognition requirements in ASC Topic 840,“Leases.” The new standard establishes a right- of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all
leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statements of operations. The new standard is effective for annual periods beginning after December 15, 2018 with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which amends ASU 2016-02. The new ASU offers an additional transition method by which entities may elect not to recast the comparative periods presented in financial statements in the period of adoption and allows lessors to elect a practical expedient to not separate lease and non-lease components when certain conditions are met. This ASU has the same transition requirements and effective date as ASU 2016-02. We elected not to recast the comparative periods presented in financial statements in the period of adoption. We adopted this guidance in January 2019; as a result we recorded between $50 and $60 million of operating lease right-of-use assets and operating lease liabilities. Adoption had an immaterial impact on our results of operations.
Item 7A: |
|
2019. Hypothetical Change in Teradyne Stock Price 10% Increase No Change 10% Decrease than 10% of our accounts receivable balance as of December 31, 2018 and December 31, 2017.2018,2020, the Notes had a fair value of $547.1$1,740 million. The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end of 20182020 and the estimated impact on the fair value of the Notes. The selected scenarios are not predictions of future events, but rather are intended to illustrate the effect such event may have on the fair value of the Notes. The fair value of the Notes is subject to equity price risk due to the convertible feature. The fair value of the Notes will generally increase as Teradyne’s common stock price increases and will generally decrease as the common stock price declines in value. The change in stock price affects the fair value of the convertible senior notes, but does not impact Teradyne’s financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. In connection with the offering of the Notes we also sold warrants to the option counterparties. These transactions have been accounted for as an adjustment to our shareholders’ equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon conversion of the Notes. The warrants along with any shares issuable upon conversion of the Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or Notes, respectively. Fair Value Estimated
change in fair
value Hypothetical percentage
increase (decrease) in
fair value $ 581,716 $ 34,603 6.3 % 547,113 — — 514,703 (32,410 ) (5.9 )
change in fair
value
increase (decrease) in
fair value $ 1,917,955 $ 178,402 10.3 % 1,739,553 — — 1,569,357 (170,196 ) (9.8 ) H:J: “Debt” for further information.
Item 8: |
|
Principles:20182020 and 2017,2019, and the related consolidated statements of operations, comprehensive income, (loss),convertible common shares and shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,2020, including the related notes and schedule of valuation and qualifiedqualifying accounts for each of the three years in the period ended December 31, 20182020 appearing under Item 15(c) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2018,2020, based on criteria established inControl—Control - Integrated Framework20182020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20182020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2020, based on criteria established inControl—Control - Integrated FrameworkChangePrinciple
March 1, 2019
| December 31, | ||||||||
| 2018 | 2017 | |||||||
(in thousands, except per share information) | ||||||||
| ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 926,752 | $ | 429,843 | ||||
Marketable securities | 190,096 | 1,347,979 | ||||||
Accounts receivable, less allowance for doubtful accounts of $1,673 and $2,219 in 2018 and 2017, respectively | 291,267 | 272,783 | ||||||
Inventories, net | 153,541 | 107,525 | ||||||
Prepayments and other current assets | 170,826 | 112,151 | ||||||
|
|
|
| |||||
Total current assets | 1,732,482 | 2,270,281 | ||||||
Property, plant and equipment, net | 279,821 | 268,447 | ||||||
Marketable securities | 87,731 | 125,926 | ||||||
Deferred tax assets | 70,848 | 84,026 | ||||||
Retirement plans assets | 16,883 | 17,491 | ||||||
Other assets | 11,509 | 12,275 | ||||||
Acquired intangible assets, net | 125,482 | 79,088 | ||||||
Goodwill | 381,850 | 252,011 | ||||||
|
|
|
| |||||
Total assets | $ | 2,706,606 | $ | 3,109,545 | ||||
|
|
|
| |||||
| LIABILITIES | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 100,688 | $ | 86,393 | ||||
Accrued employees’ compensation and withholdings | 148,566 | 141,694 | ||||||
Deferred revenue and customer advances | 77,711 | 83,614 | ||||||
Other accrued liabilities | 78,272 | 59,083 | ||||||
Contingent consideration | 34,865 | 24,497 | ||||||
Income taxes payable | 36,185 | 59,055 | ||||||
|
|
|
| |||||
Total current liabilities | 476,287 | 454,336 | ||||||
Retirement plans liabilities | 117,456 | 119,776 | ||||||
Long-term deferred revenue and customer advances | 32,750 | 30,127 | ||||||
Long-term contingent consideration | 35,678 | 20,605 | ||||||
Deferred tax liabilities | 20,662 | 6,720 | ||||||
Long-term other accrued liabilities | 37,547 | 10,273 | ||||||
Long-term income taxes payable | 83,891 | 148,075 | ||||||
Long-term debt | 379,981 | 365,987 | ||||||
|
|
|
| |||||
Total liabilities | 1,184,252 | 1,155,899 | ||||||
|
|
|
| |||||
Commitments and contingencies (Note K) | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
Common stock, $0.125 par value, 1,000,000 shares authorized, 175,522 and 195,548 shares issued and outstanding at December 31, 2018 and 2017, respectively | 21,940 | 24,444 | ||||||
Additional paid-in capital | 1,671,645 | 1,638,413 | ||||||
Accumulated other comprehensive (loss) income | (13,040 | ) | 18,776 | |||||
(Accumulated deficit) Retained earnings | (158,191 | ) | 272,013 | |||||
|
|
|
| |||||
Total shareholders’ equity | 1,522,354 | 1,953,646 | ||||||
|
|
|
| |||||
Total liabilities and shareholders’ equity | $ | 2,706,606 | $ | 3,109,545 | ||||
|
|
|
| |||||
2020 | 2019 | |||||||
(in thousands, except per share information) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 914,121 | $ | 773,924 | ||||
Marketable securities | 522,280 | 137,303 | ||||||
Accounts receivable, less allowance for doubtful accounts of $2,034 and $1,736 in 2020 and 2019, respectively | 497,506 | 362,368 | ||||||
Inventories, net | 222,189 | 196,691 | ||||||
Prepayments and other current assets | 259,338 | 188,598 | ||||||
Total current assets | 2,415,434 | 1,658,884 | ||||||
Property, plant and equipment, net | 394,800 | 320,216 | ||||||
Operating lease right-of-use assets, net | 54,569 | 57,539 | ||||||
Marketable securities | 117,980 | 104,490 | ||||||
Deferred tax assets | 87,913 | 75,185 | ||||||
Retirement plans assets | 17,468 | 18,457 | ||||||
Other assets | 9,384 | 10,332 | ||||||
Acquired intangible assets, net | 100,939 | 125,480 | ||||||
Goodwill | 453,859 | 416,431 | ||||||
Total assets | $ | 3,652,346 | $ | 2,787,014 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 133,663 | $ | 126,617 | ||||
Accrued employees’ compensation and withholdings | 220,321 | 163,883 | ||||||
Deferred revenue and customer advances | 134,662 | 104,876 | ||||||
Other accrued liabilities | 77,581 | 70,871 | ||||||
Operating lease liabilities | 20,573 | 19,476 | ||||||
Contingent consideration | — | 9,106 | ||||||
Income taxes payable | 80,728 | 44,200 | ||||||
Current debt | 33,343 | — | ||||||
Total current liabilities | 700,871 | 539,029 | ||||||
Retirement plans liabilities | 151,140 | 134,471 | ||||||
Long-term deferred revenue and customer advances | 58,359 | 45,974 | ||||||
Long-term contingent consideration | 7,227 | 30,599 | ||||||
Deferred tax liabilities | 10,821 | 14,070 | ||||||
Long-term other accrued liabilities | 19,352 | 19,535 | ||||||
Long-term operating lease liabilities | 42,073 | 45,849 | ||||||
Long-term income taxes payable | 74,930 | 82,642 | ||||||
Debt | 376,768 | 394,687 | ||||||
Total liabilities | 1,441,541 | 1,306,856 | ||||||
Commitments and contingencies (Note M) | 0 | 0 | ||||||
Mezzanine equity: | ||||||||
Convertible common shares | 3,787 | — | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock, $0.125 par value, 1,000,000 shares authorized, 166,123 and 166,410 shares issued and outstanding at December 31, 2020 and 2019, respectively | 20,765 | 20,801 | ||||||
Additional paid-in capital | 1,765,323 | 1,720,129 | ||||||
Accumulated other comprehensive income (loss) | 33,516 | (18,854 | ) | |||||
Retained earnings (accumulated deficit) | 387,414 | (241,918 | ) | |||||
Total shareholders’ equity | 2,207,018 | 1,480,158 | ||||||
Total liabilities, convertible common shares and shareholders’ equity | $ | 3,652,346 | $ | 2,787,014 | ||||
| Years Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands, except per share amounts) | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 1,729,621 | $ | 1,784,695 | $ | 1,453,248 | ||||||
Services | 371,181 | 351,911 | 300,002 | |||||||||
|
|
|
|
|
| |||||||
Total revenues | 2,100,802 | 2,136,606 | 1,753,250 | |||||||||
Cost of revenues: | ||||||||||||
Cost of products | 727,138 | 760,967 | 660,056 | |||||||||
Cost of services | 153,270 | 154,186 | 134,586 | |||||||||
|
|
|
|
|
| |||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 880,408 | 915,153 | 794,642 | |||||||||
|
|
|
|
|
| |||||||
Gross profit | 1,220,394 | 1,221,453 | 958,608 | |||||||||
Operating expenses: | ||||||||||||
Selling and administrative | 390,669 | 348,913 | 316,544 | |||||||||
Engineering and development | 301,505 | 307,305 | 292,159 | |||||||||
Acquired intangible assets amortization | 39,191 | 30,530 | 52,648 | |||||||||
Restructuring and other | 15,232 | 9,362 | 21,942 | |||||||||
Goodwill impairment | — | — | 254,946 | |||||||||
Acquired intangible assets impairment | — | — | 83,339 | |||||||||
|
|
|
|
|
| |||||||
Total operating expenses | 746,597 | 696,110 | 1,021,578 | |||||||||
|
|
|
|
|
| |||||||
Income (loss) from operations | 473,797 | 525,343 | (62,970 | ) | ||||||||
Non-operating (income) expenses: | ||||||||||||
Interest income | (26,704 | ) | (17,805 | ) | (9,296 | ) | ||||||
Interest expense | 31,269 | 21,663 | 3,637 | |||||||||
Other (income) expense, net | 1,431 | (2,927 | ) | (2,251 | ) | |||||||
|
|
|
|
|
| |||||||
Income (loss) before income taxes | 467,801 | 524,412 | (55,060 | ) | ||||||||
Income tax provision (benefit) | 16,022 | 266,720 | (11,639 | ) | ||||||||
|
|
|
|
|
| |||||||
Net income (loss) | $ | 451,779 | $ | 257,692 | $ | (43,421 | ) | |||||
|
|
|
|
|
| |||||||
Net income (loss) per common share: | ||||||||||||
Basic | $ | 2.41 | $ | 1.30 | $ | (0.21 | ) | |||||
|
|
|
|
|
| |||||||
Diluted | $ | 2.35 | $ | 1.28 | $ | (0.21 | ) | |||||
|
|
|
|
|
| |||||||
Weighted average common shares—basic | 187,672 | 198,069 | 202,578 | |||||||||
|
|
|
|
|
| |||||||
Weighted average common shares—diluted | 192,605 | 201,641 | 202,578 | |||||||||
|
|
|
|
|
| |||||||
Cash dividend declared per common share | $ | 0.36 | $ | 0.28 | $ | 0.24 | ||||||
|
|
|
|
|
| |||||||
Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 2,690,906 | $ | 1,887,674 | $ | 1,729,621 | ||||||
Services | 430,563 | 407,291 | 371,181 | |||||||||
Total revenues | 3,121,469 | 2,294,965 | 2,100,802 | |||||||||
Cost of revenues: | ||||||||||||
Cost of products | 1,157,476 | 782,047 | 727,138 | |||||||||
Cost of services | 178,252 | 173,089 | 153,270 | |||||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 1,335,728 | 955,136 | 880,408 | |||||||||
Gross profit | 1,785,741 | 1,339,829 | 1,220,394 | |||||||||
Operating expenses: | ||||||||||||
Selling and administrative | 464,769 | 437,084 | 390,669 | |||||||||
Engineering and development | 374,964 | 322,824 | 301,505 | |||||||||
Acquired intangible assets amortization | 30,803 | 40,147 | 39,191 | |||||||||
Restructuring and other | (13,202 | ) | (13,880 | ) | 15,232 | |||||||
Total operating expenses | 857,334 | 786,175 | 746,597 | |||||||||
Income from operations | 928,407 | 553,654 | 473,797 | |||||||||
Non-operating (income) expenses: | ||||||||||||
Interest income | (5,982 | ) | (16,990 | ) | (20,458 | ) | ||||||
Interest expense | 24,182 | 22,224 | 21,780 | |||||||||
Other (income) expense, net | 9,192 | 22,648 | 4,674 | |||||||||
Income before income taxes | 901,015 | 525,772 | 467,801 | |||||||||
Income tax provision | 116,868 | 58,304 | 16,022 | |||||||||
Net income | $ | 784,147 | $ | 467,468 | $ | 451,779 | ||||||
Net income per common share: | ||||||||||||
Basic | $ | 4.72 | $ | 2.74 | $ | 2.41 | ||||||
Diluted | $ | 4.28 | $ | 2.60 | $ | 2.35 | ||||||
Weighted average common shares—basic | 166,120 | 170,425 | 187,672 | |||||||||
Weighted average common shares—diluted | 183,042 | 179,459 | 192,605 | |||||||||
| Years Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Net income (loss) | $ | 451,779 | $ | 257,692 | $ | (43,421 | ) | |||||
Other comprehensive (loss) income, net of tax: | ||||||||||||
Foreign currency translation adjustment, net of tax of $0, $0, $0 | (28,442 | ) | 37,840 | (13,162 | ) | |||||||
Available-for-sale marketable securities: | ||||||||||||
Unrealized (losses) gains on marketable securities arising during period, net of tax of $(722), $1,903, $923, respectively | (2,110 | ) | 1,863 | 2,037 | ||||||||
Less: Reclassification adjustment for losses (gains) included in net income, net of tax of $(21), $(297), $(255), respectively | 1,337 | (441 | ) | (683 | ) | |||||||
|
|
|
|
|
| |||||||
| (773 | ) | 1,422 | 1,354 | |||||||||
Defined benefit pension and post-retirement plans: | ||||||||||||
Amortization of prior service benefit included in net periodic pension and post-retirement benefit, net of tax $(71), $(154), $(190), respectively | (245 | ) | (272 | ) | (321 | ) | ||||||
Prior service benefit arising during period, net of tax of $0, $0, $34, respectively | — | — | 59 | |||||||||
|
|
|
|
|
| |||||||
| (245 | ) | (272 | ) | (262 | ) | |||||||
|
|
|
|
|
| |||||||
Other comprehensive (loss) income | (29,460 | ) | 38,990 | (12,070 | ) | |||||||
|
|
|
|
|
| |||||||
Comprehensive income (loss) | $ | 422,319 | $ | 296,682 | $ | (55,491 | ) | |||||
|
|
|
|
|
| |||||||
Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Net income | $ | 784,147 | $ | 467,468 | $ | 451,779 | ||||||
Other comprehensive income, net of tax: | ||||||||||||
Foreign currency translation adjustment, net of tax of $0, $0, $0 | 48,903 | (10,991 | ) | (28,442 | ) | |||||||
Available-for-sale marketable securities: | ||||||||||||
Unrealized gains (losses) on marketable securities arising during period, net of tax of $1,629, $1,659, $(722), respectively | 5,839 | 6,015 | (2,110 | ) | ||||||||
Less: Reclassification adjustment for (gains) losses included in net income, net of tax of $(665), $(192), $(21), respectively | (2,365 | ) | (690 | ) | 1,337 | |||||||
| 3,474 | 5,325 | (773 | ) | |||||||||
Defined benefit pension and post-retirement plans: | ||||||||||||
Amortization of prior service benefit included in net periodic pension and post-retirement benefit, net of tax $(2), $(43), $(71), respectively | (7 | ) | (148 | ) | (245 | ) | ||||||
Other comprehensive income (loss) | 52,370 | (5,814 | ) | (29,460 | ) | |||||||
Comprehensive income | $ | 836,517 | $ | 461,654 | $ | 422,319 | ||||||
Years Ended December 31, 2018, 2017 and 2016
| Common Stock Shares Issued | Common Stock Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) Income | Retained Earnings (Accumulated Deficit) | Total Shareholders’ Equity | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Balance, December 31, 2015 | 203,641 | $ | 25,455 | $ | 1,480,647 | $ | (8,144 | ) | $ | 467,828 | $ | 1,965,786 | ||||||||||||
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $9,398 | 2,377 | 297 | 10,368 | 10,665 | ||||||||||||||||||||
Equity component of convertible debt | 100,836 | 100,836 | ||||||||||||||||||||||
Equity component of convertible notes issuance cost | (2,017 | ) | (2,017 | ) | ||||||||||||||||||||
Purchase of convertible notes hedges | (100,834 | ) | (100,834 | ) | ||||||||||||||||||||
Proceeds from issuance of warrants | 67,852 | 67,852 | ||||||||||||||||||||||
Stock-based compensation expense | 30,745 | 30,745 | ||||||||||||||||||||||
Repurchase of common stock | (6,841 | ) | (855 | ) | (145,476 | ) | (146,331 | ) | ||||||||||||||||
Tax benefit related to stock options and restricted stock units | 6,087 | 6,087 | ||||||||||||||||||||||
Cash dividends | (48,639 | ) | (48,639 | ) | ||||||||||||||||||||
Net loss | (43,421 | ) | (43,421 | ) | ||||||||||||||||||||
Foreign currency translation adjustment | (13,162 | ) | (13,162 | ) | ||||||||||||||||||||
Unrealized gains on marketable securities: | ||||||||||||||||||||||||
Unrealized gains on marketable securities, net of tax of $923 | 2,037 | 2,037 | ||||||||||||||||||||||
Less: reclassification adjustment for gains included in net income, net of tax $(255) | (683 | ) | (683 | ) | ||||||||||||||||||||
Amortization of prior service (credit) cost, net of tax of $(190) | (321 | ) | (321 | ) | ||||||||||||||||||||
Prior service income arising during period, net of tax of $34 | 59 | 59 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| �� |
| |||||||||||||
Balance, December 31, 2016 | 199,177 | 24,897 | 1,593,684 | (20,214 | ) | 230,292 | 1,828,659 | |||||||||||||||||
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $12,881 | 2,211 | 277 | 10,747 | 11,024 | ||||||||||||||||||||
Stock-based compensation expense | 33,982 | 33,982 | ||||||||||||||||||||||
Repurchase of common stock | (5,840 | ) | (730 | ) | (199,574 | ) | (200,304 | ) | ||||||||||||||||
Cumulative effect adjustment for prior year tax benefits related to stock options and restricted stock units | 39,081 | 39,081 | ||||||||||||||||||||||
Cash dividends | (55,478 | ) | (55,478 | ) | ||||||||||||||||||||
Net income | 257,692 | 257,692 | ||||||||||||||||||||||
Foreign currency translation adjustment | 37,840 | 37,840 | ||||||||||||||||||||||
Unrealized gains on marketable securities: | ||||||||||||||||||||||||
Unrealized gains on marketable securities, net of tax of $1,903 | 1,863 | 1,863 | ||||||||||||||||||||||
Less: reclassification adjustment for gains included in net income, net of tax of $(297) | (441 | ) | (441 | ) | ||||||||||||||||||||
Amortization of prior service benefit, net of tax of $(154) | (272 | ) | (272 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2017 | 195,548 | 24,444 | 1,638,413 | 18,776 | 272,013 | 1,953,646 | ||||||||||||||||||
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $20,025 | 1,613 | 201 | (72 | ) | 129 | |||||||||||||||||||
Stock-based compensation expense | 33,304 | 33,304 | ||||||||||||||||||||||
Repurchase of common stock | (21,639 | ) | (2,705 | ) | (829,651 | ) | (832,356 | ) | ||||||||||||||||
Cash dividends | (67,367 | ) | (67,367 | ) | ||||||||||||||||||||
Net income | 451,779 | 451,779 | ||||||||||||||||||||||
Foreign currency translation adjustment | (28,442 | ) | (28,442 | ) | ||||||||||||||||||||
Unrealized losses on marketable securities: | ||||||||||||||||||||||||
Unrealized losses on marketable securities, net of tax of $(722) | (2,110 | ) | (2,110 | ) | ||||||||||||||||||||
Less: reclassification adjustment for losses included in net income, net of tax $(21) | 1,337 | 1,337 | ||||||||||||||||||||||
Reclassification of unrealized gains on equity securities, net of tax of $(902) | (3,125 | ) | 3,125 | — | ||||||||||||||||||||
Amortization of prior service benefit, net of tax of $(71) | (245 | ) | (245 | ) | ||||||||||||||||||||
Reclassification of tax effects resulting from the Tax Reform Act, net of tax of $769 | 769 | (769 | ) | — | ||||||||||||||||||||
