UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~April 3, ~~2021~~2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File

No. 001-06462

TERADYNE, INC.

(Exact name of registrant as specified in its charter)

(State or Other Jurisdiction of

Incorporation or Organization)

600 Riverpark Drive, North Reading,

(Address of Principal Executive Offices)

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange

Common Stock, par value $0.125
per share

Nasdaq Stock Market LLC

Indicate

~~Indicate~~ by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in

Rule 12b-2

of the Exchange Act (check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s only class of Common Stock as of ~~November 1, 2021~~May 2, 2022 was ~~163,004,340~~

160,203,017 shares.

PART I

Item 1:

Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	April 3, 2022			December 31, 2021

	(in thousands, except per share amount)
ASSETS

Current assets:

Cash and cash equivalents	$	794,603		$	1,122,199
Marketable securities		282,016			244,231
Accounts receivable, less allowance for credit losses of $1,891 and $2,012 at April 3, 2022 and December 31, 2021, respectively		546,881			550,749
Inventories, net		259,341			243,330
Prepayments		479,414			406,266
Other current assets		12,127			9,452

Total current assets		2,374,382			2,576,227
Property, plant and equipment, net		399,485			387,240
Operating lease right-of-use assets, net		67,718			68,807
Marketable securities		126,130			133,858
Deferred tax assets		113,556			102,428
Retirement plans assets		14,669			15,110
Other assets		23,480			24,096
Acquired intangible assets, net		69,846			75,635
Goodwill		419,888			426,024

Total assets	$	3,609,154		$	3,809,425

LIABILITIES
Current liabilities:
Accounts payable	$	156,493		$	153,133
Accrued employees’ compensation and withholdings		139,287			253,667
Deferred revenue and customer advances		155,761			146,185
Other accrued liabilities		118,252			124,187
Operating lease liabilities		18,523			19,977
Income taxes payable		103,386			88,789
Current debt		20,497			19,182

Total current liabilities		712,199			805,120
Retirement plans liabilities		151,697			151,141
Long-term deferred revenue and customer advances		51,698			54,921
Long-term other accrued liabilities		15,748			15,497
Deferred tax liabilities		4,927			6,327
Long-term operating lease liabilities		55,934			56,178
Long-term incomes taxes payable		67,041			67,041
Debt		75,378			89,244

Total liabilities		1,134,622			1,245,469

Commitments and contingencies ( N ote Q )		0			0
Mezzanine equity:
Convertible common shares		—			1,512
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 161,053 and 162,251 shares issued and outstanding at April 3, 2022 and December 31, 2021, respectively		20,132			20,281
Additional paid-in capital		1,711,690			1,811,545
Accumulated other comprehensive loss		(19,479	)		(5,948	)
Retained earnings		762,189			736,566

Total shareholders’ equity		2,474,532			2,562,444

Total liabilities, convertible common shares and shareholders’ equity	$	3,609,154		$	3,809,425

October 3, 2021

December 31, 2020



(in thousands, except per share amount)

ASSETS

Current assets:

Cash and cash equivalents
   $ 1,079,454    $ 914,121
Marketable securities
   233,397    522,280
Accounts receivable, less allowance for credit losses of $1,913 and $2,034 at October 3, 2021 and December 31, 2020, respectively
   597,124    497,506
Inventories, net
   224,242    222,189
Prepayments and other current assets
   386,967    259,338

Total current assets
   2,521,184    2,415,434
Property, plant and equipment, net
   390,545    394,800
Operating lease
right-of-use
assets, net
   61,608    54,569
Marketable securities
   136,664    117,980
Deferred tax assets
   96,808    87,913
Retirement plans assets
   16,958    17,468
Other assets
   23,340    9,384
Acquired intangible assets, net
   81,677    100,939
Goodwill
   433,398    453,859

Total assets
   $ 3,762,182    $ 3,652,346

LIABILITIES

Current liabilities:

Accounts payable
   $ 154,912    $ 133,663
Accrued employees’ compensation and withholdings
   196,928    220,321
Deferred revenue and customer advances
   140,380    134,662
Other accrued liabilities
   135,492    77,581
Operating lease liabilities
   20,601    20,573
Income taxes payable
   73,077    80,728
Current debt
   32,219    33,343

Total current liabilities
   753,609    700,871
Retirement plans liabilities
   153,249    151,140
Long-term deferred revenue and customer advances
   60,022    58,359
Long-term contingent consideration
   0

   7,227
Long-term other accrued liabilities
   19,704    19,352
Deferred tax liabilities
   6,907    10,821
Long-term operating lease liabilities
   48,492    42,073
Long-term incomes taxes payable
   67,041    74,930
Debt
   112,784    376,768

Total liabilities
   1,221,808    1,441,541

Commitments and contingencies
   0 0    0 0
Mezzanine equity:

Convertible common shares
   2,881    3,787
SHAREHOLDERS’ EQUITY

Common stock, $0.125 par value, 1,000,000 shares authorized; 163,728 and 166,123 shares issued and outstanding at October 3, 2021 and December 31, 2020, respectively
   20,466    20,765
Additional
paid-in
capital
   1,800,373    1,765,323
Accumulated other comprehensive income
   4,217    33,516
Retained earnings
   712,437    387,414

Total shareholders’ equity
   2,537,493    2,207,018

Total liabilities, convertible common shares and shareholders’ equity
   $ 3,762,182    $ 3,652,346

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report

~~Annual Report~~ on Form

10-K

for the year ended December 31, ~~2020,~~2021, are an integral part of the condensed

consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months

Ended

For the Nine Months

Ended


October 3,
2021

September 27,
2020

October 3,
2021

September 27,
2020



(in thousands, except per share amount)

Revenues:

Products    $ 825,448 $ 697,745 $ 2,437,901 $ 2,043,281
Services    125,053 121,739 379,934 319,219

Total revenues    950,501 819,484 2,817,835 2,362,500
Cost of revenues:
Cost of products    333,229 300,174 989,859 882,902
Cost of services    46,271 60,382 148,368 143,647

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)    379,500 360,556 1,138,227 1,026,549

Gross profit    571,001 458,928 1,679,608 1,335,951
Operating expenses:
Selling and administrative    134,829 115,840 404,812 340,488
Engineering and development    107,220 94,909 317,644 274,170
Acquired intangible assets amortization    5,355 6,219 16,293 25,052
Restructuring and other    1,197 (27,701 ) (3,426 ) 1,915

Total operating expenses    248,601 189,267 735,323 641,625

Income from operations    322,400 269,661 944,285 694,326
Non-operating
(income) expense:

Interest income    (626 ) (1,071 ) (2,066 ) (5,189 )
Interest expense    3,785 6,237 15,354 17,831
Other (income) expense, net    21,486 764 25,223 3,595

Income before income taxes    297,755 263,731 905,774 678,089
Income tax provision    41,037 41,013 115,225 90,274

Net income    $ 256,718 $ 222,718 $ 790,549 $ 587,815

Net income per common share:
Basic    $ 1.56 $ 1.34 $ 4.77 $ 3.54

Diluted    $ 1.41 $ 1.21 $ 4.26 $ 3.23

Weighted average common shares—basic    164,583 166,014 165,690 166,131

Weighted average common shares—diluted    181,987 184,338 185,492 181,777


	For the Three Months Ended
	April 3, 2022			April 4, 2021

	(in thousands, except per share amount)

Revenues:
Products	$	625,875		$	660,508
Services		129,495			121,098

Total revenues		755,370			781,606
Cost of revenues:
Cost of products		243,016			267,784
Cost of services		57,421			52,204

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		300,437			319,988

Gross profit		454,933			461,618
Operating expenses:
Selling and administrative		140,185			129,797
Engineering and development		108,116			100,402
Acquired intangible assets amortization		5,063			5,536
Restructuring and other		15,714			(7,130	)

Total operating expenses		269,078			228,605

Income from operations		185,855			233,013
Non-operating (income) expense:
Interest income		(703	)		(808	)
Interest expense		1,012			6,004
Other (income) expense, net		5,187			3,824

Income before income taxes		180,359			223,993
Income tax provision		18,431			18,481

Net income	$	161,928		$	205,512

Net income per common share:
Basic	$	1.00		$	1.23

Diluted	$	0.92		$	1.09

Weighted average common shares—basic		162,048			166,491

Weighted average common shares—diluted		175,575			187,740

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, are an integral part of the condensed

consolidated financial statements.

Table of Contents

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

For the Three Months

Ended

For the Nine Months

Ended


October 3,
2021

September 27,
2020

October 3,
2021

September 27,
2020



(in thousands)

Net income    $ 256,718 $ 222,718 $ 790,549 $ 587,815
Other comprehensive income, net of tax:
Foreign currency translation adjustment, net of tax of $0, $0, $0, $0, respectively    (10,698 ) 17,104 (26,672 ) 24,131
Available-for-sale
marketable securities:

Unrealized (losses) gains on marketable securities arising during period, net of tax of $(44), $139, $(516), and $1,410, respectively    (176 ) 335 (1,952 ) 5,165
Less: Reclassification adjustment for gains included in net income, net of tax of $(65), $(194), $(186), $(615), respectively    (229 ) (689 ) (670 ) (2,188 )

   (405 ) (354 ) (2,622 ) 2,977
Defined benefit post-retirement plan:
Amortization of prior service credit, net of tax of $0, $0, $(2), $(1), respectively    (2 ) (2 ) (5 ) (6 )

Other comprehensive (loss) income    (11,105 ) 16,748 (29,299 ) 27,102

Comprehensive income    $ 245,613 $ 239,466 $ 761,250 $ 614,917


	For the Three Months Ended
	April 3, 2022			April 4, 2021

	(in thousands)
Net income	$	161,928			$205,512
Other comprehensive income, net of tax:
Foreign currency translation adjustment, net of tax of $0 and $0, respectively		(8,076	)		(21,123	)
Available-for-sale marketable securities:
Unrealized losses on marketable securities arising during period, net of tax of $(1,333) and $(908), respectively		(5,388	)		(3,270	)
Less: Reclassification adjustment for gains included in net income, net of tax of $(18) and $(123), respectively		(65	)		(444	)

		(5,453	)		(3,714	)
Defined benefit post-retirement plan:
Amortization of prior service credit, net of tax of $0 and $0, respectively		(2	)		(2	)

Other comprehensive loss		(13,531	)		(24,839	)

Comprehensive income		$148,397			$180,673

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, are an integral part of the condensed

consolidated financial statements.

Table of Contents

TERADYNE, INC.

CONDENSED ~~CONSOLIDATED~~ STATEMENTS OF CONVERTIBLE COMMON SHARES

AND SHAREHOLDERS’ EQUITY

(Unaudited)

Shareholders’ Equity

Convertible
Common
Share
s

Value

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)

For the Three Months Ended October 3, 2021

Balance, July 4, 2021 $ 21,386 165,444 $ 20,680 $ 1,772,302 $ 15,322 $ 684,952 $ 2,493,256
Net issuance of common stock under stock-based plans 8 1 (259 ) (258 )
Stock-based compensation expense 10,042 10,042
Repurchase of common stock (1,724 ) (215 ) (212,781 ) (212,996 )
Cash dividends ($0.10 per share) (16,452 ) (16,452 )
Settlements of convertible notes 5,589 699 636,798 637,497
Exercise of convertible notes hedge call options (5,589 ) (699 ) (637,015 ) (637,714 )
Convertible common shares (18,505 ) 18,505 18,505
Net income 256,718 256,718
Other comprehensive loss (11,105 ) (11,105 )

Balance, October 3, 2021 $ 2,881 163,728 $ 20,466 $ 1,800,373 $ 4,217 $ 712,437 $ 2,537,493

For the Three Months Ended September 27, 2020

Balance, June 28, 2020 $ —   165,806 $ 20,725 $ 1,730,716 $ (8,500 ) $ 1,610 $ 1,744,551
Net issuance of common stock under stock-based plans 237 30 13,515 13,545
Stock-based compensation expense 12,600 12,600
Cash dividends ($0.10 per share) (16,618 ) (16,618 )
Net income 222,718 222,718
Other comprehensive income 16,748 16,748

Balance, September 27, 2020 $ —   166,043 $ 20,755 $ 1,756,831 $ 8,248 $ 207,710 $ 1,993,544

For the Nine Months Ended October 3, 2021

Balance, December 31, 2020 $ 3,787 166,123 $ 20,765 $ 1,765,323 $ 33,516 $ 387,414 $ 2,207,018
Net issuance of common stock under stock-based plans 893 112 (48 ) 64
Stock-based compensation expense 35,915 35,915
Repurchase of common stock (3,288 ) (411 ) (415,769 ) (416,180 )
Cash dividends ($0.30 per share) (49,757 ) (49,757 )
Settlements of convertible notes 7,178 897 840,305 841,202
Exercise of convertible notes hedge call options (7,178 ) (897 ) (842,028 ) (842,925 )
Convertible common shares (906 ) 906 906
Net income 790,549 790,549
Other comprehensive loss (29,299 ) (29,299 )

Balance, October 3, 2021 $ 2,881 163,728 $ 20,466 $ 1,800,373 $ 4,217 $ 712,437 $ 2,537,493

For the Nine Months Ended September 27, 2020

Balance, 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 1,150 144 3,019 3,163
Stock-based compensation expense 33,683 33,683
Repurchase of common stock (1,517 ) (190 ) (88,275 ) (88,465 )
Cash dividends ($0.30 per share) (49,912 ) (49,912 )
Net income 587,815 587,815
Other comprehensive income 27,102 27,102

Balance, September 27, 2020 $ —   166,043 $ 20,755 $ 1,756,831 $ 8,248 $ 207,710 $ 1,993,544


				Shareholders’ Equity
	Convertible Common Shares Value			Common Stock Shares			Common Stock Par Value			Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Total Shareholders’ Equity
				(in thousands)
For the Three Months Ended April 3, 2022
Balance, December 31, 2021	$	1,512			162,251		$	20,281		$	1,811,545		$	(5,948	)	$	736,566		$	2,562,444
Net issuance of common stock under stock-based plans					552			70			(14,644	)								(14,574	)
Stock-based compensation expense											14,204									14,204
Repurchase of common stock					(1,750	)		(219	)								(211,247	)		(211,466	)
Cash dividends ($0.11 per share)																	(17,908	)		(17,908	)
Settlements of convertible notes					509			64			(157	)								(93	)
Exercise of convertible notes hedge call options					(509	)		(64	)		64									—
Cumulative-effect of change in accounting principle related to convertible debt		(1,512	)								(99,322	)					92,850			(6,472	)
Net income																	161,928			161,928
Other comprehensive loss														(13,531	)					(13,531	)

Balance, April 3, 2022	$	0			161,053		$	20,132		$	1,711,690		$	(19,479	)	$	762,189		$	2,474,532

For the Three Months Ended April 4, 2021
Balance, December 31, 2020	$	3,787			166,123		$	20,765		$	1,765,323		$	33,516		$	387,414		$	2,207,018
Net issuance of common stock under stock-based plans					670			84			(14,071	)								(13,987	)
Stock-based compensation expense											13,359									13,359
Repurchase of common stock					(374	)		(47	)								(47,141	)		(47,188	)
Cash dividends ($0.10 per share)																	(16,682	)		(16,682	)
Settlements of convertible notes					1,222			153			157,529									157,682
Exercise of convertible notes hedge call options					(1,222	)		(153	)		(158,723	)								(158,876	)
Convertible common shares		(2,554	)								2,554									2,554
Net income																	205,512			205,512
Other comprehensive loss														(24,839	)					(24,839	)

Balance, April 4, 2021	$	1,233			166,419		$	20,802		$	1,765,971		$	8,677		$	529,103		$	2,324,553

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, are an integral part of the condensed

consolidated financial statements.

Table of Contents

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended


October 3,
2021

September 27,
2020



(in thousands)

Cash flows from operating activities:
Net income    $ 790,549 $ 587,815
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation    67,866 58,111
Stock-based compensation    34,649 33,028
Amortization    27,626 36,577
Loss on convertible debt conversion    25,397 —
Provision for excess and obsolete inventory    11,775 13,116
Deferred taxes    (10,732 ) (4,547 )
Contingent consideration adjustment    (7,227 ) (7,967 )
Gains on investments    (4,750 ) (3,515 )
Retirement plan actuarial (gains) losses    (627 ) 2,589
Other    243 750
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable    (103,299 ) (222,015 )
Inventories    21,943 16,998
Prepayments and other assets    (138,564 ) (40,751 )
Accounts payable and other liabilities    65,064 81,557
Deferred revenue and customer advances    8,699 36,589
Retirement plans contributions    (4,123 ) (3,884 )
Income taxes    (17,406 ) 24,060

Net cash provided by operating activities    767,083 608,511

Cash flows from investing activities:
Purchases of property, plant and equipment    (103,162 ) (146,872 )
Purchases of marketable securities    (509,470 ) (488,428 )
Proceeds from maturities of marketable securities    571,277 309,407
Proceeds from sales of marketable securities    209,437 32,611
Purchase of investment and acquisition of business    (12,000 ) 149
Proceeds from life insurance    —   546

Net cash provided by (used for) investing activities    156,082 (292,587 )

Cash flows from financing activities:
Issuance of common stock under stock purchase and stock option plans    32,590 26,528
Repurchase of common stock    (406,180 ) (88,465 )
Payments of convertible debt principal    (301,997 ) —
Dividend payments    (49,711 ) (49,870 )
Payments related to net settlement of employee stock compensation awards    (32,045 ) (22,735 )
Payments of contingent consideration    —   (8,852 )

Net cash used for financing activities    (757,343 ) (143,394 )

Effects of exchange rate changes on cash and cash equivalents    (489 ) (1,274 )

Increase in cash and cash equivalents    165,333 171,256
Cash and cash equivalents at beginning of period    914,121 773,924

Cash and cash equivalents at end of period    $ 1,079,454 $ 945,180

Non-cash
investing activities:

Capital expenditures incurred but not yet paid:    $ 2,286 $ 3,119


	For the Three Months Ended
	April 3, 2022			April 4, 2021

	(in thousands)
Cash flows from operating activities:

Net income	$	161,928		$	205,512
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation		22,503			23,910
Stock-based compensation		12,894			12,232
Amortization		5,233			9,822
Deferred taxes		11,288			(1,057	)
Losses (gains) on investments		2,001			(2,491	)
Provision for excess and obsolete inventory		1,590			2,285
Loss on convertible debt conversion s		0			4,069
Contingent consideration fair value adjustment s		0			(7,227	)
Other		177			200
Changes in operating assets and liabilities
Accounts receivable		208			(87,512	)
Inventories		(9,480	)		(35,870	)
Prepayments and other assets		(74,305	)		(86,131	)
Accounts payable and other accrued expenses		(124,382	)		(10,571	)
Deferred revenue and customer advances		6,747			7,952
Retirement plan contributions		(1,329	)		(1,925	)
Income taxes		(7,611	)		4,941

Net cash provided by operating activities		7,462			38,139

Cash flows from investing activities:
Purchases of property, plant and equipment		(43,999	)		(39,250	)
Purchases of marketable securities		(165,977	)		(211,604	)
Proceeds from maturities of marketable securities		96,682			194,228
Proceeds from sales of marketable securities		30,581			61,293

Net cash (used for) provided by investing activities		(82,713	)		4,667

Cash flows from financing activities:
Issuance of common stock under stock purchase and stock option plans		16,475			17,144
Repurchase of common stock		(201,465	)		(45,188	)
Payments related to net settlement of employee stock compensation awards		(31,048	)		(30,675	)
Payments of convertible debt principal		(20,694	)		(51,275	)
Dividend payments		(17,895	)		(16,667	)

Net cash used for financing activities		(254,627	)		(126,661	)

Effects of exchange rate changes on cash and cash equivalents		2,282			883

Decrease in cash and cash equivalents		(327,596	)		(82,972	)
Cash and cash equivalents at beginning of period		1,122,199			914,121

Cash and cash equivalents at end of period	$	794,603		$	831,149

Non-cash investing activities:
Capital expenditures incurred but not yet paid:	$	2,500		$	3,840

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, are an integral part of the condensed

consolidated financial statements.

Table of Contents

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A. THE COMPANY

Teradyne, Inc. (“Teradyne”) is a leading global supplier of automation equipment for test and industrial applications. Teradyne designs, develops, manufactures and sells automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s industrial automation products include collaborative robotic arms, autonomous mobile robots, 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. Teradyne’s automatic test equipment and industrial automation products and services include:

semiconductor test (“Semiconductor Test”) systems;

storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);

wireless test (“Wireless Test”) systems; and

industrial automation (“Industrial Automation”) products.

