☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Emerging growth company MASSACHUSETTS 04-2272148 Title of Each Class Name of Each Exchange on Which Registered New YorkTERExchangeMarket LLCand posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K (229.405) is not contained herein, and will not be contained to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or in any amendment to this Form10-K. ☐July 1, 2016June 2$3.9$7.3 billion based upon the closing price of the registrant’s Common Stock on the New York Exchange20172020 was 200,302,178166,784,497 shares.20172020 annual meeting of shareholders are incorporated by reference into Part III of this Form10-K.
robots, autonomous mobile robots and wireless test systems. The sales of our products and services are dependent, to a large degree, on customers who are subject to cyclical trends in 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. payable upon achievement of certain performance targets, extending potentially through 2022. The maximum contingent consideration that could be paid is $106.9 million. 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. AutoGuide is included in our Industrial Automation segment. Foundries for wafer manufacturing and OSATs for test and assembly. These customers obtain the overall benefit of comprehensively testing devices and reducing the total costs associated with testing by using our Semiconductor Test systems to: performance. UR10, each with different weight carrying capacity and arm reach. All models are easily integrated into existing production environments. Universal Robots’ products are differentiated by their: Semiconductor Test System Test Industrial Automation Wireless Test Taiwan China Cohu, Inc. Semiconductor Test System Test Wireless Test Industrial Automation material adverse effect on our business, results of operations and financial condition. In addition, we rely on contract manufacturers for certain subsystems used in our products, and our ability to meet customer orders for those products depends upon the timeliness and quality of the work performed by these subcontractors, over whom we do not exercise any control. These tax savings may not be achievable in subsequent years due to changes in Singapore’s tax laws or the expiration of the tax holiday. be materially impacted. We expect to continue to devote significant resources to the security of our information technology networks and systems. Location Operating Segment Properties owned: North Reading, Massachusetts Agoura Hills, California Kumamoto, Japan Properties leased: Cebu, Philippines San Jose, California Odense, Denmark Buffalo Grove, Illinois Sunnyvale, California Shanghai, China Semiconductor Test, System Test, Wireless Test & Industrial Automation Heredia, Costa Rica Hsinchu, Taiwan Singapore, Singapore Seoul, Korea Period 2015 First quarter Second quarter Third quarter Fourth quarter 2016 First quarter Second quarter Third quarter Fourth quarter trading symbol “TER”. Period October 3, 2016 – October 30, 2016 October 31, 2016 – November 27, 2016 November 28, 2016 – December 31, 2016 Consolidated Statements of Operations Data (1)(2)(3)(4)(5): Revenues Net (loss) income Net (loss) income per common share—basic Net (loss) income per common share—diluted Cash dividend declared per common share Consolidated Balance Sheets Data: Total assets Short-term debt obligations Long-term debt obligations 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 segment. further expand our addressable markets while tightly managing our costs. acceptance. on the balance sheet. for both excess and obsolete inventory when such write-downs or write-offs are identified through the quarterly review process. The inventory valuation is based upon assumptions about future demand, product mix, and possible alternative uses. In accordance with ASU period. related acquisition. Percentage of revenues: Revenues: Products Services Total revenues Cost of revenues: Cost of products Cost of services Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) Gross profit Operating expenses: Engineering and development Selling and administrative Acquired intangible assets amortization Acquired intangible assets impairment Goodwill impairment Restructuring and other Total operating expenses (Loss) income from operations Non-operating (income) expenses: Interest income Interest expense Other (income) expense, net (Loss) income before income taxes Income tax (benefit) provision Net (loss) income Semiconductor Test System Test Industrial Automation Wireless Test Total Company Semiconductor Test System Test Industrial Automation Wireless Test higher sales in Defense/Aerospace test instrumentation and systems, and higher sales in Production Board Test from higher 5G demand. test products and services. Semiconductor Test System Test Industrial Automation Wireless Test Taiwan United States China Korea Japan Europe Malaysia Singapore Philippines Thailand Rest of the World Product revenues Service revenues Gross profit Percent of total revenues Product gross profit Percent of product revenues Service gross profit Percent of service revenues Test, and $0.5 million was related to Industrial Automation. Semiconductor Test, $2.5 million was related to Wireless Test, $1.2 million was related to System Test, and $0.7 million was related to Industrial Automation. Engineering and development Percent of total revenues liability. October 2020. Interest income Interest expense Other (income) expense, net $8.2 million loss in 2019. Semiconductor Test System Test Wireless Test Industrial Automation Corporate (1) engineering spending. estimate of the losses. Convertible debt Purchase obligations Retirement plans contributions Operating lease obligations Interest on long-term debt Fair value of contingent consideration Other long-term liabilities reflected on the balance sheet under GAAP (1) Total plan contributions. cash surrender value from the cancellation of Teradyne owned life insurance policies. accrued employee compensation due primarily to variable compensation. equipment. plans. $45.89. In 2018, we repurchased 21.6 million shares of common stock for $823.5 million at an average price per share of $38.06. The cumulative repurchases as of December 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. of return on assets assumptions annually on a plan and country specific basis. We evaluate other assumptions related to demographic factors, such as retirement age, mortality and turnover periodically, and update them to reflect our experience and expectations for the future. Return on Plan Assets 3.5% 4.0% 4.5% cost. 2019. In 2019, the increase in plan assets and plan liability was due to a decrease in interest rates. In 2018, the accrued pension obligations for approximately 1,700 retiree participants were transferred to an insurance company and resulted in a $151.3 million reduction in the pension benefit obligation and pension assets. We recorded a settlement loss of $0.3 million related to the retiree group annuity transaction. Plan category Equity plans approved by shareholders Equity plans not approved by shareholders (3,4) Total 2006 Equity Plan as of December 31, 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. secure accounts receivable. There were no customers who accounted for 10% or more 2019, the Notes had a fair value of $1,010 million. The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end 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. 2018. 2, 2020 Current assets: Cash and cash equivalents Marketable securities Accounts receivable, less allowance for doubtful accounts of $2,356 and $2,407 in 2016 and 2015, respectively Inventories, net Deferred tax assets Prepayments Other current assets Total current assets Property, plant and equipment, net Marketable securities Deferred tax assets Other assets Retirement plans assets Intangible assets, net Goodwill Total assets Current liabilities: Accounts payable Accrued employees’ compensation and withholdings Deferred revenue and customer advances Other accrued liabilities Contingent consideration Accrued income taxes Total current liabilities Retirement plans liabilities Long-term deferred revenue and customer advances Deferred tax liabilities Long-term other accrued liabilities Long-term contingent consideration Long-term debt Total liabilities Commitments and contingencies (Note K) Common stock, $0.125 par value, 1,000,000 shares authorized; 199,177 and 203,641 shares issued and outstanding at December 31, 2016 and 2015, respectively Additionalpaid-in capital Accumulated other comprehensive loss Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity Revenues: Products Services Total revenues Cost of revenues: Cost of products Cost of services Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) Gross profit Operating expenses: Engineering and development Selling and administrative Acquired intangible assets amortization Acquired intangible assets impairment Goodwill impairment Restructuring and other Total operating expenses (Loss) income from operations Non-operating (income) expenses: Interest income Interest expense Other (income) expense, net (Loss) income before income taxes Income tax (benefit) provision Net (loss) income Net (loss) income per common share: Basic Diluted Weighted average common shares—basic Weighted average common shares—diluted Cash dividend declared per common share Net (loss) income Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment, net of tax of $0, $0, $0 Available-for-sale marketable securities: Unrealized gains (losses) on marketable securities: Unrealized gains (losses) on marketable securities arising during period, net of tax of $923, $(1,667), $1,449, respectively Less: Reclassification adjustment for gains included in net (loss) income, net of tax of $(255), $(390), $(645), respectively Defined benefit pension and post-retirement plans: Amortization of prior service (credit) cost included in net periodic pension and post-retirement expense/income, net of tax of $(190), $(169), $(169), respectively Prior service income arising during period, net of tax of $34, $0, $0, respectively Other comprehensive (loss) income Comprehensive (loss) income Balance, December 31, 2013 Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $12,018 Warrant settlement Stock-based compensation expense Tax benefit related to stock options and restricted stock units Cash dividends Net income Unrealized gains on marketable securities: Unrealized gains on marketable securities, net of tax of $1,449 Less: reclassification adjustment for gains included in net income, net of tax of $(645) Amortization of prior service (credit) cost, net of tax of $(169) Balance, December 31, 2014 Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $10,597 Stock-based compensation expense Repurchase of common stock Tax benefit related to stock options and restricted stock units Cash dividends Net income Foreign currency translation adjustment Unrealized losses on marketable securities: Unrealized losses on marketable securities, net of tax of $(1,667) Less: reclassification adjustment for gains included in net income, net of tax of $(390) Amortization of prior service (credit) cost, net of tax of $(169) Balance, December 31, 2015 Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $9,808 Equity component of convertible notes Equity component of convertible notes issuance cost Purchase of convertible notes hedges Proceeds from issuance of warrants Stock-based compensation expense Repurchase of common stock Tax benefit related to stock options and restricted stock units Cash dividends Net loss Foreign currency translation adjustment Unrealized gains on marketable securities: Unrealized gains on marketable securities, net of tax of $923 Less: reclassification adjustment for gains included in net income, net of tax of $(255) Amortization of prior service (credit) cost, net of tax of $(190) Prior service income arising during period, net of tax of $34 Balance, December 31, 2016 Cash flows from operating activities: Net (loss) income Adjustments to reconcile net (loss) income from operations to net cash provided by operating activities: Depreciation Amortization Stock-based compensation Provision for excess and obsolete inventory Goodwill impairment Acquired intangible assets impairment Deferred taxes Tax benefit related to employee stock compensation awards Impairment of fixed assets Property insurance recovery Gain from the sale of an equity investment Non-cash charge for the sale of inventories revalued at the date of acquisition Retirement plans actuarial (gains) losses Contingent consideration adjustment Other Changes in operating assets and liabilities, net of businesses acquired: Accounts receivable Inventories Prepayments and other assets Accounts payable and other accrued expenses Deferred revenue and customer advances Retirement plan contributions Income taxes Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Purchases ofavailable-for-sale marketable securities Proceeds from maturities ofavailable-for-sale marketable securities Proceeds from sales ofavailable-for-sale marketable securities Proceeds from property insurance Acquisition of businesses, net of cash acquired Proceeds from life insurance Proceeds from the sale of an equity investment Net cash used for investing activities Cash flows from financing activities: Proceeds from issuance of convertible notes, net of issuance costs Purchase of convertible note hedges Proceeds from issuance of warrants Issuance of common stock under stock option and stock purchase plans Repurchase of common stock Tax benefit related to employee stock compensation awards Dividend payments Payment of revolving credit facility costs Payments of long-term debt Payments of contingent consideration Net cash provided by (used for) financing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplementary disclosure of cash flow information: Cash paid for: Interest Income taxes Automation segment. Extended warranty Equipment maintenance and training Customer advances, undelivered elements and other Total deferred revenue and customer advances Balance at December 31, 2013 Accruals for warranties issued during the period Accruals related topre-existing warranties Settlements made during the period Balance at December 31, 2014 Acquisition Accruals for warranties issued during the period Accruals related topre-existing warranties Settlements made during the period Balance at December 31, 2015 Accruals for warranties issued during the period Accruals related topre-existing warranties Settlements made during the period Balance at December 31, 2016 Balance at December 31, 2013 Deferral of new extended warranty revenue Recognition of extended warranty deferred revenue Balance at December 31, 2014 Acquisition Deferral of new extended warranty revenue Recognition of extended warranty deferred revenue Balance at December 31, 2015 Deferral of new extended warranty revenue Recognition of extended warranty deferred revenue Balance at December 31, 2016 date; input; or Contract manufacturer prepayments Prepaid maintenance and other services Prepaid taxes Other prepayments Total prepayments on the balance sheet. $(1.6) million, $(2.5) million, and $2.9 million, respectively. Prior to 2018, comprehensive income (loss) included unrealized gains and losses on investments in equity marketable securities. MiR’s results have been included in Teradyne’s Industrial Automation segment from the date of acquisition. Goodwill Intangible assets Tangible assets acquired and liabilities assumed: Current assets Non-current assets Accounts payable and current liabilities Long-term deferred tax liabilities Long-term other liabilities Total purchase price Developed technology Trademarks and tradenames Customer relationships Total intangible assets Revenue Net income Net income per common share: Basic Diluted inventory. Raw material Work-in-process Finished goods 2018: Land Buildings Machinery and equipment Furniture and fixtures, and software Leasehold improvements Construction in progress Less: accumulated depreciation 2018: 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 Equity and debt mutual funds Non-U.S. government securities Total Derivative assets Total Liabilities Contingent consideration Derivative liabilities Total 2018: Assets Cash and cash equivalents Marketable securities Long-term marketable securities Prepayments Liabilities Other current liabilities Contingent consideration Long-term contingent consideration Assets Cash Cash equivalents Available-for-sale securities: U.S. Treasury securities Corporate debt securities U.S. government agency securities Certificates of deposit and time deposits Commercial paper Equity and debt mutual funds Non-U.S. government securities Total Derivative assets Total Liabilities Contingent consideration Derivative liabilities Total Assets Cash and cash equivalents Marketable securities Long-term marketable securities Prepayments Liabilities Other current liabilities Contingent consideration Long-term contingent consideration Balance at December 31, 2014 Acquisition of Universal Robots Fair value adjustment of Universal Robots (1) Fair value adjustment of AIT (2) Fair value adjustment of ZTEC (3) Balance at December 31, 2015 Payments (4) Fair value adjustment of AIT (5) Fair value adjustment of Universal Robots (5) Balance at December 31, 2016 Liability Valuation Technique Unobservable Inputs Contingent consideration (Universal Robots) Monte Carlo simulation Monte Carlo simulation The Assets Cash and cash equivalents Marketable securities Derivative assets Liabilities Contingent consideration Derivative liabilities Convertible debt (1) U.S. Treasury securities Commercial paper Corporate debt securities Certificates of deposit and time deposits U.S. government agency securities Equity and debt mutual funds Non-U.S. government securities 2018: Marketable securities Long-term marketable securities U.S. Treasury securities Corporate debt securities U.S. government agency securities Certificates of deposit and time deposits Commercial paper Equity and debt mutual funds Non-U.S. government securities Marketable securities Long-term marketable securities Due within one year Due after 1 year through 5 years Due after 5 years through 10 years Due after 10 years Total Goodwill (1) Definite lived intangible assets (2) fluctuations on certain foreign currency denominated monetary assets and liabilities. Teradyne does not use derivative financial instruments for trading or speculative purposes. Japanese Yen Korean Won Taiwan Dollar British Pound Sterling Euro Singapore Dollar Total 2018. Balance Sheet Location Derivatives not designated as hedging instruments: Foreign exchange contracts Foreign exchange contracts Total derivatives 2018: Location of Losses of Operations Derivatives not designated as hedging instruments: Foreign exchange contracts 2017. semiannually in arrears on June 15 and December 15 of each year 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 Debt principal Unamortized discount including debt issuance cost Net carrying amount of convertible debt Contractual interest expense on the coupon Amortization of the discount component and debt issue fees recognized as interest expense Total interest expense on the convertible debt the notes was $992.0 million. Balance at December 31, 2014, net of tax of $1,598, $(453) Other comprehensive loss before reclassifications, net of tax of $0, $(1,667) Amounts reclassified from accumulated other comprehensive income, net of tax of $(390), $(169) Net current period other comprehensive loss, net of tax of $0, $(2,057), $(169) Balance at December 31, 2015, net of tax of $0, $(459), $(622) Other comprehensive (loss) income before reclassifications, net of tax of $0, $923, $34 Amounts reclassified from accumulated other comprehensive income, net of tax of $(255), $(190) Net current period other comprehensive (loss) income, net of tax of $0, $668, $(156) Balance at December 31, 2016, net of tax of $0, $209, $(778) Details about Accumulated Other Comprehensive Income Components Available-for-sale marketable securities: Unrealized gains, net of tax of $255, $390, $645 Defined benefit pension and postretirement plans: Amortization of prior service credit, net of tax of $190, $169, $169 Prior service income arising during period, net of tax of $(34), $0, $0 Total reclassifications, net of tax of $411, $559, $814 2017. Balance at December 31, 2014: Goodwill Accumulated impairment losses Universal Robots acquisition Foreign currency translation adjustment Balance at December 31, 2015: Goodwill Accumulated impairment losses Foreign currency translation adjustment Goodwill impairment losses Balance at December 31, 2016: Goodwill Accumulated impairment losses Developed technology Customer relationships Tradenames and trademarks Non-compete agreement Customer backlog Total intangible assets Developed technology Customer relationships Tradenames and trademarks Non-compete agreement Customer backlog Total intangible assets Year 2017 2018 2019 2020 2021 Thereafter 2017 2018 2019 2020 2021 Beyond 2022 Total Net (loss) 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 rights Dilutive potential common shares Weighted average common shares-diluted Net (loss) income per common share-basic Net (loss) income per common share-diluted Assets and Obligations Change in benefit obligation: Projected benefit obligation: Beginning of year Service cost Interest cost Actuarial gain (loss) Benefits paid Curtailment Plan participants’ contributions Expenses paid Non-U.S. currency movement End of year Change in plan assets: Fair value of plan assets: Beginning of year Company contributions Plan participants’ contributions Actual return on plan assets Benefits paid Settlements Expenses paid Non-U.S. currency movement End of year Funded status Retirement plans assets Accrued employees’ compensation and withholdings Retirement plans liabilities Funded status Prior service cost, before tax Deferred taxes Total recognized in other comprehensive income, net of tax 2018, respectively. Projected benefit obligation Accumulated benefit obligation Fair value of plan assets Components of Net Periodic Pension (Income) Cost: Service cost Interest cost Expected return on plan assets Amortization of prior service cost Net actuarial (gain) loss Curtailment Total net periodic pension (income) cost Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: Reversal of amortization items: Prior service cost Total recognized in other comprehensive income Total recognized in net periodic pension (income) cost and other comprehensive income Discount rate Expected return on plan assets Salary progression rate Discount rate Salary progression rate 31: 2018. Fixed income securities Equity securities Other 2018: company. During the year ended December 31, 2018, $2.7 million of pension assets were transferred out of Level 3 to Level 2. Fixed income securities: Corporate debt securities U.S. government securities Global equity Group annuity insurance contracts Other Cash and cash equivalents Total Fixed income securities: Corporate debt securities U.S. government securities Global equity Group annuity insurance contracts Other Cash and cash equivalents Total Balance at December 31, 2014 Purchases of group annuity insurance contracts Interest and market value adjustments Benefits paid Other Balance at December 31, 2015 Purchases of group annuity insurance contracts Interest and market value adjustments Benefits paid Other Non-U.S. currency movement Balance at December 31, 2016 2017 2018 2019 2020 2021 2022-2026 Assets and Obligations Change in benefit obligation: Projected benefit obligation: Beginning of year Service cost Interest cost Plan amendments Actuarial loss (gain) Benefits paid End of year Change in plan assets: Fair value of plan assets: Beginning of year Company contributions Benefits paid End of year Funded status Accrued employees’ compensation and withholdings Retirement plans liability Funded status Prior service credit, before tax Deferred taxes Total recognized in other comprehensive income, net of tax Components of Net Periodic Postretirement Benefit Income: Service cost Interest cost Amortization of prior service credit Net actuarial loss (gain) Total net periodic postretirement benefit income Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: Prior service benefit Reversal of amortization items: Prior service credit Total recognized in other comprehensive income Total recognized in net periodic postretirement cost (income) and other comprehensive income Discount rate Initial health care cost trend rate Ultimate health care cost trend rate Year in which ultimate health care cost trend rate is reached Discount rate Initial medical trend Ultimate health care trend Medical cost trend rate decrease to ultimate rate in year Effect on total service and interest cost components Effect on postretirement benefit obligations 2017 2018 2019 2020 2021 2022-2026 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. Risk-free interest rate Teradyne volatility-historical NYSE Composite Index volatility-historical Philadelphia Semiconductor Index volatility-historical Dividend yield Expected life (years) Risk-free interest rate Volatility-historical Dividend yield Restricted Stock Units: Non-vested at January 1 Awarded Vested Forfeited Non-vested at December 31 Stock Options: Outstanding at January 1 Granted Exercised Forfeited Expired Outstanding at December 31 Vested and expected to vest at December 31 Exercisable at December 31 Shares available: Available for grant at January 1 Options granted Restricted stock units awarded Restricted stock units forfeited Available for grant at December 31 2017: Non-vested at January 1 Awarded Vested Forfeited Non-vested at December 31 Vested Outstanding Expected to vest Outstanding Expected to vest Outstanding at January 1 Options granted Options exercised Options expired Outstanding at December 31 Exercisable at December 31 Exercised Outstanding Vested and expected to vest Exercisable Outstanding Vested and expected to vest Exercisable Range Of Exercise Prices $1.48 – $2.67 $3.23 – $7.71 $16.23 – $18.10 $19.16 – $19.43 Cost of revenues Engineering and development Selling and administrative Stock-based compensation Income tax benefit Total stock-based compensation expense after income taxes compensation (subject to Internal Revenue Service limitations). The Savings Plan provides for a discretionary employer match that is determined each year. In (Loss) income before income taxes: U.S. Non-U.S. (Benefit) provision for income taxes: Current: U.S. Federal Non-U.S. State Deferred: U.S. Federal Non-U.S. State Total (benefit) provision for income taxes: foreign derived intangible income deduction, foreign tax credits and a net reduction of reserves for uncertain tax positions. losses. U.S. statutory federal tax rate Foreign taxes U.S. research and development credit Domestic production activities deduction State income taxes, net of federal tax benefit Equity compensation Uncertain tax positions Goodwill impairment Other, net 2020 Deferred tax assets: Tax credits Pension liabilities Inventory valuations Accruals Deferred revenue Equity compensation Vacation accrual Net operating loss carryforwards Other Gross deferred tax assets Less: valuation allowance Total deferred tax assets Deferred tax liabilities: Intangible assets Depreciation Marketable securities Total deferred tax liabilities Net deferred assets 2017 2018 2019 2020 2021 2022-2026 2027-2031 Beyond 2031 Non-expiring Total 2039. Beginning balance as of January 1 Additions: Tax positions for current year Tax positions for prior years Reductions: Expiration of statutes Settlements with tax authorities Tax positions for prior years Ending balance as of December 31 2016 Revenues Income (loss) before taxes (1)(2) Total assets (3) Property additions Depreciation and amortization expense 2015 Revenues Income (loss) before taxes (1)(2) Total assets (3) Property additions Depreciation and amortization expense 2014 Revenues Income (loss) before taxes (1)(2) Total assets (3) Property additions Depreciation and amortization expense Cost of revenues—inventory charge Restructuring and other Cost of revenues—inventory charge Restructuring and other Restructuring and other Cost of revenues-inventorystep-up (1) Goodwill impairment charge Acquired intangible assets impairment charge Cost of revenues—inventory charge Restructuring and other Restructuring and other—Universal Robots contingent consideration adjustment Restructuring and other—Impairment of fixed assets and expenses related to Japan Earthquake Restructuring and other—Property insurance recovery Restructuring and other—ZTEC contingent consideration adjustment Restructuring and other—AIT contingent consideration adjustment Restructuring and other—Acquisition costs Restructuring and other Other (income) expense, net—Gain from the sale of an equity investment Selling and administrative—Stock based compensation expense (1) Total line items in the statements of operation Revenues from customers (1): Taiwan United States China Korea Japan Europe Malaysia Singapore Philippines Thailand Rest of the World December 31, 2016 December 31, 2015 per share of $40.68. 