Cumulative effect of changes in accounting principle related to revenue recognition | 12,679 | 12,679 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2018 | 175,522 | $ | 21,940 | $ | 1,671,645 | $ | (13,040 | ) | $ | (158,191 | ) | $ | 1,522,354 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Shareholders’ Equity | ||||||||||||||||||||||||||||
Convertible Common Shares | Common Stock Shares | Common Stock Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Shareholders’ Equity | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Year Ended December 31, 2017 | $ | — | 195,548 | $ | 24,444 | $ | 1,638,413 | $ | 18,776 | $ | 272,013 | $ | 1,953,646 | |||||||||||||||
Net issuance of common stock under stock-based plans | 1,613 | 201 | (72 | ) | 129 | |||||||||||||||||||||||
Stock-based compensation expense | 33,304 | 33,304 | ||||||||||||||||||||||||||
Repurchase of common stock | (21,639 | ) | (2,705 | ) | (829,651 | ) | (832,356 | ) | ||||||||||||||||||||
Cash dividends ($0.09 per share) | (67,367 | ) | (67,367 | ) | ||||||||||||||||||||||||
Net income | 451,779 | 451,779 | ||||||||||||||||||||||||||
Other comprehensive loss | (29,460 | ) | (29,460 | ) | ||||||||||||||||||||||||
Reclassification of unrealized gains on equity securities | (3,125 | ) | 3,125 | — | ||||||||||||||||||||||||
Reclassification of tax effects resulting from the Tax Reform Act | 769 | (769 | ) | — | ||||||||||||||||||||||||
Cumulative effect of changes in accounting principle related to revenue recognition | 12,679 | 12,679 | ||||||||||||||||||||||||||
Year Ended December 31, 2018 | — | 175,522 | 21,940 | 1,671,645 | (13,040 | ) | (158,191 | ) | 1,522,354 | |||||||||||||||||||
Net issuance of common stock under stock-based plans | 1,784 | 223 | 10,399 | 10,622 | ||||||||||||||||||||||||
Stock-based compensation expense | 38,085 | 38,085 | ||||||||||||||||||||||||||
Repurchase of common stock | (10,896 | ) | (1,362 | ) | (489,840 | ) | (491,202 | ) | ||||||||||||||||||||
Cash dividends ($0.09 per share) | (61,355 | ) | (61,355 | ) | ||||||||||||||||||||||||
Net income | 467,468 | 467,468 | ||||||||||||||||||||||||||
Other comprehensive loss | (5,814 | ) | (5,814 | ) | ||||||||||||||||||||||||
Year Ended December 31, 2019 | — | 166,410 | 20,801 | 1,720,129 | (18,854 | ) | (241,918 | ) | 1,480,158 | |||||||||||||||||||
Net issuance of common stock under stock-based plans | 1,230 | 154 | 4,696 | 4,850 | ||||||||||||||||||||||||
Stock-based compensation expense | 44,285 | 44,285 | ||||||||||||||||||||||||||
Repurchase of common stock | (1,517 | ) | (190 | ) | (88,275 | ) | (88,465 | ) | ||||||||||||||||||||
Cash dividends ($0.10 per share) | (66,540 | ) | (66,540 | ) | ||||||||||||||||||||||||
Convertible common shares | 3,787 | (3,787 | ) | (3,787 | ) | |||||||||||||||||||||||
Net income | 784,147 | 784,147 | ||||||||||||||||||||||||||
Other comprehensive income | 52,370 | 52,370 | ||||||||||||||||||||||||||
Year Ended December 31, 2020 | $ | 3,787 | 166,123 | $ | 20,765 | $ | 1,765,323 | $ | 33,516 | $ | 387,414 | $ | 2,207,018 | |||||||||||||||
| Years Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | 451,779 | $ | 257,692 | $ | (43,421 | ) | |||||
Adjustments to reconcile net income (loss) from operations to net cash provided by operating activities: | ||||||||||||
Depreciation | 67,415 | 66,122 | 64,782 | |||||||||
Amortization | 45,809 | 41,953 | 55,227 | |||||||||
Stock-based compensation | 33,577 | 34,097 | 30,750 | |||||||||
Deferred taxes | 28,340 | 37,105 | (62,936 | ) | ||||||||
Provision for excess and obsolete inventory | 11,242 | 8,844 | 17,493 | |||||||||
Contingent consideration fair value adjustment | 987 | 7,820 | 15,896 | |||||||||
Losses (gains) on investments | 3,494 | (878 | ) | (1,050 | ) | |||||||
Retirement plans actuarial gains | (3,316 | ) | (6,624 | ) | (3,203 | ) | ||||||
Property insurance recovery, net | — | (4,309 | ) | — | ||||||||
Goodwill impairment | — | — | 254,946 | |||||||||
Acquired intangible assets impairment | — | — | 83,339 | |||||||||
Tax benefit related to employee stock compensation awards | — | — | (6,198 | ) | ||||||||
Other | 1,083 | 1,585 | 602 | |||||||||
Changes in operating assets and liabilities, net of businesses acquired: | ||||||||||||
Accounts receivable | (17,938 | ) | (80,584 | ) | 18,325 | |||||||
Inventories | (29,498 | ) | 44,960 | 34,263 | ||||||||
Prepayments and other assets | (58,402 | ) | 2,254 | (19,194 | ) | |||||||
Accounts payable and other accrued expenses | 13,693 | 43,574 | 6,820 | |||||||||
Deferred revenue and customer advances | 13,379 | 4,984 | (3,634 | ) | ||||||||
Retirement plan contributions | (4,334 | ) | (5,902 | ) | (6,044 | ) | ||||||
Income taxes | (80,429 | ) | 173,802 | 18,434 | ||||||||
|
|
|
|
|
| |||||||
Net cash provided by operating activities | 476,881 | 626,495 | 455,197 | |||||||||
|
|
|
|
|
| |||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property, plant and equipment | (114,379 | ) | (105,375 | ) | (85,272 | ) | ||||||
Proceeds from government subsidy for property, plant and equipment | 7,920 | — | — | |||||||||
Purchases of marketable securities | (918,744 | ) | (1,391,917 | ) | (1,656,267 | ) | ||||||
Proceeds from maturities of marketable securities | 1,270,439 | 701,681 | 243,232 | |||||||||
Proceeds from sales of marketable securities | 846,122 | 527,746 | 852,794 | |||||||||
Proceeds from insurance | 1,126 | 5,064 | 5,051 | |||||||||
Acquisition of businesses, net of cash acquired | (169,474 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Net cash provided by (used for) investing activities | 923,010 | (262,801 | ) | (640,462 | ) | |||||||
|
|
|
|
|
| |||||||
Cash flows from financing activities: | ||||||||||||
Issuance of common stock under stock purchase and stock option plans | 20,973 | 24,493 | 20,473 | |||||||||
Repurchase of common stock | (823,478 | ) | (200,304 | ) | (146,331 | ) | ||||||
Dividend payments | (67,322 | ) | (55,447 | ) | (48,619 | ) | ||||||
Payments related to net settlement of employee stock compensation awards | (20,023 | ) | (12,881 | ) | (9,398 | ) | ||||||
Payments of contingent consideration | (13,571 | ) | (1,050 | ) | (11,697 | ) | ||||||
Proceeds from issuance of convertible notes, net of issuance costs | — | — | 450,800 | |||||||||
Purchase of convertible note hedges | — | — | (100,834 | ) | ||||||||
Proceeds from issuance of warrants | — | — | 67,852 | |||||||||
Tax benefit related to employee stock compensation awards | — | — | 6,198 | |||||||||
|
|
|
|
|
| |||||||
Net cash (used for) provided by financing activities | (903,421 | ) | (245,189 | ) | 228,444 | |||||||
|
|
|
|
|
| |||||||
Effects of exchange rate changes on cash and cash equivalents | 439 | 3,454 | — | |||||||||
|
|
|
|
|
| |||||||
Increase in cash and cash equivalents | 496,909 | 121,959 | 43,179 | |||||||||
Cash and cash equivalents at beginning of year | 429,843 | 307,884 | 264,705 | |||||||||
|
|
|
|
|
| |||||||
Cash and cash equivalents at end of year | $ | 926,752 | $ | 429,843 | $ | 307,884 | ||||||
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Supplementary disclosure of cash flow information: | ||||||||||||
Cash paid for: | ||||||||||||
Interest | $ | 6,205 | $ | 6,446 | $ | 446 | ||||||
Income taxes | $ | 72,811 | $ | 53,775 | $ | 40,424 | ||||||
Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(in | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 784,147 | $ | 467,468 | $ | 451,779 | ||||||
Adjustments to reconcile net income from operations to net cash provided by | ||||||||||||
Depreciation | 80,119 | 70,834 | 67,415 | |||||||||
Amortization | 46,624 | 49,821 | 45,809 | |||||||||
Stock-based compensation | 44,906 | 37,897 | 33,577 | |||||||||
Provision for excess and obsolete inventory | 17,534 | 15,244 | 11,242 | |||||||||
Retirement plans actuarial losses (gains) | 10,284 | 8,176 | (3,316 | ) | ||||||||
Contingent consideration fair value adjustment | (23,271 | ) | (19,257 | ) | 987 | |||||||
Deferred taxes | (15,688 | ) | (9,456 | ) | 28,340 | |||||||
(Gains) losses on investments | (7,898 | ) | (6,033 | ) | 3,494 | |||||||
Investment impairment | — | 15,000 | — | |||||||||
Other | 1,557 | 766 | 1,083 | |||||||||
Changes in operating assets and liabilities, net of businesses acquired: | ||||||||||||
Accounts receivable | (129,451 | ) | (70,440 | ) | (17,938 | ) | ||||||
Inventories | (8,438 | ) | (27,408 | ) | (29,498 | ) | ||||||
Prepayments and other assets | (64,418 | ) | (23,784 | ) | (58,402 | ) | ||||||
Accounts payable and other accrued expenses | 73,167 | 49,279 | 13,693 | |||||||||
Deferred revenue and customer advances | 39,974 | 39,313 | 13,379 | |||||||||
Retirement plan contributions | (5,382 | ) | (5,086 | ) | (4,334 | ) | ||||||
Income taxes | 25,169 | (13,584 | ) | (80,429 | ) | |||||||
Net cash provided by operating activities | 868,935 | 578,750 | 476,881 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property, plant and equipment | (184,977 | ) | (134,642 | ) | (114,379 | ) | ||||||
Proceeds from government subsidy for property, plant and equipment | — | — | 7,920 | |||||||||
Purchases of marketable securities | (900,196 | ) | (662,701 | ) | (918,744 | ) | ||||||
Proceeds from maturities of marketable securities | 479,678 | 611,927 | 1,270,439 | |||||||||
Proceeds from sales of marketable securities | 35,006 | 105,586 | 846,122 | |||||||||
Proceeds from insurance | 546 | 2,912 | 1,126 | |||||||||
Purchase of investment and acquisition of businesses, net of cash acquired | 149 | (79,742 | ) | (169,474 | ) | |||||||
Net cash (used for) provided by investing activities | (569,794 | ) | (156,660 | ) | 923,010 | |||||||
Cash flows from financing activities: | ||||||||||||
Issuance of common stock under stock purchase and stock option plans | 28,527 | 29,312 | 20,973 | |||||||||
Repurchase of common stock | (88,465 | ) | (500,000 | ) | (823,478 | ) | ||||||
Dividend payments | (66,482 | ) | (61,305 | ) | (67,322 | ) | ||||||
Payments related to net settlement of employee stock compensation awards | (23,014 | ) | (14,741 | ) | (20,023 | ) | ||||||
Payments of contingent consideration | (8,852 | ) | (27,615 | ) | (13,571 | ) | ||||||
Net cash used for financing activities | (158,286 | ) | (574,349 | ) | (903,421 | ) | ||||||
Effects of exchange rate changes on cash and cash equivalents | (658 | ) | (569 | ) | 439 | |||||||
Increase (decrease) in cash and cash equivalents | 140,197 | (152,828 | ) | 496,909 | ||||||||
Cash and cash equivalents at beginning of year | 773,924 | 926,752 | 429,843 | |||||||||
Cash and cash equivalents at end of year | $ | 914,121 | $ | 773,924 | $ | 926,752 | ||||||
Supplementary disclosure of cash flows information: | ||||||||||||
Cash paid for: | ||||||||||||
Interest | $ | 6,435 | $ | 5,996 | $ | 6,205 | ||||||
Income taxes | $ | 106,577 | $ | 81,410 | $ | 72,811 | ||||||
Non-cash investing activities: | ||||||||||||
Capital expenditures incurred but not yet paid: | $ | 3,666 | $ | 4,068 | $ | 2,537 | ||||||
wireless test (“Wireless Test”) systems.
On June 11, 2015, Teradyne acquired Universal Robots A/S (“Universal Robots”) for approximately $284 million of cash plus up to an additional $65 million of cash if certain performance targets are met extending through 2018. Universal Robots is the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers. Universal Robots is a separate operating and reportable segment, Industrial Automation.
Energid was merged with Universal Robots which is part of Teradyne’s Industrial Automation segment.
Universal Robots, MiR and Energid are included in Teradyne’sour Industrial Automation segment.
assets and liabilities, pensions, warranties, contingent consideration liabilities, and loss contingencies. Management bases its estimates on historical experience and on appropriate and customary assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and our markets. Management is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of February 22, 2021, the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur and additional information is obtained. Actual results may differ significantly from these estimates.
estimates under different assumptions or conditions.
Step 1: Identify the contract with the customer
• | Teradyne accounts for a contract with a customer when there is written approval, the contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. |
• | Teradyne periodically enters into contracts with customers in which a customer may purchase a combination of goods and services, such as products with extended warranty obligations. Teradyne determines performance obligations by assessing whether the products or services are distinct from the other elements of the contract. In order to be distinct, the product or service must perform either on its own or with readily available resources and must be separate within the context of the contract. |
• | Teradyne considers the amount stated on the face of the purchase order to be the transaction price. Teradyne does not have material variable consideration which could impact the stated purchase price agreed to by Teradyne and the customer. |
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Revenue recognized in accordance with ASC 606 was $2,088.8 million for the twelve months ended December 31, 2018. For the twelve months ended December 31, 2018, Teradyne also recognized $12.0 million in revenue on leases of Teradyne systems, which are accounted for outside of ASC 606.
Disaggregation of Revenue
The following table provides information about disaggregated revenue by primary geographical market, major product line and timing of revenue recognition.
| For the Year Ended December 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||
| Semiconductor Test | System Test | Industrial Automation | Wireless Test | Corporate and Other | Consolidated | |||||||||||||||||||||||||||||||||||||||
| System on a Chip | Memory | Defense/ Aerospace | Storage Test | Production Board Test | Universal Robots | Mobile Industrial Robots | Energid | |||||||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Americas | ||||||||||||||||||||||||||||||||||||||||||||
Point in time | $ | 43,398 | $ | 14,579 | $ | 59,246 | $ | 767 | $ | 9,082 | $ | 68,289 | $ | 7,326 | $ | 543 | $ | 17,730 | $ | (1,205 | ) | $ | 219,755 | |||||||||||||||||||||
Over time | 35,100 | 2,774 | 24,577 | — | 3,091 | 649 | — | 997 | 1,436 | — | 68,624 | |||||||||||||||||||||||||||||||||
Europe, Middle East and Africa | ||||||||||||||||||||||||||||||||||||||||||||
Point in time | 50,988 | 9,726 | 3,056 | — | 16,733 | 105,776 | 10,839 | — | 3,821 | — | 200,939 | |||||||||||||||||||||||||||||||||
Over time | 21,584 | 1,125 | 2,124 | — | 6,467 | 1,000 | — | 1,591 | 1,147 | — | 35,038 | |||||||||||||||||||||||||||||||||
Asia Pacific | ||||||||||||||||||||||||||||||||||||||||||||
Point in time | 916,107 | 235,061 | 2,769 | 58,004 | 17,761 | 57,830 | 5,950 | 10 | 100,985 | — | 1,394,477 | |||||||||||||||||||||||||||||||||
Over time | 140,887 | 10,203 | 965 | 7,877 | 3,221 | 551 | — | 101 | 6,127 | — | 169,932 | |||||||||||||||||||||||||||||||||
Lease revenue | 10,885 | — | — | — | 392 | — | — | — | 760 | — | 12,037 | |||||||||||||||||||||||||||||||||
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Total | $ | 1,218,949 | $ | 273,468 | $ | 92,737 | $ | 66,648 | $ | 56,747 | $ | 234,095 | $ | 24,115 | $ | 3,242 | $ | 132,006 | $ | (1,205 | ) | $ | 2,100,802 | |||||||||||||||||||||
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Hardware
Extended Warranty
Customers have the option to purchase an extended warranty which extends the warranty period for systems and robots beyond the one-year standard warranty. The extended warranty is purchased in the same transaction as the system or robot purchase and is classified as a separate performance obligation, which meets the criteria for over time recognition. The relative standalone selling price of the extended warranty is recognized ratably over the course of the extended warranty based on months completed.
Training and Applications Support
Teradyne sells training and applications support to customers either in standalone transactions or included with system purchases. The training and support allow the customer to use Teradyne’s systems efficiently and effectively. Training and applications supportare included in system orderscost of revenues when product revenues are valued based on their standalone selling price and all training and applications support is recognized over time as the customer receives and consumes the benefit associated with each. Both are recognized using an input method of hours consumed as this best depicts the transfer of services to the customer.
Service Agreements
Service agreements are recognized ratably over the period of agreement based on months completed.
Post-Contract Customer Support (“PCS”)
Teradyne provides support services for certain systems and robots outside of warranty. These services include telephone support, bug fixes, and when-and-if available upgrades. Standalone selling price for PCS is not directly observable as Teradyne does not sell these services separately. Teradyne has estimated the standalone selling price for these services based on adjusted market assessments. Revenue for PCS is recognized ratably over the performance period.
Teradyne does not allow customer returns or provide refunds to customers for any products or services.
Contract Balances
The following table provides information about contract liabilities. Teradyne does not have material contract assets on the balance sheet.
| December 31, 2018 | January 1, 2018 (as adjusted) | Increase | ||||||||||
| (in thousands) | ||||||||||||
Deferred revenue and customer advances | $ | 77,711 | $ | 76,638 | $ | 1,073 | ||||||
Long-term deferred revenue and customer advances | 32,750 | 20,848 | 11,902 | |||||||||
The amount of revenue recognized during the twelve months ended December 31, 2018 that was previously included within the deferred revenue and customer advances balance was $69.9 million and primarily relates to extended warranties, training, application support and PCS. Each of these represents a distinct performance obligation. Customers typically pay for these services net 30 to 60 days from the date that transfer of control of the associated system or product occurs. Teradyne expects to recognize 70% of the remaining performance obligation in the next 12 months, 25% in 1-3 years, and the remainder thereafter.
Practical Expedients
Teradyne has adopted the practical expedients available within ASC 340“Other Assets and Deferred Costs” for contract assets, specifically in relation to incremental costs of obtaining a contract. Teradyne generally expenses sales commissions when incurred because the amortization period would be less than one year. Teradyne records these costs within selling and administrative expenses.
Teradyne has adopted the practical expedient, which states an entity need not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less. Teradyne does not have material payments associated with performance obligations outside this one-year time frame.
Impacts
The following tables summarize the impact of ASC 606 to Teradyne’s consolidated financial statements. Differences are the result of timing differences between the recognition of revenue under ASC 606 and ASC 605 primarily with respect to software transactions deferred due to lack of vendor specific objective evidence of price under ASC 605 and Teradyne’s assessment of acceptance under ASC 606. Under Legacy GAAP, Teradyne did not recognize revenue prior to acceptance if payment, title, or risk of loss was tied to acceptance. Under ASC 606, Teradyne recognizes revenue prior to receipt of acceptance if acceptance is deemed a formality.