B. ACCOUNTING POLICIES

Basis of Presentation

The consolidated interim financial statements include th

the accounts of Teradyne and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year amounts ~~were~~may have been reclassified to conform to the current year presentation. The December 31, ~~2020~~2021 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form

10-K,

filed with the U.S. Securities and Exchange Commission (“SEC”) on February ~~22, 2021,~~23, 2022, for the year ended December 31, ~~2020.~~2021.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. On an

on-going

basis, management evaluates its estimates, including those related to inventories, investments, goodwill, intangible and other long-lived assets, accounts receivable, income taxes, deferred tax 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 judgements 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 ~~November 5, 2021,~~ the date of issuance of this Quarterly Report on Form

10-Q.

These estimates may change, as new events occur and additional information is obtained. Actual results may differ significantly from these estimates under different assumptions or conditions.

~~C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~

Convertible Debt

~~In August 2020, the Financial Accounting Standards Board (“FASB”) issued~~

Teradyne adopted Accounting Standards Update (“ASU”) ASU

2020-06

– ~~“Debt—~~

“Debt—Debt with Conversion and Other Options and Derivatives and ~~Hedging -~~ Hedging—Contracts in Entity’s Own Equity,” ~~which simplifies~~

on January 1, 2022 using the ~~accounting~~modified retrospective method of adoption

Under ASU

2020-06,

Teradyne accounts for ~~convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. This ASU requires~~ a convertible debt instrument ~~to be accounted for~~ as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. ~~This ASU requires an entity~~Unsettled shares are recorded in current debt, and there is no recognition of a debt discount, which was previously amortized to ~~use~~interest expense. Teradyne uses the

if-converted

method in the diluted earnings per share (“EPS”) calculation for convertible instruments. ~~This ASU will be effective~~As a result of adoption, Teradyne recorded an increase

$1.4 million to current debt for ~~Teradyne on January 1, 2022. This ASU permits~~unsettled shares, an increase of $6.6 million to long-term

debt

for unamortized debt discount, and an increase to retained earnings of $92.8 million for the ~~use of either the modified retrospective or fully retrospective method of transition. Teradyne is evaluating the effects~~reclassification of the ~~adoption of this ASU on its financial statements.~~

~~On November~~

~~, 2021, Teradyne made an irrevocable election under the indenture entered into between Teradyne~~equity component. Mezzanine equity representing unsettled shares value was reduced to 0 and Wilmington Trust, National Association, as trustee (the “Indenture”) for the issuance of the 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023 to require the principal portion of the remaining Notes to be settled in cash. Upon adoption of ASUadditional

~~2020-06,~~paid-in

~~only the amounts settled in excess of the principal will be considered in diluted earnings per share under the~~

~~if-converted~~

~~method.~~capital was reduced by $99.3 million.

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C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For the three months ended April 3, 2022, there were no recently issued accounting pronouncements that had, or are expected to have, a material impact to Teradyne’s consolidated financial statements.

D. INVESTMENT IN OTHER COMPANY

On June

1, 2021, Teradyne invested $12.0 million in MachineMetrics, Inc. (“MachineMetrics”), a private company that develops and sells products to improve manufacturing performance through automated machine data collection, alerting, and analytics. Teradyne’s investment in MachineMetrics aligns with its strategy of providing and investing in leading edge products for automating industrial production processes in growing markets. The investment was recorded at cost and is evaluated for impairment or an indication of changes in fair value resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer on a quarterly basis. At ~~October~~April 3, ~~2021,~~2022, the value of the investment was $12.0 million, and there was 0 change during the three months ended ~~October~~April 3, ~~2021.~~2022.

E. REVENUE

Disaggregation of Revenue

The following table provides information about disaggregated revenue by timing of revenue recognition, primary geographical market, and major product lines.

Semiconductor Test

Industrial Automation

System
on-a-Chip

Memory

System

Test

Universal
Robots

Mobile
Industrial
Robots

AutoGuide

Wireless

Test

Corporate

and

Other

Total

(in thousands)

For the Three Months Ended October 3, 2021 (1)

Timing of Revenue Recognition

Point in Time
$ 508,747 $ 105,454 $ 88,155 $ 76,008 $ 12,351 $ 226 $ 65,409 $ (63 ) $ 856,287
Over Time
66,270 7,761 14,450 1,742 607 80 3,304 —   94,214

Total
$ 575,017 $ 113,215 $ 102,605 $ 77,750 $ 12,958 $ 306 $ 68,713 $ (63 ) $ 950,501

Geographical Market

Asia Pacific
$ 519,886 $ 110,362 $ 62,757 $ 19,654 $ 2,788 $ —   $ 54,344 $ —   $ 769,791
Americas
29,119 2,281 34,560 23,429 5,015 306 11,352 (63 ) 105,999
Europe, Middle East and Africa
26,012 572 5,288 34,667 5,155 —   3,017 —   74,711

Total
$ 575,017 $ 113,215 $ 102,605 $ 77,750 $ 12,958 $ 306 $ 68,713 $ (63 ) $ 950,501

For the Three Months Ended September 27, 2020 (1)

Timing of Revenue Recognition

Point in Time
$ 393,717 $ 137,929 $ 101,045 $ 51,523 $ 10,175 $ 4,076 $ 37,901 $ (41 ) $ 736,325
Over Time
55,988 4,507 17,124 1,686 59 1,192 2,603 —   83,159

Total
$ 449,705 $ 142,436 $ 118,169 $ 53,209 $ 10,234 $ 5,268 $ 40,504 $ (41 ) $ 819,484

Geographical Market

Asia Pacific
$ 420,821 $ 137,286 $ 78,534 $ 14,471 $ 1,566 $ —   $ 33,865 $ —   $ 686,543
Americas
17,678 3,730 35,140 16,527 3,981 5,268 5,211 (41 ) 87,494
Europe, Middle East and Africa
11,206 1,420 4,495 22,211 4,687 —   1,428 —   45,447

Total
$ 449,705 $ 142,436 $ 118,169 $ 53,209 $ 10,234 $ 5,268 $ 40,504 $ (41 ) $ 819,484

For the Nine Months Ended October 3, 2021 (2)

Timing of Revenue Recognition

Point in Time
$ 1,548,895 $ 291,578 $ 295,666 $ 214,427 $ 41,506 $ 106 $ 154,908 $ (352 ) $ 2,546,734
Over Time
188,022 21,776 44,595 5,001 1,483 628 9,596 —   271,101

Total
$ 1,736,917 $ 313,354 $ 340,261 $ 219,428 $ 42,989 $ 734 $ 164,504 $ (352 ) $ 2,817,835

Geographical Market

Asia Pacific
$ 1,618,117 $ 301,562 $ 223,507 $ 55,531 $ 8,674 $ —   $ 133,678 $ —   $ 2,341,069
Americas
71,562 9,373 98,475 66,390 17,065 734 24,228 (352 ) 287,475
Europe, Middle East and Africa
47,238 2,419 18,279 97,507 17,250 —   6,598 —   189,291

Total
$ 1,736,917 $ 313,354 $ 340,261 $ 219,428 $ 42,989 $ 734 $ 164,504 $ (352 ) $ 2,817,835

For the Nine Months Ended September 27, 2020 (2)

Timing of Revenue Recognition

Point in Time
$ 1,261,468 $ 298,150 $ 259,498 $ 140,829 $ 30,468 $ 8,608 $ 125,304 $ (294 ) $ 2,124,031
Over Time
162,159 14,000 46,553 5,628 176 2,083 7,870 —   238,469

Total
$ 1,423,627 $ 312,150 $ 306,051 $ 146,457 $ 30,644 $ 10,691 $ 133,174 $ (294 ) $ 2,362,500

Geographical Market

Asia Pacific
$ 1,330,463 $ 296,679 $ 197,208 $ 39,665 $ 4,391 $ —   $ 113,576 $ —   $ 1,981,982
Americas
51,315 11,481 91,924 42,634 9,836 10,691 15,253 (294 ) 232,840
Europe, Middle East and Africa
41,849 3,990 16,919 64,158 16,417 —   4,345 —   147,678

Total
$ 1,423,627 $ 312,150 $ 306,051 $ 146,457 $ 30,644 $ 10,691 $ 133,174 $ (294 ) $ 2,362,500


	Semiconductor Test						Industrial Automation
	System on-a- Chip		Memory		System Test		Universal Robots		Mobile Industrial Robots		AutoGuide			Wireless Test		Corporate and Eliminations			Total

	(in thousands)
For the Three Months Ended April 3, 2022 (1)
Timing of Revenue Recognition

Point in Time	$	323,456	$	88,723	$	105,288	$	83,182	$	16,534	$	210		$	48,429	$	(346	)	$	665,476
Over Time		63,129		7,033		13,380		2,102		674		487			3,089		0			89,894

Total	$	386,585	$	95,756	$	118,668	$	85,284	$	17,208	$	697		$	51,518	$	(346	)	$	755,370

Geographical Market
Asia Pacific	$	340,741	$	93,151	$	73,784	$	18,621	$	2,592	$	0		$	34,946	$	0		$	563,835
Americas		29,714		2,046		36,608		28,148		7,867		697			9,687		(346	)		114,421
Europe, Middle East and Africa		16,130		559		8,276		38,515		6,749		0			6,885		0			77,114

Total	$	386,585	$	95,756	$	118,668	$	85,284	$	17,208	$	697		$	51,518	$	(346	)	$	755,370

For the Three Months Ended April 4, 2021 (1)
Timing of Revenue Recognition
Point in Time	$	364,190	$	101,892	$	119,314	$	64,007	$	14,064	$	(120	)	$	37,880	$	(143	)	$	701,084
Over Time		56,040		5,941		13,523		1,594		67		339			3,018		0			80,522

Total	$	420,230	$	107,833	$	132,837	$	65,601	$	14,131	$	219		$	40,898	$	(143	)	$	781,606

Geographical Market
Asia Pacific	$	387,236	$	104,049	$	99,520	$	17,833	$	3,447	$	0		$	33,532	$	0		$	645,617
Americas		20,779		3,420		27,659		18,153		5,153		219			5,769		(143	)		81,009
Europe, Middle East and Africa		12,215		364		5,658		29,615		5,531		0			1,597		0			54,980

Total	$	420,230	$	107,833	$	132,837	$	65,601	$	14,131	$	219		$	40,898	$	(143	)	$	781,606

(1)	Includes ~~$3.8~~$2.3 million and ~~$1.7~~$3.1 million in ~~2021~~2022 and ~~2020,~~2021, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.”

~~(2)~~

~~Includes $11.1 million and $6.1 million in 2021 and 2020, respectively, for leases of Teradyne’s systems recognized outside ASC 606 “~~

~~Revenue from Contracts with Customers~~

.”

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Contract Balances

During the three ~~and nine~~ months ended ~~October~~April 3, 2022 and April 4, 2021, Teradyne recognized ~~$32.9~~$35.0 million and $82.5 million, respectively, that was previously included within the deferred revenue and customer advances balances at the beginning of the period. During the three and nine months ended September 27, 2020, Teradyne recognized $17.6 million and $78.2$27.8 million, respectively, that was previously included within the deferred revenue and customer advances balances at the beginning of the period. This revenue primarily relates to undelivered hardware, extended warranties, training, application support, and post contract support. Each of these represents a distinct performance obligation. As of ~~October~~April 3, ~~2021,~~2022, Teradyne has ~~$1,293.0~~$1,417.4 million of unsatisfied performance obligations. Teradyne expects to recognize ~~94%~~89% of the remaining performance obligations in the next 12 months 5%

and

11% in

1-3

~~years~~years.

Deferred revenue and ~~1% beyond 3 years.~~customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:


	April 3, 2022		December 31, 2021
	(in thousands)
Maintenance, service and training	$	83,212	$	81,826
Customer advances, undelivered elements and other		58,521		55,112
Extended warranty		65,726		64,168

Total deferred revenue and customer advances	$	207,459	$	201,106

Accounts Receivable

During the three months ended April 3, 2022 and April 4, 2021, Teradyne ~~sells~~sold certain trade accounts receivables on a

non-recourse

basis to third-party financial institutions pursuant to factoring agreements. ~~Teradyne accounts for these transactions as sales of receivables~~During the three months ended April 3, 2022 and ~~presents cash proceeds as cash provided by operating activities in the consolidated statements of cash flows. Total~~April 4, 2021, total trade accounts receivable sold under the factoring agreements were ~~$66.9~~

$19.4 million and ~~$16.5~~$7.3 million ~~for the three months ended October 3, 2021 and September 27, 2020, respectively, and $81.7 million and $113.5 million for the nine months ended October 3, 2021 and September 27, 2020,~~

respectively. Factoring fees for the sales of receivables were recorded in interest expense and were not material. Teradyne accounted for these transactions as sales of receivables and presented cash proceeds as cash provided

operating activities in the consolidated statements of cash flows.

F. INVENTORIES

Inventories, net consisted of th

the following at ~~October~~April 3, ~~2021~~2022 and December 31, ~~2020:~~2021:


					April 3, 2022		December 31, 2021
	October 3, 2021		December 31, 2020
					(in thousands)
	(in thousands)
Raw material	$	131,807	$	114,133	$	187,856	$	155,641
Work-in-process		34,911		25,408		30,877		37,740
Finished goods		57,524		82,648		40,608		49,949

	$	224,242	$	222,189	$	259,341	$	243,330

Inventory reserves at ~~October~~April 3, ~~2021~~2022 and December 31, ~~2020~~2021 were ~~$112.5~~$112.8 million and ~~$110.6~~$114.1 million, respectively.

G. FINANCIAL INSTRUMENTS

Cash Equivalents

Teradyne considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents.

Marketable Securities

Teradyne’s

available-for-sale

debt securities are classified as Level 2 and equity and debt mutual funds are classified as Level 1. Contingent consideration is classified as Level 3. The vast majority of Level 2 securities are fixed income securities priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.

During the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020,~~April 4, 2021, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.

Table of Contents

Realized gains recorded in the three ~~and nine~~ months ended ~~October~~April 3, 2022 and April 4, 2021 were ~~$0.5~~$0.4 million and ~~$2.6~~$1.2 million, respectively. Realized ~~gains~~losses recorded in the three ~~and nine~~ months ended ~~September 27, 2020~~April 3, 2022 were ~~$1.1 million and $4.1 million, respectively.~~$0.2 million. NaN realized losses were recorded in the three ~~and nine~~ months ended ~~October 3,~~April 4, 2021. ~~Realized losses recorded in the three and nine months ended September 27, 2020 were $0.1 million and $0.3 million, respectively.~~ Realized gains and losses are included in other (income) expense, net.

Unrealized ~~gains on equity securities recorded in the nine months ended October 3, 2021 were $3.3 million. Unrealized~~ losses on equity securities recorded in the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 were ~~$0.4 million and $1.1 million, respectively.~~$2.2 million. Unrealized gains on equity securities recorded in the three ~~and nine~~ months ended ~~September 27, 2020~~April 4, 2021 were ~~$2.0 million and $5.7 million, respectively. Unrealized losses on equity securities recorded in the nine months ended September 27, 2020 were $6.0~~$1.4 million. Unrealized gains and losses on equity securities are included in other (income) expense, net.

Unrealized gains and losses on

available-for-sale

debt securities are included in accumulated other comprehensive ~~income.~~income (loss).

The cost of securities sold is based on average cost.

~~Table of Contents~~

The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of ~~October~~April 3, ~~2021~~2022 and December 31, ~~2020.~~2021.


	October 3, 2021								April 3, 2022
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

	(in thousands)								(in thousands)
Assets

Cash	$	577,752	$	—	$	—	$	577,752	$	508,245	$	0	$	0	$	508,245
Cash equivalents		176,703		324,999		—		501,702		212,647		73,711		0		286,358
Available-for-sale securities:
Commercial paper		—		179,629		—		179,629		0		179,481		0		179,481
U.S. Treasury securities		—		80,519		—		80,519		0		119,837		0		119,837
Corporate debt securities		—		58,648		—		58,648		0		53,161		0		53,161
Debt mutual funds		8,937		—		—		8,937		7,030		0		0		7,030
U.S. government agency securities		—		4,616		—		4,616		0		4,714		0		4,714
Certificates of deposit and time deposits		—		1,346		—		1,346		0		1,312		0		1,312
Non-U.S. government securities		—		590		—		590		0		578		0		578
Equity securities:
Mutual funds		35,776		—		—		35,776		42,033		0		0		42,033

	$	799,168	$	650,347	$	—	$	1,449,515	$	769,955	$	432,794	$	0	$	1,202,749
Derivative assets		—		93		—		93		0		9		0		9

Total	$	799,168	$	650,440	$	—	$	1,449,608	$	769,955	$	432,803	$	0	$	1,202,758

Liabilities
Derivative liabilities		—		433		—		433	$	0	$	469	$	0	$	469

Total	$	—	$	433	$	—	$	433	$	0	$	469	$	0	$	469

Reported as follows:

Reported as follows:
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total

	(in thousands)								(in thousands)
Assets
Cash and cash equivalents	$	754,455	$	324,999	$	—	$	1,079,454	$	720,892	$	73,711	$	0	$	794,603
Marketable securities		—		233,397		—		233,397		0		282,016		0		282,016
Long-term marketable securities		44,713		91,951		—		136,664		49,063		77,067		0		126,130
Prepayments and other current assets		—		93		—		93
Prepayments										0		9		0		9

Total	$	799,168	$	650,440	$	—	$	1,449,608	$	769,955	$	432,803	$	0	$	1,202,758

Liabilities
Other current liabilities	$	—	$	433	$	—	$	433	$	0	$	469	$	0	$	469

Total	$	—	$	433	$	—	$	433	$	0	$	469	$	0	$	469

Table of Contents


	December 31, 2021
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

	(in thousands)
Assets

Cash	$	628,740	$	0	$	0	$	628,740
Cash equivalents		412,212		81,247		0		493,459
Available for sale securities:
Commercial paper		0		189,620		0		189,620
U.S. Treasury securities		0		77,789		0		77,789
Corporate debt securities		0		56,901		0		56,901
Debt mutual funds		7,971		0		0		7,971
U.S. government agency securities		0		4,610		0		4,610
Certificates of deposit and time deposits		0		1,356		0		1,356
Non-U.S. government securities		0		589		0		589
Equity securities:
Mutual funds		39,253		0		0		39,253

Total	$	1,088,176	$	412,112	$	0	$	1,500,288
Derivative assets		0		92		0		92

Total	$	1,088,176	$	412,204	$	0	$	1,500,380

Liabilities
Derivative liabilities	$	0	$	118	$	0	$	118

Total	$	0	$	118	$	0	$	118

Reported as follows:
	(Level 1)		(Level 2)		(Level 3)		Total

	(in thousands)
Assets
Cash and cash equivalents	$	1,040,952	$	81,247	$	0	$	1,122,199
Marketable securities		0		244,231		0		244,231
Long-term marketable securities		47,224		86,634		0		133,858
Prepayments		0		92		0		92

Total	$	1,088,176	$	412,204	$	0	$	1,500,380

Liabilities
Other current liabilities	$	0	$	118	$	0	$	118

Total	$	0	$	118	$	0	$	118

Table of Contents

December 31, 2020


Quoted Prices

in Active

Markets for

Identical

Instruments

    (Level 1)

Significant

Other

Observable

Inputs

    (Level 2)

Significant

Unobservable

Inputs

    (Level 3)

    Total



(in thousands)

Assets









Cash    $ 443,166    $ —      $ —      $ 443,166
Cash equivalents    347,768    123,187    —      470,955
Available-for-sale
securities:
            —
U.S. Treasury securities    —      258,304    —      258,304
Commercial paper    —      254,413    —      254,413
Corporate debt securities    —      83,615    —      83,615
Debt mutual funds    8,565    —      —      8,565
U.S. government agency securities    —      4,339    —      4,339
Certificates of deposit and time deposits    —      979    —      979
Non-U.S.
government securities
   —      625    —      625
Equity securities:
Equity mutual funds    29,420    —      —      29,420

   $ 828,919    $ 725,462    $ —    $ 1,554,381
Derivative assets    —      95    —      95

Total    $ 828,919    $ 725,557    $ —      $ 1,554,476

Liabilities
Contingent consideration    $ —      $ —      $ 7,227    $ 7,227
Derivative liabilities    —      504    —      504

Total    $ —      $ 504    $ 7,227    $ 7,731


Reported as follows:

    (Level 1)

    (Level 2)

    (Level 3)

    Total



(in thousands)

Assets
Cash and cash equivalents    $ 790,934    $ 123,187    $ —      $ 914,121
Marketable securities    —      522,280    —      522,280
Long-term marketable securities    37,985    79,995    —      117,980
Prepayments and other current assets    —      95    —      95

Total    $ 828,919    $ 725,557    $ —      $ 1,554,476

Liabilities
Other accrued liabilities    $ —      $ 504    $ —      $ 504
Long-term contingent consideration    —      —      7,227    7,227

Total    $ —      $ 504    $ 7,227    $ 7,731

~~Table of Contents~~

Changes in the fair value of Level 3 contingent consideration for the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022, and ~~September 27, 2020~~April 4, 2021 were as follows:

For the Three Months

Ended

For the Nine Months

Ended


October 3,
2021

September 27,
2020

October 3,
2021

September 27,
2020


(in thousands)

Balance at beginning of period    $ 0      $ 49,737    $ 7,227    $ 39,705
Fair value adjustment (a)(b)(c)    0      (27,206 )    (7,227 )    (7,967 )
Foreign currency impact    0      0      0      (355 )
Payments (d)    —      —      —      (8,852 )

Balance at end of period    $ 0      $ 22,531    $ 0      $ 22,531


	For the Three Months Ended
	April 3, 2022		April 4, 2021

	(in thousands)
Balance at beginning of period	$	0	$	7,227
Fair value adjustment (a)		0		(7,227	)

Balance at end of period	$	0	$	0

(a)

In the ~~nine~~three months ended ~~October 3,~~April 4, 2021, the fair value of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide was reduced to zero, which resulted in a benefit of $7.2 million, primarily due to a decrease in forecasted revenues and earnings before interest and taxes. ~~As of October 3, 2021, the maximum amount of contingent consideration that could be paid in connection with the acquisition of AutoGuide is $100.2 million. The remaining~~

~~earn-out~~

~~periods end on December 31, 2021 and December 31, 2022. The sellers of AutoGuide have filed an arbitration claim against Teradyne related to allegations of~~

~~non-compliance~~

~~with its~~

~~earn-out~~

obligations. The ultimate amount of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide may be affected by the outcome of the arbitration (see Note R: “Commitments and Contingencies”).