21, 2020 Revenues: Products Services Total revenues Cost of revenues: Cost of products Cost of services Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) Gross profit Operating expenses: Engineering and development Selling and administrative Acquired intangible assets amortization Acquired intangible assets impairment Goodwill impairment Restructuring and other Total operating expenses Income (loss) from operations Non-operating (income) expense: Interest income Interest expense Other (income) expense, net Income (loss) before income taxes Income tax provision (benefit) Net income (loss) Net income (loss) per common share—basic Net income (loss) per common share—diluted Cash dividend declared per common share Restructuring and other includes Revenues: Products Services Total revenues Cost of revenues: Cost of products Cost of services Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) Gross profit Operating expenses: Engineering and development Selling and administrative Acquired intangible assets amortization Restructuring and other Total operating expenses Income (loss) from operations Non-operating (income) expense: Interest income Interest expense Other (income) expense, net Income (loss) before income taxes Income tax provision (benefit) Net income (loss) Net income (loss) per common share—basic Net income (loss) per common share—diluted Cash dividend declared per common share 2019. Column A Description Valuation reserve deducted in the balance sheet from the asset to which it applies: Accounts receivable: 2016 Allowance for doubtful accounts 2015 Allowance for doubtful accounts 2014 Allowance for doubtful accounts Column A Description Valuation reserve deducted in the balance sheet from the asset to which it applies: Inventory: 2016 Inventory reserve 2015 Inventory reserve 2014 Inventory reserve Column A Description Valuation reserve deducted in the balance sheet from the asset to which it applies: Deferred taxes: 2016 Valuation allowance 2015 Valuation allowance 2014 Valuation allowance �� Roy A. Vallee Mark E. Jagiela Michael A. Bradley Edwin J. Gillis Timothy E. Guertin Marilyn Matz Item 1: broad 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.2015,2019, revenue in our test businesses exceeded our plan as a result of Semiconductor Test demand in China, early 5G test investments and strength in our System Test businesses. The revenue growth of our Industrial Automation business was below our plan. In 2020, we expect continued strong momentum in our test businesses and improvement in the growth of our Industrial Automation businesses.UniversalEnergid 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. Energid is included in our Industrial Automation segment.A/SApS (“Universal Robots”MiR”), thea Danish limited liability company. MiR is a leading suppliermaker of collaborative autonomous mobile robots which arelow-cost,easy-to-deploy andsimple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Universal Robots is a separate operating and reportable segment, Industrial Automation. The acquisition of UniversalRobots provides a growth engine to our business and complements our existing System Test and Wireless Test segments.(“AMRs”) for industrial applications. The total purchase price for Universal Robots was approximately $315$197.8 million, which included cash paid of approximately $284$145.2 million and $32 million in fair value of contingent consideration payable upon achievement of revenue and earnings targets through 2018. Contingent consideration paid for 2015 was $15 million. The remaining maximum contingent consideration that could be paid is $50 million.In 2014, we acquired Avionics Interface Technologies LLC (“AIT”), a supplier of equipment for testingstate-of-the-art data communication buses. The acquisition of AIT complements our Defense/Aerospace line of bus test instrumentation for commercial and defense avionics systems. AIT is included in our System Test segment. The total purchase price for AIT was approximately $21 million, which included cash paid of approximately $19 million and $2 million in fair value of contingent consideration payable upon achievement of revenue and gross margin targets in 2015 and 2016. The total amount of contingent consideration paid was $1.1 million.In 2013, we acquired ZTEC Instruments Inc. (“ZTEC”), a supplier of modular wireless test instruments. The acquisition of ZTEC expands our Wireless Test segment into the design verification test of wireless components and chipsets. The total purchase price for ZTEC was approximately $17 million, which included cash paid of approximately $15 million and $2$52.6 million in fair value of contingent consideration payable upon achievement of certain customer orderthresholds and targets for revenue targetsand earnings before interest and taxes through 2015. None2020. Contingent consideration for 2018 was $30.8 million and was paid in March 2019. Contingent consideration for 2019 was $9.1 million and is expected to be paid in March 2020. The remaining maximum contingent consideration that could be paid is $63.2 million. MiR is included in our Industrial Automation segment.was paid.Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, N.E., Washington, DC 20549 or by calling the SEC at1-800-SEC-0330. In addition, theThe SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file documents electronically.IG-XL™ being made by IDMs, OSATs, Foundries and Fabless customers. The FLEX Test Platform has become a widely used test solution at OSATs by providing versatile testers that can handle the widest range of devices, allowing OSATs to leverage their capital investments. The broad consumer, automotive and broadband markets have historically driven most of the device volume growth in the semiconductor industry. These markets include smart phones,smartphones, cell phones, tablets, set top boxes, HDTVs, game controllers, computer graphics, and automotive controllers to name a few. These end use markets continue to be drivers for the FLEXTheUltraFLEX-MIn 2019, we introduced our next generation UltraFlexextends the FLEX Test Platform intonewest member of the High Speed DRAM testing market.UltraFlex family, UltraFlex5,5007,000 systems.J750™ J750Sensor™ Sensorsmart phonessmartphones and other imaging products. We have continued to invest in the J750 platform with new instrument releases that bring new capabilities to existing market segments and expand the J750 platform to new devices that include high end microcontrollers and the latest generation of cameras. In 2013, we introduced the J750Ex-HD which includes system enhancements and new high density instruments that enable the J750 test platform to provide higher test cell productivity. The J750 platform has an installed base of over 5,2005,800 systems.2,1002,800 systems.SmartPin™ SmartPinIn 2013, we introducedThe newest products from the platform include thedevices. In 2015, we introduceddevices, and the4,1005,200 systems. Our acquisitionOurIn 2017, we developed a system level test product for the semiconductor production market, called Titan. Titan is used to test devices following wafer and package test. The business unit’s products lead in addressing customer requirements related to factory density, throughput and thermal performance and vibration isolation.wewas acquired in June 2015, is thea leading supplier of collaborative robots, which are12,00042,000 collaborative robots in diverse production environments and applications.smart phones,smartphones, tablets, notebooks, laptops, peripherals, and802.11ax and 802.11ad as well as the existing standards 802.11a/b/g/n and 11ac,WiFi 6 (802.11ax) and includes a variety of other standards such as Bluetooth Classic, Bluetooth 5.0 and Bluetooth low energy, Zigbee,An important component in all wireless systems The IQcell, is the analog RF front end. The performance of these components is continually pushed higher as device makers add more bands, channels, antennas and higher data rates. We offer the LitePoint zSeries of modular wirelessa multi-device cellular signaling test instruments for design verification test and productionsolution which enables user experience testing of these wireless components.LTE cellular devices vialab-in-a-box zSeries IQgig family provides test solution provides simpleat the intermediary and fast design verification of RF power amplifiermillimeter wave frequencies for 5G and smart device RF front end modules. It is capable of rapid analysis of802.11ad. In 2018, we introduced a new product in the latest digitalpre-distortion and envelope tracking technologiesIQgig family for both LTE andWi-Fi standards. A ruggedized version of the product is designed for high volume testing of these same devices.Summary of Revenues by Reportable SegmentOur four reportable segments accounted for the following percentages of consolidated revenues for each of the last three years: 2016 2015 2014 78 % 73 % 79 % 11 13 10 6 3 — 5 11 11 100 % 100 % 100 % 2016, revenues from Taiwan Semiconductor Manufacturing Company Ltd.2019 and JA Mitsui Leasing, Ltd. accounted for 12% and 12%, respectively, of our consolidated revenues. Taiwan Semiconductor Manufacturing Company Ltd. and JA Mitsui Leasing, Ltd. are customers of our Semiconductor Test segment. In 2015, revenues from JA Mitsui Leasing, Ltd. accounted for 13% of our consolidated revenues. In 2014,2018, no single direct customer accounted for more than 10% of our consolidated revenues. In 2017, revenues from Taiwan Semiconductor Manufacturing Company Ltd. accounted for 13% of our consolidated revenues. Taiwan Semiconductor Manufacturing Company Ltd. is a customer of our Semiconductor Test segment. In each of the years, 2016, 20152019, 2018 and 2014,2017, our five largest direct customers in aggregate accounted for 36%27%, 34%27% and 30%32% of our consolidated revenues, respectively.LTD.Ltd., often purchase our test systems based upon recommendations from OEMs, IDMs and Fabless companies. In all cases when an OSAT customer purchases a test system from us, we consider the OSAT as the customer since credit risk, title and risk of loss, among other things, are between Teradyne and the OSAT. We estimate product demandconsolidated revenues driven by a singleHuawei Technologies Co. Ltd. (“Huawei”), combining direct sales to that customer with sales to the customer’s OSATs, accounted for approximately 11%, 4% and 1% of our consolidated revenues in 2019, 2018 and 2017, and its leasing company, JA Mitsui Leasing, Ltd)), accounted for approximately 25%10%, 23%,13% and 22% of our consolidated revenues in 2016, 2015,2019, 2018 and 2014,2017, respectively. The loss of, or significant decrease in demand from Huawei or this other OEM customer, or any of our five largest direct customers, could have a material adverse effect on our business, results of operations and financial condition. segment products, which are sold through distributors. Our manufacturing activities are primarily conducted through subcontractors and outsourced contract manufacturers with significant operations in China and Malaysia.2016, 20152019, 2018 and 2014.2017. Sales are attributed to geographic areas based on the location of the customer site.Sales to customers by country outside of the United States that accounted for 10% or more of our consolidated revenues in any of the previous three years were as follows: 2016 2015 2014 37 % 27 % 30 % 10 16 18 R:T: “Operating Segment, Geographic and Significant Customer Information” in Notes to Consolidated Financial Statements.Xcerra Corporation.Astronics,Advantest Corporation, Test Research, Inc. and SPEA S.p.A.Competitors in our Industrial Automation segment include manufacturers of traditional industrial robots such as KUKA Robotics Corporation, ABB, FANUC and Yaskawa Electric Corporation as well as emerging companies developing collaborative robots. equipment companies and from internal suppliers at several of our customers. Some of our competitors have introduced or announced new products with certain performance characteristics which may be considered equal or superior to those we currently offer. We expect our competitors to continue to improve the performance of their current products and to introduce new products or new technologies that provide improved cost of ownership and performance characteristics. See also “Item 1A: Risk Factors.”20162019 and 2015,2018, our backlog of unfilled orders in our four reportable segments was as follows: 2016 2015 (in millions) $ 575.7 $ 472.9 117.8 108.8 32.4 33.4 3.8 0.6 $ 729.7 $ 615.7 Of the backlog at December 31, 2016, approximately 99% $ $ $ $ 2016,2019, we employed approximately 4,3005,400 people. Since the inception of our business, we have experienced no work stoppages or other labor disturbances.Engineering and Development ActivitiesThe highly technical nature of our products requires a large and continuing engineering and development effort. For the years ended December 31, 2016, 2015 and 2014, our engineering and development expenditures were $291.0 million, $292.3 million, and $291.6 million, respectively. These expenditures accounted for approximately 16.6%, 17.8%, and 17.7%, of our consolidated revenues in 2016, 2015, and 2014, respectively.G(3)G (3) of FormExecutive OfficerAge Position Forfor The Past 5 Years 56 Gregory R. Beecher 59 Teradyne since 2001; Treasurer of TeradyneQCT at Qualcomm from 2003October 2010 to 2005 and since 2006.November 2015.Charles J. Gray 55 Bradford B. Robbins 58 Gregory S. Smith 53 Walter G. Vahey 52 President of System Test sincefrom July 2012;2012 to December 2017; Vice President of Teradyne since 2008; General Manager of Storage Test since 2008;from 2008 to December 2017; General Manager of Production Board Test sincefrom April 2013; General Manager of Defense/Aerospace from 20042013 to July 2012.December 2017.Item 1A: and semiconductor industries and industrial automation, such as Teradyne, have, in the past, been negatively impacted by both sudden slowdowns in the global economies and recurring cyclicality within those industries. These cycles have resulted in periods of over-supply; a trend we believe will continue tooccur for newer generations of electronic products. occur. Our business and results of operations depend, in significant part, upon capital expenditures of manufacturers of semiconductors electronics and other electronics,industrial products, which in turn depend upon the current and anticipated market demand for those products. Disruption or deterioration in economic conditions may reduce customer purchases of our products, thereby reducing our revenues and earnings. In addition, such adverse changes in economic conditions, and resulting slowdowns in the market for our products, may, among other things, result in increased price competition for our products, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts receivable from our customers, potential reserves for doubtful accounts and write-offs of accounts receivable, increased risk of restructuring charges, and higher operating costs as a percentage of revenues, which, in each case and together, adversely affect our operating results. We are unable to predict the likely duration, frequency and severity of disruptions in financial markets, credit availability, and adverse economic conditions throughout the world, and we cannot ensure that the level of revenues or new orders for a fiscal quarter will be sustained in subsequent quarters. We have taken actions to address the effects of general economic variability and recurring industry cyclicality, including implementing cost control and reduction measures. We cannot predict whether these measures will be sufficient to offset global or market-specific disruptions that might affect our test businesses and we may need to take additional or different measures in the future. equipment companies and internal development at several of our customers. Some of our competitors have introduced or announced new products with certain performance characteristics that may be considered equal or superior to those we currently offer. We expect our competitors to continue to improve the performance of their current products and to introduce new products or new technologies that provide improved cost of ownership and performance characteristics. New product introductions by competitors could cause a decline in revenues or loss of market acceptance of our products.2016, 20152019, 2018 and 2014,2017, our five largest direct customers in aggregate accounted for 36%27%, 34%27% and 30%32% of consolidated revenues, respectively.product demandconsolidated revenues driven by a singleHuawei, combining direct sales to that customer with sales to the customer’s OSATs, accounted for approximately 11%, 4% and 1% of our consolidated revenues in 2019, 2018 and 2017, respectively. We estimate consolidated revenues driven by another OEM customer, combining direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd. and its leasing company, JA Mitsui Leasing, Ltd)), accounted for approximately 25%10%, 23%,13% and 22% of our consolidated revenues in 2016, 2015,2019, 2018 and 2014,2017, respectively. In any one reporting period, a single customer or several customers may contribute even a larger percentage of our consolidated revenues. In addition, our ability to increase sales will depend, in part, on our ability to obtain orders from current or new significant customers. The opportunities to obtain orders from these customers may be limited, which may impair our ability to grow revenues. We expect that sales of our products will continue to be concentrated with a limited number of significant customers for the foreseeable future. Theproduct demand increases.consolidated revenues increase.SingaporeKorea and other parts of Asia. As a result, we are subject to a number of economic and other risks, particularly during times of political, health or financial instability in these regions. Disruption of manufacturing or supply sources in these international locations could materially adversely impact our ability to fill customer orders and potentially result in lost business.requirements;requirements including with respect to safety and cyber security;a number of ourcertain general and administrative functions to reputable service providers, many of which are in foreign countries, sometimes impacting communication with them because of language and time differences. Their presence in foreign countries also increases the risk they could be exposed to political risk. Additionally, there may be difficulties encountered in coordinating the outsourced operations with existing functions and operations. If we fail in successfully coordinating and managing the outsourced service providers, it may cause an adverse effect on our operations which could have a material adverse effect on our business, results of operations or financial condition.Robots.Robots, in 2018, we acquired Energid and MiR and, in 2019, we acquired Lemsys and AutoGuide. We may not be able to realize the benefit of acquiring Universal Robots or successfully grow Universal Robots’ business.growing these businesses. We may continue to acquire additional businesses, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing businesses. We may not be able to realize the expected synergies and cost savings from the integration with our existing operations of other businesses or technologies that we may acquire. In addition, the integration process for our acquisitions may be complex, costly and time consuming and include unanticipated issues, expenses and liabilities. We may have difficulty in developing, manufacturing and marketing the products of a newly acquired company in a manner that enhances the performance of our combined businesses or product lines and allows us to realize value from expected synergies. Following an acquisition, we may not achieve the revenue or net income levels that justify the acquisition. Acquisitions may also result inIn the second quarter of 2016, we performed an interim goodwill impairment test and recorded a goodwill impairment loss of $254.9 million and $83.3 million intangible asset impairment in our Wireless Test segment as a result of a sharp decline in projected demand attributable to an estimated smaller future wireless test market.The decrease in projected demand was due to lower forecasted buying from our largest Wireless Test segment customer (who has contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011 through 2015) as a result of the customer’s numerous operational efficiencies; slower smartphone growth rates; and a slowdown of new wireless technology adoption.In the fourth quarter of 2014, we performed our annual goodwill impairment test and recorded a goodwill impairment charge of $98.9 million in our Wireless Test segment as a result of decreased projected demand attributable to an estimated smaller future wireless test market due to reuse of wireless test equipment, price competition and different testing techniques.2016,2019, we have not incurred material costs as a result of the monitoring and remediation steps taken at the Massachusetts and New Hampshire sites.entitiesauthorities in the United States and other countries. We have pursued a global tax strategy which could be adversely be affected by the mix of earnings and tax rates in the countries where we operate, changes to tax laws, tax regulations or an adverse tax ruling by administrative entities.authorities. We are also subject to tax audits in the countries where we operate. Any material assessmentchange in our tax liability resulting from changes in tax laws, tax regulations, administrative ruling or from an audit from an administrative tax or revenue entityauthority could also negatively affect our financial results.Teradynewe entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2015. The new tax holiday is scheduled to expire on December 31, 2020. The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2016, 20152019, 2018 and 20142017 were $17.0$15.1 million or $0.08 per diluted share, $11.5 million or $0.05 per diluted share and $13.2$11.9 million or $0.06 per diluted share and $24.8 million or $0.12 per diluted share, respectively.K:M: “Commitments and Contingencies—Guarantees and Indemnification Obligations” in Notes to Consolidated Financial Statements.In January 2017, ourOur Board of Directors increased our quarterly cash dividend to $0.07 per share.share in January 2017, to $0.09 per share in January 2018 and to $0.10 per share in January 2020. In December 2016,January 2018, our Board of Directors approved a $1.5 billion share repurchase authorization. In 2019 and 2018, we repurchased $500 million and $823 million of common stock, respectively. In January 2020, our Board of Directors approved a new $500 million$1.0 billion share repurchase authorization that commenced on January 1, 2017.and cancelled the 2018 authorization. We intend to repurchase at least $200a minimum of $250 million in 2017. Our January 2015 stock repurchase program was terminated on December 31, 2016. In 2016 and 2015, we repurchased $146 million and $300 million of common stock, respectively.2020. Holders of our common stock are only entitled to receive dividends when and if they are declared by our Board of Directors. Future cash dividends and share repurchases are subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition. While we have declared a quarterly cash dividend on our common stock and authorized a share repurchase program, we are not required to do either and may reduce or eliminate our cash dividend or share repurchase program in theOn April 27, 2015, we entered into a five-year, senior secured revolving credit facility of up to $350.0 million. Subject to customary conditions, we may seek to obtain from existing or new lenders incremental commitments under the credit facility in an aggregate principal amount not to exceed $150.0 million. We have not borrowed any funds under this credit facility. We could borrow funds under this credit facility at any time for general corporate purposes and working capital.initial conversion price of the Notes of $31.84.$31.62. The Note Hedge Transactions cover, subject to customary antidilutionanti-dilution adjustments, approximately 14.414.5 million shares of our common stock. (or,antidilutionanti-dilution adjustments, approximately 14.414.5 million shares of our common stock. The strike price of the warrants will initially be $39.95is $39.68 per share (subject to adjustment), which was approximately 60% above the closing sale price of our common stock on December 6, 2016.share. The Warrant Transactions could have a dilutive effect to our common stock to the extent that the market price per share of our common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.Restrictive covenants in the agreement governing our senior secured revolving credit facility may restrict our ability to pursue business strategies.The agreement governing our senior secured revolving credit facility limits our ability, among other things, to: incur additional secured indebtedness; sell, transfer, license or dispose of assets; consolidate or merge; enter into transactions with our affiliates; and incur liens. In addition, our senior secured revolving credit facility contains financial and other restrictive covenants that limit our ability to engage in activities that may be in ourlong term best interest, such as, subject to permitted exceptions, making capital expenditures in excess of certain thresholds, making investments, loans and other advances, and prepaying any additional indebtedness while our indebtedness under our senior secured revolving credit facility is outstanding. Our failure to comply with financial and other restrictive covenants could result in an event of default, which if not cured or waived, could result in the lenders requiring immediate payment of all outstanding borrowings or foreclosing on collateral pledged to them to secure the indebtedness.In 2016, an earthquakeJapan damagedearly February 2020, the coronavirus outbreak has resulted in disruption to our building beyond repairbusiness operations in China, including increased travel restrictions and impactedthe extended closing of certain of our operations located in Kumamoto, Japan. We have temporarily transferredoffices. At this time, the manufacturing operations to other facilities so we dodisruption has not expect the damage to havehad a significantmaterial adverse impact on our ability to manufacture our productsbusiness. If the spread of the virus continues and disruption in China or sell products to our customers. However, the situation in Kumamoto remains uncertain so the events could have a short-term impact toelsewhere worsens, our business in Japan. In addition, we may incur significant uninsured costs in order to rebuild our operations which could have an adverse effect on our financial condition and results of operations.some of which are managed by third parties, to process, transmit and store electronic information, including proprietary and confidential data, and to carry out and support a variety of businesscyber attacks,cyber-attacks, could have a material adverse effect on our business or financial results, disrupt our business, result in the disclosure or misuse of proprietary or confidential information, damage our reputation, cause losses and increase our costs.have increasingly becomeare subject to campaigns by shareholders advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases or divestitures. We may become subject in the future to such shareholder activity and demands. Such activities could interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, divert the attention of management or result in our initiating borrowing or increasing our share repurchase plan or dividend, any of which could have an adverse effect on our business or stock price.Item 1B: UnresolvedItem 2: PropertiesThe following table provides information asprincipal facilities: Major
Activity(1) Approximate
Square Feet of
