View Filing Data

Print Document View Excel Document

Cover Page - shares	6 Months Ended
Cover Page - shares	Jun. 28, 2020	Jul. 24, 2020
Cover [Abstract]
Amendment Flag	false
Document Type	10-Q
Document Fiscal Year Focus	2020
Entity Central Index Key	0000097210
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Document Period End Date	Jun. 28, 2020
Entity Registrant Name	TERADYNE, INC
Entity Filer Category	Large Accelerated Filer
Trading Symbol	TER
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Entity Current Reporting Status	Yes
Title of 12(b) Security	Common Stock
Security Exchange Name	NASDAQ
Entity File Number	001-06462
Entity Incorporation, State or Country Code	MA
Entity Tax Identification Number	04-2272148
Entity Address, Address Line One	600 Riverpark Drive
Entity Address, City or Town	North Reading
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01864
City Area Code	978
Local Phone Number	370-2700
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		166,032,335

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 28, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 725,431	$ 773,924
Marketable securities	229,791	137,303
Accounts receivable, less allowance for doubtful accounts of $1,829 and $1,736 at June 28, 2020 and December 31, 2019, respectively	694,521	362,368
Inventories, net	206,088	196,691
Prepayments and other current assets	238,176	188,598
Total current assets	2,094,007	1,658,884
Property, plant and equipment, net	353,595	320,216
Operating lease right-of-use assets, net	56,172	57,539
Marketable securities	106,968	104,490
Deferred tax assets	79,210	75,185
Retirement plans assets	17,817	18,457
Other assets	11,854	10,332
Acquired intangible assets, net	107,563	125,480
Goodwill	422,003	416,431
Total assets	3,249,189	2,787,014
Current liabilities:
Accounts payable	184,163	126,617
Accrued employees' compensation and withholdings	175,589	163,883
Deferred revenue and customer advances	124,224	104,876
Other accrued liabilities	119,732	70,871
Operating lease liabilities	20,000	19,476
Contingent consideration	16,789	9,106
Income taxes payable	89,216	44,200
Total current liabilities	729,713	539,029
Retirement plans liabilities	130,826	134,471
Long-term deferred revenue and customer advances	55,634	45,974
Long-term contingent consideration	32,948	30,599
Long-term other accrued liabilities	22,703	19,535
Deferred tax liabilities	11,997	14,070
Long-term operating lease liabilities	43,582	45,849
Long-term income taxes payable	74,930	82,642
Debt	402,305	394,687
Total liabilities	1,504,638	1,306,856
Commitments and contingencies (See Note Q)
SHAREHOLDERS' EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized: 165,806 and 166,410 shares issued and outstanding at June 28, 2020 and December 31, 2019, respectively	20,725	20,801
Additional paid-in capital	1,730,716	1,720,129
Accumulated other comprehensive loss	(8,500)	(18,854)
Retained earnings (accumulated deficit)	1,610	(241,918)
Total shareholders' equity	1,744,551	1,480,158
Total liabilities and shareholders' equity	$ 3,249,189	$ 2,787,014

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 28, 2020	Dec. 31, 2019
Accounts receivable, less allowance for doubtful accounts	$ 1,829	$ 1,736
Common stock, par value	$ 0.125	$ 0.125
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, shares issued	165,806	166,410
Common stock, shares outstanding	165,806	166,410

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands

3 Months Ended

6 Months Ended

Jun. 28, 2020

Jun. 30, 2019

Jun. 28, 2020

Jun. 30, 2019

Revenues:

Total revenues

$ 838,661

^[1]

$ 564,178

^[1]

$ 1,543,016

^[2]

$ 1,058,277

^[2]

Cost of revenues:

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)

367,188

240,260

665,993

446,724

Gross profit

471,473

323,918

877,023

611,553

Operating expenses:

Selling and administrative

113,259

108,811

224,647

210,824

Engineering and development

94,102

81,434

179,261

158,225

Acquired intangible assets amortization

8,941

10,083

18,832

20,717

Restructuring and other

37,222

(10,404)