Condensed Consolidated Balance Sheet:
| December 31, 2018 | ||||||||||||
| As Reported | Adjustments to Recognize under Legacy GAAP | Legacy GAAP | ||||||||||
| (in thousands, except per share amount) | ||||||||||||
Assets | ||||||||||||
Accounts receivable, less allowance for doubtful accounts | $ | 291,267 | $ | (37,348 | ) | $ | 253,919 | |||||
Inventories, net | 153,541 | 10,759 | 164,300 | |||||||||
Deferred tax assets | 70,848 | (3,874 | ) | 66,974 | ||||||||
Liabilities | ||||||||||||
Deferred revenue and customer advances | $ | 77,711 | $ | (4,118 | ) | $ | 73,593 | |||||
Income taxes payable | 36,185 | (4,495 | ) | 31,690 | ||||||||
Long-term deferred revenue and customer advances | 32,750 | (10,303 | ) | 22,447 | ||||||||
Shareholders’ equity | ||||||||||||
Accumulated deficit | $ | (158,191 | ) | $ | (11,547 | ) | $ | (169,738 | ) | |||
Condensed Consolidated Statement of Operation:
| For the Year Ended December 31, 2018 | ||||||||||||
| As Reported | Adjustments to Recognize under Legacy GAAP | Legacy GAAP | ||||||||||
| (in thousands, except per share amount) | ||||||||||||
Total revenues | $ | 2,100,802 | $ | (39,184 | ) | $ | 2,061,618 | |||||
Total cost of revenues | 880,408 | (10,760 | ) | 869,648 | ||||||||
Income tax provision | 16,022 | (4,197 | ) | 11,825 | ||||||||
Net income | 451,779 | (24,227 | ) | 427,552 | ||||||||
Net income per common share: | ||||||||||||
Basic | $ | 2.41 | $ | (0.13 | ) | $ | 2.28 | |||||
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Diluted | $ | 2.35 | $ | (0.13 | ) | $ | 2.22 | |||||
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As of December 31, 20182020 and 2017,2019, deferred revenue and customer advances consisted of the following and are included in the short and long-term deferred revenue and customer advances:
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Maintenance and training | $ | 58,362 | $ | 57,256 | ||||
Extended warranty | 27,422 | 24,438 | ||||||
Customer advances, undelivered elements and other | 24,677 | 32,047 | ||||||
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Total deferred revenue and customer advances | $ | 110,461 | $ | 113,741 | ||||
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2020 | 2019 | |||||||
(in thousands) | ||||||||
Maintenance, service and training | $ | 77,654 | $ | 63,815 | ||||
Customer advances, undelivered elements and other | 63,438 | 56,358 | ||||||
Extended warranty | 51,929 | 30,677 | ||||||
Total deferred revenue and customer advances | $ | 193,021 | $ | 150,850 | ||||
| Amount | ||||
| (in thousands) | ||||
Balance at December 31, 2015 | $ | 6,925 | ||
Accruals for warranties issued during the period | 14,291 | |||
Accruals related to pre-existing warranties | (1,354 | ) | ||
Settlements made during the period | (12,659 | ) | ||
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Balance at December 31, 2016 | 7,203 | |||
Accruals for warranties issued during the period | 14,223 | |||
Accruals related to pre-existing warranties | (379 | ) | ||
Settlements made during the period | (12,847 | ) | ||
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Balance at December 31, 2017 | 8,200 | |||
Acquisition | 41 | |||
Accruals for warranties issued during the period | 13,045 | |||
Accruals related to pre-existing warranties | 921 | |||
Settlements made during the period | (14,298 | ) | ||
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Balance at December 31, 2018 | $ | 7,909 | ||
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Amount | ||||
(in thousands) | ||||
Balance at December 31, 2017 | $ | 8,200 | ||
Acquisition | 41 | |||
Accruals for warranties issued during the period | 13,045 | |||
Accruals related to pre-existing warranties | 921 | |||
Settlements made during the period | (14,298 | ) | ||
Balance at December 31, 2018 | 7,909 | |||
Acquisition | 14 | |||
Accruals for warranties issued during the period | 14,106 | |||
Accruals related to pre-existing warranties | 4,026 | |||
Settlements made during the period | (17,059 | ) | ||
Balance at December 31, 2019 | 8,996 | |||
Accruals for warranties issued during the period | 28,490 | |||
Accruals related to pre-existing warranties | 821 | |||
Settlements made during the period | (21,674 | ) | ||
Balance at December 31, 2020 | $ | 16,633 | ||
| Amount | ||||
| (in thousands) | ||||
Balance at December 31, 2015 | $ | 30,024 | ||
Deferral of new extended warranty revenue | 19,909 | |||
Recognition of extended warranty deferred revenue | (21,733 | ) | ||
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Balance at December 31, 2016 | 28,200 | |||
Deferral of new extended warranty revenue | 20,513 | |||
Recognition of extended warranty deferred revenue | (24,275 | ) | ||
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Balance at December 31, 2017 | 24,438 | |||
Deferral of new extended warranty revenue | 23,753 | |||
Recognition of extended warranty deferred revenue | (20,769 | ) | ||
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Balance at December 31, 2018 | $ | 27,422 | ||
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Amount | ||||
(in thousands) | ||||
Balance at December 31, 2017 | $ | 24,438 | ||
Deferral of new extended warranty revenue | 23,753 | |||
Recognition of extended warranty deferred revenue | (20,769 | ) | ||
Balance at December 31, 2018 | 27,422 | |||
Deferral of new extended warranty revenue | 23,271 | |||
Recognition of extended warranty deferred revenue | (20,016 | ) | ||
Balance at December 31, 2019 | 30,677 | |||
Deferral of new extended warranty revenue | 41,694 | |||
Recognition of extended warranty deferred revenue | (20,442 | ) | ||
Balance at December 31, 2020 | $ | 51,929 | ||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Contract manufacturer and supplier prepayments | $ | 131,642 | $ | 82,503 | ||||
Prepaid taxes | 9,646 | 5,039 | ||||||
Prepaid maintenance and other services | 8,487 | 8,189 | ||||||
Other prepayments | 12,744 | 12,386 | ||||||
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Total prepayments | $ | 162,519 | $ | 108,117 | ||||
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2020 | 2019 | |||||||
(in thousands) | ||||||||
Contract manufacturer and supplier prepayments | $ | 212,286 | $ | 143,392 | ||||
Prepaid taxes | 9,361 | 8,046 | ||||||
Prepaid maintenance and other services | 13,116 | 8,503 | ||||||
Other prepayments | 15,329 | 16,753 | ||||||
Total prepayments | $ | 250,092 | $ | 176,694 | ||||
guidance, Teradyne continues to record the service cost component in the same line item as other employee compensation costs and the non-service components of net benefit costs such as interest cost, expected return on assets, amortization of prior service cost, and actuarial gains or losses are reported within other (income) expense, net. In the twelve months ended December 31, 2017 and 2016, the retrospective adoption of this standard decreased income from operations by $5.0 million and $3.0 million, respectively, due to the removal of net actuarial pension gains and increased non-operating (income) expense by the same amount with no impact to net income.
Buildings | 40years | |
Building improvements | 5to 10 years | |
Leasehold improvements | Lesser of lease term or 10 years | |
Furniture and fixtures | 10 years | |
Test systems manufactured internally | 6years | |
Machinery, equipment and | 3to 5 years | |
|
the net book value of the system is transferred to inventory and expensed as cost of revenues. The net book value of internally manufactured test systems sold in the years ended December 31, 2020, 2019, and 2018 2017,was $7.3 million, $5.0 million, and 2016 was $3.8 million, $3.6 million,respectively.
the related amendments (collectively “ASC 842”) on January 1, 2019 and utilized the modified retrospective approach provided by ASU 2018-11, “
In March 2016, the FASB issued ASU 2016-09,“Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Teradyne adopted this ASU in the first quarter of 2017. This ASU changes how Teradyne accounts for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows.
Adoption of this ASU required recognition of a cumulative effect adjustment to retained earnings for any prior year excess tax benefits or tax deficiencies not previously recorded. The cumulative effect adjustment of $39 million was recorded in the first quarter of 2017 as an increase to retained earnings and deferred tax assets.
This ASU also required a change in how Teradyne recognizes the excess tax benefits or tax deficiencies related to stock-based compensation. Prior to adopting ASU 2016-09, these excess tax benefits or tax deficiencies were credited or charged to additional paid-in capital in Teradyne’s consolidated balance sheets. In accordance with ASU 2016-09, starting in the first quarter of 2017, these excess
ASU 2016-09 requires companies to adopt the amendment related to accounting for excess tax benefits or tax deficiencies on a prospective basis. In 2017, Teradyne recognized a discrete tax benefit of $6.3 million related to net excess tax benefit.
In addition, under ASU 2016-09,operations, all excess tax benefits related
Upon adoption of ASU 2016-09, Teradyne made an accounting policy election to continue accountingaccount for forfeitures by applying an estimated forfeiture rate and to continue to recognizerecognizes compensation costs only for those stock-based compensation awards expected to vest.
on the balance sheet.
On January 26, 2017,
In February 2016,Teradyne’s growth strategy.
Purchase Price Allocation | ||||
(in thousands) | ||||
Goodwill | $ | 41,223 | ||
Intangible assets | 37,660 | |||
Tangible assets acquired and liabilities assumed: | ||||
Other current assets | 3,661 | |||
Non-current assets | 1,227 | |||
Accounts payable and current liabilities | (1,223 | ) | ||
Long-term other liabilities | (949 | ) | ||
Total purchase price | $ | 81,599 | ||
Fair Value | Estimated Useful Life | |||||||
(in thousands) | (in years) | |||||||
Developed technology | $ | 24,590 | 6.0 | |||||
Customer relationships | 7,360 | 6.0 | ||||||
Trademarks and tradenames | 5,450 | 7.0 | ||||||
Backlog | 260 | 0.3 | ||||||
Total intangible assets | $ | 37,660 | 6.1 | |||||
D. ACQUISITIONS
Business
consolidated financial statements.
Purchase Price Allocation | ||||
(in thousands) | ||||
Goodwill | $ | 135,976 | ||
Intangible assets | 80,670 | |||
Tangible assets acquired and liabilities assumed: | ||||
Current assets | 6,039 | |||
Non-current assets | 1,336 | |||
Accounts payable and current liabilities | (7,336 | ) | ||
Long-term deferred tax liabilities | (18,007 | ) | ||
Other long-term liabilities | (900 | ) | ||
Total purchase price | $ | 197,778 | ||
| Fair Value | Estimated Useful Life | |||||||
| (in thousands) | (in years) | |||||||
Developed technology | $ | 58,900 | 7.0 | |||||
Trademarks and tradenames | 13,240 | 11.0 | ||||||
Customer relationships | 8,500 | 2.5 | ||||||
Backlog | 30 | 0.2 | ||||||
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Total intangible assets | $ | 80,670 | 7.2 | |||||
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For the period from April 25, 2018 to December 31, 2018, MiR contributed $24.1 million
Fair Value | Estimated Useful Life | |||||||
(in thousands) | (in | |||||||
Developed technology | $ | 58,900 | 7.0 | |||||
Trademarks and tradenames | 13,240 | 11.0 | ||||||
Customer relationships | 8,500 | 2.5 | ||||||
Backlog | 30 | 0.2 | ||||||
Total intangible assets | $ | 80,670 | 7.2 | |||||
The following unaudited pro forma information gives effect to the acquisition of MiR as if the acquisition occurred on January 1, 2017. The unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented:
| For the Year Ended | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
(in thousands, except per share amounts) | ||||||||
Revenues | $ | 2,107,600 | $ | 2,148,320 | ||||
Net income | $ | 450,559 | $ | 243,399 | ||||
Net income per common share: | ||||||||
Basic | $ | 2.40 | $ | 1.23 | ||||
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Diluted | $ | 2.34 | $ | 1.21 | ||||
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Pro forma results for the year ended December 31, 2018 were adjusted to exclude $2.9 million of acquisition related costs and $0.4 million of non-recurring expense related to fair value adjustment to acquisition-date inventory.
Pro forma results for the year ended December 31, 2017 were adjusted to include $2.9 million of acquisition related costs and $0.4 million of non-recurring expense related to fair value adjustment to acquisition-date inventory.
condensed consolidated financial statements.
$ 2,303,737 $ 2,111,373 $ 464,602 $ 442,082 $ 2.73 $ 2.36 $ 2.59 $ 2.30
Semiconductor Test | Industrial Automation | Wireless Test | Corporate and Other | Total | ||||||||||||||||||||||||||||||||
System on-a-chip | Memory | System Test | Universa l Robots | Mobile Industrial Robots | AutoGuide | |||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
For the Year Ended December 31, 2020 (1) | ||||||||||||||||||||||||||||||||||||
Timing of Revenue Recognition | ||||||||||||||||||||||||||||||||||||
Point in Time | $ | 1,659,414 | $ | 363,324 | $ | 348,454 | $ | 214,212 | $ | 44,622 | $ | 10,911 | $ | 163,834 | $ | (604 | ) | $ | 2,804,166 | |||||||||||||||||
Over Time | 217,975 | 18,884 | 61,275 | 7,269 | 211 | 2,506 | 9,182 | — | 317,302 | |||||||||||||||||||||||||||
Total | $ | 1,877,389 | $ | 382,208 | $ | 409,729 | $ | 221,481 | $ | 44,833 | $ | 13,417 | $ | 173,016 | $ | (604 | ) | $ | 3,121,469 | |||||||||||||||||
Geographical Market | ||||||||||||||||||||||||||||||||||||
Asia Pacific | $ | 1,744,593 | $ | 364,000 | $ | 258,521 | $ | 60,277 | $ | 6,471 | $ | — | $ | 143,969 | $ | — | $ | 2,577,831 | ||||||||||||||||||
Americas | 77,671 | 12,999 | 128,482 | 64,164 | 16,769 | 13,417 | 22,544 | (604 | ) | 335,441 | ||||||||||||||||||||||||||
Europe, Middle East and Africa | 55,125 | 5,209 | 22,726 | 97,040 | 21,593 | — | 6,503 | — | 208,196 | |||||||||||||||||||||||||||
Total | $ | 1,877,389 | $ | 382,208 | $ | 409,729 | $ | 221,481 | $ | 44,833 | $ | 13,417 | $ | 173,016 | $ | (604 | ) | $ | 3,121,469 | |||||||||||||||||
For the Year Ended December 31, 2019 (1) | ||||||||||||||||||||||||||||||||||||
Timing of Revenue Recognition | ||||||||||||||||||||||||||||||||||||
Point in Time | $ | 1,070,375 | $ | 247,221 | $ | 237,686 | $ | 244,515 | $ | 44,329 | $ | 1,144 | $ | 148,322 | $ | (515 | ) | $ | 1,993,077 | |||||||||||||||||
Over Time | 216,065 | 18,910 | 49,769 | 7,843 | 74 | 234 | 8,993 | — | 301,888 | |||||||||||||||||||||||||||
Total | $ | 1,286,440 | $ | 266,131 | $ | 287,455 | $ | 252,358 | $ | 44,403 | $ | 1,378 | $ | 157,315 | $ | (515 | ) | $ | 2,294,965 | |||||||||||||||||
Geographical Market | ||||||||||||||||||||||||||||||||||||
Asia Pacific | $ | 1,152,881 | $ | 238,714 | $ | 132,826 | $ | 68,027 | $ | 9,513 | $ | — | $ | 126,549 | $ | — | $ | 1,728,510 | ||||||||||||||||||
Americas | 73,257 | 23,826 | 129,840 | 71,926 | 14,438 | 1,378 | 24,234 | (515 | ) | 338,384 | ||||||||||||||||||||||||||
Europe, Middle East and Africa | 60,302 | 3,591 | 24,789 | 112,405 | 20,452 | — | 6,532 | — | 228,071 | |||||||||||||||||||||||||||
Total | $ | 1,286,440 | $ | 266,131 | $ | 287,455 | $ | 252,358 | $ | 44,403 | $ | 1,378 | $ | 157,315 | $ | (515 | ) | $ | 2,294,965 | |||||||||||||||||
For the Year Ended December 31, 2018 (1) | ||||||||||||||||||||||||||||||||||||
Timing of Revenue Recognition | ||||||||||||||||||||||||||||||||||||
Point in Time | $ | 1,010,493 | $ | 259,366 | $ | 167,418 | $ | 232,448 | $ | 24,115 | $ | — | $ | 122,536 | $ | (1,205 | ) | $ | 1,815,171 | |||||||||||||||||
Over Time | 208,456 | 14,102 | 48,714 | 4,889 | — | — | 9,470 | — | 285,631 | |||||||||||||||||||||||||||
Total | $ | 1,218,949 | $ | 273,468 | $ | 216,132 | $ | 237,337 | $ | 24,115 | $ | — | $ | 132,006 | $ | (1,205 | ) | $ | 2,100,802 | |||||||||||||||||
Geographical Market | ||||||||||||||||||||||||||||||||||||
Asia Pacific | $ | 1,067,879 | $ | 245,264 | $ | 90,989 | $ | 58,492 | $ | 5,950 | $ | — | $ | 107,872 | $ | — | $ | 1,576,446 | ||||||||||||||||||
Americas | 78,498 | 17,353 | 96,763 | 70,478 | 7,326 | — | 19,166 | (1,205 | ) | 288,379 | ||||||||||||||||||||||||||
Europe, Middle East and Africa | 72,572 | 10,851 | 28,380 | 108,367 | 10,839 | — | 4,968 | — | 235,977 | |||||||||||||||||||||||||||
Total | $ | 1,218,949 | $ | 273,468 | $ | 216,132 | $ | 237,337 | $ | 24,115 | $ | — | $ | 132,006 | $ | (1,205 | ) | $ | 2,100,802 | |||||||||||||||||
| (1) | Includes $10.0 million, $8.4 million and $12.0 million in 2020, 2019 and 2018, respectively, for leases of Teradyne’s systems recognized outside of ASC 606: “Revenue from Contracts with Customers.” |
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Raw material | $ | 89,365 | $ | 62,668 | ||||
Work-in-process | 31,014 | 19,464 | ||||||
Finished goods | 33,162 | 25,393 | ||||||
|
|
|
| |||||
| $ | 153,541 | $ | 107,525 | |||||
|
|
|
| |||||
2019:
2020 | 2019 | |||||||
(in thousands) | ||||||||
Raw material | $ | 114,133 | $ | 118,595 | ||||
Work-in-process | 25,408 | 32,695 | ||||||
Finished goods | 82,648 | 45,401 | ||||||
| $ | 222,189 | $ | 196,691 | |||||
F.
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Land | $ | 16,561 | $ | 16,561 | ||||
Buildings | 105,935 | 98,369 | ||||||
Machinery and equipment | 689,770 | 647,961 | ||||||
Furniture and fixtures, and software | 90,384 | 88,539 | ||||||
Leasehold improvements | 52,536 | 49,540 | ||||||
Construction in progress | 6,276 | 13,522 | ||||||
|
|
|
| |||||
| 961,462 | 914,492 | |||||||
Less: accumulated depreciation | 681,641 | 646,045 | ||||||
|
|
|
| |||||
| $ | 279,821 | $ | 268,447 | |||||
|
|
|
| |||||
2019:
2020 | 2019 | |||||||
(in thousands) | ||||||||
Land | $ | 17,207 | $ | 16,561 | ||||
Buildings | 108,221 | 107,282 | ||||||
Machinery, equipment and software | 956,035 | 834,970 | ||||||
Furniture and fixtures | 28,487 | 29,157 | ||||||
Leasehold improvements | 61,276 | 59,378 | ||||||
Construction in progress | 13,098 | 2,537 | ||||||
| 1,184,324 | 1,049,885 | |||||||
Less: accumulated depreciation | 789,524 | 729,669 | ||||||
| $ | 394,800 | $ | 320,216 | |||||
G.
Effective January 1, 2018,
earnings. Teradyne’s available-for-sale debt securities are classified as Level 2, and equity securitiesand debt mutual funds are classified as Level 1.
Unrealized gains related to equity securities are included in interest income and unrealized losses are included in interest expense. Unrealized losses related to equity securities recognized in 2018 were $6.0 million.
| 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: | ||||||||||||||||
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 | ||||||||
|
|
|
|
|
|
|
| |||||||||
2019:
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: | ||||||||||||||||
Mutual funds | 29,420 | — | — | 29,420 | ||||||||||||
Total | $ | 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 | ||||||||
| 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 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 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 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | 514 | $ | 70,543 | $ | 71,057 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| 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 | ||||||||
|
|
|
|
|
|
|
| |||||||||
(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 current liabilities | $ | — | $ | 504 | $ | — | $ | 504 | ||||||||
Long-term contingent consideration | — | — | 7,227 | 7,227 | ||||||||||||
Total | $ | — | $ | 504 | $ | 7,227 | $ | 7,731 | ||||||||
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: | ||||||||||||||||
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 | ||||||||
| 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 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 427,720 | $ | 1,476,417 | $ | — | $ | 1,904,137 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Other current liabilities | $ | — | $ | 446 | $ | — | $ | 446 | ||||||||
Contingent consideration | — | — | 24,497 | 24,497 | ||||||||||||
Long-term contingent consideration | — | — | 20,605 | 20,605 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | — | $ | 446 | $ | 45,102 | $ | 45,548 | |||||||||
|
|
|
|
|
|
|
| |||||||||
(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 and other current assets | — | 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 | ||||||||
| Contingent Consideration | ||||
| (in thousands) | ||||
Balance at December 31, 2016 | $ | 38,332 | ||
Payments (1) | (1,050 | ) | ||
Fair value adjustment (2) | 7,820 | |||
|
| |||
Balance at December 31, 2017 | 45,102 | |||
Acquisition of MiR | 52,547 | |||
Foreign currency impact | (3,540 | ) | ||
Payments (3) | (24,553 | ) | ||
Fair value adjustment (4) | 987 | |||
|
| |||
Balance at December 31, 2018 | $ | 70,543 | ||
|
| |||
Contingent Consideration | ||||
(in thousands) | ||||
Balance at December 31, 2018 | $ | 70,543 | ||
Acquisition of AutoGuide | 23,976 | |||
Foreign currency impact | (967 | ) | ||
Payments (1) | (34,590 | ) | ||
Fair value adjustment (2) | (19,257 | ) | ||
Balance at December 31, 2019 | 39,705 | |||
Foreign currency impact | (355 | ) | ||
Payments (3) | (8,852 | ) | ||
Fair value adjustment (4) | (23,271 | ) | ||
Balance at December 31, 2020 | $ | 7,227 | ||
| (1) | During the year ended December 31, |
| (2) | During the year ended December 31, |
|
|
| (3) | During the year ended December 31, 2020, Teradyne paid $8.9 million of contingent consideration for the earn-out in connection with the acquisition of MiR. |
| (4) | During the year ended December 31, 2020, the fair value of contingent consideration for the earn-out in connection with the acquisition of AutoGuide was decreased by and earnings before interest and taxes . Teradyne has received a letter from the sellers of AutoGuide alleging non-compliance with the earn-out provisions of the AutoGuide acquisition agreement. Teradyne disputes the allegation of non-compliance. 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 dispute. During the year ended December 31, 2020, the fair value of contingent consideration for the earn-out in connection with the acquisition of MiR was decreased by $3.5 million primarily due to a decrease in forecasted revenues. |
Liability | December 31, 2018 Fair Value | Valuation Technique | Unobservable Inputs | Weighted Average | ||||||||
| (in thousands) | ||||||||||||
Contingent consideration (MiR) | $ | 66,672(1) | Monte Carlo simulation | Revenue volatility | 18.0% | |||||||
| Discount rate | 1.1% | |||||||||||
Contingent consideration (Universal Robots) | $3,871(1) | |||||||||||
|
Liability | December 31, 2020 Fair Value | Valuation Technique | Unobservable Inputs | Weighted Average | ||||||||
(in thousands) | ||||||||||||
Contingent consideration (AutoGuide) | $ | 7,227 | Monte Carlo simulation | Revenue Volatility | 16.5% | |||||||
| Discount Rate | 1.0% | |||||||||||
| December 31, 2018 | December 31, 2017 | |||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 926,752 | $ | 926,752 | $ | 429,843 | $ | 429,843 | ||||||||
Marketable securities | 277,827 | 277,827 | 1,473,905 | 1,473,905 | ||||||||||||
Derivative assets | 79 | 79 | 389 | 389 | ||||||||||||
Liabilities | ||||||||||||||||
Contingent consideration | 70,543 | 70,543 | 45,102 | 45,102 | ||||||||||||
Derivative liabilities | 514 | 514 | 446 | 446 | ||||||||||||
Convertible debt (1) | 379,981 | 547,113 | 365,987 | 659,525 | ||||||||||||
December 31, 2020 | December 31, 2019 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 914,121 | $ | 914,121 | $ | 773,924 | $ | 773,924 | ||||||||
Marketable securities | 640,260 | 640,260 | 241,793 | 241,793 | ||||||||||||
Derivative assets | 95 | 95 | 528 | 528 | ||||||||||||
Liabilities | ||||||||||||||||
Contingent consideration | 7,227 | 7,227 | 39,705 | 39,705 | ||||||||||||
Derivative liabilities | 504 | 504 | 203 | 203 | ||||||||||||
Convertible debt (1) | 410,111 | 1,739,553 | 394,687 | 1,010,275 | ||||||||||||
(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. |
| December 31, 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 | $ | 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 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2019:
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 | ||||||||||
| 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 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cost | Unrealized Gain | Unrealized (Loss) | Fair 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 | ||||||||||
| 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 | 10,727 | ||||||||||||||
Non-U.S. government securities | 582 | 4 | — | 586 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| $ | 1,470,729 | $ | 6,582 | $ | (3,406 | ) | $ | 1,473,905 | $ | 1,350,896 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
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 | ||||||||||
| 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 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cost | Unrealized Gain | Unrealized (Loss) | Fair 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 | ||||||||||
totaled $70.4 million.