~~(b)~~

~~In the three and nine months ended September 27, 2020, the fair value of contingent consideration for the earn-outs in connection~~

On March 25, 2022, the arbitration claim filed by Industrial Automation LLC, sellers of AutoGuide, against Teradyne alleging

non-compliance

with ~~the acquisition of AutoGuide decreased by $27.2 million and $4.4 million, respectively, due to lower forecasted revenues and earnings before interest and taxes.~~

~~(c)~~

In the nine months ended September 27, 2020, the fair value of contingent consideration for the earn-outs in connection with the acquisition of Mobile Industrial Robots (“MiR”) decreased by $3.5 million due to lower forecasted results.

~~(d)~~

~~In the nine months ended September 27, 2020, Teradyne paid $8.9 million of contingent consideration for~~ the

earn-out

provisions of the Membership Interests Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide was settled

for

$26.7 million. As a result, Teradyne has no remaining

earn-out

obligations.

~~in connection with the acquisition of MiR.~~

The carrying amounts and fair values of Teradyne’s financial instruments at ~~October~~April 3, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


									April 3, 2022				December 31, 2021
	October 3, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value

	(in thousands)								(in thousands)
Assets
Cash and cash equivalents	$	1,079,454	$	1,079,454	$	914,121	$	914,121	$	794,603	$	794,603	$	1,122,199	$	1,122,199
Marketable securities		370,061		370,061		640,260		640,260		408,146		408,146		378,089		378,089
Derivative assets		93		93		95		95		9		9		92		92
Liabilities
Contingent consideration		—		—		7,227		7,227
Derivative liabilities		433		433		504		504		469		469		118		118
Convertible debt ~~(1)~~		145,003		546,464		410,111		1,739,553		95,875		323,670		108,426		604,648

~~(1)~~

~~The carrying value represents the bifurcated debt component only, while the level 2 fair value is based on quoted market prices for the convertible note, which includes the equity conversion features.~~

The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.

~~Table of Contents~~

The following table summarizes the composition of

available-for-sale

marketable securities at ~~October~~April 3, ~~2021:~~2022:


												April 3, 2022
	October 3, 2021											Available-for-Sale
	Available-for-Sale											Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
												(in thousands)
	(in thousands)
Commercial paper	$	179,624	$	5	$	0		$	179,629	$	20,799	$	179,736	$	3	$	(258	)	$	179,481	$	106,951
U.S. Treasury securities		80,370		636		(487	)		80,519		17,336		121,504		8		(1,675	)		119,837		114,043
Corporate debt securities		53,329		5,421		(102	)		58,648		22,010		53,079		1,585		(1,503	)		53,161		32,283
Debt mutual funds		8,872		65		—			8,937		—		7,150		—		(120	)		7,030		—
U.S. government agency securities		4,610		11		(5	)		4,616		3,302		4,795		—		(81	)		4,714		4,714
Certificates of deposit and time deposits		1,346		0		—			1,346		—		1,312		—		—			1,312		—
Non-U.S. government securities		590		—		—			590		—		578		—		—			578		—

	$	328,741	$	6,138	$	(594	)	$	334,285	$	63,447	$	368,154	$	1,596	$	(3,637	)	$	366,113	$	257,991

Table of Contents

Reported as follows:


												Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
												(in thousands)
	(in thousands)
Marketable securities	$	233,327	$	92	$	(22	)	$	233,397	$	28,773	$	282,563	$	11	$	(558	)	$	282,016	$	202,243
Long-term marketable securities		95,414		6,046		(572	)		100,888		34,674		85,591		1,585		(3,079	)		84,097		55,748

	$	328,741	$	6,138	$	(594	)	$	334,285	$	63,447	$	368,154	$	1,596	$	(3,637	)	$	366,113	$	257,991

The following table summarizes the composition of

available-for-sale

marketable securities at December 31, ~~2020:~~2021:


	December 31, 2020											December 31, 2021
	Available-for-Sale											Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses		Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses

	(in thousands)											(in thousands)
Commercial paper												$	189,614	$	15	$	(9	)	$	189,620	$	22,784
U.S. Treasury securities	$	257,132	$	1,330	$	(158	)	$	258,304	$	17,243		77,707		551		(470	)		77,789		46,435
Commercial paper		254,404		10		(1	)		254,413		12,173
Corporate debt securities		76,129		7,539		(53	)		83,615		39,896		52,266		4,863		(227	)		56,901		19,422
Debt mutual funds		8,413		152		—			8,565		—		7,928		43		—			7,971		—
U.S. government agency securities		4,294		46		(1	)		4,339		1,106		4,617		5		(12	)		4,610		3,296
Certificates of deposit and time deposits		979		—		—			979		—		1,356		—		—			1,356		—
Non-U.S. government securities		625		—		—			625		—		589		—		—			589		—

	$	601,976	$	9,077	$	(213	)	$	610,840	$	70,418	$	334,077	$	5,477	$	(718	)	$	338,836	$	91,937

Reported as follows:


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

	(in thousands)											(in thousands)
Marketable securities	$	522,228	$	92	$	(40	)	$	522,280	$	61,806	$	244,213	$	64	$	(46	)	$	244,231	$	54,798
Long-term marketable securities		79,748		8,985		(173	)		88,560		8,612		89,864		5,413		(672	)		94,605		37,139

	$	601,976	$	9,077	$	(213	)	$	610,840	$	70,418	$	334,077	$	5,477	$	(718	)	$	338,836	$	91,937

~~Table of Contents~~

As of ~~October~~April 3, ~~2021 and December 31, 2020,~~2022, the fair market value of investments with unrealized losses less than one year and greater than one year totaled ~~$57.3~~$248.2 million and ~~$70.4~~$9.8 million

respectively. As of ~~October 3,~~December 31, 2021, the fair market value of investments with unrealized losses for less than one year and greater than one year totaled ~~$6.2 million.~~$85.4 million and $6.5 million, respectively.

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments at ~~October~~April 3, ~~2021~~2022 and December 31, ~~2020~~2021 were not other than temporary.

The contractual maturities of investments in

available-for-sale

securities held at ~~October~~April 3, ~~2021~~2022 were as follows:


	October 3, 2021				April 3, 2022
	Cost		Fair Market Value		Cost		Fair Market Value

	(in thousands)				(in thousands)
Due within one year	$	233,327	$	233,397	$	282,563	$	282,016
Due after 1 year through 5 years		46,460		46,744		36,844		35,718
Due after 5 years through 10 years		6,120		6,586		6,117		5,978
Due after 10 years		33,962		38,621		35,480		35,371

Total	$	319,869	$	325,348	$	361,004	$	359,083

Contractual maturities of investments in

available-for-sale

securities held at ~~October~~April 3 ~~2021~~

, 2022

exclude debt mutual funds with a fair market value of ~~$8.9~~$7.0 million, as they do not have a contractual maturity date.

Table of Contents

Derivatives

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

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

~~The notional amount of foreign currency forward contracts at October~~

At April 3, ~~2021~~2022 and December 31, ~~2020~~2021, Teradyne had the following contracts to buy and sell non-U.S. currencies for U.S. dollars and other non-U.S. currencies with the following notional amounts:


	April 3, 2022								December 31, 2021
	Buy Position			Sell Position		Net Total			Buy Position			Sell Position		Net Total
	(in millions)
Japanese Yen	$	(45.9	)	$	—	$	(45.9	)	$	(31.4	)	$	—	$	(31.4	)
Taiwan Dollar		(43.7	)		—		(43.7	)		(35.1	)		—		(35.1	)
Korean Won		(5.0	)		—		(5.0	)		(4.2	)		—		(4.2	)
British Pound Sterling		(2.9	)		—		(2.9	)		(1.8	)		—		(1.8	)
Singapore Dollar		—			75.5		75.5			—			61.9		61.9
Euro		—			42.3		42.3			—			44.9		44.9
Philippine Peso		—			3.8		3.8			—			3.9		3.9
Chinese Yuan		—			2.8		2.8			—			2.8		2.8

Total	$	(97.5	)	$	124.4	$	26.9		$	(72.5	)	$	113.5	$	41.0

The fair value of the outstanding contracts was ~~$181.8~~a loss of $0.5 million and ~~$152.9~~$0.1 million, ~~respectively.~~respectively, at April 3, 2022 and December 31, 2021.

Gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in other (income) expense, net.

The following table summarizes the fair value of derivative instruments as of ~~October~~April 3, ~~2021~~2022 and December 31, ~~2020:~~

2021:


	Balance Sheet Location		October 3, 2021			December 31, 2020			Balance Sheet Location	April 3, 2022			December 31, 2021

			(in thousands)							(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Prepayments	$	93		$	95		Prepayments	$	9		$	92
Foreign exchange contracts		Other current liabilities		(433	)		(504	)	Other current liabilities		(469	)		(118	)

Total derivatives			$	(340	)	$	(409	)		$	(460	)	$	(26	)

The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020:~~April 4, 2021:

Location of Losses (Gains)

Recognized in

Statement of Operations

For the Three Months

Ended

For the Nine Months

Ended


October 3,

2021

September 27,

2020

October 3,

2021

September 27,

2020



(in thousands)

Derivatives not designated as hedging instruments:
Foreign exchange contracts    Other (income) expense, net    $ 2,288    $ (551 ) $ 5,937    $ 3,930

~~Table of Contents~~

Location of (Gains) Losses

For the Three Months

Ended

Recognized in
Statement of Operations

April 3,
2022

April 4,
2021

(in thousands)

Derivatives not designated as hedging instruments:

Foreign exchange contracts

Other

(income) expense, net

(1,752

)

2,118

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

(2)	For the three ~~and nine~~ months ended ~~October~~April 3, 2022 , net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $4.3 million.

(3)	For the three months ended April 4, 2021, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were ~~$1.0 million and $1.3 million, respectively.~~

~~(3)~~

For the three months ended September 27, 2020, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.2 million. For the nine months ended September 27, 2020, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $0.4$0.2 million.

See Note H: “Debt” regarding derivatives related to the convertible senior notes.

Table of Contents

H. DEBT

Convertible Senior Notes

On December 12,

2016

, Teradyne 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 of the convertible note hedge transactions and $50.1 million of which was used to repurchase 2.0 million shares of Teradyne’s

common stock under its existing stock repurchase

program

from purchasers of the Notes in privately negotiated transactions effected through one of the initial purchasers or its affiliates conducted concurrently with the pricing of the Note offering. The Notes will mature on December 15, 2023, unless earlier repurchased or converted. The Notes bear interest ~~from December 12, 2016~~ at a rate of ~~1.25%~~

1.25

% per year

payable semiannually in arrears on June 15 and December 15 of each ~~year.~~year

. The Notes will be convertible at the option of the noteholders at any time prior to the close of business on the business day immediately preceding September 15, 2023, only under the following circumstances: (1) during any calendar quarter beginning after

March 31, 2017 ~~(and~~

(and only during such calendar quarter), if the closing sale price of Teradyne’s common stock, for at least

trading days (whether or not consecutive) during a period of

consecutive trading days ending on the last trading day of the immediately preceding

calendar

quarter is greater than ~~130%~~

130

% of the conversion price on each applicable trading day; (2) during the

business day period after any

consecutive trading day period (the “measurement period”) in which the trading price (as defined in the ~~indenture dated as of December 12, 2016 between Teradyne and Wilmington Trust, National Association, as trustee (the “Indenture”))~~Indenture) per ~~$1,000~~ $

1,000

principal amount of Notes for each trading day of the measurement period was less 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 future conversion obligation by paying cash for the principal amount of the Notes and paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s ~~election.~~election for the amount in excess of principal. As of ~~October~~April 3, ~~2021,~~2022, the conversion price was approximately ~~$31.53~~ $

31.51

per share of Teradyne’s common stock. The conversion rate is subject to adjustment under certain circumstances. As of ~~November 5, 2021, seventy-~~May 6, 2022, ninety

~~nine~~

eight holders had exercised the option to convert ~~$343.0~~$

373.5

million worth of ~~Notes. On November~~

4notes.

~~, 2021, Teradyne made an irrevocable election under the Indenture to require the principal portion of the remaining Notes to be settled in cash.~~

Concurrent with the offering of the Notes, Teradyne 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 the common stock that underlie the Notes, with a strike price equal to the conversion price of the Notes of ~~$31.53. The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, approximately 8.7 million shares of Teradyne’s common stock.~~$31.51.

Separately and concurrent with the pricing of the Notes, Teradyne entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which it sold

net-share-settled

(or, at its election subject to certain conditions, cash-settled) warrants to the Option Counterparties. The Warrant Transactions currently cover, subject to customary anti-dilution adjustments, approximately 14.6 million shares of common stock. As of ~~October~~April 3, ~~2021,~~2022, the strike price of the warrants was approximately ~~$39.56~~$39.54 per share. The strike price is subject to adjustment under certain circumstances. The Warrant Transactions could have a dilutive effect to Teradyne’s common stock to the extent that the market price per share of Teradyne’s 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 Teradyne’s 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 Teradyne’s common stock exceeds the applicable strike price of the warrant. 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 Teradyne’s common stock and/or purchased shares of Teradyne’s common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In addition, the Option

~~Table of Contents~~

Counterparties may modify their hedge positions by entering into or unwinding various derivative transactions with respect to Teradyne’s common stock or by selling Teradyne’s 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 affect the value of Teradyne’s common stock and the Notes.

~~Teradyne considered the guidance of ASC~~

~~815-40,~~

~~“Derivatives and Hedging—Contracts in Entity’s Own Equity,”~~Originally, Teradyne

and concluded that the convertible note hedge is both indexed to Teradyne’s common stock and should be classified in stockholders’ equity in its statements of financial position. The convertible note hedge is considered indexed to Teradyne’s common stock as the terms of the Note Hedge Transactions do not contain an exercise contingency and the settlement amount equals the difference between the fair value of a fixed number of Teradyne’s shares and a fixed strike price. Because the only variable that can affect the settlement amount is Teradyne’s stock price, which is an input to the fair value of a

~~fixed-for-fixed~~

~~option contract, the convertible note hedge is considered indexed to Teradyne’s common stock.~~

~~Teradyne assessed whether the convertible note hedge should be classified as equity under ASC~~

~~815-40.~~

~~In the Note Hedge Transactions contract the settlement terms permit net cash settlement or net share settlement, at the option of Teradyne. Therefore, the criteria as set forth in ASC~~

~~815-40~~

were evaluated by Teradyne. In reviewing the criteria, Teradyne noted the following: (1) the convertible note hedge does not require Teradyne to issue shares; (2) there is no requirement to net cash settle the convertible note hedge for failure to make timely filings with the SEC; (3) in the case of termination, the convertible note hedge is settled in the same consideration as the holders of the underlying stock; (4) the counterparty does not have rights that rank higher than those of a shareholder of the stock underlying the convertible note hedge; and (5) there is no requirement to post collateral. Based on its analysis of those criteria, Teradyne concluded that the convertible note hedge should be recorded in equity and no further adjustment should be made in future periods to adjust the value of the convertible note hedge.

~~Teradyne analyzed the Warrant Transactions under ASC~~

~~815-40,~~

~~“Derivatives and Hedging—Contracts in Entity’s Own Equity,”~~

and other relevant literature, and determined that it met the criteria for classification as an equity transaction and is considered indexed to Teradyne’s common stock. As a result, Teradyne recorded the proceeds from the warrants as an increase to additional

~~paid-in~~

~~capital. Teradyne does not recognize subsequent changes in fair value of the warrants in its financial statements.~~

~~The provisions of ASC~~

~~470-20,~~

“

~~Debt with Conversion and Other Options,~~

~~” are applicable to the Notes. ASC~~

~~470-20~~

requires Teradyne to separately account for the liability (debt) and equity (conversion feature) components of the Notes in a manner that reflects Teradyne’s nonconvertible debt borrowing rate at the date of issuance when interest cost is recognized in subsequent periods. Teradyne allocated $100.8 million of the $460.0 million principal amount of the Notes to the equity component, which ~~represents~~ represent

a discount to the debt and ~~will be~~

was

amortized to interest expense using the effective interest method through December 2023. ~~Accordingly, Teradyne’s effective annual interest rate on~~

Effective January 1, 2022, Teradyne adopted ASC 2020-06 using the ~~Notes will be approximately 5.0%. The Notes are classified~~modified retrospective method of transition and accounts for the debt as a single liability measured at its amortized cost. As a result of the adoption, Teradyne recorded an increase of

$1.4

million to current debt for unsettled shares, an increase of

$6.6 million

to long-term debt ~~in the balance sheet based on their December 15, 2023 maturity date, except~~ for unamortized debt discount, and an increase to retained earnings of

$92.8 million

for the ~~conversions that occurred during~~reclassification of the ~~third quarter~~equity component. Mezzanine equity representing unsettled shares value was reduced to 0 and additional paid-in capital was reduced by

$99.3 million.

On November 4, 2021, Teradyne made an irrevocable election under the Indenture to require the principal portion of ~~2021, which are included~~the remaining Notes to be settled in ~~current debt.~~ cash.

Debt issuance ~~costs~~

fees

of approximately ~~$7.2~~$0.4 million ~~initially~~

, at April 3, 2022,

are being amortized to interest expense using the effective interest method over the seven-year term of the Notes. As

Table of ~~October 3, 2021, unamortized debt issuance costs were approximately $0.9 million.~~Contents

The below tables represent the key components of Teradyne’s convertible senior notes:

October 3,

2021

December 31,
2020



(in thousands)

Debt principal    $ 157,972    $ 459,971
Unamortized discount    12,969    49,860

Net Carrying amount of convertible debt    $ 145,003    $ 410,111


	April 3, 2022		December 31, 2021

	(in thousands)
Debt principal	$	96,285	$	116,980
Unamortized debt issuance fees (1)		410		8,554

Net carrying amount of convertible debt	$	95,875	$	108,426

Reported as follows:


	October 3, 2021		December 31, 2020		April 3, 2022		December 31, 2021

	(in thousands)				(in thousands)
Current debt	$	32,219	$	33,343	$	20,497	$	19,182
Long-term debt		112,784		376,768		75,378		89,244

Net carrying amount of convertible debt	$	145,003	$	410,111	$	95,875	$	108,426


	For the Three Months Ended
	April 3, 2022		April 4, 2021

	(in thousands)
Contractual interest expense on the coupon	$	311	$	1,239
Amortization of debt issuance fees recognized as interest expense ( 2 )		66		3,836

Total interest expense on the convertible debt	$	377	$	5,075

~~Table of Contents~~

For the Three Months Ended

For the Nine Months Ended


October 3,

2021

September 27,

2020

October 3,

2021

September 27,

2020



(in thousands)

Contractual interest expense on the coupon    $ 355    $ 1,438    $ 2,666    $ 4,313
Amortization of the discount component and debt issue fees recognized as interest expense    2,424    3,887    9,771    11,518

Total interest expense on the convertible debt    $ 2,779    $ 5,325    $ 12,437    $ 15,831

(1)	Unamortized debt issuance fees as of December 31, 2021 include unamortized debt discount of $8.1 million, which was eliminated with the adoption of ASU 2020-6 on January 1, 2022.