Floor Space Semiconductor Test & System Test 1-2-3-4-5 422,000 Semiconductor Test 3-4 120,000 Semiconductor Test 2-3-4-5 79,000 621,000 Semiconductor Test 1-2-5 183,000 Semiconductor Test 2-3-4-5 128,000 Industrial Automation 2-3-4-5 130,000 Semiconductor Test 2-3-4-5 95,000 Wireless Test & Semiconductor Test 2-3-4-5 91,000 3-4-5 75,000 Semiconductor Test 1-5 63,000 Semiconductor Test & System Test 4 43,000 Semiconductor Test & Industrial Automation 1-3-4 32,000 Semiconductor Test 4 30,000 870,000 (1)Item 3:Major activities have been separated into the following categories: 1. Corporate Administration, 2. Manufacturing, 3. Engineering, 4. Sales and Marketing, 5. Storage and Distribution.Item 3:Legal ProceedingsItem 4: SafetySafety DisclosureItem 5: Registrant’sRegistrant’s Common Equity, Related ShareholderShareholder Matters and Issuer Purchases of Equity SecuritiesThe following table shows the market range for ourbased on reported sales priceis traded on the New York Stock Exchange andNasdaq Global Select Market under the dividends declared per share during such periods: High Low Dividends $ 20.15 $ 17.60 $ 0.06 21.33 18.03 0.06 20.00 16.06 0.06 21.58 18.09 0.06 $ 21.83 $ 17.34 $ 0.06 21.84 18.07 0.06 21.66 18.87 0.06 26.59 20.22 0.06 The number of record holders of our common stock at February 24, 2017 was 1,737.In January 2016, May 2016, August 2016 and November 2016, our Board of Directors declared a quarterly cash dividend of $0.06 per share.In January 2015, May 2015, August 2015 and November 2015, our Board of Directors declared a quarterly cash dividend of $0.06 per share.In January 2015, our Board of Directors cancelled the November 2010 stock repurchase program and authorized a new stock repurchase program for up to $500 million of common stock. The cumulative repurchases as of December 31, 2016 totaled 22.5 million shares of common stock for $446 million at an average price per share of $19.87.In December 2016, our Board of Directors approved a new $500 million share repurchase authorization which commenced on January 1, 2017. We intend to repurchase at least $200 million in 2017. Our January 2015 stock repurchase program was terminated on December 31, 2016.In January 2017, our Board of Directors approved an increase to our quarterly cash dividend to $0.07 per share.our performance graph.quarterthree months ended December 31, 20162019 (in thousands except per share price): (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 422 $ 21.44 420 $ 105,961 99 22.75 95 $ 103,803 2,007 24.97 2,006 $ 53,721 2,528 (1) 24.29 (1) 2,521 $ $ $ $ $ $ (1) $ (1) (1) Includes approximately seventhree thousand shares at an average price of $22.68$60.44 withheld from employees for the payment of taxes.Item 6: Years Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands, except per share amounts) $ 1,753,250 $ 1,639,578 $ 1,647,824 $ 1,427,933 $ 1,656,750 $ (43,421 ) $ 206,477 $ 81,272 $ 164,947 $ 217,049 $ (0.21 ) $ 0.98 $ 0.40 $ 0.86 $ 1.16 $ (0.21 ) $ 0.97 $ 0.37 $ 0.70 $ 0.94 $ 0.24 $ 0.24 $ 0.18 $ — $ — $ 2,762,493 $ 2,548,674 $ 2,538,520 $ 2,629,824 $ 2,429,345 $ — $ — $ — $ 186,663 $ 2,328 $ 352,669 $ — $ — $ — $ 171,059 $ $ $ $ $ $ $ $ $ ) $ $ $ $ $ ) $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (1) The Consolidated Statementyear ended December 31, 2019 includes a $26.0 million tax benefit from the release of Operations Datauncertain tax position reserves due to the IRS completion of its audit of our 2015 Federal tax return, a $15.0 million charge for the impairment of the investment in RealWear, $8.2 million of pension actuarial losses, and the results of operations of Lemsys and AutoGuide from January 30, 2019 and November 13, 2019, respectively.(2) The year ended December 31, 2018 includes $49.5 million of tax benefit related to the finalization of the U.S. transition tax liability, $3.3 million of pension actuarial gains, and the results of operations of Mobile Industrial Robots and Energid from April 25, 2018 and February 26, 2018, respectively. (3) The year ended December 31, 2017 includes $186.0 million of provisional tax expense related to the Tax Reform Act and $6.6 million of pension actuarial gains. (4) The year ended December 31, 2016 includes a $254.9 million goodwill impairment charge and an $83.3 million acquired intangible assets impairment charge related to the Wireless Test segment, and $3.2 million of pension actuarial gains. (2)(5)The Consolidated Statement of Operations Data for the year ended December 31, 2015 includes $17.7 million of pension actuarial losses, a $5.4 million gain from the sale of an equity investment and the results of operations of Universal Robots from June 12, 2015.(3)The Consolidated Statement of Operations Data for the year ended December 31, 2014 includes a $98.9 million goodwill impairment charge related to the Wireless Test segment and $46.6 million of pension actuarial losses.(4)The Consolidated Statement of Operations Data for the year ended December 31, 2013 includes a $34.2 million gain from the sale of an equity investment and $10.3 million of pension actuarial gains.(5)The Consolidated Statement of Operations Data for the year ended December 31, 2012 includes $23.3 million of pension actuarial losses.Item 7: broad 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.In 2015, we acquired Universal Robots A/S (“Universal Robots”), the leading supplier of collaborative robots, which arelow-cost,easy-to-deployautonomous mobile robots andsimple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Universal Robots is a separate operating and reportable segment, Industrial Automation. The acquisition of Universal Robots provides a growth engine to our business and complements our existing System Test and Wireless Test segments. The total purchase price for Universal Robots was approximately $315 million, which included cash paid of approximately $284 million and $32 million in fair value of contingent consideration payable upon achievement of revenue and earnings targets through 2018. Contingent consideration paid for 2015 was $15 million. The maximum payment for each of the two remaining Universal Robots earn-outs is $25.0 million.In 2014, we acquired Avionics Interface Technologies, LLC (“AIT”), a supplier of equipment for testingstate-of-the-art data communication buses. The acquisition of AIT complements our Defense/Aerospace line of bus wireless test instrumentation for commercial and defense avionics systems. AIT is included in our System Test segment. The total purchase price for AIT was approximately $21 million, which included cash paid of approximately $19 million and $2 million in fair value of contingent consideration payable upon achievement of revenue and gross margin targets in 2015 and 2016. The total amount of contingent consideration paid was $1.1 million.We believe our recent acquisitions 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.sincebecause our customers often delay or accelerate purchases in reaction to changes in their businesses and to demand fluctuations in the semiconductor, electronics and electronicsindustrial automation industries. Historically, these demand fluctuations have resulted in significant variations in our results of operations.sharp swingsmarket for our test products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. A few customers drive significant demand for our test products both through direct sales and sales to the customers’ supply partners. We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future.semiconductorgrowth of our Industrial Automation businesses.electronics industriessimplifies the programming of complex robotic motions used in recent years have generally affecteda wide variety of end markets, ranging from heavy industry to healthcare, utilizing both traditional robots and collaborative robots. Energid is included in our Industrial Automation segment.semiconductor and electronics test equipment and services industries more significantly than the overall capital equipment sector.In recent years, this cyclical demand has become an even/odd year trend where demand has increased in even years and decreased in odd years due principally to demand swingsMiR reporting unit’s estimated fair value exceeded its carrying value by 14%. The MiR goodwill amount is $123.6 million as of December 31, 2019. Key assumptions in the mobility marketgoodwill valuation model are forecasted revenues, discount rate and earnings before interest and taxes. A change in any of our Semiconductor Test business. We expect the even/odd year demand trendthese key assumptions could result in the mobility market to most likely lessenreporting unit being impaired in a future period.future due to slower smart phone unit growth, along with rising device complexityelectrification trends of vehicles, solar, wind, and the reduced impact of parallel testindustrial applications. Lemsys is included in our Semiconductor Test business.April 16, 2016, an earthquakeJune 3, 2019, we invested $15.0 million in Kumamoto, Japan damaged our main building atRealWear, Inc. (“RealWear”). RealWear, a private company, develops and sells advanced wearable technology including industrial, hands-free, head-mounted augmented reality devices that location. The building, which was used for engineering, production,make the workplace safer and support operations, was damaged beyond repair. With respectmore productive. On February 28, 2020, RealWear’s debt holder demanded repayment of its $25.0 million loan to the location, we have $10 million of earthquake insurance with a deductible of approximately $2.5 million.RealWear. As a result, we impaired the building and recorded a charge of $4.2 million and a charge of $1.2 million for other earthquake related expenses. The $5.4 million of total charges were offset by $5.4 million of property insurance recovery. We have temporarily transferred some operations to other facilities in Japan and elsewhere while our Kumamoto operations are restored.In the second quarter of 2016, the Wireless Test reporting unit (which is our Wireless Test operating and reportable segment) reduced headcount by 11% as a result of a sharp decline in projected demand attributable to an estimated smaller future wireless test market. The decrease in projected demand was due to lower forecasted buying from our largest Wireless Test segment customer (who has contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011 through 2015) as a result of the customer’s numerous operational efficiencies; slower smartphone growth rates; and a slowdown of new wireless technology adoption. We considered the headcount reduction and sharp decline in projected demand to be a triggering event for an interim goodwill impairment test. Following the interim goodwill impairment test, we recorded a goodwill impairment charge of $254.9 million, with approximately $8.0 million of goodwill remaining, and $83.3 million for the impairment of acquired intangible assets with approximately $5.0 million of intangible assets remaining. In the third quarter of 2016, the Wireless Test reporting unit reduced headcount by an additional 14%.In the fourth quarter of 2014,2019, we performed our annual goodwill impairment test and recorded a goodwillan impairment charge of $98.9$15.0 million to reduce our investment in RealWear to zero as of December 31, 2019.Wireless TestIndustrial Automation segment, aswhich is a resultkey component of decreased projected demand attributableour growth strategy.an estimated smaller future wireless testcontinue to invest in our business, grow market due to reuse of wireless test equipment, price competitionshare in our markets and different testing techniques.RecognitionWefrom Contracts with Customersincluding revenues from distributors,when or as control is transferred to a customer. Our determination of revenue is dependent upon a five step process outlined below.persuasive evidencewritten approval, the contract is committed, the rights of an arrangement, titlethe parties, including payment terms, are identified, the contract has commercial substance and riskconsideration is probable of losscollection.passed, delivery has occurred orvariable consideration which could impact the services have been rendered,stated purchase price agreed to by us and the salescustomer.fixedallocated to each individual performance obligation based on the standalone selling price of that performance obligation. We use standalone transactions when available to value each performance obligation. If standalone transactions are not available, we will estimate the standalone selling price through market assessments or determinable and collectioncost plus a reasonable margin analysis. Any discounts from standalone selling price are spread proportionally to each performance obligation.related receivablefive criteria for transfer of control. We have concluded that revenue should be recognized when shipped or delivered based on contractual terms. Typically, acceptance of our products and services is reasonably assured. Titlea formality as we deliver similar systems, instruments and risk of loss generally passrobots to our customers upon shipment or at delivery destination point.standard specifications. In circumstancescases where either title or risk of loss pass upon destination, acceptance or cash payment,is not deemed a formality, we will defer revenue recognition until such events occur except when title transfer is tied to cash payment outside the United States. Outside the United States, we recognize revenues upon shipment or at delivery destination point, even if we retain a form of title to products delivered to customers, provided the sole purpose is to enable us to recover the products in the event of customer payment default and the arrangement does not prohibit the customer’s use or resale of the product in the ordinary course of business.Our equipment hasnon-software and embedded software components that function together to deliver the equipment’s essential functionality. Revenue is recognized upon shipment or at delivery destination point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require us toperform tests of the product to ensure that performance meets the published product specifications or customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. We also defer the portion of the sales price that is not due until acceptance, which represents deferred profit.For multiple element arrangements, we allocate revenues to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenues to deliverables as follows: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). For a delivered item to be considered a separate unit, the delivered item must have value to the customer on a standalone basis and the delivery or performance of the undelivered item must be considered probable and substantially in our control.Our post-shipment obligations include installation, training services,one-year standard warranties, and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or tools and can be performed by the customers or other vendors. Installation is typically provided within five days of product shipment and is completed within one to two days thereafter. Training services are optional and do not affect the customers’ ability to use the product. We defer revenues for the selling price of installation and training. Extended warranties constitute warranty obligations beyond one year and we defer revenues in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)605-20, “Separately Priced Extended Warranty and Product Maintenance Contracts” and ASC605-25, “Revenue Recognition Multiple-Element Arrangements.” Service revenue is recognized over the contractual period or as services are performed.Our products are generally subject to warranty and the related costs of the warranty are provided for in cost of revenues when product revenue is recognized. We classify shipping and handling costs in cost of revenues.We do not provide our customers with contractual rights of return for any of our products.the Industrial Automation segmentUniversal Robots, MiR and Lemsys for which the local currency is its functional currency. All foreign currency denominated monetary assets and liabilities are remeasured on a monthly basis into the functional currency using exchange rates in effect at the end of the period. All foreign currency denominatedIndustrial Automation,Universal Robots, MiR and Lemsys, assets and liabilities are translated into U.S. dollars using exchange rates in effect at the end of the period. Revenues and expense amounts are translated using an average of exchange rates in effect during the period. Translation adjustments are recorded within accumulated other comprehensive income (loss).( using a standard costing system which approximates cost based on a basis)As required by ASC 718,Upon adoption of ASU have made an estimate of expectedaccounting policy election to continue accounting for forfeitures by applying an estimated forfeiture rate and are recognizing compensation costs only for those stock-based compensation awards expected to vest. U.S. income taxes are not provided for on the earnings ofnon-U.S. subsidiaries which are expected to be reinvested indefinitely in operations outside the U.S. For intra-period tax allocations, we first utilizenon-equity related tax attributes, such as net operating losses and credit carryforwards, and then equity-related tax attributes. We use thewith-and-without method for calculating excess stock compensation deductions and do not take into account any indirect impacts of excess stock compensation deductions on our research and development tax credits, domestic production activities deduction, and other differences between financial reporting and tax reporting.In the second quarter of 2016, the Wireless Test reporting unit (which is our Wireless Test operating and reportable segment) reduced headcount by 11% as a result of a sharp decline in projected demand attributable toan estimated smaller future wireless test market. The decrease in projected demand was due to lower forecasted buying from our largest Wireless Test segment customer (who has contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011 through 2015) as a result of the customer’s numerous operational efficiencies; slower smartphone growth rates; and a slowdown of new wireless technology adoption. We considered the headcount reduction and sharp decline in projected demand to be a triggering event for an interim goodwill impairment test. Following the interim goodwill impairment test, we recorded a goodwill impairment charge of $254.9 million, with approximately $8.0 million of goodwill remaining. In the third quarter of 2016, the Wireless Test reporting unit reduced headcount by an additional 14%. the fourth quarter of 2016, as part of the annual goodwill impairment test.No goodwill impairment was identified in 2015. In the fourth quarter of 2014, we performed2019, 2018 and 2017.annualDecember 31, 2019 goodwill impairment test, the MiR reporting unit’s estimated fair value exceeded its carrying value by 14%. The MiR goodwill amount is $123.6 million as of December 31, 2019. Key assumptions in the goodwill valuation model are forecasted revenues, discount rate and recordedearnings before interest and taxes. A change in any of these key assumptions could result in the reporting unit being impaired in a goodwill impairment charge of $98.9 million in our Wireless Test segment as a result of decreased projected demand attributable to an estimated smaller future wireless test market due to reuse of wireless test equipment, price competition and different testing techniques.As a resultinterim goodwill impairment test inacquisition using all pertinent information known to us at the second quartertime to assess the probability of 2016 described above, we performed an impairment testpayment of contingent amounts or through the Wireless Test segment’s intangible and long-lived assets based onuse of a Monte Carlo simulation model. We allocate any excess purchase price over the comparison of the estimated undiscounted cash flows to the recordedfair value of the assetsnet tangible and recorded an $83.3 million acquired intangible assets impairment charge, with approximately $5.0 millionacquired and liabilities assumed to goodwill. The assumptions used in the valuations for our acquisitions may differ materially from actual results depending on performance of intangiblethe acquired businesses and other factors. While we believe the assumptions used were appropriate, different assumptions in the valuation of assets remaining. There were no events or circumstances indicating thatacquired and liabilities assumed could have a material impact on the carrying valuetiming and extent of acquired intangible and long-lived assets may not be recoverable in 2015, as such no impairment test was performedimpact on our statements of operations. Goodwill is assigned to reporting units as of December 31, 2015. As a resultthe date of the Wireless Test segment goodwill impairment charge in the fourth quarter of 2014 described above, we also performed an impairment test of the Wireless Test segment’s intangible and long-lived assets as of December 31, 2014, with no indication of impairment. When we determine that the carrying value of intangible and long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate commensurate with the associated risks. Years Ended December 31, 2016 2015 2014 82.9 % 81.8 % 82.8 % 17.1 18.2 17.2 100.0 100.0 100.0 37.6 36.1 38.9 7.7 8.1 7.8 45.3 44.2 46.7 54.7 55.8 53.3 16.6 17.8 17.7 18.0 18.7 19.4 3.0 4.2 4.3 4.8 — — 14.5 — 6.0 1.3 0.3 0.1 58.2 41.0 47.5 (3.4 ) 14.8 5.9 (0.5 ) (0.4 ) (0.4 ) 0.2 0.1 0.4 — (0.3 ) — (3.1 ) 15.4 5.8 (0.7 ) 2.8 0.9 (2.5 )% 12.6 % 4.9 % Book to Bill RatioBook to bill ratio is calculated as net bookings divided by net sales. Book to bill ratio by reportable segment was as follows: Three months ended December 31, 2016 2015 2014 1.9 2.0 1.0 0.9 1.1 1.5 1.0 0.8 — 0.9 0.9 1.0 1.7 1.6 1.0 % % ) ) ) % % four reportable segments were as follows: 2016 2015 2014 2015-2016
Dollar
Change 2014-2015
Dollar
Change (in millions) $ 1,368.2 $ 1,201.5 $ 1,300.8 $ 166.7 $ (99.3 ) 189.8 211.6 162.5 (21.8 ) 49.1 99.0 41.9 — 57.1 41.9 96.2 184.6 184.5 (88.4 ) 0.1 $ 1,753.3 $ 1,639.6 $ 1,647.8 $ 113.7 $ (8.2 ) $ $ $ ) ) $ $ $ $166.7$60.2 million, or 4%, from 2018 to 2019 was driven primarily by an increase in semiconductor tester sales for 5G infrastructure and image sensors and higher service revenue, partially offset by a decrease in sales in the automotive and analog test segments.20152018 to 2016 was driven primarily bysystem-on-a-chip (“SOC”) product volume in the mobile application processor market. The decrease in Semiconductor Test revenues of $99.3 million, or 8%, from 2014 to 20152019 was primarily due to a decreasehigher demand for collaborative robots. The MiR acquisition was completed in SOC product volume, driven by smaller microcontroller, power management and radio frequency test markets.The decrease in System Test revenues of $21.8 million, or 10%, from 2015 to 2016 was primarily due to lower sales in Storage Test of 3.5” hard disk drive testers used for testing drives for cloud storage applications. April 2018.$49.1$71.4 million, or 30%33%, from 20142018 to 20152019 was primarily due to higher sales in Storage Test of 3.5” hard disk drive testers, used for testing drives for cloud storage applications.acquisition of Universal Robots, which is our Industrial Automation segment, completed in June 2015, added $99.0 million of revenues in 2016 and $41.9 million of revenues in 2015.The decreaseincrease in Wireless Test revenues of $88.4$25.3 million, or 48%19%, from 20152018 to 20162019 was driven by lowerprimarily due to higher demand for connectivitymillimeter wave and cellular test systems primarily from our largest Wireless Test segment customer. As a result of significant customer concentration in our Wireless Test segment, revenues in that segment are subject to significant fluctuations based on the segment’s largest customer’s order levels. Wireless Test revenues were approximately flat from 2014 to 2015 as an increase in cellular product volume wasproducts driven by new wireless standards and 5G, partially offset by lower sales in connectivity product volume. four reportable segments accounted for the following percentages of consolidated revenues: 2016 2015 2014 78 % 73 % 79 % 11 13 10 6 3 — 5 11 11 100 % 100 % 100 % % % % % 2016 2015 2014 37 % 27 % 30 % 13 13 13 10 16 18 8 7 9 8 8 4 7 7 7 6 5 5 4 6 7 3 6 4 3 4 2 1 1 1 100 % 100 % 100 % % % % % (1) Revenues attributable to a country are based on the location of the customer site. 2016 2015 2014 2015-2016
Dollar
Change 2014-2015
Dollar
Change (in millions) $ 1,453.2 $ 1,340.6 $ 1,364.0 $ 112.6 $ (23.4 ) 300.0 299.0 283.8 1.0 15.2 $ 1,753.3 $ 1,639.6 $ 1,647.8 $ 113.7 $ (8.2 ) $ $ $ $ $ $ $112.6$158.1 million, or 8%9%, in 20162019 from 20152018 primarily due to higher volume in the mobile application processor marketsales in Semiconductor Test and the addition of Universal Robots in June 2015. This increase was partially offset by decreases in Wireless Test revenues due to lower demand for connectivity and cellular test systems and lower sales in Storage Test of 3.5” hard disk drive testers for cloud storage. Service revenues, which are derived from the servicing of our installed base of products5G infrastructure and include equipment maintenance contracts, repairs, extended warranties, parts sales, and applications support increased $1.0 million.Our product revenues decreased $23.4 million, or 2%, in 2015 from 2014 primarily due to lower SOC product volume, driven by smaller microcontroller, power management and radio frequency test markets. This decrease was partially offset byimage sensors, higher sales in Storage Test of 3.5” hard disk drive testers, for cloud storage and the addition of Universal Robotshigher demand in 2015.Industrial Automation, partially offset by a decrease in sales in Semiconductor Test automotive and analog test segments. Service revenues increased $15.2$36.1 million or 5%10%.2016, two customers each accounted for 12% of our consolidated revenues. In 2015, revenues from one customer accounted for 13% of our consolidated revenues. In 2014,2019 and 2018, no single direct customer accounted for more than 10% of our consolidated revenues. In each of the years, 2016, 20152019 and 2014,2018, our five largest direct customers in aggregate accounted for 36%, 34%27% and 30%, respectively,27% of our consolidated revenues. revenues, respectively.product demandconsolidated revenues driven by a singleHuawei Technologies Co. Ltd. (“Huawei”), combining direct sales to that customer with sales to the customer’s OSATs, accounted for approximately 11% and 4% of our consolidated revenues in 2019 and 2018, respectively. We estimate consolidated revenues driven by another OEM customer, combining direct sales to that customer with sales to the customer’s OSATs, accounted for approximately 25%, 23%,10% and 22%13% of our consolidated revenues in 2016, 2015,2019 and 2014,2018, respectively. 2016 2015 2014 2015-2016
Dollar /
Point
Change 2014-2015
Dollar /
Point
Change (dollars in millions) $ 959.6 $ 915.6 $ 878.8 $ 44.0 $ 36.8 54.7 % 55.8 % 53.3 % (1.1 ) 2.5 Gross profit as a percent of total revenues decreased from 2015 to 2016 by 1.1 points, of which a 2.5 point decrease was related to product mix and sales of previously leased testers in Semiconductor Test in 2015, and lower Wireless Test sales, partially offset by a 0.6 points increase due to lower pension expense related to actuarial gains in 2016 compared to actuarial losses in 2015, a 0.5 point increase due to higher product volume and a 0.3 point increase due to lower excess and obsolete inventory provisions. $ $ $ % % 20142018 to 20152019 by 2.50.3 points, primarily due to favorable product mix in Semiconductor Test product mix and sales of previously leased testers in SemiconductorStorage Test. 2016 2015 2014 2015-2016
Dollar /
Point
Change 2014-2015
Dollar /
Point
Change (dollars in millions) $ 794.2 $ 748.8 $ 723.2 $ 45.4 $ 25.6 54.6 % 55.9 % 53.0 % (1.3 ) 2.9 $ 165.4 $ 166.8 $ 155.6 $ (1.4 ) $ 11.2 55.1 % 55.8 % 54.8 % (0.7 ) 1.0 $ $ $ % % $ $ $ % % ) revenuerevenues information isproduct demand.consolidated revenues. 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, Industrial Automation and System Test and Industrial Automation segments and next four quarters for our Wireless Test segment, is written-down to estimated net realizable value.2016,2019, we recorded an inventory provision of $17.5$15.2 million included in cost of revenues, primarily due to downward revisions to previously forecasted demand levels.levels for certain products. Of the $17.5$15.2 million of total excess and obsolete provisions, $9.7$8.7 million was inrelated to Semiconductor Test, $7.2$4.0 million was inrelated to Wireless Test, and $0.6$2.0 million was related to System Test.2015,2018, we recorded an inventory provision of $21.3$11.2 million included in cost of revenues, primarily due to downward revisions to previously forecasted demand levels for certain products. Of the following factors:—A charge of $15.3$11.2 million due to downward revisions to previously forecasted demand levels, of which $8.2 million was for our 2.5” hard disk drive testers in Storage Test, $4.5 million was in Semiconductor Test and $2.5 million was in Wireless Test; and—A $6.0 million inventory write-down as a result of product transition in Semiconductor Test.During the year ended December 31, 2014, we recorded an inventory provision of $22.2total excess and obsolete provisions, $6.8 million included in cost of revenues, duewas related to the following factors:—A charge of $15.4 million due to downward revisions to previously forecasted demand levels, of which $8.1 million was in Semiconductor Test, $5.2 million was in Wireless Test and $2.1 million was in System Test; and—A $6.8 million inventory write-down as a result of product transition, of which $6.3 million was in Semiconductor Test and $0.5 million in Wireless Test.2016, 20152019 and 2014,2018, we scrapped $15.2 million, $7.0$9.2 million and $20.8$7.0 million of inventory, respectively, and sold $10.0 million, $7.9$3.2 million and $13.1$6.7 million of previously written-down or2016,2019, we had inventory related reserves for amounts which had been written-down or$116.0$103.6 million. We have no $ $ $ % % 2016 2015 2014 2015-2016
Change 2014-2015
Change (dollars in millions) $ 291.0 $ 292.3 $ 291.6 $ (1.3 ) $ 0.7 16.6 % 17.8 % 17.7 % $ $ $ % % decreaseincrease of $1.3$21.3 million in engineering and development expenses from 20152018 to 20162019 was due primarily to lower pension expense related to $1.2 million actuarial gainshigher spending in 2016 compared to $4.7 million of actuarial losses in 2015, partially offset by additional costs as a result of the acquisition of Universal Robots in June 2015.The increase of $0.7 million in engineeringIndustrial Automation and development expenses from 2014 to 2015 was due to $3.9 million ofWireless Test and higher variable compensation, $2.6 millioncompensation.Other2016,2019, we recorded $15.9a gain of $22.2 million from the decrease in the fair value of the MiR contingent consideration liability, partially offset by a $3.0 million increase in the fair value of the AutoGuide contingent consideration, $2.9 million of otherseverance charges related to headcount reductions primarily in Semiconductor Test and Industrial Automation, and $2.5 million for acquisition related expenses and compensation.which $15.3$17.7 million was for the increase in the fair value of the MiR contingent consideration liability, $8.7 million of severance charges related to headcount reductions primarily in Semiconductor Test, and $4.5 million for acquisition related expenses and compensation, partially offset by a gain of $16.7 million from the decrease in the fair value of the Universal Robots contingent consideration liability,$0.6 million for the increase in the fair value of the AIT contingent consideration liability, $4.2 million for an impairment of fixed assets and $1.2 million for expenses related to an earthquake in Kumamoto, Japan, partially offset by $5.4 million of property insurance recovery related to the Japan earthquake.During the year ended December 31, 2015, we recorded $3.6 million of other charges, of which $5.3 million was for the increase in the fair value of the Universal Robots contingent consideration liability and $1.0 million for acquisition costs related to Universal Robots, partially offset by a $2.9 million gain from fair value adjustments to decrease the acquisition contingent consideration liability related to ZTEC Instruments Inc. (“ZTEC”) ($1.6 million) and AIT ($1.3 million).During the year ended December 31, 2014, we recorded a $0.6 million gain from the fair value adjustment to decrease the ZTEC acquisition contingent consideration, partially offset by $0.4 million of acquisition costs related to AIT.RestructuringDuring the year ended December 31, 2016, we recorded $6.0 million of severance charges related to headcount reductions of 146 people, of which 102 people were in Wireless Test and 44 people were in Semiconductor Test.During the year ended December 31, 2015, we recorded $1.5 million of severance charges related to headcount reductions of 23 people primarily in System Test and Semiconductor Test.During the year ended December 31, 2014, we recorded $1.6 million of severance charges related to headcount reductions of approximately 43 people, primarily in Semiconductor Test and Wireless Test.$2.1$0.5 million is reflected in the accrued employees’ compensation and withholdings on the balance sheet and is expected to be paid by June 2017. 2016 2015 2014 2015-2016
