TERADYNE, INC
10-Qs and 10-Ks
PROXIES
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 September 29, 2019
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
(Exact name of registrant as specified in its charter)
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| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
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| (Address of Principal Executive Offices) |
(Zip Code) |
(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 | ||
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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 Yes
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) ☒
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):| |
☒ |
Accelerated filer |
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| Non-accelerated filer |
☐ |
Emerging growth company |
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| Smaller reporting company |
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I
f 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 4, 2019 was 167,577,669 shares.
TERADYNE, INC.
INDEX
| Page No. |
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| Item 1. |
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| 1 |
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| 2 |
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| 3 |
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| 4 |
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| 5 |
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| 6 |
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| Item 2. |
33 |
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| Item 3. |
44 |
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| Item 4. |
44 |
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| Item 1. |
45 |
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| Item 1A. |
45 |
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| Item 2. |
45 |
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| Item 4. |
46 |
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| Item 6. |
46 |
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PART I
Item 1: |
Financial Statements |
TERADYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 29, 2019 |
December 31, 2018 |
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| (in thousands, except per share amount) |
||||||||
| ASSETS |
||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | |
$ | |
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| Marketable securities |
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|
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| Accounts receivable, less allowance for doubtful accounts of $ |
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|
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| Inventories, net |
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| Prepayments and other current assets |
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| Total current assets |
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| Property, plant and equipment, net |
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|
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| Operating lease right-of-use assets, net |
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— |
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| Marketable securities |
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| Deferred tax assets |
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| Other assets |
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| Retirement plans assets |
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| Acquired intangible assets, net |
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| Goodwill |
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| Total assets |
$ | |
$ | |
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| LIABILITIES |
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| Current liabilities: |
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| Accounts payable |
$ | |
$ | |
||||
| Accrued employees’ compensation and withholdings |
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| Deferred revenue and customer advances |
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| Other accrued liabilities |
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| Operating lease liabilities |
|
— |
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| Contingent consideration |
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| Income taxes payable |
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| Total current liabilities |
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| Retirement plans liabilities |
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| Long-term deferred revenue and customer advances |
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| Deferred tax liabilities |
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| Long-term other accrued liabilities |
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| Long-term contingent consideration |
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|
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| Long-term operating lease liabilities |
|
— |
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| Long-term income taxes payable |
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| Debt |
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|
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| Total liabilities |
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|
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| Commitments and contingencies (See Note S) |
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| SHAREHOLDERS’ EQUITY |
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| Common stock, $ |
|
|
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| Additional paid-in capital |
|
|
||||||
| Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| Total shareholders’ equity |
|
|
||||||
| Total liabilities and shareholders’ equity |
$ | |
$ | |
||||
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s
Annual Report on Form condensed
consolidated financial statements.
Annual Report on Form
10-K
for the year ended December 31, 2018, are an integral part of theconsolidated financial statements.
1
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
|||||||||||||
| (in thousands, except per share amount) |
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| Revenues: |
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| Products |
$ | |
$ | |
$ | |
$ | |
||||||||
| Services |
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|
|
|
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| Total revenues |
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|
|
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| Cost of revenues: |
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| Cost of products |
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| Cost of services |
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|
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| Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) |
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| Gross profit |
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| Operating expenses: |
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| Selling and administrative |
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| Engineering and development |
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| Acquired intangible assets amortization |
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|
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|
||||||||||||
| Restructuring and other |
( |
) | |
( |
) | |
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| Total operating expenses |
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| Income from operations |
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| Non-operating (income) expense: |
||||||||||||||||
| Interest income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest expense |
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| Other (income) expense, net |
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| Income before income taxes |
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| Income tax provision |
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| Net income |
$ | |
$ | |
$ | |
$ | |
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| Net income per common share: |
||||||||||||||||
| Basic |
$ | |
$ | |
$ | |
$ | |
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| Diluted |
$ | |
$ | |
$ | |
$ | |
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| Weighted average common shares—basic |
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|
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| Weighted average common shares—diluted |
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The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s
Annual Report on Form
consolidated financial statements.
Annual Report on Form
10-K
for the year ended December 31, 2018, are an integral part of the condensedconsolidated financial statements.
2
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
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| (in thousands) |
||||||||||||||||
| Net income |
$ | |
$ | |
$ | |
$ | |
||||||||
| Other comprehensive income, net of tax: |
||||||||||||||||
| Foreign currency translation adjustment, net of tax of $ |
( |
) | |
( |
) | ( |
) | |||||||||
| Available-for-sale marketable securities: |
||||||||||||||||
| Unrealized gains (losses) on marketable securities arising during period, net of tax of $ |
|
( |
) | |
( |
) | ||||||||||
| Less: Reclassification adjustment for (gains) losses included in net income, net of tax of $( |
( |
) | ( |
) | ( |
) | |
|||||||||
| |
( |
) | |
( |
) | |||||||||||
| Defined benefit pension and post-retirement plans: |
||||||||||||||||
| Amortization of prior service benefit included in net periodic pension and post-retirement benefit, net of tax of $( |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other comprehensive (loss) income |
( |
) | |
( |
) | ( |
) | |||||||||
| Comprehensive income |
$ | |
$ | |
$ | |
$ | |
||||||||
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, 2018, are an integral part of the condensedconsolidated financial statements.
3
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
| |
Common Stock Shares Issued |
Common Stock Value |
Additional Paid-in Capital |
Accumulated Other Comprehensive ( Loss) Income |
Accumulated Deficit |
Total Shareholders’ Equity |
||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||
| For the Three Months Ended September 29, 2019 |
||||||||||||||||||||||||
| Balance, June 30, 2019 |
|
$ | |
$ | |
$ | ( |
) | $ | ( |
) | $ | |
|||||||||||
| Net issuance of common stock under stock-based plans |
|
|
|
— |
— |
|
||||||||||||||||||
| Stock-based compensation expense |
— |
— |
|
— |
— |
|
||||||||||||||||||
| Repurchase of common stock |
( |
) | ( |
) | — |
— |
( |
) | ( |
) | ||||||||||||||
| Cash dividends ($ |
— |
— |
— |
— |
( |
) | ( |
) | ||||||||||||||||
| Net income |
— |
— |
— |
— |
|
|
||||||||||||||||||
| Other comprehensive loss |
— |
— |
— |
( |
) | — |
( |
) | ||||||||||||||||
| Balance, September 29 , 2019 |
|
$ | |
$ | |
$ | ( |
) | $ | ( |
) | $ | |
|||||||||||
| For the Three Months Ended September 30, 2018 |
||||||||||||||||||||||||
| Balance, July 1, 2018 |
|
$ | |
$ | |
$ | ( |
) | $ | |
$ | |
||||||||||||
| Net issuance of common stock under stock-based plans |
|
|
|
— |
— |
|
||||||||||||||||||
| Stock-based compensation expense |
— |
— |
|
— |
— |
|
||||||||||||||||||
| Repurchase of common stock |
( |
) | ( |
) | — |
— |
( |
) | ( |
) | ||||||||||||||
| Cash dividends ($ |
— |
— |
— |
— |
( |
) | ( |
) | ||||||||||||||||
| Net income |
— |
— |
— |
— |
|
|
||||||||||||||||||
| Other comprehensive income |
— |
— |
— |
|
— |
7,028 |
||||||||||||||||||
| Balance, September 30, 2018 |
|
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
||||||||||||
| For the Nine Months Ended September 29, 2019 |
||||||||||||||||||||||||
| Balance, December 31, 2018 |
|
$ | |
$ | |
$ | ( |
) | $ | ( |
) | $ | |
|||||||||||
| Net issuance of common stock under stock-based plans |
|
|
|
— |
— |
|
||||||||||||||||||
| Stock-based compensation expense |
— |
— |
|
— |
— |
|
||||||||||||||||||
| Repurchase of common stock |
( |
) | ( |
) | — |
— |
( |
) | ( |
) | ||||||||||||||
| Cash dividends ($ |
— |
— |
— |
— |
( |
) | ( |
) | ||||||||||||||||
| Net income |
— |
— |
— |
— |
|
|
||||||||||||||||||
| Other comprehensive loss |
— |
— |
— |
( |
) | — |
( |
) | ||||||||||||||||
| Balance, September 29 , 2019 |
|
$ | |
$ | |
$ | ( |
) | $ | ( |
) | $ | |
|||||||||||
| For the Nine Months Ended September 30, 2018 |
||||||||||||||||||||||||
| Balance, December 31, 2017 |
|
$ | |
$ | |
$ | |
$ | |
$ | |
|||||||||||||
| Net issuance of common stock under stock-based plans |
|
|
|
— |
— |
|
||||||||||||||||||
| Stock-based compensation expense |
— |
— |
|
— |
— |
|
||||||||||||||||||
| Repurchase of common stock |
( |
) | ( |
) | — | — |
( |
) | ( |
) | ||||||||||||||
| Cash dividends ($ |
— |
— |
— |
— |
( |
) | ( |
) | ||||||||||||||||
| Net income |
— |
— |
— |
— |
|
|
||||||||||||||||||
| Other comprehensive loss |
— |
— |
— |
( |
) | — |
( |
) | ||||||||||||||||
| Reclassification of unrealized gains on equity securities |
— |
— |
— |
( |
) | |
— |
|||||||||||||||||
| Reclassification of tax effects resulting from the Tax Reform Act |
— |
— |
— |
|
( |
) | — |
|||||||||||||||||
| Cumulative effect of changes in accounting principle related to recognition |
— |
— |
— |
— |
|
|
||||||||||||||||||
| Balance, September 30, 2018 |
|
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
||||||||||||
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s
Annual Report on Form condensed
consolidated financial statements.
Annual Report on Form
10-K
for the year ended December 31, 2018, are an integral part of theconsolidated financial statements.
4
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended |
||||||||
| September 29, 2019 |
September 30, 2018 |
|||||||
| (in thousands) |
||||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | |
$ | |
||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
|
|
||||||
| Amortization |
|
|
||||||
| Stock-based compensation |
|
|
||||||
| Deferred taxes |
( |
) | |
|||||
| Provision for excess and obsolete inventory |
|
|
||||||
| Contingent consideration fair value adjustment |
( |
) | ( |
) | ||||
| Gains on marketable securities |
( |
) | ( |
) | ||||
| Retirement plan s actuarial losses |
|
|
||||||
| Other |
|
|
||||||
| Changes in operating assets and liabilities, net of businesses acquired: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Inventories |
( |
) | ( |
) | ||||
| Prepayments and other assets |
( |
) | ( |
) | ||||
| Accounts payable and other liabilities |
|
|
||||||
| Deferred revenue and customer advances |
|
|
||||||
| Retirement plans contributions |
( |
) | ( |
) | ||||
| Income taxes |
( |
) | ( |
) | ||||
| Net cash provided by operating activities |
|
|
||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
| Proceeds from government subsidy for property, plant and equipment |
— |
|
||||||
| Purchases of marketable securities |
( |
) | ( |
) | ||||
| Proceeds from sales of marketable securities |
|
|
||||||
| Proceeds from maturities of marketable securities |
|
|
||||||
| Proceeds from life insurance |
|
|
||||||
| Purchase of investment and acquisition of businesses, net of cash acquired |
( |
) | ( |
) | ||||
| Net cash (used for) provided by investing activities |
( |
) | |
|||||
| Cash flows from financing activities: |
||||||||
| Issuance of common stock under stock purchase and stock option plans |
|
|
||||||
| Repurchase of common stock |
( |
) | ( |
) | ||||
| Dividend payments |
( |
) | ( |
) | ||||
| Payments related to net settlement of employee stock compensation awards |
( |
) | ( |
) | ||||
| Payments of contingent consideration |
( |
) | ( |
) | ||||
| Net cash used for financing activities |
( |
) | ( |
) | ||||
| Effects of exchange rate changes on cash and cash equivalents |
( |
) | |
|||||
| (Decrease) increase in cash and cash equivalents |
( |
) | |
|||||
| Cash and cash equivalents at beginning of period |
|
|
||||||
| Cash and cash equivalents at end of period |
$ | |
$ | |
||||
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, 2018, are an integral part of the condensedconsolidated 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 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; |
| • | industrial automation (“Industrial Automation”) products; |
| • | defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, storage test (“Storage Test”) systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”); and |
| • | wireless test (“Wireless Test”) systems. |
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, 2018 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
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 1, 2019, for the year ended December 31, 2018.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.
Investment in Other Company
Teradyne holds an investment in a private company that develops and sells advanced wearable technology. Teradyne does not have the ability to exert significant influence over the company. 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 a similar investment of the same issuer on a quarterly basis. See Note D: “Acquisitions and Investment in Other Company.”
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) (“Topic 842”), which requires a lessee to record a that allowed for a cumulative effect adjustment in the period of adoption. Under this method of adoption, the comparative information in the consolidated financial statements has not been revised and continues to be reported under the previously applicable lease accounting guidance (ASC 840). Teradyne also utilized the package of practical expedients permitted under the transition guidance which included the carry-forward of historical lease classification. Adoption of ASC 842 resulted in recording ROU assets and lease liabilities of approximately $50.1 million and $54.3 million, respectively. Operating lease liabilities were calculated using the discount rate on January 1, 2019. The adoption of ASC 842 did not have a material impact on beginning retained earnings, the consolidated statement of operations, cash flows, or earnings per share.
