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10-Q
falseP60Y2017-06-150000097210Q3--12-31NASDAQIncludes $3.8 million and $1.7 million in 2021 and 2020, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.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.In the nine months ended September 27, 2020, Teradyne paid $8.9 million of contingent consideration for the earn-out in connection with the acquisition of MiR.In the three and nine months ended September 27, 2020, the fair value of contingent consideration for the earn-outs in connection 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.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.In the nine months ended October 3, 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”).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 amortization of prior service credit is included in the computation of net periodic postretirement benefit cost. See Note Q: “Retirement Plans.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, multiplied by 8.7 million shares and 11.7 million shares, for the three and nine months ended October 3, 2021, respectively. 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.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, multiplied by 14.6 million shares and 14.6 million shares for the three and nine months ended October 3, 2021, respectively. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period.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 income (loss) before taxes are charges and credits related to restructuring and other, loss on convertible debt conversions and inventory charges.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.Total assets are attributable to each segment. 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Table of Contents
 
 
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 3, 2021
OR
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
        
    
to
    
    
        
    
Commission File
No. 001-06462
 
 
TERADYNE, INC.
(Exact name of registrant as specified in its charter)
 
 
 
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)
978-370-2700
(Registrant’s Telephone Number, Including Area Code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
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
 
 
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):
 
Large accelerated filer   ☒    Accelerated filer   ☐
Non-accelerated
filer		   ☐    Emerging growth company   ☐
Smaller reporting company   ☐     
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 was 163,004,340 shares.
 
 
 
Table of Contents
TERADYNE, INC.
INDEX
 
         
Page No.
  
     
Item 1.
    Financial Statements (Unaudited):   
   Condensed Consolidated Balance Sheets as of October 3, 2021 and December 31, 2020      1  
   Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 3, 2021 and September 27, 2020      2  
   Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 3, 2021 and September 27, 2020      3  
   Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended October 3, 2021 and September 27, 2020      4  
   Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 3, 2021 and September 27, 2020      5  
   Notes to Condensed Consolidated Financial Statements      6  
Item 2.
    Management’s Discussion and Analysis of Financial Condition and Results of Operations      28  
Item 3.
    Quantitative and Qualitative Disclosures about Market Risk      38  
Item 4.
    Controls and Procedures      39  
     
Item 1.
    Legal Proceedings      39  
Item 1A.
    Risk Factors      39  
Item 2.
    Unregistered Sales of Equity Securities and Use of Proceeds      40  
Item 4.
    Mine Safety Disclosures      41  
Item 6.
    Exhibits      42  
Table of Contents
PART I
 
Item 1:
Financial Statements
TERADYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
  
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
  
 
 —
  
 
  
 
 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
  
 
  
 
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 on Form
10-K
for the year ended December 31, 2020, are an integral part of the condensed
consolidated financial statements.
 
1
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  
    
 
 
    
 
 
    
 
 
    
 
 
  
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, are an integral part of the condensed
consolidated financial statements.
 
2
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  
    
 
 
    
 
 
    
 
 
    
 
 
  
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, are an integral part of the condensed
consolidated financial statements.
 
3
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  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
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, are an integral part of the condensed
consolidated financial statements.
 
4
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  
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, are an integral part of the condensed
consolidated financial statements.
 
5
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
e
 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, 2020 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, for the year ended December 31, 2020.
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
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 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 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. Teradyne is evaluating the effects of the adoption of this ASU on its financial statements.
On November 
4
, 2021, Teradyne made an irrevocable election under the indenture entered into between Teradyne 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 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.
 
6
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 3, 2021, the value of the investment was $12.0 million, and there was no change during the three months ended October 3, 2021.
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
 
   
 
 
    
 
 
    
 
 
   &#