Change 2014-2015
Change (in millions) $ (9.3 ) $ (7.2 ) $ (6.3 ) $ (2.1 ) $ (0.9 ) 3.6 1.9 6.9 1.7 (5.0 ) 0.7 (4.8 ) 0.4 5.5 (5.2 ) $ ) $ ) $ ) increaseddecreased by $2.1$1.9 million from 20152018 to 2016,2019 due primarily to higherlower cash and marketable securities balances and higher interest rates in 2016. Interest income increased by $0.9 million from 2014 to 2015 due primarily to higher interest rates on marketable securitiesInterest expense increased by $1.7 million, from 2015 to 2016, due primarily to $1.0 million of interest expense related to our convertible senior notes in 2016 and $0.7 million due primarily to costs related to the revolving credit facility and realized losses on sales of marketable securities in 2016.2019. Interest expense decreased by $5.0$8.2 million from 20142018 to 2015,2019 due primarily to the first quarter 2014 repayment of our previously issued convertible debt.In 2015, otherunrealized losses on equity marketable securities recognized in 2018. Other (income) expense, net includedincreased by $28.1 million from 2018 to 2019 due primarily to a $5.4$15.0 million charge for the impairment of the investment in RealWear and an $11.5 million change in pension actuarial (gains) losses from a $3.3 million gain from the sale ofin 2018 to an equity investment. Income Before Income Taxes 2016 2015 2014 2015-2016
Change 2014-2015
Change (in millions) $ 311.9 $ 260.2 $ 255.8 $ 51.7 $ 4.4 28.9 25.1 12.1 3.8 13.0 (371.4 ) (13.8 ) (116.2 ) (357.6 ) 102.4 (16.8 ) (7.6 ) — (9.2 ) (7.6 ) (7.7 ) (10.7 ) (56.3 ) 3.0 45.5 $ (55.1 ) $ 253.1 $ 95.4 $ (308.2 ) $ 157.7 $ $ $ ) ) ) ) $ $ $ (1) Included in Corporate and Other are the following: contingent consideration adjustments, investment impairment, pension and postretirement plans actuarial gains(gains) and losses, contingent consideration adjustments, interest income(income) and interest expense.expense, net foreign exchange (gains) and losses, intercompany eliminations and acquisition related charges.from 2015 to 2016 was primarily due to a $254.9 million goodwill impairment charge and an $83.3 million acquired intangible assets impairment charge related to Wireless Test in 2016, and amortization of intangible assets related to our June 2015 acquisition of Universal Robots, which is our Industrial Automation segment, partially offset byfrom 2018 to 2019 was due primarily to higher revenues in Semiconductor Test application processor marketsales and $3.2 million of pension actuarial gains in 2016 as compared to actuarial losses of $17.7 million in 2015.The increase in income before income taxes from 2014 to 2015 was primarily due to a $98.9 million goodwill impairment charge related to Wireless Test in 2014marketing, and lower pension expense related to actuarial losses of $17.7 million in 2015 as compared to $46.6 million in 2014. Actuarial losses of $46.6 million in 2014 were primarily related to increases in life expectancy in the U.S.Income tax benefit for 2016 totaled $11.6 million. 20152019, 2018 and 20142017 totaled $46.6$58.3 million, $16.0 million and $14.1$266.7 million, respectively. The effective tax rate for 2016, 20152019, 2018 and 20142017 was 21.1%11.1%, 18.4%3.4% and 14.8%50.9%, respectively.20152018 to 2016 resulted from a shift2019 is primarily attributable to increases in expense associated with U.S. global intangiblegeographic distributionmandatory deemed repatriation of income which decreased income subject to taxation in the U.S. relative to lower tax rate jurisdictions, reductions in uncertain tax positions resulting from the expiration of statutes and the settlement of an audit, and an increase innon-taxableforeign exchange gains.earnings. These increases in the effective tax rateexpense were partially offset by increased benefit from the U.S. foreign derived intangible income deduction, foreign tax credits and a net reduction in reserves for uncertain tax positions.non-deductible goodwill impairment charge, which reduced Tax Reform Act based on the benefitapplication of the loss beforeguidance available as of December 31, 2018 and recorded $49.5 million of net income taxestax benefit. The net benefit consisted of $51.7 million of benefit resulting from a reduction in the U.S.increasechange in the effective tax rate from 20142017 to 2015 resulted from2018 was also impacted by a shift in the geographic distribution of income which increased income subject to taxation in the U.S. relative to lower tax rate jurisdictions, and a reduction in the benefit fromof the U.S. researchforeign derived intangible income deduction and development tax credits. These increases in the effective tax rate were partially offset by decreases associated with uncertain tax positionsdiscrete benefit fromanon-deductible goodwill impairment charge.2016, 20152019, 2018 and 20142017 were $17.0$15.1 million or $0.08 per diluted share, $11.5$11.9 million or $0.05$0.06 per diluted share and $13.2$24.8 million or $0.06$0.12 per diluted share, respectively. The tax holiday is scheduled to expire on December 31, 2020.2016: Payments Due by Period Total Less than
1 year 1-3
years 3-5
years More than
5 years Other (in thousands) $ 460,000 $ — $ — $ — $ 460,000 $ — 260,715 247,855 12,860 — — — 110,872 5,912 8,104 8,392 88,464 — 72,111 16,467 28,991 16,523 10,130 — 40,314 5,814 11,500 11,500 11,500 — 38,332 1,050 37,282 — — — 64,249 — 23,463 — — 40,786 $ 1,046,593 $ 277,098 $ 122,200 $ 36,415 $ 570,094 $ 40,786 $ $ $ $ $ $ $ $ $ $ $ $ $ (1) Represents the transition tax liability associated with our accumulated foreign earnings as a result of enactment of the Tax Reform Act on December 22, 2017. (2) Included in other long-term liabilities are liabilities for customer advances, extended warranty, uncertain tax positions, deferred tax liabilities and other obligations. For certain long-term obligations, we are unable to provide a reasonably reliable estimate of the timing of future payments relating to these obligations and therefore we included these amounts in the column marked “Other.” increased $604 million to $1,613decreased by $189 million from 20152018 to 2016.In 2016, changes2019 to $1,016 million.providedused cash of $40.8 million. This was$51.7 million due to a $33.7$121.6 million decreaseincrease in operating assets and a $7.1$69.9 million increase in operating liabilities.decreaseincrease in operating assets was due to an $18.3a $70.4 million decreaseincrease in accounts receivable due to increased collectionssales, a $27.4 million increase in inventories, and a $34.3 million decrease in inventories, partially offset by an $18.9$23.8 million increase in prepayments and other assets.$18.4$39.3 million increase in income taxes,deferred revenue and customer advance payments, a $3.9$24.8 million increase in accounts payable, a $15.3 million increase in accrued employee compensation and a $7.6$9.2 million increase in other accrued liabilities, partially offset by a $13.2$13.6 million decrease in accrued employee compensation due primarily to variable compensationincome taxes, and employee stock compensation awards’ payroll tax payments, $6.0$5.1 million of retirement plans contributions and a $3.6 million decrease in customer advance payments and deferred revenue.20162019 used cash of $640.5$156.7 million, due to $1,656.3$662.7 million used for purchases of marketable securities, and $85.3$134.6 million used for purchases of property, plant and equipment, $57.8 million, net of cash acquired, used for the acquisition of AutoGuide, $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 $611.9 million and $105.6 million in proceeds from maturities and sales of marketable securities, of $243.2 million and $852.8 million, respectively, and proceeds from propertylife insurance of $5.1$2.9 million related to the Japan earthquake.2016 provided2019 used cash of $237.8$574.3 million, due to $450.8$500.0 million used for the repurchase of proceeds from the issuance10.9 million shares of senior convertible notes,common stock at an average price of $45.89 per share, $61.3 million used for dividendissuance costs, $67.9 million of proceeds from the issuance of warrants, $20.5employee stock compensation awards, partially offset by $29.3 million from the issuance of common stock under employee stock purchase and stock option plans and $6.2 million from the tax benefit related to employee stock compensation awards, partially offset by $146.3 million used for the repurchaseplans.6.8 million shares of common stock at an average price of $21.39 per share, $100.8 million used for the purchase of convertible note hedges, $48.6 million used for dividend payments and $11.7 million used for a payment related to the Universal Robots acquisition contingent consideration.In 2015, changes$476.9 million. Changes in operating assets and liabilities net of businesses acquired, providedused cash of $9.3$163.5 million. This was due to a $38.7$105.8 million increase in operating assets and a $48.0$57.7 million increasedecrease in operating liabilities.$57.3$58.4 million increase in prepayments and other assets due primarily to payments to our contract manufacturers, a $29.5 million increase in inventories, and a $17.9 million increase in accounts receivable due to an increasehigher sales in sales during the last month of the fourth quarter of 2015 compared to 2014, partially offset by a $15.6 million2018. in inventories and a $3.0 million decrease in prepayments and other assets.The increase in operating liabilities was due to a $37.0$80.4 million increasedecrease in accounts payable asincome taxes, primarily related to a resultdecrease in our transitional tax liability associated with our accumulated foreign earnings under the U.S. Tax Reform Act, a $5.5 million decrease in other accrued liabilities and $4.3 million of our planned inventory increase in the fourth quarter of 2015 as we added material to maintain attractive lead times,retirement plans contributions, partially offset by a $17.0$13.4 million increase in customer advance payments and deferred revenue, and a $11.3$12.9 million increase in other accrued liabilities, partially offset by $12.1 million of retirement plans contributionsaccounts payable, and a $5.2$6.3 million increase in income taxes.2015 used2018 provided cash of $113.7$923.0 million, due to $1,424.0$1,270.4 million used for purchases of marketable securities, $282.7and $846.1 million used for the acquisition of Universal Robots, and $89.9 million used for purchases of property, plant and equipment, partially offset byin proceeds from maturities and sales of marketable securities, of $360.3 million and $1,316.1 million, respectively, proceeds from the salea government subsidy of an equity investment of $5.4$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 a Teradyne owned life insurance policies. The decrease inpolicy, partially offset by $918.7 million used for purchase of marketable securities, $169.5 million used for the acquisitions of MiR and Energid, and $114.4 million used for purchases of property, plant and equipment of $79.1 million was primarily due to an increase in purchases of testers for customer leasing in 2014.20152018 used cash of $328.7$903.4 million, due to $300.0$823.5 million used for the repurchase of 15.621.6 million shares of common stock at an average price of $19.20$38.06 per share, $50.7$67.3 million used for dividend payments, and $2.3$20.0 million used for debt issuance costspayments related to our April 2015 revolving credit facility,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 $19.5$21.0 million from the issuance of common stock under employee stock purchase and stock option plans and $4.7 million from the tax benefit related to employee stock compensation awards.In 2014, changes in operating assets and liabilities, net of businesses acquired, provided cash of $68.5 million. This was due to a $101.4 million decrease in operating assets and a $32.9 million decrease in operating liabilities.The decrease in operating assets was due to a $41.5 million decrease in prepayments and other assets primarily related to a reduction in prepayments to our contract manufacturers, a $51.8 million decrease in inventories due to higher sales, and an $8.1 million decrease in accounts receivable.The decrease in operating liabilities was due to $33.9 million of retirement plan contributions, a $17.0 million decrease in other accrued liabilities, a $16.9 million decrease in accounts payable, a $7.3 million decrease in accrued employee compensation due primarily to employee stock awards payroll taxes and variable compensation payments, and a $4.3 million convertible note interest payment, partially offset by a $24.4 million increase in income taxes, and a $22.0 million increase in customer advance payments and deferred revenue.Investing activities during 2014 used cash of $332.9 million, due to $1,578.7 million used for purchases of marketable securities and $169.0 million used for purchases of property, plant and equipment, and $19.4 million used for the acquisition of AIT, completed in October 2014, partially offset by proceeds from sales and maturities of marketable securities that provided cash of $859.7 million and $570.4 million, respectively, and net proceeds from life insurance of $4.2 million primarily related to the cash surrender value from the cancellation of Teradyne owned life insurance policies on its retired chief executive officer. The increase in purchase of property, plant and equipment of $62.3 million in 2014 compared to the year ended December 31, 2013 is primarily due to testers used for customer leases.Financing activities during 2014 used cash of $206.6 million, due to $191.0 million used for payments on long-term debt related to the convertible note and a loan in Japan and $37.4 million used for dividend payments,partially offset by $21.3 million provided by the issuance of common stock under employee stock purchase and stock option plans and $0.5 million from the tax benefit related to stock options and restricted stock units.2016,2019, May 2016,2019, August 20162019 and November 2016,2019, our Board of Directors declared a quarterly cash dividend of $0.06$0.09 per share. Total dividend payments in 20162019 were $48.6$61.3 million.2015,2018, May 2015,2018, August 20152018 and November 2015,2018, our Board of Directors declared a quarterly cash dividend of $0.06$0.09 per share. Total dividend payments in 20152018 were $50.7$67.3 million.2014, our Board of Directors declared an initial quarterly cash dividend of $0.06 per share. In each of the second, third and fourth quarters of 2014, we paid a cash dividend of $0.06 per share. Total dividend payments in 2014 were $37.4 million.In January 2017,2020, our Board of Directors declared a quarterly cash dividend of $0.07$0.10 per share to be paid on March 20, 20172020 to shareholders of record as of February 24, 2017.21, 2020. Payment of future cash dividends are subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition.2015,2018, our Board of Directors cancelled the December 2016 stock repurchase program and authorized thea new stock repurchase ofprogram for up to $500 million$1.5 billion of common stock. In 2015,2019, we repurchased 15.6 million shares of common stock at an average price of $19.20, for a total cost of $300.0 million. In 2016, we repurchased 6.8 million shares of common stock at an average price of $21.39, for a total cost of $146.3 million. The cumulative repurchases as of December 31, 2016 totaled 22.510.9 million shares of common stock for $446.3$500.0 million at an average price per share of $19.87.2016,31, 2019 totaled 32.5 million shares of common stock for $1,323.0 million at an average price per share of $40.68.$500 million sharestock repurchase authorization which commenced on January 1, 2017.program for up to $1.0 billion of common stock. We intend to repurchase at least $200a minimum of $250.0 million in 2017. Our January 2015 stock2020.was terminated on December 31, 2016.The amount of cash, cash equivalents and marketable securities in the U.S. and our operations in the U.S. provide sufficient liquidity to fund our business activities in the U.S. We have approximately $768 million of cash outside the U.S. that if repatriated would incur additional taxes. Determination of the additional taxes that would be incurred is not practicable due to uncertainty regarding the remittance structure, the mix of earnings and earnings and profit pools in the year of remittance, and overall complexity of the calculation. Inflation has not had a significant long-term impact on earnings.2016,2019, our pension income,expense, which includes the U.S. Qualified Pension Plan (“U.S. Plan”), certain qualified plans for$(0.3)$11.6 million. The largest portion of our 2016 pension income was $(5.2) million for our U.S. Plan. Pension expense or income is calculated based upon a number of actuarial assumptions. Discount rate and expected return on assets are two assumptions which are important elements of pension plan expense (income) and asset/liability measurement. We evaluate our discount rate and expected rate In the fourth quarter of 2014, we updated the mortality assumptions related to our U.S. retirement plans using the mortality tables published in October 2014 by the U.S. Society of Actuaries. The change in the mortality assumptions resulted in approximately $39.0 million of actuarial losses in 2014 for the U.S. retirement plans.4.8%4.25% was an appropriate rate of return on assets to use for 2016.2019. The December 31, 20162019 asset allocation for our U.S. Plan was 88%94% invested in fixed income securities, 10%5% invested in equity securities, and 2%1% invested in other securities. Our investment manager regularly reviews the actual asset allocation and periodically rebalances the portfolio to ensure alignment with our target allocations.CitigroupFTSE Pension Index adjusted for the U.S. Plan’s expected cash flows and was 3.9%3.10% at December 31, 2016,2019, down from 4.0%4.15% at December 31, 2015.2018. We estimate that in 20172020 we will recognize approximately $0.8$0.9 million of pension expense for the U.S. Plan. The U.S. Plan pension expense estimate for 20172020 is based on a 3.9%3.1% discount rate and a 4.0%3.0% return on assets. Future pension expense or income will depend on future investment performance, changes in future discount rates and various other factors related to the employee population participating in our pension plans.2016,2019, our pension plans had no unrecognized pension prior service cost of $0.1 million.We performed a sensitivity analysis, which expresses the potential U.S. Plan (income) expense for the year ending December 31, 2017, which would result from changes to either the discount rate or the expected return on plan assets. The below estimates exclude the impact of any potential actuarial gains or losses. It is difficult to reliably forecast or predict whether there will be any actuarial gains or losses in 2017 as they are primarily driven by events and circumstances beyond our control, such as changes in interest rates and the performance of the financial markets. Discount Rate 3.4% 3.9% 4.4% (in millions) $ 1.6 $ 2.3 $ 2.9 0.1 0.8 1.4 (1.4 ) (0.7 ) (0.1 ) $298.4$144.3 million at December 31, 20152018 to $307.3$166.9 million at December 31, 20162019 while the U.S. Plan’s liability increased from $297.8$127.4 million at December 31, 20152018 to $299.6$148.5 million at December 31, 2016.2016,2019, we made contributions of $1.9 million to the U.S. Plan, $2.6$2.8 million to the U.S. supplemental executive defined benefit pension plan, and $0.9 million to certain qualified plans for2017,2020, we expect to contribute approximately $1.9 million to the U.S.Plan and $2.6$2.8 million to the U.S. supplemental executive defined benefit pension plan. Contributions to be made in 20172020 to certain qualified plans for$0.8$1.0 million.O: “Stock BasedQ:20162019 (share numbers in thousands): Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights Weighted-average
exercise price of
outstanding options,
warrants and rights Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column one) 4,336 (1) $ 18.03 13,399 (2) 368 2.71 — 4,704 11.93 13,399 (1) $ (2) (1) Includes 3,777,6282,269,426 shares of restricted stock units that are not included in the calculation of the weighted average exercise price.(2) Consists of 9,545,4196,719,918 securities available for issuance under the 2006 Equity Plan and 3,853,6381,822,724 of securities available for issuance under the Employee Stock Purchase Plan.(3) In connection with the 2008 acquisition of Eagle Test (the “Eagle Acquisition”), we assumed the options granted under the Eagle Test Systems, Inc. 2003 Stock Option and Grant Plan and the Eagle Test Systems, Inc. 2006 Stock Option and Incentive Plan (collectively, the “Eagle Plans”). Upon the consummation of the Eagle Acquisition, these options were converted automatically into options to purchase an aggregate of 3,594,916 shares of our common stock. No additional awards will be granted under the Eagle Plans. As of December 31, 2016, there were outstanding options exercisable for an aggregate of 57,928 shares of our common stock pursuant to the Eagle Plans, with a weighted average exercise price of $3.54 per share.(4)In connection with the 2011 acquisition of LitePoint Corporation (the “LitePoint Acquisition”), we assumed the options granted under the LitePoint Corporation 2002 Stock Plan (the “LitePoint Plan”). Upon the consummation of the LitePoint Acquisition, these options were converted automatically into options to purchase an aggregate of 2,828,344 shares of our common stock. No additional awards will bewere granted under the LitePoint Plan. As of December 31, 2016,2019, there were outstanding options exercisable for an aggregate of 310,43746,518 shares of our common stock pursuant to the LitePoint Plan, with a weighted average exercise price of $2.55$2.89 per share.20162019 was 9,545,4196,719,918 shares of our common stock. The 2006 Equity Plan authorizes the grant of stock-based awards in the form of(1) The 2006 Equity Plan will expire on May 12, 2025.2016,2019, total unrecognized compensation expense related to$40.6$45 million, and is expected to be recognized over a weighted average period of 2.31.8 years.20112014 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. Historic stock price performance is not necessarily indicative of future price performance.
Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)ASUnow be theWe are currently evaluating the impact of this ASU on our financial position, results of operations and statements of cash flows.On October 24, 2016, the FASB issued ASU2016-16,“Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.” Under current Generally Accepted Accounting Principles (“GAAP”), the tax effects of intra-entity asset transfers are deferred until the transferred assetThis pronouncement is sold to a third party or otherwise recovered through use. The new guidance requires recognition of the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though thepre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does not apply to intra-entity transfers of inventory. The income tax consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party. The new guidance will be effective in fiscal years beginning after December 15, 2017. Early adoption is permitted. The modified retrospective approach will be required for transition to the new guidance, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. We do not expect this ASUexpected to have a material impact on our financial position, results of operations and statements of cash flows.On March 31, 2016, the FASB issued ASU2016-09,“Compensation-Stock Compensation (Topic 718): Improvements to EmployeeShare-Based Payment Accounting.” This ASU changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows. This pronouncement is effective for annual periods beginning after December 15, 2016. Early adoption is permitted. Adoption of the new guidance will require recognition of excess tax benefits and tax deficiencies in the consolidated statements of operations on a prospective basis, with a cumulative effect adjustment to retained earnings for any prior year excess tax benefits or tax deficiencies not previously recorded. We expect the cumulative effect adjustment to increase retained earnings and deferred tax assets by approximately $39 million. In the years ended December 31, 2016, 2015 and 2014, we recorded excess tax benefits of $6.1 million, $4.6 million, and $0.2 million, respectively, as a component of additionalpaid-in capital. In accordance with this ASU, amounts for future periods related to the difference between the fair value of a restricted stock unit (“RSU”) on the grant date and the fair value on the vest date will be recorded as a discrete benefit or expense to the current income tax provision in the period in which the RSU vests. A majority of the future amounts will be recorded during the first quarter consistent with the vesting of a majority of our RSU grants.In February 2016, the FASB issued ASU2016-02,“Leases (Topic 842).” The guidance in this ASU supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840,“Leases.” The new standard establishes aright-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statements of operation. The new standard is effective for annual periods beginning after December 15, 2018 with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the impact of this ASU on our financial position and results of operations.In January 2016, the FASB issued ASU2016-01,“Financial Instruments—Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.”This ASU provides guidance for the recognition, measurement, presentation, and disclosure of financial instruments. The new pronouncement revises accounting related to equity investments and the presentation of certain fair value changes for financial liabilities measured at fair value. Among other things, it amends the presentation and disclosure requirements of equity securities that do not result in consolidation and are not accounted for under the equity method. Changesin the fair value of these equity securities will be recognized directly in net income. This pronouncement is effective for fiscal years beginning after December 15, 2017. We are currently evaluating the impact of this ASU on our financial position and results of operations.In November 2015, the FASB issued ASU2015-17,“Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” ASU2015-17 simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the balance sheet. The new guidance requires that all deferred tax liabilities and assets be classified as noncurrent in the balance sheet. This ASU is effective for annual periods beginning after December 15, 2016, and may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted. We early adopted this ASU prospectively in the first quarter of 2016.In April 2015, the FASB issued ASU2015-03,“Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation for debt discount. ASU2015-03 does not specifically address requirements for the presentation or subsequent measurement of debt issuance costs related toline-of-credit arrangements. On August 8, 2015, the FASB issued ASU2015-15,“Interest—Imputation of Interest (Subtopic835-30)” clarifying that debt issuance costs related toline-of-credit arrangements could be presented as an asset and amortized over the term of theline-of-credit arrangement, regardless of whether there are any outstanding borrowings on theline-of-credit arrangement. We adopted this ASU in the first quarter of 2016. Adoption of this ASU did not have a material impact on our financial position and results of operations.In August 2014, the FASB issued ASU2014-15, “Presentation of Financial Statements—Going Concern (Subtopic205-40).” ASU2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This ASU is effective for annual periods ending after December 15, 2016. We do not expect this ASU to have a material impact on our consolidated financial statements.In May 2014, the FASB issued ASU2014-09,“Revenue from Contracts with Customers (Topic 606),” which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to show the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. In August 2015, FASB issued ASU2015-14, which deferred the effective date of the new revenue standard by one year. For Teradyne, the standard will be effective in the first quarter of 2018. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We have selected the modified retrospective transition method. We are currently evaluating the impact of this ASU on our financial position and results of operations.Item 7A: QualitativeQualitative Disclosures about Market Risks than 10% of our accounts receivable balance as of December 31, 2016. One customer accounted for more than 10%2019 or December 31, 2018.accounts receivable balance asconvertible 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 December 31, 2015.