2016-02,
“Leases (Topic 842)”
right-of-use
(“ROU”) asset and a lease liability on the balance sheet for operating leases with terms longer than twelve months. Teradyne adopted this standard and the related amendments (collectively “ASC 842”) on January 1, 2019 and utilized the modified retrospective approach provided by ASU 2018-11,
“Leases (Topic 842): Targeted
Improvements,”
6
Under ASC 842, a contract is or contains a lease when Teradyne has the right to control the use of an identified asset. Teradyne determines if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. The commencement date of the lease is the date that the lessor makes an underlying asset available for use by Teradyne. As of September 29, 2019, Teradyne does not have material leases that have not yet commenced.
Teradyne determines if the lease is operating or finance at the lease commencement date based upon the terms of the lease and the nature of the asset. The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised.
For leases commencing after January 1, 2019, the lease liability is measured at the present value of future lease payments, discounted using the discount rate for the lease at the commencement date. As Teradyne is typically unable to determine the implicit rate, Teradyne uses an incremental borrowing rate based on the lease term and economic environment at commencement date. Teradyne initially measures payments based on an index by using the applicable rate at lease commencement. Variable payments that do not depend on an index are not included in the lease liability and are recognized as they are incurred. The ROU asset is initially measured as the amount of lease liability, adjusted for any initial lease costs, prepaid lease payments, and reduced by any lease incentives.
Teradyne’s contracts often include
non-lease
components such as common area maintenance. Teradyne elected the practical expedient to account for the lease and non-lease
components as a single lease component. For leases with a term of one year or less Teradyne has elected not to record the lease asset or liability. The lease payments are recognized in the consolidated statement of earnings on a straight-line basis over the lease term. Teradyne includes lease costs within cost of revenues and operating expenses. See Note H: “Leases.”C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On January 26, 2017, the FASB issued ASU The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. 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
2017-04,
“Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.”
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. The revised guidance will be applied prospectively, and is effective in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. Teradyne is currently evaluating the impact of this ASU on its financial position, results of operations and statements of cash flows.D. ACQUISITIONS AND INVESTMENT IN OTHER COMPANY
Acquisitions
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, wind, 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 condensed consolidated financial statements.
Mobile Industrial Robots
On April 25, 2018, Teradyne acquired all of the issued and outstanding shares of Mobile Industrial Robots Aps (“MiR”), a Danish limited liability company located in Odense, Denmark. MiR is the leading maker of collaborative autonomous mobile robots for industrial applications. MiR is part of Teradyne’s Industrial Automation segment.
7
The total purchase price of $197.8 million included $145.2 million of cash paid and $52.6 million of contingent consideration measured at fair value. The contingent consideration is payable in Euros upon the achievement of certain thresholds and targets for revenue and earnings before interest and taxes for periods from January 1, 2018 to December 31, 2018; January 1, 2018 to December 31, 2019; and January 1, 2018 to December 31, 2020. The contingent consideration related to revenue for the period from January 1, 2018 to December 31, 2018 in the amount of $30.8 million was paid in March 2019. The remaining maximum contingent consideration that could be paid is $81.0 million.
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 MiR acquisition was accounted for as a business combination and, accordingly, the results have been included in Teradyne’s consolidated results of operations from the date of acquisition. MiR’s products will help expand the Industrial Automation segment, which is a key component of Teradyne’s growth strategy. The allocation of the total purchase price to MiR’s net tangible liabilities 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 liabilities in the amount of $136.0 million was allocated to goodwill, which is not deductible for tax purposes. MiR’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 |
$ | |
||
| Intangible assets |
|
|||
| Tangible assets acquired and liabilities assumed: |
||||
| Current assets |
|
|||
| Non-current assets |
|
|||
| Accounts payable and current liabilities |
( |
) | ||
| Long-term deferred tax liabilities |
( |
) | ||
| Other long-term liabilities |
( |
) | ||
| Total purchase price |
$ | |
||
Teradyne estimated the fair value of intangible assets using the income and cost approaches. 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 |
$ | |
|
|||||
| Trademarks and tradenames |
|
|
||||||
| Customer relationships |
|
|
||||||
| Backlog |
|
|
||||||
| Total intangible assets |
$ | |
|
|||||
8
The following unaudited pro forma information gives effect to the acquisition of MiR 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 Nine Months Ended |
||||
| September 30, 2018 |
||||
| (in thousands) |
||||
| Revenue |
$ | |
||
| Net income |
|
|||
| Net income per common share: |
||||
| Basic |
$ | |
||
| Diluted |
$ | |
||
Pro forma results for the nine months ended September 30, 2018 were adjusted to exclude $2.9 million of acquisition related costs, and $0.4 million of
non-recurring
expense related to fair value adjustment to acquisition-date inventory.Energid Technologies Corporation
On February 26, 2018, Teradyne acquired all of the issued and outstanding shares of Energid Technologies Corporation (“Energid”) for a total purchase price of approximately $27.6 million. Energid’s technology enables and simplifies the programming of complex robotic motions used in a wide variety of end markets, ranging from heavy industry to healthcare, utilizing both traditional robots and collaborative robots. The Energid acquisition was accounted for as a business combination and, accordingly, Energid’s results have been included in Teradyne’s Industrial Automation segment from the date of acquisition. As of the acquisition date, Teradyne’s purchase price allocation was goodwill of $14.4 million which is deductible for tax purposes, acquired intangible assets of $12.3 million with an average estimated useful life of 7.7 years, and $1.0 million of net tangible assets. The acquisition was not material to Teradyne’s condensed consolidated financial statements.
Investment in Other Company
On June 3, 2019, Teradyne invested $15.0 million in RealWear, Inc. (“RealWear”). RealWear, a private company, develops and sells advanced wearable technology including industrial, hands-free, head-mounted augmented reality devices that make the workplace safer and more productive. Teradyne’s investment in RealWear aligns with its strategy of bringing the power of advanced automation to companies of all sizes to improve the productivity of their employees and the quality of their products and services. 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 a similar investment of the same issuer on a quarterly basis. At September 29, 201915.0 million
,
the value of the investment was $, which was unchanged in the three months ended September 30, 2019
.
E. REVENUE
For the three and nine months ended September 29, 2019, revenues recognized in accordance with ASC 606: “were $580.6 million and $1,635.5 million, respectively. For the three and nine months ended September 29, 2019, Teradyne also recognized $1.5 million and $4.9 million, respectively, of revenues from leases of Teradyne systems, which are accounted for outside of ASC 606.
Revenue from Contracts with Customers”
For the three and nine months ended September 30, 2018, revenues recognized in accordance with ASC 606: “were $564.5 million and $1,571.0 million, respectively. For the three and nine months ended September 30, 2018, Teradyne also recognized $2.3 million and $10.2 million, respectively, of revenues from leases of Teradyne systems, which are accounted for outside of ASC 606.
Revenue from Contracts with Customers”
9
Disaggregation of Revenue
The following table provides information about disaggregated revenue by primary geographical market, major product line and timing of revenue recognition.
| For the Three Months Ended September 29, 2019 |
||||||||||||||||||||||||||||||||||||||||||||
| Semiconductor Test |
System Test |
Industrial Automation |
Wireless Test |
Corporate and Other |
Consolidated |
|||||||||||||||||||||||||||||||||||||||
| System a chip (“SOC”) |
Memory |
Defense/ Aerospace |
Storage Test |
Production Board Test |
Universal Robots |
M iR |
Energid |
|||||||||||||||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||||||||||||||||||
| Americas |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | — |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||
| Over time |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Europe, Middle East |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
|
|
|
— |
|
|
|
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Over time |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Asia Pacific |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
|
|
|
|
|
|
|
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Over time |
|
|
|
|
|
|
— |
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Lease Revenue |
|
— |
— |
— |
|
— |
— |
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Total |
$ | |
$ |
|
$ | |
$ | |
$ | |
$ |
|
$ |
|
$ | |
$ |
|
$ | ( |
) | $ | |
|||||||||||||||||||||
| For the Three Months Ended September 30, 2018 |
||||||||||||||||||||||||||||||||||||||||||||
| Semiconductor Test |
System Test |
Industrial Automation |
Wireless Test |
Corporate and Other |
Consolidated |
|||||||||||||||||||||||||||||||||||||||
| SOC |
Memory |
Defense/ Aerospace |
Storage Test |
Production Board Test |
Universal Robots |
M iR |
Energid |
|||||||||||||||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||||||||||||||||||
| Americas |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||
| Over time |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Europe, Middle East |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
|
|
|
— |
|
|
|
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Over time |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Asia Pacific |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
|
|
|
|
|
|
|
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Over time |
|
|
|
|
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Lease Revenue |
|
— |
— |
— |
|
— |
— |
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Total |
$ | |
$ |
|
$ | |
$ | |
$ | |
$ |
|
$ |
|
$ | |
$ |
|
$ | ( |
) | $ | |
|||||||||||||||||||||
| For the Nine Months Ended September 29, 2019 |
||||||||||||||||||||||||||||||||||||||||||||
| Semiconductor Test |
System Test |
Industrial Automation |
Wireless Test |
Corporate and Other |
Consolidated |
|||||||||||||||||||||||||||||||||||||||
| SOC |
Memory |
Defense/ Aerospace |
Storage Test |
Production Board Test |
Universal Robots |
M iR |
Energid |
|||||||||||||||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||||||||||||||||||
| Americas |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | — |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||
| Over time |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Europe, Middle East |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
|
|
|
— |
|
|
|
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Over time |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Asia Pacific |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
|
|
|
|
|
|
|
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Over time |
|
|
|
|
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Lease Revenue |
|
— |
— |
— |
|
— |
— |
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Total |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||
10
| For the Nine Months Ended September 30, 2018 |
||||||||||||||||||||||||||||||||||||||||||||
| Semiconductor Test |
System Test |
Industrial Automation |
Wireless Test |
Corporate and Other |
Consolidated |
|||||||||||||||||||||||||||||||||||||||
| SOC |
Memory |
Defense/ Aerospace |
Storage Test |
Production Board Test |
Universal Robots |
M iR |
Energid |
|||||||||||||||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||||||||||||||||||
| Americas |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||
| Over time |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Europe, Middle East |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
|
|
|
— |
|
|
|
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Over time |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Asia Pacific |
||||||||||||||||||||||||||||||||||||||||||||
| Point in time |
|
|
|
|
|
|
|
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Over time |
|
|
|
|
|
|
— |
|
|
— |
|
|||||||||||||||||||||||||||||||||
| Lease Revenue |
|
— |
— |
— |
|
— |
— |
— |
|
— |
|
|||||||||||||||||||||||||||||||||
| Total |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||
Contract Balances
During the three and nine months ended September 29, 2019, Teradyne recognized $14.2 million and $47.6 million, respectively, that was previously included within the deferred revenue and customer advances balances. During the three and nine months ended September 30, 2018, Teradyne recognized $24.5 million and $70.9 million, respectively, that was previously included within the deferred revenue and customer advances balances. This revenue primarily relates to 69 % of the remaining performance obligation in the next 12 months, 26 % in 1 -3 years, and the remainder thereafter.
undelivered hardware
extended warranties, training, application support, and post contract support. Each of these represents a distinct performance obligation. Teradyne expects to recognize ,
Accounts Receivable
Teradyne sells certain trade accounts receivables on a 113.4 million and $10.6 million for the nine months ended September 29, 2019 and September 30, 2018, respectively. Factoring fees for the sales of receivables
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 in
operating activities in the consolidated statements of cash flows. Total trade accounts receivable sold under the factoring agreements were $are
recorded in interest expense and a
re not material.F. INVENTORIES
Inventories, net consisted of the following at September 29, 2019 and December 31, 2018:
| September 29, 2019 |
December 31, 2018 |
|||||||
| (in thousands) |
||||||||
| Raw material |
$ | |
$ | |
||||
| Work-in-process |
|
|
||||||
| Finished goods |
|
|
||||||
| $ | |
$ | |
|||||
Inventory reserves at September 29, 2019 and December 31, 2018 were $101.2 million and $100.8 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.
11
Marketable Securities
Teradyne’s
available-for-sale
debt securities are classified as Level 2 and equity securities 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 September 29, 2019 and September 30, 2018, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.
Realized gains recorded in the three and nine months ended September 29, 2019 were $0.5 million and $0.7 million, respectively. Realized losses recorded in the nine months ended September 29, 2019 were $0.2 million. Realized gains recorded in the three and nine months ended September 30, 2018 were $0.2 million and $0.6 million, respectively. Realized losses recorded in the nine months ended September 30, 2018 were $1.6 million. Realized gains are included in interest income and realized losses are included in interest expense.
Unrealized gains on equity securities recorded in the three and nine months ended September 29, 2019 were $0.1 million and $3.8 million, respectively. Unrealized losses on equity securities recorded in the three and nine months ended September 29, 2019 were $0.2 1.0 million and $1.4 million, respectively. Unrealized gains on equity securities are included in interest income and unrealized losses are included in interest expense.
Unrealized gains and losses on available-for-sale
debt securities are included in accumulated other comprehensive income (loss) on the balance sheet.The cost of securities sold is based on the specific identification method.