29,616

(5,292)

Total operating expenses

253,524

189,924

452,356

384,474

Income from operations

217,949

133,994

424,667

227,079

Non-operating (income) expense:

Interest income

(1,368)

(4,384)

(4,119)

(9,373)

Interest expense

6,043

5,800

11,594

11,320

Other (income) expense, net

(4,017)

1,401

2,833

(24)

Income before income taxes

217,291

131,177

414,359

225,156

Income tax provision

28,383

33,780

49,261

18,621

Net income

$ 188,908

$ 97,397

$ 365,098

$ 206,535

Net income per common share:

Basic

$ 1.14

$ 0.57

$ 2.20

$ 1.20

Diluted

$ 1.05

$ 0.55

$ 2.02

$ 1.16

Weighted average common shares—basic

165,789

171,241

166,189

172,387

Weighted average common shares—diluted

180,257

178,590

180,497

177,781

Cash dividend declared per common share

$ 0.10

$ 0.09

$ 0.20

$ 0.18

Product [Member]

Revenues:

Total revenues

$ 734,630

$ 457,511

$ 1,345,536

$ 850,953

Cost of revenues:

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)

322,732

193,299

582,728

358,667

Service [Member]

Revenues:

Total revenues

104,031

106,667

197,480

207,324

Cost of revenues:

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)

$ 44,456

$ 46,961

$ 83,265

$ 88,057

[1]	Includes $2.5 million and $1.7 million in 2020 and 2019, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.”
[2]	Includes $4.3 million and $3.4 million in 2020 and 2019, respectively, for leases of Teradyne’s systems recognized outside ASC 606 “Revenue from Contracts with Customers.”

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2020	Jun. 30, 2019	Jun. 28, 2020	Jun. 30, 2019
Net income	$ 188,908	$ 97,397	$ 365,098	$ 206,535
Other comprehensive income, net of tax:
Foreign currency translation adjustment, net of tax of $0, $0, $0, $0, respectively	15,805	5,642	7,026	983
Available-for-sale marketable securities:
Unrealized gains on debt securities arising during period, net of tax of $1,084, $678, $1,271, $1,256, respectively	3,793	2,537	4,830	4,637
Less: Reclassification adjustment for gains included in net income, net of tax of $(277), $(6), $(421), $(26), respectively	(983)	(27)	(1,499)	(97)
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax, Total	2,810	2,510	3,331	4,540
Defined benefit retirement plans:
Amortization of prior service credit, net of tax of $0, $(11), $(1), $(21), respectively	(2)	(37)	(3)	(74)
Other comprehensive income	18,613	8,115	10,354	5,449
Comprehensive income	$ 207,521	$ 105,512	$ 375,452	$ 211,984

