| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
June 28, 2020
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Massachusetts | 04-2272148 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
600 Riverpark Drive, North Reading, Massachusetts | 01864 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.125 per share | TER | Nasdaq Stock Market LLC |
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | |||||
| Emerging | ☐ | |||||
| Smaller reporting company | ☐ | |||||
Page No. | ||||||||
Item 1. | ||||||||
1 | ||||||||
2 | ||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
Item 2. | 30 | |||||||
Item 3. | 4 2 | |||||||
Item 4. | 4 2 | |||||||
Item 1. | 4 3 | |||||||
Item 1A. | 4 3 | |||||||
Item 2. | 4 5 | |||||||
Item 4. | 4 5 | |||||||
Item 6. | 4 6 | |||||||
Item 1: | Financial Statements |
(in thousands, except per share amount) Current assets: Cash and cash equivalents Marketable securities Accounts receivable, less allowance for doubtful accounts of $2,222 and $2,356 at October 1, 2017 and December 31, 2016, respectively Inventories, net Prepayments Other current assets Total current assets Property, plant and equipment, net Marketable securities Deferred tax assets Other assets Retirement plans assets Acquired 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 (See Note P) Common stock, $0.125 par value, 1,000,000 shares authorized; 196,711 and 199,177 shares issued and outstanding at October 1, 2017 and December 31, 2016, respectively Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity October 1,
2017 December 31,
2016 ASSETS $ 418,677 $ 307,884 1,217,830 871,024 268,068 192,444 125,183 135,958 105,309 108,454 5,021 8,039 2,140,088 1,623,803 259,080 253,821 211,943 433,843 120,228 107,405 12,028 12,165 10,954 7,712 85,729 100,401 249,277 223,343 $ 3,089,327 $ 2,762,493 LIABILITIES $ 79,429 $ 95,362 113,634 109,944 111,506 84,478 62,611 51,382 21,818 1,050 42,377 30,480 431,375 372,696 114,316 106,938 31,686 23,463 10,543 12,144 11,604 28,642 17,311 37,282 362,595 352,669 979,430 933,834 SHAREHOLDERS’ EQUITY 24,589 24,897 1,631,106 1,593,684 16,001 (20,214 ) 438,201 230,292 2,109,897 1,828,659 $ 3,089,327 $ 2,762,493
June 28, 2020 | December 31, 2019 | |||||||
(in thousands, except per share amount) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 725,431 | $ | 773,924 | ||||
Marketable securities | 229,791 | 137,303 | ||||||
Accounts receivable, less allowance for doubtful accounts of $1,829 and $1,736 at June 28, 2020 and December 31, 2019, respectively | 694,521 | 362,368 | ||||||
Inventories, net | 206,088 | 196,691 | ||||||
Prepayments and other current assets | 238,176 | 188,598 | ||||||
Total current assets | 2,094,007 | 1,658,884 | ||||||
Property, plant and equipment, net | 353,595 | 320,216 | ||||||
Operating lease right-of-use | 56,172 | 57,539 | ||||||
Marketable securities | 106,968 | 104,490 | ||||||
Deferred tax assets | 79,210 | 75,185 | ||||||
Retirement plans assets | 17,817 | 18,457 | ||||||
Other assets | 11,854 | 10,332 | ||||||
Acquired intangible assets, net | 107,563 | 125,480 | ||||||
Goodwill | 422,003 | 416,431 | ||||||
Total assets | $ | 3,249,189 | $ | 2,787,014 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 184,163 | $ | 126,617 | ||||
Accrued employees’ compensation and withholdings | 175,589 | 163,883 | ||||||
Deferred revenue and customer advances | 124,224 | 104,876 | ||||||
Other accrued liabilities | 119,732 | 70,871 | ||||||
Operating lease liabilities | 20,000 | 19,476 | ||||||
Contingent consideration | 16,789 | 9,106 | ||||||
Income taxes payable | 89,216 | 44,200 | ||||||
Total current liabilities | 729,713 | 539,029 | ||||||
Retirement plans liabilities | 130,826 | 134,471 | ||||||
Long-term deferred revenue and customer advances | 55,634 | 45,974 | ||||||
Long-term contingent consideration | 32,948 | 30,599 | ||||||
Long-term other accrued liabilities | 22,703 | 19,535 | ||||||
Deferred tax liabilities | 11,997 | 14,070 | ||||||
Long-term operating lease liabilities | 43,582 | 45,849 | ||||||
Long-term income taxes payable | 74,930 | 82,642 | ||||||
Debt | 402,305 | 394,687 | ||||||
Total liabilities | 1,504,638 | 1,306,856 | ||||||
Commitments and contingencies (See Note Q) | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock, $0.125 par value, 1,000,000 shares authorized: 165,806 and 166,410 shares issued and outstanding at June 28, 2020 and December 31, 2019, respectively | 20,725 | 20,801 | ||||||
Additional paid-in capital | 1,730,716 | 1,720,129 | ||||||
Accumulated other comprehensive loss | (8,500 | ) | (18,854 | ) | ||||
Retained earnings (accumulated deficit) | 1,610 | (241,918 | ) | |||||
Total shareholders’ equity | 1,744,551 | 1,480,158 | ||||||
Total liabilities and shareholders’ equity | $ | 3,249,189 | $ | 2,787,014 | ||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands, except per share amount) | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 412,854 | $ | 334,610 | $ | 1,396,413 | $ | 1,149,581 | ||||||||
Services | 90,524 | 75,865 | 260,778 | 223,680 | ||||||||||||
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Total revenues | 503,378 | 410,475 | 1,657,191 | 1,373,261 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Cost of products | 169,744 | 148,266 | 591,880 | 531,616 | ||||||||||||
Cost of services | 38,848 | 34,850 | 114,373 | 101,084 | ||||||||||||
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Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 208,592 | 183,116 | 706,253 | 632,700 | ||||||||||||
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Gross profit | 294,786 | 227,359 | 950,938 | 740,561 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and administrative | 86,244 | 78,794 | 260,282 | 239,393 | ||||||||||||
Engineering and development | 77,190 | 71,400 | 235,101 | 220,973 | ||||||||||||
Acquired intangible assets amortization | 7,028 | 8,487 | 23,145 | 44,725 | ||||||||||||
Restructuring and other | (4,407 | ) | 12,177 | 392 | 16,372 | |||||||||||
Goodwill impairment | — | — | — | 254,946 | ||||||||||||
Acquired intangible assets impairment | — | — | — | 83,339 | ||||||||||||
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Total operating expenses | 166,055 | 170,858 | 518,920 | 859,748 | ||||||||||||
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Income (loss) from operations | 128,731 | 56,501 | 432,018 | (119,187 | ) | |||||||||||
Non-operating (income) expense: | ||||||||||||||||
Interest income | (4,517 | ) | (2,892 | ) | (11,329 | ) | (6,201 | ) | ||||||||
Interest expense | 5,372 | 633 | 16,283 | 2,034 | ||||||||||||
Other (income) expense, net | 439 | (921 | ) | 735 | (1,075 | ) | ||||||||||
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Income (loss) before income taxes | 127,437 | 59,681 | 426,329 | (113,945 | ) | |||||||||||
Income tax provision (benefit) | 24,017 | (4,113 | ) | 62,713 | (4,178 | ) | ||||||||||
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Net income (loss) | $ | 103,420 | $ | 63,794 | $ | 363,616 | $ | (109,767 | ) | |||||||
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Net income (loss) per common share: | ||||||||||||||||
Basic | $ | 0.52 | $ | 0.32 | $ | 1.83 | $ | (0.54 | ) | |||||||
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Diluted | $ | 0.52 | $ | 0.31 | $ | 1.81 | $ | (0.54 | ) | |||||||
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Weighted average common shares—basic | 197,485 | 202,211 | 198,755 | 203,167 | ||||||||||||
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Weighted average common shares—diluted | 200,775 | 203,929 | 201,413 | 203,167 | ||||||||||||
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Cash dividend declared per common share | $ | 0.07 | $ | 0.06 | $ | 0.21 | $ | 0.18 | ||||||||
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For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
(in thousands, except per share amount) | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 734,630 | $ | 457,511 | $ | 1,345,536 | $ | 850,953 | ||||||||
Services | 104,031 | 106,667 | 197,480 | 207,324 | ||||||||||||
Total revenues | 838,661 | 564,178 | 1,543,016 | 1,058,277 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Cost of products | 322,732 | 193,299 | 582,728 | 358,667 | ||||||||||||
Cost of services | 44,456 | 46,961 | 83,265 | 88,057 | ||||||||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 367,188 | 240,260 | 665,993 | 446,724 | ||||||||||||
Gross profit | 471,473 | 323,918 | 877,023 | 611,553 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and administrative | 113,259 | 108,811 | 224,647 | 210,824 | ||||||||||||
Engineering and development | 94,102 | 81,434 | 179,261 | 158,225 | ||||||||||||
Acquired intangible assets amortization | 8,941 | 10,083 | 18,832 | 20,717 | ||||||||||||
Restructuring and other | 37,222 | (10,404 | ) | 29,616 | (5,292 | ) | ||||||||||
Total operating expenses | 253,524 | 189,924 | 452,356 | 384,474 | ||||||||||||
Income from operations | 217,949 | 133,994 | 424,667 | 227,079 | ||||||||||||
Non-operating (income) expense: | ||||||||||||||||
Interest income | (1,368 | ) | (4,384 | ) | (4,119 | ) | (9,373 | ) | ||||||||
Interest expense | 6,043 | 5,800 | 11,594 | 11,320 | ||||||||||||