(2)	Three months ended April 4, 2021 includes the amortization of debt discount component, which was eliminated with the adoption of ASU 2020-06 on January 1, 2022.

As of ~~October~~April 3, 2021, the remaining unamortized discount was $13.0 million, which will be amortized over 2.3 years using the effective interest rate method. The carrying amount of the equity component was $100.8 million.

~~As of October 3, 2021,~~2022, the conversion price was approximately ~~$31.53~~$31.51 per share and the

if-converted

value of the notes was ~~$1,364.6~~$355.6 million.

During the three ~~and nine~~ months ended ~~October~~April 3, ~~2021, certain~~2022, eleven debt holders elected to convert ~~$235.2~~$20.7 million ~~and $302.0 million, respectively,~~ of debt principal. The conversions in the three and nine months ended October 3, 2021 resulted in a loss of $20.2 million and $25.4 million, respectively, recorded to other (income) expense, net in the consolidated statement of operations. The conversion of the debt was settled in cash for principal amount and in shares for the excess of conversion value over principal amount. The ~~7.2~~0.5 million shares issued to the debt holders were received from exercising the convertible notes hedge call options.

Additional conversions of approximately ~~$41.0~~$20.5 million of debt principal will occur in the ~~fourth~~second quarter of ~~2021. The~~2022 and the liability ~~component~~ is included in current ~~debt~~debt.

Teradyne expects to make principal interest payments of $1.2 million in the next 12 months and ~~the equity component is included in convertible common shares.~~$1.2 million thereafter.

Revolving Credit Facility

On May 1, 2020, Teradyne entered into a credit agreement (the “Credit Agreement”) with Truist Bank, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement ~~provides~~ provide

for a three-year, senior secured revolving credit facility of $400.0 million (the “Credit Facility”). ~~The~~

On December 10, 2021, the Credit Agreement ~~further~~was amended to extend maturity date of the Credit Facility to December 10, 2026. The amended Credit Agreement provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders the available incremental ~~commitments~~amount under the Credit Facility, ~~in an aggregate principal amount~~ not to exceed ~~$150.0 million.~~

~~Proceeds from~~ the ~~Credit Facility may be used for general corporate purposes and working capital. Teradyne incurred $3.5~~greater of $200.0 million ~~in costs related to the revolving credit facility. These costs are being amortized over the three-year term~~or 15% of ~~the revolving credit facility and are included in interest expense in the statement of operations. As of November 5, 2021, Teradyne has not borrowed any funds under the Credit Facility.~~

consolidated EBIDTA. The interest ~~rates~~rate applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a margin ranging from ~~0.50%~~0.00% to ~~1.25%~~0.75% per annum or LIBOR ~~a minimum of 0.75%,~~ plus a margin ranging from ~~1.50%~~1.00% to ~~2.25%~~1.75% per annum, based on the consolidated leverage ratio of Teradyne. In addition, Teradyne will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from ~~0.25%~~0.15% to ~~0.40%~~0.25% per annum, based on the then applicable consolidated leverage ratio.

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Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBOR breakage costs.

The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne’s ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal ~~quarter:~~quarter a consolidated leverage ratio and an interest coverage ratio.

The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.

As of ~~November 5, 2021,~~May 6, 2022, Teradyne has 0t borrowed any funds under the credit facility and was in compliance with all covenants.

~~Table of Contents~~

I. PREPAYMENTS

Prepayments consist of the ~~following and are included in prepayments and other assets on the balance sheet:~~following:


	October 3, 2021		December 31, 2020		April 3, 2022		December 31, 2021

	(in thousands)				(in thousands)
Contract manufacturer and supplier prepayments	$	334,660	$	212,286	$	441,665	$	364,478
Prepaid maintenance and other services		13,574		13,116		14,772		13,660
Prepaid taxes		13,822		9,361		10,756		15,090
Other prepayments		12,093		15,329		12,221		13,038

Total prepayments	$	374,149	$	250,092	$	479,414	$	406,266

J. ~~DEFERRED REVENUE AND CUSTOMER ADVANCES~~PRODUCT WARRANTY

~~Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:~~

October 3,
2021

December 31,
2020



(in thousands)

Maintenance, service and training    $ 83,046    $ 77,654
Extended warranty    67,482    51,929
Customer advances, undelivered elements and other    49,874    63,438

Total deferred revenue and customer advances    $ 200,402    $ 193,021

~~K. PRODUCT WARRANTY~~

Teradyne generally provides a

one-year

warranty on its products, commencing upon installation, acceptance or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities.

For the Three Months

Ended

For the Nine Months

Ended


October 3,
2021

September 27,
2020

October 3,
2021

September 27,
2020



(in thousands)

Balance at beginning of period    $ 25,676    $ 13,016    $ 16,633    $ 8,996
Accruals for warranties issued during the period    6,641    8,255    28,719    19,522
Accruals related to
pre-existing
warranties
   (963 )    158    (3,966 )    1,569
Settlements made during the period    (5,233 )    (6,272 )    (15,265 )    (14,930 )

Balance at end of period    $ 26,121    $ 15,157    $ 26,121    $ 15,157


	For the Three Months Ended
	April 3, 2022			April 4, 2021

	(in thousands)

Balance at beginning of period	$	24,577		$	16,633
Accruals for warranties issued during the period		4,100			11,881
Accruals related to pre-existing warranties		(2,758	)		447
Settlements made during the period		(5,814	)		(5,068	)

Balance at end of period	$	20,105		$	23,893

When Teradyne receives revenue for extended warranties, beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The balance below is included in short and long-term deferred revenue and customer advances.

For the Three Months

Ended

For the Nine Months

Ended


October 3,
2021

September 27,
2020

October 3,
2021

September 27,
2020



(in thousands)

Balance at beginning of period    $ 63,525    $ 40,178    $ 51,929    $ 30,677
Deferral of new extended warranty revenue    12,728    13,674    36,533    32,724
Recognition of extended warranty deferred revenue    (8,771 )    (5,149 )    (20,980 )    (14,698 )

Balance at end of period    $ 67,482    $ 48,703    $ 67,482    $ 48,703


	For the Three Months Ended
	April 3, 2022			April 4, 2021

	(in thousands)

Balance at beginning of period	$	64,168		$	51,929
Deferral of new extended warranty revenue		11,774			7,517
Recognition of extended warranty deferred revenue		(10,216	)		(5,538	)

Balance at end of period	$	65,726		$	53,908

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L.K. STOCK-BASED COMPENSATION

Under Teradyne’s stock compensation plans, Teradyne grants service-based restricted stock units, performance-based restricted stock units and stock options, and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).

Service-based restricted stock unit awards granted to employees vest in equal annual installments over four years. Restricted stock unit awards granted to

non-employee

directors vest 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~~Annual Meeting of ~~shareholders.~~Shareholders. Teradyne expenses the cost of the restricted stock unit awards subject to service-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.

Performance-based restricted stock units (“PRSUs”) granted to Teradyne’s executive officers may have a performance metric based on relative total shareholder return (“TSR”). Teradyne’s three-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 0% to 200% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period or the period from the grant to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the year following the grant. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted below.

PRSUs granted to Teradyne’s executive officers may also have a performance metric based on three-year cumulative

non-GAAP

profit before interest and tax (“PBIT”) as a percent of Teradyne’s revenue.

Non-GAAP

PBIT is a financial measure equal to GAAP income from operations less restructuring and other, ~~net;~~ amortization of acquired intangible assets; acquisition and divestiture related charges or credits; pension actuarial gains and losses;

~~non-cash~~

~~convertible debt interest expense;~~ and other

non-recurring

gains and charges. The final number of PBIT PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of the target shares. The PBIT PRSUs will vest upon the three-year anniversary of the grant date. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period or the period from the grant date to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the year following the grant. Compensation expense is recognized based on the number of units that are earned based upon the three-year Teradyne PBIT as a percent of Teradyne’s revenue, provided the executive officer remains an employee at the end of the three-year period subject to the

retirement and termination eligibility provisions noted below.

a PRSU recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability or death or (2) retirement or termination other than for cause, after attaining both at least age sixty and at least ten years of service, then all or a portion of the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will vest on the date the performance percentage is determined. Except as set forth in the preceding sentence, no PRSUs will vest if the executive officer is no longer an employee at the end of the three-year period.

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.

During

the ~~nine~~three months ended ~~October~~ April

3 ~~2021~~

2022

and ~~September 27, 2020,~~April

2021

, Teradyne granted ~~0.3~~

0.4

million and ~~0.4~~

0.3

million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of ~~$113.76~~ $

111.31

and ~~$70.76, respectively, and 0.1 million of service-based restricted stock unit awards to~~$

112.55

~~non-employee~~

~~directors at a weighted average grant date fair value of $127.77 and $64.99,~~, respectively.

During the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020,~~April 4, 2021, Teradyne granted 0.1 million of PBIT PRSUs with a grant date fair value of ~~$113.65~~$110.84 and ~~$70.94,~~$112.28, respectively.

~~Table of Contents~~

During the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020,~~April 4, 2021, Teradyne granted 0.1 million of TSR PRSUs, with a grant date fair value of ~~$125.02~~$101.06 and ~~$89.93,~~$125.02, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:


	For the Nine Months Ended
	October 3, 2021	September 27, 2020	For the Three Months Ended
			April 3, 2022			April 4, 2021
Risk-free interest rate	0.2%	1.5%		1.4	%		0.2	%
Teradyne volatility-historical	43.9%	34.9%		47.1	%		43.9	%
NYSE Composite Index volatility-historical	22.9%	11.4%		22.7	%		22.9	%
Dividend yield	0.4%	0.6%		0.4	%		0.4	%

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Expected

volatility was based on the historical volatility of Teradyne’s stock and the NYSE Composite Index over the most recent three-year period. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of ~~$0.40~~ $

0.44

per share divided by Teradyne’s stock price on the grant date of ~~$113.48~~ $

112.12

for the ~~2021~~2022 grant and an estimated annual dividend amount of ~~$0.40~~ $

0.40

per share divided by Teradyne’s stock price on the grant date of ~~$72.10~~ $

113.48

for the ~~2020~~2021 grant.

During the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020,~~April 4, 2021, Teradyne granted 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $39.01 and $36.60, ~~and $20.67,~~ respectively.

The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:

For the Nine Months Ended

October 3,
2021

September 27,
2020
Expected life (years)      5.0   5.0
Risk-free interest rate    0.4% 1.6%
Volatility-historical    37.8% 31.6%
Dividend yield    0.4% 0.6%


	For the Three Months Ended
	April 3, 2022			April 4, 2021
Expected life (years)		4.0			5.0
Risk-free interest rate		1.6	%		0.4	%
Volatility-historical		43.7	%		37.8	%
Dividend yield		0.4	%		0.4	%

Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of ~~$0.40~~$0.44 per share divided by Teradyne’s stock price on the grant date of ~~$113.48~~$112.12 for the ~~2021~~2022 grant and an estimated annual dividend amount of $0.40 per share divided by Teradyne’s stock price on the grant date of ~~$72.10~~$113.48 for the ~~2020~~2021 grant.

~~Table of Contents~~

L. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss), which are presented net of tax, consist of the following:

Foreign

Currency

Translation

Adjustment

Unrealized

Gains

(Losses) on

Marketable

Securities

Retirement

Plans
Prior

Service

Credit

Total



(in thousands)

Nine Months Ended October 3, 2021

Balance at December 31, 2020, net of tax of $0, $1,910, $(1,126), respectively    $ 25,389    $ 6,954    $ 1,173    $ 33,516
Other comprehensive loss before reclassifications, net of tax of $0, $(516), $0, respectively    (26,672 )    (1,952 )    0       (28,624 )
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(186), $(2), respectively    0       (670 )    (5 )    (675 )

Net current period other comprehensive loss, net of tax of $0
, $(702), $
(2), respectively
   (26,672 )    (2,622 )    (5 )    (29,299 )

Balance at October 3, 2021, net of tax of $0, $1,208, $(1,128), respectively    $ (1,283 )    $ 4,332    $ 1,168    $ 4,217


Nine Months Ended September 27, 2020

Balance at December 31, 2019, net of tax of $0, $946, $(1,124), respectively    $ (23,514 )    $ 3,480    $ 1,180    $ (18,854 )
Other comprehensive income before reclassifications, net of tax of $0, $1,410, $0, respectively    24,131    5,165    0       29,296
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(615), $
(1
), respectively
   0       (2,188 )    (6 )    (2,194 )

Net current period other comprehensive income (loss), net of tax of $0, $795, $(1), respectively    24,131    2,977    (6 )    27,102

Balance at September 27, 2020, net of tax of $0, $1,741, $(1,125), respectively    $ 617    $ 6,457    $ 1,174    $ 8,248


	Foreign Currency Translation Adjustment			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total

	(in thousands)
Three Months Ended April 3, 2022
Balance at December 31, 2021, net of tax of $0, $1,055, $(1,128), respectively	$	(10,818	)	$	3,704		$	1,166		$	(5,948	)
Other comprehensive loss before reclassifications, net of tax of $0, $(1,333), $0, respectively		(8,076	)		(5,388	)		0			(13,464	)
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(18), $0, respectively		0			(65	)		(2	)		(67	)

Net current period other comprehensive loss, net of tax of $0, $(1,351), $0, respectively		(8,076	)		(5,453	)		(2	)		(13,531	)

Balance at April 3, 2022, net of tax of $0, $(296), $(1,128), respectively	$	(18,894	)	$	(1,749	)	$	1,164		$	(19,479	)

Three Months Ended April 4, 2021
Balance at December 31, 2020, net of tax of $0, $1,910, $(1,126), respectively	$	25,389		$	6,954		$	1,173		$	33,516
Other comprehensive loss before reclassifications, net of tax of $0, $(908), $0, respectively		(21,123	)		(3,270	)		0			(24,393	)
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(123), $0, respectively		0			(444	)		(2	)		(446	)

Net current period other comprehensive loss, net of tax of $0, $(1,031), $0, respectively		(21,123	)		(3,714	)		(2	)		(24,839	)

Balance at April 4, 2021, net of tax of $0, $879, $(1,126), respectively	$	4,266		$	3,240		$	1,171		$	8,677

Reclassifications out of accumulated other comprehensive income (loss) to the statement of operations for the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020~~April 4, 2021 were as follows:

Details about Accumulated Other Comprehensive Income Components

For the Three Months

Ended

For the Nine Months

Ended

Affected Line Item

in the Statements

of Operations


October 3,
2021

September 27,
2020

October 3,
2021

September 27,
2020



(in thousands)

Available-for-sale
marketable securities:

Unrealized gains, net of tax of $65, $194, $186, $615, respectively    $ 229    $ 689    $ 670    $ 2,188    Other (income)
expense, net

Defined benefit postretirement plan:
Amortization of prior service credit, net of tax of $0, $0, $2, $1, respectively    2    2    5    6    (a)

Total reclassifications, net of tax of $65, $194, $188, $616, respectively    $ 231    $ 691    $ 675    $ 2,194    Net income


Details about Accumulated Other Comprehensive Income (Loss) Components	For the Three Months Ended				Affected Line Item in the Statements of Operations

	April 3,		April 4,
	2022		2021

	(in thousands)
Available-for-sale marketable securities:
Unrealized gains, net of tax of $18 and $123, respectively	$	65	$	444		Other (income) expense, net
Defined benefit pension and postretirement plans:
Amortization of prior service cre dit , net of tax of $0 and $0, respectively		2		2		(a)

Total reclassifications, net of tax of $18 and $123, respectively	$	67	$	446		Net income

~~(a) The amortization of prior service credit is included in the computation of net periodic postretirement benefit cost. See Note Q:~~

(a)	The amortization of prior service credit is included in the computation of net periodic postretirement benefit cost. See Note P : “Retirement Plans.”

M. GOODWILL AND ACQUIRED INTANGIBLE ASSETS

Goodwill

Teradyne performs its annual goodwill impairment test as required under the provisions of ASC

350-10,

“Intangibles—Goodwill and Other”

on December 31 of each fiscal year unless interim indicators of impairment exist. In the three months ended April 3, 2022

there were no interim indicators of impairment. Goodwill is considered impaired when the net book value of a reporting unit exceeds its estimated fair value.

~~Table of Contents~~

The changes in the carrying amount of goodwill by reportable segments for the ~~nine~~three months ended ~~October~~April 3, ~~2021,~~2022, were as follows:


	Industrial Automation			System Test			Wireless Test			Semiconductor Test			Total			Industrial Automation			Wireless Test			Semiconductor Test			System Test			Total

	(in thousands)															(in thousands)
Balance at December 31, 2020
Balance at December 31, 2021
Goodwill	$	433,752		$	158,699		$	361,819		$	262,155		$	1,216,425		$	405,971		$	361,819		$	262,101		$	158,699		$	1,188,590
Accumulated impairment losses		0			(148,183	)		(353,843	)		(260,540	)		(762,566	)		—			(353,843	)		(260,540	)		(148,183	)		(762,566	)

Total goodwill																	405,971			7,976			1,561			10,516			426,024
		433,752			10,516			7,976			1,615			453,859
Foreign currency translation adjustment		(20,373	)		0			0			(88	)		(20,461	)		(6,122	)		0			(14	)		0			(6,136	)

Balance at October 3, 2021
Balance at April 3, 2022
Goodwill		413,379			158,699			361,819			262,067			1,195,964			399,849			361,819			262,087			158,699			1,182,454
Accumulated impairment losses		0			(148,183	)		(353,843	)		(260,540	)		(762,566	)		—			(353,843	)		(260,540	)		(148,183	)		(762,566	)

Total goodwill																$	399,849		$	7,976		$	1,547		$	10,516		$	419,888
	$	413,379		$	10,516		$	7,976		$	1,527		$	433,398

Intangible Assets

Teradyne reviews 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.

Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheet:


	Gross Carrying Amount		Accumulated Amortization			Foreign Currency Translation Adjustment			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Foreign Currency Translation Adjustment			Net Carrying Amount

Balance at October 3, 2021		(in thousands)
											(in thousands)
Balance at April 3, 2022

Developed technology	$	272,547	$	(220,147	)	$	(3,489	)	$	48,911	$	272,547	$	(226,648	)	$	(4,565	)	$	41,334
Customer relationships		57,739		(48,351	)		174			9,562		57,739		(49,492	)		194			8,441
Tradenames and trademarks		70,120		(46,643	)		(273	)		23,204		59,387		(38,494	)		(822	)		20,071

Total intangible assets	$	400,406	$	(315,141	)	$	(3,588	)	$	81,677	$	389,673	$	(314,634	)	$	(5,193	)	$	69,846

Balance, December 31, 2020
Balance, December 31, 2021
Developed technology	$	272,547	$	(210,479	)	$	(1,610	)	$	60,458	$	272,547	$	(223,413	)	$	(4,093	)	$	45,041
Customer relationships		66,239		(54,524	)		305			12,020		57,739		(48,921	)		209			9,027
Tradenames and trademarks		70,120		(42,344	)		685			28,461		59,387		(37,237	)		(583	)		21,567

Total intangible assets	$	408,906	$	(307,347	)	$	(620	)	$	100,939	$	389,673	$	(309,571	)	$	(4,467	)	$	75,635

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Aggregate

intangible asset amortization expense ~~was $5.4 million and $16.3 million, respectively,~~ for the three ~~and nine~~ months ended ~~October~~April 3, 2022 and April 4, 2021 ~~and $6.2~~was $

5.1

million and ~~$25.1~~$

5.5

million, ~~respectively, for the three and nine months ended September 27, 2020.~~respectively.