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2020	Jun. 30, 2019	Jun. 28, 2020	Jun. 30, 2019
Foreign currency translation adjustments, tax	$ 0	$ 0	$ 0	$ 0
Unrealized gains (losses) on marketable securities arising during period, net of tax	1,084	678	1,271	1,256
Reclassification adjustment for (gains) losses included in net income, net of tax	(277)	(6)	(421)	(26)
Amortization of prior service credit, net of tax	$ 0	$ (11)	$ (1)	$ (21)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive (Loss) Income	Accumulated Deficit
Balance at Dec. 31, 2018	$ 1,522,354	$ 21,940	$ 1,671,645	$ (13,040)	$ (158,191)
Balance, Shares at Dec. 31, 2018		175,522
Net issuance of common stock under stock-based plans	643	$ 174	469
Net issuance of common stock under stock-based plans (in shares)		1,385
Stock-based compensation expense	16,097		16,097
Repurchase of common stock	$ (240,624)	$ (809)			(239,815)
Repurchase of common stock (in shares)	6,500	(6,471)
Cash dividends	$ (31,042)				(31,042)
Net income	206,535				206,535
Other comprehensive income	5,449			5,449
Balance at Jun. 30, 2019	1,479,412	$ 21,305	1,688,211	(7,591)	(222,513)
Balance, Shares at Jun. 30, 2019		170,436
Balance at Mar. 31, 2019	1,470,228	$ 21,544	1,679,997	(15,706)	(215,607)
Balance, Shares at Mar. 31, 2019		172,353
Net issuance of common stock under stock-based plans	692	$ 13	679
Net issuance of common stock under stock-based plans (in shares)		99
Stock-based compensation expense	7,535		7,535
Repurchase of common stock	(89,154)	$ (252)			(88,902)
Repurchase of common stock (in shares)		(2,016)
Cash dividends	(15,401)				(15,401)
Net income	97,397				97,397
Other comprehensive income	8,115			8,115
Balance at Jun. 30, 2019	1,479,412	$ 21,305	1,688,211	(7,591)	(222,513)
Balance, Shares at Jun. 30, 2019		170,436
Balance at Dec. 31, 2019	1,480,158	$ 20,801	1,720,129	(18,854)	(241,918)
Balance, Shares at Dec. 31, 2019		166,410
Net issuance of common stock under stock-based plans	(10,382)	$ 114	(10,496)
Net issuance of common stock under stock-based plans (in shares)		913
Stock-based compensation expense	21,083		21,083
Repurchase of common stock	$ (88,465)	$ (190)			(88,275)
Repurchase of common stock (in shares)	1,500	(1,517)
Cash dividends	$ (33,295)				(33,295)
Net income	365,098				365,098
Other comprehensive income	10,354			10,354
Balance at Jun. 28, 2020	1,744,551	$ 20,725	1,730,716	(8,500)	1,610
Balance, Shares at Jun. 28, 2020		165,806
Balance at Mar. 29, 2020	1,550,673	$ 20,742	1,721,367	(27,113)	(164,323)
Balance, Shares at Mar. 29, 2020		165,938
Net issuance of common stock under stock-based plans	(446)	$ 5	(451)
Net issuance of common stock under stock-based plans (in shares)		41
Stock-based compensation expense	9,800		9,800
Repurchase of common stock	(6,401)	$ (22)			(6,379)
Repurchase of common stock (in shares)		(173)
Cash dividends	(16,596)				(16,596)
Net income	188,908				188,908
Other comprehensive income	18,613			18,613
Balance at Jun. 28, 2020	$ 1,744,551	$ 20,725	$ 1,730,716	$ (8,500)	$ 1,610
Balance, Shares at Jun. 28, 2020		165,806

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 28, 2020	Jun. 30, 2019	Jun. 28, 2020	Jun. 30, 2019
Common Stock, Dividends, Per Share, Cash Paid	$ 0.10	$ 0.09	$ 0.10	$ 0.09

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 28, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net income	$ 365,098	$ 206,535
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation	38,305	33,882
Amortization	26,234	24,976
Stock-based compensation	21,367	18,109
Contingent consideration adjustment	19,239	(8,701)
Provision for excess and obsolete inventory	9,637	5,799
Deferred taxes	(7,163)	515
Gains on investments	(469)	(3,741)
Retirement plan actuarial (gains) losses	(99)	448
Other	523	429
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable	(331,040)	(79,478)
Inventories	(3,728)	(2,447)
Prepayments and other assets	(49,479)	(17,067)
Accounts payable and other liabilities	113,578	(14,424)
Deferred revenue and customer advances	28,655	15,826
Retirement plans contributions	(2,501)	(2,414)
Income taxes	37,842	(14,973)
Net cash provided by operating activities	265,999	163,274
Cash flows from investing activities:
Purchases of property, plant and equipment	(84,014)	(58,956)
Purchases of marketable securities	(299,548)	(484,181)
Proceeds from maturities of marketable securities	182,984	233,193
Proceeds from sales of marketable securities	26,661	42,454
Proceeds from life insurance	546	273
Acquisition of businesses, net of cash acquired	149	(21,970)
Net cash used for investing activities	(173,222)	(289,187)
Cash flows from financing activities:
Issuance of common stock under stock purchase and stock option plans	12,757	15,089
Repurchase of common stock	(88,465)	(247,222)
Dividend payments	(33,266)	(31,019)
Payments related to net settlement of employee stock compensation awards	(22,519)	(14,446)
Payments of contingent consideration	(8,852)	(27,615)
Net cash used for financing activities	(140,345)	(305,213)
Effects of exchange rate changes on cash and cash equivalents	(925)	(519)
Decrease in cash and cash equivalents	(48,493)	(431,645)
Cash and cash equivalents at beginning of period	773,924	926,752
Cash and cash equivalents at end of period	725,431	495,107
Non-cash investing activities:
Capital expenditures incurred but not yet paid	$ 6,281	$ 4,068