Other (income) expense, net | (4,017 | ) | 1,401 | 2,833 | (24 | ) | ||||||||||
Income before income taxes | 217,291 | 131,177 | 414,359 | 225,156 | ||||||||||||
Income tax provision | 28,383 | 33,780 | 49,261 | 18,621 | ||||||||||||
Net income | $ | 188,908 | $ | 97,397 | $ | 365,098 | $ | 206,535 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 1.14 | $ | 0.57 | $ | 2.20 | $ | 1.20 | ||||||||
Diluted | $ | 1.05 | $ | 0.55 | $ | 2.02 | $ | 1.16 | ||||||||
Weighted average common shares—basic | 165,789 | 171,241 | 166,189 | 172,387 | ||||||||||||
Weighted average common shares—diluted | 180,257 | 178,590 | 180,497 | 177,781 | ||||||||||||
Cash dividend declared per common share | $ | 0.10 | $ | 0.09 | $ | 0.20 | $ | 0.18 | ||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Net income (loss) | $ | 103,420 | $ | 63,794 | $ | 363,616 | $ | (109,767 | ) | |||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments | 9,291 | 1,843 | 34,235 | 7,072 | ||||||||||||
Available-for-sale marketable securities: | ||||||||||||||||
Unrealized gains (losses) on marketable securities arising during period, net of tax of $481, $51, $1,666, $2,405, respectively | 950 | (336 | ) | 2,448 | 5,110 | |||||||||||
Less: Reclassification adjustment for gains included in net income (loss), net of tax of $(67), $(150), $(173), $(152), respectively | (87 | ) | (334 | ) | (264 | ) | (468 | ) | ||||||||
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| 863 | (670 | ) | 2,184 | 4,642 | ||||||||||||
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 $(38), $(46), $(115), $(139) respectively | (68 | ) | (81 | ) | (204 | ) | (244 | ) | ||||||||
Prior service income arising during the period, net of tax of $0, $0, $0, $34, respectively | — | — | — | 59 | ||||||||||||
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| (68 | ) | (81 | ) | (204 | ) | (185 | ) | |||||||||
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Other comprehensive income | 10,086 | 1,092 | 36,215 | 11,529 | ||||||||||||
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Comprehensive income (loss) | $ | 113,506 | $ | 64,886 | $ | 399,831 | $ | (98,238 | ) | |||||||
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For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, | June 30, | June 28, | June 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(in thousands) | ||||||||||||||||
Net income | $ | 188,908 | $ | 97,397 | $ | 365,098 | $ | 206,535 | ||||||||
Other comprehensive income, net of tax: | ||||||||||||||||
Foreign currency translation adjustment, net of tax of $0, $0, $0, $0, respectively | 15,805 | 5,642 | 7,026 | 983 | ||||||||||||
Available-for-sale | ||||||||||||||||
Unrealized gains on debt securities arising during period, net of tax of $1,084, $678, $1,271, $1,256, respectively | 3,793 | 2,537 | 4,830 | 4,637 | ||||||||||||
Less: Reclassification adjustment for gains included in net income, net of tax of $(277), $(6), $(421), $(26), respectively | (983 | ) | (27 | ) | (1,499 | ) | (97 | ) | ||||||||
| 2,810 | 2,510 | 3,331 | 4,540 | |||||||||||||
Defined benefit retirement plans: | ||||||||||||||||
Amortization of prior service credit, net of tax of $0, $(11), $(1), $(21), respectively | (2 | ) | (37 | ) | (3 | ) | (74 | ) | ||||||||
Other comprehensive income | 18,613 | 8,115 | 10,354 | 5,449 | ||||||||||||
Comprehensive income | $ | 207,521 | $ | 105,512 | $ | 375,452 | $ | 211,984 | ||||||||
SHAREHOLDERS’ EQUITY
| For the Nine Months Ended | ||||||||
| October 1, 2017 | October 2, 2016 | |||||||
| (in thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 363,616 | $ | (109,767 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation | 49,243 | 48,437 | ||||||
Amortization | 32,313 | 46,275 | ||||||
Stock-based compensation | 25,620 | 23,012 | ||||||
Provision for excess and obsolete inventory | 7,154 | 15,148 | ||||||
Contingent consideration fair value adjustment | 1,847 | 10,451 | ||||||
Deferred taxes | (679 | ) | (42,568 | ) | ||||
Retirement plans actuarial gains | (2,504 | ) | (1,200 | ) | ||||
Gain on insurance recovery | (4,309 | ) | — | |||||
Tax benefit related to employee stock compensation awards | — | (3,399 | ) | |||||
Goodwill impairment | — | 254,946 | ||||||
Acquired intangible assets impairment | — | 83,339 | ||||||
Other | 429 | 151 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (75,623 | ) | 45,660 | |||||
Inventories | 23,770 | 48,601 | ||||||
Prepayments and other assets | 7,362 | (13,273 | ) | |||||
Accounts payable and other accrued expenses | 5,298 | (39,584 | ) | |||||
Deferred revenue and customer advances | 34,535 | 53,380 | ||||||
Retirement plans contributions | (4,858 | ) | (5,871 | ) | ||||
Income taxes | 15,808 | 4,227 | ||||||
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Net cash provided by operating activities | 479,022 | 417,965 | ||||||
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Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (73,247 | ) | (66,252 | ) | ||||
Purchases of available-for-sale marketable securities | (1,036,523 | ) | (875,837 | ) | ||||
Proceeds from sales of available-for-sale marketable securities | 443,169 | 466,744 | ||||||
Proceeds from maturities of available-for-sale marketable securities | 473,255 | 202,162 | ||||||
Proceeds from property insurance | 5,064 | 5,051 | ||||||
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Net cash used for investing activities | (188,282 | ) | (268,132 | ) | ||||
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Cash flows from financing activities: | ||||||||
Issuance of common stock under stock purchase and stock option plans | 24,462 | 20,085 | ||||||
Repurchase of common stock | (151,821 | ) | (85,092 | ) | ||||
Dividend payments | (41,730 | ) | (36,548 | ) | ||||
Payments related to net settlement of employee stock compensation awards | (12,584 | ) | (9,229 | ) | ||||
Payments of contingent consideration | (1,050 | ) | (11,697 | ) | ||||
Tax benefit related to employee stock compensation awards | — | 3,399 | ||||||
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Net cash used for financing activities | (182,723 | ) | (119,082 | ) | ||||
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Effects of exchange rate changes on cash and cash equivalents | 2,776 | 2,481 | ||||||
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Increase in cash and cash equivalents | 110,793 | 33,232 | ||||||
Cash and cash equivalents at beginning of period | 307,884 | 264,705 | ||||||
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Cash and cash equivalents at end of period | $ | 418,677 | $ | 297,937 | ||||
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Common Stock Shares | Common Stock Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | (Accumulated Deficit) Retain ed Earnings | Total Shareholders’ Equity | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
For the Three Months Ended June 28, 2020 | ||||||||||||||||||||||||
Balance, March 29, 2020 | 165,938 | $ | 20,742 | $ | 1,721,367 | $ | (27,113 | ) | $ | (164,323 | ) | $ | 1,550,673 | |||||||||||
Net issuance of common stock under stock-based plans | 41 | 5 | (451 | ) | (446 | ) | ||||||||||||||||||
Stock-based compensation expense | 9,800 | 9,800 | ||||||||||||||||||||||
Repurchase of common stock | (173 | ) | (22 | ) | (6,379 | ) | (6,401 | ) | ||||||||||||||||
Cash dividends ($0.10 per share) | (16,596 | ) | (16,596 | ) | ||||||||||||||||||||
Net income | 188,908 | 188,908 | ||||||||||||||||||||||
Other comprehensive income | 18,613 | 18,613 | ||||||||||||||||||||||
Balance, June 28, 2020 | 165,806 | $ | 20,725 | $ | 1,730,716 | $ | (8,500 | ) | $ | 1,610 | $ | 1,744,551 | ||||||||||||
For the Three Months Ended June 30, 2019 | ||||||||||||||||||||||||
Balance, March 31, 2019 | 172,353 | $ | 21,544 | $ | 1,679,997 | $ | (15,706 | ) | $ | (215,607 | ) | $ | 1,470,228 | |||||||||||
Net issuance of common stock under stock-based plans | 99 | 13 | 679 | 692 | ||||||||||||||||||||
Stock-based compensation expense | 7,535 | 7,535 | ||||||||||||||||||||||
Repurchase of common stock | (2,016 | ) | (252 | ) | (88,902 | ) | (89,154 | ) | ||||||||||||||||
Cash dividends ($0.09 per share) | (15,401 | ) | (15,401 | ) | ||||||||||||||||||||
Net income | 97,397 | 97,397 | ||||||||||||||||||||||
Other comprehensive income | 8,115 | 8,115 | ||||||||||||||||||||||
Balance, June 30, 2019 | 170,436 | $ | 21,305 | $ | 1,688,211 | $ | (7,591 | ) | $ | (222,513 | ) | $ | 1,479,412 | |||||||||||
For the Six Months Ended June 28, 2020 | ||||||||||||||||||||||||
Balance, December 31, 2019 | 166,410 | $ | 20,801 | $ | 1,720,129 | $ | (18,854 | ) | $ | (241,918 | ) | $ | 1,480,158 | |||||||||||
Net issuance of common stock under stock-based plans | 913 | 114 | (10,496 | ) | (10,382 | ) | ||||||||||||||||||
Stock-based compensation expense | 21,083 | 21,083 | ||||||||||||||||||||||
Repurchase of common stock | (1,517 | ) | (190 | ) | (88,275 | ) | (88,465 | ) | ||||||||||||||||
Cash dividends ($0.10 per share) | (33,295 | ) | (33,295 | ) | ||||||||||||||||||||
Net income | 365,098 | 365,098 | ||||||||||||||||||||||
Other comprehensive income | 10,354 | 10,354 | ||||||||||||||||||||||