12
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 September 29, 2019 and December 31, 2018.
| September 29, 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 |
$ | |
$ | — |
$ | — |
$ | |
||||||||
| Cash equivalents |
|
|
— |
|
||||||||||||
| Available-for-sale securities: |
||||||||||||||||
| U.S. Treasury securities |
— |
|
— |
|
||||||||||||
| Commercial paper |
— |
|
— |
|
||||||||||||
| Corporate debt securities |
— |
|
— |
|
||||||||||||
| Certificates of deposit and time deposits |
— |
|
— |
|
||||||||||||
| U.S. government agency securities |
— |
|
— |
|
||||||||||||
| Debt mutual funds |
|
— |
— |
|
||||||||||||
| Non-U.S. government securities |
— |
|
— |
|
||||||||||||
| Equity securities: |
||||||||||||||||
| Mutual funds |
|
— |
— |
|
||||||||||||
| $ | |
$ | |
$ | — |
$ | |
|||||||||
| Derivative assets |
— |
|
— |
|
||||||||||||
| Total |
$ | |
$ | |
$ | — |
$ | |
||||||||
| Liabilities |
||||||||||||||||
| Contingent consideration |
$ | — |
$ | — |
$ | |
$ | |
||||||||
| Derivative liabilities |
— |
|
— |
|
||||||||||||
| Total |
$ | — |
$ | |
$ | |
$ | |
||||||||
Reported as follows:
| (Level 1) |
(Level 2) |
(Level 3) |
Total |
|||||||||||||
| (in thousands) |
||||||||||||||||
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
$ | |
$ |
|
$ | — |
$ | |
||||||||
| Marketable securities |
— |
|
— |
|
||||||||||||
| Long-term marketable securities |
|
|
— |
|
||||||||||||
| Prepayments |
— |
|
— |
|
||||||||||||
| Total |
$ |
|
$ | |
$ |
— |
$ | |
||||||||
| Liabilities |
|
|||||||||||||||
| Other current liabilities |
$ | — |
$ | |
$ | — |
$ | |
||||||||
| Contingent consideration |
— |
— |
|
|
||||||||||||
| Long-term contingent consideration |
— |
— |
|
|
||||||||||||
| Total |
$ | — |
$ | |
$ | |
$ | |
||||||||
13
| December 31, 2018 |
||||||||||||||||
| Quoted in Active Markets for Identical Instruments (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total |
|||||||||||||
| (in thousands) |
||||||||||||||||
| Assets |
||||||||||||||||
| Cash |
$ | |
$ | — |
$ | — |
$ | |
||||||||
| Cash equivalents |
|
|
— |
|
||||||||||||
| Available-for-sale securities: |
||||||||||||||||
| U.S. Treasury securities |
— |
|
— |
|
||||||||||||
| Commercial paper |
— |
|
— |
|
||||||||||||
| Corporate debt securities |
— |
|
— |
|
||||||||||||
| U.S. government agency securities |
— |
|
— |
|
||||||||||||
| Certificates of deposit and time deposits |
— |
|
— |
|
||||||||||||
| Debt mutual funds |
|
— |
— |
|
||||||||||||
| Non-U.S. government securities |
— |
|
— |
|
||||||||||||
| Equity securities: |
— |
|||||||||||||||
| Mutual funds |
|
— |
— |
|
||||||||||||
| $ | |
$ | |
$ | — |
$ | |
|||||||||
| Derivative assets |
— |
|
— |
|
||||||||||||
| Total |
$ | |
$ | |
$ | — |
$ | |
||||||||
| Liabilities |
||||||||||||||||
| Contingent consideration |
$ | — |
$ | — |
$ | |
$ | |
||||||||
| Derivative liabilities |
— |
|
— |
|
||||||||||||
| Total |
$ | — |
$ | |
$ | |
$ | |
||||||||
Reported as follows:
| |
|
) |
Total |
|||||||||||||
| (in thousands) |
||||||||||||||||
| Assets |
||||||||||||||||
| Cash and cash equivalents |
$ |
|
$ |
|
$ | — |
$ | |
||||||||
| Marketable securities |
— |
|
— |
|
||||||||||||
| Long-term marketable securities |
|
|
— |
|
||||||||||||
| Prepayments |
— |
|
— |
|
||||||||||||
| Total |
$ | |
$ | |
$ | — |
$ | |
||||||||
| Liabilities |
||||||||||||||||
| Other accrued liabilities |
$ | — |
$ | |
$ | — |
$ | |
||||||||
| Contingent consideration |
— |
— |
|
|
||||||||||||
| Long-term contingent consideration |
— |
— |
|
|
||||||||||||
| Total |
$ | — |
$ | |
$ |
|
$ | |
||||||||
14
Changes in the fair value of Level 3 contingent consideration for the three and nine months ended September 29, 2019 and September 30, 2018 were as follows:
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
|||||||||||||
| (in thousands) |
||||||||||||||||
| Balance at beginning of period |
$ | |
$ | |
$ | |
$ | |
||||||||
| Fair value adjustment (a) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Foreign currency impact |
( |
) | |
( |
) | ( |
) | |||||||||
| Payments (b) |
— |
— |
( |
) | ( |
) | ||||||||||
| Acquisition of MiR |
— |
— |
— |
|
||||||||||||
| Balance at end of period |
$ | |
$ | |
$ | |
$ | |
||||||||
| (a) | In the three and nine months ended September 29, 2019, the fair value of contingent consideration for the earn-out in connection with the acquisition of MiR was decreased by $, partially offset by impact from the modification, in the three months ended September 29, 2019, of the earn-out structure . In the three and nine months ended September 30, 2018, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots A/S (“Universal Robots”) was decreased by $ |
| (b) | In the nine months ended September 29, 2019, Teradyne paid $ earn-out in connection with the acquisition of Universal Robots. |
The following table provides quantitative information associated with the fair value measurement of Teradyne’s Level 3 financial instruments:
| Liability |
September 29, 2019 Fair Value |
Valuation Technique |
|
Unobservable Inputs |
Weighted Average |
|||||||
| (in thousands) |
||||||||||||
| Contingent consideration (MiR) |
$ | |
Monte Carl o s imulation |
Revenue volatility |
|
% | ||||||
| Discount r ate |
|
% | ||||||||||
As of September 29, 2019, the significant unobservable inputs used in the Monte Carlo simulation to fair value the 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 September 29, 2019, the maximum amount of contingent consideration that could be paid in connection with the acquisition of MiR is $81.0 million. The remaining
earn-out
periods end on December 31, 2019 and December 31, 2020.The carrying amounts and fair values of Teradyne’s financial instruments at September 29, 2019 and December 31, 2018 were as follows:
| September 29, 2019 |
December 31, 2018 |
|||||||||||||||
| Carrying Value |
Fair Value |
Carrying Value |
Fair Value |
|||||||||||||
| (in thousands) |
||||||||||||||||
| Assets |
||||||||||||||||
| Cash and cash equivalents |
$ | |
$ | |
$ | |
$ | |
||||||||
| Marketable securities |
|
|
|
|
||||||||||||
| Derivative assets |
|
|
|
|
||||||||||||
| Liabilities |
||||||||||||||||
| Contingent consideration |
|
|
|
|
||||||||||||
| Derivative liabilities |
|
|
|
|
||||||||||||
| Convertible debt (1) |
|
|
|
|
||||||||||||
| (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. |
15
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 September 29, 2019:| September 29, 2019 |
||||||||||||||||||||
| 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 |
$ | |
$ | |
$ | ( |
) | $ | |
$ | |
|||||||||
| Commercial paper |
|
|
( |
) | |
|
||||||||||||||
| Corporate debt securities |
|
|
( |
) | |
|
||||||||||||||
| Certificates of deposit and time deposits |
|
|
— |
|
— |
|||||||||||||||
| U.S. government agency securities |
|
|
( |
) | |
|
||||||||||||||
| Debt mutual funds |
|
|
— |
|
— |
|||||||||||||||
| Non-U.S. government securities |
|
— |
— |
|
— |
|||||||||||||||
| $ | |
$ | |
$ | ( |
) | $ | |
$ | |
||||||||||
Reported as follows:
| Cost |
Unrealized Gain |
Unrealized (Loss) |
Fair Market Value |
Fair Market Value of Investments with Unrealized Losses |
||||||||||||||||
| (in thousands) |
||||||||||||||||||||
| Marketable securities |
$ | |
$ | |
$ | ( |
) | $ | |
$ | |
|||||||||
| Long-term marketable securities |
|
|
( |
) | |
|
||||||||||||||
| $ | |
$ | |
$ | ( |
) | $ | |
$ | |
||||||||||
The following table summarizes the composition of
available-for-sale
marketable securities at December 31, 2018:| December 31, 2018 |
||||||||||||||||||||
| 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 |
$ | |
$ | |
$ | ( |
) | $ | |
$ | |
|||||||||
| Commercial paper |
|
|
( |
) | |
|
||||||||||||||
| Corporate debt securities |
|
|
( |
) | |
|
||||||||||||||
| U.S. government agency securities |
|
|
( |
) | |
|
||||||||||||||
| Certificates of deposit and time deposits |
|
— |
— |
|
— |
|||||||||||||||
| Debt mutual funds |
|
|
— |
|
— |
|||||||||||||||
| Non-U.S. government securities |
|
— |
— |
|
— |
|||||||||||||||
| $ | |
$ | |
$ | ( |
) | $ | |
$ | |
||||||||||
16
Reported as follows:
| Cost |
Unrealized Gain |
Unrealized (Loss) |
Fair Market Value |
Fair Market Value of Investments with Unrealized Losses |
||||||||||||||||
| (in thousands) |
||||||||||||||||||||
| Marketable securities |
$ | |
$ | |
$ | ( |
) | $ | |
$ | |
|||||||||
| Long-term marketable securities |
|
|
( |
) | |
|
||||||||||||||
| $ | |
$ | |
$ | ( |
) | $ | |
$ | |
||||||||||
As of September 29, 2019, the fair market value of investments in 4.9 million had unrealized losses of $0.1 million for greater than one year and $55.8 million had unrealized losses of $0.1 million for less than one year.
available-for-sale
securities with unrealized losses totaled $60.7 million. Of this value, $As of December 31, 2018, the fair market value of investments with unrealized losses totaled $192.0 million. Of this value, $28.5 million had unrealized losses of $1.6 million greater than one year and $163.5 million had unrealized losses of $1.4 million for less than one year.
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 September 29, 2019 and December 31, 2018 were temporary.
The contractual maturities of investments in
available-for-sale
securities held at September 29, 2019 were as follows:| September 29, 2019 |
||||||||
| Cost |
Fair Market Value |
|||||||
| (in thousands) |
||||||||
| Due within one year |
$ | |
$ | |
||||
| Due after 1 year through 5 years |
|
|
||||||
| Due after 5 years through 10 years |
|
|
||||||
| Due after 10 years |
|
|
||||||
| Total |
$ | |
$ | |
||||
Contractual maturities of investments in 4.0 million of debt mutual funds as they do not have a contractual maturity date.
available-for-sale
securities held at September 29, 2019 exclude $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 September 29, 2019 and December 31, 2018 was $114.9 million and $163.1 million, respectively.
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.
17
The following table summarizes the fair value of derivative instruments as of September 29, 2019 and December 31, 2018:
| Balance Sheet Location |
September 29, 2019 |
December 31, 2018 |
||||||||||
| (in thousands) |
||||||||||||
| Derivatives not designated as hedging instruments: |
||||||||||||
| Foreign exchange contracts - derivative assets |
Prepayments |
$ | |
$ | |
|||||||
| Foreign exchange contracts - derivative liabilities |
Other current liabilities |
( |
) | ( |
) | |||||||
| Total derivatives |
$ | ( |
) | $ | ( |
) | ||||||
The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three and nine months ended September 29, 2019 and September 30, 2018.
| Location of Losses (Gains) Recognized in Statement of Operations |
|
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
|||||||||||||||
| (in thousands) |
||||||||||||||||||
| Derivatives not designated as hedging instruments: |
||||||||||||||||||
| Foreign exchange contracts |
Other (income) expense, net |
$ | |
$ | ( |
) | $ | |
$ | |
||||||||
| (1) | The table does not reflect the corresponding gains and losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies. |
| (2) | For the three months ended September 29, 2019, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $ |
| (3) | For the three and nine months ended September 30, 2018, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $ |
See Note I: “Debt” regarding derivatives related to the convertible senior notes.
H. LEASES
On January 1, 2019, Teradyne adopted ASC 842 using the modified retrospective approach. Under this method of adoption, the comparative information in the consolidated financial statements has not been revised and continues to be reported under the previously applicable lease accounting guidance (ASC 840). Adoption of ASC 842 resulted in recording ROU assets and lease liabilities of approximately $50.1 million and $54.3 million, respectively. The adoption of ASC 842 did not have a material impact on beginning retained earnings, the consolidated statement of operations, cash flows, or earnings per share.
Teradyne has facility and auto leases, which are accounted for as operating leases. Teradyne’s facility leases are primarily used for administrative functions, research and development, manufacturing, and storage and distribution. Remaining lease terms range from less than one year to ten years.
Total lease expense for the three months ended September 29, 2019 was $9.1 million and included $3.0 million of variable lease costs and $0.7 million of costs related to short-term leases which are not recorded on the consolidated balance sheets. Total lease expense for the nine months ended September 29, 2019 was $26.6 million and included $8.3 million of variable lease costs and $2.2 million of costs related to short-term leases which are not recorded on the consolidated balance sheets.
At September 29, 2019, the weighted average remaining lease term and weighted average discount rate for operating leases was 4.7 years and 5.0 %, respectively.