Estimated intangible asset amortization expense for each of the five succeeding fiscal years

and thereafter

is as follows:

Year

Amortization Expense


(in thousands)

2021 (remainder)    $ 5,199
2022    20,299
2023    19,815
2024    19,507
2025    11,645
Thereafter    5,212

~~Table of Contents~~


Year	Amortization Expense
	(in thousands)
2022	$	14,879
2023		19,377
2024		19,069
2025		11,456
2026		2,404
Thereafter		2,661

N. NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per common share:


									For the Three Months Ended
									April 3,		April 4,
	For the Three Months Ended				For the Nine Months Ended				2022		2021
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
									(in thousands, except per share amounts)
	(in thousands, except per share amounts)
Net income for basic and diluted net income per share	$	256,718	$	222,718	$	790,549	$	587,815	$	161,928	$	205,512

Weighted average common shares-basic		164,583		166,014		165,690		166,131		162,048		166,491
Effect of dilutive potential common shares:
Convertible note hedge warrant shares (1)		9,819		7,775		9,774		6,364		10,028		9,429
Incremental shares from assumed conversion of convertible notes (2)		6,464		9,156		8,784		8,029		2,541		10,310
Restricted stock units		1,035		1,237		1,147		1,104		875		1,395
Stock options		73		141		87		136		69		108
Employee stock purchase plan		13		15		10		13		14		7

Dilutive potential common shares		17,404		18,324		19,802		15,646		13,527		21,249

Weighted average common shares-diluted		181,987		184,338		185,492		181,777		175,575		187,740

Net income per common share-basic	$	1.56	$	1.34	$	4.77	$	3.54	$	1.00	$	1.23

Net income per common share-diluted	$	1.41	$	1.21	$	4.26	$	3.23	$	0.92	$	1.09

(1)

Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of ~~$39.56~~

~~and $39.58,~~$39.54, multiplied by

~~14.6~~

~~million shares and~~ 14.6 million ~~shares for the three and nine months ended October 3, 2021, respectively.~~shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period.

(2)

Incremental shares from assumed conversion of the convertible notes were calculated using the difference between the average Teradyne stock price for the period and the conversion price of ~~$31.53~~

~~and $31.54,~~$31.51, multiplied by

~~8.7~~

3.4 million ~~shares and 11.7 million shares, for the three and nine months ended October 3, 2021, respectively.~~shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period.

The computation of diluted net income per common share for the three ~~and nine~~ months ended ~~October~~April 3, 2022 and April 4, 2021 excludes the effect of the potential vesting of 0.1 million and 0.1 million, respectively, of restricted stock units because the effect would have been anti-dilutive.

The computation of diluted net income per common share for the three and nine months ended September 27, 2020 excludes the effect of the potential vesting of 0.1 million and 0.2 million, respectively, of restricted stock units because the effect would have been anti-dilutive.

O. RESTRUCTURING AND OTHER

During the three months ended ~~October~~April 3, 2022, Teradyne recorded a charge of $14.7

million related to the arbitration claim filed against Teradyne and AutoGuide related to an earn-out dispute, which was settled

March

25,

2022 for $26.7 million. Previously, in the three months ended December 31, 2021, Teradyne recorded ~~$0.6~~a charge of $12.0 million ~~of severance charges primarily in Industrial Automation, $0.3 million of acquisition~~ related ~~compensation expenses and $0.3 million for other expenses.~~to this earn-out dispute.

During the three months ended September 27, 2020, Teradyne recorded a $27.2 million gain for the decrease in the fair value of the AutoGuide contingent consideration liability, a $1.1 million gain for the decrease in acquisition related compensation liability, partially offset by $0.5 million recorded for employee severance charges primarily in Industrial Automation.

~~During the nine months ended October 3,~~April 4, 2021, Teradyne recorded a gain of $7.2

million for the decrease in the fair value of the AutoGuide contingent consideration liability, partially offset by a charge of $1.7 million for an increase in environmental and legal liabilities, $1.2 million of severance charges primarily in Industrial Automation, $0.6 million for other expenses and $0.3 million of acquisition related compensation expenses.liability.

During the nine months ended September 27, 2020, Teradyne recorded a $4.0 million contract termination settlement charge, $3.4 million of acquisition related compensation and expenses, $1.2 million of severance charges primarily in Industrial Automation, and $1.2 million of other expenses, partially offset by a $4.4 million gain for the decrease in the fair value of the AutoGuide contingent consideration liabilities, and a $3.5 million gain for the decrease in the fair value of the MiR contingent consideration liability.

P. RETIREMENT PLANS

ASC 715,

~~“Compensation—~~ “Compensation—Retirement ~~Benefits”~~

Benefits,” requires an employer with a defined benefit ~~plan~~plans or other postretirement benefit ~~plan~~plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the ~~plan.~~plans as defined by ASC 715. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation at December 31. Teradyne uses a December 31 measurement date for all of its plans.

Defined Benefit Pension Plans

Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain

non-U.S.

subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to make contributions to these plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of the U.S. qualified pension plan consist primarily of fixed income and equity securities. In addition, Teradyne has ~~unfunded qualified foreign plans as well as~~ an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act (“ERISA”) and the Internal Revenue Code ~~(“IRC”~~(the “IRC”)., as well as unfunded qualified foreign plans.

In the ~~nine~~

three

months ended ~~October~~ April

3 ~~2021,~~

2022

and ~~September 27, 2020,~~April

2021

, Teradyne contributed ~~$2.5~~$

0.8

million and ~~$2.2~~$

0.8

million, respectively, to the U.S. supplemental executive defined benefit pension plan

and ~~$0.8~~$

0.3

million and ~~$0.7~~$

0.3

million, respectively, to certain qualified pension plans for

non-U.S.

subsidiaries.

For the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020,~~April 4, 2021, Teradyne’s net periodic pension cost was comprised of the ~~following components:~~following:


													For the Three Months Ended
	For the Three Months Ended												April 3, 2022						April 4, 2021
	October 3, 2021						September 27, 2020
	United States			Foreign			United States			Foreign			United States			Foreign			United States			Foreign

	(in thousands)												(in thousands)
Service cost	$	452		$	240		$	417		$	216		$	397		$	206		$	453		$	243
Interest cost		1,098			86			1,460			123			1,222			118			1,100			87
Expected return on plan assets		(936	)		(17	)		(1,170	)		(16	)		(732	)		(20	)		(936	)		(16	)
Net actuarial loss		—			—			2,238			—
Settlement loss		—			—			450			—

Total net periodic pension cost	$	614		$	309		$	3,395		$	323		$	887		$	304		$	617		$	314


	For the Nine Months Ended
	October 3, 2021						September 27, 2020
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	1,357		$	720		$	1,283		$	648
Interest cost		3,295			257			4,505			369
Expected return on plan assets		(2,809	)		(50	)		(3,634	)		(47	)
Net actuarial (gain) loss		(400	)		—			2,418			—
Settlement loss		—			—			450			—

Total net periodic pension cost	$	1,443		$	927		$	5,022		$	970

~~The net periodic pension cost components other than service cost were recorded in other (income) expense, net in the statement of operations.~~

Postretirement Benefit Plan

In addition to receiving pension benefits, Teradyne employees in the United States who meet early retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.

For the three months ended April 3, 2022 and April 4, 2021, Teradyne’s net periodic postretirement benefit cost was comprised of the following:


	For the Three Months Ended
	April 3, 2022			April 4, 2021

	(in thousands)
Service cost	$	17		$	16
Interest cost		44			44
Amortization of prior service credit		(2	)		(2	)

Total net periodic postretirement benefit cost	$	59		$	58

Table of Contents

~~For the three and nine months ended October 3, 2021 and September 27, 2020, Teradyne’s net periodic postretirement benefit cost (credit) was comprised of the following components:~~

For the Three

Months

Ended

For the Nine Months

Ended


October 3,
  2021

September 27,
  2020

October 3,
  2021

September 27,
  2020



(in thousands)

Service cost    $ 16    $ 14    $ 48    $ 43
Interest cost    43    60    128    180
Amortization of prior service credit    (2 )    (2 )    (7 )    (7 )
Net actuarial gain    0      0      (228 )    (279 )

Total net periodic postretirement benefit cost (credit)    $ 57    $ 72    $ (59 )    $ (63 )

~~The net periodic postretirement benefit cost (credit) components other than service cost were recorded in other (income) expense, net in the statement of operations.~~

R.Q. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of ~~October~~April 3, ~~2021,~~2022, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately ~~$811.9~~$904.0 million, of which ~~$777.8~~$826.7 million is for less than one year.

Legal Claims

Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Teradyne believes that it has meritorious defenses against all pending claims and intends to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending claims or to provide possible ranges of losses that may arise, Teradyne believes the potential losses associated with all of these actions are unlikely to have a material adverse effect on its business, financial position or results of operations.

On March 8, 2021, Industrial Automation LLC, sellers of AutoGuide, submitted a demand for arbitration against Teradyne and AutoGuide in Wilmington, Delaware alleging that Teradyne and AutoGuide breached certain provisions of the Membership Interests Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide. The arbitration demand ~~seeks full~~sought

ful

l acceleration of the maximum ~~earnout~~earn-out amount payable under the Purchase Agreement, or $106.9

million, for the alleged breach of the ~~earnout~~earn-out provisions of the Purchase Agreement. On March ~~26,~~21, 2022, the arbitration claim was settled for

$26.7

million. As a result, Teradyne has no remaining earn-

out

obligations.

Guarantees and Indemnification Obligations

Teradyne provides indemnification, to the extent permitted by law, to its officers, directors, employees and agents for liabilities arising from certain events or occurrences, while the officer, director, employee, or agent, is or was serving, at Teradyne’s request in such capacity. Teradyne may enter into indemnification agreements with certain of its officers and directors. With respect to acquisitions, Teradyne provides indemnifications to or assumes indemnification obligations for the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’ by-laws and charter. As a matter of practice, Teradyne has maintained directors’ and officers’ liability insurance coverage including coverage for directors and officers of acquired companies.

Teradyne enters into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require Teradyne to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to Teradyne’s products. From time to time, Teradyne also indemnifies customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, breach of confidentiality obligations and environmental claims relating to the use of Teradyne’s products and services or resulting from the acts or omissions of Teradyne, its employees, authorized agents or subcontractors. On occasion, Teradyne has also provided guarantees to customers regarding the delivery and performance of its products in addition to the warranty described below.

As a matter of ordinary course of business, Teradyne warrants that its products will substantially perform in accordance with its standard published specifications in effect at the time of delivery. Most warranties have a one-year duration commencing from installation. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based upon historical experience. When Teradyne receives revenue for extended warranties beyond the standard duration, the revenue is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. As of April 3, 2022 and December 31, 2021, Teradyne had a product warranty accrual of $20.1 million and ~~AutoGuide filed an answer denying that~~$24.6 million, respectively, included in other accrued liabilities, and revenue deferrals related to extended warranties of $65.7 million and $64.2 million, respectively, included in short and long-term deferred revenue and customer advances.

In addition, in the ordinary course of business, Teradyne ~~and AutoGuide breached any provisions~~provides minimum purchase guarantees to certain vendors to ensure continuity of supply against the market demand. Although some of these guarantees provide penalties for cancellations and/or modifications to the purchase commitments as the market demand decreases, most of the ~~Purchase Agreement. The arbitration hearing is scheduled for March 21, 2022. While it is not possible at this stage~~guarantees do not. Therefore, as the market demand decreases, Teradyne re-evaluates these guarantees and determines what charges, if any, should be recorded.

With respect to ~~predict the outcome~~its agreements covering product, business or entity divestitures and acquisitions, Teradyne provides certain representations, warranties and covenants to purchasers and agrees to indemnify and hold such purchasers harmless against breaches of such representations, warranties and covenants. Many of the ~~arbitration,~~indemnification claims have a definite expiration date while some remain in force indefinitely. With respect to its acquisitions, Teradyne ~~and AutoGuide intend~~may, from time to ~~vigorously defend against~~time, assume the ~~Industrial Automation LLC claims.~~liability for certain events or occurrences that took place prior to the date of acquisition.

Table of Contents

As a matter of ordinary course of business, Teradyne occasionally guarantees certain indebtedness obligations of its subsidiary companies, limited to the borrowings from financial institutions, purchase commitments to certain vendors, and lease commitments to landlords.

Based on historical experience and information known as of April 3, 2022 and December 31, 2021, except for product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.

R. INCOME TAXES

A reconciliation of the United States federal statutory corporate tax rate to Teradyne’s effective tax rate was as follows:


	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended
	October 3, 2021			September 27, 2020			October 3, 2021			September 27, 2020			April 3, 2022			April 4, 2021


U.S. statutory federal tax rate		21.0	%		21.0	%		21.0	%		21.0	%
US statutory federal tax rate														21.0	%		21.0	%
Non-deductible officers’ compensation														1.1			0.8
Discrete benefit related to equity compensation														(6.6	)		(6.2	)
Foreign taxes		(4.4	)		(6.9	)		(4.4	)		(5.8	)		(3.4	)		(4.7	)
Tax credits		(1.9	)		(1.6	)		(1.4	)		(1.6	)		(1.6	)		(1.3	)
International provisions of the U.S. Tax Cuts and Jobs Act of 2017		(1.5	)		3.0			(1.6	)		0.5			(1.3	)		(1.5	)
Discrete benefit related to equity compensation		(0.1	)		(0.4	)		(1.6	)		(1.4	)
Other, net		0.7			0.5			0.7			0.6			1.0			0.2

Effective tax rate		13.8	%		15.6	%		12.7	%		13.3	%		10.2	%		8.3	%

On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of ~~October~~April 3, ~~2021,~~2022, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is

more-likely-than-not

that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.

~~Table of Contents~~

As of ~~October~~April 3, ~~2021,~~2022 and December 31, ~~2020,~~2021, Teradyne had ~~$16.8~~$14.6 million and ~~$17.9~~$14.5 million, respectively, of reserves for uncertain tax positions. The ~~$1.1~~$0.1 million net ~~decrease~~increase in reserves for uncertain tax positions is ~~primarily~~ related to ~~U.S. state research and development credits generated in prior years, as well as~~ U.S. federal research and development credits generated in the current year.

As of ~~October~~April 3, ~~2021,~~2022, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately ~~$1.6~~$0.2 million in the next twelve months because of a lapse of statutes of limitation. The estimated decrease relates to loss ~~carryforwards, research credits and U.S. manufacturing activities deductions.~~carryforwards.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of ~~October~~April 3, ~~2021,~~2022 and December 31, ~~2020, $1.5~~2021, $0.3 million and ~~$1.2~~$0.3 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020,~~April 4, 2021, expense of ~~$0.3~~$0.1 million and ~~$0.0~~$0.1 million, respectively, was recorded for interest and penalties related to income tax items.

Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 was ~~$23.9~~$3.5 million, or ~~$0.13~~$0.02 per diluted share. The tax savings due to the tax holiday for the ~~nine~~three months ended ~~September 27, 2020~~April 4, 2021 was ~~$24.9~~$6.2 million, or ~~$0.14~~$0.03 per diluted share. In November 2020, Teradyne entered into an agreement with the Singapore Economic Development Board which extended ~~its~~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.

S. SEGMENT INFORMATION

Teradyne has ~~4 reportable~~4reportable segments (Semiconductor Test, System Test, Industrial Automation and Wireless Test). Each of the reportable segments is also an individual operating segment.

Table of Contents

The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products and services for defense/aerospace instrumentation test, storage and system level test, and circuit-board test. The Industrial Automation segment includes operations related to the design, manufacturing and marketing of collaborative robotic arms, autonomous mobile robots and advanced robotic control software. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. Each operating segment has a segment manager who is directly accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts, and plans for the segment.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income (loss) before income taxes. The accounting policies of the business segments in effect are described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form

10-K

for the year ended December 31, ~~2020.~~

252021.

~~Table of Contents~~

Segment information for th

the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020~~April 4, 2021 is as follows:


	Semiconductor Test		System Test		Industrial Automation			Wireless Test		Corporate and Other			Consolidated		Semiconductor Test		System Test		Industrial Automation			Wireless Test		Corporate and Eliminations			Consolidated

	(in thousands)														(in thousands)

Three Months Ended October 3, 2021
Three Months Ended April 3, 2022
Revenues	$	688,232	$	102,605	$	91,014		$	68,713	$	(63	)	$	950,501	$	482,341	$	118,668	$	103,189		$	51,518	$	(346	)	$	755,370
Income (loss) before income taxes (1)(2)		265,017		31,773		(4,226	)		31,726		(26,535	)		297,755		149,705		41,322		(5,098	)		18,619		(24,189	)		180,359
Total assets (3)		1,251,549		147,970		696,792			119,568		1,546,303			3,762,182		1,296,070		187,283		675,560			113,821		1,336,420			3,609,154

Three Months Ended September 27, 2020
Three Months Ended April 4, 2021
Revenues	$	592,141	$	118,169	$	68,711		$	40,504	$	(41	)	$	819,484	$	528,063	$	132,837	$	79,951		$	40,898	$	(143	)	$	781,606
Income (loss) before income taxes (1)(2)		189,116		47,368		(5,302	)		10,938		21,611			263,731		176,368		51,061		(12,967	)		9,616		(85	)		223,993
Total assets (3)		1,069,830		155,642		667,132			108,671		1,435,237			3,436,512		1,243,358		179,195		672,596			104,367		1,520,201			3,719,717

Nine Months Ended October 3, 2021 (4)
Revenues	$	2,050,271	$	340,261	$	263,151		$	164,504	$	(352	)	$	2,817,835
Income (loss) before income taxes (1)(2)		778,687		116,788		(14,586	)		63,810		(38,925	)		905,774
Total assets (3)		1,251,549		147,970		696,792			119,568		1,546,303			3,762,182

Nine Months Ended September 27, 2020
Revenues	$	1,735,777	$	306,051	$	187,792		$	133,174	$	(294	)	$	2,362,500
Income (loss) before income taxes (1)(2)		571,719		114,968		(32,041	)		35,640		(12,197	)		678,089
Total assets (3)		1,069,830		155,642		667,132			108,671		1,435,237			3,436,512

(1)

Included in Corporate and ~~Other~~Eliminations are: legal fees, contingent consideration fair value adjustments, ~~loss on convertible debt conversions,~~ interest income, interest expense, severance charges, net foreign exchange gains (losses), ~~pension,~~acquisition related charges and compensation, intercompany eliminations and ~~acquisition related: (a) charges; (b) legal fees; (c) compensation.~~for the three months ended April 4, 2021, loss on convertible debt conversions.

(2)	Included in income (loss) before taxes are charges and credits related to restructuring and other, inventory charges and, for the three months ended April 4, 2021, loss on convertible debt ~~conversions and inventory charges.~~conversions.

(3)	Total assets are attributable to each segment. Corporate assets consist of cash and cash equivalents, marketable securities, and certain other assets.

~~(4)~~

~~The (loss) before income taxes for the nine months ended October 3, 2021 for Industrial Automation has been decreased and Corporate and Other has been increased to correctly eliminate a~~

~~$10.1~~

~~million immaterial error in the three and six months ended July 4, 2021 related to intercompany charges. The error is not material to any historical periods.~~

Included in each segment are charges and credits in the following line items in the statements of operations:

For the Three Months

Ended

For the Nine Months

Ended



October 3,
2021

September 27,
2020

October 3,
2021

September 27,
2020



(in thousands)

Semiconductor Test:

Cost of revenues—inventory charge    $ 3,725    $ 1,131    $ 4,959    $ 7,956
Restructuring and other—Contract termination settlement charge    —         —      —      4,000
Industrial Automation:

Cost of revenues—inventory charge    $ 3,656    $ —      $ 4,941    $ 505
Restructuring and other—employee severance    476    —      965    664
Restructuring and other—acquisition related expenses and compensation    —      —      825    790
Wireless:

Cost of revenues—inventory charge    $ 679    $ 1,802    $ 1,351    $ 3,957
System Test:

Cost of revenues—inventory charge    $ —      $ —      $ 524    $ 698
Corporate and Other:

Other (income) expense, net—loss on convertible debt conversion    $ 20,153    $ —      $ 25,397    $ —
Restructuring and other—other    —      —      1,846    —
Restructuring and other—AutoGuide contingent consideration adjustment    —      (27,206 )    (7,227 )    (4,421 )
Restructuring and other—acquisition related expenses and compensation    —      (1,086 )    (513 )    2,629
Restructuring and other—MiR contingent consideration adjustment    —      —      —      (3,546 )


	For the Three Months Ended
	April 3, 2022		April 4, 2021

	(in thousands)
Semiconductor Test:

Cost of revenues—inventory charge	$	—	$	1,079
Industrial Automation:
Cost of revenues—inventory charge	$	—	$	1,221
Wireless:
Cost of revenues—inventory charge	$	877	$	—
Corporate and Eliminations :
Restructuring and other— legal settlement charge	$	14,700	$	0
Restructuring and other—AutoGuide contingent consideration adjustment		0		(7,227	)
Other (income) expense, net—loss on convertible debt conversion s		0		4,069
Restructuring and other—acquisition related expenses and compensation		0		(513	)

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U.T. SHAREHOLDERS’ EQUITY

Stock Repurchase Program

In January 2021, Teradyne’s Board of Directors cancelled the January 2020 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. Teradyne intends to repurchase a minimum of ~~$600~~$750.0 million of its common stock

in ~~2021.~~

2022.