Balance, June 28, 2020 | 165,806 | $ | 20,725 | $ | 1,730,716 | $ | (8,500 | ) | $ | 1,610 | $ | 1,744,551 | ||||||||||||
For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||||
Balance, December 31, 2018 | 175,522 | $ | 21,940 | $ | 1,671,645 | $ | (13,040 | ) | $ | (158,191 | ) | $ | 1,522,354 | |||||||||||
Net issuance of common stock under stock-based plans | 1,385 | 174 | 469 | 643 | ||||||||||||||||||||
Stock-based compensation expense | 16,097 | 16,097 | ||||||||||||||||||||||
Repurchase of common stock | (6,471 | ) | (809 | ) | (239,815 | ) | (240,624 | ) | ||||||||||||||||
Cash dividends ($0.09 per share) | (31,042 | ) | (31,042 | ) | ||||||||||||||||||||
Net income | 206,535 | 206,535 | ||||||||||||||||||||||
Other comprehensive income | 5,449 | 5,449 | ||||||||||||||||||||||
Balance, June 30, 2019 | 170,436 | $ | 21,305 | $ | 1,688,211 | $ | (7,591 | ) | $ | (222,513 | ) | $ | 1,479,412 | |||||||||||
For the Six Months Ended | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
(in thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 365,098 | $ | 206,535 | ||||
Adjustments to reconcile net income from operations to net cash provided by operating activities: | ||||||||
Depreciation | 38,305 | 33,882 | ||||||
Amortization | 26,234 | 24,976 | ||||||
Stock-based compensation | 21,367 | 18,109 | ||||||
Contingent consideration adjustment | 19,239 | (8,701 | ) | |||||
Provision for excess and obsolete inventory | 9,637 | 5,799 | ||||||
Deferred taxes | (7,163 | ) | 515 | |||||
Gains on investments | (469 | ) | (3,741 | ) | ||||
Retirement plan actuarial (gains) losses | (99 | ) | 448 | |||||
Other | 523 | 429 | ||||||
Changes in operating assets and liabilities, net of businesses acquired: | ||||||||
Accounts receivable | (331,040 | ) | (79,478 | ) | ||||
Inventories | (3,728 | ) | (2,447 | ) | ||||
Prepayments and other assets | (49,479 | ) | (17,067 | ) | ||||
Accounts payable and other liabilities | 113,578 | (14,424 | ) | |||||
Deferred revenue and customer advances | 28,655 | 15,826 | ||||||
Retirement plans contributions | (2,501 | ) | (2,414 | ) | ||||
Income taxes | 37,842 | (14,973 | ) | |||||
Net cash provided by operating activities | 265,999 | 163,274 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (84,014 | ) | (58,956 | ) | ||||
Purchases of marketable securities | (299,548 | ) | (484,181 | ) | ||||
Proceeds from maturities of marketable securities | 182,984 | 233,193 | ||||||
Proceeds from sales of marketable securities | 26,661 | 42,454 | ||||||
Proceeds from life insurance | 546 | 273 | ||||||
Acquisition of businesses, net of cash acquired | 149 | (21,970 | ) | |||||
Net cash used for investing activities | (173,222 | ) | (289,187 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of common stock under stock purchase and stock option plans | 12,757 | 15,089 | ||||||
Repurchase of common stock | (88,465 | ) | (247,222 | ) | ||||
Dividend payments | (33,266 | ) | (31,019 | ) | ||||
Payments related to net settlement of employee stock compensation awards | (22,519 | ) | (14,446 | ) | ||||
Payments of contingent consideration | (8,852 | ) | (27,615 | ) | ||||
Net cash used for financing activities | (140,345 | ) | (305,213 | ) | ||||
Effects of exchange rate changes on cash and cash equivalents | (925 | ) | (519 | ) | ||||
�� | ||||||||
Decrease in cash and cash equivalents | (48,493 | ) | (431,645 | ) | ||||
Cash and cash equivalents at beginning of period | 773,924 | 926,752 | ||||||
Cash and cash equivalents at end of period | $ | 725,431 | $ | 495,107 | ||||
Supplemental cash flow disclosure | ||||||||
Non-cash investing activities: | ||||||||
Capital expenditures incurred but not yet paid | $ | 6,281 | $ | 4,068 | ||||
America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 1, 2017,2, 2020, for the year ended December 31, 2016.
2019.
Stock-Based Compensation
In March 2016,estimates under different assumptions or conditions.
Adoption of this ASU required 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 as an increase to retained earnings and deferred tax assets.
This ASU also required a change in how Teradyne recognizes the excess tax benefits or tax deficiencies related to stock-based compensation. Prior to adopting ASU 2016-09, these excess tax benefits or tax deficiencies were credited or charged to additional paid-in capital in Teradyne’s consolidated balance sheets. In accordance with ASU 2016-09, starting in the first quarter of 2017, these excess tax benefits or tax deficiencies are recognized as a discrete tax benefit or discrete tax expense to the current income tax provision in Teradyne’s consolidated statements of operations.
ASU 2016-09 requires companies to adopt the amendment related to accounting for excess tax benefits or tax deficiencies on a prospective basis. For the three and nine months ended October 1, 2017, Teradyne recognized a discrete tax benefit of $0.0 and $6.0 million, respectively, related to net excess tax benefit.
In addition, under ASU 2016-09, all excess tax benefits related to share-based payments are reported as cash flows from operating activities. Previously, excess tax benefits from share-based payments arrangements were reported as cash flows from financing activities. The classification amendment was applied prospectively. This ASU also clarifies that all cash payments made to taxing authorities on the employees’ behalf for withheld shares should be presented as financing activities on the statement of cash flows. Previously, Teradyne reported cash payments made to taxing authorities as operating activities on the statement of cash flows. This change was applied retrospectively.
Upon adoption of ASU 2016-09, Teradyne made an accounting policy election to continue accounting for forfeitures by applying an estimated forfeiture rate.
Contingencies and Litigation
Teradyne may be subject to certain legal proceedings, lawsuits and other claims as discussed in Note P. Teradyne accrues for a loss contingency, including legal proceedings, lawsuits, pending claims and other legal matters, when the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. When the reasonable estimate of the loss is within a range of amounts, and no amount in the range constitutes a better estimate than any other amount, Teradyne accrues the amount at the low end of the range. Teradyne adjusts the accruals from time to time as additional information is received, but the loss incurred may be significantly greater than or less than the amount accrued. Loss contingencies are disclosed when they are material and there is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.
C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On March 10, 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU provides guidance on presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires the service cost component to be presented in the same line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost such as interest cost, amortization of prior service cost, and actuarial gains or losses, are required to be presented separately outside of income or loss from operations. The presentation of service cost should be applied retrospectively. The guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. This guidance will impact the presentation of Teradyne’s consolidated financial statements. Upon adoption of the new standard, Teradyne will present interest cost, amortization of prior service cost, and actuarial gains or losses within other (income) expense, net.
On January 26, 2017, the FASB issued ASU 2017-04,“Intangibles—Goodwill and Other (Topic
In February 2016, the FASB issued ASU 2016-02,“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 a right-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 financeflows, or operating, with classification affecting the pattern of expense recognition in the statements of operations. 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 beginningearnings per share.
In January 2016, the FASB issued ASU 2016-01,“Financial Instruments—Overall (Subtopic 825-10): 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$24.0 million in consolidation and are not accounted for under the equity method. Changes in the fair value of these equity securities willcontingent consideration payable upon achievement of certain performance targets, extending potentially through 2022. At June 28, 2020, the maximum contingent consideration that could be recognized directly in net income. This pronouncementpaid is effective$106.9 million.
In May 2014, the FASB issued ASU 2014-09,“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. January 1, 2019 to December 31, 2022.
entitled to in exchange for those goods or services. In August 2015, FASB issued ASU 2015-14, 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 the modified retrospective transition method.
Teradyne has completed its preliminary assessment of the financial statement impact of the new standardvolatility, earnings before interest and does not expect this ASU to have a material impact on its financial position or results of operations. This preliminary assessment istaxes, and discount rate. These assumptions were estimated based on a review of the typeshistorical and numberprojected results.