The Company

6 Months Ended

Jun. 28, 2020

The Company

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 the 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 and light industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease

manufacturing

costs. Teradyne’s automatic test equipment and industrial automation products and services include:

•

semiconductor test (“Semiconductor Test”) systems;

•

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

•

industrial automation (“Industrial Automation”) products; and

•

wireless test (“Wireless Test”) systems.

Accounting Policies

6 Months Ended

Jun. 28, 2020

Accounting Policies

B. ACCOUNTING POLICIES

Basis of Presentation

The consolidated interim financial statements include 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 reclassified to conform to the current year presentation. The December 31, 2019 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 March 2, 2020, for the year ended December 31, 2019.

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. Due to the

COVID-19

pandemic, there has been uncertainty and disruption in the global economy and our markets. Teradyne 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 August 3, 2020, 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 could differ significantly from these estimates under different assumptions or conditions.

Goodwill

On January 26, 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2017-04,

“Intangibles—Goodwill and Other (Topic

350): Simplifying the Accounting for Goodwill Impairment.”

The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Teradyne adopted this standard on January 1, 2020, on a prospective basis. The adoption of ASU

2017-04

did not have a material impact on the consolidated statement of operations, cash flows, or earnings per share. Teradyne assesses goodwill for impairment at least annually in the fourth quarter, as of December 31, on a reporting unit basis, or more frequently, when events and circumstances occur indicating that the recorded goodwill may be impaired. Under ASU

2017-04,

goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same

one-step

impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts.

Credit Losses

In June 2016, the FASB issued ASU

2016-13,

“Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard introduced the expected credit losses methodology for the measurement of credit losses on financial assets that are not measured at fair value through net income and replaces the “incurred loss” model with an “expected credit loss” model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of the asset. Teradyne adopted this standard on January 1, 2020 on a modified retrospective basis. The adoption of ASU

2016-13

did not have a material impact on the consolidated statement of operations, balance sheets, cash flows, or earnings per share.

Acquisitions

6 Months Ended

Jun. 28, 2020

Acquisitions

C. ACQUISITIONS

AutoGuide LLC

On November 13, 2019, Teradyne acquired 100% of the membership interests of AutoGuide, LLC (“AutoGuide”), a maker of high-payload autonomous mobile robots (“AMRs”), based in Chelmsford, MA, an emerging and fast growing segment of the global forklift market. The total purchase price was approximately $81.6 million, which included cash paid of approximately $57.6 million and $24.0 million in fair value of contingent consideration payable upon achievement of certain performance targets, extending potentially through 2022. At June 28, 2020, the maximum contingent consideration that could be paid is $106.9 million.

The contingent consideration is payable upon achievement of certain thresholds and targets for revenue and earnings before interest and taxes for periods from January 1, 2019 to December 31, 2020, January 1, 2019 to December 31, 2021, and January 1, 2019 to December 31, 2022.

The valuation of the contingent consideration is dependent on the following assumptions: forecasted revenues, revenue volatility, earnings before interest and taxes, and discount rate. These assumptions were estimated based on a review of the historical and projected results.