change in fair
value
increase (decrease) in
fair value $ $ % ) ) Euro.Chinese Yuan. These foreign currency forward contracts have maturities of approximately one month. These contracts are used to minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities. We do not engage in currency speculation.2016, 20152019, 2018, and 2014,2017, the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations or cash flows.in the Netherlands, United States and Singapore related to short-term and long-term marketable securities.20162019 and 2015.Item 8: :In our opinion,financial statements listed in the index appearing under Item 15(a) (1) present fairly, in all material respects, the financial positionbalance sheets of Teradyne, Inc. and its subsidiaries (the “Company”) as of December 31, 20162019 and 2015,2018, and the resultsrelated consolidated statements of their operations, comprehensive income, shareholders’ equity and their cash flows for each of the three years in the period ended December 31, 20162019, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2019 appearing under Item 15(c) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016,2019, based on criteria established inControl—Control - Integrated FrameworkCommittee of Sponsoring Organizations ofCOSO.Treadway Commission (COSO). consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenue from contracts with customers in 2018. and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on thesethe Company’s consolidated financial statements on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidated financial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based onAs discussed in Note C to the consolidated financial statements, the Company changed the manner in which it classifies deferred taxes in 2016.1, 2017 December 31, 2016 2015 (in thousands, except per
share information) ASSETS $ 307,884 $ 264,705 871,024 477,696 192,444 211,293 135,958 153,588 — 54,973 108,454 91,519 8,039 6,194 1,623,803 1,259,968 253,821 273,414 433,843 265,928 107,405 7,404 12,165 13,080 7,712 636 100,401 239,831 223,343 488,413 $ 2,762,493 $ 2,548,674 LIABILITIES $ 95,362 $ 92,358 109,944 113,994 84,478 85,527 51,382 43,727 1,050 15,500 30,480 21,751 372,696 372,857 106,938 103,531 23,463 25,745 12,144 26,663 28,642 32,156 37,282 21,936 352,669 — 933,834 582,888 SHAREHOLDERS’ EQUITY 24,897 25,455 1,593,684 1,480,647 (20,214 ) (8,144 ) 230,292 467,828 1,828,659 1,965,786 $ 2,762,493 $ 2,548,674 $ $ $ $ $ $ ) ) ) ) $ $ Years Ended December 31, 2016 2015 2014 (in thousands, except per share amounts) $ 1,453,248 $ 1,340,566 $ 1,364,024 300,002 299,012 283,800 1,753,250 1,639,578 1,647,824 659,097 591,772 640,787 134,586 132,163 128,229 793,683 723,935 769,016 959,567 915,643 878,808 291,025 292,250 291,639 315,682 306,313 319,713 52,648 69,031 70,771 83,339 — — 254,946 — 98,897 21,942 5,080 1,365 1,019,582 672,674 782,385 (60,015 ) 242,969 96,423 (9,296 ) (7,214 ) (6,259 ) 3,637 1,876 6,934 704 (4,817 ) 372 (55,060 ) 253,124 95,376 (11,639 ) 46,647 14,104 $ (43,421 ) $ 206,477 $ 81,272 $ (0.21 ) $ 0.98 $ 0.40 $ (0.21 ) $ 0.97 $ 0.37 202,578 211,544 202,908 202,578 213,321 222,550 $ 0.24 $ 0.24 $ 0.18 $ $ $ ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ (LOSS) INCOME Years Ended December 31, 2016 2015 2014 (in thousands) $ (43,421 ) $ 206,477 $ 81,272 (13,162 ) (8,759 ) — 2,037 (3,075 ) 2,417 (683 ) (704 ) (1,433 ) 1,354 (3,779 ) 984 (321 ) (295 ) (295 ) 59 — — (262 ) (295 ) (295 ) (12,070 ) (12,833 ) 689 $ (55,491 ) $ 193,644 $ 81,961 $ $ $ ) ) ) ) ) ) ) ) ) ) ) $ $ $ Years Ended December 31, 2016, 2015 and 2014 Common
Stock
Shares
Issued Common
Stock Par
Value Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income (Loss) Retained
Earnings Total
Shareholders’
Equity (in thousands) 191,731 $ 23,966 $ 1,390,896 $ 4,000 $ 566,232 $ 1,985,094 3,661 458 8,815 9,273 21,221 2,653 (2,653 ) — 39,868 39,868 209 209 (37,425 ) (37,425 ) 81,272 81,272 2,417 2,417 (1,433 ) (1,433 ) (295 ) (295 ) 216,613 27,077 1,437,135 4,689 610,079 2,078,980 2,649 331 8,602 8,933 30,285 30,285 (15,621 ) (1,953 ) (297,996 ) (299,949 ) 4,625 4,625 (50,732 ) (50,732 ) 206,477 206,477 (8,759 ) (8,759 ) (3,075 ) (3,075 ) (704 ) (704 ) (295 ) (295 ) 203,641 25,455 1,480,647 (8,144 ) 467,828 1,965,786 2,377 297 10,368 10,665 100,836 100,836 (2,017 ) (2,017 ) (100,834 ) (100,834 ) 67,852 67,852 30,745 30,745 (6,841 ) (855 ) (145,476 ) (146,331 ) 6,087 6,087 (48,639 ) (48,639 ) (43,421 ) (43,421 ) (13,162 ) (13,162 ) 2,037 2,037 (683 ) (683 ) (321 ) (321 ) 59 59 199,177 $ 24,897 $ 1,593,684 $ (20,214 ) $ 230,292 $ 1,828,659
Stock
Shares
Stock
Value
Capital
Other
Comprehensive
(Loss) Income
Earnings
(Accumulated
Deficit)
Shareholders’
Equity $ $ $ ) $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ ) $ ) $ TERADYNE, INC. Years Ended December 31, 2016 2015 2014 (in thousands) $ (43,421 ) $ 206,477 $ 81,272 64,782 68,181 73,390 55,227 72,592 79,154 30,750 30,451 40,307 17,493 21,332 22,193 254,946 — 98,897 83,339 — — (62,936 ) (7,124 ) (19,928 ) (6,198 ) (4,715 ) (535 ) 4,179 — — (5,363 ) — — — (5,406 ) — — 1,567 — (3,203 ) 17,732 46,564 15,896 2,489 (630 ) (448 ) (34 ) 2,874 18,325 (57,267 ) 8,060 34,263 15,559 51,803 (18,882 ) 3,034 41,537 (1,706 ) 48,213 (45,430 ) (3,634 ) 17,011 22,033 (6,044 ) (12,095 ) (33,916 ) 18,434 (5,156 ) 24,417 445,799 412,841 492,062 (85,272 ) (89,878 ) (168,982 ) (1,656,267 ) (1,424,002 ) (1,578,743 ) 243,232 360,264 570,358 852,794 1,316,131 859,729 5,051 — — — (282,741 ) (19,419 ) — 1,098 4,184 — 5,406 — (640,462 ) (113,722 ) (332,873 ) 450,800 — — (100,834 ) — — 67,852 — — 20,473 19,530 21,291 (146,331 ) (299,949 ) — 6,198 4,715 535 (48,619 ) (50,713 ) (37,425 ) — (2,253 ) — — — (190,972 ) (11,697 ) — — 237,842 (328,670 ) (206,571 ) 43,179 (29,551 ) (47,382 ) 264,705 294,256 341,638 $ 307,884 $ 264,705 $ 294,256 $ 446 $ 301 $ 4,294 $ 40,424 $ 35,218 $ 25,893 15,000 — — industrial automation (“Industrial Automation”) products; and11, 2015,3, 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. On February 28, 2020, RealWear’s debt holder demanded repayment of its $25.0 million loan to RealWear. As a result, in the fourth quarter of 2019, Teradyne recorded an impairment charge of $15.0 million to reduce its investment in RealWear to 0 as of December 31, 2019.Universal Robots A/S100% of theUniversal Robots”AutoGuide”) for, a maker of highpayload AMRs, an emerging and fast growing segment of the global forklift market$284$81.7 million, which included cash paid of cash plus up to an additional $65approximatelycash ifcontingent consideration payable upon achievement of certain performance targets, extending potentially through 2022. The maximum contingent consideration that could be paidmet extending through 2018. Universal Robotsused for material transport of payloads up tothe leading supplier of collaborative robots which arelow-cost,easy-to-deploy andsimple-to-program robots that work side by side with production workers. Universal Robots is a separate operating and reportable segment,included in our Industrial Automation.including revenues from distributors,when or as control is transferred to a customer. Teradyne’s determination of revenue is dependent upon a five step process outlined below.persuasive evidencewritten approval, the contract is committed, the rights of an arrangement, titlethe parties, including payment terms, are identified, the contract has commercial substance and riskconsideration is probable of losscollection.passed, delivery has occurred ormaterial variable consideration which could impact the services have been rendered,stated purchase price agreed to by Teradyne and the salescustomer.fixedallocated to each individual performance obligation based on the standalone selling price of that performance obligation. Teradyne uses standalone transactions when available to value each performance obligation. If standalone transactions are not available, Teradyne will estimate the standalone selling price through market assessments or determinable and collectioncost plus a reasonable margin analysis. Any discounts from standalone selling price are spread proportionally to each performance obligation.related receivable is reasonably assured. Title and riskappropriate timing for revenue recognition, Teradyne first determines if the transaction meets any of loss generally pass to Teradyne’s customers upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass upon destination, acceptance or cash payment, Teradyne defers revenuerecognition until such events occur except when title transfer is tied to cash payment outsidethree criteria for over time recognition. If the United States. Outsidetransaction meets the United States,criteria for over time recognition, Teradyne recognizes revenue upon shipmentas the good or at delivery destination point, even ifservice is delivered. Teradyne retains a form of title to products delivered to customers, provided the sole purpose is to enable Teradyne to recover the products in the event of customer payment default and the arrangement does not prohibit the customer’s useuses input variables such as hours or resale of the product in the ordinary course of business.Teradyne’s equipment hasnon-software and software components that function together to deliver the equipment’s essential functionality. Revenue is recognized upon shipmentmonths utilized or at delivery destination point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require Teradyne to perform tests of the product to ensure that performance meets the published product specifications or customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. Teradyne also defers the portion of the sales price that is not due until acceptance, which represents deferred profit.For multiple element arrangements, Teradyne allocates revenue to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is usedcosts incurred to determine the selling price for allocatingamount of revenue to deliverablesrecognize in a given period. Input variables are used as follows: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii)they best estimatealign consumption with benefit to the customer. For transactions that do not meet the criteria for over time recognition, Teradyne will recognize revenue at a point in time based on an assessment of the five criteria for transfer of control. Teradyne has concluded that revenue should be recognized when shipped or delivered based on contractual terms. Typically, acceptance of Teradyne’s products and services is a formality as Teradyne delivers similar systems, instruments and robots to standard specifications. In cases where acceptance is not deemed a formality, Teradyne will defer revenue recognition until customer acceptance.price (“BESP”). Forprice. Extended warranty, training and support, service agreements and PCS are recognized over time based on the period of service. Replacement parts are recognized at a delivered itempoint in time upon transfer of control to bethe customer.unit the delivered item must have valueservice to the customer on a standalone basis and the delivery or performance of the undelivered item mustit cannot be considered probable and substantially in Teradyne’s control.Teradyne’s post-shipment obligations include installation, training services,one-year standard warranties, and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or tools and can be performed by the customers or other vendors. Installation is typically provided within five days of product shipment and is completed within one to two days thereafter. Training services are optional and do not affect the customers’ ability to use the product. Teradyne defers revenue for the selling price of installation and training. Extended warranties constitute warranty obligations beyond one year and Teradyne defers revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)605-20, “Separately Priced Extended Warranty and Product Maintenance Contracts” and ASC605-25, “Revenue Recognition Multiple-Element Arrangements.” Service revenue is recognized over the contractual period or as services are performed.Teradyne’s products are generally subjectpurchased separately. Cost related to warranty and related costs of the warranty are provided forincluded in cost of revenues when product revenue isrevenues are recognized. Teradyne classifies shipping and handling costs in cost of revenue. Teradyne does not provide its customers with contractual rights of return for any of its products.20162019 and 2015,2018, deferred revenue and customer advances consisted of the following and are included in the short and long-term deferred revenue and customer advances: 2016 2015 (in thousands) $ 46,753 $ 46,499 39,037 30,616 22,151 34,157 $ 107,941 $ 111,272 $ $ $ $ Amount (in thousands) $ 6,660 15,406 (2,008 ) (11,116 ) 8,942 409 11,539 (3,159 ) (10,806 ) 6,925 14,291 (1,354 ) (12,659 ) $ 7,203 $ ) ) ) ) $ Amount (in thousands) $ 34,909 29,519 (21,128 ) 43,300 870 28,549 (26,220 ) 46,499 27,182 (26,928 ) $ 46,753 $ ) ) ) $ Teradyne uses the market and income approach techniques to value its financial instruments and there were no changes in valuation techniques during the years ended December 31, 2016, 2015 and 2014.ASCdate.therefore is considered a Level 2 input.primarily classified withinas Level 1 and 2.1. Acquisition-related contingent consideration is classified withinas Level 3. Teradyne determines the fair value of acquisition-related contingent consideration using a Monte Carlo simulation model. Assumptions utilized in the model include forecasted revenues, revenuesrevenue volatility, earnings before interest and taxes, and discount rate. 2016 2015 (in thousands) $ 77,017 $ 66,283 7,676 8,481 4,664 3,781 19,097 12,974 $ 108,454 $ 91,519 $ $ $ $ more-likely-than-not more likely than not that the fair value of a reporting unit is less than its carrying amount. If Teradyne determines this is the case, Teradyne is required to perform themore-likely-than-not more likely than not that the fair value of the reporting unit is greater than its carrying amounts, theBuildings 40 yearsBuilding improvements equipmentsoftware Software 3 to 5 yearssix-year2016, 20152019, 2018, and 20142017 was $11.4$5.0 million, $50.7$3.8 million, and $9.7$3.6 million, respectively. Asby ASC718-10,recognition of a cumulative effect adjustment to retained earnings for any prior year excess tax benefits or tax deficiencies not previously recorded. The cumulative effect adjustment of $39 million was recorded in the first quarter of 2017 as an increase to retained earnings and deferred tax assets.hasrecognizes the excess tax benefits or tax deficiencies related to stock-based compensation. Prior to adopting ASUestimate of expectedaccounting policy election to continue accounting for forfeitures by applying an estimated forfeiture rate and is recognizingto continue to recognize compensation costs only for those stock-based compensation awards expected to vest. U.S. income taxes are notprovided for on the earnings ofnon-U.S. subsidiaries which are expected to be reinvested indefinitely in operations outside the U.S. For intra-period tax allocations, Teradyne first utilizesnon-equity related tax attributes, such as net operating losses and credit carryforwards and then equity-related tax attributes. Teradyne uses thewith-and-without method for calculating excess stock compensation deductions and does not take into account any indirect impacts of excess stock compensation deductions on its research and development tax credits, domestic production activities deduction, and other differences between financial reporting and tax reporting.$6.4$16.6 million, $3.3$15.4 million and $1.9$9.1 million in 2016, 20152019, 2018 and 2014,2017, respectively.the Industrial Automation segmentUniversal Robots, MiR and Lemsys for which the local currency is its functional currency. All foreign currency denominated monetary assets and liabilities are remeasured on a monthly basis into the functional currency using exchange rates in effect at the end of the period. All foreign currency denominatedIndustrial Automation,Universal Robots, MiR and Lemsys, assets and liabilities are translated into U.S. dollars using exchange rates in effect at the end of the period. RevenueRevenues and expense amounts are translated using an average of exchange rates in effect during the period. Translation adjustments are recorded within accumulated other comprehensive income (loss).20162019, 2018, and 2015, gains from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $8.0 million and $2.5 million, respectively. For the year ended December 31, 2014,2017, (gains) losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $0.9 million.gains (losses)(gains) losses from foreign exchange contracts. See Note G:H: “Financial Instruments” regarding foreign exchange contracts. income per common share is calculated by dividing net income (loss) income by the weighted average number of common shares outstanding during the period. Except where the result would be antidilutive,anti-dilutive, diluted net income (loss) income per common share is calculated by dividing net income (loss) income by the sum of the weighted average number of common shares plus common stock equivalents, if applicable.For the year ended December 31, 2014, dilutive potential common shares included incremental shares from the assumed conversion of the convertible notes and the convertible notes hedge warrant shares. Incremental shares from the 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 $5.48, multiplied by 34.7 million shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period. Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of $7.67, multiplied by 34.7 million shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period. Teradyne’s call option for 34.7 million shares at an exercise price of $5.48 was not used in the GAAP earnings per share calculation as its effect was anti-dilutive.In 2014, Teradyne settled its conversion spread (i.e., the intrinsic value of the embedded option feature contained in the convertible debt) in shares. Teradyne accounted for its conversion spread using the treasury stock method. Teradyne determined that it had the ability and intent to settle the principal amount of the convertible debt in cash; accordingly, the principal amount was excluded from the determination of diluted earnings per share.and equity marketable securities and foreign currency translation adjustment.Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)ASUTeradyneThis pronouncement is currently evaluating thenot expected to have a material impact of this ASU on itsTeradyne’s financial position, results of operations and statements of cash flows.October 24, 2016,November 1 FASB issued ASU2016-16,“Accounting for Income Taxes: Intra-Entity Asset TransfersAssets Other than Inventory.” Under current Generally Accepted Accounting PrinciplesAutoGuide, LLC (“GAAP”AutoGuide”), the tax effectsa maker of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance requires recognitionhigh-payload AMRs, based in Chelmsford, MA, an emerging and fast growing segment of the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though thepre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does not apply to intra-entity transfers of inventory. The income tax consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party. The new guidance will be effective in fiscal years beginning after December 15, 2017. Early adoption is permitted. The modified retrospective approach will be required for transition to the new guidance, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. Teradyne does not expect this ASU to have a material impact on its financial position, results of operations and statements of cash flows.On March 31, 2016, the FASB issued ASU2016-09,“Compensation-Stock Compensation (Topic 718): Improvements to EmployeeShare-Based Payment Accounting.” This ASU changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows. This pronouncement is effective for annual periods beginning after December 15, 2016. Early adoption is permitted. Adoption of the new guidance will require recognition of excess tax benefits and tax deficiencies inthe consolidated statements of operations on a prospective basis, with a cumulative effect adjustment to retained earnings for any prior year excess tax benefits or tax deficiencies not previously recorded. Teradyne expects the cumulative effect adjustment to increase retained earnings and deferred tax assets by approximately $39 million. In the years ended December 31, 2016, 2015 and 2014, Teradyne recorded excess tax benefits of $6.1 million, $4.6 million, and $0.2 million, respectively, as a component of additionalpaid-in capital. In accordance with this ASU, amounts for future periods related to the difference between the fair value of a restricted stock unit (“RSU”) on the grant date and the fair value on the vest date will be recorded as a discrete benefit or expense to the current income tax provision in the period in which the RSU vests. A majority of the future amounts will be recorded during the first quarter consistent with the vesting of a majority of Teradyne’s RSU grants.In February 2016, the FASB issued ASU2016-02,“Leases (Topic 842)global forklift market” The guidance in this ASU supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840,“Leases.” The new standard establishes aright-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations. The new standard is effective for annual periods beginning after December 15, 2018, including interim periods within those years, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Teradyne is currently evaluating the impact of this ASU on its financial position and results of operations.In January 2016, the FASB issued ASU2016-01,“Financial Instruments—Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.”This ASU provides guidance for the recognition, measurement, presentation, and disclosure of financial instruments. The new pronouncement revises accounting related to equity investments and the presentation of certain fair value changes for financial liabilities measured at fair value. Among other things, it amends the presentation and disclosure requirements of equity securities that do not result in consolidation and are not accounted for under the equity method. Changes in the fair value of these equity securities will be recognized directly in net income. This pronouncement is effective for fiscal years and interim periods within those years beginning after December 15, 2017. Teradyne is currently evaluating the impact of this ASU on its financial position and results of operations.In November 2015, the FASB issued ASU2015-17,“Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” ASU2015-17 simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the balance sheet. The new guidance requires that all deferred tax liabilities and assets be classified as noncurrent in the balance sheet. This ASU is effective for annual periods beginning after December 15, 2016, and may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted. Teradyne early adopted this ASU prospectively in the first quarter of 2016.In April, 2015, the FASB issued ASU2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation for debt discount. ASU2015-03 does not specifically address requirements for the presentation or subsequent measurement of debt issuance costs related toline-of-credit arrangements. On August 8, 2015, the FASB issued ASU2015-15, “Interest—Imputation of Interest (Subtopic835-30)” clarifying that debt issuance costs related toline-of-credit arrangements could be presented as an asset and amortized over the term of theline-of-credit arrangement, regardless of whether there are any outstanding borrowings on theline-of-credit arrangement. Teradyne adopted this ASU in the first quarter of 2016. Adoption of this ASU did not have a material impact on Teradyne’s financial position and results of operations.In August 2014, the FASB issued ASU2014-15, “Presentation of Financial Statements—Going Concern (Subtopic205-40).” ASU2014-15 provides guidance on management’s responsibility in evaluating whether thereis substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This ASU is effective for annual periods ending after December 15, 2016. Teradyne does not expect this ASU to have a material impact on its consolidated financial statements.In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606),” which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to show the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. In August 2015, FASB issued ASU2015-14, which deferred the effective date of the new revenue standard by one year. For Teradyne, the standard will be effective in the first quarter of 2018. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. Teradyne has selected a modified retrospective transition method. Teradyne is currently evaluating the impact of this ASU on its financial position and results of operations.D. ACQUISITIONSBusinessUniversal RobotsOn June 11, 2015, Teradyne acquired all of the outstanding equity of Universal Robots A/S (“Universal Robots”) located in Odense, Denmark. Universal Robots is the leading supplier of collaborative robots which arelow-cost,easy-to-deploy andsimple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Universal Robots is a separate operating and reportable segment, Industrial Automation. of $315.4was approximately $81.7 million, consisted of $283.8 million ofwhich included cash paid of approximately $57.8 million $31.6 measured at fair value. Thepayable upon achievement of certain performance targets, extending potentially through 2022. At December 31, 2019, the maximum contingent consideration was valued using a Monte Carlo simulation based on the following key inputs: (1) forecasted revenue (2) forecasted EBITDA (3) revenue volatility (4) EBITDA volatility; and (5) discount rate. that could be paidthe achievement ofincomeinterest and taxes depreciation and amortization (“EBITDA”) for calendar year 2015, revenue for the periodperiods from JulyJanuary 1, 20152019 to December 31, 20172020, January 1, 2019revenue for the period from JulyJanuary 1, 20152019 to December 31, 2018. 202maximum amountvaluation of the contingent consideration that could be paid is $65 million. Baseddependent on Universal Robots’ calendar 2015 EBITDA results, Teradyne paid $15 million or 100%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 eligible EBITDA contingent consideration amount in the first quarter of 2016. historical and projected results.maximum payment for each of the two remaining Universal Robots earn-outs is $25.0 million.The Universal RobotsAutoGuide 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. 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 and expand the Industrial Automation segment $ ) ) $
Life $ $ Universal Robots’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 $221.1$136.0 million was allocated to goodwill, which is not deductible for tax purposes. Purchase Price Allocation (in thousands) $ 221,128 121,590 10,853 3,415 (11,976 ) (26,653 ) (2,920 ) $ 315,437 $ ) ) ) $ Fair Value Estimated Useful
Life (in thousands) (in years) $ 89,240 4.9 22,920 10.0 9,430 2.0 $ 121,590 5.6
Life $ $ June 12, 2015April 25, 2018 to December 31, 2015, Universal Robots2018, MiR contributed $41.9$24.1 million of revenues and had a $7.6$(Universal RobotsAutoGuide as if the acquisition occurred on January 1, 2014.2018 and the acquisition of MiR as if the acquisition occurred on January 1, 2017. The unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented: For the Years Ended December 31,
2015 December 31,
2014 (in thousands, except per
share amounts) $ 1,657,626 $ 1,686,689 $ 199,784 $ 61,078 $ 0.94 $ 0.30 $ 0.94 $ 0.27 $ $ $ $ $ $ $ $ 20152019 were adjusted to exclude $1.6$1.2 million of AutoGuide acquisition related costs and $0.1 million of AutoGuide the fair value adjustment to acquisition-date inventory and $1.0 million of acquisition related costs incurred in 2015.20142018 were adjusted to include $1.6$1.2 million of AutoGuide acquisition related costs and $0.4 million of AutoGuide the fair value adjustment to acquisition-date inventory and $1.0inventory.costs.Avionics Interface Technologies, LLC.On October 31, 2014, Teradyne acquired all of the assetscosts and liabilities of Avionics Interface Technologies, LLC (“AIT”) located in Omaha, Nebraska and Dayton, Ohio. AIT is a supplier of equipment for testingstate-of-the-art data communication buses. The acquisition of AIT complements Teradyne’s Defense/Aerospace line of bus test instrumentation for commercial and defense avionics systems. AIT is included in Teradyne’s System Test segment.The total purchase price of $21.2 million consisted of $19.4$0.4 million of cash paidMiRacquire AIT’s assetsfair value adjustment to acquisition-date inventory.liabilitiessells advanced wearable technology including industrial, hands-free, head-mounted augmented reality devices that make the workplace safer and $1.8 millionmore productive. The investment was recorded at cost and is evaluated for impairment or an indication of changes in fair value resulting from observable price changes in orderly transactions for the identical or similar investment of contingent consideration payable upon the achievementsame issuer on a quarterly basis. On February 28, 2020, RealWear’s debt holder demanded repayment of certainits $25.0 million loan to RealWear. As a result, in the fourth quarter of 2019, Teradyne recorded an impairment charge of $15.0 million to reduce its investment in RealWear to 0 as of December 31, 2019.