Purchase Price Allocation | ||||
(in thousands) | ||||
Goodwill | $ | 41,223 | ||
Intangible assets | 37,660 | |||
Tangible assets acquired and liabilities assumed: | ||||
Other current assets | 3,661 | |||
Non-current assets | 1,227 | |||
Accounts payable and current liabilities | (1,223 | ) | ||
Long-term other liabilities | (949 | ) | ||
Total purchase price | $ | 81,599 | ||
Fair Value | Estimated Useful Life | |||||||
(in thousands) | (in years) | |||||||
Developed technology | $ | 24,590 | 6.0 | |||||
Trademarks and tradenames | 7,360 | 6.0 | ||||||
Customer relationships | 5,450 | 7.0 | ||||||
Backlog | 260 | 0.3 | ||||||
Total intangible assets | $ | 37,660 | 6.1 | |||||
For the Three Months Ended | For the Six Months Ended | |||||||
June 30, 2019 | June 30, 2019 | |||||||
(in thousands) | ||||||||
Revenue | $ | 565,978 | $ | 1,061,577 | ||||
Net income | 95,948 | 203,237 | ||||||
Net income per common share: | ||||||||
Basic | $ | 0.56 | $ | 1.18 | ||||
Diluted | $ | 0.54 | $ | 1.14 | ||||
Semiconductor Test | Industrial Automation | |||||||||||||||||||||||||||||||||||
System on a Chip | Memory | System Test | Universal Robots | Mobile Industrial Robots | AutoGuide | Wireless Test | Corporate and Other | Total | ||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
For the Three Months Ended June 28, 2020 (1) | ||||||||||||||||||||||||||||||||||||
Timing of Revenue Recognition | ||||||||||||||||||||||||||||||||||||
Point in Time | $ | 520,496 | $ | 80,032 | $ | 57,741 | $ | 41,804 | $ | 11,196 | $ | 3,408 | $ | 46,347 | $ | (253 | ) | $ | 760,771 | |||||||||||||||||
Over Time | 54,077 | 4,542 | 14,065 | 1,747 | 76 | 545 | 2,838 | — | 77,890 | |||||||||||||||||||||||||||
Total | $ | 574,573 | $ | 84,574 | $ | 71,806 | $ | 43,551 | $ | 11,272 | $ | 3,953 | $ | 49,185 | $ | (253 | ) | $ | 838,661 | |||||||||||||||||
Geographical Market | ||||||||||||||||||||||||||||||||||||
Asia Pacific | $ | 547,700 | $ | 82,492 | $ | 38,656 | $ | 14,279 | $ | 1,232 | $ | — | $ | 41,907 | $ | — | $ | 726,266 | ||||||||||||||||||
Americas | 16,251 | 855 | 28,494 | 11,364 | 2,390 | 3,953 | 5,353 | (253 | ) | 68,407 | ||||||||||||||||||||||||||
Europe, Middle East and Africa | 10,622 | 1,227 | 4,656 | 17,908 | 7,650 | — | 1,925 | — | 43,988 | |||||||||||||||||||||||||||
Total | $ | 574,573 | $ | 84,574 | $ | 71,806 | $ | 43,551 | $ | 11,272 | $ | 3,953 | $ | 49,185 | $ | (253 | ) | $ | 838,661 | |||||||||||||||||
For the Three Months Ended June 30, 2019 (1) | ||||||||||||||||||||||||||||||||||||
Timing of Revenue Recognition | ||||||||||||||||||||||||||||||||||||
Point in Time | $ | 265,130 | $ | 53,984 | $ | 60,137 | $ | 62,015 | $ | 10,505 | $ | — | $ | 39,236 | $ | (89 | ) | $ | 490,918 | |||||||||||||||||
Over Time | 51,483 | 4,301 | 13,270 | 2,206 | — | — | 2,000 | — | 73,260 | |||||||||||||||||||||||||||
Total | $ | 316,613 | $ | 58,285 | $ | 73,407 | $ | 64,221 | $ | 10,505 | $ | — | $ | 41,236 | $ | (89 | ) | $ | 564,178 | |||||||||||||||||
Geographical Market | ||||||||||||||||||||||||||||||||||||
Asia Pacific | $ | 285,981 | $ | 47,202 | $ | 38,191 | $ | 18,820 | $ | 2,681 | $ | — | $ | 34,642 | $ | — | $ | 427,517 | ||||||||||||||||||
Americas | 15,601 | 8,783 | 29,911 | 17,980 | 2,783 | — | 5,926 | (89 | ) | 80,895 | ||||||||||||||||||||||||||
Europe, Middle East and Africa | 15,031 | 2,300 | 5,305 | 27,421 | 5,041 | — | 668 | — | 55,766 | |||||||||||||||||||||||||||
Total | $ | 316,613 | $ | 58,285 | $ | 73,407 | $ | 64,221 | $ | 10,505 | $ | — | $ | 41,236 | $ | (89 | ) | $ | 564,178 | |||||||||||||||||
For the Six Months Ended June 28, 2020 (2) | ||||||||||||||||||||||||||||||||||||
Timing of Revenue Recognition | ||||||||||||||||||||||||||||||||||||
Point in Time | $ | 868,542 | $ | 159,429 | $ | 158,453 | $ | 89,306 | $ | 20,293 | $ | 4,532 | $ | 87,403 | $ | (253 | ) | $ | 1,387,705 | |||||||||||||||||
Over Time | 106,171 | 9,494 | 29,429 | 3,942 | 117 | 891 | 5,267 | — | 155,311 | |||||||||||||||||||||||||||
Total | $ | 974,713 | $ | 168,923 | $ | 187,882 | $ | 93,248 | $ | 20,410 | $ | 5,423 | $ | 92,670 | $ | (253 | ) | $ | 1,543,016 | |||||||||||||||||
Geographical Market | ||||||||||||||||||||||||||||||||||||
Asia Pacific | $ | 910,433 | $ | 158,601 | $ | 118,674 | $ | 25,195 | $ | 2,825 | $ | — | $ | 79,711 | $ | — | $ | 1,295,439 | ||||||||||||||||||
Americas | 33,637 | 7,751 | 56,784 | 26,108 | 5,855 | 5,423 | 10,041 | (253 | ) | 145,346 | ||||||||||||||||||||||||||
Europe, Middle East and Africa | 30,643 | 2,571 | 12,424 | 41,945 | 11,730 | — | 2,918 | — | 102,231 | |||||||||||||||||||||||||||
Total | $ | 974,713 | $ | 168,923 | $ | 187,882 | $ | 93,248 | $ | 20,410 | $ | 5,423 | $ | 92,670 | $ | (253 | ) | $ | 1,543,016 | |||||||||||||||||
For the Six Months Ended June 30, 2019 (2) | ||||||||||||||||||||||||||||||||||||
Timing of Revenue Recognition | ||||||||||||||||||||||||||||||||||||
Point in Time | $ | 503,952 | $ | 97,693 | $ | 105,373 | $ | 117,392 | $ | 19,613 | $ | — | $ | 66,691 | $ | (240 | ) | $ | 910,474 | |||||||||||||||||
Over Time | 105,534 | 8,572 | 26,254 | 3,857 | — | — | 3,586 | — | 147,803 | |||||||||||||||||||||||||||
Total | $ | 609,486 | $ | 106,265 | $ | 131,627 | $ | 121,249 | $ | 19,613 | $ | — | $ | 70,277 | $ | (240 | ) | $ | 1,058,277 | |||||||||||||||||
Geographical Market | ||||||||||||||||||||||||||||||||||||
Asia Pacific | $ | 546,374 | $ | 85,988 | $ | 62,478 | $ | 33,437 | $ | 4,408 | $ | — | $ | 60,661 | $ | — | $ | 793,346 | ||||||||||||||||||
Americas | 31,768 | 17,546 | 56,718 | 33,783 | 6,322 | — | 8,167 | (240 | ) | 154,064 | ||||||||||||||||||||||||||
Europe, Middle East and Africa | 31,344 | 2,731 | 12,431 | 54,029 | 8,883 | — | 1,449 | — | 110,867 | |||||||||||||||||||||||||||
Total | $ | 609,486 | $ | 106,265 | $ | 131,627 | $ | 121,249 | $ | 19,613 | $ | — | $ | 70,277 | $ | (240 | ) | $ | 1,058,277 | |||||||||||||||||
| (1) | Includes $2.5 million and $1.7 million in 2020 and 2019, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “ Revenue from Contracts with Customers.” |
| (2) | Includes $4.3 million and $3.4 million in 2020 and 2019, respectively, for leases of Teradyne’s systems recognized outside ASC 606 “ Revenue from Contracts with Customers.” |
D.receivables and presents cash proceeds as cash provided by operating activities in the consolidated statements of cash flows. Total trade accounts receivable sold under the factoring agreements were $50.0 million
| October 1, 2017 | December 31, 2016 | |||||||
| (in thousands) | ||||||||
Raw material | $ | 64,550 | $ | 58,530 | ||||
Work-in-process | 17,189 | 22,946 | ||||||
Finished goods | 43,444 | 54,482 | ||||||
|
|
|
| |||||
| $ | 125,183 | $ | 135,958 | |||||
|
|
|
| |||||
2019:
June 28, 2020 | December 31, 2019 | |||||||
(in thousands) | ||||||||
Raw material | $ | 106,610 | $ | 118,595 | ||||
Work-in-process | 29,710 | 32,695 | ||||||
Finished goods | 69,768 | 45,401 | ||||||
| $ | 206,088 | $ | 196,691 | |||||
E.