The AutoGuide acquisition was accounted for as a bu

iness combination and, accordingly, the results have been included in Teradyne’s consolidated results of operations from the date of acquisition. AutoGuide’s AMRs are used for material transport of payloads up to 4,500

kg in manufacturing, warehouse and logistics applications. These products complement Mobile Industrial Robots Aps (“MiR”) lower payload products and expand the Industrial Automation segment, which is a key component of Teradyne’s growth strategy.

The allocation of the total purchase price to AutoGuide’s net tangible assets and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible assets and net tangible assets in the amount of $41.2 million was allocated to goodwill, which is deductible for tax purposes. AutoGuide’s results have been included in Teradyne’s Industrial Automation segment from the date of acquisition.

The following table represents the final allocation of the purchase price:


	Purchase Price Allocation
	(in thousands)
Goodwill	$	41,223
Intangible assets		37,660
Tangible assets acquired and liabilities assumed:
Other current assets		3,661
Non-current assets		1,227
Accounts payable and current liabilities		(1,223	)
Long-term other liabilities		(949	)

Total purchase price	$	81,599

Teradyne estimated the fair value of intangible assets using the income approach. Forecasted revenues is the key assumption for estimating the fair value. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. Components of these intangible assets and their estimated useful lives at the acquisition date are as follows:


	Fair Value		Estimated Useful Life
	(in thousands)		(in years)
Developed technology	$	24,590		6.0
Trademarks and tradenames		7,360		6.0
Customer relationships		5,450		7.0
Backlog		260		0.3

Total intangible assets	$	37,660		6.1

The following unaudited pro forma information gives effect to the acquisition of AutoGuide as if the acquisition occurred on January 1, 2018. The unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented:


	For the Three Months Ended		For the Six Months Ended
	June 30, 2019		June 30, 2019
	(in thousands)
Revenue	$	565,978	$	1,061,577
Net income		95,948		203,237
Net income per common share:
Basic	$	0.56	$	1.18
Diluted	$	0.54	$	1.14

Lemsys SA

On January 30, 2019, Teradyne acquired all of the issued and outstanding shares of Lemsys SA (“Lemsys”) for a total purchase price of approximately $9.1 million. Lemsys strengthens Teradyne’s position in the electrification trends of vehicles, solar and wind power, and industrial applications. The Lemsys acquisition was accounted for as a business combination and, accordingly, the results have been included in Teradyne’s Semiconductor Test segment from the date of acquisition. Teradyne’s final allocation of the purchase price was goodwill of $1.4 million, which is not deductible for tax purposes, acquired intangible assets of $4.6 million with an average estimated useful life of 5.2 years, and $3.1 million of net tangible assets. The acquisition was not material to Teradyne’s consolidated financial statements.

Revenue

6 Months Ended

Jun. 28, 2020

Revenue from Contract with Customer [Abstract]

Revenue

D. 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 June 28, 2020 (1)
Timing of Revenue Recognition
Point in Time	$	520,496	$	80,032	$	57,741	$	41,804	$	11,196	$	3,408	$	46,347	$	(253	)	$	760,771
Over Time		54,077		4,542		14,065		1,747		76		545		2,838		—			77,890

Total	$	574,573	$	84,574	$	71,806	$	43,551	$	11,272	$	3,953	$	49,185	$	(253	)	$	838,661

Geographical Market
Asia Pacific	$	547,700	$	82,492	$	38,656	$	14,279	$	1,232	$	—	$	41,907	$	—		$	726,266
Americas		16,251		855		28,494		11,364		2,390		3,953		5,353		(253	)		68,407
Europe, Middle East and Africa		10,622		1,227		4,656		17,908		7,650		—		1,925		—			43,988

Total	$	574,573	$	84,574	$	71,806	$	43,551	$	11,272	$	3,953	$	49,185	$	(253	)	$	838,661