Robots
Industrial
Robots $ $ $ $ $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ ) $ (1) gross margin targets in 2015customer advances balances. This revenue primarily relates to undelivered hardware, extended warranties, training, application support, and 2016. The total amountpost contract support. Each of contingent consideration paid was $1.1 million, which was paid in January 2017.The valuationthese represents a distinct performance obligation. Teradyne expects to recognize 70% of the contingent consideration utilized the following assumptions: (1) probability of meeting each target; (2) expected timing of meeting each target; and (3) discount rate reflecting the risk associated with the expected payments. The probabilities and timing for each target were estimated based on a review of the historical and projected results. A discount rate of 4.7 percent was selected based on the cost of debt for the business. A significant portion of the risk in achieving the contingent consideration was capturedremaining performance obligation in the probabilities assigned to meeting each target.The AIT acquisition was accounted for as a business combinationnext 12 months, 26% inaccordingly, the results have been included in Teradyne’s consolidated resultsremainder thereafter.20162019 and 2015: 2016 2015 (in thousands) $ 58,530 $ 73,117 22,946 32,825 54,482 47,646 $ 135,958 $ 153,588 $ $ $ $ 20162019 and 20152018 were $116.0$103.6 million and $119.4$100.8 million, respectively.F.20162019 and 2015: 2016 2015 (in thousands) $ 16,561 $ 16,561 98,031 108,797 601,835 595,445 82,897 82,612 46,612 43,328 3,032 2,630 848,968 849,373 595,147 575,959 $ 253,821 $ 273,414 $ $ $ $ 2016, 20152019, 2018, and 20142017 was $64.8$70.8 million, $68.2$67.4 million, and $73.4$66.1 million, respectively. As of December 31, 20162019 and 2015,2018, the gross book value included in machinery and equipment for internally manufactured test systems being leased by customers was $19.4$5.4 million and $20.4$5.5 million, respectively. As of December 31, 20162019 and 2015,2018, the accumulated depreciation on these test systems was $10.5$5.1 million and $8.5$5.2 million, respectively.G.12, and equity and debt mutual funds are classified as Level 2.1. Contingent consideration is classified as Level 3. The vast majority of Level 2 securities areRealized gains recorded in 2016, 2015 and 2014 were $1.6 million, $1.7 million and $2.4 million, respectively. Realized losses recorded in 2016 and 2015 were $0.5 million and $0.4 million, respectively. There were no realized losses recorded in 2014. Realized gains are included in interest income, and realized losses are included in interest expense. Unrealized gains and losses are included in accumulated other comprehensive income (loss). The cost of securities sold is based on the specific identification method.20162019 and 2015,2018, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.20162019 and 2015: December 31, 2016 Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total (in thousands) $ 214,722 $ — $ — $ 214,722 37,458 55,704 — 93,162 — 900,038 — 900,038 — 161,630 — 161,630 — 100,153 — 100,153 — 82,133 — 82,133 — 42,014 — 42,014 18,171 — — 18,171 — 728 — 728 $ 270,351 $ 1,342,400 $ — $ 1,612,751 — 1 — 1 $ 270,351 $ 1,342,401 $ — $ 1,612,752 $ — $ — $ 38,332 $ 38,332 — 131 — 131 $ — $ 131 $ 38,332 $ 38,463 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (Level 1) (Level 2) (Level 3) Total (in thousands) $ 252,180 $ 55,704 $ — $ 307,884 — 871,024 — 871,024 18,171 415,672 — 433,843 — 1 — 1 $ 270,351 $ 1,342,401 $ — $ 1,612,752 $ — $ 131 $ — $ 131 — — 1,050 1,050 — — 37,282 37,282 $ — $ 131 $ 38,332 $ 38,463 December 31, 2015 Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total (in thousands) $ 213,336 $ — $ — $ 213,336 49,241 2,128 — 51,369 — 419,958 — 419,958 — 161,634 — 161,634 — 83,952 — 83,952 — 43,394 — 43,394 — 20,308 — 20,308 13,954 — — 13,954 — 424 — 424 $ 276,531 $ 731,798 $ — $ 1,008,329 — 109 — 109 $ 276,531 $ 731,907 $ — $ 1,008,438 $ — $ — $ 37,436 $ 37,436 — 146 — 146 $ — $ 146 $ 37,436 $ 37,582 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (Level 1) (Level 2) (Level 3) Total (in thousands) $ 262,577 $ 2,128 $ — $ 264,705 — 477,696 — 477,696 13,954 251,974 — 265,928 — 109 — 109 $ 276,531 $ 731,907 $ — $ 1,008,438 $ — $ 146 $ — $ 146 — — 15,500 15,500 — — 21,936 21,936 $ — $ 146 $ 37,436 $ 37,582 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 20162019 and 20152018 were as follows: Contingent Consideration (in thousands) $ 3,350 31,597 5,339 (1,250 ) (1,600 ) 37,436 (15,000 ) 550 15,346 $ 38,332 $ ) ) ) ) ) $ (1) During the year ended December 31, 2015,201(2) increased$5.3$ an increase(2)(3)During the year ended December 31, 2015, the fair value 201 AIT was reduced by $1.3 million due to decrease in the forecasted revenues.(3)During the year ended December 31, 2015, the fair value measurement of the contingent consideration for theearn-out in connection with the acquisition of ZTEC Instruments, Inc. (“ZTEC”) was reduced by $1.6 million, to $0, because Teradyne and the Securityholder Representative, on behalf of the ZTEC securityholders, agreed to terminate theearn-out prior to the end of the December 31, 2015earn-out period, with no payout in connection with the resolution of indemnity claims asserted by both Teradyne and the Securityholder Representative.(4) During the year ended December 31, 2016, based on Universal Robots’ calendar year 2015 EBITDA results, Teradyne paid $15 million or 100% of the eligible EBITDA contingent consideration amount.(5)During the year ended December 31, 2016,201Universal RobotsMiR was increased$15.3$an increasea and a decrease indiscount rate. impact from modification of the earn-out structure.2016,December 31, 201 AIT increased$0.6$an increasea revenues. The AIT contingent consideration in the amount of $1.1 million was paid in January 2017. December 31,
2016
Fair Value Weighted
Average (in thousands) $ 21,301 Revenues for the period July 1, 2015—December 31, 2017 volatility 10.8% Discount Rate 3.3% $15,981 Revenues for the period July 1, 2015—December 31, 2018 volatility 10.8% Discount Rate 3.3% Contingent consideration (AIT) $ 1,050(1) $ $ (1) TeradyneContingent consideration related to MiR of $this amount in January 2017.March 202016,2019, the significant unobservable inputs used in the Monte Carlo simulation to fair value the Universal RobotsTheAs of December 31, 2019, the maximum payment for eachamount of contingent consideration that could be paid in connection with the twoacquisition ofUniversal Robots earn-outsmaximum amount of contingent consideration that could be paid in connection with the acquisition of MiR is $25.0$63.2 million.20162019 and 20152018 were as follows: December 31, 2016 December 31, 2015 Carrying Value Fair Value Carrying Value Fair Value (in thousands) $ 307,884 $ 307,884 $ 264,705 $ 264,705 1,304,867 1,304,867 743,624 743,624 1 1 109 109 38,332 38,332 37,436 37,436 131 131 146 146 352,669 486,754 — — $ $ $ $ (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. available for sale 20162019 and 2015: December 31, 2016 Available-for-Sale Fair Market
Value of Investments
with Unrealized Losses Cost Unrealized
Gain Unrealized
(Loss) Fair Market
Value (in thousands) $ 901,975 $ 97 $ (2,034 ) $ 900,038 $ 572,284 161,672 24 (66 ) 161,630 84,034 99,708 1,065 (620 ) 100,153 53,642 82,080 54 (1 ) 82,133 7,760 42,026 7 (19 ) 42,014 13,461 16,505 1,724 (58 ) 18,171 1,661 745 6 (23 ) 728 137 $ 1,304,711 $ 2,977 $ (2,821 ) $ 1,304,867 $ 732,979 $ $ $ ) $ $ ) ) ) $ $ $ ) $ $ Cost Unrealized
Gain Unrealized
(Loss) Fair Market
Value Fair Market
Value of Investments
with Unrealized Losses (in thousands) $ 871,321 $ 134 $ (431 ) $ 871,024 $ 423,128 433,390 2,843 (2,390 ) 433,843 309,851 $ 1,304,711 $ 2,977 $ (2,821 ) $ 1,304,867 $ 732,979 December 31, 2015 Available-for-Sale Fair Market
Value of Investments
with Unrealized Losses Cost Unrealized
Gain Unrealized
(Loss) Fair Market
Value (in thousands) $ 421,060 $ 65 $ (1,167 ) $ 419,958 $ 379,434 163,297 902 (2,565 ) 161,634 145,373 84,032 42 (122 ) 83,952 55,120 43,391 6 (3 ) 43,394 10,527 20,298 11 (1 ) 20,308 8,646 12,996 1,119 (161 ) 13,954 2,560 424 — — 424 — $ 745,498 $ 2,145 $ (4,019 ) $ 743,624 $ 601,660 $ $ $ ) $ $ ) $ $ $ ) $ $ $ $ $ ) $ $ ) ) ) $ $ $ ) $ $ Cost Unrealized
Gain Unrealized
(Loss) Fair Market
Value Fair Market
Value of Investments
with Unrealized Losses (in thousands) $ 478,306 $ 38 $ (648 ) $ 477,696 $ 374,785 267,192 2,107 (3,371 ) 265,928 226,875 $ 745,498 $ 2,145 $ (4,019 ) $ 743,624 $ 601,660 $ $ $ ) $ $ ) $ $ $ ) $ $ 2016,2019, the fair market value of investments with unrealized losses$733.0$192.0 million. Of this value, $2.9$28.5 million had unrealized losses of $0.3$1.6 million greater than one year and $730.1$163.5 million had unrealized losses of $2.5$1.4 million for less than one year.As of December 31, 2015, the fair market value of investments with unrealized losses totaled $601.7 million. Of this value, $0.9 million had unrealized losses of $0.5 million greater than one year and $600.8 million had unrealized losses of $3.6 million for less than one year.20162019 and 2015, 2018,20162019 were as follows: Cost Fair Value (in thousands) $ 871,321 $ 871,024 365,873 365,451 12,839 12,309 38,173 37,912 $ 1,288,206 $ 1,286,696 $ $ $ $ 2016,2019 exclude $18$6.9 million of equity and debt mutual funds as they do not have a contractual maturity date.The following table sets forth by fair value hierarchy Teradyne’snon-financial assets that were measured at fair value on anon-recurring basis as of July 3, 2016: July 3, 2016 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Other
Unobservable
Inputs
(Level 3)) Total Total Losses (in thousands) $ — $ — $ 7,976 $ 7,976 $ 254,946 — — 5,750 5,750 83,339 $ — $ — $ 13,726 $ 13,726 $ 338,285 (1)In accordance with the provisions of ASC350-20, “Goodwill” goodwill in the Wireless Test reporting unit with a carrying amount of $262.9 million was written down in the second quarter of 2016 to its implied fair value of $8.0 million, resulting in an impairment charge of $254.9 million. See Note J: “Goodwill and Intangible Assets” regarding goodwill impairment.(2)In accordance with the provisions of ASC360-10,“Property, Plant and Equipment,” definite lived intangible assets in the Wireless Test reporting unit with a carrying amount of $89.2 million were written down in the second quarter of 2016 to their implied fair value of $5.8 million, resulting in an impairment charge of $83.3 million. See Note J: “Goodwill and Intangible Assets” regarding definite lived intangible assets impairment.20162019 and 2015,2018, Teradyne had the following contracts to buy and sell December 31, 2016 December 31, 2015 Buy
Position Sell
Position Net
Total Buy
Position Sell
Position Net
Total (in millions) $ (17.7 ) $ — $ (17.7 ) $ (51.9 ) $ — $ (51.9 ) (8.8 ) — (8.8 ) (5.5 ) — (5.5 ) (6.9 ) — (6.9 ) (5.0 ) — �� (5.0 ) (1.3 ) — (1.3 ) (9.5 ) — (9.5 ) — 25.2 25.2 — 27.2 27.2 — 24.0 24.0 — 15.0 15.0 $ (34.7 ) $ 49.2 $ 14.5 $ (71.9 ) $ 42.2 $ (29.7 ) $ ) $ $ ) $ ) $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) $ ) $ $ $ ) $ $ $0.1$0.4 million, and $0.0 million,respectively, at December 31, 20162019 and 2015, respectively.In 2016, 2015 and 2014, Teradyne recorded net realized losses related to foreign currency forward contracts hedging net monetary assets and liabilities of $8.7 million, $3.0 million and $0.2 million, respectively.20162019 and 2015: December 31,
2016 December 31,
2015 (in thousands) Prepayments $ 1 $ 109 Other current liabilities (131 ) (146 ) $ (130 ) $ (37 ) $ $ ) ) $ $ ) 2016, 20152019, 2018, and 2014. The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the years ended December 31, 2016 and 2015, gains from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $8.0 million and $2.5 million, respectively. For the year ended December 31, 2014, losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $0.9 million.
Recognized in Statements December 31,
2016 December 31,
2015 December 31,
2014 (in thousands) Other (income) expense, net $ 8,671 $ 3,047 $ 237 $ $ $ ) (1) The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. (2) For the years ended December 31, 2019 and 2018, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $ (3) For the year ended December 31, 2017, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $ H:J: “Debt” regarding derivatives related to the convertible senior notes. than 10% 2016. One customer2019 and 2018.moreas 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 10%one year toTeradyne’s accounts receivablevariable lease costs and $2.6 million of costs related to short-term leases $ 2015.Equity InterestOn November 1, 2013, in connection with the acquisition2019 were as follows: $ ) $ Empirix, Inc. by Thoma Bravo LLC, Teradyne sold its equity interest in Empirix, Inc., a private company, and received cash proceedsDecember 31, 2018, future $ $ $450.8$$33.0$$50.1$ Teradyne’s from December 12, 2016 1.25% beginning on June 15, 2017. (and the Teradyne’s 130% five five $1,000 $ 98% Teradyne’s Teradyne’sThe conversion rate forAs of December Notes will initially be 31.4102 shares per $1,000 principal amount, which is equivalent to an initial conversion price ofwas approximately $31.84 $ Teradyne’sinitial conversion price of the Notes of $31.84.$31.62. The Note Hedge Transactions cover, subject to customary antidilutionanti-dilution adjustments, approximately 14.414.5 million shares of Teradyne’s common stock. (or,antidilutionanti-dilution adjustments, approximately 14.414.5 million shares of common stock. TheAs of December 31, 2019, the strike price of the warrants will initially be $39.95was approximately $39.68 per share (subjectshare. The strike price is subject to adjustment).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.seven yearseven-year term of the Notes. As of December 31, 2016,2019, debt issuance costs were approximately $7.1$4.3 million. December 31,
2016 (in thousands) $ 460,000 107,331 $ 352,669 For the year ended
December 31, 2016 (in thousands) $ 303 688 $ 991
2019
2018 $ $ $ $
2019
2018 $ $ $ $ 2016,2019, the unamortized discount was $107.3$65.3 million, which will be amortized over sevenfour years using the effective interest rate method. The carrying amount of the equity component was $100.8 million. As of December 31, 2016,2019, the conversion rateprice was equal toapproximately $31.initial conversion pricevalue of approximately $31.84 per share.AprilJune 27, 2015,2019, Teradyne terminated its credit agreement, which Teradyne entered into a Credit Agreement (the “Credit Agreement”) with Barclays Bank PLC on April 27, 2015. The terminated credit agreementadministrative agent and collateral agent, and the lenders party thereto. The Credit Agreement providesund $350 (the “Credit Facility”) The Credit Agreement further provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders incremental commitments under the Credit Facility in an aggregate principal amount not to exceed $150 million.Proceeds from the Credit Facility may be used for general corporate purposes and working capital. Teradyne incurred $2.3 million in costs related to the revolving credit facility. These costs are being amortized over the five-year term (LOSS) (loss), which is presented net of tax, consistsconsist of the following: Foreign
Currency
Translation
Adjustment Unrealized
Gains
(Losses) on
Marketable
Securities Retirement
Plans Prior
Service
Credit Total (in thousands) $ — $ 2,365 $ 2,324 $ 4,689 (8,759 ) (3,075 ) — (11,834 ) — (704 ) (295 ) (999 ) (8,759 ) (3,779 ) (295 ) (12,833 ) $ (8,759 ) $ (1,414 ) $ 2,029 $ (8,144 ) (13,162 ) 2,037 59 (11,125 ) — (683 ) (321 ) (945 ) (13,162 ) 1,354 (262 ) (12,070 ) $ (21,921 ) $ (60 ) $ 1,767 $ (20,214 ) $ $ $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ ) $ $ $ ) (a) In the year ended December 31, 2018, Teradyne early adopted ASU (b) In the year ended December 31, 2018, Teradyne adopted ASU 2016, 20152019, 2018, and 2014,2017, were as follows: For the year ended Affected Line Item
in the Statements
of Operations December 31,
2016 December 31,
2015 December 31,
2014 (in thousands) $ 683 $ 704 $ 1,433 Interest income 321 295 295 (1) (59 ) — — 262 295 295 $ 945 $ 999 $ 1,728 Net income $ $ ) $ $ $ ) $ (1)(a)The amortization of prior service credit is included in the computation of net periodic pension cost and postretirement benefit; see Note N:P: “Retirement Plans.”J.more-likely-than-not more likely than not that the fair value of a reporting unit is less than its carrying amount. If Teradyne determines this is the case, Teradyne is required to perform themore-likely-than-not more likely than not that the fair value of the reporting unit is greater than its carrying amounts, theapproach.approachIn the second quarter of 2016, the Wireless Test reporting unit (which is Teradyne’s Wireless Test operating and reportable segment) reduced headcount by 11% as a result of a sharp decline in projected demand attributable to an estimated smaller future wireless test market. The decrease in projected demand was due to lower forecasted buying from Teradyne’s largest Wireless Test segment customer (who has contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011 through 2015) as a result of the customer’s numerous operational efficiencies; slower smartphone growth rates; and a slowdown of new wireless technology adoption. Teradyne considered the headcount reduction and sharp decline in projected demand to be a triggering event for an interim goodwill impairment test.Teradyne allocated the fair value of the Wireless Test reporting unit to all of its assets and liabilities (including unrecognized intangible assets). The net book value of raw materials inventory was estimated as an approximation of current replacement costs. The fair value of finished goods inventory was estimated at the present value of selling price less direct selling costs and profit on the selling effort. The selling price used in the inventory fair values was based upon the product gross margins included in Teradyne’s forecast. The fair value of the deferred revenue liability was estimated by assessing the costs required to service the obligation plus a reasonable profit margin. The fair value for personal property assets, which consisted of furniture and fixtures,machinery and equipment, computer equipment, software and leasehold improvements, was estimated using the replacement cost approach, which approximated carrying value. The fair value of intangible assets was estimated using the income approach and, in particular, developed technology and trademarks/trade names were valued using the relief-from-royalty method and customer relationships and customer backlog were valued using the discounted cash flow method. Royalty rates were estimated using rates applicable to wireless testing equipment and other similar technologies. Based upon this allocation, Teradyne determined that the Wireless Test reporting unit goodwill is valued at $8.0 million and recorded an impairment loss of $254.9 million in the second quarter of 2016.2016,201two- step Industrial Automation,Universal Robots2016.In 2015, Teradyne performed step one of thetwo-step impairment test for the Wireless Test and Defense/Aerospace reporting units and the step zero assessment for the Industrial Automation reporting unit. In 2015, there was no impairment.In 2014, as a result of decreased projected demand attributable to an estimated smaller future wireless test market due to reuse of wireless test equipment, price competition and different testing techniques, Teradyne determined that for its Wireless Test reporting unit, the carrying amount of its net assets exceeded its respective fair value, indicating that a potential impairment existed. After completing the second step of the goodwill impairment test, Teradyne recorded a $98.9 million goodwill impairment charge in the fourth quarter of 2014.The fourth quarter 2014 goodwill impairment test of Teradyne’s Defense/Aerospace reporting unit, which is included in Teradyne’s System Test reportable segment, did not identify any goodwill impairment.20162019 and 20152018 are as follows: Industrial
Automation System
Test Wireless
Test Semiconductor
Test Total (in thousands) $ — $ 158,699 $ 361,819 $ 260,540 $ 781,058 — (148,183 ) (98,897 ) (260,540 ) (507,620 ) — 10,516 262,922 — 273,438 221,128 — — — 221,128 (6,153 ) — — — (6,153 ) 214,975 158,699 361,819 260,540 996,033 — (148,183 ) (98,897 ) (260,540 ) (507,620 ) 214,975 10,516 262,922 — 488,413 (10,124 ) — — — (10,124 ) — — (254,946 ) — (254,946 ) 204,851 158,699 361,819 260,540 985,909 — (148,183 ) (353,843 ) (260,540 ) (762,566 ) $ 204,851 $ 10,516 $ 7,976 $ — $ 223,343 $ $ $ $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ $ As a result of the Wireless Test segment goodwill impairment review in the second quarter of 2016, Teradyne performed an impairment test of the Wireless Test segment’s intangible and long-lived assets. The impairment test is based on a comparison of the estimated undiscounted cash flows to the carrying value of the asset group. If undiscounted cash flows for the asset group are less than the carrying amount, the asset group is written down to its estimated fair value based on a discounted cash flow analysis. The cash flow estimates used to determine the impairment contain management’s best estimates using appropriate assumptions and projections at that time. The fair value of intangible assets was estimated using the income approach and, in particular, developed technology and trademarks/trade names were valued using the relief-from-royalty method and customer relationships were valued using the discounted cash flow method. Royalty rates were estimated using rates applicable to wireless testing equipment and other similar technologies. As a result of the analysis, Teradyne recorded an $83.3 million impairment charge in the second quarter of 2016 in acquired intangible assets impairment on the statements of operations, resulting in a remaining intangible assets balance of $5.0 million for the Wireless Test segment.2015. In 2014, as a result of the Wireless Test segment goodwill impairment charge in the fourth quarter of 2014, Teradyne performed an impairment test of the Wireless Test segment’s intangible 2019 long-lived assets based on a comparison of the estimated undiscounted cash flows to the recorded value of the assets and there was no indication of impairment. December 31, 2016 Gross
Carrying
Amount (1) Accumulated
Amortization (1)(2) Foreign
Currency
Translation
Adjustment Net
Carrying
Amount Weighted
Average
Useful Life (in thousands) $ 270,877 $ 206,376 $ (5,093 ) $ 59,408 6.0 years 92,741 76,707 (538 ) 15,496 7.9 years 50,100 23,435 (1,308 ) 25,357 9.5 years 320 180 — 140 4.0 years 170 170 — — 0.3 years $ 414,208 $ 306,868 $ (6,939 ) $ 100,401 6.8 years
(2)
Currency
Translation
Adjustment $ $ ) $ ) $ ) ) ) ) ) $ $ ) $ ) $
Currency
Translation
Adjustment $ $ ) $ ) $ ) ) ) ) ) ) $ $ ) $ ) $ (1) DuringIncludes intangible assets acquired in 2019, $37.7 million from the year ended December 31, 2016, Teradyne recorded an $83.3impairmentfrom the (2) In 2019, $32.7 million of Wireless Test amortizable intangible assets. The impairment assets became fully amortized and have been eliminated from the gross carrying amount and accumulated amortization.(2)In 2016, $48.1 million of amortizable intangible assets became fully amortized and has been eliminated from the gross carrying amount and accumulated amortization. December 31, 2015 Gross
Carrying
Amount Accumulated
Amortization (1)(2) Foreign
Currency
Translation
Adjustment Net
Carrying
Amount Weighted
Average