During

the ~~nine~~three months ended ~~October~~April 3, ~~2021,~~2022, Teradyne repurchased ~~3.3~~1.8 million shares of common stock for ~~$406.2~~$201.5 million at an average price of ~~$123.53~~$115.12 per share. During the ~~nine~~three months ended ~~September 27, 2020,~~April 4, 2021, Teradyne repurchased ~~1.5~~0.4 million shares of common stock for ~~$88.5~~$45.2 million at an average price of ~~$58.33~~$120.73 per share. The cumulative repurchases under the $2.0 billion common stock repurchase program as of April 3, 2022 were 6.5 million shares of common stock for $801.5 million at an average price per share of $122.89.

The total price includes commissions and is recorded as a reduction to retained earnings.

Dividend

Holders of Teradyne’s common stock are entitled to receive dividends when they are declared by Teradyne’s Board of Directors.

In January ~~2021, May 2021 and August~~2022, Teradyne’s Board of Directors declared a 10% increase in the quarterly cash dividend to $0.11 per share. Dividend payments for the three months ended April 3, 2022 were $17.9 million. In January 2021, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for the three ~~and nine~~ months ended ~~October 3,~~April 4, 2021 were ~~$16.4 million and $49.7 million, respectively.~~$16.7 million.

In January 2020, May 2020 and August 2020, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for the three and nine months ended September 27, 2020 were $16.6 million and $49.9 million, respectively.

While Teradyne declared a quarterly cash dividend and authorized a share repurchase program, it may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of Teradyne’s Board of Directors which will consider, among other things, Teradyne’s earnings, capital requirements and financial condition.

Table of Contents

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements in this Quarterly Report on Form

10-Q

which are not historical facts, so called “forward-looking statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in our filings with the Securities and Exchange Commission. See also Part II, Item 1A of this Quarterly Report on Form

10-Q

and Part I, Item 1A “Risk Factors” in our Annual Report on Form

10-K

for the year ended December 31, ~~2020.~~2021. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management’s analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements, except as may be required by law.

Overview

We are a leading global supplier of automation equipment for test and industrial applications. We design, develop, manufacture and sell automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including the 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:

semiconductor test (“Semiconductor Test”) systems;

storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);

wireless test (“Wireless Test”) systems; and

industrial automation (“Industrial Automation”) products.

The market for our test products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. A few customers drive significant demand for our test products both through direct sales and sales to the customers’ supply partners. We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future.

In 2022, we expect lower demand in the mobility segment of our Semiconductor Test business due to a slower technology transition in one of our largest

end-markets.

We expect this demand to accelerate in 2023 as a result of the expected ramp in 3 nanometer volume production. We also expect demand in the automotive segment to strengthen through 2022.

Our Industrial Automation segment consists of Universal Robots A/S (“UR”), a leading supplier of collaborative robotic arms, Mobile Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial ~~applications~~automation and AutoGuide, LLC (“AutoGuide”), a maker of high payload AMRs. The market for our ~~industrial automation~~Industrial Automation segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (SMEs) throughout the world.

We expect our UR and MiR businesses to continue to grow in 2022, while our AutoGuide business will focus on continuing to invest to scale and integrate high payload AMR solutions. Both our test and industrial automation businesses will continue to be impacted by supply constraints which will in turn impact our revenue and may, along with inflation, increase costs in 2022.

Our corporate strategy iscontinues to focus on profitably ~~growing~~gaining market share in our test businesses through the introduction of differentiated products that target ~~growth~~expanding segments and accelerating growth through continued investment in our Industrial Automation businesses. We plan to execute on our strategy while balancing capital allocations between returning capital to our shareholders through ~~dividends~~stock repurchases and ~~stock repurchases~~dividends and using capital for opportunistic acquisitions.

Impact of the

COVID-19

Pandemic on our Business

The novel coronavirus

(COVID-19)

pandemic resulted in government authorities implementing numerous measures in an effort to contain the spread of the virus, such as travel bans and restrictions, limitations on gatherings or social distancing requirements, quarantines,

shelter-in-place

orders, ~~vaccine~~vaccination and testing mandates, and business limitations and shutdowns. These measures have impacted our

day-to-day

operations and disrupted our business, workforce and operations, as well as the operations of our customers, contract manufacturers and suppliers. We are continuing to monitor the rapidly evolving situation regarding the

COVID-19

pandemic particularly in China and the availability and impact of vaccinations globally. However, we are unable to accurately predict the full

impact of

COVID-19,

which will depend on future developments that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, any new surges or new strains or variants of the virus in areas where we do business, the availability and use of vaccinations, any further government actions to contain the virus or treat its impact, continuing shutdowns in China, and how quickly and to what extent normal economic and operating conditions can resume.

Due to the

COVID-19

pandemic, there has been uncertainty and disruption in the global economy and our markets. We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of May 6, 2022, the date of issuance of this Quarterly Report on Form

10-Q.

Health and Safety

In response to the

COVID-19

pandemic, we have taken proactive, aggressive action to protect the health and safety of our employees, customers, contract manufacturers and suppliers and we have complied with all government orders around the globe. The spread of ~~COVID- 19~~

COVID-19

has caused us to modify our business practices, including implementing ~~vaccination, testing, masking and~~ social distancing ~~policies,~~protocols, suspending employee travel, requiring ~~most~~ employees to work remotely and cancelling physical participation in meetings, and extensively and frequently disinfecting our workspaces. Around the world, many of our employees are working from home. However, some of our engineering, operations, supply line and customer support teams must be

~~on-site~~

~~at our or our customers’ facilities. We are providing those~~

~~on-site~~

~~employees with the necessary protective resources and procedures to minimize their exposure risk.~~meetings. We may take further actions as may be required or recommended by government authorities or that we determine are in the best interests of our employees, customers, contract manufacturers and suppliers.

Operations

We believe the

COVID-19

pandemic, and the numerous measures implemented by authorities in response, has adversely impacted our results of operations, including by increasing costs, but we cannot accurately estimate the amount of the impact to our ~~third~~first quarter of ~~2021~~2022 financial results or to our future financial results. In addition, the pandemic has disrupted our contract manufacturers and suppliers, and has resulted in ~~some instances~~supply constraints and in short-term cost increases to meet customer demand. While the duration and severity of the pandemic may further impact our workforce and operations, as well as those of our customers, contract manufacturers and suppliers, we expect that our manufacturing facilities will remain operational, at sufficient capacity to support production demand. We are monitoring our operations closely in an effort to avoid any potential productivity loss caused by responses to the

COVID-19

pandemic.

Supply

We have experienced interruptions to our supply chain as a result of the

COVID-19

pandemic. Our suppliers have faced and may continue to face difficulties maintaining operations in light of

COVID-19

disruptions and government-ordered restrictions. Our supply chain team, and our suppliers, continue to manage numerous supply, production, and logistics obstacles caused by the pandemic. There is no assurance that these efforts will be successful. The

COVID-19

pandemic may continue to disrupt our ability to obtain components required to manufacture our products, adversely affecting our operations and in some instances resulting in higher costs and delays, both for obtaining components and shipping finished goods to customers. ~~The interruptions to our supply chain caused by the~~

~~COVID-19~~

~~pandemic impacted our financial results in the quarter, particularly for our Industrial Automation businesses, and may continue to impact our business, revenue, and profitability.~~

Demand

The

COVID-19

pandemic has significantly increased economic uncertainty in our markets. Demand for our Test products in China and other countries was strong throughout ~~2020~~2021 and in the first ~~nine months~~quarter of ~~2021. Our Industrial Automation business, however, experienced a significant decline in demand through the first half of 2020 due to~~

~~COVID-19~~

~~related shutdowns affecting global manufacturing but demand recovered in the second half of 2020 from the low point in the second quarter and continued to recover in the first nine months of 2021.~~2022. The

COVID-19

pandemic could cause further ~~global~~ economic disruption that could cause demand for our products to decline, which would adversely affect our business.

Liquidity

Although there is continued uncertainty related to the impact of the

COVID-19

pandemic on our future results, we believe our business model and our current cash reserves leave us well-positioned to manage our business through this crisis. We have a strong balance sheet as well as an operating model that we believe is capable of flexing up and down with extreme demand swings while still remaining profitable. Based on our 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

COVID-19

pandemic, in order to bolster our liquidity position, on May 1, 2020 we entered into a credit agreement providing for a three-year, senior secured revolving credit facility of $400 ~~million~~million. On December 10, 2021, we amended the credit agreement to extend its maturity to December 10, 2026 as further described in Note H: “Debt.” As of ~~November 5, 2021,~~May 6, 2022, we have not borrowed any funds under the credit facility.

We are continuing to monitor the evolving situation regarding the

COVID-19

pandemic, the availability of vaccinations where we do business and guidance from government authorities around the world. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As a result, given the uncertain nature of this situation, we are not able to accurately predict the full extent of the impact of

COVID-19

on our business, financial condition, results of operations, liquidity, or cash flows in the future. ~~In addition, see~~

Impact of Russia’s invasion of Ukraine on our Business

We currently do not expect a significant impact on our results of operations in the future due to Russia’s invasion of Ukraine, as we have minimal business in Russia and Ukraine, both directly and indirectly. However, following the invasion, the U.S. and other countries imposed significant sanctions against the Russian government and many Russian companies and individuals. Although Teradyne does not have significant operations in Russia, the sanctions could impact Teradyne’s business in other countries and could have a negative impact on the Company’s future revenue and supply chain, either of which could adversely affect Teradyne’s business and financial results.

See Part II—Item 1A, “Risk Factors,” included in our Annual Report on Form

10-K

for the fiscal year ended December 31, ~~2020~~2021 for our risk factors regarding risks associated with both the

COVID-19

~~pandemic.~~pandemic and international conflicts.

Critical Accounting Policies and Estimates

We have identified the policies which are critical to understanding our business and our results of operations. There have been no significant changes during the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 to the items disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form

10-K

for the fiscal year ended December 31, ~~2020.~~2021, except as noted below.

~~Due~~

Critical accounting estimates are complex and may require significant judgment by management. Changes to the

~~COVID-19~~

~~pandemic, there has been uncertainty~~ underlying assumptions may have a material impact on our financial condition and ~~disruption in the global economy and our markets. We are not aware~~results of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of November 5, 2021, the date of issuance of this Quarterly Report on Form

~~10-Q.~~

operations. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ significantly from these estimates under different assumptions or conditions.

Convertible Debt

We adopted Accounting Standards Update (“ASU”) ASU

2020-06

–

“Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity,”

on January 1, 2022 using the modified retrospective method of adoption

Under ASU

2020-06,

we account for a convertible debt instrument as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Unsettled shares are recorded in current debt, and there is no recognition of a debt discount, which was previously amortized to interest expense. We use the

if-converted

method in the diluted EPS calculation for convertible instruments. As a result of adoption, we recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $6.6 million to long-term debt for unamortized debt discount, and an increase to retained earnings of $92.8 million for the reclassification of the equity component. Mezzanine equity representing unsettled shares value was reduced to zero and additional

paid-in

capital was reduced by $99.3 million.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates under different assumptions or conditions.

SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS


	For the Three Months Ended						For the Nine Months Ended
	October 3,			September 27,			October 3,			September 27,			For the Three Months Ended
	2021			2020			2021			2020			April 3, 2022			April 4, 2021

Percentage of revenues:
Revenues:
Products		87	%		85	%		87	%		86	%		83	%		85	%
Services		13			15			13			14			17			15

Total revenues		100			100			100			100			100			100
Cost of revenues:
Cost of products		35			37			35			37			32			34
Cost of services		5			7			5			6			8			7

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		40			44			40			43			40			41

Gross profit		60			56			60			57			60			59
Operating expenses:
Selling and administrative		14			14			14			14			19			17
Engineering and development		11			12			11			12			14			13
Acquired intangible assets amortization		1			1			1			1			1			1
Restructuring and other		—			(3	)		—			—			2			(1	)

Total operating expenses		26			23			26			27			36			29

Income from operations		34			33			34			29			25			30
Non-operating (income) expense:
Interest income		—			—			—			—			—			—
Interest expense		—			1			1			1			—			1
Other (income) expense, net		2			—			1			—			1			—

Income before income taxes		31			32			32			29			24			29
Income tax provision		4			5			4			4			2			2

Net income		27	%		27	%		28	%		25	%		21	%		26	%

Results of Operations

~~Third~~First Quarter ~~2021~~2022 Compared to ~~Third~~First Quarter ~~2020~~2021

Revenues

Revenues by our reportable segments were as follows:


	For the Three Months Ended
	October 3,			September 27,		Dollar
	2021			2020		Change			April 3, 2022		April 4, 2021		Dollar Change

	(in millions)								(in millions)
Semiconductor Test	$	688.2		$	592.1	$	96.1		$	482.3	$	528.1	$	(45.8	)
System Test		102.6			118.2		(15.6	)		118.7		132.8		(14.1	)
Industrial Automation		91.0			68.7		22.3			103.2		80.0		23.2
Wireless Test		68.7			40.5		28.2			51.5		40.9		10.6
Corporate and Other		(0.1	)		—		(0.1	)

	$	950.5		$	819.5	$	131.0		$	755.4	$	781.7	$	(26.3	)

The ~~increase~~decrease in Semiconductor Test revenues of ~~$96.1~~$45.8 million, or ~~16.2%~~8.7%, was driven primarily by ~~greater~~lower tester sales ~~driven by testing of mobile application processors and industrial and automotive devices, partially offset by a decrease~~ in ~~tester sales for~~ high performance compute ~~processors~~processor and industrial applications and lower memory test sales of ~~DRAM~~flash memory testers. The decrease in System Test revenues of ~~$15.6~~$14.1 million, or ~~13.2%~~10.6%, was primarily due to lower sales in Storage Test of system level and hard disk drive testers, partially offset by greater sales in Defense/Aerospace and Production Board ~~Test, due to higher automotive electronics demand.~~Test. The increase in Industrial Automation revenues of ~~$22.3~~$23.2 million, or ~~32.5%~~29.0%, was driven primarily by higher demand for collaborative robotic ~~arms.~~arms and MiR’s autonomous mobile robots. The rise in Wireless Test revenues of ~~$28.2~~$10.6 million, or ~~69.6%~~25.9%, was primarily due to an increase in ~~WiFi tester sales, including our new WiFi 7 product,~~connectivity test products and higher demand in ~~the~~ ultra-wide band wireless ~~test market.~~test.

Revenues by country as a percentage of total revenues were as follows (1):

For the Three Months

Ended


October 3,

September 27,


2021

2020


Taiwan
   27 % 37 %
China
   19 15
United States
   11 10
Korea
   8 16
Europe
   8 6
Malaysia
   6 2
Japan
   5 2
Singapore
   5 2
Philippines
   5 2
Thailand
   3 5
Rest of World
   3 3


   100 % 100 %

~~(1)~~

~~Revenues attributable to a country are based on location of customer site.~~

~~Gross Profit~~

~~Our gross profit was as follows:~~

For the Three Months

Ended


October 3,

September 27,

Dollar/Point


2021

2020

Change



(in millions)

Gross profit
   $ 571.0 $ 458.9 $ 112.1
Percent of total revenues
   60.1 % 56.0 % 4.1

~~Gross profit as a percent of revenue increased by 4.1 points, primarily due to product mix of higher margin products in Semiconductor Test and operating leverage due to higher revenues.~~

~~Selling and Administrative~~

~~Selling and administrative expenses were as follows:~~

For the Three Months

Ended


October 3,

September 27,

Dollar


2021

2020

    Change



(in millions)

Selling and administrative
   $ 134.8 $ 115.8 $ 19.0
Percent of total revenues
   14.2 % 14.1 %

~~The increase of $19.0 million in selling and administrative expenses was primarily due to higher variable compensation, and greater selling and administrative spending across all segments.~~

~~Engineering and Development~~

~~Engineering and development expenses were as follows:~~

For the Three Months

Ended


October 3,

September 27,

    Dollar


2021

2020

Change



(in millions)

Engineering and development
   $ 107.2 $ 94.9 $ 12.3
Percent of total revenues
   11.3 % 11.6 %

~~The increase of $12.3 million in engineering and development expenses was primarily due to higher spending across all segments and higher variable compensation.~~

~~Restructuring and Other~~

During the three months ended October 3, 2021, we recorded $0.6 million of severance charges primarily in Industrial Automation, $0.3 million of acquisition related compensation expenses and $0.3 million for other expenses.

During the three months ended September 27, 2020, we recorded a $27.2 million gain for the decrease in the fair value of the AutoGuide contingent consideration liability, and a $1.1 million gain for the decrease in acquisition related compensation liability, partially offset by $0.5 million recorded for employee severance charges primarily in Industrial Automation.

~~Interest and Other~~

For the Three Months

Ended


October 3,

September 27,

Dollar


        2021

        2020

        Change



(in millions)

Interest income
   $ (0.6 )    $ (1.1 )    $ 0.5
Interest expense
   3.8    6.2    $ (2.4 )
Other (income) expense, net
   21.5    0.8    $ 20.7

Interest income decreased by $0.5 million primarily due to lower interest rates in 2021 compared to 2020. Interest expense decreased by $2.4 million primarily due to lower convertible debt interest expenses, as a result of early conversions in 2021. Other (income) expense, rose by $20.7 million primarily due to $20.2 million losses on convertible debt conversions in 2021.

~~Income (Loss) Before Income Taxes~~

For the Three Months

Ended


October 3,

September 27,

Dollar


        2021

        2020

        Change



(in millions)

Semiconductor Test
   $ 265.0    $ 189.1    $ 75.9
System Test
   31.8    47.4    (15.6 )
Wireless Test
   31.7    10.9    20.8
Industrial Automation
   (4.2 )    (5.3 )    1.1
Corporate and Other (1)
   (26.5 )    21.6    (48.1 )






   $ 297.8    $ 263.7    $ 34.1

~~(1)~~

Included in Corporate and Other are: contingent consideration adjustments, loss on convertible debt conversions, interest income, interest expense, net foreign exchange gains (losses), pension, intercompany eliminations and acquisition related: (a) charges; (b) legal fees; (c) compensation.

The increase in income before income taxes in Semiconductor Test was driven by testing of mobile application processors and industrial and automotive devices, partially offset by a decrease in tester sales for high performance compute processors and lower memory test sales of DRAM memory testers. The decrease in income before income taxes in System Test was primarily due to lower sales in Storage Test of hard disk drive testers, partially offset by greater sales in Production Board Test, due to higher automotive electronics demand. The increase in income before income taxes in Wireless Test was primarily due to growth in WiFi tester sales, including our new WiFi 7 product, and greater demand in the ultra-wide band wireless test market. The decrease in income (loss) before income taxes in Corporate and Other was primarily due to a gain for the decrease in the fair value of the AutoGuide contingent consideration liability in 2020 and losses on convertible debt conversions in 2021.

~~Income Taxes~~

The effective tax rate for the three months ended October 3, 2021 and September 27, 2020 was 13.8% and 15.6%, respectively. The decrease in the effective tax rate from the three months ended September 27, 2020 to the three months ended October 3, 2021 was primarily attributable to an increase in benefit from the international provisions of the U.S. Tax Cuts and Jobs Act of 2017 and an increase in benefit from tax credits partially offset by a projected shift in the geographic distribution of income, which increases the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions and a decrease in discrete benefit related to equity compensation.