For the Three Months Ended June 30, 2019 (1)
Timing of Revenue Recognition
Point in Time	$	265,130	$	53,984	$	60,137	$	62,015	$	10,505	$	—	$	39,236	$	(89	)	$	490,918
Over Time		51,483		4,301		13,270		2,206		—		—		2,000		—			73,260

Total	$	316,613	$	58,285	$	73,407	$	64,221	$	10,505	$	—	$	41,236	$	(89	)	$	564,178

Geographical Market
Asia Pacific	$	285,981	$	47,202	$	38,191	$	18,820	$	2,681	$	—	$	34,642	$	—		$	427,517
Americas		15,601		8,783		29,911		17,980		2,783		—		5,926		(89	)		80,895
Europe, Middle East and Africa		15,031		2,300		5,305		27,421		5,041		—		668		—			55,766

Total	$	316,613	$	58,285	$	73,407	$	64,221	$	10,505	$	—	$	41,236	$	(89	)	$	564,178

For the Six Months Ended June 28, 2020 (2)
Timing of Revenue Recognition
Point in Time	$	868,542	$	159,429	$	158,453	$	89,306	$	20,293	$	4,532	$	87,403	$	(253	)	$	1,387,705
Over Time		106,171		9,494		29,429		3,942		117		891		5,267		—			155,311

Total	$	974,713	$	168,923	$	187,882	$	93,248	$	20,410	$	5,423	$	92,670	$	(253	)	$	1,543,016

Geographical Market
Asia Pacific	$	910,433	$	158,601	$	118,674	$	25,195	$	2,825	$	—	$	79,711	$	—		$	1,295,439
Americas		33,637		7,751		56,784		26,108		5,855		5,423		10,041		(253	)		145,346
Europe, Middle East and Africa		30,643		2,571		12,424		41,945		11,730		—		2,918		—			102,231

Total	$	974,713	$	168,923	$	187,882	$	93,248	$	20,410	$	5,423	$	92,670	$	(253	)	$	1,543,016

For the Six Months Ended June 30, 2019 (2)
Timing of Revenue Recognition
Point in Time	$	503,952	$	97,693	$	105,373	$	117,392	$	19,613	$	—	$	66,691	$	(240	)	$	910,474
Over Time		105,534		8,572		26,254		3,857		—		—		3,586		—			147,803

Total	$	609,486	$	106,265	$	131,627	$	121,249	$	19,613	$	—	$	70,277	$	(240	)	$	1,058,277

Geographical Market
Asia Pacific	$	546,374	$	85,988	$	62,478	$	33,437	$	4,408	$	—	$	60,661	$	—		$	793,346
Americas		31,768		17,546		56,718		33,783		6,322		—		8,167		(240	)		154,064
Europe, Middle East and Africa		31,344		2,731		12,431		54,029		8,883		—		1,449		—			110,867

Total	$	609,486	$	106,265	$	131,627	$	121,249	$	19,613	$	—	$	70,277	$	(240	)	$	1,058,277

(1)	Includes $2.5 million and $1.7 million in 2020 and 2019, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “ Revenue from Contracts with Customers.”

(2)	Includes $4.3 million and $3.4 million in 2020 and 2019, respectively, for leases of Teradyne’s systems recognized outside ASC 606 “ Revenue from Contracts with Customers.”

Contract Balances

During the three and six months ended June 28, 2020, Teradyne recognized $21.1 million and $60.6 million, respectively, that was previously included within the deferred revenue and customer advances balances. During the three and six months ended June 30, 2019, Teradyne recognized $13.3 million and $33.4 million, respectively, that was previously included within the deferred revenue and customer advances balances. This revenue primarily relates to undelivered hardware, extended warranties, training, application support, and post contract support. Each of these represents a distinct performance obligation. Teradyne expects to recognize 69% of the remaining performance obligation in the next 12 months, 26% in

1-3

years, and the remainder thereafter.