Useful Life (in thousands) $ 382,262 $ 220,346 $ (2,444 ) $ 159,472 6.0 years 110,602 63,722 (258 ) 46,622 7.9 years 53,034 18,889 (628 ) 33,517 9.5 years 320 100 — 220 4.0 years 170 170 — — 0.3 years $ 546,388 $ 303,227 $ (3,330 ) $ 239,831 6.7 years (1)During the year ended December 31, 2015, Teradyne recorded intangible assets in the amount of $121.6 million related to its Universal Robots acquisition.(2)During the year ended December 31, 2015, Teradyne wrote off $98.2 million of fully amortized intangible assets.2016, 20152019, 2018, and 20142017, was $52.6$40.1 million, $69.0$39.2 million, and $70.8$30.5 million, respectively. Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows: Amortization Expense (in thousands) $ 28,986 26,848 23,037 10,042 3,435 8,053 K. $ 2016, 2019,$260.7$415.6 million, of which $247.9$412.9 million is for less than one year.CommitmentsTeradyne leases certain of its office buildings and other facilities under various operating lease arrangements that include renewal options and escalation clauses for adjusting rent payments to reflect changes in price indices. Rental expense for leases with fixed escalation clauses is recognized on a straight line basis over the lease term.Rental expense for the years ended December 31, 2016, 2015 and 2014 was $18.8 million, $15.9 million and $16.0 million, respectively.The following table reflects Teradyne’snon-cancelable operating lease commitments: Non-cancelable
Lease
Commitments (in thousands) $ 16,467 15,258 13,733 9,374 7,149 10,130 $ 72,111 course, Teradyne warrants that its products will substantially perform in accordance with its standard published specifications in effect at the time of delivery. Most warranties have a it 20162019 and 2015, 2018$7.2$9.0 million and $6.9$7.9 million, respectively, included in other accrued liabilities, and revenue deferrals related to extended warranties of $46.8$30.7 million and $46.5$27.4 million, respectively, included in short and long-term deferred revenue and customer advances. and in the ordinary course of business, Teradyne provides minimum purchase guarantees to certain vendors to ensure continuity of supply against the market demand. Although some of these guarantees provide penalties for cancellations and/or modifications to the purchase commitments as the market demand decreases, most of the guarantees do not. Therefore, as the market demand decreases, Teradyne20162019, and 2015,2018, except for product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.L. (LOSS) INCOME PER COMMON SHARE(loss) income per common share: 2016 2015 2014 (in thousands, except per share amounts) $ (43,421 ) $ 206,477 $ 81,272 202,578 211,544 202,908 — — 5,013 — — 12,562 — 1,130 1,092 — 606 944 — 41 31 — 1,777 19,642 202,578 213,321 222,550 $ (0.21 ) $ 0.98 $ 0.40 $ (0.21 ) $ 0.97 $ 0.37 $ $ $ $ $ $ $ $ $ (1) Incremental shares from the assumed conversion of the convertible notes was calculated using the difference between the average Teradyne stock price for the period and the conversion price of $5.48,$31.62, multiplied by 34.714.5 million shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period.(2) Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of $7.67,$39.68, multiplied by 34.714.5 million shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period. Teradyne’s call option on its common stock (convertible note hedge transaction) was excluded from the calculation of diluted shares because the effect was anti-dilutive.The computation of diluted net loss per common share for 2016 excludes the effect of the potential exercise of all outstanding stock options and restricted stock units because Teradyne had a net loss and inclusion would be anti-dilutive.20152018 excludes the effect of the potential exercise of stock options to purchase approximately 0.20.1 million shares and restricted stock units to purchase approximately 0.5 million shares because the effect would have been anti-dilutive.20142017 excludes the effect of the potential exercise of stock options to purchase approximately 0.30.1 million shares because the effect would have been anti-dilutive.M.Other2016,2019, Teradyne recorded $15.9otherseverance charges related to headcount reductions primarily in Semiconductor Test, and $4.5 million for acquisition related expenses and compensation, partially offset by a gain of which $15.3$wasfor the decrease in the fair value of the Universal Robots contingent consideration liability.$0.6$3.8 million for the increaseof severance charges related to headcount reductions primarily in the fair value of the AIT contingent consideration liability, $4.2Semiconductor Test, $1.1 million for an impairment of fixed assets and $1.2in Semiconductor Test, $1.0 million for a lease impairment of a Wireless Test facility in Sunnyvale, CA, which was terminated in September 2017, and $0.8 million of expenses related to an earthquake in Kumamoto, Japan, partially offset by $5.4$5.1 million of property insurance recovery related to the Japan earthquake.During the year ended December 31, 2015, Teradyne recorded $3.6 million of other charges, of which $5.3 million was for the increase in the fair value of the Universal Robots contingent consideration liability and $1.0 million for acquisition costs related to Universal Robots, partially offset by a $2.9 million gain from fair value adjustments to decrease the acquisition contingent consideration liability related to ZTEC, $1.6 million, and AIT, $1.3 million.During the year ended December 31, 2014, Teradyne recorded a $0.6 million gain from the fair value adjustment to decrease the ZTEC acquisition contingent consideration, partially offset by $0.4 million of acquisition costs related to AIT.RestructuringDuring the year ended December 31, 2016, Teradyne recorded $6.0 million of severance charges related to headcount reductions of 146 people, of which 102 people were in Wireless Test and 44 people were in Semiconductor Test.During the year ended December 31, 2015, Teradyne recorded $1.5 million of severance charges related to headcount reductions of 23 people primarily in System Test and Semiconductor Test.During the year ended December 31, 2014, Teradyne recorded $1.6 million of severance charges related to headcount reductions of approximately 43 people, primarily in Semiconductor Test and Wireless Test.The remaining accrual for severance of $2.1 million is reflected in the accrued employees’ compensation and withholdings on the balance sheet and is expected to be paid by June 2017.N. 2016 2015 United States Foreign United States Foreign (in thousands) $ 351,117 $ 62,290 $ 367,619 $ 58,210 2,302 761 2,462 1,006 13,630 1,185 13,142 1,444 6,053 5,621 (13,221 ) 7,498 (19,486 ) (1,385 ) (18,885 ) (859 ) — — — (634 ) — — — 64 — (609 ) — — — (7,125 ) — (4,439 ) 353,616 60,738 351,117 62,290 298,404 28,141 316,072 29,511 4,489 867 10,517 808 — — — 64 23,897 5,142 (9,300 ) (136 ) (19,486 ) (1,148 ) (18,885 ) (859 ) — — — — — (609 ) — (43 ) — (4,822 ) — (1,204 ) 307,304 27,571 298,404 28,141 $ (46,312 ) $ (33,167 ) $ (52,713 ) $ (34,149 ) $ $ $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ ) $ ) $ ) $ ) 2016 2015 United States Foreign United States Foreign (in thousands) $ 7,712 $ — $ 636 $ — (2,591 ) (772 ) (2,564 ) (695 ) (51,433 ) (32,395 ) (50,785 ) (33,454 ) $ (46,312 ) $ (33,167 ) $ (52,713 ) $ (34,149 ) $ $ $ $ ) ) ) ) ) ) ) ) $ ) $ ) $ ) $ ) 2016 2015 United States Foreign United States Foreign (in thousands) $ 127 $ — $ 224 $ — 514 — 479 — $ 641 $ — $ 703 $ — The estimated portion of prior service cost remaining in accumulated other comprehensive income that is expected to be recognized as a component of net periodic pension cost in 2017 is $0.1 million. $ $ $ $ $342.9$198.2 million and $340.1$172.8 million at December 31, 20162019 and 2015,2018, respectively. The accumulated benefit obligation for foreign defined benefit pension plans was $56.6$39.9 million and $35.6 million at December 31, 20162019 and 2015. 2016 2015 United States Foreign United States Foreign (in millions) $ 54.0 $ 34.3 $ 53.3 $ 35.2 48.0 30.1 47.3 29.5 — 1.1 — 1.0 $ $ $ $ — 2016, 20152019, 2018, and 2014,2017, Teradyne’s net periodic pension cost was comprised of the following: 2016 2015 2014 United
States Foreign United
States Foreign United
States Foreign (in thousands) $ 2,302 $ 761 $ 2,462 $ 1,006 $ 2,218 $ 897 13,630 1,185 13,142 1,444 12,875 1,837 (13,830 ) (443 ) (14,517 ) (781 ) (12,500 ) (868 ) 96 — 134 — 135 — (4,013 ) 815 10,596 8,415 43,168 4,651 — — — (634 ) — — $ (1,815 ) $ 2,318 $ 11,817 $ 9,450 $ 45,896 $ 6,517 (96 ) — (134 ) — (135 ) — (96 ) — (134 ) — (135 ) — $ (1,911 ) $ 2,318 $ 11,683 $ 9,450 $ 45,761 $ 6,517 $ $ $ $ $ $ ) ) ) ) ) ) ) ) ) $ $ $ ) $ $ ) $ ) ) ) ) $ $ $ ) $ $ ) $ 2016 2015 2014 United States Foreign United States Foreign United States Foreign 4.0 % 2.3 % 3.7 % 2.6 % 4.5 % 3.8 % 4.8 2.0 4.8 2.6 5.0 3.4 2.7 3.2 2.9 3.2 3.0 3.5 % % % % % % 31 : 2016 2015 United States Foreign United States Foreign 3.9 % 1.8 % 4.0 % 2.3 % 2.6 2.7 2.7 3.2 % % % % 4.8%4.25% was an appropriate rate to use for fiscal 20162019 for the U.S. Qualified Pension Plan (“U.S. Plan”).CitigroupFTSE Pension Index adjusted for the plan’s expected cash flows and was 3.9%3.10% at December 31, 2016, 2019,4.0%4.15% at December 31, 2015.2016,2019, the fair value of Teradyne’s pension plans’ assets totaled $334.9$168.5 million of which $307.3$166.9 million was related to the U.S. Plan $26.5 million was related to the U.K. defined benefit pension plan, and $1.1$1.6 million was related to the Taiwan defined benefit pension plan. Substantially all of Teradyne’s pension plans’ assets are held in individual trusts, which were established for the investment of assets of Teradyne’s sponsored retirement plans.20162019 and 2015: 2016 2015 United States Foreign United States Foreign 88.1 % — % 88.6 % — % 9.9 — 9.8 — 2.0 100.0 1.6 100.0 100.0 % 100.0 % 100.0 % 100.0 % % % % % % % % % 76% 10 8 Corporate High Yield 2% Issuer Cap Index the fourth quarter of 2015, the Trustees of2017, the U.K. defined benefit pension was terminated and the obligations and assets of the plan purchased group annuitywere transferred to an insurance contracts. The cash flows from the contracts are intended to match the plan’s obligations.yearsyear ended December 31, 2016 and 2015,2019, there were no transfers of pension assets in or out of Level 1, Level 2, orand Level 3.20162019 and December 31, 20152018 were as follows: December 31, 2016 United States Foreign Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total (in thousands) $ — $ 246,528 $ — $ 246,528 $ — $ — $ — $ — — 24,322 — 24,322 — — — — — 30,360 — 30,360 — — — — — — 3,071 3,071 — — 26,385 26,385 — — — — — 1,124 — 1,124 3,023 — — 3,023 62 — — 62 $ 3,023 $ 301,210 $ 3,071 $ 307,304 $ 62 $ 1,124 $ 26,385 $ 27,571 December 31, 2015 United States Foreign Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total (in thousands) $ — $ 240,695 $ — $ 240,695 $ — $ — $ — $ — — 23,761 — 23,761 — — — — — 29,193 — 29,193 — — — — — — 2,982 2,982 — — 26,410 26,410 — — — — — 1,029 — 1,029 1,773 — — 1,773 702 — — 702 $ 1,773 $ 293,649 $ 2,982 $ 298,404 $ 702 $ 1,029 $ 26,410 $ 28,141 The pension plan assets identified as Level 3 above are related to group annuity insurance contracts held by the U.K. defined benefit pension plan and the U.S. Plan. The fair value $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ yearsyear ended December 31, 2016 and 2015 2018 Group Annuity Insurance Contracts (in thousands) $ 2,990 27,313 (825 ) (67 ) (19 ) 29,392 709 5,308 (611 ) (634 ) (4,708 ) $ 29,456 $ ) ) ) ) $ 2016,2019, Teradyne contributed $1.9 million to the U.S. Plan, $2.6$2.8 million to the U.S. supplemental executive defined benefit pension plan and $0.9 million to certain qualified plans for2015,2018, Teradyne contributed $8.0$2.6 million to the U.S. Plan, $2.5 million to the U.S.U.S supplemental executive defined benefit pension plan and $0.8 million to certain qualified plans for 2017,U.S. Plan and certain qualified plans from$2.6 million, $1.9$2.8 million and $0.8$1.0 million, respectively. United States Foreign (in thousands) $ 19,205 $ 788 18,568 754 19,046 780 19,768 1,054 20,390 882 111,334 5,209 $ $ 2016 2015 (in thousands) $ 6,030 $ 7,162 37 48 218 237 (93 ) — 5 (648 ) (687 ) (769 ) 5,510 6,030 — — 687 769 (687 ) (769 ) — — $ (5,510 ) $ (6,030 ) $ $ Benefits paid ) ) ) ) $ ) $ ) 2016 2015 (in thousands) $ (571 ) $ (692 ) (4,939 ) (5,338 ) $ (5,510 ) $ (6,030 ) $ ) $ ) ) ) $ ) $ ) 2016 2015 (in thousands) $ (1,118 ) $ (1,632 ) (1,292 ) (1,100 ) $ (2,410 ) $ (2,732 ) The estimated portion $ ) $ ) ) ) $ ) $ ) 2016, 20152019, 2018, and 2014,2017, Teradyne’s net periodic postretirement benefit incomecost (income) was comprised of the following: 2016 2015 2014 (in thousands) $ 37 $ 48 $ 59 218 237 335 (607 ) (598 ) (598 ) 5 (648 ) (1,255 ) (347 ) (961 ) (1,459 ) (93 ) — — 607 598 598 514 598 598 $ 167 $ (363 ) $ (861 ) $ $ $ ) ) ) $ $ $ 2016 2015 2014 3.9 % 3.5 % 4.1 % 7.5 7.5 8.0 5.0 5.0 5.0 2023 2022 2020 % % % 2016 2015 2014 3.9 % 3.9 % 3.5 % 7.3 7.5 7.5 5.0 5.0 5.0 2023 2023 2022 % % % 20162019 would have the following effects: 1 Percentage
Point
Increase 1 Percentage
Point
Decrease (in thousands) $ 2 $ (2 ) 44 (42 ) $ $ ) ) Benefit Payments (in thousands) $ 571 529 456 409 367 1,536 O. $ stock options, and 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. year period, -ythe award vesting on(a) the first anniversary of the grant date.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-basedtimeCommencing in January 2014, Teradyne granted performance-based its with For TSR grants issued in 2014 and 2015, Teradyne’s three-year TSR performance is measured against the Philadelphia Semiconductor Index. For TSR grants issued in January 2016, Teradyne’s three-year TSR performance will be measured against the New York Stock Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 200% to 0% of the target shares.shares capped at four times the grant date value for grants prior to 2019. The TSR PRSUs will period.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 endIn January 2016, Teradyne PRSUs to its with . as a percent of Teradyne’s revenue.period.periodBeginning with PRSUs granted in January 2014, if thethree-yearthree-year period.The TSR PRSUs are valued usingMonte Carlo simulation model. maximum term of seven years.2016, 20152019, 2018 and 20142017, Teradyne granted 0.8 million, 0.6 million and 0.8 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $37.65, $45.92 and $28.19, respectively.0.2 millionof service-based restricted stock unit awards to non-employee directors at a weighted average grant date fair value of $48.03, $35.81 and $34.48, respectively. respectively, with a grant date fair value of $20.29, $18.21$51.51, $54.85 and $22.06,$35.66 respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions: 2016 2015 2014 0.97 % 0.77 % 0.75 % 27.0 % 28.2 % 36.1 % 13.1 % — % — % — % 19.7 % 24.6 % 1.24 % 1.33 % 1.25 % % % % % % % % % % % % % 2016 grant2019, 2018 and Philadelphia Semiconductor Index for the 2015 and 20142017 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 grant. for 2016, 2015 and 2014 was based upon an estimated annual dividend amount of $0.24$0.36 per share for 2019$19.43$37.95 for the 2016 2019 $18.102015 2018$19.16$28.56 for the 2014 grants.Stock Options Valuation Assumptions:The total number2017granted in 2016, 2015 and 2014 were 0.1 million, 0.1 million and 0.1 million, respectively,to executive officers at thea weighted average grant date fair value of $5.30, $4.43$$5.49 per share,$the stock options at grant date was estimated using the Black-Scholes option-pricing model with the following assumptions: 2016 2015 2014 5.0 4.0 4.0 1.4 % 1.1 % 1.2 % 32.9 % 33.4 % 38.8 % 1.24 % 1.33 % 1.25 % % % % % % % % % % option’s executives award.$0.24$0.36 per share divided by Teradyne’s stock price on the grant date of $19.43$37.95 for the 20162019 grants, $18.10$47.70 for the 20152018 grants and $19.16$28.56 for the 20142017 grants.2016, 20152019, 2018, and 20142017, is as follows: 2016 2015 2014 (in thousands) 4,070 4,352 4,636 1,471 1,681 1,870 (1,530 ) (1,679 ) (1,965 ) (233 ) (284 ) (189 ) 3,778 4,070 4,352 1,121 1,507 2,706 130 132 89 (324 ) (518 ) (1,248 ) — — (38 ) (2 ) — (2 ) 926 1,121 1,507 926 1,121 1,507 598 779 1,089 ) ) ) ) ) ) ) ) ) ) ) ) 2016, 20152019, 2018, and 2014: 2016 2015 2014 (in thousands) 10,914 12,443 14,213 (130 ) (132 ) (89 ) (1,471 ) (1,681 ) (1,870 ) 233 284 189 9,546 10,914 12,443 ) ) ) 7 — — ) ) ) 2016, 20152019, 2018, and 20142017 2016 2015 2014 $ 17.46 $ 17.24 $ 15.60 18.68 17.36 18.41 17.21 16.85 14.38 17.57 17.08 16.97 $ 18.03 $ 17.46 $ 17.24 $ $ $ $ $ $ 2016, 2015 2019, 201820142017 is as follows: 2016 2015 2014 (in thousands) $ 30,008 $ 32,200 $ 37,160 95,952 84,129 86,113 91,871 79,611 81,582 $ $ $ 2016, 20152019, 2018, 2014 2016 2015 2014 1.04 1.09 1.11 1.03 1.08 1.10 20162019 is as follows: 2016 $ 10.21 19.43 9.06 3.07 11.93 8.32 $ 2016, 20152019, 2018, and 2014,2017, was $2.9$3.7 million, $2.8$1.0 million and $6.7$6.8 million, respectively. In connection with these exercises, the tax benefit realized by Teradyne for the years ended December 31, 2016, 20152019, 2018, and 2014,2017, was $0.8$2.0 million, $2.1$0.4 million, and $5.7$2.5 million, respectively.2016, 20152019, 2018, and 20142017 is as follows: 2016 2015 2014 (in thousands) $ 3,729 $ 7,255 $ 17,847 12,468 11,729 17,936 12,468 11,729 17,936 10,217 10,716 16,101 $ $ $ 2016, 20152019, 2018, and 20142017 is as follows: 2016 2015 2014 3.9 4.2 4.5 3.9 4.2 4.5 3.2 3.9 4.2 Significant option groups outstanding at December 31, 2016 and related weighted average price and remaining contractual life information follow: Options Outstanding Options Exercisable Weighted-
Average Remaining
Contractual Life
(Years) Shares Weighted-
Average
Exercise Price Shares Weighted-
Average
Exercise Price (shares in thousands) 3.74 294 $ 2.31 294 $ 2.31 1.77 75 4.26 75 4.26 3.51 338 17.18 185 16.87 5.26 219 19.32 44 19.16 926 11.93 598 8.32 2016,2019, total unrecognized expense related to$40.6$45 million, and is expected to be recognized over a weighted average period of 2.31.8 years.Effective January 31, 2014, Michael Bradley retired as Chief Executive Officer of Teradyne. On January 22, 2014, Teradyne entered into an agreement (the “Retirement Agreement”) with Mr. Bradley. Under the Retirement Agreement, Mr. Bradley’s unvested restricted stock units and stock options granted prior to his retirement date will continue to vest in accordance with their terms through January 31, 2017; and any vested options or options that vest during that period may be exercised for the remainder of the applicable option term. In the Retirement Agreement, Mr. Bradley agreed to be bound bynon-competition andnon-solicitation restrictions through January 31, 2017. In January 2014, Teradyne recorded aone-time charge to stock-based compensation expense of $6.6 million related to the Retirement Agreement.Teradyne 1996 Employee Stock Purchase Plan (“ESPP”),ESPP, eligible employees may purchase shares of common stock through regular payroll deductions of up to 10% of their compensation, to a maximum of shares with a fair market value of $25,000 per calendar year, not to exceed 6,000 shares. Under the plan, the price paid for the common stock is equal to 85% of the stock price on the last business day of the2016, 0.52019, 0.3 million shares of common stock were issued to employees who participated in the plan during the first half of 2016,2019 at the price of $16.74$40.72 per share. In January 2017,2020, Teradyne issued 0.2 million shares of common stock to employees who participated in the plan during the second half of 2019 at the price of $57.96 per share.2016,2018 at the price of $21.59$26.67 per share.2015, 0.52017, 0.3 million shares of common stock were issued to employees who participated in the plan during the first half of 2015,2017 at the price of $16.40$25.53 per share. In January 2016,2018, Teradyne issued 0.50.3 million shares of common stock to employees who participated in the plan during the second half of 2015,2017 at the price of $17.57$35.59 per share.In July 2014, 0.5 million shares of common stock were issued to employees who participated in the plan during the first half of 2014, at the price of $16.66 per share. In January 2015, Teradyne issued 0.5 million shares of common stock to employees who participated in the plan during the second half of 2014, at the price of $16.82 per share.2016,2019, there were 3.91.8 million shares available for grant under the ESPP.was as follows: 2016 2015 2014 (in thousands) $ 3,153 $ 3,065 $ 3,675 9,458 9,362 10,146 18,139 18,024 26,486 30,750 30,451 40,307 (8,752 ) (8,528 ) (11,537 ) $ 21,998 $ 21,923 $ 28,770 P.2019, 2018, and 2017: $ $ $ ) ) ) $ $ $ 2016, 20152019, 2018 and 2014,2017, Teradyne matched 100% of eligible employee contributions up to 4% of their compensation for employees not accruing benefits in the U.S. Qualified Pension Plan. There was no match for employees still actively accruing benefits in the U.S. Qualified Pension Plan. Teradyne’s contributions vest 25% per year for the first four years of employment, and contributions for those employees with four years of service vest immediately. established also established contribution 2016, 20152019, 2018, and 20142017 were $14.5$20.9 million, $13.5$19.4 million, and $12.8$16.8 million, respectively.Q. income before income taxes and the provision (benefit) provision for income taxes as shown in the consolidated statements of operations were as follows: 2016 2015 2014 (in thousands) $ (341,018 ) $ 56,270 $ (151,889 ) 285,958 196,854 247,265 $ (55,060 ) $ 253,124 $ 95,376 $ 7,750 $ 16,635 $ 5,197 41,579 35,707 28,157 1,968 1,429 678 51,297 53,771 34,032 (51,482 ) (574 ) (20,449 ) (9,240 ) (7,761 ) (404 ) (2,214 ) 1,211 925 (62,936 ) (7,124 ) (19,928 ) $ (11,639 ) $ 46,647 $ 14,104 Income tax benefit for 2016 totaled $11.6 million. $ $ $ $ $ $ $ $ ) $ ) ) ) ) ) ) ) ) $ $ $ 2015201920142017 totaled $46.6$58.3$14.1$266.7 million, respectively. The effective tax rate for 2016, 20152019, 2018 and 20142017 was 21.1%11.1%, 18.4%3.4% and 14.8%50.9%, respectively.20152018 to 2016 resulted from a shift2019 is primarily attributable to increases in the geographic distribution of income which decreased income subject to taxation in the U.S. relative to lower tax rate jurisdictions, reductions in uncertain tax positions resulting from the expiration of statutesexpense associated with GILTI and the settlementtransition tax on the mandatory deemed repatriation of an audit, and an increase innon-taxableforeign exchange gains.earnings. These increases in the effective tax rateexpense were partially offset by the effect of thenon-deductible goodwill impairment charge, which reduced theincreased benefit of the loss before income taxes infrom the U.S.increaseIRS appealed the decision in June 2016. On July 24, 2018, the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) issued a decision that was subsequently withdrawn and a reconstituted panel conferred on the appeal. On June 7, 2019, the Ninth Circuit upheld the cost-sharing regulations. On November 12, 2019 the Ninth Circuit denied Altera’s petition for rehearing of its case. As a result, during the fourth quarter of 2019, Teradyne recognized a tax expense of approximately $6.3 million related to the inclusion of stock-based compensation in its intercompany cost-sharing arrangement.20142017 to 2015 resulted2018 was primarily attributable to the $186.0 million of income tax expense recorded in the fourth quarter of 2017and areduction in the benefit fromof the U.S. researchforeign derived intangible income deduction and development tax credits. These increases in the effective tax rate were partially offset by decreases associated with uncertain tax positionsdiscrete benefit fromanon-deductible goodwill impairment charge.2016, 20152019, 2018 and 20142017 is as follows: 2016 2015 2014 35.0 % 35.0 % 35.0 % 127.1 (16.5 ) (58.1 ) 15.8 (3.0 ) (7.9 ) 2.3 (1.0 ) (0.5 ) 2.3 0.4 (0.1 ) (2.7 ) 0.6 (1.8 ) (2.6 ) 2.2 7.9 (162.1 ) — 36.3 6.0 0.7 4.0 21.1 % 18.4 % 14.8 % % % % ) ) ) ) ) ) (4.0 ) (2.0 ) (16.3 ) (2.6 ) (1.8 ) ) ) ) ) ) ) 0.3 6.9 (0.3 ) 11.1 % 3.4 % 50.9 % 2016, 20152019, 2018 and 20142017 were $17.0$15.1 million or $0.08 $$11.5$$0.05$0.06 per diluted share and $13.2$24.8 million or $0.06$0.12 per diluted share, respectively. The tax holiday is scheduled to expire on2020.20162019 and 20152018 were as follows: 2016 2015 (in thousands) $ 57,313 $ 44,684 31,581 31,742 31,227 29,445 27,247 26,563 12,806 10,232 9,922 9,674 7,874 7,354 5,244 7,989 630 502 183,844 168,185 (48,369 ) (43,039 ) $ 135,475 $ 125,146 $ (22,887 ) $ (68,433 ) (17,117 ) (20,541 ) (210 ) (458 ) $ (40,214 ) $ (89,432 ) $ 95,261 $ 35,714 During 2016, Teradyne’s valuation allowance increased by $5.3 million primarily due to the increase in the deferred tax assets related to state tax credits generated in 2016. $ $ 3,292 — ) ) $ $ $ ) $ ) ) ) (1,601 ) $ ) $ ) $ $ 20162019 and 2015,2018, Teradyne evaluated the likelihood that it would realize the deferred income taxes to offset future taxable income and concluded that it is more likely than not that a substantial majority of its deferred tax assets will be realized through consideration of both the positive and negative evidence. At December 31, 20162019 and 2015,2018, Teradyne maintained a valuation allowance for certain deferred tax assets of $48.4$77.2 million and $43.0$69.9 million, respectively, primarily related to state net operating losses and state tax credit carryforwards, due to the uncertainty regarding their realization. Adjustments could be required in the future if Teradyne estimates that the amount of deferred tax assets to be realized is more or less than the net amount recorded.2016,2019, Teradyne had operating loss carryforwards that expire in the following years: State