Supplemental cash flow information related to leases was as follows:
| For the Three Months Ended |
For the Nine Months Ended |
|||||||
| September 29, 2019 |
September 29, 2019 |
|||||||
| (in thousands) |
||||||||
| Cash paid for amounts included in the measurement of lease liabilities included in operating cash flows: |
$ | |
$ | |
||||
| Right-of-use assets obtained in exchange for new lease obligations |
|
|
||||||
18
Maturities of lease liabilities as of September 29, 2019 were as follows:
| Operating Lease |
||||
| (in thousands) |
||||
| 2019 |
$ | |
||
| 2020 |
|
|||
| 2021 |
|
|||
| 2022 |
|
|||
| 2023 |
|
|||
| Thereafter |
|
|||
| Total lease payments |
|
|||
| Less imputed interest |
( |
) | ||
| Total lease liabilities |
$ | |
||
As of December 31, 2018, future
non-cancelable
rent obligations as determined under ASC 840 were as follows:| Operating Lease |
||||
| (in thousands) |
||||
| 2019 |
$ | |
||
| 2020 |
|
|||
| 2021 |
|
|||
| 2022 |
|
|||
| 2023 |
|
|||
| Thereafter |
|
|||
| Total lease payments |
$ | |
||
I. 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% per year payable semiannually in arrears on June 15 and December 15 of each year , beginning on June 15, 2017 . 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 only during such calendar quarter), if the closing sale price of Teradyne’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $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 conversion obligation by paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s election. As of September 29, 2019, the conversion price was approximately $31.70 per share of Teradyne’s common stock. The conversion rate is subject to adjustment under certain circumstances.
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 $31.70 . The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, approximately 14.5 million shares of Teradyne’s common stock.
19
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 39.78 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.
net-share-settled
(or, at its election subject to certain conditions, cash-settled) warrants to the Option Counterparties. The Warrant Transactions cover, subject to customary anti-dilution adjustments, approximately 14.5 million shares of common stock. As of September 29, 2019, the strike price of the warrants was approximately $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 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 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
815-40,
“Derivatives and Hedging—Contracts in Entity’s Own Equity,”
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 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
815-40,
“Derivatives and Hedging—Contracts in Entity’s Own Equity,”
paid-in
capital. Teradyne does not recognize subsequent changes in fair value of the warrants in its financial statements.The provisions of ASC ” are applicable to the Notes. ASC 100.8 million of the $460.0 million principal amount of the Notes to the equity component, which represents a discount to the debt and will be amortized to interest expense using the effective interest method through December 2023. Accordingly, Teradyne’s effective annual interest rate on the Notes will be approximately 5.0%. The Notes are classified as long-term debt in the balance sheet based on their December 15, 2023 maturity date. Debt issuance costs of approximately $7.2 million are being amortized to interest expense using the effective interest method over the seven-year term of the Notes. As of September 29, 2019, debt issuance costs were approximately $4.6 million.
470-20,
“Debt with Conversion and Other Options,
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 $20
The below tables represent the key components of Teradyne’s convertible senior notes:
| September 29, 2019 |
December 31, 2018 |
|||||||
| (in thousands) |
||||||||
| Debt Principal |
$ | |
$ | |
||||
| Unamortized discount |
|
|
||||||
| Net Carrying amount of convertible debt |
$ | |
$ | |
||||
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
|||||||||||||
| (in thousands) |
||||||||||||||||
| Contractual interest expense on the coupon |
$ | |
$ | |
$ | |
$ | |
||||||||
| Amortization of the discount component recognized as interest expense |
|
|
|
|
||||||||||||
| Total interest expense on the convertible debt |
$ | |
$ | |
$ | |
$ | |
||||||||
As of September 29, 2019, the remaining unamortized discount was $69.1 million, which will be amortized over 4.3 years using the effective interest rate method. The carrying amount of the equity component was $100.8 million. As of September 29, 2019, the 832.9 million.
if-converted
value of the Notes was $Revolving Credit Facility
On June 27, 2019, Teradyne terminated its credit agreement, which Teradyne entered into with Barclays Bank PLC, on April 27, 2015. The terminated credit agreement provided for a five-year, senior secured revolving credit facility of up to $350 million.
J. PREPAYMENTS
Prepayments consist of the following and are included in prepayments and other assets on the balance sheet:
| September 29, 2019 |
December 31, 2018 |
|||||||
| (in thousands) |
||||||||
| Contract manufacturer and supplier prepayments |
$ | |
$ | |
||||
| Prepaid taxes |
|
|
||||||
| Prepaid maintenance and other services |
|
|
||||||
| Other prepayments |
|
|
||||||
| Total prepayments |
$ | |
$ | |
||||
K. DEFERRED REVENUE AND CUSTOMER ADVANCES
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:
| September 29, 2019 |
December 31, 2018 |
|||||||
| (in thousands) |
||||||||
| Maintenance and training |
$ | |
$ | |
||||
| Extended warranty |
|
|
||||||
| Customer advances, undelivered performance obligations and other |
|
|
||||||
| Total deferred revenue and customer advances |
$ | |
$ | |
||||
21
L. PRODUCT WARRANTY
Teradyne generally provides a The warranty balance below is included in other accrued liabilities on the balance sheet.
one-year
warranty on its products, commencing upon installation, acceptance, delivery 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. For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
September 29, |
September 30, |
September 29, |
September 30, |
|||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
(in thousands) |
||||||||||||||||
Balance at beginning of period |
$ |
$ |
$ |
$ |
||||||||||||
Acquisition |
— |
— |
||||||||||||||
Accruals for warranties issued during the period |
||||||||||||||||
Accruals related to pre-existing warranties |
||||||||||||||||
Settlements made during the period |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
Balance at end of period |
$ |
$ |
$ |
$ |
||||||||||||
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 on the balance sheet.
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
|||||||||||||
(in thousands) |
||||||||||||||||
Balance at beginning of period |
$ | $ | $ | $ | ||||||||||||
Deferral of new extended warranty revenue |
||||||||||||||||
Recognition of extended warranty deferred revenue |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Balance at end of period |
$ | $ | $ | $ | ||||||||||||
M. STOCK-BASED COMPENSATION
On
Beecher. Under the Retirement Agreement, Mr.
Beecher’s
During the three and nine months ended September 29, 2019, Teradyne recorded a stock based compensation expense of $2.1
.
Under Teradyne’s stock compensation plans, Teradyne grants stock options, restricted stock units and performance-based restricted stock units, and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).
Time-based restricted stock unit awards granted to employees vest in equal annual installments over four years . Restricted stock unit awards granted to one-year period, with 100 % of the award vesting on the earlier of (a) the first anniversary of the grant date or (b) the date of the following year’s Annual Meeting of Shareholders. Teradyne expenses the cost of the restricted stock unit awards subject to time-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.
non-employee
directors vest after a Performance-based restricted stock units (“PRSUs”) granted to Teradyne’s executive officers have a performance metric based on relative total shareholder return (“TSR”). Teradyne’s 200 % to 0 % of the target shares capped at four times the grant date value. 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.
-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 22
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 employees meeting the retirement provisions prior to the grant date will be recognized in full on the date of 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.
During the nine months ended September 29, 2019 and September 30, 2018, Teradyne granted PRSUs to its executive officers with 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; 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
% to
% 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
service period or the period from the grant date to the date described in the retirement provisions below. Compensation expense for employees meeting the retirement provisions prior to the grant date will be recognized in full on the date of 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.
If 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 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.
During the nine months ended September 29, 2019 and September 30, 2018, Teradyne granted 0.1 million and 0.1 million TSR PRSUs, respectively, with a grant date fair value of $51.51 and $54.85 , respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:
For the Nine Months Ended |
||||||||
September 29, 2019 |
September 30, 2018 |
|||||||
Risk-free interest rate |
% | % | ||||||
Teradyne volatility-historical |
% | % | ||||||
NYSE Composite Index volatility-historical |
% | % | ||||||
Dividend yield |
% | % | ||||||
Expected volatility was based on the historical volatility of Teradyne’s stock and the NYSE Composite Index for each of the 2019 and 2018 grants 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 each of the grants. Dividend yield was based upon an estimated annual dividend amount of $0.36 37.95 for 47.70 for the 2018 grant
the
2019 grants and $s
. During the nine months ended September 29, 2019 and September 30, 2018, Teradyne granted 0.1 million and 0.1 million, respectively, of PBIT PRSUs with a grant date fair value of $36.88 and $46.62 , respectively.
During the nine months ended September 29, 2019, Teradyne granted 0.7 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $36.85 , 0.1 million of service-based restricted stock unit awards to 48.03 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $10.61 .
non-employee
directors at a weighted average grant date fair value of $,
and During the nine months ended September 30, 2018, Teradyne granted 0.6 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $46.25 , 0.1 million of service-based restricted stock unit awards to 35.81 , and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $12.17 .
non-employee
directors at a weighted average grant date fair value of $Restricted stock unit awards granted to employees vest in equal annual installments over four years. 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 .
23
The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:
For the Nine Months Ended |
||||||||
September 29, 2019 |
September 30, 2018 |
|||||||
Expected life (years) |
||||||||
Risk-free interest rate |
% | % | ||||||
Volatility-historical |
% | % | ||||||
Dividend yield |
% | % | ||||||
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 $0.36 37.95 for 47.70 for the 2018 grant
the
2019 grants and $s
. N. 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 September 29, 2019 |
||||||||||||||||
Balance at December 31, 2018, net of tax of $ |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
Other comprehensive loss before reclassifications, net of tax of $ |
( |
) | ( |
) | ||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax of $ 125 ), $( |
( |
) | ( |
) | ( |
) | ||||||||||
Net current period other comprehensive income (loss), net of tax of $ |
( |
) | ( |
) | ( |
) | ||||||||||
Balance at September 29, 2019, net of tax of $ |
$ | ( |
) | $ | $ | $ | ( |
) | ||||||||
Foreign Currency Translation Adjustments |
Unrealized Gains (Losses) on Marketable Securities |
Retirement Plans Prior Service Credit |
Total |
|||||||||||||
(in thousands) |
||||||||||||||||
Nine Months Ended September 30, 2018 |
||||||||||||||||
Balance at December 31, 2017, net of tax of $ |
$ | $ | $ | $ | ||||||||||||
Other comprehensive income (loss) before reclassifications, net of tax of $ |
( |
) | ( |
) | — |
( |
) | |||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax of $ |
— |
( |
) | 1,227 |
||||||||||||
Net current period other comprehensive income (loss), net of tax of $ |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Reclassification of income tax effects from the Tax Reform Act, net of tax of $ |
— |
|||||||||||||||
Reclassification of unrealized gains on equity securities, net of tax of $ |
— |
( |
) | — |
( |
) | ||||||||||
Balance a t September 30, 2018, net of tax of $ |
$ | $ | ( |
) | $ | $ | ||||||||||
24
Reclassifications out of accumulated other comprehensive income (loss) to the statement of operations for the three and nine months ended September 29
,
2019 and September
30,
2018 were as follows:
For the Three Months Ended |
For the Nine Months Ended |
Affected Line Item in the Statements of Operations |
|||||||||||||||||
September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
||||||||||||||||
Details about Accumulated Other Comprehensive Income |
(in thousands) |
||||||||||||||||||
Available-for-sale marketable securities: |
|||||||||||||||||||
Unrealized gains (losses), net of tax of $ |
$ | $ | $ | $ | ( |
) | Interest income (expense) |
||||||||||||
Defined benefit pension and postretirement plans: |
|||||||||||||||||||
Amortization of prior service benefit, net of tax of $ |
(a) |
||||||||||||||||||
Total reclassifications, net of tax of $ |
$ | $ | $ | $ | (1,227 |
) | Net income |
||||||||||||
| (a) | The amortization of prior service benefit is included in the computation of net periodic pension cost and postretirement benefit. See Note R: “Retirement Plans.” |
O. GOODWILL AND ACQUIRED INTANGIBLE ASSETS
Goodwill
Teradyne performs its annual goodwill impairment test as required under the provisions of ASC on December 31 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered impaired when the net book value of a reporting unit exceeds its estimated fair value.
350-10,
“Intangibles—Goodwill and Other”
The changes in the carrying amount of goodwill by reportable segments for the nine months ended September 29, 2019 were as follows:
Industrial Automation |
System Test |
Wireless Test |
Semiconductor Test |
Total |
||||||||||||||||
(in thousands) |
||||||||||||||||||||
Balance at December 31, 2018 |
||||||||||||||||||||
Goodwill |
$ | $ | $ | $ | $ | |||||||||||||||
Accumulated impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
— |
||||||||||||||||||||
Lemsys acquisition |
— |
— |
— |
|||||||||||||||||
Foreign currency translation adjustment |
( |
) | — |
— |
( |
) | ||||||||||||||
Balance at September 29, 2019 |
||||||||||||||||||||
Goodwill |
||||||||||||||||||||
Accumulated impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
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.