Teradyne accounts for its investments in debt and equity securities in accordance with the provisions of ASC 320-10, “Investments—Debt and Equity Securities.” ASC 320-10 requires that certain debt and equity securities be classified into one of three categories: trading, available-for-sale or held-to-maturity securities. As of October 1, 2017, Teradyne’s investments in debt and equity securities were classified as available-for-sale and recorded at their fair market value.
On a quarterly basis, Teradyne reviews its investments to identify and evaluate those that have an indication of a potential other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include:
Teradyne uses the market and income approach techniques to value its financial instruments and there were no changes in valuation techniques during the three and nine months ended October 1, 2017 and October 2, 2016. As defined in ASC 820-10, “Fair Value Measurements and Disclosures,” fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
Level 1: Quoted prices in active markets for identical assets as of the reporting date;
Level 2: Inputs other than Level 1, that are observable either directly or indirectly as of the reporting date. For example, a common approach for valuing fixed income securities is the use of matrix pricing. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices, and is considered a Level 2 input; or
Level 3: Unobservable inputs that are not supported by market data. Unobservable inputs are developed based on the best information available, which might include Teradyne’s own data.
Teradyne’s
Realized gains recorded in the three and nine months ended October 1, 2017 were $0.2 million and $0.7 million, respectively. Realized losses recorded in the three and nine months ended October 1, 2017 were $0.0 million and $0.3 million, respectively. Realized gains in the three and nine months ended October 2, 2016 were $0.7 million and $1.2 million, respectively. Realized losses recorded in the three and nine months ended October 2, 2016 were $0.1 million and $0.4 million, respectively. 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.
| October 1, 2017 | ||||||||||||||||
| Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash | $ | 213,664 | $ | — | $ | — | $ | 213,664 | ||||||||
Cash equivalents | 166,803 | 38,210 | — | 205,013 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||
U.S. Treasury securities | — | 942,250 | — | 942,250 | ||||||||||||
Commercial paper | — | 194,948 | — | 194,948 | ||||||||||||
Corporate debt securities | — | 118,487 | — | 118,487 | ||||||||||||
Certificates of deposit and time deposits | — | 95,469 | — | 95,469 | ||||||||||||
U.S. government agency securities | — | 55,938 | — | 55,938 | ||||||||||||
Equity and debt mutual funds | 22,104 | — | — | 22,104 | ||||||||||||
Non-U.S. government securities | — | 577 | — | 577 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 402,571 | 1,445,879 | — | 1,848,450 | |||||||||||||
Derivative assets | — | 157 | — | 157 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 402,571 | $ | 1,446,036 | $ | — | $ | 1,848,607 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 39,129 | $ | 39,129 | ||||||||
Derivative liabilities | — | 190 | — | 190 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | 190 | $ | 39,129 | $ | 39,319 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Reported as follows:
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 380,467 | $ | 38,210 | $ | — | $ | 418,677 | ||||||||
Marketable securities | — | 1,217,830 | — | 1,217,830 | ||||||||||||
Long-term marketable securities | 22,104 | 189,839 | — | 211,943 | ||||||||||||
Prepayments | — | 157 | — | 157 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 402,571 | $ | 1,446,036 | $ | — | $ | 1,848,607 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | . | |||||||||||||||
Other current liabilities | $ | — | $ | 190 | $ | — | $ | 190 | ||||||||
Contingent consideration | — | — | 21,818 | 21,818 | ||||||||||||
Long-term contingent consideration | — | — | 17,311 | 17,311 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | 190 | $ | 39,129 | $ | 39,319 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| 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) | ||||||||||||||||
Assets | ||||||||||||||||
Cash | $ | 214,722 | $ | — | $ | — | $ | 214,722 | ||||||||
Cash equivalents | 37,458 | 55,704 | — | 93,162 | ||||||||||||
Available for sale securities: | ||||||||||||||||
U.S. Treasury securities | — | 902,800 | — | 902,800 | ||||||||||||
Commercial paper | — | 161,630 | — | 161,630 | ||||||||||||
Corporate debt securities | — | 100,153 | — | 100,153 | ||||||||||||
Certificates of deposit and time deposits | — | 82,133 | — | 82,133 | ||||||||||||
U.S. government agency securities | — | 39,252 | — | 39,252 | ||||||||||||
Equity and debt mutual funds | 18,171 | — | — | 18,171 | ||||||||||||
Non-U.S. government securities | — | 728 | — | 728 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 270,351 | 1,342,400 | — | 1,612,751 | |||||||||||||
Derivative assets | — | 1 | — | 1 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 270,351 | $ | 1,342,401 | $ | — | $ | 1,612,752 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 38,332 | $ | 38,332 | ||||||||
Derivative liabilities | — | 131 | — | 131 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | 131 | $ | 38,332 | $ | 38,463 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Reported as follows:
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 252,180 | $ | 55,704 | $ | — | $ | 307,884 | ||||||||
Marketable securities | — | 871,024 | — | 871,024 | ||||||||||||
Long-term marketable securities | 18,171 | 415,672 | — | 433,843 | ||||||||||||
Prepayments | — | 1 | — | 1 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 270,351 | $ | 1,342,401 | $ | — | $ | 1,612,752 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Other accrued liabilities | $ | — | $ | 131 | $ | — | $ | 131 | ||||||||
Contingent consideration | — | — | 1,050 | 1,050 | ||||||||||||
Long-term contingent consideration | — | — | 37,282 | 37,282 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | 131 | $ | 38,332 | $ | 38,463 | ||||||||
|
|
|
|
|
|
|
| |||||||||
June 28, 2020 | ||||||||||||||||
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash | $ | 345,312 | $ | — | $ | — | $ | 345,312 | ||||||||
Cash equivalents | 326,347 | 53,772 | — | 380,119 | ||||||||||||
Available-for-sale | — | |||||||||||||||
U.S. Treasury securities | — | 165,305 | — | 165,305 | ||||||||||||
Commercial paper | — | 63,844 | — | 63,844 | ||||||||||||
Corporate debt securities | — | 63,218 | — | 63,218 | ||||||||||||
Certificates of deposit and time deposits | — | 9,506 | — | 9,506 | ||||||||||||
Debt mutual funds | 6,876 | — | — | 6,876 | ||||||||||||
U.S. government agency securities | — | 4,425 | — | 4,425 | ||||||||||||
Non-U.S. government securities | — | 601 | — | 601 | ||||||||||||
Equity securities: | ||||||||||||||||
Mutual funds | 22,984 | — | — | 22,984 | ||||||||||||
| $ | 701,519 | $ | 360,671 | $ | — | $ | 1,062,190 | |||||||||
Derivative assets | — | 30 | — | 30 | ||||||||||||
Total | $ | 701,519 | $ | 360,701 | $ | — | $ | 1,062,220 | ||||||||
Liabilities | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 49,737 | $ | 49,737 | ||||||||
Derivative liabilities | — | 222 | — | 222 | ||||||||||||
Total | $ | — | $ | 222 | $ | 49,737 | $ | 49,959 | ||||||||
Reported as follows: | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 671,659 | $ | 53,772 | $ | — | $ | 725,431 | ||||||||
Marketable securities | — | 229,791 | — | 229,791 | ||||||||||||
Long-term marketable securities | 29,860 | 77,108 | — | 106,968 | ||||||||||||
Prepayments and other current assets | — | 30 | — | 30 | ||||||||||||
Total | $ | 701,519 | $ | 360,701 | $ | — | $ | 1,062,220 | ||||||||
Liabilities | . | |||||||||||||||
Other current liabilities | $ | — | $ | 222 | $ | — | $ | 222 | ||||||||
Contingent consideration | — | — | 16,789 | 16,789 | ||||||||||||
Long-term contingent consideration | — | — | 32,948 | 32,948 | ||||||||||||
Total | $ | — | $ | 222 | $ | 49,737 | $ | 49,959 | ||||||||
December 31, 2019 | ||||||||||||||||
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash | $ | 311,975 | $ | — | $ | — | 311,975 | |||||||||
Cash equivalents | 410,285 | 51,664 | — | 461,949 | ||||||||||||