totaled $23.6 million.
| Cost | Fair Value | |||||||
| (in thousands) | ||||||||
Due within one year | $ | 190,100 | $ | 190,096 | ||||
Due after 1 year through 5 years | 9,199 | 9,144 | ||||||
Due after 5 years through 10 years | 14,081 | 13,405 | ||||||
Due after 10 years | 42,478 | 40,804 | ||||||
|
|
|
| |||||
Total | $ | 255,858 | $ | 253,449 | ||||
|
|
|
| |||||
Cost | Fair Value | |||||||
(in | ||||||||
Due within one year | $ | 522,228 | $ | 522,280 | ||||
Due after 1 year through 5 years | 24,829 | 25,245 | ||||||
Due after 5 years through 10 years | 13,030 | 14,183 | ||||||
Due after 10 years | 33,476 | 40,567 | ||||||
Total | $ | 593,563 | $ | 602,275 | ||||
| December 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
| Buy Position | Sell Position | Net Total | Buy Position | Sell Position | Net Total | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
Japanese Yen | $ | (35.0 | ) | $ | — | $ | (35.0 | ) | $ | (35.7 | ) | $ | — | $ | (35.7 | ) | ||||||||
Taiwan Dollar | (11.2 | ) | — | (11.2 | ) | (9.9 | ) | — | (9.9 | ) | ||||||||||||||
Korean Won | (9.6 | ) | — | (9.6 | ) | (8.9 | ) | — | (8.9 | ) | ||||||||||||||
British Pound Sterling | (1.4 | ) | — | (1.4 | ) | (1.4 | ) | — | (1.4 | ) | ||||||||||||||
Euro | — | 82.2 | 82.2 | — | 27.4 | 27.4 | ||||||||||||||||||
Singapore Dollar | — | 15.7 | 15.7 | — | 33.5 | 33.5 | ||||||||||||||||||
Philippine Peso | — | 5.2 | 5.2 | — | — | — | ||||||||||||||||||
Chinese Yuan | — | 2.8 | 2.8 | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | (57.2 | ) | $ | 105.9 | $ | 48.7 | $ | (55.9 | ) | $ | 60.9 | $ | 5.0 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||
Buy Position | Sell Position | Net Total | Buy Position | Sell Position | Net Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Japanese Yen | $ | (14.1 | ) | $ | — | $ | (14.1 | ) | $ | (29.3 | ) | $ | — | $ | (29.3 | ) | ||||||||
Taiwan Dollar | (27.9 | ) | — | (27.9 | ) | (18.4 | ) | — | (18.4 | ) | ||||||||||||||
Korean Won | (5.3 | ) | — | (5.3 | ) | (10.7 | ) | — | (10.7 | ) | ||||||||||||||
British Pound Sterling | (1.0 | ) | — | (1.0 | ) | (3.8 | ) | — | (3.8 | ) | ||||||||||||||
Singapore Dollar | — | 52.3 | 52.3 | — | 25.3 | 25.3 | ||||||||||||||||||
Euro | — | 43.9 | 43.9 | — | 47.8 | 47.8 | ||||||||||||||||||
Philippine Peso | — | 5.0 | 5.0 | — | 5.2 | 5.2 | ||||||||||||||||||
Chinese Yuan | — | 3.4 | 3.4 | — | 4.4 | 4.4 | ||||||||||||||||||
Total | $ | (48.3 | ) | $ | 104.6 | $ | 56.3 | $ | (62.2 | ) | $ | 82.7 | $ | 20.5 | ||||||||||
2019.
Balance Sheet Location | December 31, 2018 | December 31, 2017 | ||||||||
| (in thousands) | ||||||||||
Derivatives not designated as hedging instruments: | ||||||||||
Foreign exchange contracts | Prepayments | $ | 79 | $ | 389 | |||||
Foreign exchange contracts | Other current liabilities | (514 | ) | (446 | ) | |||||
|
|
|
| |||||||
Total derivatives | $ | (435 | ) | $ | (57 | ) | ||||
|
|
|
| |||||||
Balance Sheet Location | December 31, 2020 | December 31, 2019 | ||||||||
(in thousands) | ||||||||||
Derivatives not designated as hedging instruments: | ||||||||||
Foreign exchange contracts | Prepayments | $ | 95 | $ | 528 | |||||
Foreign exchange contracts | Other current liabilities | (504 | ) | (203 | ) | |||||
Total derivatives | $ | (409 | ) | $ | 325 | |||||
Location of (Gains) Losses Recognized in Statement of Operations | 2018 | 2017 | 2016 | |||||||||||
| (in thousands) | ||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||
Foreign exchange contracts | Other (income) expense, net | $ | 7,257 | $ | (1,133 | ) | $ | 8,671 | ||||||
Location of (Gains) Losses Recognized in Statement of Operations | December 31, 2020 | December 31, 2019 | December 31, 2018 | |||||||||||
(in thousands) | ||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||
Foreign exchange contracts | Other (income) expense, net | $ | 3,515 | $ | 5,960 | $ | 7,386 | |||||||
(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, million. |
| (3) | For the year ended December 31, 2019 and 2018, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were |
|
H.2020 was $38.5 million and included $12.1 million of variable lease costs and $3.4 million of costs related to short-term leases, which are not recorded on the consolidated balance sheets.
For the Year Ended December 31, 2020 | ||||
Cash paid for amounts included in the measurement of lease liabilities included in operating cash flows: | $ | 24,136 | ||
Right-of-use assets obtained in exchange for new lease obligations | 14,801 | |||
Operating Lease | ||||
(in thousands) | ||||
2021 | $ | 22,451 | ||
2022 | 16,798 | |||
2023 | 9,727 | |||
2024 | 7,215 | |||
2025 | 5,715 | |||
Thereafter | 6,149 | |||
Total lease payments | 68,055 | |||
Less imputed interest | (5,409 | ) | ||
Total lease liabilities | $ | 62,646 | ||
than 98% of the product of the closing sale price of the Teradyne’s common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate
events. On or after September 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Teradyne may satisfy its conversion obligation by paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s election. As of December 31,As of February 22, 2021, NaN holders had exercised the option to convert $51.0 million worth of notes.
| December 31, 2018 | December 31, 2017 | |||||||
(in thousands) | ||||||||
Debt principal | $ | 460,000 | $ | 460,000 | ||||
Unamortized discount | 80,019 | 94,013 | ||||||
|
|
|
| |||||
Net carrying amount of convertible debt | $ | 379,981 | $ | 365,987 | ||||
|
|
|
| |||||
| For the year ended | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
(in thousands) | ||||||||
Contractual interest expense on the coupon | $ | 5,750 | $ | 5,734 | ||||
Amortization of the discount component and debt issue fees recognized as interest expense | 13,995 | 13,318 | ||||||
|
|
|
| |||||
Total interest expense on the convertible debt | $ | 19,745 | $ | 19,052 | ||||
|
|
|
| |||||
December 31, 2020 | December 31, 2019 | |||||||
(in thousands) | ||||||||
Debt principal | $ | 459,971 | $ | 460,000 | ||||
Unamortized discount | 49,860 | 65,313 | ||||||
Net carrying amount of convertible debt | $ | 410,111 | $ | 394,687 | ||||
December 31, 2020 | December 31, 2019 | |||||||
(in thousands) | ||||||||
Current debt | $ | 33,343 | $ | — | ||||
Long-term debt | 376,768 | 394,687 | ||||||
Net carrying amount of convertible debt | $ | 410,111 | $ | 394,687 | ||||
For the year ended | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
(in thousands) | ||||||||
Contractual interest expense on the coupon | $ | 5,750 | $ | 5,750 | ||||
Amortization of the discount component and debt issue fees recognized as interest expense | 15,454 | 14,706 | ||||||
Total interest expense on the convertible debt | $ | 21,204 | $ | 20,456 | ||||
Proceeds from the Credit Facility may be used for general corporate purposes and working capital. Teradyne incurred $2.3 million in costs related to the revolving credit facility. These costs are being amortized over the five-year term of the revolving credit facility and are included in interest expense in the statements of operations. As of March 1, 2019, Teradyne has not borrowed any funds under the Credit Facility.
consolidated leverage ratio.
I.
| Foreign Currency Translation Adjustment | Unrealized Gains (Losses) on Marketable Securities | Retirement Plans Prior Service Credit | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
Balance at December 31, 2016, net of tax of $0, $209, $(778) | $ | (21,921 | ) | $ | (60 | ) | $ | 1,767 | $ | (20,214 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
Other comprehensive income before reclassifications, net of tax of $0, $1,903, $0 | 37,840 | 1,863 | — | 39,703 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(297), $(154) | — | (441 | ) | (272 | ) | (713 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net current period other comprehensive income, net of tax of $0, $1,606, $(154) | 37,840 | 1,422 | (272 | ) | 38,990 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at December 31, 2017, net of tax of $0, $1,815, $(932) | 15,919 | 1,362 | 1,495 | 18,776 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other comprehensive loss before reclassifications, net of tax of $0, $(722), $0 | (28,442 | ) | (2,110 | ) | — | (30,552 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(21), $(71) | — | 1,337 | (245 | ) | 1,092 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net current period other comprehensive loss, net of tax of $0, $(743), $(71) | (28,442 | ) | (773 | ) | (245 | ) | (29,460 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Reclassification of tax effects resulting from the Tax Reform Act, net of tax of $0, $(691), $(78), respectively (a) | — | 691 | 78 | 769 | ||||||||||||
Reclassification of unrealized gains on equity securities, net of tax of $0, $(902), $0, respectively, (b) | — | (3,125 | ) | — | (3,125 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at December 31, 2018, net of tax of $0, $(521), $(1,081) | $ | (12,523 | ) | $ | (1,845 | ) | $ | 1,328 | $ | (13,040 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
|
|
Foreign Currency Translation Adjustment | Unrealized (Losses) Gains on Marketable Securities | Retirement Plans Service Credit | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at December 31, 2018, net of tax of $0, $(521), $(1,081) | $ | (12,523 | ) | $ | (1,845 | ) | $ | 1,328 | $ | (13,040 | ) | |||||
Other comprehensive (loss) income before | (10,991 | ) | 6,015 | 0 | (4,976 | ) | ||||||||||
Amounts reclassified from accumulated other | 0 | (690 | ) | (148 | ) | (838 | ) | |||||||||
Net current period other comprehensive (loss) income, | (10,991 | ) | 5,325 | (148 | ) | (5,814 | ) | |||||||||
Balance at December 31, 2019, net of tax of $0, $946, $(1,124) | $ | (23,514 | ) | $ | 3,480 | $ | 1,180 | $ | (18,854 | ) | ||||||
Other comprehensive income before | 48,903 | 5,839 | 0 | 54,742 | ||||||||||||
Amounts reclassified from accumulated other | 0 | (2,365 | ) | (7 | ) | (2,372 | ) | |||||||||
Net current period other comprehensive income (loss), | 48,903 | 3,474 | (7 | ) | 52,370 | |||||||||||
Balance at December 31, 2020, net of tax of $0, $1,910, $(1,126) | $ | 25,389 | $ | 6,954 | $ | 1,173 | $ | 33,516 | ||||||||
Details about Accumulated Other Comprehensive Income Components | For the year ended | Affected Line Item in the Statements of Operations | ||||||||||||||
| December 31, 2018 | December 31, 2017 | December 31, 2016 | ||||||||||||||
| (in thousands) | ||||||||||||||||
Available-for-sale marketable securities | ||||||||||||||||
Unrealized (losses) gains, net of tax of $21, $297, $255 | $ | (1,337 | ) | $ | 441 | $ | 683 | | Interest income (expense) | | ||||||
Defined benefit pension and postretirement plans: | ||||||||||||||||
Amortization of prior service benefit, net of tax of $71, $154, $190 | 245 | 272 | 321 | (a) | ||||||||||||
|
|
|
|
|
| |||||||||||
Total reclassifications, net of tax of $92, $451, $445 | $ | (1,092 | ) | $ | 713 | $ | 1,004 | Net income | ||||||||
|
|
|
|
|
| |||||||||||
Details about Accumulated Other Comprehensive Income Components | For the year ended | Affected Line Item in the Statements of Operations | ||||||||||||||
December 31, 2020 | December 31, 2019 | December 31, 2018 | ||||||||||||||
(in thousands) | ||||||||||||||||
Available-for-sale marketable securities | ||||||||||||||||
Unrealized gains (losses), net of tax of $665, $192, $21 | $ | 2,365 | $ | 690 | $ | (1,337 | ) | Interest income (expense) | | |||||||
Defined benefit pension and postretirement plans: | ||||||||||||||||
Amortization of prior service benefit, net of tax of $2, $43, $71 | 7 | 148 | 245 | (a) | ||||||||||||
Total reclassifications, net of tax of $667, $235, $92 | $ | 2,372 | $ | 838 | $ | (1,092 | ) | Net income | ||||||||
(a) | The amortization of prior service credit is included in the computation of net periodic pension cost and postretirement benefit; see Note |
J.
liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination andexceeds the fair value of the reporting unit, wasbut not below zero.
Teradyne’s reporting units exceeded their carrying values. In the secondfourth quarter of 2016,2020, Teradyne performed the annual goodwill impairment test, completing a qualitative assessment for the Wireless Test, System Test, and Industrial Automation reporting unit (which is Teradyne’s Wireless Test operating and reportable segment) reduced headcount by 11% as a result of a sharp decline in projected demand attributable to an estimated smaller future wireless test market. The decrease in projected demandunits. There was due to lower forecasted buying from Teradyne’s largest Wireless Test segment customer (who has contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011 through 2015)no impairment as a result of the customer’s numerous operational efficiencies; slower smartphone growth rates;annual test performed in the fourth quarter of 2020. Key assumptions in the goodwill valuation model are forecasted revenues, discount rate, earnings before interest and taxes, and revenue multiples from comparable companies. A change in any of these key assumptions could result in the reporting unit being impaired in a slowdown of new wireless technology adoption. Teradyne considered the headcount reduction and sharp decline in projected demand to be a triggering event for an interimfuture period.
Teradyne allocatedtest, the MiR reporting unit’s estimated fair value exceeded its carrying value by 14%. The MiR goodwill amount is $123.6 million as of December 31, 2019. Key assumptions in the Wireless Testgoodwill valuation model are forecasted revenues, discount rate, earnings before interest and taxes, and revenue multiples from comparable companies. A change in any of these key assumptions could result in the reporting unit to all of its assets and liabilities (including unrecognized intangible assets). The net book value of raw materials inventory was estimated as an approximation of current replacement costs. The fair value of finished goods inventory was estimated at the present value of selling price less direct selling costs and profit on the selling effort. The selling price usedbeing impaired in the inventory fair values was based upon the product gross margins included in Teradyne’s forecast. The fair value of the deferred revenue liability was estimated by assessing the costs required to service the obligation plus a reasonable profit margin. The fair value for personal property assets, which consisted of furniture and fixtures, machinery and equipment, computer equipment, software and leasehold improvements, was estimated using the replacement cost approach, which approximated carrying value. The fair value of intangible assets was estimated using the income approach and, in particular, developed technology and trademarks/trade names were valued using the relief-from-royalty method and customer relationships and customer backlog were valued using the discounted cash flow method. Royalty rates were estimated using rates applicable to wireless testing equipment and other similar technologies. Based upon this allocation, Teradyne determined that the Wireless Test reporting unit goodwill is valued at $8.0 million and recorded an impairment loss of $254.9 million in the second quarter of 2016.
future period.
In the fourth quarter
| Industrial Automation | System Test | Wireless Test | Semiconductor Test | Total | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
Balance at December 31, 2016: | ||||||||||||||||||||
Goodwill | $ | 204,851 | $ | 158,699 | $ | 361,819 | $ | 260,540 | $ | 985,909 | ||||||||||
Accumulated impairment losses | — | (148,183 | ) | (353,843 | ) | (260,540 | ) | (762,566 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 204,851 | 10,516 | 7,976 | — | 223,343 | ||||||||||||||||
Foreign currency translation adjustment | 28,668 | — | — | — | 28,668 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at December 31, 2017: | ||||||||||||||||||||
Goodwill | 233,519 | 158,699 | 361,819 | 260,540 | 1,014,577 | |||||||||||||||
Accumulated impairment losses | — | (148,183 | ) | (353,843 | ) | (260,540 | ) | (762,566 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 233,519 | 10,516 | 7,976 | — | 252,011 | ||||||||||||||||
MiR acquisition | 135,976 | — | — | — | 135,976 | |||||||||||||||
Energid acquisition | 14,394 | — | — | — | 14,394 | |||||||||||||||
Foreign currency translation adjustment | (20,531 | ) | — | — | — | (20,531 | ) | |||||||||||||
Balance at December 31, 2018: | ||||||||||||||||||||
Goodwill | 363,358 | 158,699 | 361,819 | 260,540 | 1,144,416 | |||||||||||||||
Accumulated impairment losses | — | (148,183 | ) | (353,843 | ) | (260,540 | ) | (762,566 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| $ | 363,358 | $ | 10,516 | $ | 7,976 | $ | — | $ | 381,850 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Industrial Automation | Wireless Test | Semiconductor Test | System Test | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at December 31, 2018: | ||||||||||||||||||||
Goodwill | $ | 363,358 | $ | 361,819 | $ | 260,540 | $ | 158,699 | $ | 1,144,416 | ||||||||||
Accumulated impairment losses | — | (353,843 | ) | (260,540 | ) | (148,183 | ) | (762,566 | ) | |||||||||||
| 363,358 | 7,976 | — | 10,516 | 381,850 | ||||||||||||||||
Lemsys acquisition | — | — | 1,428 | — | 1,428 | |||||||||||||||
AutoGuide acquisition | 41,372 | — | — | — | 41,372 | |||||||||||||||
Foreign currency translation adjustment | (8,247 | ) | — | 28 | — | (8,219 | ) | |||||||||||||
Balance at December 31, 2019: | ||||||||||||||||||||
Goodwill | 396,483 | 361,819 | 261,996 | 158,699 | 1,178,997 | |||||||||||||||
Accumulated impairment losses | — | (353,843 | ) | (260,540 | ) | (148,183 | ) | (762,566 | ) | |||||||||||
| 396,483 | 7,976 | 1,456 | 10,516 | 416,431 | ||||||||||||||||
AutoGuide acquisition | (149 | ) | — | — | — | (149 | ) | |||||||||||||
Foreign currency translation adjustment | 37,418 | — | 159 | — | 37,577 | |||||||||||||||
Balance at December 31, 2020: | ||||||||||||||||||||
Goodwill | 433,752 | 361,819 | 262,155 | 158,699 | 1,216,425 | |||||||||||||||
Accumulated impairment losses | — | (353,843 | ) | (260,540 | ) | (148,183 | ) | (762,566 | ) | |||||||||||
| $ | 433,752 | $ | 7,976 | $ | 1,615 | $ | 10,516 | $ | 453,859 | |||||||||||
| December 31, 2018 | ||||||||||||||||
| Gross Carrying Amount (1)(2) | Accumulated Amortization (2) | Foreign Currency Translation Adjustment | Net Carrying Amount | |||||||||||||
| (in thousands) | ||||||||||||||||
Developed technology | $ | 336,308 | $ | (252,080 | ) | $ | (4,079 | ) | $ | 80,149 | ||||||
Customer relationships | 97,153 | (83,448 | ) | (340 | ) | 13,365 | ||||||||||
Tradenames and trademarks | 64,420 | (31,653 | ) | (799 | ) | 31,968 | ||||||||||
Non-compete agreement | 320 | (320 | ) | — | — | |||||||||||
Backlog | 30 | (30 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total intangible assets | $ | 498,231 | $ | (367,531 | ) | $ | (5,218 | ) | $ | 125,482 | ||||||
|
|
|
|
|
|
|
| |||||||||
| December 31, 2017 | ||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net Carrying Amount | |||||||||||||
| (in thousands) | ||||||||||||||||
Developed technology | $ | 270,877 | $ | (226,190 | ) | $ | 1,618 | $ | 46,305 | |||||||
Customer relationships | 92,741 | (83,585 | ) | 171 | 9,327 | |||||||||||
Tradenames and trademarks | 50,100 | (27,120 | ) | 416 | 23,396 | |||||||||||
Non-compete agreement | 320 | (260 | ) | — | 60 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total intangible assets | $ | 414,038 | $ | (337,155 | ) | $ | 2,205 | $ | 79,088 | |||||||
|
|
|
|
|
|
|
| |||||||||
December 31, 2020 | ||||||||||||||||
Gross Carrying Amount | Accumulated Amortization (1) | Foreign Currency Translation Adjustment | Net Carrying Amount | |||||||||||||
(in thousands) | ||||||||||||||||
Developed technology | $ | 272,547 | $ | (210,479 | ) | $ | (1,610 | ) | $ | 60,458 | ||||||
Customer relationships | 66,239 | (54,524 | ) | 305 | 12,020 | |||||||||||
Tradenames and trademarks | 70,120 | (42,344 | ) | 685 | 28,461 | |||||||||||
Total intangible assets | $ | 408,906 | $ | (307,347 | ) | $ | (620 | ) | $ | 100,939 | ||||||
December 31, 2019 | ||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net Carrying Amount | |||||||||||||
(in thousands) | ||||||||||||||||
Developed technology | $ | 361,787 | $ | (279,000 | ) | $ | (5,709 | ) | $ | 77,078 | ||||||
Customer relationships | 75,669 | (59,077 | ) | (455 | ) | 16,137 | ||||||||||
Tradenames and trademarks | 70,120 | (36,671 | ) | (1,184 | ) | 32,265 | ||||||||||
Backlog | 260 | (260 | ) | — | — | |||||||||||
Total intangible assets | $ | 507,836 | $ | (375,008 | ) | $ | (7,348 | ) | $ | 125,480 | ||||||
| (1) |
|
In |
Year | Amortization Expense | |||
| (in thousands) | ||||
2019 | $ | 38,496 | ||
2020 | 24,186 | |||
2021 | 13,945 | |||
2022 | 13,052 | |||
2023 | 12,785 | |||
Thereafter | 23,018 | |||
K.