25
Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheet:
September 29, 2019 |
||||||||||||||||
Gross Carrying Amount (1) (2) |
Accumulated Amortization (2) |
Foreign Currency Translation Adjustment |
Net Carrying Amount |
|||||||||||||
(in thousands) |
||||||||||||||||
Developed technology |
$ | $ | ( |
) | $ | ( |
) | $ |
||||||||
Customer relationships |
( |
) | ( |
) | ||||||||||||
Tradenames and trademarks |
( |
) | ( |
) | ||||||||||||
Total intangible assets |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||
December 31, 2018 |
||||||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Foreign Currency Translation Adjustment |
Net Carrying Amount |
|||||||||||||
(in thousands) |
||||||||||||||||
Developed technology |
$ |
$ |
( |
) | $ | ( |
) | $ | ||||||||
Customer relationships |
( |
) | ( |
) | ||||||||||||
Tradenames and trademarks |
( |
) | ( |
) | ||||||||||||
Non-compete agreement |
( |
) | — |
— |
||||||||||||
Backlog |
( |
) | — |
— |
||||||||||||
Total intangible assets |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||
| (1) | $ have been added in January 2019 . |
| (2) | $ removed from the gross carrying amount and accumulated amortization. |
Aggregate intangible asset amortization expense was $9.6 million and $30.4 million, respectively, for the three and nine months ended September 29, 2019 and $11.1 million and $28.6 million, respectively, for the three and nine months ended September 30, 2018.
Estimated intangible asset amortization expense for each of the five succeeding fiscal years is as follows:
Amortization Expense |
||||
Year |
(in thousands) |
|||
2019 (remainder) |
||||
2020 |
||||
2021 |
||||
2022 |
||||
2023 |
||||
Thereafter |
||||
26
P. 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 |
For the Nine Months Ended |
|||||||||||||||
September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
|||||||||||||
(in thousands, except per share amounts) |
||||||||||||||||
Net income for basic and diluted net income per share |
$ | $ | $ | $ | ||||||||||||
Weighted average common shares-basic |
||||||||||||||||
Effect of dilutive potential common shares: |
||||||||||||||||
Incremental shares from assumed conversion of convertible notes (1) |
||||||||||||||||
Convertible note hedge warrant shares (2) |
||||||||||||||||
Restricted stock units |
||||||||||||||||
Stock options |
||||||||||||||||
Employee stock purchase plan |
||||||||||||||||
Dilutive potential common shares |
||||||||||||||||
Weighted average common shares-diluted |
||||||||||||||||
Net income per common share-basic |
$ | $ | $ | $ | ||||||||||||
Net income per common share-diluted |
$ | $ | $ | $ | ||||||||||||
| (1) | 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 $ |
| (2) | Convertible note hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of $ |
The computation of diluted net income per common share for the three and nine months ended September 29, 2019 excludes the effect of the potential vesting of 0.1
,
because the effect would have been anti-dilutive. The computation of diluted net income per share for the nine months ended September 29, 2019 excludes the effect of the potential vesting of 0.2 million 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 30, 2018 excludes the effect of the potential vesting of 0.5
Q. RESTRUCTURING AND OTHER
During the three months ended September 29, 2019, Teradyne recorded a $7.8 million 0.5 million recorded for
gain
for the decrease in the fair value of the MiR contingent consideration liability, partially offset by $employee
severance charges primarily in
Industrial Automation,
$0.5 million f
or
acquisition related compensation and expenses, and $0.3 million of fixed assets impairment in Wireless Test
.
During the three months ended September 30, 2018, Teradyne recorded $1.7 million for employee severance charges, primarily in Semiconductor Test and $0.8 million 0.8 million gain for the decrease in the fair value of the Universal Robots contingent consideration liability.
f
o
r
acquisition related compensation, partially offset by a $During the nine months ended September 29, 2019, Teradyne recorded a $16.5 million gain for the decrease in the fair value of the MiR contingent consideration liability, partially offset by $2.1 million recorded for employee severance charges primarily in Semiconductor Test and Industrial Automation, $2.3 million for acquisition related expenses and compensation, and $0.3 million of fixed assets impairment in Wireless Test.
During the nine months ended September 30, 2018, Teradyne recorded $7.9 million for employee severance charges, primarily in Semiconductor Test, and $4.1 million for acquisition related compensation
and expenses
, partially offset by a $9.2 million gain for the decrease in the fair value of the Universal Robots contingent consideration liability.
2
7
R. RETIREMENT PLANS
ASC 715, requires an employer with a defined benefit plan or other postretirement benefit plan to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plan. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation.
“Compensation—Retirement Benefits
,
”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”).In the nine months ended September 29, 2019, Teradyne contributed $2.1 million to the U.S. supplemental executive defined benefit pension plan and $0.6 million to certain qualified pension plans for
non-U.S.
subsidiaries.For the three and nine months ended September 29, 2019 and September 30, 2018, Teradyne’s net periodic pension cost was comprised of the following:
| |
For the Three Months Ended |
|||||||||||||||
| |
September |
September 30, 2018 |
||||||||||||||
| |
United States |
Foreign |
United States |
Foreign |
||||||||||||
| |
(in thousands) |
|||||||||||||||
| Service cost |
$ | |
$ | |
$ | |
$ | |
||||||||
| Interest cost |
|
|
|
|
||||||||||||
| Expected return on plan assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of prior service cost |
— |
— |
|
— |
||||||||||||
| Settlement loss |
— |
— |
|
— |
||||||||||||
| Total net periodic pension cost |
$ | |
$ | |
$ | |
$ | |
||||||||
| For the Nine Months Ended |
||||||||||||||||
| September 29, 2019 |
September 30, 2018 |
|||||||||||||||
| United States |
Foreign |
United States |
Foreign |
|||||||||||||
| (in thousands) |
||||||||||||||||
| Service cost |
$ | |
$ | |
$ | |
$ | |
||||||||
| Interest cost |
|
|
|
|
||||||||||||
| Expected return on plan assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of prior service cost |
— |
— |
|
— |
||||||||||||
| Net actuarial loss (gain) |
|
— |
( |
) | — |
|||||||||||
| Settlement loss |
— |
— |
|
— |
||||||||||||
| Total net periodic pension cost |
$ | |
$ | |
$ | |
$ | |
||||||||
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.
28
For the three and nine months ended September 29, 2019 and September 30, 2018, Teradyne’s net periodic postretirement benefit cost was comprised of the following:
| For the Three Months |
For the Nine Months Ended |
|||||||||||||||
| September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
|||||||||||||
| (in thousands) |
||||||||||||||||
| Service cost |
$ | |
$ | |
$ | |
$ | |
||||||||
| Interest cost |
|
|
|
|
||||||||||||
| Amortization of prior service credit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net actuarial loss |
— |
— |
|
|
||||||||||||
| Special termination benefits |
— |
|
— |
|
||||||||||||
| Total net periodic postretirement benefit cost |
$ | |
$ | |
$ | |
$ | |
||||||||
S. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
As of September 29, 2019, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $360.3 million, of which $354.2 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. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on Teradyne’s results of operations, financial condition or cash flows.
T. 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 |
|||||||||||||||
| September 29, 2019 |
September 30, 2018 |
September 29, 2019 |
September 30, 2018 |
|||||||||||||
| US statutory federal tax rate |
|
% | |
% | |
% | |
% | ||||||||
| Discrete expense related to U.S. transition tax |
— |
— |
|
|
||||||||||||
| Foreign taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| International provisions of the U.S. Tax Cuts and Jobs |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Tax credits |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Discrete benefit related to equity compensation |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Discrete benefit related to release of reserves for uncertain tax positions |
— |
( |
) |
( |
) |
— |
||||||||||
| Other, net |
( |
) | |
|
|
|||||||||||
| Effective tax rate |
|
% |
|
% |
|
% |
|
% | ||||||||
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 September 29, 2019, 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.As of September 29, 2019 and December 31, 2018, Teradyne had $13.6 million and $43.4 million, respectively, of reserves for uncertain tax positions. The $29.8 million net decrease in reserves for uncertain tax positions is primarily composed of reductions in uncertain tax positions amounting to $22.4 million related to transfer pricing and $7.2 million associated with U.S. research and development tax credits. These reductions primarily resulted from the conclusion of the U.S. Federal income tax audit for the year ended December 31, 2015.
As of
September
29
, 2019, Teradyne does not anticipate a material change in the balance of unrecognized tax benefits during the next twelve months. 29
On July 27, 2015, in Altera Corp. v. Commissioner (“Altera”), the U.S. Tax Court issued an opinion invalidating the regulations relating to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision was issued by the Tax Court in December 2015. The IRS appealed the decision in June 2016. On July 24, 2018, the Ninth Circuit Federal Court issued a decision that was subsequently withdrawn and a reconstituted panel has conferred on the appeal. On June 7, 2019, the Ninth Circuit Federal Court upheld the cost-sharing regulations. Due to the uncertainty surrounding the status of the current regulations, questions related to the scope of potential benefits or obligations, the outcome of the appeals process, and questions regarding jurisdiction, Teradyne has not established any income tax reserves as of
September
29
, 2019 related to Altera. Teradyne estimates that including stock-based compensation in Teradyne’s intercompany cost-sharing arrangement could result in a potential tax reserve of $Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of September 29, 2019 and December 31, 2018, $0.5 million and $0.3 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the nine months ended September 29, 2019 and September 30, 2018, expense of $0.2 million and $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 months ended September 29, 2019 was $12.0 million, or $0.07 per diluted share. The tax savings due to the tax holiday for the nine months ended September 30, 2018 was $8.9 million, or $0.05 per diluted share. The tax holiday is scheduled to expire on December 31, 2020.
U. SEGMENT INFORMATION
Teradyne has four reportable segments (Semiconductor Test, System Test, Industrial Automation and Wireless Test). Each of the Semiconductor Test, System Test, and Wireless Test segments is also an individual operating segment. The Industrial Automation reportable segment consists of operating segments with discrete financial information, which have been combined into one reportable segment as they share similar economic characteristics, types of products, production processes, distribution channels, and currency risks. 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 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.
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, 2018, and Note B: “Accounting Policies” in this filing for any changes in the three and nine months ended September 29, 2019.30
Segment information for the three and nine months ended September 29, 2019 and September 30, 2018 is as follows:
Semiconductor Test |
Industrial Automation |
System Test |
Wireless Test |
Corporate and Other |
Consolidated |
|||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||
Three Months Ended September 29, 2019 |
||||||||||||||||||||||||
Revenues |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Income (loss) before income taxes (1)(2) |
( |
) | ||||||||||||||||||||||
Total assets (3) |
||||||||||||||||||||||||
Three Months Ended September 30, 2018 |
||||||||||||||||||||||||
Revenues |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Income (loss) before income taxes (1)(2) |
( |
) | ||||||||||||||||||||||
Total assets (3) |
||||||||||||||||||||||||
Nine Months Ended September 29, 2019 |
||||||||||||||||||||||||
Revenues |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Income (loss) before income taxes (1)(2) |
( |
) | ||||||||||||||||||||||
Total assets (3) |
||||||||||||||||||||||||
Nine Months Ended September 30, 2018 |
||||||||||||||||||||||||
Revenues |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Income (loss) before income taxes (1)(2) |
( |
) | ( |
) | ||||||||||||||||||||
Total assets (3) |
||||||||||||||||||||||||
| (1) | Included in Corporate and Other are: contingent consideration adjustments, severance charges, interest income and expense, net foreign exchange gains (losses), intercompany eliminations, acquisition related expenses and compensation, pension and postretirement plans actuarial losses and an expense for the modification of Teradyne’s former chief financial officer’s outstanding equity awards. |
| (2) | Included in the income (loss) before income taxes for each of the segments are charges and credits related to restructuring and other and inventory charges. |
| (3) | Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets. |
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 |
|||||||||||||||
September 29, |
September 30, |
September 29, |
September 30, |
|||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
(in thousands) |
||||||||||||||||
Semiconductor Test: |
||||||||||||||||
Cost of revenues—inventory charge |
$ |
$ |
$ |
$ |
||||||||||||
Restructuring and other—employee severance |
— |
|||||||||||||||
Industrial Automation: |
||||||||||||||||
Restructuring and other—acquisition related expenses |
$ |
— |
$ |
$ |
$ |
|||||||||||
Restructuring and other—employee severance |
— |
— |
— |
|||||||||||||
Cost of revenues—inventory charge |
— |
— |
||||||||||||||
System Test: |
||||||||||||||||
Cost of revenues—inventory charge |
$ |
— |
$ |
— |
$ |
$ |
||||||||||
Wireless Test: |
||||||||||||||||
Cost of revenues—inventory charge |
$ |
$ |
$ |
$ |
||||||||||||
Corporate and Other: |
||||||||||||||||
Restructuring and other—MiR contingent consideration adjustment |
$ |
( |
) |
$ |
— |
$ |
( |
) |
$ |
— |
||||||
Selling and administrative – equity modification charge |
— |
— |
||||||||||||||
Restructuring and other—acquisition related expenses and compensation |
— |
|||||||||||||||
Restructuring and other—Universal Robots contingent consideration adjustment |
— |
( |
) |
— |
( |
) | ||||||||||
31
V. SHAREHOLDERS’ EQUITY
Stock Repurchase Program
In January 2018, Teradyne’s Board of Directors cancelled the December 2016 stock repurchase program and authorized a new stock repurchase program for up to $1.5 billion of common stock. Teradyne intends to repurchase $500 million in 2019.
During the nine months ended September 29, 2019, Teradyne repurchased 8.8 million shares of common stock for $368.8 million at an average price of $41.93 per share. The cumulative repurchases under the $1.5 billion stock repurchase program as of September 29, 2019 totaled 30.4 million shares of common stock for $1.2 billion at an average price per share of $39.18 .
During the nine months ended September 30, 2018, Teradyne repurchased 13.8 million shares of common stock for $562.3 million at an average price of $40.62 per share.
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 20190.09 per share. Dividend payments for the three and nine months ended September 29, 2019 were $15.3 million and $46.3 million, respectively.