Available-for-sale | — | |||||||||||||||
Corporate debt securities | — | 97,307 | — | 97,307 | ||||||||||||
Commercial paper | — | 54,149 | — | 54,149 | ||||||||||||
U.S. Treasury securities | — | 42,382 | — | 42,382 | ||||||||||||
U.S. government agency securities | — | 9,952 | — | 9,952 | ||||||||||||
Debt mutual funds | 6,888 | — | — | 6,888 | ||||||||||||
Certificates of deposit and time deposits | — | 4,751 | — | 4,751 | ||||||||||||
Non-U.S. government securities | — | 592 | — | 592 | ||||||||||||
Equity securities: | ||||||||||||||||
Equity mutual funds | 25,772 | — | — | 25,772 | ||||||||||||
| $ | 754,920 | $ | 260,797 | $ | — | $ | 1,015,717 | |||||||||
Derivative assets | — | 528 | — | 528 | ||||||||||||
Total | $ | 754,920 | $ | 261,325 | $ | — | $ | 1,016,245 | ||||||||
Liabilities | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 39,705 | $ | 39,705 | ||||||||
Derivative liabilities | — | 203 | — | 203 | ||||||||||||
Total | $ | — | $ | 203 | $ | 39,705 | $ | 39,908 | ||||||||
Reported as follows: | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 722,260 | $ | 51,664 | $ | — | $ | 773,924 | ||||||||
Marketable securities | — | 137,303 | — | 137,303 | ||||||||||||
Long-term marketable securities | 32,660 | 71,830 | — | 104,490 | ||||||||||||
Prepayments and other current assets | — | 528 | — | 528 | ||||||||||||
Total | $ | 754,920 | $ | 261,325 | $ | — | $ | 1,016,245 | ||||||||
Liabilities | ||||||||||||||||
Other accrued liabilities | $ | — | $ | 203 | $ | — | $ | 203 | ||||||||
Contingent consideration | — | — | 9,106 | 9,106 | ||||||||||||
Long-term contingent consideration | — | — | 30,599 | 30,599 | ||||||||||||
Total | $ | — | $ | 203 | $ | 39,705 | $ | 39,908 | ||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 39,415 | $ | 24,914 | $ | 38,332 | $ | 37,436 | ||||||||
Payments (a) | — | — | (1,050 | ) | (15,000 | ) | ||||||||||
Fair value adjustment (b)(c) | (286 | ) | 7,973 | 1,847 | 10,451 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 39,129 | $ | 32,887 | $ | 39,129 | $ | 32,887 | ||||||||
|
|
|
|
|
|
|
| |||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, | June 30, | June 28, | June 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 20,472 | $ | 38,313 | $ | 39,705 | $ | 70,543 | ||||||||
Foreign currency impact | 6 | 206 | (355 | ) | (405 | ) | ||||||||||
Payments (a)(b) | — | — | (8,852 | ) | (34,590 | ) | ||||||||||
Fair value adjustment (c)(d) | 29,259 | (11,672 | ) | 19,239 | (8,701 | ) | ||||||||||
Balance at end of period | $ | 49,737 | $ | 26,847 | $ | 49,737 | $ | 26,847 | ||||||||
| (a) | In the earn-out in connection with the acquisitionof MiR. |
| (b) | In the six months ended June 30, 2019, Teradyne paid $30.8 million and $3.8 million of contingent consideration for the earn-outs in connection with the acquisition of |
| (c) | In the |
, due to .or e casted results |
In the earn-out in connection with the acquisition of |
Liability | October 1, 2017 Fair Value | Valuation Technique | Unobservable Inputs | Weighted Average | ||||||||||||||
| (in thousands) | ||||||||||||||||||
Contingent consideration (Universal Robots) | $21,818 | | Monte Carlo Simulation |
| Revenue for the period July 1, 2015—December 31, 2017 volatility | 11.5 | % | |||||||||||
| Discount rate | 2.6 | % | ||||||||||||||||
| $17,311 | | Monte Carlo Simulation |
| Revenue for the period July 1, 2015—December 31, 2018 volatility | 11.5 | % | ||||||||||||
| Discount rate | 2.6 | % | ||||||||||||||||
Liability | June 28, 2020 Fair | Valuation Technique | Unobservable Inputs | Weighted Average | ||||||||
(in thousands) | ||||||||||||
Contingent consideration (AutoGuide) | $ | 49,737 | Monte Carlo Simulation | Revenue volatility | 15.5 | % | ||||||
| Discount Rate | 1.8 | % | ||||||||||
Contingent consideration (MiR) | $ | — | Monte Carlo Simulation | Revenue volatility | 10.0 | % | ||||||
| Discount Rate | 0.8 | % | ||||||||||
| October 1, 2017 | December 31, 2016 | |||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 418,677 | $ | 418,677 | $ | 307,884 | $ | 307,884 | ||||||||
Marketable securities | 1,429,773 | 1,429,773 | 1,304,867 | 1,304,867 | ||||||||||||
Derivative assets | 157 | 157 | 1 | 1 | ||||||||||||
Liabilities | ||||||||||||||||
Contingent consideration | 39,129 | 39,129 | 38,332 | 38,332 | ||||||||||||
Derivative liabilities | 190 | 190 | 131 | 131 | ||||||||||||
Convertible debt (1) | 362,595 | 613,238 | 352,669 | 486,754 | ||||||||||||
June 28, 2020 | December 31, 2019 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 725,431 | $ | 725,431 | $ | 773,924 | $ | 773,924 | ||||||||
Marketable securities | 336,759 | 336,759 | 241,793 | 241,793 | ||||||||||||
Derivative assets | 30 | 30 | 528 | 528 | ||||||||||||
Liabilities | ||||||||||||||||
Contingent consideration | 49,737 | 49,737 | 39,705 | 39,705 | ||||||||||||
Derivative liabilities | 222 | 222 | 203 | 203 | ||||||||||||
Convertible debt (1) | 402,305 | 1,198,669 | 394,687 | 1,010,275 | ||||||||||||
| (1) | The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the convertible note, which includes the equity conversion features. |
June 28, 2020 | ||||||||||||||||||||
Available-for-Sale | ||||||||||||||||||||
Cost | Unrealized Gain | Unrealized (Loss) | Fair Market Value | Fair Market Value of Investments with Unrealized Losses | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities | $ | 163,586 | $ | 1,734 | $ | (15 | ) | $ | 165,305 | $ | 18,709 | |||||||||
Commercial paper | 63,774 | 70 | — | 63,844 | — | |||||||||||||||
Corporate debt securities | 56,672 | 6,682 | (136 | ) | 63,218 | 1,447 | ||||||||||||||
Certificates of deposit and time deposits | 9,498 | 8 | — | 9,506 | — | |||||||||||||||
Debt mutual funds | 6,686 | 190 | — | 6,876 | — | |||||||||||||||
U.S. government agency securities | 4,353 | 72 | — | 4,425 | — | |||||||||||||||
Non-U.S. government securities | 601 | — | — | 601 | — | |||||||||||||||
| $ | 305,170 | $ | 8,756 | $ | (151 | ) | $ | 313,775 | $ | 20,156 | ||||||||||
Cost | Unrealized Gain | Unrealized (Loss) | Fair Market Value | Fair Market Value of Investments with Unrealized Losses | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Marketable securities | $ | 229,471 | $ | 331 | $ | (11 | ) | $ | 229,791 | $ | 17,366 | |||||||||
Long-term marketable securities | 75,699 | 8,425 | (140 | ) | 83,984 | 2,790 | ||||||||||||||
| $ | 305,170 | $ | 8,756 | $ | (151 | ) | $ | 313,775 | $ | 20,156 | ||||||||||
December 31, 2019 | ||||||||||||||||||||
Available-for-Sale | ||||||||||||||||||||
Cost | Unrealized Gain | Unrealized (Loss) | Fair Market Value | Fair Market Value of Investments with Unrealized Losses | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Corporate debt securities | $ | 93,267 | $ | 4,081 | $ | (41 | ) | $ | 97,307 | $ | 2,009 | |||||||||
Commercial paper | 54,124 | 26 | (1 | ) | 54,149 | 1,391 | ||||||||||||||
U.S. Treasury securities | 42,167 | 431 | (216 | ) | 42,382 | 17,556 | ||||||||||||||
U.S. government agency securities | 9,942 | 14 | (4 | ) | 9,952 | 3,043 | ||||||||||||||
Debt mutual funds | 6,753 | 135 | — | 6,888 | — | |||||||||||||||
Certificates of deposit and time deposits | 4,751 | — | — | 4,751 | — | |||||||||||||||
Non-U.S. government securities | 592 | — | — | 592 | — | |||||||||||||||
| $ | 211,596 | $ | 4,687 | $ | (262 | ) | $ | 216,021 | $ | 23,999 | ||||||||||
Cost | Unrealized Gain | Unrealized (Loss) | Fair Market Value | Fair Market Value of Investments with Unrealized Losses | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Marketable securities | $ | 137,144 | $ | 160 | $ | (1 | ) | $ | 137,303 | $ | 2,922 | |||||||||
Long-term marketable securities | 74,452 | 4,527 | (261 | ) | 78,718 | 21,077 | ||||||||||||||
| $ | 211,596 | $ | 4,687 | $ | (262 | ) | $ | 216,021 | $ | 23,999 | ||||||||||
| October 1, 2017 | ||||||||||||||||||||
| Available-for-Sale | Fair Market Value of Investments with Unrealized Losses | |||||||||||||||||||
| Cost | Unrealized Gain | Unrealized (Loss) | Fair Market Value | |||||||||||||||||
| (in thousands) | ||||||||||||||||||||
U.S. Treasury securities | $ | 944,120 | $ | 64 | $ | (1,934 | ) | $ | 942,250 | $ | 936,195 | |||||||||
Commercial paper | 194,985 | 11 | (48 | ) | 194,948 | 140,562 | ||||||||||||||
Corporate debt securities | 116,687 | 2,046 | (246 | ) | 118,487 | 79,119 | ||||||||||||||