Accounts Receivable

Teradyne sells 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 and presents cash proceeds as cash provided by operating activities in the consolidated statements of cash flows. Total trade accounts receivable sold under the factoring agreements were $50.0 million

and $40.4 million for the three months ended June 28, 2020 and June 30, 2019, respectively and $96.8 million

and $82.1 million for the six months ended June 28, 2020 and June 30, 2019, respectively. Factoring fees for the sales of receivables were recorded in interest expense and were not material.

Inventories

6 Months Ended

Jun. 28, 2020

Inventories

E. INVENTORIES

Inventories, net consisted of the following at June 28, 2020 and December 31, 2019:


	June 28, 2020		December 31, 2019
	(in thousands)
Raw material	$	106,610	$	118,595
Work-in-process		29,710		32,695
Finished goods		69,768		45,401

	$	206,088	$	196,691

Inventory reserves at June 28, 2020 and December 31, 2019 were $107.4 million and $103.6 million, respectively.

Financial Instruments

6 Months Ended

Jun. 28, 2020

Financial Instruments

F. 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 six months ended June 28, 2020 and June 30, 2019, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.

Realized gains recorded in the three and six months ended June 28, 2020 were $1.6 million and $3.0 million, respectively. Realized losses recorded in the three and six months ended June 28, 2020 were $0.1 million and $0.2 million

, respe

ctively

. Realized gains recorded in the three and six months ended June 30, 2019 were $0.1 million and $0.2 million, respectively. Realized losses recorded in the six months ended June 30, 2019 were $0.1 million. Realized gains and losses are included in other (income) expense, net.

Unrealized gains

on equity securities recorded in the three and six months ended June 28, 2020 were $3.7 million

Unrealized losses on equity securities recorded in the six months ended June 28, 2020 were

$6.0 million. Unrealized gains on equity securities recorded in the three and six months ended June 30, 2019 were $0.9 million and $3.7 million

, respectively

. 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 (loss).

The cost of securities sold is based on the specific identification method.

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 June 28, 2020 and December 31, 2019.


	June 28, 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	$	345,312	$	—	$	—	$	345,312
Cash equivalents		326,347		53,772		—		380,119
Available-for-sale securities:								—
U.S. Treasury securities		—		165,305		—		165,305
Commercial paper		—		63,844		—		63,844
Corporate debt securities		—		63,218		—		63,218
Certificates of deposit and time deposits		—		9,506		—		9,506
Debt mutual funds		6,876		—		—		6,876
U.S. government agency securities		—		4,425		—		4,425
Non-U.S. government securities		—		601		—		601
Equity securities:
Mutual funds		22,984		—		—		22,984

	$	701,519	$	360,671	$	—	$	1,062,190
Derivative assets		—		30		—		30

Total	$	701,519	$	360,701	$	—	$	1,062,220

Liabilities
Contingent consideration	$	—	$	—	$	49,737	$	49,737
Derivative liabilities		—		222		—		222

Total	$	—	$	222	$	49,737	$	49,959


Reported as follows:
	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	671,659	$	53,772	$	—	$	725,431
Marketable securities		—		229,791		—		229,791
Long-term marketable securities		29,860		77,108		—		106,968
Prepayments and other current assets		—		30		—		30

Total	$	701,519	$	360,701	$	—	$	1,062,220

Liabilities		.
Other current liabilities	$	—	$	222	$	—	$	222
Contingent consideration		—		—		16,789		16,789
Long-term contingent consideration		—		—		32,948		32,948
Total	$	—	$	222	$	49,737	$	49,959


	December 31, 2019
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	311,975	$	—	$	—		311,975
Cash equivalents		410,285		51,664		—		461,949
Available-for-sale securities:								—
Corporate debt securities		—		97,307		—		97,307
Commercial paper		—		54,149		—		54,149
U.S. Treasury securities		—		42,382		—		42,382
U.S. government agency securities		—		9,952		—		9,952
Debt mutual funds		6,888		—		—		6,888
Certificates of deposit and time deposits		—		4,751		—		4,751
Non-U.S. government securities		—		592		—		592
Equity securities:
Equity mutual funds		25,772		—		—		25,772