,
May 2019 and August 2019, Teradyne’s Board of Directors declared a quarterly cash dividend of $In January 20180.09 per share. Dividend payments for the three and nine months ended September 30, 2018 were $16.6 million and $51.3 million, respectively.
,
May 2018 and August 2018, Teradyne’s Board of Directors declared a quarterly cash dividend of $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.
W. SUBSEQUENT EVENTS
On October 18, 2019, Teradyne entered into an agreement to acquire 100 % of the equity of AutoGuide, LLC (“AutoGuide”), a maker of high-payload autonomous mobile robots (AMRs), an emerging and fast growing segment of the global forklift market for $58 million of cash and up to $107 million in earn-outs potentially through 2022. AutoGuide is based in Chelmsford, MA. AutoGuide’s AMRs are used for material transport of payloads up to 4,500 kg in manufacturing, warehouse and logistics applications. These products complement MiR’s lower payload products. The acquisition of AutoGuide is expected to close in the fourth quarter of 2019, subject to customary closing conditions and regulatory approval. AutoGuide will be included in Teradyne’s Industrial Automation segment.
32
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, 2018. 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 the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Our 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. Our automatic test equipment and industrial automation products and services include:
| • | semiconductor test (“Semiconductor Test”) systems; |
| • | industrial automation (“Industrial Automation”) products; |
| • | defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, storage test (“Storage Test”) systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”); and |
| • | wireless test (“Wireless Test”) systems. |
We have a customer base which includes integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”), original equipment manufacturers (“OEMs”), wafer foundries, fabless companies that design, but contract with others for the manufacture of integrated circuits (“ICs”), developers of wireless devices and consumer electronics, manufacturers of circuit boards, automotive suppliers, wireless product manufacturers, storage device manufacturers, aerospace and military contractors, and distributors that sell collaborative robots, autonomous mobile robots and wireless test systems. The sales of our products and services are dependent, to a large degree, on these customers who are subject to cyclical trends in the demand for their products. These cyclical periods have had, and will continue to have, a significant effect on our business because our customers often delay or accelerate purchases in reaction to changes in their businesses and to demand fluctuations in the semiconductor, electronics and industrial automation industries. Historically, these demand fluctuations have resulted in significant variations in our results of operations.
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 customer’s 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 the nine months ended September 29, 2019, revenue in our test businesses has exceeded forecasts as a result of semiconductor test demand in China, early 5G test investments and strength in our System Test businesses. It is difficult to predict whether these positive trends will continue in 2020.
In the nine months ended September 29, 2019, the revenue growth of our industrial automation business was below our forecast. We expect 2019 full year revenue growth of our industrial automation business to be under the low end of our long-term range of 30% to 40%. We will continue to invest in our industrial automation businesses to position us for returning to our long-term range of 30% to 40% growth when industrial activity and investment increase.
On February 26, 2018, we acquired Energid Technologies Corporation (“Energid”) for a total purchase price of approximately $27.6 million. Energid’s technology enables and simplifies the programming of complex robotic motions used in a wide variety of end markets, ranging from heavy industry to healthcare, utilizing both traditional robots and collaborative robots.
On April 25, 2018, we acquired Mobile Industrial Robots ApS (“MiR”), a Danish limited liability company. MiR is the leading maker of collaborative autonomous mobile robots for industrial applications. The total purchase price was approximately $197.8 million, which included cash paid of approximately $145.2 million and $52.6 million in fair value of contingent consideration payable upon achievement of certain thresholds and targets for revenue and earnings before interest and taxes through 2020. Contingent consideration for 2018 was $30.8 million and was paid in March 2019. The maximum payment for the remaining MiR contingent consideration that could be paid is $81.0 million.
33
MiR and Energid are included in our Industrial Automation segment.
On January 30, 2019, we acquired all of the issued and outstanding shares of Lemsys SA (“Lemsys”) for a total purchase price of approximately $9.1 million. Lemsys strengthens our position in the electrification trends of vehicles, solar, wind, and industrial applications. Lemsys is included in our Semiconductor Test segment.
On June 3, 2019, we invested $15 million in RealWear, Inc. (“RealWear”). RealWear, a private company, develops and sells advanced wearable technology including industrial, hands-free, head-mounted augmented reality devices that make the workplace safer and more productive. Our investment in RealWear aligns with our strategy of bringing the power of advanced automation to companies of all sizes to improve the productivity of their employees and the quality of their products and services.
On October 18, 2019, we entered into an agreement to acquire 100% of the equity of AutoGuide, LLC (“AutoGuide”), a maker of high-payload autonomous mobile robots (AMRs), an emerging and fast growing segment of the global forklift market for $58 million of cash and up to $107 million in earn-outs potentially through 2022. AutoGuide is based in Chelmsford, MA. AutoGuide’s AMRs are used for material transport of payloads up to 4,500 kg in manufacturing, warehouse and logistics applications. These products complement MiR’s lower payload products. The acquisition of AutoGuide is expected to close in the fourth quarter of 2019, subject to customary closing conditions and regulatory approval. AutoGuide will be included in Teradyne’s Industrial Automation segment.
We believe our recent acquisitions and investments have enhanced our opportunities for growth. We intend to continue to invest in our business, grow market share in our markets and expand further our addressable markets while tightly managing our costs.
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 three and nine months ended September 29, 2019 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, 2018, except as noted below.Investment in Other Company
We hold an investment in a private company that develops and sells advanced wearable technology. We do not have the ability to exert significant influence over the company. 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 a similar investment of the same issuer on a quarterly basis. See Note D: “Acquisitions and Investment in Other Company.”
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) (“Topic 842”), which requires a lessee to record a that allowed for a cumulative effect adjustment in the period of adoption. Under this method of adoption, the comparative information in the consolidated financial statements has not been revised and continues to be reported under the previously applicable lease accounting guidance (ASC 840). We also utilized the package of practical expedients permitted under the transition guidance which included the carry-forward of historical lease classification. Adoption of ASC 842 resulted in recording ROU assets and lease liabilities of approximately $50.1 million and $54.3 million, respectively. Operating lease liabilities were calculated using the discount rate on January 1, 2019. The adoption of ASC 842 did not have a material impact on beginning retained earnings, the consolidated statement of operations, cash flows, or earnings per share.
2016-02,
“Leases (Topic 842)”
right-of-use
(“ROU”) asset and a lease liability on the balance sheet for operating leases with terms longer than twelve months. We adopted this standard and the related amendments (collectively “ASC 842”) on January 1, 2019 and utilized the modified retrospective approach provided by ASU 2018-11,
“Leases (Topic 842): Targeted Improvements,”
Under ASC 842, a contract is or contains a lease when we have the right to control the use of an identified asset. We determine if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. The commencement date of the lease is the date that the lessor makes an underlying asset available for use. As of September 29, 2019, we do not have material leases that have not yet commenced.
We determine if the lease is operating or finance at the lease commencement date based upon the terms of the lease and the nature of the asset. The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised.
34
For leases commencing after January 1, 2019, the lease liability is measured at the present value of future lease payments, discounted using the discount rate for the lease at the commencement date. As we are typically unable to determine the implicit rate, we use an incremental borrowing rate based on the lease term and economic environment at commencement date. We initially measure payments based on an index by using the applicable rate at lease commencement. Variable payments that do not depend on an index are not included in the lease liability and are recognized as they are incurred. The ROU asset is initially measured as the amount of lease liability, adjusted for any initial lease costs, prepaid lease payments, and reduced by any lease incentives.
Our contracts often include
non-lease
components such as common area maintenance. We elected the practical expedient to account for the lease and non-lease
components as a single lease component. For leases with a term of one year or less we elected not to record the lease asset or liability. The lease payments are recognized in the consolidated statement of earnings on a straight-line basis over the lease term. We include lease costs within cost of revenues and operating expenses.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.
SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| September 29, |
September 30, |
September 29, |
September 30, |
|||||||||||||
| 2019 |
2018 |
2019 |
2018 |
|||||||||||||
| Percentage of revenues: |
||||||||||||||||
| Revenues: |
||||||||||||||||
| Products |
84 |
% | 83 |
% | 82 |
% | 83 |
% | ||||||||
| Services |
16 |
17 |
18 |
17 |
||||||||||||
| Total revenues |
100 |
100 |
100 |
100 |
||||||||||||
| Cost of revenues: |
||||||||||||||||
| Cost of products |
34 |
34 |
34 |
35 |
||||||||||||
| Cost of services |
7 |
7 |
8 |
7 |
||||||||||||
| Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) |
41 |
41 |
42 |
42 |
||||||||||||
| Gross profit |
59 |
59 |
58 |
58 |
||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling and administrative |
19 |
18 |
20 |
18 |
||||||||||||
| Engineering and development |
13 |
14 |
14 |
14 |
||||||||||||
| Acquired intangible assets amortization |
2 |
2 |
2 |
2 |
||||||||||||
| Restructuring and other |
(1 |
) | — |
(1 |
) | — |
||||||||||
| Total operating expenses |
33 |
34 |
35 |
35 |
||||||||||||
| Income from operations |
27 |
25 |
23 |
23 |
||||||||||||
| Non-operating (income) expense: |
||||||||||||||||
| Interest income |
(1 |
) | (1 |
) | (1 |
) | (1 |
) | ||||||||
| Interest expense |
1 |
1 |
1 |
1 |
||||||||||||
| Other (income) expense, net |
— |
1 |
— |
— |
||||||||||||
| Income before income taxes |
26 |
25 |
23 |
23 |
||||||||||||
| Income tax provision |
3 |
4 |
2 |
3 |
||||||||||||
| Net income |
23 |
% | 21 |
% | 21 |
% | 19 |
% | ||||||||
35
Results of Operations
Third Quarter 2019 Compared to Third Quarter 2018
Revenues
Revenues by our four reportable segments were as follows:
| For the Three Months Ended |
||||||||||||
| September 29, |
September 30, |
Dollar |
||||||||||
| 2019 |
2018 |
Change |
||||||||||
| (in millions) |
||||||||||||
| Semiconductor Test |
$ | 397.7 |
$ | 417.3 |
$ | (19.6 |
) | |||||
| System Test |
73.3 |
49.6 |
23.7 |
|||||||||
| Industrial Automation |
68.9 |
65.9 |
3.0 |
|||||||||
| Wireless Test |
42.3 |
34.3 |
8.0 |
|||||||||
| Corporate and Other |
(0.2 |
) | (0.3 |
) | 0.1 |
|||||||
| $ | 582.0 |
$ | 566.8 |
$ | 15.2 |
|||||||
The decrease in Semiconductor Test revenues of $19.6 million, or 4.7%, was driven primarily by a decrease in sales in the automotive and memory test segments, partially offset by an increase in semiconductor tester sales for 5G infrastructure. The increase in System Test revenues of $23.7 million, or 47.8%, was primarily due to higher sales in Storage Test of 3.5” hard disk drive and system level testers, higher sales in Defense/Aerospace test instrumentation and systems, and higher sales in Production Board Test from higher 5G demand. The increase in Industrial Automation revenues of $3.0 million, or 4.6%, was due to higher demand for collaborative autonomous mobile robots. The increase in Wireless Test revenues of $8.0 million, or 23.3%, was primarily due to higher demand for millimeter wave test products driven by new wireless standards and 5G.
Revenues by country as a percentage of total revenues were as follows (1):
| For the Three Months Ended |
||||||||
| September 29, |
September 30, |
|||||||
| 2019 |
2018 |
|||||||
| China |
31 |
% | 21 |
% | ||||
| Taiwan |
21 |
25 |
||||||
| United States |
14 |
12 |
||||||
| Korea |
10 |
6 |
||||||
| Europe |
9 |
9 |
||||||
| Japan |
4 |
7 |
||||||
| Thailand |
4 |
2 |
||||||
| Singapore |
3 |
7 |
||||||
| Malaysia |
2 |
7 |
||||||
| Philippines |
2 |
3 |
||||||
| Rest of World |
— |
1 |
||||||
| 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 |
||||||||||||
| September 29, |
September 30, |
Dollar/Point |
||||||||||
| 2019 |
2018 |
Change |
||||||||||
| (in millions) |
||||||||||||
| Gross profit |
$ | 345.0 |
$ | 333.7 |
$ | 11.3 |
||||||
| Percent of total revenues |
59.3 |
% | 58.9 |
% | 0.4 |
|||||||
36
Gross profit as a percent of revenue increased by 0.4 points, primarily due to favorable product mix in Semiconductor Test and Storage Test.
We assess the carrying value of our inventory on a quarterly basis by estimating future demand and comparing that demand against
on-hand
and on-order
inventory positions. Forecasted revenue information is obtained from sales and marketing groups and incorporates factors such as backlog and future revenue demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next twelve quarters for our Semiconductor Test, System Test and Industrial Automation segments and the next four quarters for our Wireless Test segment, is written-down to estimated net realizable value.During the three months ended September 29, 2019, we recorded an inventory provision of $3.0 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels, of which $1.9 million was related to Semiconductor Test, $0.7 million was related to Wireless Test and $0.4 million was related to System Test.
During the three months ended September 30, 2018, we recorded an inventory provision of $3.3 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels, of which $2.1 million was related to Semiconductor Test, $0.7 million was related to Wireless Test, and $0.4 million was related to Industrial Automation.