Year | Amortization Expense | |||
(in thousands) | ||||
2021 | $ | 21,893 | ||
2022 | 21,000 | |||
2023 | 20,504 | |||
2024 | 20,192 | |||
2025 | 11,922 | |||
Thereafter | 5,428 | |||
Commitments
Teradyne leases certain of its office buildings and other facilities under various operating lease arrangements that include renewal options and escalation clauses for adjusting rent payments to reflect changes in price indices. Rental expense for leases with fixed escalation clauses is recognized on a straight line basis over the lease term.
Rental expense for the years ended December 31, 2018, 2017, and 2016 was $19.3 million, $20.2 million, and $19.1 million, respectively.
The following table reflects Teradyne’s non-cancelable operating lease commitments:
| Non-cancelable Lease Commitments | ||||
| (in thousands) | ||||
2019 | $ | 19,570 | ||
2020 | 18,293 | |||
2021 | 13,578 | |||
2022 | 9,693 | |||
2023 | 5,449 | |||
Beyond 2024 | 9,472 | |||
|
| |||
Total | $ | 76,055 | ||
|
| |||
extended warranties beyond the standard duration, itthe revenue is deferred and recognized on a straight linestraight-line basis over the contract period. Related costs are expensed as incurred. As of December 31, 20182020, and 2017,2019, Teradyne had a product warranty accrual of $7.9$16.6 million and $8.2$9.0 million, respectively, included in other accrued liabilities, and revenue deferrals related to extended warranties of $27.4$51.9 million and $24.4$30.7 million, respectively, included in short and long-term deferred revenue and customer advances.
L.
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands, except per share amounts) | ||||||||||||
Net income (loss) for basic and diluted net income per share | $ | 451,779 | $ | 257,692 | $ | (43,421 | ) | |||||
|
|
|
|
|
| |||||||
Weighted average common shares-basic | 187,672 | 198,069 | 202,578 | |||||||||
Effect of dilutive potential common shares: | ||||||||||||
Incremental shares from assumed conversion of convertible notes (1) | 2,749 | 1,298 | — | |||||||||
Convertible note hedge warrant shares (2) | 485 | 112 | — | |||||||||
Restricted stock units | 1,385 | 1,800 | — | |||||||||
Stock options | 278 | 335 | 0 | |||||||||
Employee stock purchase rights | 36 | 27 | 0 | |||||||||
|
|
|
|
|
| |||||||
Dilutive potential common shares | 4,933 | 3,572 | — | |||||||||
|
|
|
|
|
| |||||||
Weighted average common shares-diluted | 192,605 | 201,641 | 202,578 | |||||||||
|
|
|
|
|
| |||||||
Net income (loss) per common share-basic | $ | 2.41 | $ | 1.30 | $ | (0.21 | ) | |||||
|
|
|
|
|
| |||||||
Net income (loss) per common share-diluted | $ | 2.35 | $ | 1.28 | $ | (0.21 | ) | |||||
|
|
|
|
|
| |||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Net income for basic and diluted net income per share | $ | 784,147 | $ | 467,468 | $ | 451,779 | ||||||
Weighted average common shares-basic | 166,120 | 170,425 | 187,672 | |||||||||
Effect of dilutive potential common shares: | ||||||||||||
Incremental shares from assumed conversion of convertible notes (1) | 8,528 | 4,909 | 2,749 | |||||||||
Convertible note hedge warrant shares (2) | 6,989 | 2,698 | 485 | |||||||||
Restricted stock units | 1,264 | 1,236 | 1,385 | |||||||||
Stock options | 131 | 178 | 278 | |||||||||
Employee stock purchase rights | 10 | 13 | 36 | |||||||||
Dilutive potential common shares | 16,922 | 9,034 | 4,933 | |||||||||
Weighted average common shares-diluted | 183,042 | 179,459 | 192,605 | |||||||||
Net income per common share-basic | $ | 4.72 | $ | 2.74 | $ | 2.41 | ||||||
Net income per common share-diluted | $ | 4.28 | $ | 2.60 | $ | 2.35 | ||||||
| (1) | Incremental shares from the assumed conversion of the convertible notes was calculated using the difference between the average Teradyne stock price for the period and the conversion price of |
| (2) | Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of |
The computation of diluted net loss per common share for 2016 excludes the effect of the potential exercise of all outstanding stock options and restricted stock units because Teradyne had a net loss and inclusion would be anti-dilutive.
M.
PLANS
During 2018, Teradyne purchased
In 2019, Teradyne’s projected benefit obligations increased primarily due to actuarial losses of approximately $29.0 million across all pension plans from decreases in discount rates.
| 2018 | 2017 | |||||||||||||||
| United States | Foreign | United States | Foreign | |||||||||||||
| (in thousands) | ||||||||||||||||
Assets and Obligations | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Projected benefit obligation: | ||||||||||||||||
Beginning of year | $ | 363,026 | $ | 39,353 | $ | 353,616 | $ | 60,738 | ||||||||
Service cost | 2,196 | 786 | 2,239 | 818 | ||||||||||||
Interest cost | 8,940 | 687 | 13,151 | 852 | ||||||||||||
Actuarial (gain) loss | (30,136 | ) | 773 | 12,702 | 262 | |||||||||||
Benefits paid | (14,793 | ) | (741 | ) | (18,682 | ) | (994 | ) | ||||||||
Retiree annuity purchase | (151,341 | ) | — | — | — | |||||||||||
Liability loss due to settlement | 345 | — | — | — | ||||||||||||
Settlements | — | — | — | (28,560 | ) | |||||||||||
Admin expenses paid | — | — | — | (40 | ) | |||||||||||
Non-U.S. currency movement | — | (1,712 | ) | — | 6,277 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
End of year | 178,237 | 39,146 | 363,026 | 39,353 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets: | ||||||||||||||||
Beginning of year | 324,506 | 1,307 | 307,304 | 27,571 | ||||||||||||
Company contributions | 2,587 | 822 | 4,462 | 883 | ||||||||||||
Actual return on plan assets | (16,658 | ) | 50 | 31,422 | 737 | |||||||||||
Benefits paid | (14,793 | ) | (741 | ) | (18,682 | ) | (994 | ) | ||||||||
Retiree annuity purchase | (151,341 | ) | — | — | — | |||||||||||
Settlements | — | — | — | (28,560 | ) | |||||||||||
Admin expenses paid | — | — | — | (40 | ) | |||||||||||
Non-U.S. currency movement | — | (38 | ) | — | 1,710 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
End of year | 144,301 | 1,400 | 324,506 | 1,307 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Funded status | $ | (33,936 | ) | $ | (37,746 | ) | $ | (38,520 | ) | $ | (38,046 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
2020 | 2019 | |||||||||||||||
United States | Foreign | United States | Foreign | |||||||||||||
(in thousands) | ||||||||||||||||
Assets and Obligations | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Projected benefit obligation: | ||||||||||||||||
Beginning of year | $ | 203,791 | $ | 43,952 | $ | 178,237 | $ | 39,146 | ||||||||
Service cost | 1,773 | 907 | 1,608 | 751 | ||||||||||||
Interest cost | 5,770 | 516 | 7,189 | 691 | ||||||||||||
Actuarial loss | 24,671 | 2,951 | 24,447 | 4,520 | ||||||||||||
Benefits paid | (9,844 | ) | (1,299 | ) | (7,690 | ) | (836 | ) | ||||||||
Retiree annuity purchase | (24,379 | ) | 0 | — | — | |||||||||||
Liability loss due to settlement | 451 | 0 | — | — | ||||||||||||
Non-U.S. currency movement | 0 | 3,961 | — | (320 | ) | |||||||||||
End of year | 202,233 | 50,988 | 203,791 | 43,952 | ||||||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets: | ||||||||||||||||
Beginning of year | 166,932 | 1,586 | 144,301 | 1,400 | ||||||||||||
Actual return on plan assets | 23,048 | 67 | 27,516 | 64 | ||||||||||||
Company contributions | 3,098 | 1,079 | 2,805 | 923 | ||||||||||||
Benefits paid | (9,844 | ) | (988 | ) | (7,690 | ) | (836 | ) | ||||||||
Retiree annuity purchase | (24,379 | ) | 0 | — | — | |||||||||||
Non-U.S. currency movement | 0 | 112 | — | 35 | ||||||||||||
End of year | 158,855 | 1,856 | 166,932 | 1,586 | ||||||||||||
Funded status | $ | (43,378 | ) | $ | (49,132 | ) | $ | (36,859 | ) | $ | (42,366 | ) | ||||
| 2018 | 2017 | |||||||||||||||
| United States | Foreign | United States | Foreign | |||||||||||||
| (in thousands) | ||||||||||||||||
Retirement plans assets | $ | 16,883 | $ | — | $ | 17,491 | $ | — | ||||||||
Accrued employees’ compensation and withholdings | (2,676 | ) | (852 | ) | (2,524 | ) | (863 | ) | ||||||||
Retirement plans liabilities | (48,143 | ) | (36,894 | ) | (53,487 | ) | (37,183 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Funded status | $ | (33,936 | ) | $ | (37,746 | ) | $ | (38,520 | ) | $ | (38,046 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
2020 | 2019 | |||||||||||||||
United States | Foreign | United States | Foreign | |||||||||||||
(in thousands) | ||||||||||||||||
Retirement plans assets | $ | 17,468 | $ | 0 | $ | 18,457 | $ | — | ||||||||
Accrued employees’ compensation and withholdings | (3,273 | ) | (1,019 | ) | (2,826 | ) | (922 | ) | ||||||||
Retirement plans liabilities | (57,573 | ) | (48,113 | ) | (52,490 | ) | (41,444 | ) | ||||||||
Funded status | $ | (43,378 | ) | $ | (49,132 | ) | $ | (36,859 | ) | $ | (42,366 | ) | ||||
| 2018 | 2017 | |||||||||||||||
| United States | Foreign | United States | Foreign | |||||||||||||
| (in thousands) | ||||||||||||||||
Prior service cost, before tax | $ | — | $ | — | $ | 58 | $ | — | ||||||||
Deferred taxes | 560 | — | 539 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total recognized in other comprehensive income, net of tax | $ | 560 | $ | — | $ | 597 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
2020 | 2019 | |||||||||||||||
United States | Foreign | United States | Foreign | |||||||||||||
(in thousands) | ||||||||||||||||
Deferred taxes related to prior service cost recognized in other comprehensive income | $ | 560 | $ | 0 | $ | 560 | $ | — | ||||||||
| 2018 | 2017 | |||||||||||||||
| United States | Foreign | United States | Foreign | |||||||||||||
| (in millions) | ||||||||||||||||
Projected benefit obligation | $ | 50.8 | $ | 39.1 | $ | 56.0 | $ | 39.4 | ||||||||
Accumulated benefit obligation | 48.6 | 35.6 | 51.6 | 34.7 | ||||||||||||
Fair value of plan assets | — | 1.4 | — | 1.3 | ||||||||||||
2020 | 2019 | |||||||||||||||
United States | Foreign | United States | Foreign | |||||||||||||
(in millions) | ||||||||||||||||
Projected benefit obligation | $ | 60.8 | $ | 51.0 | $ | 55.3 | $ | 44.0 | ||||||||
Accumulated benefit obligation | 58.5 | 46.5 | 53.2 | 39.9 | ||||||||||||
Fair value of plan assets | 0 | 1.9 | — | 1.6 | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||||||||||||||
| United States | Foreign | United States | Foreign | United States | Foreign | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Components of Net Periodic Pension (Income) Cost: | ||||||||||||||||||||||||
Service cost | $ | 2,196 | $ | 786 | $ | 2,239 | $ | 818 | $ | 2,302 | $ | 761 | ||||||||||||
Interest cost | 8,940 | 687 | 13,151 | 852 | 13,630 | 1,185 | ||||||||||||||||||
Expected return on plan assets | (9,049 | ) | (19 | ) | (12,008 | ) | (165 | ) | (13,830 | ) | (443 | ) | ||||||||||||
Amortization of prior service cost | 58 | — | 70 | — | 96 | — | ||||||||||||||||||
Net actuarial (gain) loss | (4,429 | ) | 743 | (6,712 | ) | (310 | ) | (4,013 | ) | 815 | ||||||||||||||
Settlement loss | 345 | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total net periodic pension (income) cost | $ | (1,939 | ) | $ | 2,197 | $ | (3,260 | ) | $ | 1,195 | $ | (1,815 | ) | $ | 2,318 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: | ||||||||||||||||||||||||
Reversal of amortization items: | ||||||||||||||||||||||||
Prior service cost | (58 | ) | — | (70 | ) | — | (96 | ) | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total recognized in other comprehensive income | (58 | ) | — | (70 | ) | — | (96 | ) | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total recognized in net periodic pension (income) cost and other comprehensive income | $ | (1,997 | ) | $ | 2,197 | $ | (3,330 | ) | $ | 1,195 | $ | (1,911 | ) | $ | 2,318 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
United States | Foreign | United States | Foreign | United States | Foreign | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Components of Net Periodic Pension Cost (Income): | ||||||||||||||||||||||||
Service cost | $ | 1,773 | $ | 907 | $ | 1,608 | $ | 751 | $ | 2,196 | $ | 786 | ||||||||||||
Interest cost | 5,770 | 516 | 7,189 | 691 | 8,940 | 687 | ||||||||||||||||||
Expected return on plan assets | (4,840 | ) | (65 | ) | (6,042 | ) | (29 | ) | (9,049 | ) | (19 | ) | ||||||||||||
Amortization of prior service cost | — | — | — | — | 58 | — | ||||||||||||||||||
Net actuarial loss (gain) | 6,463 | 2,949 | 2,973 | 4,485 | (4,429 | ) | 743 | |||||||||||||||||
Settlement loss | 451 | 0 | — | — | 345 | — | ||||||||||||||||||
Total net periodic pension cost (income) | $ | 9,617 | $ | 4,307 | $ | 5,728 | $ | 5,898 | $ | (1,939 | ) | $ | 2,197 | |||||||||||
Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: | ||||||||||||||||||||||||
Reversal of amortization items: | ||||||||||||||||||||||||
Prior service cost | — | 0 | — | — | (58 | ) | — | |||||||||||||||||
Total recognized in other comprehensive income | — | 0 | — | — | (58 | ) | — | |||||||||||||||||
Total recognized in net periodic pension cost (income) and other comprehensive income | $ | 9,617 | $ | 4,307 | $ | 5,728 | $ | 5,898 | $ | (1,997 | ) | $ | 2,197 | |||||||||||
| 2018 | 2017 | 2016 | ||||||||||||||||||||||
| United States | Foreign | United States | Foreign | United States | Foreign | |||||||||||||||||||
Discount rate | 3.4 | % | 1.8 | % | 3.9 | % | 1.8 | % | 4.0 | % | 2.3 | % | ||||||||||||
Expected return on plan assets | 4.3 | 1.5 | 4.0 | 2.0 | 4.8 | 2.0 | ||||||||||||||||||
Salary progression rate | 2.3 | 2.7 | 2.6 | 2.7 | 2.7 | 3.2 | ||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
United States | Foreign | United States | Foreign | United States | Foreign | |||||||||||||||||||
Discount rate | 2.8 | % | 1.1 | % | 4.1 | % | 1.8 | % | 3.4 | % | 1.8 | % | ||||||||||||
Expected return on plan assets | 3.0 | 3.8 | 4.3 | 2.0 | 4.3 | 1.5 | ||||||||||||||||||
Salary progression rate | 2.6 | 2.5 | 2.3 | 2.5 | 2.3 | 2.7 | ||||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| United States | Foreign | United States | Foreign | |||||||||||||
Discount rate | 4.1 | % | 1.8 | % | 3.4 | % | 1.8 | % | ||||||||
Salary progression rate | 2.3 | 2.6 | 2.3 | 2.7 | ||||||||||||
2020 | 2019 | |||||||||||||||
United States | Foreign | United States | Foreign | |||||||||||||
Discount rate | 2.2 | % | 0.7 | % | 3.0 | % | 1.1 | % | ||||||||
Salary progression rate | 2.4 | 2.3 | 2.6 | 2.5 | ||||||||||||
2019.
| 2018 | 2017 | |||||||||||||||
| United States | Foreign | United States | Foreign | |||||||||||||
Fixed income securities | 94.0 | % | — | % | 88.1 | % | — | % | ||||||||
Equity securities | 5.0 | — | 9.9 | — | ||||||||||||
Other | 1.0 | 100.0 | 2.0 | 100.0 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
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| |||||||||
2019:
2020 | 2019 | |||||||||||||||
United States | Foreign | United States | Foreign | |||||||||||||
Fixed income securities | 94.0 | % | — | % | 94.0 | % | — | % | ||||||||
Equity securities | 5.0 | — | 5.0 | — | ||||||||||||
Other | 1.0 | 100.0 | 1.0 | 100.0 | ||||||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
an investment structure for managing U.S. Plan assets, including setting the asset allocation ranges, which are expected to provide an appropriate level of overall diversification required to maximize the long-term return on plan assets for a prudent and reasonable level of risk given prevailing market conditions, total investment return over the long term, and preservation of capital, while maintaining sufficient liquidity to pay the benefits of the U.S. Plan. The investment portfolio will not, at any time, have a direct investment in Teradyne stock. It may have indirect investment in Teradyne stock, if one of the funds selected by the investment manager invests in Teradyne stock. In developing the asset allocation ranges, third party asset allocation studies are periodically performed that consider the current and expected positions of the plan assets and funded status. Based on this study and other appropriate information, the Fiduciary Committee establishes asset allocation ranges taking into account acceptable risk targets and associated returns. The investment return objectives are to avoid excessive volatility and produce a rate of return that at least matches the Policy Index identified below. The manager’s investment performance is reviewed at least annually. Results for the total portfolio and for each major category of assets are evaluated in comparison with appropriate market indices and the Policy Index.
|
| Target Allocation | ||||
| U.S. corporate fixed income | Bloomberg Barclays U.S. Corporate A or Better Index | 75 | % | |||
| Global equity | MSCI World Minimum Volatility Index | 5 | ||||
| U.S. government fixed income | Bloomberg Barclays U.S. | 14 | ||||
| High yield fixed income | Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index | 5 | ||||
| Cash | Citigroup Three Month U.S. Treasury Bill Index | 1 | ||||
In 2017, the U.K. defined benefit pension was terminated and the obligations and assets of the plan were transferred to an insurance company.
| December 31, 2018 | ||||||||||||||||||||||||||||||||
| United States | Foreign | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||||||||||
Corporate debt securities | $ | — | $ | 115,424 | $ | — | $ | 115,424 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
U.S. government securities | — | 20,176 | — | 20,176 | — | — | — | — | ||||||||||||||||||||||||
Global equity | — | 7,252 | — | 7,252 | — | — | — | — | ||||||||||||||||||||||||
Other | — | — | — | — | — | 1,400 | — | 1,400 | ||||||||||||||||||||||||
Cash and cash equivalents | 1,449 | — | — | 1,449 | — | — | — | — | ||||||||||||||||||||||||
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| |||||||||||||||||
Total | $ | 1,449 | $ | 142,852 | $ | — | $ | 144,301 | $ | — | $ | 1,400 | $ | — | $ | 1,400 | ||||||||||||||||
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December 31, 2020 | ||||||||||||||||||||||||||||||||
United States | Foreign | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level | Total | Level | Level 2 | Level | Total | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||||||||||
Corporate debt securities | $ | 0 | $ | 127,098 | $ | 0 | $ | 127,098 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
U.S. government securities | 0 | 22,250 | 0 | 22,250 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Global equity | 0 | 7,925 | 0 | 7,925 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Other | 0 | 0 | 0 | 0 | 0 | 1,856 | 0 | 1,856 | ||||||||||||||||||||||||
Cash and cash equivalents | 1,582 | 0 | 0 | 1,582 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Total | $ | 1,582 | $ | 157,273 | $ | 0 | $ | 158,855 | $ | 0 | $ | 1,856 | $ | 0 | $ | 1,856 | ||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||||||||||
United States | Foreign | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level | Total | Level | Level 2 | Level | Total | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||||||||||
Corporate debt securities | $ | — | $ | 133,792 | $ | — | $ | 133,792 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
U.S. government securities | — | 23,186 | — | 23,186 | — | — | — | — | ||||||||||||||||||||||||
Global equity | — | 8,344 | — | 8,344 | — | — | — | — | ||||||||||||||||||||||||
Other | — | — | — | — | — | 1,586 | — | 1,586 | ||||||||||||||||||||||||
Cash and cash equivalents | 1,610 | — | — | 1,610 | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 1,610 | $ | 165,322 | $ | — | $ | 166,932 | $ | — | $ | 1,586 | $ | — | $ | 1,586 | ||||||||||||||||
| December 31, 2017 | ||||||||||||||||||||||||||||||||
| United States | Foreign | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||||||||||
Corporate debt securities | $ | — | $ | 260,294 | $ | — | $ | 260,294 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
U.S. government securities | — | 25,709 | — | 25,709 | — | — | — | — | ||||||||||||||||||||||||
Global equity | — | 32,120 | — | 32,120 | — | — | — | — | ||||||||||||||||||||||||
Group annuity insurance contracts | — | — | 3,166 | 3,166 | — | — | — | — | ||||||||||||||||||||||||
Other | — | — | — | — | — | 1,307 | — | 1,307 | ||||||||||||||||||||||||
Cash and cash equivalents | 3,217 | — | — | 3,217 | — | — | — | — | ||||||||||||||||||||||||
|
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| |||||||||||||||||
Total | $ | 3,217 | $ | 318,123 | $ | 3,166 | $ | 324,506 | $ | — | $ | 1,307 | $ | — | $ | 1,307 | ||||||||||||||||
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| |||||||||||||||||
The pension plan assets identified as Level 3 above are related to group annuity insurance contracts held by the U.S. Plan.