	$	754,920	$	260,797	$	—	$	1,015,717
Derivative assets		—		528		—		528

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

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

Total	$	—	$	203	$	39,705	$	39,908


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

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

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

Total	$	—	$	203	$	39,705	$	39,908

Changes in the fair value of Level 3 contingent consideration for the three and six months ended June 28, 2020 and June 30, 2019 were as follows:


	For the Three Months Ended					For the Six Months Ended
	June 28,		June 30,			June 28,			June 30,
	2020		2019			2020			2019
	(in thousands)
Balance at beginning of period	$	20,472	$	38,313		$	39,705		$	70,543
Foreign currency impact		6		206			(355	)		(405	)
Payments (a)(b)		—		—			(8,852	)		(34,590	)
Fair value adjustment (c)(d)		29,259		(11,672	)		19,239			(8,701	)

Balance at end of period	$	49,737	$	26,847		$	49,737		$	26,847

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

(b)	In the six months ended June 30, 2019, Teradyne paid $30.8 million and $3.8 million of contingent consideration for the earn-outs in connection with the acquisition of MiR and Universal Robots A/S (“Universal Robots”), respectively.

(c)

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

, due to higher f

casted re

sults

(d)	In the three and six months ended June 30, 2019, the fair value of contingent consideration for the earn-out in connection with the acquisition of MiR decreased by $11.7 million and $8.7 million, respectively, primarily due to a decrease in the forecasted revenue.

The following table provides quantitative information associated with the fair value measurement of Teradyne’s Level 3 financial instruments:


Liability	June 28, 2020 Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(in thousands)
Contingent consideration (AutoGuide)	$	49,737	Monte Carlo Simulation	Revenue volatility		15.5	%
				Discount Rate		1.8	%
Contingent consideration (MiR)	$	—	Monte Carlo Simulation	Revenue volatility		10.0	%
				Discount Rate		0.8	%

As of June 28, 2020, the significant unobservable inputs used in the Monte Carlo simulation to fair value the AutoGuide and MiR contingent consideration include forecasted revenues, revenue volatility, earnings before interest and taxes, and discount rate. Increases or decreases in the inputs would result in a higher or lower fair value measurement.

As of June 28, 2020, the maximum amount of contingent consideration that could be paid in connection with the acquisition of AutoGuide is $106.9 million. The

earn-out

periods end on December 31, 2020, December 31, 2021 and December 31, 2022.

As of June 28, 2020, the maximum amount of contingent consideration that could be paid in connection with the acquisition of MiR is $63.5 million. The remaining

earn-out

period ends on December 31, 2020.

The carrying amounts and fair values of Teradyne’s financial instruments at June 28, 2020 and December 31, 2019 were as follows:


	June 28, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	725,431	$	725,431	$	773,924	$	773,924
Marketable securities		336,759		336,759		241,793		241,793
Derivative assets		30		30		528		528
Liabilities
Contingent consideration		49,737		49,737		39,705		39,705
Derivative liabilities		222		222		203		203
Convertible debt (1)		402,305		1,198,669		394,687		1,010,275

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

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

The following table summarizes the composition of

available-for-sale

marketable securities at June 28, 2020:


	June 28, 2020
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	163,586	$	1,734	$	(15	)	$	165,305	$	18,709
Commercial paper		63,774		70		—			63,844		—
Corporate debt securities		56,672		6,682		(136	)		63,218		1,447
Certificates of deposit and time deposits		9,498		8		—			9,506		—
Debt mutual funds		6,686		190		—			6,876		—
U.S. government agency securities		4,353		72		—			4,425		—
Non-U.S. government securities		601		—		—			601		—

	$	305,170	$	8,756	$	(151	)	$	313,775	$	20,156