During the three months ended September 29, 2019 and September 30, 2018, we scrapped $3.4 million and $1.7 million of inventory, respectively. During the three months ended September 29, 2019 and September 30, 2018, we sold $0.8 million and $1.0 million of previously written-down or
written-off
inventory, respectively. As of September 29, 2019, we had inventory related reserves, which had been written-down or written-off
totaling $101.2 million. We have no pre-determined
timeline to scrap the remaining inventory.Selling and Administrative
Selling and administrative expenses were as follows:
| For the Three Months Ended |
||||||||||||
| September 29, |
September 30, |
Dollar |
||||||||||
| 2019 |
2018 |
Change |
||||||||||
| (in millions) |
||||||||||||
| Selling and administrative |
$ | 109.2 |
$ | 100.2 |
$ | 9.0 |
||||||
| Percent of total revenues |
18.8 |
% | 17.7 |
% | ||||||||
The increase of $9.0 million in selling and administrative expenses was due primarily to higher spending in Industrial Automation from higher sales and marketing spending in Universal Robots and MiR, and higher stock compensation expense from the modification of Teradyne’s former chief financial officer’s outstanding equity awards.
Engineering and Development
Engineering and development expenses were as follows:
| For the Three Months Ended |
||||||||||||
| September 29, |
September 30, |
Dollar |
||||||||||
| 2019 |
2018 |
Change |
||||||||||
| (in millions) |
||||||||||||
| Engineering and development |
$ | 77.8 |
$ | 77.0 |
$ | 0.8 |
||||||
| Percent of total revenues |
13.4 |
% | 13.6 |
% | ||||||||
The increase of $0.8 million in engineering and development expenses was primarily due to higher spending in Industrial Automation, partially offset by lower spending in Semiconductor Test.
Restructuring and Other
During the three months ended September 29, 2019, we recorded a $7.8 million gain for the decrease in the fair value of the MiR contingent consideration liability, partially offset by $0.5 million recorded for employee severance charges primarily in Industrial Automation, $0.5 million for acquisition related compensation and expenses, and $0.3 million of fixed assets impairment in Wireless Test.
37
During the three months ended September 30, 2018, we recorded $1.7 million for employee severance charges, primarily in Semiconductor Test and $0.8 million for acquisition related compensation, partially offset by a $0.8 million gain for the decrease in the fair value of the Universal Robots contingent consideration liability.
Interest and Other
| For the Three Months Ended |
||||||||||||
| September 29, 2019 |
September 30, 2018 |
Dollar Change |
||||||||||
| (in millions) |
||||||||||||
| Interest income |
$ | (5.2 |
) | $ | (6.2 |
) | $ | 1.0 |
||||
| Interest expense |
5.7 |
5.6 |
0.1 |
|||||||||
| Other (income) expense, net |
2.7 |
3.4 |
(0.7 |
) | ||||||||
Interest income decreased by $1.0 million due primarily to lower unrealized gains on equity marketable securities in 2019. Other (income) expense, net decreased by $0.7 million due primarily to lower foreign exchange losses.
Income (Loss) Before Income Taxes
| For the Three Months Ended |
||||||||||||
| September 29, 2019 |
September 30, 2018 |
Dollar Change |
||||||||||
| (in millions) |
||||||||||||
| Semiconductor Test |
$ | 116.6 |
$ | 126.6 |
$ | (10.0 |
) | |||||
| System Test |
24.4 |
9.1 |
15.3 |
|||||||||
| Wireless Test |
11.2 |
7.8 |
3.3 |
|||||||||
| Industrial Automation |
(1.6 |
) | 0.9 |
(2.6 |
) | |||||||
| Corporate and Other (1) |
1.2 |
(3.6 |
) | 4.8 |
||||||||
| $ | 151.7 |
$ | 140.8 |
$ | 10.9 |
|||||||
| (1) | Included in Corporate and Other are: contingent consideration adjustments, employee severance, equity modification charge, interest income, interest expense, net foreign exchange gains and losses, intercompany eliminations, and acquisition related expenses and compensation. |
The decrease in income before income taxes in Semiconductor Test was driven primarily by a decrease in sales in the automotive and memory test segments, partially offset by an increase in semiconductor tester sales for 5G infrastructure. The increase in income before income taxes in System Test was primarily due to higher sales in Storage Test of 3.5” hard disk drive testers and system level testers, higher sales in Defense/Aerospace test instrumentation and systems, and higher sales in Production Board Test from higher 5G demand. The increase in income before income taxes in Wireless Test was primarily due to higher demand for millimeter wave test products. The decrease in income before income taxes in Industrial Automation was primarily due to higher sales and marketing, and engineering spending.
Income Taxes
The effective tax rate for the three months ended September 29, 2019 and September 30, 2018 was 10.5% and 14.8%, respectively. The decrease in the effective tax rate from the three months ended September 29, 2019 to the three months ended September 30, 2018 primarily resulted from the tax rate effect of a projected shift in the geographic distribution of income, which reduces the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, an increase in the net favorable impact of the U.S. Tax Cuts and Jobs Act of 2017, and an increase in net discrete tax benefit.
38
Nine Months 2019 Compared to Nine Months 2018
Revenues
Revenues by our four reportable segments were as follows:
| For the Nine Months Ended |
||||||||||||
| September 29, 2019 |
September 30, 2018 |
Dollar Change |
||||||||||
| (in millions) |
||||||||||||
| Semiconductor Test |
$ | 1,113.5 |
$ | 1,150.7 |
$ | (37.2 |
) | |||||
| Industrial Automation |
209.8 |
176.8 |
33.0 |
|||||||||
| System Test |
204.9 |
162.3 |
42.6 |
|||||||||
| Wireless Test |
112.5 |
92.0 |
20.5 |
|||||||||
| Corporate and Other |
(0.4 |
) | (0.6 |
) | 0.2 |
|||||||
| $ | 1,640.3 |
$ | 1,581.2 |
$ | 59.1 |
|||||||
The decrease in Semiconductor Test revenues of $37.2 million, or 3.2%, was driven primarily by a decrease in sales in the automotive and memory test segments, partially offset by an increase in semiconductor tester sales for 5G infrastructure and image sensors. The increase in Industrial Automation revenues of $33.0 million, or 18.7%, was primarily due to higher demand for collaborative robots. The increase in System Test revenues of $42.6 million, or 26.2%, was primarily due to higher sales in Storage Test of 3.5” hard disk drive testers, higher sales in Defense/Aerospace test instrumentation and systems, and higher sales in Production Board Test from higher 5G demand. The increase in Wireless Test revenues of $20.5 million, or 22.3%, was primarily due to higher demand for millimeter wave and cellular test products driven by new wireless standards and 5G, partially offset by lower sales in connectivity test products.
Revenues by country as a percentage of total revenues were as follows (1):
| For the Nine Months Ended |
||||||||
| September 29, 2019 |
September 30, 2018 |
|||||||
| China |
23 |
% | 18 |
% | ||||
| Taiwan |
22 |
26 |
||||||
| United States |
14 |
13 |
||||||
| Europe |
10 |
10 |
||||||
| Korea |
10 |
8 |
||||||
| Japan |
7 |
6 |
||||||
| Singapore |
4 |
5 |
||||||
| Thailand |
4 |
3 |
||||||
| Malaysia |
3 |
6 |
||||||
| Philippines |
3 |
4 |
||||||
| Rest of World |
— |
1 |
||||||
| 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 |
||||||||||||
| September 29, 2019 |
September 30, 2018 |
Dollar/Point Change |
||||||||||
| (in millions) |
||||||||||||
| Gross profit |
$ | 956.6 |
$ | 910.9 |
$ | 45.7 |
||||||
| Percent of total revenues |
58.3 |
% | 57.6 |
% | 0.7 |
|||||||
39
Gross profit as a percent of revenue increased by 0.7 points, primarily due to favorable product mix in Semiconductor Test and Storage Test.
We assess the carrying value of our inventory on a quarterly basis by estimating future demand and comparing that demand against
on-hand
and on-order
inventory positions. Forecasted revenue information is obtained from sales and marketing groups and incorporates factors such as backlog and future revenue demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next twelve quarters for our Semiconductor Test, System Test and Industrial Automation segments and the next four quarters for our Wireless Test segment, is written-down to estimated net realizable value.During the nine months ended September 29, 2019, we recorded an inventory provision of $8.8 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels, of which $5.3 million was related to Semiconductor Test, $1.9 million was related to Wireless Test, $1.1 million was related to System Test, and $0.5 million was related to Industrial Automation.
During the nine months ended September 30, 2018, we recorded an inventory provision of $9.5 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels, of which $5.9 million was related to Semiconductor Test and $2.2 million was related to Wireless Test.
During the nine months ended September 29, 2019 and September 30, 2018, we scrapped $6.4 million and $3.2 million of inventory, respectively. During the nine months ended September 29, 2019 and September 30, 2018, we sold $2.0 million and $5.2 million of previously written-down or
written-off
inventory, respectively. As of September 29, 2019, we had inventory related reserves for inventory, which had been written-down or written-off
totaling $101.2 million. We have no pre-determined
timeline to scrap the remaining inventory.Selling and Administrative
Selling and administrative expenses were as follows:
| For the Nine Months Ended |
||||||||||||
| September 29, 2019 |
September 30, 2018 |
Dollar Change |
||||||||||
| (in millions) |
||||||||||||
| Selling and administrative |
$ | 320.0 |
$ | 290.1 |
$ | 29.9 |
||||||
| Percent of total revenues |
19.5 |
% | 18.3 |
% | ||||||||
The increase of $29.9 million in selling and administrative expenses was due primarily to higher spending in Industrial Automation from higher sales and marketing spending in Universal Robots and MiR, which was acquired on April 25, 2018.
Engineering and Development
Engineering and development expenses were as follows:
| For the Nine Months Ended |
||||||||||||
| September 29, 2019 |
September 30, 2018 |
Dollar Change |
||||||||||
| (in millions) |
||||||||||||
| Engineering and development |
$ | 236.0 |
$ | 226.8 |
$ | 9.2 |
||||||
| Percent of total revenues |
14.4 |
% | 14.3 |
% | ||||||||
The increase of $9.2 million in engineering and development expenses was primarily due to higher spending in Industrial Automation partially offset by lower spending in Semiconductor Test.
Restructuring and Other
During the nine months ended September 29, 2019, we recorded a $16.5 million gain for the decrease in the fair value of the MiR contingent consideration liability, partially offset by $2.1 million recorded for employee severance charges primarily in Semiconductor Test and Industrial Automation, $2.3 million for acquisition related expenses and compensation and $0.3 million of fixed assets impairment in Wireless Test.
40
During the nine months ended September 30, 2018, we recorded $7.9 million for employee severance charges, primarily in Semiconductor Test, and $4.1 million for acquisition related compensation and expenses, partially offset by a $9.2 million gain for the decrease in the fair value of the Universal Robots contingent consideration liability.
Interest and Other
| For the Nine Months Ended |
||||||||||||
| September 29, 2019 |
September 30, 2018 |
Dollar Change |
||||||||||
| (in millions) |
||||||||||||
| Interest income |
$ | (18.6 |
) | $ | (17.6 |
) | $ | (1.0 |
) | |||
| Interest expense |
17.2 |
18.1 |
(0.9 |
) | ||||||||
| Other (income) expense, net |
6.6 |
4.4 |
2.2 |
|||||||||
Interest income increased by $1.0 million due primarily to higher unrealized gains on equity marketable securities in 2019. Interest expense decreased by $0.9 million due primarily to lower realized losses on sales of marketable securities in 2019. Other (income) expense, net increased by $2.2 million due primarily to higher pension costs and higher foreign exchange losses.
Income (Loss) Before Income Taxes
| For the Nine Months Ended |
||||||||||||
| September 29, 2019 |
September 30, 2018 |
Dollar Change |
||||||||||
| (in millions) |
||||||||||||
| Semiconductor Test |
$ | 291.0 |
$ | 305.9 |
$ | (14.8 |
) | |||||
| System Test |
63.3 |
35.3 |
28.0 |
|||||||||
| Wireless Test |
25.7 |
18.6 |
7.1 |
|||||||||
| Industrial Automation |
(10.7 |
) | (1.2 |
) | (9.5 |
) | ||||||
| Corporate and Other (1) |
7.5 |
(1.9 |
) | 9.4 |
||||||||
| $ | 376.9 |
$ | 356.7 |
$ | 20.2 |
|||||||
| (1) | Included in Corporate and Other are: contingent consideration adjustments, employee severance, equity modification charge, interest income, interest expense, net foreign exchange gains and losses, intercompany eliminations, and acquisition related expenses and compensation. |
The decrease in income before income taxes in Semiconductor Test revenues was driven primarily by a decrease in sales in the automotive and memory test segments, partially offset by an increase in semiconductor tester sales for 5G infrastructure and image sensors. The increase in income before income taxes in System Test was primarily due to higher sales in Storage Test of 3.5” hard disk drive testers, higher sales in Defense/Aerospace test instrumentation and systems and higher sales in Production Board Test for 5G. The increase in income before income taxes in Wireless Test was primarily due to higher demand for millimeter wave and cellular test products driven by new wireless standards and 5G, partially offset by lower connectivity test products sales. The decrease in income before income taxes in Industrial Automation was primarily due to higher sales and marketing, and engineering spending.