Changes in the fair value of Level 3 group annuity insurance contracts for the years ended December 31, 2018 and 2017 were as follows:
| Group Annuity Insurance Contracts | ||||
| (in thousands) | ||||
Balance at December 31, 2016 | $ | 29,456 | ||
Settlements | (28,560 | ) | ||
Interest and market value adjustments | 959 | |||
Benefits paid | (244 | ) | ||
Other | (61 | ) | ||
Non-U.S. currency movement | 1,616 | |||
|
| |||
Balance at December 31, 2017 | 3,166 | |||
Transfer out of Level 3 | (2,658 | ) | ||
Purchases of retiree annuity insurance contracts | (512 | ) | ||
Interest and market value adjustments | 59 | |||
Benefits paid | (40 | ) | ||
Other | (15 | ) | ||
|
| |||
Balance at December 31, 2018 | $ | — | ||
|
| |||
2019 2020 2021 2022 2023 2024-2028 Assets and Obligations Change in benefit obligation: Projected benefit obligation: Beginning of year Service cost Interest cost Actuarial loss Special termination benefits Benefits paid End of year Change in plan assets: Fair value of plan assets: Beginning of year Company contributions Benefits paid End of year Funded status United States Foreign (in thousands) $ 6,903 $ 874 7,133 1,522 8,026 905 8,863 888 9,584 1,199 57,120 5,921 $ 8,902 $ 1,058 8,782 1,063 9,189 1,313 9,815 1,192 10,374 1,140 54,145 7,053 2018 2017 (in thousands) $ 6,177 $ 5,510 39 34 196 201 25 398 3,708 591 (889 ) (557 ) 9,256 6,177 — — 889 557 (889 ) (557 ) — — $ (9,256 ) $ (6,177 ) $ 9,003 $ 9,256 57 41 240 347 421 717 (1,205 ) (1,358 ) 8,515 9,003 0 — 1,205 1,358 (1,205 ) (1,358 ) 0 — $ (8,515 ) $ (9,003 )
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Accrued employees’ compensation and withholdings | $ | (1,310 | ) | $ | (591 | ) | ||
Retirement plans liability | (7,946 | ) | (5,586 | ) | ||||
|
|
|
| |||||
Funded status | $ | (9,256 | ) | $ | (6,177 | ) | ||
|
|
|
| |||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Accrued employees’ compensation and withholdings | $ | (1,161 | ) | $ | (1,231 | ) | ||
Retirement plans liability | (7,354 | ) | (7,772 | ) | ||||
Funded status | $ | (8,515 | ) | $ | (9,003 | ) | ||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Prior service credit, before tax | $ | (249 | ) | $ | (622 | ) | ||
Deferred taxes | (1,641 | ) | (1,472 | ) | ||||
|
|
|
| |||||
Total recognized in other comprehensive income, net of tax | $ | (1,890 | ) | $ | (2,094 | ) | ||
|
|
|
| |||||
The estimated portion of prior service credit remaining in accumulated other comprehensive income that is expected to be recognized as a component of net periodic postretirement benefit income in 2019 is $(0.2) million.
2020 | 2019 | |||||||
(in thousands) | ||||||||
Prior service credit, before tax | $ | (49 | ) | $ | (58 | ) | ||
Deferred taxes | (1,686 | ) | (1,684 | ) | ||||
Total recognized in other comprehensive income, net of tax | $ | (1,735 | ) | $ | (1,742 | ) | ||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Components of Net Periodic Postretirement Benefit Cost (income): | ||||||||||||
Service cost | $ | 39 | $ | 34 | $ | 37 | ||||||
Interest cost | 196 | 201 | 218 | |||||||||
Amortization of prior service credit | (373 | ) | (496 | ) | (607 | ) | ||||||
Net actuarial loss | 25 | 398 | 5 | |||||||||
Special termination benefits | 3,708 | 591 | — | |||||||||
|
|
|
|
|
| |||||||
Total net periodic postretirement benefit cost (income) | 3,595 | 728 | (347 | ) | ||||||||
|
|
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|
|
| |||||||
Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: | ||||||||||||
Prior service cost | — | — | (93 | ) | ||||||||
Reversal of amortization items: | ||||||||||||
Prior service credit | 373 | 496 | 607 | |||||||||
|
|
|
|
|
| |||||||
Total recognized in other comprehensive income | 373 | 496 | 514 | |||||||||
|
|
|
|
|
| |||||||
Total recognized in net periodic postretirement benefit cost (income) and other comprehensive income | $ | 3,968 | $ | 1,224 | $ | 167 | ||||||
|
|
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|
|
| |||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Components of Net Periodic Postretirement Benefit Cost (income): | ||||||||||||
Service cost | $ | 57 | $ | 41 | $ | 39 | ||||||
Interest cost | 240 | 347 | 196 | |||||||||
Amortization of prior service credit | (9 | ) | (191 | ) | (373 | ) | ||||||
Net actuarial loss | 421 | 717 | 25 | |||||||||
Special termination benefits | 0 | — | 3,708 | |||||||||
Total net periodic postretirement benefit cost | 709 | 914 | 3,595 | |||||||||
Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: | ||||||||||||
Reversal of amortization items: | ||||||||||||
Prior service credit | 9 | 191 | 373 | |||||||||
Total recognized in other comprehensive income | 9 | 191 | 373 | |||||||||
Total recognized in net periodic postretirement cost and other comprehensive income | $ | 718 | $ | 1,105 | $ | 3,968 | ||||||
| 2018 | 2017 | 2016 | ||||||||||
Discount rate | 3.4 | % | 3.9 | % | 3.9 | % | ||||||
Initial health care cost trend rate | 7.9 | 7.3 | 7.5 | |||||||||
Ultimate health care cost trend rate | 4.5 | 5.0 | 5.0 | |||||||||
Year in which ultimate health care cost trend rate is reached | 2026 | 2023 | 2023 | |||||||||
2020 | 2019 | 2018 | ||||||||||
Discount rate | 3.0 | % | 4.0 | % | 3.4 | % | ||||||
Initial health care cost trend rate | 7.1 | 7.5 | 7.9 | |||||||||
Ultimate health care cost trend rate | 4.5 | 4.5 | 4.5 | |||||||||
Year in which ultimate health care cost trend rate is reached | 2026 | 2026 | 2026 | |||||||||
| 2018 | 2017 | 2016 | ||||||||||
Discount rate | 4.0 | % | 3.4 | % | 3.9 | % | ||||||
Initial medical trend | 7.5 | 7.9 | 7.3 | |||||||||
Ultimate health care trend | 4.5 | 4.5 | 5.0 | |||||||||
Medical cost trend rate decrease to ultimate rate in year | 2026 | 2026 | 2023 | |||||||||
Assumed health care trend rates could have a significant effect on the amounts reported for health care plans. A one percentage point change in the assumed health care cost trend rates for the year ended December 31, 2018 would have the following effects:
| 1 Percentage Point Increase | 1 Percentage Point Decrease | |||||||
| (in thousands) | ||||||||
Effect on total service and interest cost components | $ | 7 | $ | (7 | ) | |||
Effect on postretirement benefit obligations | 181 | (171 | ) | |||||
2019 2020 2021 2022 2023 2024-2028 2.2 % 3.0 % 4.0 % 7.3 7.1 7.5 4.5 4.5 4.5 2029 2026 2026 Benefit Payments (in thousands) $ 1,310 1,234 1,181 984 811 2,364 O. $ 1,161 961 786 646 533 1,601 stock options,time-based restricted stock units, and performance-based restricted stock units, stock options and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).Stock options to purchase Teradyne’s common stock at 100% of the fair market value on the grant date vest in equal annual installments over four years from the grant date and have a maximum term of seven years.in full,after a one-year period, with 100% of the award vesting on the earlier of (a) the first anniversary of the grant date or (b) the date of the following year’s Annual Meeting of Shareholders. Teradyne expenses the cost of the restricted stock unit awards subject to time basedtime-based vesting, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restrictions lapse.Teradyne grants performance-baseditsTeradyne’s executive officers withmay have a performance metric based on relative total shareholder return (“TSR”). For TSR grants issued in 2018, 2017, and 2016, Teradyne’s three-yearthree-year TSR performance is measured against the New York Stock Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 200% to 0% of the target shares
the executive officer remains an
In January 2018, 2017, and 2016, Teradyne
| 2018 | 2017 | 2016 | ||||||||||
Risk-free interest rate | 2.2 | % | 1.5 | % | 1.0 | % | ||||||
Teradyne volatility-historical | 26.8 | % | 26.6 | % | 27.0 | % | ||||||
NYSE Composite Index volatility-historical | 12.4 | % | 13.4 | % | 13.1 | % | ||||||
Dividend yield | 0.8 | % | 1.0 | % | 1.2 | % | ||||||
2020 | 2019 | 2018 | ||||||||||
Risk-free interest rate | 1.5 | % | 2.6 | % | 2.2 | % | ||||||
Teradyne volatility-historical | 34.9 | % | 31.9 | % | 26.8 | % | ||||||
NYSE Composite Index volatility-historical | 11.4 | % | 11.9 | % | 12.4 | % | ||||||
Dividend yield | 0.6 | % | 1.0 | % | 0.8 | % | ||||||
During 2018, 2017, and 2016, Teradyne granted 0.1 million of PBIT PRSUs with a grant date fair value of $70.94, $36.88 and $46.62, $27.72respectively.
During 2018, 2017, and 2016, Teradyne granted 0.6 million, 0.8 million, and 1.2 million of service-based restricted stock unit awards to employees, respectively, at a weighted average grant date fair value of $45.92, $28.19, and $18.88, respectively.
During 2018, 2017, and 2016, Teradyne granted 0.1 million of service-based restricted stock unit awards to non-employee directors at a weighted average grant date fair value of $35.81, $34.48, and $18.71, respectively.
During 2018, 2017, and 2016, Teradyne granted 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $20.93, $10.64, and $12.17, $7.13, and $5.30, respectively.
| 2018 | 2017 | 2016 | ||||||||||
Expected life (years) | 5.0 | 5.0 | 5.0 | |||||||||
Risk-free interest rate | 2.4 | % | 2.0 | % | 1.4 | % | ||||||
Volatility-historical | 26.4 | % | 27.8 | % | 32.9 | % | ||||||
Dividend yield | 0.80 | % | 1.00 | % | 1.20 | % | ||||||
2020 | 2019 | 2018 | ||||||||||
Expected life (years) | 5.0 | 5.0 | 5.0 | |||||||||
Risk-free interest rate | 1.5 | % | 2.5 | % | 2.4 | % | ||||||
Volatility-historical | 32.0 | % | 30.1 | % | 26.4 | % | ||||||
Dividend yield | 0.5 | % | 1.0 | % | 0.8 | % | ||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Restricted Stock Units: | ||||||||||||
Non-vested at January 1 | 3,174 | 3,778 | 4,070 | |||||||||
Awarded | 790 | 939 | 1,471 | |||||||||
Vested | (1,382 | ) | (1,434 | ) | (1,530 | ) | ||||||
Forfeited | (128 | ) | (109 | ) | (233 | ) | ||||||
|
|
|
|
|
| |||||||
Non-vested at December 31 | 2,454 | 3,174 | 3,778 | |||||||||
|
|
|
|
|
| |||||||
Stock Options: | ||||||||||||
Outstanding at January 1 | 531 | 926 | 1,121 | |||||||||
Granted | 69 | 111 | 130 | |||||||||
Exercised | (94 | ) | (501 | ) | (324 | ) | ||||||
Expired | — | (5 | ) | (2 | ) | |||||||
|
|
|
|
|
| |||||||
Outstanding at December 31 | 506 | 531 | 926 | |||||||||
|
|
|
|
|
| |||||||
Vested and expected to vest at December 31 | 506 | 531 | 926 | |||||||||
|
|
|
|
|
| |||||||
Exercisable at December 31 | 256 | 233 | 598 | |||||||||
|
|
|
|
|
| |||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Restricted Stock Units: | ||||||||||||
Non-vested at January 1 | 2,269 | 2,454 | 3,174 | |||||||||
Awarded | 616 | 1,139 | 790 | |||||||||
Vested | (1,028 | ) | (1,237 | ) | (1,382 | ) | ||||||
Forfeited | (68 | ) | (87 | ) | (128 | ) | ||||||
Non-vested at December 31 | 1,789 | 2,269 | 2,454 | |||||||||
Stock Options: | ||||||||||||
Outstanding at January 1 | 319 | 506 | 531 | |||||||||
Granted | 56 | 102 | 69 | |||||||||
Exercised | (159 | ) | (280 | ) | (94 | ) | ||||||
Forfeited | — | (7 | ) | — | ||||||||
Expired | — | (2 | ) | — | ||||||||
Outstanding at December 31 | 216 | 319 | 506 | |||||||||
Vested and expected to vest at December 31 | 216 | 319 | 506 | |||||||||
Exercisable at December 31 | 27 | 85 | 256 | |||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Shares available: | ||||||||||||
Available for grant at January 1 | 8,605 | 9,546 | 10,914 | |||||||||
Options granted | (69 | ) | (111 | ) | (130 | ) | ||||||
Restricted stock units awarded | (790 | ) | (939 | ) | (1,471 | ) | ||||||
Restricted stock units forfeited | 128 | 109 | 233 | |||||||||
|
|
|
|
|
| |||||||
Available for grant at December 31 | 7,874 | 8,605 | 9,546 | |||||||||
|
|
|
|
|
| |||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Shares available: | ||||||||||||
Available for grant at January 1 | 6,727 | 7,874 | 8,605 | |||||||||
Options granted | (56 | ) | (102 | ) | (69 | ) | ||||||
Options forfeited | — | 7 | ||||||||||
Restricted stock units awarded | (616 | ) | (1,139 | ) | (790 | ) | ||||||
Restricted stock units forfeited | 68 | 87 | 128 | |||||||||
Available for grant at December 31 | 6,123 | 6,727 | 7,874 | |||||||||
| 2018 | 2017 | 2016 | ||||||||||
Non-vested at January 1 | $ | 21.71 | $ | 18.27 | $ | 17.66 | ||||||
Awarded | 45.99 | 28.91 | 18.95 | |||||||||
Vested | 20.20 | 17.90 | 17.36 | |||||||||
Forfeited | 24.67 | 20.35 | 17.80 | |||||||||
Non-vested at December 31 | $ | 29.22 | $ | 21.71 | $ | 18.27 | ||||||
2020 | 2019 | 2018 | ||||||||||
Non-vested at January 1 | $ | 35.58 | $ | 29.22 | $ | 21.71 | ||||||
Awarded | 72.76 | 39.08 | 45.99 | |||||||||
Vested | 31.53 | 23.59 | 20.20 | |||||||||
Forfeited | 45.36 | 35.60 | 24.67 | |||||||||
Non-vested at December 31 | $ | 47.84 | $ | 35.58 | $ | 29.22 | ||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Vested | $ | 63,688 | $ | 40,649 | $ | 30,008 | ||||||
Outstanding | 77,015 | 132,875 | 95,952 | |||||||||
Expected to vest | 77,187 | 130,594 | 91,871 | |||||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Vested | $ | 71,582 | $ | 46,110 | $ | 63,688 | ||||||
Outstanding | 214,509 | 154,752 | 77,015 | |||||||||
Expected to vest | 210,301 | 152,374 | 77,187 | |||||||||
| 2018 | 2017 | 2016 | ||||||||||
Outstanding | 0.92 | 1.00 | 1.04 | |||||||||
Expected to vest | 0.91 | 0.99 | 1.03 | |||||||||
2020 | 2019 | 2018 | ||||||||||
Outstanding | 0.96 | 1.02 | 0.92 | |||||||||
Expected to vest | 0.96 | 1.02 | 0.91 | |||||||||
| 2018 | ||||
Outstanding at January 1 | $ | 13.92 | ||
Options granted | 47.70 | |||
Options exercised | 10.89 | |||
Outstanding at December 31 | 19.06 | |||
Exercisable at December 31 | 8.31 | |||
2020 | ||||
Outstanding at January 1 | $ | 29.91 | ||
Options granted | 72.61 | |||
Options exercised | 23.77 | |||
Options forfeited | 0— | |||
Options cancelled | 0— | |||
Outstanding at December 31 | 45.59 | |||
Exercisable at December 31 | 23.51 | |||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Exercised | $ | 2,960 | $ | 8,035 | $ | 3,729 | ||||||
Outstanding | 7,359 | 14,831 | 12,468 | |||||||||
Vested and expected to vest | 7,359 | 14,831 | 12,468 | |||||||||
Exercisable | 5,905 | 9,076 | 10,217 | |||||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Exercised | $ | 9,682 | $ | 9,232 | $ | 2,960 | ||||||
Outstanding | 16,083 | 12,218 | 7,359 | |||||||||
Vested and expected to vest | 13,499 | 7,701 | 7,359 | |||||||||
Exercisable | 2,584 | 4,517 | 5,905 | |||||||||
| 2018 | 2017 | 2016 | ||||||||||
Outstanding | 3.6 | 4.1 | 3.9 | |||||||||
Vested and expected to vest | 3.6 | 4.1 | 3.9 | |||||||||
Exercisable | 2.4 | 2.8 | 3.2 | |||||||||
Significant option groups outstanding at December 31, 2018 and related weighted average price and remaining contractual life information follow:
| Options Outstanding | Options Exercisable | |||||||||||||||||||
Range Of Exercise Prices | Weighted- Average Remaining Contractual Life (Years) | Shares | Weighted- Average Exercise Price | Shares | Weighted- Average Exercise Price | |||||||||||||||
| (shares in thousands) | ||||||||||||||||||||
$1.48 – $2.58 | 1.23 | 67 | $ | 1.83 | 67 | $ | 1.83 | |||||||||||||
$2.67 – $3.28 | 2.20 | 103 | 2.69 | 103 | 2.69 | |||||||||||||||
$7.71 – $19.43 | 3.41 | 166 | 18.59 | 68 | 18.02 | |||||||||||||||
$28.56 – $47.70 | 5.62 | 170 | 36.30 | 18 | 28.56 | |||||||||||||||
|
|
|
| |||||||||||||||||
| 506 | $ | 19.06 | 256 | $ | 8.31 | |||||||||||||||
|
|
|
| |||||||||||||||||
2020 | 2019 | 2018 | ||||||||||
Outstanding | 4.6 | 4.2 | 3.6 | |||||||||
Vested and expected to vest | 4.9 | 5.0 | 3.6 | |||||||||
Exercisable | 2.5 | 2.1 | 2.4 | |||||||||
In July 2017, 0.3 million shares of common stock were issued to employees who participated in the plan during the first half of 2017 at the price of $25.53 per share. In January 2018, Teradyne issued 0.3 million shares of common stock to employees who participated in the plan during the second half of 2017 at the price of $35.59 per share.
In July 2016, 0.5 million shares of common stock were issued to employees who participated in the plan during the first half of 2016 at the price of $16.74 per share. In January 2017, Teradyne issued 0.4 million shares of common stock to employees who participated in the plan during the second half of 2016 at the price of $21.59 per share.
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Cost of revenues | $ | 3,129 | $ | 3,212 | $ | 3,153 | ||||||
Engineering and development | 9,181 | 9,370 | 9,458 | |||||||||
Selling and administrative | 21,267 | 21,515 | 18,139 | |||||||||
|
|
|
|
|
| |||||||
Stock-based compensation | 33,577 | 34,097 | 30,750 | |||||||||
Income tax benefit | (12,036 | ) | (10,462 | ) | (8,752 | ) | ||||||
|
|
|
|
|
| |||||||
Total stock-based compensation expense after income taxes | $ | 21,541 | $ | 23,635 | $ | 21,998 | ||||||
|
|
|
|
|
| |||||||
P.2018:
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Cost of revenues | $ | 4,227 | $ | 3,480 | $ | 3,129 | ||||||
Engineering and development | 12,039 | 9,913 | 9,181 | |||||||||
Selling and administrative | 28,640 | 24,504 | 21,267 | |||||||||
Stock-based compensation | 44,906 | 37,897 | 33,577 | |||||||||
Income tax benefit | (13,060 | ) | (8,360 | ) | (12,036 | ) | ||||||
Total stock-based compensation expense after income taxes | $ | 31,846 | $ | 29,537 | $ | 21,541 | ||||||
Q.