~~Nine Months 2021 Compared to Nine Months 2020~~

~~Revenues~~

~~Revenues by our four reportable segments were as follows:~~

For the Nine Months

Ended


October 3,

September 27,

Dollar


        2021

        2020

        Change



(in millions)

Semiconductor Test
   $ 2,050.3    $ 1,735.8    $ 314.5
System Test
   340.3    306.1    34.2
Industrial Automation
   263.2    187.8    75.4
Wireless Test
   164.5    133.2    31.3
Corporate and Other
   (0.4 )    (0.3 )    (0.1 )






   $ 2,817.8    $ 2,362.5    $ 455.3

The increase in Semiconductor Test revenues of $314.5 million, or 18.1%, was driven primarily by incremental tester sales driven by testing of high performance compute processors, automotive and industrial devices, and higher service, partially offset by lower mobile application processor testers. The rise in System Test revenues of $34.2 million, or 11.2%, was primarily due to elevated sales in Storage Test of system level testers, and greater sales in Production Board Test due to higher automotive electronics demand. The growth in Industrial Automation revenues of $75.4 million, or 40.1%, was driven by demand for collaborative robotic arms. The increase in Wireless Test revenues of $31.3 million, or 23.5%, was primarily due to greater sales in connectivity test products.

~~Revenues by country as a percentage of total revenues were as follows (1):~~


	For the Nine Months Ended						For the Three Months Ended
	October 3,			September 27,			April 3, 2022			April 4, 2021
	2021			2020

China								19	%		19	%
Taiwan		36	%		40	%		18			33
China		18			15
United States		10			9			15			10
Korea		8			12			13			8
Europe		7			6			10			7
Japan								6			3
Malaysia								5			4
Thailand								5			7
Singapore								4			3
Philippines		5			2			2			4
Japan		4			5
Thailand		4			4
Malaysia		4			2
Singapore		3			2
Rest of World		1			3			3			2

		100	%		100	%		100	%		100	%

(1)	Revenues attributable to a country are based on location of customer site.

Gross Profit

Our gross profit was as follows:


	For the Nine Months Ended
	October 3,			September 27,			Dollar/Point		For the Three Months Ended
	2021			2020			Change		April 3, 2022			April 4, 2021			Dollar/Point Change

	(in millions)								(in millions)
Gross profit	$	1,679.6		$	1,336.0		$	343.6	$	454.9		$	461.6		$	(6.7	)
Percent of total revenues		59.6	%		56.5	%		3.1		60.2	%		59.1	%		1.1

Gross profit as a percent of revenue increased by ~~3.1~~1.1 points, primarily due to product mix ~~of higher margin products~~ in Semiconductor ~~Test and operating leverage due to higher revenues.~~Test.

Selling and Administrative

Selling and administrative expenses were as follows:


	For the Nine Months Ended
	October 3,			September 27,			Dollar		For the Three Months Ended
	2021			2020			Change		April 3, 2022			April 4, 2021			Dollar Change

	(in millions)								(in millions)
Selling and administrative	$	404.8		$	340.5		$	64.3	$	140.2		$	129.8		$	10.4
Percent of total revenues		14.4	%		14.4	%				18.6	%		16.6	%

The increase of ~~$64.3~~$10.4 million in selling and administrative expenses was primarily due to higher spending in Industrial Automation and Semiconductor Test, partially offset by lower variable ~~compensation and higher selling spending across all segments.~~compensation.

Engineering and Development

Engineering and development expenses were as follows:


	For the Nine Months Ended
	October 3,			September 27,			Dollar		For the Three Months Ended
	2021			2020			Change		April 3, 2022			April 4, 2021			Dollar Change

	(in millions)								(in millions)
Engineering and development	$	317.6		$	274.2		$	43.4	$	108.1		$	100.4		$	7.7
Percent of total revenues		11.3	%		11.6	%				14.3	%		12.8	%

The increase of ~~$43.4~~$7.7 million in engineering and development expenses was ~~primarily~~ due to higher spending across all segments, ~~and higher~~partially offset by lower variable compensation.

Restructuring and Other

During the ~~nine~~three months ended ~~October~~April 3, 2022, we recorded a charge of $14.7 million related to the arbitration claim filed against Teradyne and AutoGuide related to an earn-out dispute, which was settled on March 25, 2022 for $26.7 million. Previously, in the three months ended December 31, 2021, we recorded a charge of $12.0 million related to this earn-out dispute.

During the three months ended April 4, 2021, we recorded a gain of $7.2 million for the decrease in the fair value of the AutoGuide contingent consideration liability, partially offset by a charge of $1.7 million for an increase in environmental and legal liabilities, $1.2 million of severance charges primarily in Industrial Automation, $0.6 million for other expenses and $0.3 million of acquisition related compensation expenses.

During the nine months ended September 27, 2020, we recorded a $4.0 million contract termination settlement charge, $3.4 million of acquisition related compensation and expenses, $1.2 million of severance charges primarily in Industrial Automation, and $1.2 million of other expenses, partially offset by a $4.4 million gain for the decrease in the fair value of the AutoGuide contingent consideration liabilities, and a $3.5 million gain for the decrease in the fair value of the MiR contingent consideration liability.

Interest and Other


	For the Nine Months Ended
	October 3,			September 27,			Dollar			For the Three Months Ended
	2021			2020			Change			April 3, 2022			April 4, 2021			Dollar Change

	(in millions)									(in millions)
Interest income	$	(2.1	)	$	(5.2	)	$	3.1		$	(0.7	)	$	(0.8	)	$	0.1
Interest expense		15.4			17.8			(2.4	)		1.0			6.0			(5.0	)
Other (income) expense, net		25.2			3.6			21.6			5.2			3.8			1.4

Interest ~~income~~expense decreased by ~~$3.1~~$5.0 million primarily due to ~~lower interest rates and a lower marketable securities balance~~the January 1, 2022 adoption of ASU

2020-06

which eliminated the amortization of the debt discount which was $3.6 million in ~~2021 compared to 2020. Interest expense decreased by $2.4 million primarily due to lower convertible debt interest expense due to early conversions in~~the three months ended April 4, 2021. Other (income) expense, net increased by ~~$21.6~~$1.4 million primarily due to ~~$25.4 million losses on convertible debt conversions in 2021, partially offset by the change~~changes in unrealized gains/losses on equity securities, from ~~losses in 2020 to gains~~a $1.4 million gain in 2021 ~~and the change~~to a $2.2 million loss in ~~pension actuarial gains/~~2022, partially offset by lower losses ~~from losses in 2020 to gains in 2021.~~on convertible debt early conversions.

Income (Loss) Before Income Taxes


	For the Nine Months Ended
	October 3,			September 27,			Dollar			For the Three Months Ended
	2021			2020			Change			April 3, 2022			April 4, 2021			Dollar Change

	(in millions)									(in millions)
Semiconductor Test	$	778.7		$	571.7		$	207.0		$	149.7		$	176.4		$	(26.7	)
System Test		116.8			115.0			1.8			41.3			51.1			(9.8	)
Wireless Test		63.8			35.6			28.2			18.6			9.6			9.0
Industrial Automation		(14.6	)		(32.0	)		17.4			(5.1	)		(13.0	)		7.9
Corporate and Other (1)		(38.9	)		(12.2	)		(26.7	)
Corporate and Eliminations (1)											(24.2	)		(0.1	)		(24.1	)

	$	905.8		$	678.1		$	227.7		$	180.4		$	224.0		$	(43.6	)

(1)

Included in Corporate and ~~Other~~Eliminations are legal fees, contingent consideration adjustments, ~~loss on convertible debt conversions,~~ interest income, interest expense, net foreign exchange gains (losses), ~~pension,~~ intercompany eliminations, acquisition related charges and ~~acquisition related: (a) charges; (b) legal fees; (c) compensation.~~compensation and for the three months ended April 4, 2021, loss on convertible debt conversions.

The ~~increase~~decrease in income before income taxes in Semiconductor Test was driven primarily by ~~an increase~~lower revenues in ~~tester sales driven by testing of high performance~~ compute ~~processors, automotive~~processor and industrial ~~devices,~~applications and ~~service, partially offset by~~ lower ~~mobile applications processor~~memory test sales of flash memory testers. The ~~improvement~~decrease in income before income taxes in System Test was primarily due to ~~elevated~~lower sales in Storage Test of system level and hard disk drive testers, ~~and~~partially offset by greater sales in Defense/Aerospace and Production Board ~~Test due to~~Test. The elevated income before taxes in Industrial Automation was driven primarily by higher ~~automotive electronics demand.~~demand for collaborative robotic arms and MiR’s autonomous mobile robots. The ~~increase~~rise in income before ~~income~~ taxes in Wireless Test was driven primarily ~~due to higher sales~~by an increase in connectivity test ~~products. The decrease~~products and higher demand in ~~loss before income taxes in Industrial Automation was primarily due to higher sales and lower intangible assets amortization expense.~~ultra-wide band wireless test. The loss before income taxes in Corporate and ~~Other~~Eliminations was primarily due to ~~losses on convertible debt conversions~~legal settlement charges related to litigation for the

earn-out

dispute in ~~2021.~~

connection with the AutoGuide acquisition.

Income Taxes

The effective tax rate for the ~~nine~~three months ended ~~October~~April 3, 2022 and April 4, 2021 was 10.2% and ~~September 27, 2020 was 12.7% and 13.3%~~8.3%, respectively. The ~~decrease~~increase in the effective tax rate from the ~~nine~~three months ended ~~September 27, 2020~~April 4, 2021 to the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 was primarily attributable to ~~an increase in benefits from the international provisions of the U.S. Tax Cuts and Jobs Act of 2017 and an increase in discrete benefits related to equity compensation partially offset by~~ a projected shift in the geographic distribution of income, which increases the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, and ~~a reduction~~an increase in ~~benefits~~

non-deductible

officers’ compensation. These increases in expense were partially offset by an increase in benefit from ~~tax credits.~~

equity compensation.

Contractual Obligations

There have been no changes outside of the ordinary course of business to our contractual obligations as disclosed in our Annual Report on Form

10-K

for the year ended December 31, ~~2020.~~2021.

Liquidity and Capital Resources

Our cash, cash equivalents, and marketable securities balances decreased by ~~$104.9~~$297.5 million in the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 to ~~$1,449.5~~$1,202.7 million.

Operating activities during the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 provided cash of ~~$767.1~~$7.5 million. Changes in operating assets and liabilities used cash of ~~$167.7~~$210.2 million. This was due to ~~a $219.9~~an $83.6 million increase in operating assets and a ~~$52.2~~$126.6 million ~~increase~~decrease in operating liabilities.

The increase in operating assets was due to a ~~$138.6~~$74.3 million increase in prepayments and other assets due to prepayments to our contract manufacturers, a ~~$103.3~~$9.5 million increase in ~~accounts receivable due to greater sales,~~inventories, partially offset by a ~~$21.9~~$0.2 million decrease in ~~inventories.~~accounts receivable.

The ~~change~~decrease in operating liabilities was due to ~~increases of $63.5~~a $114.0 million decrease in accrued employee compensation, a $13.8 million decrease in other accrued liabilities, ~~$23.8~~a $7.6 million decrease in ~~accounts payable,~~income taxes, and ~~$8.7~~$1.3 million of retirement plan contributions, partially offset by a $6.7 million increase in deferred revenue and customer advance payments, ~~partially offset by~~and a ~~$17.4~~$3.4 million ~~decrease~~increase in ~~income taxes, a $22.3 million decrease in accrued employee compensation, and $4.1 million of retirement plan contributions.~~accounts payable.

Investing activities during the ~~nine~~three months ended ~~October~~April 3, ~~2021 provided~~2022 used cash of ~~$156.1~~$82.7 million due to ~~$571.3~~$166.0 million used for purchases of marketable securities, and $44.0 million used for purchases of property, plant and equipment, partially offset by $96.7 million and ~~$209.4~~$30.6 million in proceeds from maturities and sales of marketable securities, partially offset by $509.5 million used for purchases of marketable securities, $103.2 million used for purchases of property, plant and equipment and $12.0 million used for an investment in MachineMetrics, Inc.(“MachineMetrics”).respectively.

Financing activities during the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022 used cash of ~~$757.3~~$254.6 million due to ~~$406.2~~$201.5 million used for the repurchase of ~~3.3~~1.8 million shares of common stock at an average price of ~~$123.53~~$115.12 per share, ~~$302.0~~$31.0 million used for ~~payments of convertible debt principal, $49.7 million used for dividend payments, and $32.0 million used for payments~~payment related to net settlements of employee stock compensation awards, $20.7 million used for payments of convertible debt principal, $17.9 million used for dividend payments, partially offset by ~~$32.6~~$16.5 million from the issuance of common stock under employee stock purchase and stock option plans.

Operating activities during the ~~nine~~three months ended ~~September 27, 2020~~April 4, 2021 provided cash of ~~$608.5~~$38.1 million. Changes in operating assets and liabilities used cash of ~~$107.4~~$209.1 million. This was due to a ~~$245.8~~$209.5 million increase in operating assets and a ~~$138.3~~$0.4 million increase in operating liabilities.

The increase in operating assets was due to ~~a $222.0~~an $87.5 million ~~increase in~~greater accounts receivable due to ~~increased~~improved sales, ~~a $40.8~~an $86.1 million increase in prepayments and other assets ~~partially offset by~~due to prepayments to our contract manufacturers as a ~~$17.0~~result of higher forecasted revenues, and a $35.9 million ~~decrease~~rise in inventories.

The ~~increase~~change in operating liabilities was due to a ~~$47.3~~$44.5 million rise in accounts payable, a $26.4 million increase in other accrued liabilities, ~~a $36.6~~an $8.0 million increase in deferred revenue and customer advance payments, and a ~~$24.1~~$4.9 million increase in income taxes, ~~a $23.8~~partially offset by an $81.5 million ~~increase in accounts payable, and a $10.5 million increase~~decrease in accrued employee compensation ~~partially offset by $3.9~~and $1.9 million of retirement plan contributions.

Investing activities during the ~~nine~~three months ended ~~September 27, 2020 used~~April 4, 2021 provided cash of ~~$292.6~~$4.7 million due to ~~$488.4 million used for purchases of marketable securities, and $146.9 million used for purchases of property, plant and equipment, partially offset by $309.4~~$194.2 million and ~~$32.6~~$61.3 million in proceeds from maturities and sales of marketable securities, respectively, partially offset by $211.6 million used for purchases of marketable securities, and ~~proceeds from life insurance~~$39.3 million used for purchases of ~~$0.5 million related to the cash surrender value from the cancellation of a Teradyne owned life insurance policy.~~property, plant and equipment.

Financing activities during the ~~nine~~three months ended ~~September 27, 2020~~April 4, 2021 used cash of ~~$143.4~~$126.7 million, due to ~~$88.5~~$51.3 million used for payments of convertible debt principal, $45.2 million used for the repurchase of ~~1.5~~0.4 million shares of common stock at an average price of ~~$58.33~~$120.73 per share, ~~$49.9 million used for dividend payments, $22.7~~$30.7 million used for payments related to net settlements of employee stock compensation awards, and ~~$8.9~~$16.7 million used for ~~a payment related to MiR acquisition contingent consideration,~~dividend payments, partially offset by ~~$26.5~~$17.1 million from the issuance of common stock under employee stock purchase and stock option plans.

In January 2022, Teradyne’s Board of Directors declared a 10% increase in the quarterly cash dividend to $0.11 per share. Dividend payments for the three months ended April 3, 2022 were $17.9 million. In January 2021, ~~May 2021 and August 2021, our~~Teradyne’s Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for the ~~nine~~three months ended ~~October 3,~~April 4, 2021 were ~~$49.7 million.~~

~~In January 2020, May 2020 and August 2020, our Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for the nine months ended September 27, 2020 were $49.9~~$16.7 million.

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 a minimum of ~~$600~~$750.0 million in ~~2021.~~2022.

During the ~~nine~~three months ended ~~October~~April 3, ~~2021,~~2022, we repurchased ~~3.3~~1.8 million shares of common stock for ~~$406.2~~$201.5 million at an average price of ~~$123.53~~$115.12 per share. During the ~~nine~~three months ended ~~September 27, 2020,~~April 4, 2021, we repurchased ~~1.5~~0.4 million shares of common stock for ~~$88.5~~$45.2 million at an average price of ~~$58.33~~$120.73 per share.

While we declared a quarterly cash dividend and authorized a share repurchase program, we may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of our Board of Directors, which will consider, among other things, our earnings, capital requirements and financial condition.

On May 1, 2020, we entered into a credit agreement providing ~~for~~ a three-year, senior secured revolving credit facility of $400 million. On December 10, 2021, the credit agreement was amended to extend the senior secured revolving credit facility to December 10, 2026. As of ~~November 5, 2021,~~May 6, 2022, we have not borrowed any funds under the credit facility.

We believe our cash, cash equivalents and marketable securities balance will be sufficient to pay our quarterly dividend and meet our working capital and expenditure needs for at least the next twelve months. Inflation has not had a significant long-term impact on earnings. At this time, the

COVID-19

pandemic has not had an impact on our liquidity, but there is no assurance that continued impacts resulting from the pandemic will not have an adverse effect in the future.

Equity Compensation Plans

As discussed in Note Q: “Stock-Based Compensation” in our ~~2020~~2021 Annual Report on Form

10-K,

we have a 1996 Employee Stock Purchase Plan and a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”).

The purpose of the 1996 Employee Stock Purchase Plan is to encourage stock ownership by all eligible employees of Teradyne. The purpose of the 2006 Equity Plan is to provide equity ownership and compensation opportunities in Teradyne to our employees, officers, directors, consultants and/or advisors. Both plans were approved by our shareholders.

Recently Issued Accounting Pronouncements

~~In August 2020,~~

For the ~~FASB~~three months ended April 3, 2022, there were no recently issued ~~ASU~~

~~2020-06~~

~~– “Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity,” which simplifies the~~ accounting ~~for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features~~pronouncements that ~~could be recognized separately from the primary contract. This ASU requires~~had, or are expected to have, a ~~convertible debt instrument~~material impact to ~~be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. This ASU requires an entity to use the~~

~~if-converted~~

method in the diluted earnings per share calculation for convertible instruments. This ASU will be effective for Teradyne on January 1, 2022. This ASU permits the use of either the modified retrospective or fully retrospective method of transition. We are evaluating the effects of the adoption of this ASU on our consolidated financial statements.

~~On November 4, 2021, we made an irrevocable election under the Indenture to require the principal portion of the remaining Notes to be settled in cash. Upon adoption of ASU~~

~~2020-06~~

~~only the amounts settled in excess of the principal will be considered in diluted earnings per share under the~~

~~if-converted~~

~~method.~~

Item 3:

Quantitative and Qualitative Disclosures about Market Risks

For “Quantitative and Qualitative Disclosures about Market Risk” affecting Teradyne, see Part 2 Item 7A, “Quantitative and Qualitative Disclosures about Market Risks,” in our Annual Report on Form

10-K

filed with the SEC on February ~~22, 2021.~~23, 2022. There were no material changes in our exposure to market risk from those set forth in our Annual Report on Form

10-K

for the fiscal year ended December 31, ~~2020.~~2021.

Table of Contents

In addition to market risks described in our Annual Report on Form

10-K,

we have an equity price risk related to the fair value of our convertible senior unsecured notes issued in December 2016. In December 2016, Teradyne issued $460 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023. As of ~~October~~April 3, ~~2021, $158.0~~2022, $96.3 million of principal remained outstanding and the Notes had a fair value of ~~$546.5~~$323.7 million. The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end of the ~~third~~first quarter of ~~2021~~2022 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 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.


Hypothetical Change in Teradyne Stock Price	Fair Value		Estimated change in fair value			Hypothetical percentage increase (decrease) in fair value			Fair Value		Estimated change in fair value			Hypothetical percentage increase (decrease) in fair value

10% Increase	$	601,331	$	54,867			10.0	%	$	359,092	$	35,422			10.9	%
No Change		546,464		—			—			323,670		—			—
10% Decrease		491,600		(54,864	)		(10.0	)		288,248		(35,422	)		(10.9	)

~~Table of Contents~~

Item 4:

Controls and Procedures

As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule

13a-15(b)

or Rule

~~15d-15(b)~~15d-15(f)

promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (as defined in Rules

13a-15(f)

and

15d-15(f)

under the Exchange Act) during the three months ended ~~October~~April 3, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1:

Legal Proceedings

We are subject to various legal proceedings and claims which have arisen in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. ~~We believe~~Teradyne believes that ~~we have~~it has meritorious defenses against all pending claims and ~~intend~~intends to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending claims or to provide possible ranges of losses that may arise, ~~we believe~~Teradyne believes the potential losses associated with all of these actions are unlikely to have a material adverse effect on ~~our~~its business, financial position or results of operations.