Income Taxes
The effective tax rate for the nine months ended September 29, 2019 and September 30, 2018 was 9.2% and 13.6%, respectively. The decrease in the effective tax rate from the nine months ended September 29, 2019 to the nine months ended September 30, 2018 primarily resulted from the tax rate effect of a projected shift in the geographic distribution of income, which reduces the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, and an increase in net discrete tax benefit. These reductions were partially offset by a decrease in the net favorable impact of the U.S. Tax Cuts and Jobs Act of 2017.
41
Contractual Obligations
The following table reflects our contractual obligations as of September 29, 2019:
| Payments Due by Period |
||||||||||||||||||||||||
| Total |
Less than 1 year |
1-3 years |
3-5 years |
More than 5 years |
Other |
|||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||
| Convertible debt |
$ | 460,000 |
$ | — |
$ | — |
$ | 460,000 |
$ | — |
$ | — |
||||||||||||
| Purchase obligations |
360,342 |
354,195 |
6,147 |
— |
— |
— |
||||||||||||||||||
| Retirement plans contributions |
126,147 |
9,494 |
20,594 |
26,485 |
69,574 |
— |
||||||||||||||||||
| Transition tax payable (1) |
91,139 |
7,358 |
15,958 |
22,940 |
44,883 |
— |
||||||||||||||||||
| Operating lease obligations |
73,253 |
21,342 |
29,923 |
12,508 |
9,480 |
— |
||||||||||||||||||
| Interest on long-term debt |
25,875 |
5,750 |
11,500 |
8,625 |
— |
— |
||||||||||||||||||
| Fair value of contingent consideration |
18,080 |
6,297 |
11,783 |
— |
— |
— |
||||||||||||||||||
| Other long-term liabilities reflected on the balance sheet under GAAP (2) |
67,785 |
— |
36,044 |
6,097 |
451 |
25,193 |
||||||||||||||||||
| Total |
$ | 1,222,621 |
$ | 404,436 |
$ | 131,949 |
$ | 536,655 |
$ | 124,388 |
$ | 25,193 |
||||||||||||
| (1) | Represents the transition tax liability associated with our accumulated foreign earnings as a result of the enactment of the Tax Reform Act on December 22, 2017. |
| (2) | Included in other long-term liabilities are liabilities for customer advances, extended warranty, uncertain tax positions, deferred tax liabilities and other obligations. For certain long-term obligations, we are unable to provide a reasonably reliable estimate of the timing of future payments relating to these obligations and therefore we included these amounts in the column marked “Other.” |
Liquidity and Capital Resources
Our cash, cash equivalents, and marketable securities balances decreased by $164.5 million in the nine months ended September 29, 2019 to $1.0 billion.
Operating activities during the nine months ended September 29, 2019 provided cash of $362.4 million. Changes in operating assets and liabilities used cash of $83.5 million due to a $97.1 million increase in operating assets and a $13.6 million increase in operating liabilities.
The increase in operating assets was primarily due to a $66.8 million increase in accounts receivable due to increased sales, a $16.1 million increase in prepayments and other assets, and a $14.1 million increase in inventories.
The increase in operating liabilities was due to a $27.8 million increase in deferred revenue and customer advance payments, a $23.7 million increase in other accrued liabilities, and a $17.5 million increase in accounts payable, partially offset by a $31.2 million decrease in income taxes, a $20.4 million decrease in accrued employee compensation due primarily to first quarter payments related to variable compensation, and $3.8 million of retirement plan contributions.
Investing activities during the nine months ended September 29, 2019 used cash of $266.9 million due to $605.5 million used for purchases of marketable securities, $96.0 million used for purchases of property, plant and equipment, $15.0 million used for an investment in RealWear, and $7.0 million, net of cash acquired, used for the acquisition of Lemsys, partially offset by $393.5 million and $60.3 million in proceeds from maturities and sales of marketable securities, respectively, and proceeds from life insurance of $2.9 million related to the cash surrender value from the cancellation of Teradyne owned life insurance policies.
Financing activities during the nine months ended September 29, 2019 used cash of $427.9 million due to $368.8 million used for the repurchase of 8.8 million shares of common stock at an average price of $41.93 per share, $46.3 million used for dividend payments, $27.6 million used for payments related to MiR and Universal Robots acquisition contingent consideration, and $14.5 million used for payments related to net settlements of employee stock compensation awards, partially offset by $29.3 million from the issuance of common stock under employee stock purchase and stock option plans.
Operating activities during the nine months ended September 30, 2018 provided cash of $290.5 million. Changes in operating assets and liabilities used cash of $151.1 million due to a $140.6 million increase in operating assets and a $10.4 million decrease in operating liabilities.
42
The increase in operating assets was primarily due to a $77.8 million increase in accounts receivable due to increased sales and the impact of the new revenue recognition standard, a $34.1 million increase in inventories, and a $28.7 million increase in prepayments and other assets.
The decrease in operating liabilities was due to a $26.1 million decrease in accrued employee compensation due primarily to first quarter payments related to variable compensation, a $33.2 million decrease in income taxes, and $3.2 million of retirement plan contributions, partially offset by a $22.9 million increase in other accrued liabilities, a $19.4 million increase in accounts payable and a $9.8 million increase in deferred revenue and customer advance payments.
Investing activities during the nine months ended September 30, 2018 provided cash of $719.0 million due to $843.2 million and $934.1 million in proceeds from sales and maturities of marketable securities, respectively, proceeds from a government subsidy of $7.9 million for property, plant and equipment and proceeds from life insurance of $1.1 million related to the cash surrender value from the cancellation of Teradyne owned life insurance policies, partially offset by $809.5 million used for purchases of marketable securities, $169.5 million used for the acquisitions of MiR and Energid, and $88.3 million used for purchases of property, plant and equipment.
Financing activities during the nine months ended September 30, 2018 used cash of $626.0 million due to $562.3 million used for the repurchase of 13.8 million shares of common stock at an average price of $40.62 per share, $51.3 million used for dividend payments, $19.8 million used for payment related to net settlement of employee stock compensation awards, and $13.6 million used for a payment related to Universal Robots acquisition contingent consideration, partially offset by $21.0 million from the issuance of common stock under employee stock purchase and stock option plans.
In January 2019, May 2019, and August 2019, our Board of Directors declared a quarterly cash dividend of $0.09 per share. Dividend payments for the nine months ended September 29, 2019 were $46.3 million.
In January 2018, May 2018, and August 2018, our Board of Directors declared a quarterly cash dividend of $0.09 per share. Dividend payments for the nine months ended September 30, 2018 were $51.3 million.
In January 2018, our Board of Directors cancelled the December 2016 stock repurchase program and authorized a new stock repurchase program for up to $1.5 billion of common stock. We intend to repurchase $500 million in 2019. During the nine months ended September 29, 2019, we repurchased 8.8 million shares of common stock for $368.8 million at an average price of $41.93 per share. During the nine months ended September 30, 2018, we repurchased 13.8 million shares of common stock for $562.3 million at an average price of $40.62 per share. The cumulative repurchases under the $1.5 billion stock repurchase program as of September 29, 2019 totaled 30.4 million shares of common stock for $1,192.3 million at an average price per share of $39.18.
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.
We believe our cash, cash equivalents and marketable securities balance will be sufficient to pay our quarterly dividend, execute our authorized share repurchase program 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.
Equity Compensation Plans
As discussed in Note O: “Stock Based Compensation” in our 2018 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
On January 26, 2017, the FASB issued ASU The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. 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
2017-04,
“Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.”
one-step
impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying43
amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. The revised guidance will be applied prospectively, and is effective in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. We are currently evaluating the impact of this ASU on our financial position, results of operations and statements of cash flows.
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 March 1, 2019. 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, 2018.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 September 29, 2019, the Notes had a fair value of $867.4 million. The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end of the third quarter of 2019 and the estimated impact on the fair value of the Notes. The selected scenarios are not predictions of future events, but rather are intended to illustrate the effect such event may have on the fair value of the Notes. The fair value of the Notes is subject to equity price risk due to the convertible feature. The fair value of the Notes will generally increase as Teradyne’s common stock price increases and will generally decrease as the common stock price declines in value. The change in stock price affects the fair value of the convertible senior notes, but does not impact Teradyne’s financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. In connection with the offering of the Notes we also sold warrants to the option counterparties. These transactions have been accounted for as an adjustment to our shareholders’ equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon conversion of the Notes. The warrants along with any shares issuable upon conversion of the Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or Notes, respectively.| Hypothetical Change in Teradyne Stock Price |
Fair Value |
Estimated change in fair value |
Hypothetical percentage increase (decrease) in fair value |
|||||||||
| 10% Increase |
$ | 936,589 |
$ | 69,201 |
8.0 |
% | ||||||
| No Change |
867,388 |
— |
— |
|||||||||
| 10% Decrease |
793,228 |
(74,160 |
) | (8.5 |
) | |||||||
See Note I: “Debt” for further information.
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(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.44
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. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our results of operations, financial condition or cash flows.
Item 1A: |
Risk Factors |
In addition to other information set forth in this Form
10-Q,
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, 2018, 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.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.Trade regulations and restrictions could impact our ability to sell products to and support certain customers, which may materially adversely affect our sales and results of operations.
We are subject to U.S. laws and regulations that limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, business partners and other persons. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item. We must also comply with export restrictions and laws imposed by other countries affecting trade and investments. We maintain an export compliance program but there are risks that the compliance controls could be circumvented, exposing us to legal liabilities. Compliance with these laws has not significantly limited our sales, but could significantly limit them in the future. Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to drop, which could have a material adverse effect on our business, financial condition or results of operations.
The U.S. government from time to time has issued export restrictions that prohibit U.S. companies from exporting U.S. manufactured products, foreign manufactured products with more than 25% controlled U.S. content, as well as U.S. origin technology. For example, the U.S. Department of Commerce has restricted the access of U.S. origin technologies to certain Chinese companies by adding those companies to the Entity List under U.S. Export Administration Regulations (“EAR”). On May 16, 2019, Huawei and 68 of its affiliates, including HiSilicon, were added to the U.S. Department of Commerce Entity List under the EAR. This action by the U.S. Department of Commerce imposes new export licensing requirements on exports,
re-exports,
and in-country
transfers of all U.S. regulated products, software and technology to the designated Huawei entities. While most of our products are not subject to the EAR and therefore not affected by the Entity List restrictions, certain of our products are currently manufactured in the U.S. and thus subject to the Entity List restrictions. Compliance with the Entity List restrictions has not significantly impacted our sales, but could limit sales in the future. In addition, the prohibition on transfers of U.S. origin technology to Huawei could significantly limit our ability to service certain of our products sold to Huawei and our ability to engage in product development activities with Huawei and, therefore, could have a material adverse effect on our business, financial condition or results of operations. Furthermore, Huawei’s inability to obtain products from other companies in its supply chain may adversely impact Huawei’s demand for our products. Huawei or other foreign customers affected by future U.S. government sanctions or threats of sanctions may respond by developing their own solutions to replace our products or by adopting our foreign competitors’ solutions. Also, our controls related to Entity List compliance could be circumvented, exposing us to legal liabilities. Even if such restrictions are lifted, any financial or other penalties or continuing export restrictions imposed on Huawei could have a material adverse effect on our business, financial condition or results of operations.Item 2: |
Unregistered Sales of Equity Securities and Use of Proceeds |
In January 2018, our Board of Directors cancelled the December 2016 stock repurchase program and authorized a new stock repurchase program for up to $1.5 billion of common stock. We intend to repurchase $500 million in 2019. During the nine months ended September 29, 2019, we repurchased 8.8 million shares of common stock for $368.8 million at an average price of $41.93 per share. During the nine months ended September 30, 2018, we repurchased 13.8 million shares of common stock for $562.3 million at an average price of $40.62 per share. The cumulative repurchases under the $1.5 billion stock repurchase program as of September 29, 2019 totaled 30.4 million shares of common stock for $1,192.3 million at an average price per share of $39.18.
45
The following table includes information with respect to repurchases we made of our common stock during the three months ended September 29, 2019 (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 1, 2019 – July 28, 2019 |
806 |
$ | 47.02 |
806 |
$ | 391,430 |
||||||||||
| July 29, 2019 – August 25, 2019 |
386 |
$ | 53.36 |
385 |
$ | 370,875 |
||||||||||
| August 26, 2019 – September 29, 2019 |
1,133 |
$ | 55.75 |
1,132 |
$ | 307,737 |
||||||||||
| 2,325 |
(1) | $ | 52.33 |
(1) | 2,323 |
|||||||||||
| (1) | Includes approximately two thousand shares at an average price of $50.83 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.
Item 4: |
Mine Safety Disclosures |
Not Applicable
Item 6: |
Exhibits |
| Exhibit Number |
Description | |||
| 31.1 |
||||
| 31.2 |
||||
| 32.1 |
||||
| 32.2 |
||||
| 101.INS |
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||
| 101.SCH |
XBRL Taxonomy Extension Schema Document | |||
| 101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document | |||
| 101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document | |||
| 101.LAB |
XBRL Taxonomy Extension Label Linkbase Document | |||
| 101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document | |||
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL, and contained in Exhibit 101) | |||
46
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 / Sanjay Mehta |
| Sanjay Mehta Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer) |
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TABLE OF CONTENTS
Part IprintItem 1: Financial StatementsprintItem 2: Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 3: Quantitative and Qualitative Disclosures About Market RisksprintItem 4: Controls and ProceduresprintPart II. Other InformationprintItem 1: Legal ProceedingsprintItem 1A: Risk FactorsprintItem 2: Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 4: Mine Safety DisclosuresprintItem 6: Exhibitsprint