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Income (loss) before income taxes: | ||||||||||||
U.S. | $ | 189,691 | $ | 76,699 | $ | (341,018 | ) | |||||
Non-U.S. | 278,110 | 447,713 | 285,958 | |||||||||
|
|
|
|
|
| |||||||
| $ | 467,801 | $ | 524,412 | $ | (55,060 | ) | ||||||
|
|
|
|
|
| |||||||
Provision (benefit) for income taxes: | ||||||||||||
Current: | ||||||||||||
U.S. Federal | $ | (59,122 | ) | $ | 162,679 | $ | 7,750 | |||||
Non-U.S. | 45,083 | 64,313 | 41,579 | |||||||||
State | 1,721 | 2,623 | 1,968 | |||||||||
|
|
|
|
|
| |||||||
| (12,318 | ) | 229,615 | 51,297 | |||||||||
|
|
|
|
|
| |||||||
Deferred: | ||||||||||||
U.S. Federal | 29,252 | 43,687 | (51,482 | ) | ||||||||
Non-U.S. | (1,243 | ) | (6,476 | ) | (9,240 | ) | ||||||
State | 331 | (106 | ) | (2,214 | ) | |||||||
|
|
|
|
|
| |||||||
| 28,340 | 37,105 | (62,936 | ) | |||||||||
|
|
|
|
|
| |||||||
Total provision (benefit) for income taxes: | $ | 16,022 | $ | 266,720 | $ | (11,639 | ) | |||||
|
|
|
|
|
| |||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Income before income taxes: | ||||||||||||
U.S. | $ | 312,153 | $ | 192,442 | $ | 189,691 | ||||||
Non-U.S. | 588,862 | 333,330 | 278,110 | |||||||||
| $ | 901,015 | $ | 525,772 | $ | 467,801 | |||||||
Provision (benefit) for income taxes: | ||||||||||||
Current: | ||||||||||||
U.S. Federal | $ | 58,678 | $ | 19,297 | $ | (59,122 | ) | |||||
Non-U.S. | 75,193 | 52,810 | 45,083 | |||||||||
State | (1,315 | ) | (4,347 | ) | 1,721 | |||||||
| 132,556 | 67,760 | (12,318 | ) | |||||||||
Deferred: | ||||||||||||
U.S. Federal | (12,604 | ) | (4,522 | ) | 29,252 | |||||||
Non-U.S. | (5,127 | ) | (8,007 | ) | (1,243 | ) | ||||||
State | 2,043 | 3,073 | 331 | |||||||||
| (15,688 | ) | (9,456 | ) | 28,340 | ||||||||
Total provision for income taxes: | $ | 116,868 | $ | 58,304 | $ | 16,022 | ||||||
The Tax Reform Act also includes a new U.S. tax base erosion provision, the global intangible low-taxed income (“GILTI”) provision, which imposes a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.
its intercompany cost-sharing arrangement.
| 2018 | 2017 | 2016 | ||||||||||
U.S. statutory federal tax rate | 21.0 | % | 35.0 | % | 35.0 | % | ||||||
U.S. transition tax | (10.5 | ) | 28.7 | — | ||||||||
U.S. foreign derived intangible income | (1.8 | ) | — | — | ||||||||
Impact of rate change on deferred tax | 0.3 | 6.9 | — | |||||||||
Uncertain tax positions | 1.0 | 1.7 | (2.6 | ) | ||||||||
Foreign taxes | (2.0 | ) | (16.3 | ) | 78.0 | |||||||
Foreign tax credits | (2.2 | ) | (2.2 | ) | 49.1 | |||||||
U.S. research and development credit | (2.2 | ) | (1.6 | ) | 15.8 | |||||||
Equity compensation | (1.2 | ) | (0.8 | ) | (2.7 | ) | ||||||
State income taxes, net of federal tax benefit | 0.1 | (0.4 | ) | 2.3 | ||||||||
Domestic production activities deduction | — | (0.3 | ) | 2.3 | ||||||||
Goodwill impairment | — | — | (162.1 | ) | ||||||||
U.S. alternative minimum tax credit | — | — | 3.7 | |||||||||
Inventory cost capitalization | — | — | 1.8 | |||||||||
Other, net | 0.9 | 0.2 | 0.5 | |||||||||
|
|
|
|
|
| |||||||
| 3.4 | % | 50.9 | % | 21.1 | % | |||||||
|
|
|
|
|
| |||||||
2020 | 2019 | 2018 | ||||||||||
U.S. statutory federal tax rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||
U.S. global intangible low-taxed income | 5.7 | 6.2 | 0.3 | |||||||||
State income taxes, net of federal tax benefit | 0.3 | 0.5 | 0.1 | |||||||||
Foreign taxes | (5.6 | ) | (4.0 | ) | (2.0 | ) | ||||||
Foreign tax credits | (4.8 | ) | (5.9 | ) | (2.2 | ) | ||||||
U.S. foreign derived intangible income | (2.2 | ) | (2.6 | ) | (1.8 | ) | ||||||
U.S. research and development credit | (1.3 | ) | (1.8 | ) | (2.2 | ) | ||||||
Equity compensation | (0.6 | ) | (0.7 | ) | (1.2 | ) | ||||||
Uncertain tax positions | (0.1 | ) | (4.3 | ) | 1.0 | |||||||
U.S. transition tax | — | 1.9 | (10.5 | ) | ||||||||
Impact of rate change on deferred taxes | — | — | 0.3 | |||||||||
Other, net | 0.6 | 0.8 | 0.6 | |||||||||
| 13.0 | % | 11.1 | % | 3.4 | % | |||||||
2025.
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Deferred tax assets: | ||||||||
Tax credits | $ | 69,091 | $ | 76,083 | ||||
Accruals | 23,449 | 27,508 | ||||||
Pension liabilities | 20,826 | 22,602 | ||||||
Inventory valuations | 18,514 | 17,793 | ||||||
Deferred revenue | 9,130 | 9,016 | ||||||
Equity compensation | 7,190 | 6,861 | ||||||
Vacation accrual | 4,772 | 4,747 | ||||||
Net operating loss carryforwards | 3,658 | 5,440 | ||||||
Marketable securities | 962 | — | ||||||
Other | 685 | 713 | ||||||
|
|
|
| |||||
Gross deferred tax assets | 158,277 | 170,763 | ||||||
Less: valuation allowance | (69,852 | ) | (63,919 | ) | ||||
|
|
|
| |||||
Total deferred tax assets | $ | 88,425 | $ | 106,844 | ||||
|
|
|
| |||||
Deferred tax liabilities: | ||||||||
Intangible assets | $ | (24,211 | ) | $ | (16,120 | ) | ||
Depreciation | (14,028 | ) | (12,293 | ) | ||||
Marketable securities | — | (1,125 | ) | |||||
|
|
|
| |||||
Total deferred tax liabilities | $ | (38,239 | ) | $ | (29,538 | ) | ||
|
|
|
| |||||
Net deferred assets | $ | 50,186 | $ | 77,306 | ||||
|
|
|
| |||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Deferred tax assets: | ||||||||
Tax credits | $ | 87,595 | $ | 79,480 | ||||
Accruals | 33,156 | 25,424 | ||||||
Pension liabilities | 28,348 | 24,459 | ||||||
Inventory valuations | 18,427 | 18,572 | ||||||
Lease liability | 12,627 | 13,093 | ||||||
Deferred revenue | 9,235 | 7,622 | ||||||
Equity compensation | 6,543 | 7,042 | ||||||
Vacation accrual | 5,890 | 4,768 | ||||||
Investment impairment | 3,292 | 3,292 | ||||||
Net operating loss carryforwards | 1,823 | 2,705 | ||||||
Other | 626 | 187 | ||||||
Gross deferred tax assets | 207,562 | 186,644 | ||||||
Less: valuation allowance | (84,962 | ) | (77,177 | ) | ||||
Total deferred tax assets | $ | 122,600 | $ | 109,467 | ||||
Deferred tax liabilities: | ||||||||
Depreciation | $ | (14,525 | ) | $ | (18,238 | ) | ||
Intangible assets | (12,726 | ) | (16,705 | ) | ||||
Right of use assets | (10,688 | ) | (11,197 | ) | ||||
Contingent consideration | (3,515 | ) | — | |||||
Marketable securities | (3,344 | ) | (1,601 | ) | ||||
Other | (710 | ) | (611 | ) | ||||
Total deferred tax liabilities | $ | (45,508 | ) | $ | (48,352 | ) | ||
Net deferred assets | $ | 77,092 | $ | 61,115 | ||||
| State Operating Loss Carryforwards | Foreign Operating Loss Carryforwards | |||||||
| (in thousands) | ||||||||
2019 | $ | 258 | $ | — | ||||
2020 | 269 | — | ||||||
2021 | 2,977 | — | ||||||
2022 | 5,749 | — | ||||||
2023 | 6,241 | — | ||||||
2024-2028 | 4,672 | — | ||||||
2029-2033 | 22,724 | 44 | ||||||
Beyond 2033 | 5,305 | 72 | ||||||
Non-expiring | — | 4,389 | ||||||
|
|
|
| |||||
Total | $ | 48,195 | $ | 4,505 | ||||
|
|
|
| |||||
State Operating Loss Carryforwards | Foreign Operating Loss Carryforwards | |||||||
(in thousands) | ||||||||
2021 | $ | 333 | $ | — | ||||
2022 | 2,203 | — | ||||||
2023 | 3,368 | — | ||||||
2024 | 812 | — | ||||||
2025 | 191 | — | ||||||
2026-2030 | 7,452 | — | ||||||
2031-2035 | 2,147 | 68 | ||||||
Beyond 2035 | 73 | — | ||||||
Non-expiring | 870 | 3,923 | ||||||
Total | $ | 17,449 | $ | 3,991 | ||||
2040.
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Beginning balance, as of January 1 | $ | 36,263 | $ | 38,958 | $ | 36,792 | ||||||
Additions: | ||||||||||||
Tax positions for current year | 4,716 | 8,208 | 9,766 | |||||||||
Tax positions for prior years | 2,626 | 199 | 187 | |||||||||
Reductions: | ||||||||||||
Tax positions for prior years | (153 | ) | (10,573 | ) | (1,960 | ) | ||||||
Expiration of statutes | (57 | ) | (325 | ) | (3,532 | ) | ||||||
Settlements with tax authorities | — | (204 | ) | (2,295 | ) | |||||||
|
|
|
|
|
| |||||||
Ending balance as of December 31 | $ | 43,395 | $ | 36,263 | $ | 38,958 | ||||||
|
|
|
|
|
| |||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Beginning balance as of January 1 | $ | 21,180 | $ | 43,395 | $ | 36,263 | ||||||
Additions: | ||||||||||||
Tax positions for current year | 1,082 | 1,322 | 4,716 | |||||||||
Tax positions for prior years | 66 | 8,043 | 2,626 | |||||||||
Reductions: | ||||||||||||
Tax positions for prior years | (2,989 | ) | (31,397 | ) | (153 | ) | ||||||
Expiration of statutes | (1,436 | ) | (183 | ) | (57 | ) | ||||||
Ending balance as of December 31 | $ | 17,903 | $ | 21,180 | $ | 43,395 | ||||||
On February 4, 2019, the IRS issued a closing audit letter related to the U.S. Federal income tax return for the year ended
The estimated decrease relates to loss carryforwards, research credits and U.S. manufacturing activities deductions.
R.
| Semiconductor Test | System Test | Industrial Automation | Wireless Test | Corporate And Other | Consolidated | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||
Revenues | $ | 1,492,417 | $ | 216,132 | $ | 261,452 | $ | 132,006 | $ | (1,205 | ) | $ | 2,100,802 | |||||||||||
Income (loss) before taxes (1)(2) | 397,645 | 48,857 | 7,670 | 29,052 | (15,423 | ) | 467,801 | |||||||||||||||||
Total assets (3) | 669,452 | 88,098 | 607,502 | 77,570 | 1,263,984 | 2,706,606 | ||||||||||||||||||
Property additions | 94,496 | 3,469 | 11,188 | 5,226 | — | 114,379 | ||||||||||||||||||
Depreciation and amortization expense | 58,095 | 6,430 | 36,755 | 5,328 | 6,616 | 113,224 | ||||||||||||||||||
2017 | ||||||||||||||||||||||||
Revenues | $ | 1,662,549 | $ | 192,135 | $ | 170,056 | $ | 111,866 | $ | — | $ | 2,136,606 | ||||||||||||
Income (loss) before taxes (1)(2) | 491,361 | 10,305 | 8,763 | 17,350 | (3,368 | ) | 524,411 | |||||||||||||||||
Total assets (3) | 597,480 | 97,018 | 368,037 | 59,912 | 1,987,098 | 3,109,545 | ||||||||||||||||||
Property additions | 87,920 | 5,976 | 7,044 | 4,435 | — | 105,375 | ||||||||||||||||||
Depreciation and amortization expense | 58,901 | 6,646 | 25,711 | 5,392 | 11,425 | 108,075 | ||||||||||||||||||
2016 | ||||||||||||||||||||||||
Revenues | $ | 1,368,169 | $ | 189,846 | $ | 99,031 | $ | 96,204 | $ | — | $ | 1,753,250 | ||||||||||||
Income (loss) before taxes (1)(2) | 311,939 | 28,916 | (16,783 | ) | (371,409 | ) | (7,723 | ) | (55,060 | ) | ||||||||||||||
Total assets (3) | 557,546 | 110,361 | 317,635 | 62,366 | 1,714,585 | 2,762,493 | ||||||||||||||||||
Property additions | 70,543 | 3,788 | 6,755 | 4,186 | — | 85,272 | ||||||||||||||||||
Depreciation and amortization expense | 58,087 | 6,551 | 26,869 | 25,921 | 2,581 | 120,009 | ||||||||||||||||||
Semiconductor Test | System Test | Industrial Automation | Wireless Test | Corporate and Other | Consolidated | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||
Revenues | $ | 2,259,597 | $ | 409,729 | $ | 279,731 | $ | 173,016 | $ | (604 | ) | $ | 3,121,469 | |||||||||||
Income (loss) before taxes (1)(2) | 739,695 | 152,092 | (24,019 | ) | 41,950 | (8,703 | ) | 901,015 | ||||||||||||||||
Total assets (3) | 1,070,378 | 138,295 | 712,936 | 106,273 | 1,624,464 | 3,652,346 | ||||||||||||||||||
Property additions | 168,055 | 3,092 | 8,899 | 4,931 | — | 184,977 | ||||||||||||||||||
Depreciation and amortization expense | 64,998 | 3,426 | 36,242 | 6,258 | 15,819 | 126,743 | ||||||||||||||||||
2019 | ||||||||||||||||||||||||
Revenues | $ | 1,552,571 | $ | 287,455 | $ | 298,139 | $ | 157,315 | $ | (515 | ) | $ | 2,294,965 | |||||||||||
Income (loss) before taxes (1)(2) | 416,973 | 93,543 | (5,916 | ) | 35,585 | (14,413 | ) | 525,772 | ||||||||||||||||
Total assets (3) | 784,808 | 131,428 | 671,559 | 97,299 | 1,101,920 | 2,787,014 | ||||||||||||||||||
Property additions | 112,145 | 3,059 | 9,076 | 10,362 | — | 134,642 | ||||||||||||||||||
Depreciation and amortization expense | 59,197 | 5,518 | 40,904 | 5,365 | 9,671 | 120,655 | ||||||||||||||||||
2018 | ||||||||||||||||||||||||
Revenues | $ | 1,492,417 | $ | 216,132 | $ | 261,452 | $ | 132,006 | $ | (1,205 | ) | $ | 2,100,802 | |||||||||||
Income (loss) before taxes (1)(2) | 397,645 | 48,857 | 7,670 | 29,052 | (15,423 | ) | 467,801 | |||||||||||||||||
Total assets (3) | 669,452 | 88,098 | 607,502 | 77,570 | 1,263,984 | 2,706,606 | ||||||||||||||||||
Property additions | 94,496 | 3,469 | 11,188 | 5,226 | — | 114,379 | ||||||||||||||||||
Depreciation and amortization expense | 58,095 | 6,430 | 36,755 | 5,328 | 6,616 | 113,224 | ||||||||||||||||||
(1) | Included in Corporate and Other are: contingent consideration adjustments, investment impairment, pension and postretirement plans actuarial gains (losses), severance charges, |
(2) | Included in income (loss) before taxes are charges and credits related to restructuring and other, and inventory charges. |
(3) | Total assets are attributable to each segment. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets. |
| For the Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Restructuring and other—employee severance | $ | 8,429 | $ | 1,779 | $ | 2,860 | ||||||
Cost of revenues—inventory charge | 6,822 | 4,606 | 9,656 | |||||||||
Restructuring and other—impairment of fixed assets | — | 1,124 | — | |||||||||
Included in the System Test segment are charges in the following accounts:
| For the Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Cost of revenues—inventory charge | $ | 1,175 | $ | 1,918 | $ | 630 | ||||||
Included in the Industrial Automation segment are charges in the following accounts:
| For the Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Restructuring and other—acquisition related expenses and compensation | $ | 1,163 | $ | — | $ | — | ||||||
Cost of revenues—inventory charge | 680 | — | — | |||||||||
Restructuring and other—employee severance | — | 1,414 | 585 | |||||||||
Included in the Wireless Test segment are charges in the following accounts:
| For the Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Cost of revenues—inventory charge | $ | 2,565 | $ | 2,190 | $ | 7,207 | ||||||
Restructuring and other—lease impairment | — | 972 | — | |||||||||
Restructuring and other—employee severance | — | — | 2,650 | |||||||||
Goodwill impairment charge | — | — | 254,946 | |||||||||
Intangible assets impairment charge | — | — | 83,339 | |||||||||
Included in Corporate and Other are charges and credits in the following accounts:
| For the Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Restructuring and other—MiR contingent consideration adjustment | $ | 17,666 | $ | — | $ | — | ||||||
Restructuring and other—Universal Robots contingent consideration adjustment | (16,679 | ) | 7,820 | 15,346 | ||||||||
Restructuring and other—acquisition related expenses | 3,422 | — | — | |||||||||
Restructuring and other | 872 | — | — | |||||||||
Restructuring and other—expense related to Japan earthquake and impairment of fixed assets | — | 755 | 5,051 | |||||||||
Restructuring and other—property insurance recovery | — | (5,064 | ) | (5,051 | ) | |||||||
line items in the statements of operations:
For the Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Semiconductor Test: | ||||||||||||
Cost of revenues—inventory charge | $ | 11,013 | $ | 8,731 | $ | 6,822 | ||||||
Contract termination settlement fee | 4,000 | — | — | |||||||||
Restructuring and other—employee severance | — | 1,277 | 8,429 | |||||||||
System Test: | ||||||||||||
Cost of revenues—inventory charge | $ | 887 | $ | 2,000 | $ | 1,175 | ||||||
Industrial Automation: | ||||||||||||
Restructuring and other—acquisition related expenses and compensation | $ | 985 | $ | 741 | $ | 1,163 | ||||||
Cost of revenues—inventory charge | 834 | 508 | 680 | |||||||||
Restructuring and other—employee severance | 1,584 | 796 | — | |||||||||
Wireless: | ||||||||||||
Cost of revenues—inventory charge | $ | 4,800 | $ | 4,005 | $ | 2,565 | ||||||
Corporate and Other: | ||||||||||||
Restructuring and other—AutoGuide contingent consideration adjustment | $ | (19,724 | ) | $ | 2,976 | $ | — | |||||
Restructuring and other—MiR contingent consideration adjustment | (3,546 | ) | (22,199 | ) | 17,666 | |||||||
Restructuring and other—acquisition related expenses and compensation | 1,728 | 1,765 | 3,422 | |||||||||
Other (income) expense, net—investment impairment charge | — | 15,000 | — | |||||||||
Selling and administrative—equity modification charge | 766 | 2,108 | — | |||||||||
Restructuring and other—Universal Robots contingent consideration adjustment | — | — | (16,679 | ) | ||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands) | ||||||||||||
Revenues from customers (1): | ||||||||||||
Taiwan | $ | 516,322 | $ | 687,031 | $ | 653,076 | ||||||
China | 348,942 | 260,451 | 174,876 | |||||||||
United States | 282,869 | 252,516 | 221,948 | |||||||||
Europe | 223,207 | 163,715 | 117,671 | |||||||||
Korea | 163,224 | 206,819 | 147,882 | |||||||||
Japan | 158,281 | 169,093 | 135,978 | |||||||||
Malaysia | 122,797 | 124,048 | 103,472 | |||||||||
Singapore | 108,618 | 101,085 | 73,172 | |||||||||
Philippines | 77,996 | 105,850 | 54,705 | |||||||||
Thailand | 59,184 | 29,566 | 43,097 | |||||||||
Rest of the World | 39,362 | 36,432 | 27,373 | |||||||||
|
|
|
|
|
| |||||||
| $ | 2,100,802 | $ | 2,136,606 | $ | 1,753,250 | |||||||
|
|
|
|
|
| |||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Revenues from customers (1): | ||||||||||||
Taiwan | $ | 1,178,068 | $ | 485,681 | $ | 516,322 | ||||||
China | 465,722 | 514,327 | 348,942 | |||||||||
Korea | 391,571 | 239,504 | 163,224 | |||||||||
United States | 321,674 | 333,059 | 282,869 | |||||||||
Europe | 205,587 | 219,015 | 223,207 | |||||||||
Japan | 143,983 | 175,322 | 158,281 | |||||||||
Thailand | 138,787 | 87,503 | 59,184 | |||||||||
Singapore | 76,460 | 84,111 | 108,618 | |||||||||
Philippines | 68,887 | 54,560 | 77,996 | |||||||||
Malaysia | 56,096 | 58,200 | 122,797 | |||||||||
Rest of the World | 74,634 | 43,683 | 39,362 | |||||||||
$ | 3,121,469 | $ | 2,294,965 | $ | 2,100,802 | |||||||
(1) | Revenues attributable to a country are based on location of customer site. |
| United States | Foreign(1) | Total | ||||||||||
| (in thousands) | ||||||||||||
December 31, 2018 | $ | 209,368 | $ | 70,453 | $ | 279,821 | ||||||
December 31, 2017 | $ | 198,855 | $ | 69,592 | $ | 268,447 | ||||||
United States | Foreign(1) | Total | ||||||||||
(in thousands) | ||||||||||||
December 31, 2020 | $ | 291,234 | $ | 158,135 | $ | 449,369 | ||||||
December 31, 2019 | $ | 252,812 | $ | 124,943 | $ | 377,755 | ||||||
(1) | As of December 31, |
19, 2021.S.January 2015, Teradyne’s Board of Directors authorized a stock repurchase program for up to $500 million of common stock. In 2016,2018, Teradyne repurchased 6.8 million shares of common stock at an average price of $21.39, for a total cost of $146 million. The cumulative repurchases as of December 31, 2016 totaled 22.5 million shares of common stock for $446 million at an average price per share of $19.87.In December 2016, Teradyne’s Board of Directors cancelled the January 2015 stock repurchase program and approved a new $500 million share repurchase authorization which commenced on January 1, 2017. The cumulative repurchases as of December 31, 2017 totaled 5.8 million shares of common stock for $200 million at an average price per share of $34.30.In January 2018, Teradyne’s Board of Directors cancelled the December 2016 stock repurchase program and authorized a new stock repurchase program for up to $1.5 billion of common stock. The cumulative repurchases as of December 31, 2018 totaled 21.6 million shares of common stock for $823.5 million at an average price per share of $38.06.$500a minimum of $600 million in 2019.T.2021.2019,2021, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.09$0.10 per share to be paid on March 22, 201919, 2021 to shareholders of record as of22, 2019.