Certificates of deposit and time deposits | 95,447 | 29 | (7 | ) | 95,469 | 33,238 | ||||||||||||||
U.S. government agency securities | 55,936 | 20 | (18 | ) | 55,938 | 52,997 | ||||||||||||||
Equity and debt mutual funds | 18,202 | 3,923 | (21 | ) | 22,104 | 1,529 | ||||||||||||||
Non-U.S. government securities | 570 | 7 | — | 577 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,425,947 | $ | 6,100 | $ | (2,274 | ) | $ | 1,429,773 | $ | 1,243,640 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Reported as follows:
| Cost | Unrealized Gain | Unrealized (Loss) | Fair Market Value | Fair Market Value of Investments with Unrealized Losses | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
Marketable securities | $ | 1,218,752 | $ | 65 | $ | (987 | ) | $ | 1,217,830 | $ | 1,088,881 | |||||||||
Long-term marketable securities | 207,195 | 6,035 | (1,287 | ) | 211,943 | 154,759 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,425,947 | $ | 6,100 | $ | (2,274 | ) | $ | 1,429,773 | $ | 1,243,640 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| December 31, 2016 | ||||||||||||||||||||
| Available-for-Sale | Fair Market Value of Investments with Unrealized Losses | |||||||||||||||||||
| Cost | Unrealized Gain | Unrealized (Loss) | Fair Market Value | |||||||||||||||||
| (in thousands) | ||||||||||||||||||||
U.S. Treasury securities | $ | 904,737 | $ | 97 | $ | (2,034 | ) | $ | 902,800 | $ | 572,284 | |||||||||
Commercial paper | 161,672 | 24 | (66 | ) | 161,630 | 84,034 | ||||||||||||||
Corporate debt securities | 99,708 | 1,065 | (620 | ) | 100,153 | 53,642 | ||||||||||||||
Certificates of deposit and time deposits | 82,080 | 54 | (1 | ) | 82,133 | 7,760 | ||||||||||||||
U.S. government agency securities | 39,264 | 7 | (19 | ) | 39,252 | 13,461 | ||||||||||||||
Equity and debt mutual funds | 16,505 | 1,724 | (58 | ) | 18,171 | 1,661 | ||||||||||||||
Non-U.S. government securities | 745 | 6 | (23 | ) | 728 | 137 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,304,711 | $ | 2,977 | $ | (2,821 | ) | $ | 1,304,867 | $ | 732,979 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Reported as follows:
| Cost | Unrealized Gain | Unrealized (Loss) | Fair Market Value | Fair Market Value of Investments with Unrealized Losses | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
Marketable securities | $ | 871,321 | $ | 134 | $ | (431 | ) | $ | 871,024 | $ | 423,128 | |||||||||
Long-term marketable securities | 433,390 | 2,843 | (2,390 | ) | 433,843 | 309,851 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,304,711 | $ | 2,977 | $ | (2,821 | ) | $ | 1,304,867 | $ | 732,979 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
As of October 1, 2017,2019, the fair market value of investments with unrealized losses totaled $1,243.6 million. Of this value, $113.3 million had unrealized losses of $0.9 million for greaterless than one year totaled $20.2 million and $1,130.3$23.6 million, had unrealized losses of $1.4 million for less than one year.
As of December 31, 2016, the fair market value of investments with unrealized losses totaled $733.0 million. Of this value, $2.9 million had unrealized losses of $0.3 million for greater than one year and $730.1 million had unrealized losses of $2.5 million for less than one year.
respectively.
| October 1, 2017 | ||||||||
| Cost | Fair Market Value | |||||||
| (in thousands) | ||||||||
Due within one year | $ | 1,218,752 | $ | 1,217,830 | ||||
Due after 1 year through 5 years | 136,081 | 135,889 | ||||||
Due after 5 years through 10 years | 14,129 | 13,818 | ||||||
Due after 10 years | 38,783 | 40,132 | ||||||
|
|
|
| |||||
Total | $ | 1,407,745 | $ | 1,407,669 | ||||
|
|
|
| |||||
June 28, 2020 | ||||||||
Cost | Fair Market Value | |||||||
(in thousands) | ||||||||
Due within one year | $ | 229,471 | $ | 229,791 | ||||
Due after 1 year through 5 years | 21,054 | 21,587 | ||||||
Due after 5 years through 10 years | 13,762 | 14,974 | ||||||
Due after 10 years | 34,197 | 40,547 | ||||||
Total | $ | 298,484 | $ | 306,899 | ||||
The following table summarizes the fair value of derivative instruments at October 1, 2017 and December 31, 2016:
| Balance Sheet Location | October 1, 2017 | December 31, 2016 | ||||||||||
| (in thousands) | ||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||
Foreign currency forward contracts assets | Prepayments | $ | 157 | $ | 1 | |||||||
Foreign currency forward contracts liabilities | Other current liabilities | (190 | ) | (131 | ) | |||||||
|
|
|
| |||||||||
Total | $ | (33 | ) | $ | (130 | ) | ||||||
|
|
|
| |||||||||
The following table summarizes the effect of derivative instruments recognized in the statement of operations during the three and nine months ended October 1, 2017 and October 2, 2016.
Location of (Gains) Losses Recognized in Statement of Operations | For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||||
| (in thousands) | ||||||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||
Foreign currency forward contracts | Other (income) expense, net | $ | (939 | ) | $ | 941 | $ | (1,514 | ) | $ | 11,140 | |||||||
|
|
|
|
|
|
|
| |||||||||||
Total | $ | (939 | ) | $ | 941 | $ | (1,514 | ) | $ | 11,140 | ||||||||
|
|
|
|
|
|
|
| |||||||||||
F.
Balance Sheet Location | June 28, 2020 | December 31, 2019 | ||||||||||
(in thousands) | ||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||
Foreign exchange contracts | Prepayments | $ | 30 | $ | 528 | |||||||
Foreign exchange contracts | Other current liabilities | (222 | ) | (203 | ) | |||||||
Total derivatives | $ | (192 | ) | $ | 325 | |||||||
Location of (Gains) Losses | For the Three Months Ended | For the Six Months Ended | ||||||||||||||||
Recognized in | June 28, | June 30, | June 28, | June 30, | ||||||||||||||
Statement of Operations | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
(in thousands) | ||||||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||
| Foreign exchange contracts | Other (income) expense, net | $470 | $239 | $4,481 | $4,173 | |||||||||||||
| (1) | The table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. |
| (2) | For the three months ended June 28, 2020, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $0.4 million. For the six months ended June 28, 2020, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.6 million. |
| (3) | For the three months ended June 30, 2019, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.3 million. For the six months ended June 30, 2019, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.9 million. |
converted. The Notes bear interest from December 12, 2016 at a rate of 1.25% per year payable semi-annuallysemiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2017.
year. The Notes will be convertible at the option of the noteholders at any time prior to the close of business on the business day immediately preceding September 15, 2023, only under the following circumstances: (1) during any calendar quarter beginning after March 31, 2017 (and only during such calendar quarter), if the closing sale price of Teradyne’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; (2) during the five5 business day period after any five5 consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the closing sale price of the Teradyne’s common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate events. On or after September 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Teradyne may satisfy its conversion obligation by paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s election. The conversion rate forAs of June 28, 2020, the Notes will initially be 31.4102 shares per $1,000 principal amount, which is equivalent to an initial conversion price ofwas approximately $31.84$31.59 per share of Teradyne’s common stock. The conversion rate is subject to adjustment under certain circumstances.
As of August 3, 2020, nine holders exercised the option to convert eighteen thousand dollars’ worth of Notes.
Separately and concurrent
The Note Hedge Transactions are expected to reduce the potential dilution to Teradyne’s common stock upon any conversion of the Notes. However, the Warrant Transactions could separately have a dilutive effect to the extent that the market value per share of Teradyne’s common stock exceeds the applicable strike price of the warrant.