On March 8, 2021, Industrial Automation LLC submitted a demand for arbitration against Teradyne and AutoGuide in Wilmington, Delaware alleging that Teradyne and AutoGuide breached certain provisions of the Membership Interests Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide. The arbitration demand ~~seeks~~sought full acceleration of the maximum ~~earnout~~

earn-out

amount payable under the Purchase Agreement, or $106.9 million, for the alleged breach of the ~~earnout~~

earn-out

provisions of the Purchase Agreement. On March 26, 2021, Teradyne and AutoGuide filed an answer denying that Teradyne and AutoGuide breached any provisions of the Purchase Agreement. The arbitration hearing is scheduled for March 21, 2022. While it is not possible at this stage to predict the outcome of25, 2022, the arbitration claim was settled for $26.7 million. As a result, Teradyne ~~and AutoGuide intend to vigorously defend against the Industrial Automation LLC claims.~~has no remaining

earn-out

obligations.

Table of Contents

Item 1A:

Risk Factors

In addition to other information set forth in this Form

10-Q,

including the risk discussed below, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, which could materially affect our business, financial condition or future results. The risk factors described in our Annual Report on Form

10-K

remain applicable to our business and many of these risks could be further increased due to the

COVID-19

pandemic.

The risks described in our Annual Report on Form

10-K

are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The global supply shortage of electrical components ~~may impact~~has impacted our ability to meet customer demand.

There is currently a global supply shortage of electrical components, including semiconductor chips. As a result, we have experienced increases in our lead times and costs for certain components for certain products and delays in the delivery of some orders placed by our customers. ~~At this time, these supply chain challenges have not had a material impact on our business, results of operations or financial condition. However, if~~If we are unable to secure manufacturing capacities from our current suppliers and contract manufacturers, our ability to deliver our products to our customers may be negatively ~~impacted.~~impacted for the remainder of 2022 and into 2023. Also, our suppliers and contract manufacturers may increase their ~~fees,~~prices, which would result in an increase in our manufacturing costs, which we may not be fully able to pass to our customers, which could have a negative impact on our results of operations and financial condition. Additionally, if any of our suppliers and contract manufacturers 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.

~~Table of Contents~~

~~The novel coronavirus~~

~~(COVID-19)~~

~~pandemic has impacted our business and could materially adversely affect our results of operations, financial condition, liquidity or cash flows.~~

~~The global pandemic of the novel strain of the coronavirus~~

~~(COVID-19)~~

has resulted in government authorities implementing numerous measures in an effort to contain the spread of the virus, such as travel bans and restrictions, limitations on gatherings or social distancing requirements, quarantines,

~~shelter-in-place~~

~~orders, vaccination and testing mandates, and business limitations and shutdowns. These measures have impacted our~~

~~day-to-day~~

operations and disrupted our business, workforce and operations, as well as the operations of our customers, contract manufacturers and suppliers. Most recently, on September 9, 2021, President Biden issued Executive Order 14042 requiring covered employees of certain Federal contractors and subcontractors to be “fully vaccinated,” unless legally entitled to an accommodation due to a disability or religious belief, practice, or observance. Additionally, on September 9, 2021, President Biden announced that he has directed the Occupational Safety and Health Administration (OSHA) to develop a rule mandating vaccination or weekly testing for employers with 100+ employees. As Teradyne implements measures to comply with these new regulations, the Company may experience increased compliance costs, increased risk of

~~non-compliance~~

~~and increased risk of employee attrition. The~~

~~COVID-19~~

pandemic, and the numerous measures implemented by authorities in response, has adversely impacted our results of operations, including increasing costs company-wide, but we cannot accurately estimate the full extent of the impact for our 2021 financial results or to our future financial results.

~~The~~

~~COVID-19~~

pandemic has significantly increased economic and demand uncertainty in our markets. The uncertainty resulted in a significant decrease in demand for certain of our products and could continue to impact demand for an uncertain period of time. The spread of

~~COVID-19~~

has caused us to modify our business practices, including implementing vaccination, testing, masking and social distancing policies, suspending employee travel, requiring most employees to work remotely, canceling physical participation in meetings, events and conferences, and extensively and frequently disinfecting our workspaces, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, contract manufacturers and suppliers.

~~We are continuing to monitor the rapidly evolving situation regarding the~~

~~COVID-19~~

~~pandemic and the availability of vaccinations where we do business. However, we are unable to accurately predict the full impact of~~

~~COVID-19,~~

which will depend on future developments that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, any new surges of the virus, the availability of vaccines, further government actions to contain the virus, and how quickly and to what extent normal economic and operating conditions can resume.

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

In January 2020, Teradyne’s Board of Directors authorized a new stock repurchase program for up to $1.0 billion of common stock. Effective April 1, 2020, Teradyne suspended its share repurchase program. In January 2021, Teradyne’s Board of Directors ~~cancelled the January 2020 repurchase program and~~ approved a new repurchase program for up to $2.0 billion of common stock. During the ~~nine~~three months ended ~~October~~April 3, ~~2021,~~2022, we repurchased ~~3.3~~1.8 million shares of common stock for ~~$406.2~~$201.5 million at an average price of ~~$123.53~~$115.12 per share. During the ~~nine~~three months ended ~~September 27, 2020,~~April 4, 2021, we repurchased ~~1.5~~0.4 million shares of common stock for ~~$88.5~~$45.2 million at an average price of ~~$58.33~~$120.73 per share. The cumulative repurchases under the $2.0 billion common stock repurchase program as of April 3, 2022 were 6.5 million shares of common stock for $801.5 million at an average price per share of $122.89.

The following table includes information with respect to repurchases we made of our common stock during the three months ended ~~October~~April 3, ~~2021~~2022 (in thousands except per share price):

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

July 5, 2021 - August 1, 2021
   501    $ 125.31    500    $ 1,740,717
August 2, 2021 – August 29, 2021
   545    121.08    545    1,674,719
August 30, 2021 – October 3, 2021
   679    119.22    679    1,593,820







   1,725    (1 ) $ 121.58    (1 ) 1,724


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

January 1, 2022 - January 30, 2022		194		$	140.33			—	$	1,400,000
January 31, 2022 - February 27, 2022		793		$	115.59			767	$	1,311,601
February 28, 2022 - April 3, 2022		986		$	114.96			984	$	1,198,536

		1,973	(1)	$	117.71	(1)		1,751

(1)	Includes approximately two hundred twenty-four thousand shares at an average price of ~~$125.40~~$137.98 withheld from employees for the payment of taxes.

We satisfy U.S. federal and state minimum withholding tax obligations due upon the vesting and the conversion of restricted stock units into shares of our common stock, by automatically withholding from the shares being issued, a number of shares with an aggregate fair market value on the date of such vesting and conversion that would satisfy the minimum withholding amount due.

~~Table of Contents~~

Item 4:

Mine Safety Disclosures

Not Applicable

4135

Table of Contents

Item 6:

Exhibits


Exhibit Number		Description

~~4.1~~		~~First Supplemental Indenture dated as of November 4, 2021 between Teradyne Inc. and Wilmington Trust, National Association, as trustee (filed herewith)~~

~~10.1~~		~~Deferral Plan for~~ ~~Non-Employee~~ Directors, as amended (filed herewith)*

31.1		Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2		Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL, and contained in Exhibit 101)

*	~~Management Contract or Compensatory Plan~~

4236

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TERADYNE, INC.

Registrant

/s/ S

ANJAY

EHTA

Sanjay Mehta

Vice President,

Chief Financial Officer and Treasurer

(Duly Authorized Officer

and Principal Financial Officer)

~~November 5, 2021~~

May 6, 2022


Massachusetts		04-2272148
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

600 Riverpark Drive, North Reading, Massachusetts		01864
(Address of Principal Executive Offices)		(Zip Code)


		Page No.

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of ~~October~~April 3, ~~2021~~2022 and December 31, ~~2020~~2021		1

	Condensed Consolidated Statements of Operations for the Three Months ended April 3, 2022 and ~~Nine Months Ended October 3,~~April 4, 2021 ~~and September 27, 2020~~		2

	Condensed Consolidated Statements of Comprehensive Income for the Three Months ended April 3, 2022 and ~~Nine Months Ended October 3,~~April 4, 2021 ~~and September 27, 2020~~		3

	Condensed ~~Consolidated~~ Statements of Convertible Common Shares and Shareholders’ Equity for the Three ~~and Nine~~ Months Ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020~~April 4, 2021		4

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~October~~April 3, ~~2021~~2022 and ~~September 27, 2020~~April 4, 2021		5

	Notes to Condensed Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2826

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		3833

Item 4.	Controls and Procedures		3934

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		3934

Item 1A.	Risk Factors		3935

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		4035

Item 4.	Mine Safety Disclosures		4135

Item 6.	Exhibits		4236


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, par value $0.125 per share	TER	Nasdaq Stock Market LLC


	October 3, 2021		December 31, 2020

	(in thousands, except per share amount)
ASSETS
Current assets:
Cash and cash equivalents	$	1,079,454	$	914,121
Marketable securities		233,397		522,280
Accounts receivable, less allowance for credit losses of $1,913 and $2,034 at October 3, 2021 and December 31, 2020, respectively		597,124		497,506
Inventories, net		224,242		222,189
Prepayments and other current assets		386,967		259,338

Total current assets		2,521,184		2,415,434
Property, plant and equipment, net		390,545		394,800
Operating lease right-of-use assets, net		61,608		54,569
Marketable securities		136,664		117,980
Deferred tax assets		96,808		87,913
Retirement plans assets		16,958		17,468
Other assets		23,340		9,384
Acquired intangible assets, net		81,677		100,939
Goodwill		433,398		453,859

Total assets	$	3,762,182	$	3,652,346

LIABILITIES
Current liabilities:
Accounts payable	$	154,912	$	133,663
Accrued employees’ compensation and withholdings		196,928		220,321
Deferred revenue and customer advances		140,380		134,662
Other accrued liabilities		135,492		77,581
Operating lease liabilities		20,601		20,573
Income taxes payable		73,077		80,728
Current debt		32,219		33,343

Total current liabilities		753,609		700,871
Retirement plans liabilities		153,249		151,140
Long-term deferred revenue and customer advances		60,022		58,359
Long-term contingent consideration		0		7,227
Long-term other accrued liabilities		19,704		19,352
Deferred tax liabilities		6,907		10,821
Long-term operating lease liabilities		48,492		42,073
Long-term incomes taxes payable		67,041		74,930
Debt		112,784		376,768

Total liabilities		1,221,808		1,441,541

Commitments and contingencies	0	0	0	0
Mezzanine equity:
Convertible common shares		2,881		3,787
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 163,728 and 166,123 shares issued and outstanding at October 3, 2021 and December 31, 2020, respectively		20,466		20,765
Additional paid-in capital		1,800,373		1,765,323
Accumulated other comprehensive income		4,217		33,516
Retained earnings		712,437		387,414

Total shareholders’ equity		2,537,493		2,207,018

Total liabilities, convertible common shares and shareholders’ equity	$	3,762,182	$	3,652,346

				Shareholders’ Equity
	Convertible Common Share s Value			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)
For the Three Months Ended October 3, 2021
Balance, July 4, 2021	$	21,386			165,444		$	20,680		$	1,772,302		$	15,322		$	684,952		$	2,493,256
Net issuance of common stock under stock-based plans					8			1			(259	)								(258	)
Stock-based compensation expense											10,042									10,042
Repurchase of common stock					(1,724	)		(215	)								(212,781	)		(212,996	)
Cash dividends ($0.10 per share)																	(16,452	)		(16,452	)
Settlements of convertible notes					5,589			699			636,798									637,497
Exercise of convertible notes hedge call options					(5,589	)		(699	)		(637,015	)								(637,714	)
Convertible common shares		(18,505	)								18,505									18,505
Net income																	256,718			256,718
Other comprehensive loss														(11,105	)					(11,105	)

Balance, October 3, 2021	$	2,881			163,728		$	20,466		$	1,800,373		$	4,217		$	712,437		$	2,537,493


For the Three Months Ended September 27, 2020
Balance, June 28, 2020	$	—			165,806		$	20,725		$	1,730,716		$	(8,500	)	$	1,610		$	1,744,551
Net issuance of common stock under stock-based plans					237			30			13,515									13,545
Stock-based compensation expense											12,600									12,600
Cash dividends ($0.10 per share)																	(16,618	)		(16,618	)
Net income																	222,718			222,718
Other comprehensive income														16,748						16,748

Balance, September 27, 2020	$	—			166,043		$	20,755		$	1,756,831		$	8,248		$	207,710		$	1,993,544


For the Nine Months Ended October 3, 2021
Balance, December 31, 2020	$	3,787			166,123		$	20,765		$	1,765,323		$	33,516		$	387,414		$	2,207,018
Net issuance of common stock under stock-based plans					893			112			(48	)								64
Stock-based compensation expense											35,915									35,915
Repurchase of common stock					(3,288	)		(411	)								(415,769	)		(416,180	)
Cash dividends ($0.30 per share)																	(49,757	)		(49,757	)
Settlements of convertible notes					7,178			897			840,305									841,202
Exercise of convertible notes hedge call options					(7,178	)		(897	)		(842,028	)								(842,925	)
Convertible common shares		(906	)								906									906
Net income																	790,549			790,549
Other comprehensive loss														(29,299	)					(29,299	)

Balance, October 3, 2021	$	2,881			163,728		$	20,466		$	1,800,373		$	4,217		$	712,437		$	2,537,493


For the Nine Months Ended September 27, 2020
Balance, 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					1,150			144			3,019									3,163
Stock-based compensation expense											33,683									33,683
Repurchase of common stock					(1,517	)		(190	)								(88,275	)		(88,465	)
Cash dividends ($0.30 per share)																	(49,912	)		(49,912	)
Net income																	587,815			587,815
Other comprehensive income														27,102						27,102

Balance, September 27, 2020	$	—			166,043		$	20,755		$	1,756,831		$	8,248		$	207,710		$	1,993,544


	Semiconductor Test						Industrial Automation
	System on-a-Chip		Memory		System Test		Universal Robots		Mobile Industrial Robots		AutoGuide		Wireless Test		Corporate and Other			Total
	(in thousands)
For the Three Months Ended October 3, 2021 (1)
Timing of Revenue Recognition
Point in Time	$	508,747	$	105,454	$	88,155	$	76,008	$	12,351	$	226	$	65,409	$	(63	)	$	856,287
Over Time		66,270		7,761		14,450		1,742		607		80		3,304		—			94,214

Total	$	575,017	$	113,215	$	102,605	$	77,750	$	12,958	$	306	$	68,713	$	(63	)	$	950,501

Geographical Market
Asia Pacific	$	519,886	$	110,362	$	62,757	$	19,654	$	2,788	$	—	$	54,344	$	—		$	769,791
Americas		29,119		2,281		34,560		23,429		5,015		306		11,352		(63	)		105,999
Europe, Middle East and Africa		26,012		572		5,288		34,667		5,155		—		3,017		—			74,711

Total	$	575,017	$	113,215	$	102,605	$	77,750	$	12,958	$	306	$	68,713	$	(63	)	$	950,501

For the Three Months Ended September 27, 2020 (1)
Timing of Revenue Recognition
Point in Time	$	393,717	$	137,929	$	101,045	$	51,523	$	10,175	$	4,076	$	37,901	$	(41	)	$	736,325
Over Time		55,988		4,507		17,124		1,686		59		1,192		2,603		—			83,159

Total	$	449,705	$	142,436	$	118,169	$	53,209	$	10,234	$	5,268	$	40,504	$	(41	)	$	819,484

Geographical Market
Asia Pacific	$	420,821	$	137,286	$	78,534	$	14,471	$	1,566	$	—	$	33,865	$	—		$	686,543
Americas		17,678		3,730		35,140		16,527		3,981		5,268		5,211		(41	)		87,494
Europe, Middle East and Africa		11,206		1,420		4,495		22,211		4,687		—		1,428		—			45,447

Total	$	449,705	$	142,436	$	118,169	$	53,209	$	10,234	$	5,268	$	40,504	$	(41	)	$	819,484

For the Nine Months Ended October 3, 2021 (2)
Timing of Revenue Recognition
Point in Time	$	1,548,895	$	291,578	$	295,666	$	214,427	$	41,506	$	106	$	154,908	$	(352	)	$	2,546,734
Over Time		188,022		21,776		44,595		5,001		1,483		628		9,596		—			271,101

Total	$	1,736,917	$	313,354	$	340,261	$	219,428	$	42,989	$	734	$	164,504	$	(352	)	$	2,817,835

Geographical Market
Asia Pacific	$	1,618,117	$	301,562	$	223,507	$	55,531	$	8,674	$	—	$	133,678	$	—		$	2,341,069
Americas		71,562		9,373		98,475		66,390		17,065		734		24,228		(352	)		287,475
Europe, Middle East and Africa		47,238		2,419		18,279		97,507		17,250		—		6,598		—			189,291

Total	$	1,736,917	$	313,354	$	340,261	$	219,428	$	42,989	$	734	$	164,504	$	(352	)	$	2,817,835

For the Nine Months Ended September 27, 2020 (2)
Timing of Revenue Recognition
Point in Time	$	1,261,468	$	298,150	$	259,498	$	140,829	$	30,468	$	8,608	$	125,304	$	(294	)	$	2,124,031
Over Time		162,159		14,000		46,553		5,628		176		2,083		7,870		—			238,469

Total	$	1,423,627	$	312,150	$	306,051	$	146,457	$	30,644	$	10,691	$	133,174	$	(294	)	$	2,362,500

Geographical Market
Asia Pacific	$	1,330,463	$	296,679	$	197,208	$	39,665	$	4,391	$	—	$	113,576	$	—		$	1,981,982
Americas		51,315		11,481		91,924		42,634		9,836		10,691		15,253		(294	)		232,840
Europe, Middle East and Africa		41,849		3,990		16,919		64,158		16,417		—		4,345		—			147,678

Total	$	1,423,627	$	312,150	$	306,051	$	146,457	$	30,644	$	10,691	$	133,174	$	(294	)	$	2,362,500


	Foreign Currency Translation Adjustment			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total

	(in thousands)
Nine Months Ended October 3, 2021
Balance at December 31, 2020, net of tax of $0, $1,910, $(1,126), respectively	$	25,389		$	6,954		$	1,173		$	33,516
Other comprehensive loss before reclassifications, net of tax of $0, $(516), $0, respectively		(26,672	)		(1,952	)		0			(28,624	)
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(186), $(2), respectively		0			(670	)		(5	)		(675	)

Net current period other comprehensive loss, net of tax of $0 , $(702), $ (2), respectively		(26,672	)		(2,622	)		(5	)		(29,299	)

Balance at October 3, 2021, net of tax of $0, $1,208, $(1,128), respectively	$	(1,283	)	$	4,332		$	1,168		$	4,217


Nine Months Ended September 27, 2020
Balance at December 31, 2019, net of tax of $0, $946, $(1,124), respectively	$	(23,514	)	$	3,480		$	1,180		$	(18,854	)
Other comprehensive income before reclassifications, net of tax of $0, $1,410, $0, respectively		24,131			5,165			0			29,296
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(615), $ (1 ), respectively		0			(2,188	)		(6	)		(2,194	)

Net current period other comprehensive income (loss), net of tax of $0, $795, $(1), respectively		24,131			2,977			(6	)		27,102

Balance at September 27, 2020, net of tax of $0, $1,741, $(1,125), respectively	$	617		$	6,457		$	1,174		$	8,248


	For the Three Months Ended						For the Nine Months Ended
	October 3, 2021			September 27, 2020			October 3, 2021			September 27, 2020

	(in thousands)
Service cost	$	16		$	14		$	48		$	43
Interest cost		43			60			128			180
Amortization of prior service credit		(2	)		(2	)		(7	)		(7	)
Net actuarial gain		0			0			(228	)		(279	)

Total net periodic postretirement benefit cost (credit)	$	57		$	72		$	(59	)	$	(63	)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Emerging growth company

Smaller reporting company