| 2018 | ||||||||||||||||
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
| (1) | (2)(5) | (3)(5) | (4)(5) | |||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 403,925 | $ | 434,051 | $ | 470,994 | $ | 420,652 | ||||||||
Services | 83,542 | 92,878 | 95,854 | 98,906 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 487,467 | 526,929 | 566,848 | 519,558 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Cost of products | 180,958 | 180,777 | 195,339 | 170,064 | ||||||||||||
Cost of services | 36,677 | 38,818 | 37,816 | 39,959 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 217,635 | 219,595 | 233,155 | 210,023 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | 269,832 | 307,334 | 333,693 | 309,535 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating expenses: | ||||||||||||||||
Selling and administrative | 90,505 | 99,410 | 100,202 | 100,552 | ||||||||||||
Engineering and development | 74,408 | 75,342 | 77,049 | 74,706 | ||||||||||||
Acquired intangible assets amortization | 7,698 | 9,793 | 11,142 | 10,558 | ||||||||||||
Restructuring and other | (313 | ) | 2,389 | 1,710 | 11,446 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses | 172,298 | 186,934 | 190,103 | 197,262 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from operations | 97,534 | 120,400 | 143,590 | 112,273 | ||||||||||||
Non-operating (income) expense: | ||||||||||||||||
Interest income | (5,981 | ) | (5,427 | ) | (6,213 | ) | (9,083 | ) | ||||||||
Interest expense | 6,890 | 5,639 | 5,557 | 13,182 | ||||||||||||
Other (income) expense, net | 805 | 176 | 3,405 | (2,954 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) before income taxes | 95,820 | 120,012 | 140,841 | 111,128 | ||||||||||||
Income tax provision (benefit) | 8,846 | 18,975 | 20,863 | (32,662 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) | $ | 86,974 | $ | 101,037 | $ | 119,978 | $ | 143,790 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) per common share—basic | $ | 0.45 | $ | 0.53 | $ | 0.65 | $ | 0.80 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) per common share—diluted | $ | 0.43 | $ | 0.52 | $ | 0.63 | $ | 0.79 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Cash dividend declared per common share | $ | 0.09 | $ | 0.09 | $ | 0.09 | $ | 0.09 | ||||||||
|
|
|
|
|
|
|
| |||||||||
2020 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
(1) | (2)(5) | (3)(5) | (4)(5) | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 610,906 | $ | 734,630 | $ | 697,745 | $ | 647,625 | ||||||||
Services | 93,449 | 104,031 | 121,739 | 111,343 | ||||||||||||
Total revenues | 704,355 | 838,661 | 819,484 | 758,968 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Cost of products | 259,996 | 322,732 | 300,174 | 274,574 | ||||||||||||
Cost of services | 38,809 | 44,456 | 60,382 | 34,605 | ||||||||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 298,805 | 367,188 | 360,556 | 309,179 | ||||||||||||
Gross profit | 405,550 | 471,473 | 458,928 | 449,789 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and administrative | 111,388 | 113,259 | 115,840 | 124,279 | ||||||||||||
Engineering and development | 85,159 | 94,102 | 94,909 | 100,795 | ||||||||||||
Acquired intangible assets amortization | 9,891 | 8,941 | 6,219 | 5,752 | ||||||||||||
Restructuring and other | (7,606 | ) | 37,222 | (27,701 | ) | (15,117 | ) | |||||||||
Total operating expenses | 198,832 | 253,524 | 189,267 | 215,709 | ||||||||||||
Income from operations | 206,718 | 217,949 | 269,661 | 234,080 | ||||||||||||
Non-operating (income) expense: | ||||||||||||||||
Interest income | (2,751 | ) | (1,368 | ) | (1,071 | ) | (793 | ) | ||||||||
Interest expense | 5,551 | 6,043 | 6,237 | 6,351 | ||||||||||||
Other (income) expense, net | 6,849 | (4,017 | ) | 764 | 5,597 | |||||||||||
Income before income taxes | 197,069 | 217,291 | 263,731 | 222,925 | ||||||||||||
Income tax provision | 20,878 | 28,383 | 41,013 | 26,595 | ||||||||||||
Net income | $ | 176,191 | $ | 188,908 | $ | 222,718 | $ | 196,330 | ||||||||
Net income per common share—basic | $ | 1.06 | $ | 1.14 | $ | 1.34 | $ | 1.18 | ||||||||
Net income per common share—diluted | $ | 0.97 | $ | 1.05 | $ | 1.21 | $ | 1.05 | ||||||||
Cash dividend declared per common share | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | ||||||||
| (1) | Restructuring and other includes a |
| (2) | Restructuring and other includes a |
| acquisition related compensation and expense and $0.8 million of other expenses, partially offset by a $0.6 million gain for the decrease in the fair value of |
| (3) | Restructuring and other includes |
| (4) | Restructuring and other includes a |
| (5) | Teradyne recorded pension and post retirement net actuarial (gains) losses of $(0.1) million, |
| 2017 | ||||||||||||||||
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
| (1) | (2)(5) | (3) | (4)(5) | |||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 373,204 | $ | 610,356 | $ | 412,854 | $ | 388,282 | ||||||||
Services | 83,709 | 86,545 | 90,524 | 91,133 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 456,913 | 696,901 | 503,378 | 479,415 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Cost of products | 154,883 | 267,752 | 169,661 | 168,672 | ||||||||||||
Cost of services | 37,014 | 38,511 | 38,848 | 39,813 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 191,897 | 306,263 | 208,509 | 208,485 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | 265,016 | 390,638 | 294,869 | 270,930 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating expenses: | ||||||||||||||||
Selling and administrative | 84,792 | 90,111 | 86,130 | 87,880 | ||||||||||||
Engineering and development | 75,978 | 82,270 | 76,986 | 72,070 | ||||||||||||
Acquired intangible assets amortization | 7,952 | 8,166 | 7,028 | 7,384 | ||||||||||||
Restructuring and other | 2,511 | 2,288 | (4,407 | ) | 8,970 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses | 171,233 | 182,835 | 165,737 | 176,304 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income from operations | 93,783 | 207,803 | 129,132 | 94,626 | ||||||||||||
Non-operating (income) expense: | ||||||||||||||||
Interest income | (3,520 | ) | (3,292 | ) | (4,517 | ) | (6,476 | ) | ||||||||
Interest expense | 5,402 | 5,509 | 5,372 | 5,380 | ||||||||||||
Other (income) expense, net | (115 | ) | (1,291 | ) | 840 | (2,362 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 92,016 | 206,877 | 127,437 | 98,084 | ||||||||||||
Income tax provision | 6,795 | 31,901 | 24,017 | 204,007 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) | $ | 85,221 | $ | 174,976 | $ | 103,420 | $ | (105,923 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) per common share—basic | $ | 0.43 | $ | 0.88 | $ | 0.52 | $ | (0.54 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) per common share—diluted | $ | 0.42 | $ | 0.87 | $ | 0.52 | $ | (0.54 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
Cash dividend declared per common share | $ | 0.07 | $ | 0.07 | $ | 0.07 | $ | 0.07 | ||||||||
|
|
|
|
|
|
|
| |||||||||
2019 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
(1) | (2) | (3) | (4)(5)(6) | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 393,442 | $ | 457,511 | $ | 488,170 | $ | 548,552 | ||||||||
Services | 100,657 | 106,667 | 93,868 | 106,098 | ||||||||||||
Total revenues | 494,099 | 564,178 | 582,038 | 654,650 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Cost of products | 165,368 | 193,299 | 197,196 | 226,184 | ||||||||||||
Cost of services | 41,096 | 46,961 | 39,804 | 45,228 | ||||||||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 206,464 | 240,260 | 237,000 | 271,412 | ||||||||||||
Gross profit | 287,635 | 323,918 | 345,038 | 383,238 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and administrative | 102,013 | 108,811 | 109,166 | 117,092 | ||||||||||||
Engineering and development | 76,791 | 81,434 | 77,804 | 86,794 | ||||||||||||
Acquired intangible assets amortization | 10,634 | 10,083 | 9,647 | 9,784 | ||||||||||||
Restructuring and other | 5,112 | (10,404 | ) | (6,500 | ) | (2,088 | ) | |||||||||
Total operating expenses | 194,550 | 189,924 | 190,117 | 211,582 | ||||||||||||
Income from operations | 93,085 | 133,994 | 154,921 | 171,656 | ||||||||||||
Non-operating (income) expense: | ||||||||||||||||
Interest income | (4,989 | ) | (4,384 | ) | (4,433 | ) | (3,185 | ) | ||||||||
Interest expense | 5,520 | 5,800 | 5,463 | 5,441 | ||||||||||||
Other (income) expense, net | (1,425 | ) | 1,401 | 2,158 | 20,514 | |||||||||||
Income before income taxes | 93,979 | 131,177 | 151,733 | 148,886 | ||||||||||||
Income tax provision (benefit) | (15,159 | ) | 33,780 | 15,873 | 23,811 | |||||||||||
Net income | $ | 109,138 | $ | 97,397 | $ | 135,860 | $ | 125,075 | ||||||||
Net income per common share—basic | $ | 0.63 | $ | 0.57 | $ | 0.80 | $ | 0.75 | ||||||||
Net income per common share—diluted | $ | 0.62 | $ | 0.55 | $ | 0.75 | $ | 0.69 | ||||||||
Cash dividend declared per common share | $ | 0.09 | $ | 0.09 | $ | 0.09 | $ | 0.09 | ||||||||
| (1) | Restructuring and other includes a contingent consideration, $1.3 million of |
|
Restructuring and other includes |
Restructuring and other includes a |
| (4) | Restructuring and other includes a $5.8 million gain for the decrease in the fair value adjustment to the MiR acquisition contingent consideration, partially offset by a $3.0 million fair value adjustment to increase the |
| (5) | Teradyne recorded pension and post retirement net actuarial |
| (6) | Other (income) expense, net includes a $15.0 million charge for the impairment of the investment in RealWear. |
Item 9: |
|
Item 9A: |
|
2020.20182020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.2018.
Item 10: |
|
Item 11: |
|
Item 12: |
|
Item 13: |
|
Item 14: |
|
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Description | Balance at Beginning of Period | Additions Charged to Cost and Expenses | Other | Deductions | Balance at End of Period | |||||||||||||||
| (in thousands) | ||||||||||||||||||||
Valuation reserve deducted in the balance sheet from the asset to which it applies: | ||||||||||||||||||||
Accounts receivable: | ||||||||||||||||||||
2018 Allowance for doubtful accounts | $ | 2,219 | $ | — | $ | 20 | $ | 566 | $ | 1,673 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2017 Allowance for doubtful accounts | $ | 2,356 | $ | 4 | $ | — | $ | 141 | $ | 2,219 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2016 Allowance for doubtful accounts | $ | 2,407 | $ | — | $ | — | $ | 51 | $ | 2,356 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Description | Balance at Beginning of Period | Additions Charged to Cost and Expenses | Other | Deductions | Balance at End of Period | |||||||||||||||
| (in thousands) | ||||||||||||||||||||
Valuation reserve deducted in the balance sheet from the asset to which it applies: | ||||||||||||||||||||
Inventory: | ||||||||||||||||||||
2018 Inventory reserve | $ | 102,896 | $ | 11,242 | $ | 368 | $ | 13,727 | $ | 100,779 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2017 Inventory reserve | $ | 116,016 | $ | 8,844 | $ | (126 | ) | $ | 21,838 | $ | 102,896 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2016 Inventory reserve | $ | 119,376 | $ | 17,493 | $ | 4,417 | $ | 25,270 | $ | 116,016 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Description | Balance at Beginning of Period | Additions Charged to Cost and Expenses | Other | Deductions | Balance at End of Period | |||||||||||||||
| (in thousands) | ||||||||||||||||||||
Valuation reserve deducted in the balance sheet from the asset to which it applies: | ||||||||||||||||||||
Deferred taxes: | ||||||||||||||||||||
2018 Valuation allowance | $ | 63,919 | $ | 6,333 | $ | — | $ | 400 | $ | 69,852 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2017 Valuation allowance | $ | 48,369 | $ | 15,571 | $ | — | $ | 21 | $ | 63,919 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2016 Valuation allowance | $ | 43,039 | $ | 5,413 | $ | — | $ | 83 | $ | 48,369 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Description | Balance at Beginning of Period | Additions Charged to Cost and Expenses | Other | Deductions | Balance at End of Period | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Valuation reserve deducted in the balance sheet from the asset to which it applies: | ||||||||||||||||||||
Accounts receivable: | ||||||||||||||||||||
2020 Allowance for doubtful account | $ | 1,736 | $ | 356 | $ | 32 | $ | 90 | $ | 2,034 | ||||||||||
2019 Allowance for doubtful account | $ | 1,673 | $ | 87 | $ | 28 | $ | 52 | $ | 1,736 | ||||||||||
2018 Allowance for doubtful account | $ | 2,219 | $ | 0 | $ | 20 | $ | 566 | $ | 1,673 | ||||||||||
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Description | Balance at Beginning of Period | Additions Charged to Cost and Expenses | Other | Deductions | Balance at End of Period | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Valuation reserve deducted in the balance sheet from the asset to which it applies: | ||||||||||||||||||||
Inventory: | ||||||||||||||||||||
2020 Inventory reserve | $ | 103,556 | $ | 17,534 | $ | (521 | ) | $ | 9,982 | $ | 110,587 | |||||||||
2019 Inventory reserve | $ | 100,779 | $ | 15,244 | $ | (85 | ) | $ | 12,382 | $ | 103,556 | |||||||||
2018 Inventory reserve | $ | 102,896 | $ | 11,242 | $ | 368 | $ | 13,727 | $ | 100,779 | ||||||||||
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Description | Balance at Beginning of Period | Additions Charged to Cost and Expenses | Other | Deductions | Balance at End of Period | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Valuation reserve deducted in the balance sheet from the asset to which it applies: | ||||||||||||||||||||
Deferred taxes: | ||||||||||||||||||||
2020 Valuation allowance | $ | 77,177 | $ | 7,785 | $ | 0 | $ | 0 | $ | 84,962 | ||||||||||
2019 Valuation allowance | $ | 69,852 | $ | 7,325 | $ | — | $ | — | $ | 77,177 | ||||||||||
2018 Valuation allowance | $ | 63,919 | $ | 6,333 | $ | 0 | $ | 400 | $ | 69,852 | ||||||||||
Item 16: |
|
|
|
| ||
2.1 |
|
| ||
| Share Sale and Purchase Agreement to and among Teradyne Robotics Holdings Denmark ApS, Teradyne, Inc. and the shareholders of Mobile Industrial Robots ApS dated April 25, 2018. | |||
3.1 | Restated Articles of Organization. | |||
3.2 | Amended and Restated By-laws, as amended. | |||
4.1 | Indenture dated as of December 12, 2016, between Teradyne | |||
| Description of Teradyne, Inc. Securities Registered under Section 12 of the Exchange Act. | |||
| 10.1† | Standard Manufacturing Agreement entered into as of November 24, 2003 by and between Teradyne and Solectron. | |||
10.2† |
|
| ||
| Second Amendment to Standard Manufacturing Agreement, dated as of August 27, 2007, by and between Teradyne and Solectron. | |||
|
|
| ||
| Sixth Amendment to Standard Manufacturing Agreement, dated as of July 27, 2009, by and between Teradyne and Flextronics Corporation. | |||
| Addendum to Standard Manufacturing Agreement (Authorized Purchase Agreement)—Revised July 1, 2010. | |||
| Eighth Amendment to Standard Manufacturing Agreement, dated as of April 13, 2012, by and between Teradyne and Flextronics Sales & Marketing North Asia (L) LTD. | |||
|
|
| ||
| Ninth Amendment to Standard Manufacturing Agreement, dated as of September 17, 2012, by and between Teradyne and Flextronics Sales & Marketing North Asia (L) LTD. | |||
| 2006 Equity and Cash Compensation Incentive Plan, as amended.* | |||
Exhibit No. | Description | SEC Document Reference | ||
| Danish Sub-Plan to the 2006 Equity and Cash Compensation Incentive Plan. | |||
| Form of Performance-Based Restricted Stock Unit Agreement for Executive Officers under 2006 Equity and Cash Compensation Incentive Plan.* | |||
| Form of Time-Based Restricted Stock Unit Agreement for Executive Officers under 2006 Equity and Cash Compensation Incentive Plan.* | |||
| Form of Executive Officer Stock Option Agreement under 2006 Equity and Cash Compensation Incentive Plan, as amended.* | |||
| Form of Restricted Stock Unit Agreement for Directors under 2006 Equity and Cash Compensation Incentive Plan.* | |||
| 1996 Employee Stock Purchase Plan, as amended.* | |||
|
| |||
| Danish Sub-Plan to the 1996 Employee Stock Purchase Plan. | |||
| 10.15 | Deferral Plan for Non-Employee Directors, as amended.* | |||
| Supplemental Savings Plan, as amended and restated.* | |||
| Supplemental Executive Retirement Plan, as restated.* | |||
| Agreement Regarding Termination Benefits dated January 22, 2014 between Teradyne and Mark Jagiela.* | |||
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| Employment Agreement dated May 7, 2004 between Teradyne and Mark Jagiela.* | |||
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| Executive Officer Change in Control Agreement dated January 22, 2014 between Teradyne and Mark Jagiela, as amended.* | |||
Exhibit No. | Description | SEC Document Reference | ||
| Amended and Restated Executive Officer Change in Control Agreement dated May 26, 2009 between Teradyne and Charles J. Gray, as amended.* | |||
| Employment Agreement dated July 24, 2009 between Teradyne and Charles J. Gray.* | |||
| Amended and Restated Executive Officer Change in Control Agreement dated June 30, 2012 between Teradyne and Walter G. Vahey, as amended.* | |||
| Employment Agreement dated February 6, 2013 between Teradyne and Walter G. Vahey.* | |||
| Executive Officer Change in Control Agreement dated September 1, 2014 between Teradyne, Inc. and Bradford Robbins.* | |||
| Employment Agreement dated September 1, 2014 between Teradyne, Inc. and Bradford Robbins.* | |||
| Executive Change in Control Agreement dated February 8, 2016 between Teradyne, Inc. and Greg Smith.* | |||
| Employment Agreement dated February 8, 2016 between Teradyne, Inc. and Greg Smith.* | |||
| Teradyne Offer of Employment dated February 8, 2019 for Sanjay Mehta.* | |||
| 10.31 | Executive Officer Change in Control Agreement dated April 25, 2019 between Teradyne, Inc. and Sanjay Mehta.* | |||
| 10.32 | Employment Agreement dated April 25, 2019 between Teradyne, Inc. and Sanjay Mehta.* | |||
| 10.33 | Agreement Regarding Termination Benefits dated April 25, 2019 between Teradyne, Inc. and Sanjay Mehta.* | |||
| 10.34 | Executive Officer Change in Control Agreement dated October 1, 2020 between Teradyne, Inc. and Richard Burns.* | |||
| 10.35 | Employment Agreement dated October 1, 2020 between Teradyne, Inc. and Richard Burns.* | |||
| 10.36 | Time-Based Restricted Stock Unit Agreement dated May 1, 2019 for Sanjay Mehta under 2006 Equity and Cash Compensation Plan.* | |||
Exhibit No. | Description | SEC Document Reference | ||
| 10.37 | Form of Indemnification Agreement.* | |||
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| LitePoint Corporation 2002 Stock Plan. | |||
10.39 |
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| Letter Agreement, dated December 6, 2016, between Barclays Bank PLC and Teradyne, Inc., regarding the Base Warrants. | |||
| Letter Agreement, dated December 6, 2016, between Bank of America, N.A., and Teradyne, Inc. regarding the Base Warrants. | |||
| Letter Agreement, dated December 6, 2016, between Wells Fargo Bank, National Association and Teradyne, Inc. regarding the Base Warrants. | |||
| Letter Agreement, dated December 6, 2016, between Barclays Bank PLC and Teradyne, Inc. regarding the Base Call Option Transaction. | |||
| Letter Agreement, dated December 6, 2016, between Bank of America, N.A. and Teradyne, Inc. regarding the Base Call Option Transaction. | |||
| Letter Agreement, dated December 6, 2016, between Wells Fargo Bank, National Association and Teradyne, Inc. regarding the Base Call Option Transaction. | |||
| Letter Agreement, dated December 9, 2016, between Barclays Bank PLC and Teradyne, Inc., regarding the Additional Warrants | |||
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| Letter Agreement, dated December 9, 2016, between Bank of America, N.A., and Teradyne, Inc. regarding the Additional Warrants. | |||
| Letter Agreement, dated December 9, 2016, between Wells Fargo Bank, National Association and Teradyne, Inc. regarding the Additional Warrants. | |||
| Letter Agreement, dated December 9, 2016, between Barclays Bank PLC and Teradyne, Inc. regarding the Additional Call Option Transaction. | |||
| Letter Agreement, dated December 9, 2016, between Bank of America, N.A. and Teradyne, Inc. regarding the Additional Call Option Transaction | |||
Exhibit No. | Description | SEC Document Reference | ||
| Letter Agreement, dated December 9, 2016, between Wells Fargo Bank, National Association and Teradyne, Inc. regarding the Additional Call Option Transaction. | |||
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Credit Agreement dated May 1, 2020 among Teradyne, Inc., Truist Bank, as the administrative agent, issuing bank and swingline lender, and other lenders party thereto. | |||
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Subsidiaries of | |||
| Consent of PricewaterhouseCoopers LLP. | |||
| 31.1 | Rule 13a-14(a) Certification of Principal Executive Officer. | |||
31.2 | Rule 13a-14(a) Certification of Principal Financial Officer. | |||
32.1 | Section 1350 Certification of Principal Executive Officer. | |||
32.2 | Section 1350 Certification of Principal Financial Officer. | |||
| The following financial information from Teradyne, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, formatted in Inline XBRL | |||
| The cover page of the Annual Report on Form 10-K formatted in Inline XBRL | |||
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| † | -Confidential treatment granted. |
| * | -Management contract or compensatory plan. |
TERADYNE, INC. | ||
| By: |
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Sanjay Mehta, | ||
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| Chair of the Board | |||
| Chief Executive Officer (Principal Executive Officer) and Director | |||
| Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | |||
| Director | |||
| Director | |||
| Director | |||
| Director | February 22, 2021 | ||
/S/ MERCEDES JOHNSON Mercedes Johnson | Director | |||
| Director | |||
| Director | |||
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