Operating Loss
Carryforwards Foreign
Operating Loss
Carryforwards (in thousands) $ 10,245 $ — 8,562 — 983 — 1,248 — 3,549 — 18,044 — 38,498 — 5,464 129 — 6,400 $ 86,593 $ 6,529 The operating loss carryforwards do not include any excess tax deduction related to stock-based compensation, which has not been recognized for financial statements purposes. $ $ — $ $ 554 $ $134.6$108.4 million of tax credit carryforwards including federal business tax credits of approximately $45.3$2.1 million which expire in the years 2017 through 2036, alternative minimum tax credits of approximately $8.7 million which do not expire, 2028$80.6$106.3 million, of which $47.4$59.7 million do not expire and the remainder expires in the years 20172020 through 2031.Teradyne has federal tax credits of $39.1 million, that are attributable to stock-based compensation deductions, which will be recorded as an increase to retained earnings and deferred tax assets upon adoption, in the first quarter of 2017, of ASU2016-09,“Compensation-Stock Compensation (Topic 718): Improvements to EmployeeShare-Based Payment Accounting.”2016, 20152019, 2018 and 20142017 were as follows: 2016 2015 2014 (in thousands) $ 36,792 $ 30,418 $ 21,203 9,766 6,626 8,414 187 792 3,781 (3,532 ) — — (2,295 ) (336 ) (500 ) (1,960 ) (708 ) (2,480 ) $ 38,958 $ 36,792 $ 30,418 $ $ $ ) ) ) ) ) ) ) $ $ $ and prior year additions include assessment of potential transfer pricing issues worldwide,relate to federal and state taxresearch credits. Prior year additions primarily relate toincentives, capitalization rules, and domestic production activities deductions. Reductions for tax positions for prior years primarily relate to statute expiration andresulted from the settlement tax audits. completion of the 2015 U.S. federal audit in the first quarter of 2019.$39.0$21.2 million of unrecognized tax benefits as of December 31, 2016, $27.62019, $12.7 million would impact the consolidated income tax rate if ultimately recognized. The remaining $11.4$8.5 million would impact deferred taxes if recognized. estimates that it is reasonably possible that2016 may decrease approximately $0.8 million 2019 as a result of a lapse of statutes of limitation. The estimated decrease is composed primarily of reserves relating to the U.S. research and development credits.20162019 and 20152018 amounted to $0.4$1.4 million and $0.5$0.3 million, respectively. For the years ended December 31, 2016, 20152019, 2018 and 2014,2017, expense of $1.1 million, expense of $0.1 million and benefit of $0.1 million, benefit of $0.2 million and expense of $0.2 million, respectively, was recorded for interest and penalties related to income tax items.2016,2019, all material state and local income tax matters have been concluded through 2008,2013, all material federal income tax matters have been concluded through 2012 2009.2016, a deferred tax liability has2019, Teradyne is not been established for approximately $1,020 million of cumulative undistributed earnings ofnon-U.S. subsidiaries, which are expected to bepermanently reinvested indefinitely in operations outside the U.S. except for instances where Teradyne can remit such earningswith respect to the U.S. without an associated net tax cost. Determinationunremitted earnings ofunrecognized deferred tax liability on unremittedextent that those earnings exceed local statutory and operational requirements. Remittance of those earnings is not practicable dueexpected to uncertainty regarding the remittance structure, the mix of earnings and earnings and profit poolsresult in the year of remittance, and overall complexity of the calculation.R.material income tax.four operating4 reportable segments (Semiconductor Test, Industrial AutomationIndustrial Automation, ,. Each of the Semiconductor Test, System Test, and Wireless Test segments is also an individualare itshave been combined into one reportable segments.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 robots.robotic arms, autonomous mobile robots and advanced robotic control software. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. Each operating segment has a segment manager who is directly accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts, and plans for the segment.usingbased on several factors, of which the primary financial measure is business segment income (loss) from operations before income taxes. The accounting policies of the business segments are the same as those described in Note B: “Accounting Policies.”2016, 20152019, 2018, and 20142017 is as follows: Semiconductor
Test System
Test Industrial
Automation Wireless
Test Corporate
And
Eliminations Consolidated (in thousands) $ 1,368,169 $ 189,846 $ 99,031 $ 96,204 $ — $ 1,753,250 311,939 28,916 (16,783 ) (371,409 ) (7,723 ) (55,060 ) 557,546 110,361 317,635 62,366 1,714,585 2,762,493 70,543 3,788 6,755 4,186 — 85,272 58,087 6,551 26,869 25,921 2,581 120,009 $ 1,201,530 $ 211,584 $ 41,892 $ 184,572 $ — $ 1,639,578 260,154 25,101 (7,574 ) (13,830 ) (10,727 ) 253,124 610,869 102,547 344,260 427,880 1,063,118 2,548,674 79,052 6,228 1,465 3,133 — 89,878 64,415 4,391 14,500 53,440 4,027 140,773 $ 1,300,790 $ 162,499 $ — $ 184,535 $ — $ 1,647,824 255,803 12,116 — (116,196 ) (56,347 ) 95,376 580,501 95,105 — 478,974 1,383,940 2,538,520 159,783 5,469 — 3,730 — 168,982 84,990 5,399 — 53,308 8,847 152,544 $ $ $ $ $ ) $ ) ) $ $ $ $ $ ) $ ) $ $ $ $ $ $ ) (1) Interest income, interest expense, other (income) expense, net,Included in Corporate and Other are: contingent consideration adjustments, and losses are included in Corporate and Eliminations.acquisition related charges.(2) Included in income (loss) before taxes are charges and credits related to restructuring and other, and inventory charges, goodwill impairment charges and acquired intangible assets impairment charge.charges.(3) Total business assets are directly attributable to each business.segment. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets.the Semiconductor Test segment are charges in the following accounts: For the Years Ended
December 31, 2016 2015 2014 (in thousands) $ 9,656 $ 10,508 $ 14,389 2,860 499 490 Included in the System Test segment are charges in the following accounts: For the Years Ended December 31, 2016 2015 2014 (in thousands) $ 630 $ 8,324 $ 2,125 (49 ) 1,037 742 Included in the Industrial Automation segment are charges in the following accounts: For the Years Ended December 31, 2016 2015 2014 (in thousands) $ 585 $ — $ — — 1,567 — (1)Included in the cost of revenues for the year ended December 31, 2015 is the cost for purchase accounting inventorystep-up.Included in the Wireless Test segment are charges in the following accounts: For the Years Ended
December 31, 2016 2015 2014 (in thousands) $ 254,946 $ — $ 98,897 83,339 — — 7,207 2,500 5,679 2,650 — 565 Included in the Corporate and Eliminationseach segment are charges and credits in the following accounts: For the Years Ended December 31, 2016 2015 2014 (in thousands) $ 15,346 $ 5,339 $ — 5,363 — — (5,363 ) — — — (1,600 ) (630 ) 550 (1,250 ) — — 1,104 372 — — 198 — (5,406 ) — — — 6,598 $ 15,896 $ (1,813 ) $ 6,538 (1)Expense related to the January 2014 retirement of Teradyne’s former chief executive officer; see Note O: “Stock-Based Compensation.” $ $ $ $ $ $ 1,414 1,163 $ $ $ $ $ $ $ ) $ $ Other (income) expense, net—investment impairment charge 15,000 — — Restructuring and other—AutoGuide contingent consideration adjustment 2,976 — — ) ) 2016 2015 2014 (in thousands) $ 653,076 $ 436,389 $ 495,942 221,948 217,386 213,104 174,876 264,898 292,145 147,882 120,224 145,608 135,978 128,228 63,761 117,671 111,903 111,043 103,472 76,707 83,910 73,172 105,216 119,421 54,705 96,103 68,662 43,097 59,104 44,117 27,373 23,420 10,111 $ 1,753,250 $ 1,639,578 $ 1,647,824 $ $ $ $ $ $ (1) Revenues attributable to a country are based on location of customer site. 2016, two customers of Teradyne’s Semiconductor Test segment each accounted for 12% of total consolidated revenues. In 2015, one customer of Teradyne’s Semiconductor Test segment accounted for 13% of total consolidated revenues. In 2014, no2019 and 2018, 0 single total product demandconsolidated revenues driven by a singleHuawei Technologies Co.outsourced semiconductor assembly and test providers (“OSATs”OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd.), accounted for approximately 25% 23%, 22% Teradyne’s 2016, 20152019, 2018 and 2014,2017, respectively. United States Foreign(1) Total (in thousands) $ 189,195 $ 64,626 $ 253,821 $ 198,424 $ 74,990 $ 273,414 $ $ $ $ $ $ (1) As of December 31, 20162019 and 2015,2018, long-lived assets attributable to Singapore were $31.5$39.9$19.4 million, respectively.S.2015, the2018, Teradyne’s Board of Directors cancelled the November 2010December 2016 stock repurchase program and authorized a new stock repurchase program for up to $500 million$1.5 billion of common stock. The cumulative repurchases as of December 31, 2016 totaled 22.5In 2019, Teradyne repurchased 10.9 million shares of common stock for $446$500.0 million at an average price per share of $19.87.$45.89. In 2018, Teradyne repurchased 21.6 million shares of common stock for $823.5 million at an average price per share of $38.06. The totalcumulative repurchases as of December 31, 2019 totaled 32.5 million shares of common stock for $1,323.0 million at an average price includes commissions and is recorded as a reduction to retained earnings.December 2016, theJanuary 2020, Teradyne’s Board of Directors cancelled the January 2018 repurchase program and approved a new $500 million sharestock repurchase authorization which commenced on January 1, 2017.program for up to $1.0 billion of common stock. Teradyne intends to repurchase at least $200a minimum of $250.0 million in 2017. Teradyne’s January 2015 stock repurchase program was terminated on December 31, 2016.T.2020 2017,$0.07$0.10 per share to be paid on2017 202024, 2017. 2016 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter (1)(5) (2)(5) (3)(5) (4)(5) (in thousands, except per share amounts) $ 358,139 $ 456,832 $ 334,610 $ 303,667 72,855 74,960 75,865 76,322 430,994 531,792 410,475 379,989 167,555 215,795 148,266 127,481 33,107 33,127 34,850 33,502 200,662 248,922 183,116 160,983 230,332 282,870 227,359 219,006 73,464 76,109 71,400 70,052 79,174 81,425 78,794 76,289 19,994 16,244 8,487 7,923 — 83,339 — — — 254,946 — — 1,587 2,608 12,177 5,570 174,219 514,671 170,858 159,834 56,113 (231,801 ) 56,501 59,172 (1,642 ) (1,666 ) (2,892 ) (3,095 ) 710 691 633 1,604 (147 ) (9 ) (921 ) 1,779 57,192 (230,817 ) 59,681 58,884 7,206 (7,271 ) (4,113 ) (7,461 ) $ 49,986 $ (223,546 ) $ 63,794 $ 66,345 $ 0.24 $ (1.10 ) $ 0.32 $ 0.33 $ 0.24 $ (1.10 ) $ 0.31 $ 0.33 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ $ $ $ ) ) ) ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (1) Restructuring and other includes a $1.2$3.0 million fair value adjustment to increase the Universal RobotsMiR acquisition contingent consideration.consideration, $1.3 million of acquisition related expenses and compensation and $0.8 million of employee severance charges.(2) $4.2a $11.7 million for an impairment of fixed assets, $0.9 million for expenses related to an earthquake in Kumamoto, Japan, and $1.4 milliongain for the increasedecrease in the fair value of the of which $0.8 million related to Universal Robots, and $0.6 million related to AIT, partially offset by $5.1$0.8 million of property insurance recoveryemployee severance charges and $0.5 million of acquisition related to the Japan earthquake.expenses and compensation.(3) Restructuring and other includes an $8.0 adjustment to increase the Universal Robotsofcontingent consideration.related expenses an(4) Restructuring and other includes a $5.4 $5.8 Universal RobotsAutoGuide acquisition contingent consideration.consideration, $0.5 million of employee severance charges and $0.2 million of acquisition related expenses and compensation(5) Teradyne recorded pension and post retirement net actuarial (gains) losses of $(1.2) million, $(0.7) million, $0.7 million and $(2.0)$7.7 million for the first, second, third and fourth quarter in 2016, respectively.2019. See Note B: “Accounting Policies” for a discussion of Teradyne’s accounting policy. 2015 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter (3) (4) (1)(2) (in thousands, except per share amounts) $ 272,325 $ 437,243 $ 386,488 $ 244,510 70,076 75,496 79,506 73,934 342,401 512,739 465,994 318,444 118,996 181,491 170,963 120,322 30,982 32,680 36,405 32,096 149,978 214,171 207,368 152,418 192,423 298,568 258,626 166,026 71,450 75,832 74,027 70,941 72,041 77,073 77,481 79,718 13,808 15,258 20,053 19,911 — (385 ) 261 5,204 157,299 167,778 171,822 175,774 35,124 130,790 86,804 (9,748 ) (1,816 ) (1,674 ) (1,708 ) (2,017 ) 162 444 508 762 (5,660 ) (116 ) 596 364 42,438 132,136 87,408 (8,857 ) 9,651 29,257 15,955 (8,216 ) $ 32,787 $ 102,879 $ 71,453 $ (641 ) $ 0.15 $ 0.48 $ 0.34 $ (0.00 ) $ 0.15 $ 0.48 $ 0.34 $ (0.00 ) $ 0.06 $ 0.06 $ 0.06 $ 0.06 (6) Other (income) expense, net includes a $15.0 million charge for the impairment of the investment in RealWear. $ $ $ $ ) ) ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (1) Restructuring and other includes a $5.3$3.5 million gain for the decrease in the fair value of the Universal Robots contingent consideration liability, partially offset by $2.5 million of acquisition related expenses and compensation and $2.4 million of employee severance charges.(2) Restructuring and other includes a $5.0 million gain for the decrease in the fair value of the Universal Robots contingent consideration liability, partially offset by $3.9 million of employee severance charges and $0.8 million of acquisition related expenses and compensation. (3) Restructuring and other includes $1.7 million of employee severance charges, $0.8 million of acquisition related expenses and compensation, partially offset by a $0.8 million gain for the decrease in the fair value of the Universal Robots contingent consideration liability. (4) Restructuring and other includes a $17.7 million fair value adjustment to increase the Universal RobotsMiR acquisition contingent consideration, $0.8 million of employee severance charges, and $0.5 million acquisition related expenses and compensation, partially offset by a $(0.3)$7.4 million gain for the decrease in the fair value adjustment to decreaseof the AIT acquisitionUniversal Robots contingent consideration.consideration liability.(2)(5)In the fourth quarter ended December 31, 2015, Teradyne recorded pension and post retirement net actuarial lossesgains of $17.7 million.$3.5 million for the fourth quarter in 2018. See Note B: “Accounting Policies” for a discussion of Teradyne’s accounting policy.(3)Restructuring and other includes a $(1.6) million fair value adjustment to decrease the ZTEC acquisition contingent consideration.(4)Restructuring and other includes a $(1.0) million fair value adjustment to decrease the AIT acquisition contingent consideration.ControlsOverover Financial Reporting20162019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.2016.20162019 has been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report which is included under Item 8 of this Annual Report.Item 9B: Item 10: OfficersOfficers and Corporate Governance9, 2017.8, 2020. The proxy statement will be filed with the SEC not later than 120 days after the close of the fiscal year. For this purpose, the Compensation Committee Report included in such proxy statement is specifically not incorporated herein. Also see “Item 1: Business—Our Executive Officers.”Item 11: Executive9, 2017.8, 2020. The proxy statement will be filed with the SEC not later than 120 days after the close of the fiscal year. For this purpose, the Compensation Committee Report included in such proxy statement is specifically not incorporated herein.Item 12: OwnersOwners and Management and Related Stockholder Matters9, 2017.8, 2020. The proxy statement will be filed with the SEC not later than 120 days after the close of the fiscal year. For this purpose, the Compensation Committee Report included in such proxy statement is specifically not incorporated herein. Also see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Equity Compensation Plans.”Item 13: 9, 2017.8, 2020. The proxy statement will be filed with the SEC not later than 120 days after the close of the fiscal year. For this purpose, the Compensation Committee Report included in such proxy statement is specifically not incorporated herein.Item 14: AccountantAccountant Fees and Services9, 2017.8, 2020. The proxy statement will be filed with the SEC not later than 120 days after the close of the fiscal year. For this purpose, the Audit Committee Report included in such proxy statement is specifically not incorporated herein.Item 15: FinancialFinancial Statement SchedulesSchedule Page 44 45 46 47 4849 4950 Column B Column C Column D Column E Column F Balance at
Beginning of Period Additions
Charged to
Cost and Expenses Other Deductions Balance at
End of Period (in thousands) $ 2,407 $ — $ — $ 51 $ 2,356 $ 2,491 $ — $ — $ 84 $ 2,407 $ 2,912 $ 55 $ — $ 476 $ 2,491 Column B Column C Column D Column E Column F Balance at
Beginning of Period Additions
Charged to
Cost and Expenses Other Deductions Balance at
End of Period (in thousands) $ 119,376 $ 17,493 $ 4,417 $ 25,270 $ 116,016 $ 111,252 $ 21,332 $ 1,680 $ 14,888 $ 119,376 $ 115,857 $ 22,193 $ 7,064 $ 33,862 $ 111,252 Column B Column C Column D Column E Column F Balance at
Beginning of Period Additions
Charged to
Cost and Expenses Other Deductions Balance at
End of Period (in thousands) $ 43,039 $ 5,413 $ — $ 83 $ 48,369 $ 41,737 $ 1,322 $ — $ 20 $ 43,039 $ 40,386 $ 1,380 $ — $ 29 $ 41,737 $ $ $ $ 52 $ $ $ $ $ $ $ $ $ $ $ $ $ $ ) $ $ �� $ $ $ $ $ $ $ $ ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Item 16: ExhibitNo. Description 2.1 UniversalMobile Industrial Robots A/S dated May 13, 2015.ApS. Exhibit 2.1 to Teradyne’s Quarterly Report on Form10-Q for the quarter ended July 5, 2015.3.1 Organization, as amended.Organization. 3.2 4.1 IncInc. and Wilmington Trust, National Association, as trusteetrustee. 10.1† 10.2† Amendment 1 to Standard Manufacturing Agreement, dated as of January 18, 2007, by and between Teradyne and Solectron. Exhibit 10.2 to Teradyne’s Quarterly Report on Form10-Q for the quarter ended September 30, 2007.10.3† 10.4 Fifth Amendment to Standard Manufacturing Agreement, dated as of July 17, 2009, by and between Teradyne and Flextronics Corporation. Exhibit 10.4 to Teradyne’s Annual Report on Form10-K for the fiscal year ended December 31, 2009.10.5† 10.6 10.7 ExhibitNo. Description 10.8† 10.9 Filed herewith.10.10 Filed herewith.10.11 Filed herewith.10.12 Form of Restricted Stock Unit Agreement for Directors under 2006 Equity and Cash Compensation Incentive Plan.* Filed herewith.10.13 1996 Employee Stock Purchase Plan, as amended.* Appendix B to Teradyne’s Notice and Proxy Statement on Schedule 14A filed April 11, 2013.10.14 Filed herewith.10.15 10.16 10.17 10.18 10.19 Employment Agreement dated August 9, 2004 between Teradyne and Gregory R. Beecher.* Exhibit 10.40 to Teradyne’s Quarterly Report on Form10-Q for the quarter ended July 4, 2004.10.20 ExhibitNo. Description SEC Document Reference10.21 Amended and Restated Change in ControlRetirement Agreement dated December 30, 2008July 17, 2019 between Teradyne and Gregory R. Beecher, as amended.Beecher.* 10.22 10.23 10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 Nextest Systems Corporation 1998 Equity Incentive Plan, as amended. 10.33 Nextest Systems Corporation 2006 Equity Incentive Plan. Exhibit 10.34 to Teradyne’s Annual Report on Form10-K for the fiscal year ended December 31, 2008.ExhibitNo. Description SEC Document Reference10.34Eagle Test Systems, Inc. 2003 Stock Option and Grant Plan.Exhibit 10.35 to Teradyne’s Annual Report on Form10-K for the fiscal year ended December 31, 2008.10.35Eagle Test Systems, Inc. 2006 Stock Option and Incentive Plan.Exhibit 10.36 to Teradyne’s Annual Report on Form10-K for the fiscal year ended December 31, 2008.10.36LitePoint Corporation 2002 Stock Plan.Exhibit 10.42 to Teradyne’s Annual Report on Form10-K for the fiscal year ended December 31, 2011.10.37Credit Agreement among Teradyne, Inc., Barclays Bank PLC, as the administrative agent and collateral agent, and the lenders party thereto dated April 27, 2015.Exhibit 10.1 to Teradyne’s Current Report on Form8-K filed May 1, 2015.10.38Amendment No. 1 to Credit Agreement dated as of May 19, 2015 among Teradyne Inc., Barclays Bank PLC, as the administrative agent, and the lenders party thereto.Exhibit 10.2 to Teradyne’s Quarterly Report on Form10-Q for the quarter ended July 5, 2015.10.39 10.40 10.41 10.42 10.43 10.44 10.45 ExhibitNo. Description SEC Document Reference10.46 10.47 10.48 10.49 10.50 21.1 23.1 31.1 31.2 32.1 32.2 101.INS Instance Document(eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2019 and December 31, 2018, (ii) Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017, (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017 (iv) Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017, and (vi) the Notes to Consolidated Financial Statements. 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEFTaxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document † -Confidential treatment granted. * -Management contract or compensatory plan. 1st2nd day of March, 2017.2020.TERADYNE,INC.By: SGREGORY R. BEECHER Sanjay Mehta Gregory R. Beecher, Signature Title DateSROY A. VALLEE 1, 20172, 2020SMARK E. JAGIELA 1, 20172, 2020/S/ GREGORY R. BEECHER Gregory R. Beecher
and Treasurer (Principal
Financial and Accounting Officer) 1, 20172, 2020SMICHAEL A. BRADLEY 1, 20172, 2020/S/ DANIEL W. CHRISTMAN Daniel W. Christman Director March 1, 2017SEDWIN J. GILLIS 1, 20172, 2020STIMOTHY E. GUERTIN 1, 20172, 2020/S/ MERCEDES JOHNSON Mercedes Johnson Director March 1, 2017SPAUL J. TUFANO 1, 20172, 2020113