In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, the Option Counterparties have entered into various derivative transactions with respect to Teradyne’s common stock and/or purchased shares of Teradyne’s common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In addition, the Option Counterparties may modify their hedge
positions by entering into or unwinding various derivative transactions with respect to Teradyne’s common stock or by selling Teradyne’s common stock or other securities, including the Notes, in secondary market transactions (and may do so during any observation period related to the conversion of the Notes). These activities could adversely affect the value of Teradyne’s common stock and the Notes.
effective interest method through December 2023. Accordingly, Teradyne’s effective annual interest rate on the Notes iswill be approximately 5.0%. At October 1, 2017 and December 31, 2016, theThe Notes are classified as long-term debt in the balance sheetssheet based on their December 15, 2023 maturity date. Debt issuance costs of approximately $7.2 million are being amortized to interest expense using the effective interest method over the seven-year term of the Notes. As of October 1, 2017, unamortizedJune 28, 2020, debt issuance costs were $6.5approximately $3.8 million.
| October 1, 2017 | December 31, 2016 | |||||||
| (in thousands) | ||||||||
Debt principal | $ | 460,000 | $ | 460,000 | ||||
Unamortized discount | 97,405 | 107,331 | ||||||
|
|
|
| |||||
Net carrying amount of convertible debt | $ | 362,595 | $ | 352,669 | ||||
|
|
|
| |||||
| For the Three Months Ended | For the Nine Months Ended | |||||||
| October 1, 2017 | October 1, 2017 | |||||||
| (in thousands) | ||||||||
Contractual interest expense on the coupon | $ | 1,422 | $ | 4,297 | ||||
Amortization of the discount component and debt issue fees recognized as interest expense | 3,350 | 9,926 | ||||||
|
|
|
| |||||
Total interest expense on the convertible debt | $ | 4,772 | $ | 14,223 | ||||
|
|
|
| |||||
June 28, 2020 | December 31, 2019 | |||||||
(in thousands) | ||||||||
Debt Principal | $ | 459,987 | $ | 460,000 | ||||
Unamortized discount | 57,682 | 65,313 | ||||||
Net Carrying amount of convertible debt | $ | 402,305 | $ | 394,687 | ||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
(in thousands) | ||||||||||||||||
Contractual interest expense on the coupon | $ | 1,438 | $ | 1,438 | $ | 2,875 | $ | 2,875 | ||||||||
Amortization of the discount component and debt issue fees recognized as interest expense | 3,839 | 3,653 | 7,631 | 7,262 | ||||||||||||
Total interest expense on the convertible debt | $ | 5,277 | $ | 5,091 | $ | 10,506 | $ | 10,137 | ||||||||
G.
| October 1, 2017 | December 31, 2016 | |||||||
| (in thousands) | ||||||||
Contract manufacturer prepayments | $ | 78,293 | $ | 84,473 | ||||
Prepaid taxes | 9,658 | 4,664 | ||||||
Prepaid maintenance and other services | 6,685 | 7,676 | ||||||
Other prepayments | 10,673 | 11,641 | ||||||
|
|
|
| |||||
Total | $ | 105,309 | $ | 108,454 | ||||
|
|
|
| |||||
H.
June 28, 2020 | December 31, 2019 | |||||||
(in thousands) | ||||||||
Contract manufacturer and supplier prepayments | $ | 191,029 | $ | 143,392 | ||||
Prepaid maintenance and other services | 10,316 | 8,046 | ||||||
Prepaid taxes | 6,665 | 8,503 | ||||||
Other prepayments | 14,171 | 16,753 | ||||||
Total prepayments | $ | 222,181 | $ | 176,694 | ||||
| October 1, 2017 | December 31, 2016 | |||||||
| (in thousands) | ||||||||
Extended warranty | $ | 26,492 | $ | 28,200 | ||||
Customer advances, undelivered elements and other | 58,577 | 32,938 | ||||||
Maintenance and training | 58,123 | 46,803 | ||||||
|
|
|
| |||||
Total | $ | 143,192 | $ | 107,941 | ||||
|
|
|
| |||||
I.
June 28, 2020 | December 31, 2019 | |||||||
(in thousands) | ||||||||
Maintenance, service and training | $ | 75,144 | $ | 63,815 | ||||
Extended warranty | 40,178 | 30,677 | ||||||
Customer advances, undelivered elements and other | 64,536 | 56,358 | ||||||
Total deferred revenue and customer advances | $ | 179,858 | $ | 150,850 | ||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 9,093 | $ | 8,784 | $ | 7,203 | $ | 6,925 | ||||||||
Accruals for warranties issued during the period | 2,734 | 3,248 | 11,049 | 11,626 | ||||||||||||
Adjustments related to pre-existing warranties | (35 | ) | (460 | ) | (499 | ) | (637 | ) | ||||||||
Settlements made during the period | (3,055 | ) | (3,249 | ) | (9,016 | ) | (9,591 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 8,737 | $ | 8,323 | $ | 8,737 | $ | 8,323 | ||||||||
|
|
|
|
|
|
|
| |||||||||
liabilities.
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 10,971 | $ | 7,752 | $ | 8,996 | $ | 7,909 | ||||||||
Accruals for warranties issued during the period | 6,200 | 2,295 | 11,267 | 5,360 | ||||||||||||
Accruals related to pre-existing warranties | 356 | 694 | 1,412 | 2,024 | ||||||||||||
Settlements made during the period | (4,511 | ) | (2,608 | ) | (8,659 | ) | (7,174 | ) | ||||||||
Acquisition | — | — | — | 14 | ||||||||||||
Balance at end of period | $ | 13,016 | $ | 8,133 | $ | 13,016 | $ | 8,133 | ||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 29,377 | $ | 30,422 | $ | 28,200 | $ | 30,024 | ||||||||
Deferral of new extended warranty revenue | 2,636 | 4,638 | 17,126 | 17,036 | ||||||||||||
Recognition of extended warranty deferred revenue | (5,521 | ) | (5,030 | ) | (18,834 | ) | (17,030 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 26,492 | $ | 30,030 | $ | 26,492 | $ | 30,030 | ||||||||
|
|
|
|
|
|
|
| |||||||||
J.advances.
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 33,503 | $ | 27,242 | $ | 30,677 | $ | 27,422 | ||||||||
Deferral of new extended warranty revenue | 11,450 | 5,476 | 19,050 | 11,296 | ||||||||||||
Recognition of extended warranty deferred revenue | (4,775 | ) | (4,002 | ) | (9,549 | ) | (10,002 | ) | ||||||||
Balance at end of period | $ | 40,178 | $ | 28,716 | $ | 40,178 | $ | 28,716 | ||||||||
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.
Time-based
Commencing in January 2014, Teradyne granted performance-based
PRSUs will vest upon the three-year anniversary of the grant date. The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period.period or the period from the grant to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the 365 days following the grant. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted below.
In January 2017 and 2016, Teradyne
Beginning with PRSUs granted in January 2014, if the
| For the Nine Months Ended | ||||||||
| October 1, 2017 | October 2, 2016 | |||||||
Risk-free interest rate | 1.5 | % | 1.0 | % | ||||
Teradyne volatility-historical | 26.6 | % | 27.0 | % | ||||
NYSE Composite Index volatility-historical | 13.4 | % | 13.1 | % | ||||
Dividend yield | 1.0 | % | 1.2 | % | ||||
For the Six Months Ended | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
Risk-free interest rate | 1.5 | % | 2.6 | % | ||||
Teradyne volatility-historical | 34.9 | % | 31.9 | % | ||||
NYSE Composite Index volatility-historical | 11.4 | % | 11.9 | % | ||||
Dividend yield | 0.6 | % | 1.0 | % | ||||
During the nine months ended October 1, 2017, Teradyne granted 0.8 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $28.03, 0.1 million of service-based restricted stock unit awards to non-employee directors at a weighted average grant date fair value of $34.48, and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $7.13.
During the nine months ended October 2, 2016, Teradyne granted 0.1 million PBIT PRSUs with a grant date fair value of $18.71.
During the nine months ended October 2, 2016, Teradyne granted 1.2 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $18.49, 0.1 million of service-based restricted stock unit awards to non-employee directors at a weighted average grant date fair value of $18.71$20.67 and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $5.30.
Restricted stock unit awards granted to employees vest in equal annual installments over four years. Stock options vest in equal annual installments over four years and have a term of seven years from the date of grant.
$10.61, respectively.
| For the Nine Months Ended | ||||||||
| October 1, 2017 | October 2, 2016 | |||||||
Expected life (years) | 5.0 | 5.0 | ||||||
Risk-free interest rate | 2.0 | % | 1.4 | % | ||||
Volatility-historical | 27.8 | % | 32.9 | % | ||||
Dividend yield | 1.0 | % | 1.2 | % | ||||
For the Six Months Ended | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
Expected life (years) | 5.0 | 5.0 | ||||||
Risk-free interest rate | 1.6 | % | 2.5 | % | ||||
Volatility-historical | 31.6 | % | 30.1 | % | ||||
Dividend yield | 0.6 | % | 1.0 | % | ||||
K.
| Foreign Currency Translation Adjustment | Unrealized Gains (Losses) on Marketable Securities | Retirement Plans Prior Service Credit | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
Nine Months Ended October 1, 2017 | ||||||||||||||||
Balance at December 31, 2016, net of tax of $0, $209, $(778), respectively | $ | (21,921 | ) | $ | (60 | ) | $ | 1,767 | $ | (20,214 | ) | |||||
Other comprehensive income before reclassifications, net of tax of $0, $1,666, $0, respectively | 34,235 | 2,448 | — | 36,683 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(173), $(115), respectively | — | (264 | ) | (204 | ) | (468 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net current period other comprehensive income (loss), net of tax of $0, $1,493, $(115), respectively | 34,235 | 2,184 | (204 | ) | 36,215 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at October 1, 2017, net of tax of $0, $1,702, $(893), respectively | $ | 12,314 | $ | 2,124 | $ | 1,563 | $ | 16,001 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| Foreign Currency Translation Adjustments | Unrealized Gains (Losses) on Marketable Securities | Retirement Plans Prior Service Credit | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
Nine Months Ended October 2, 2016 | ||||||||||||||||
Balance at December 31, 2015, net of tax of $0, $(459), $(622), respectively | $ | (8,759 | ) | $ | (1,414 | ) | $ | 2,029 | $ | (8,144 | ) | |||||
Other comprehensive income before reclassifications, net of tax of $0, $2,405, $34, respectively | 7,072 | 5,110 | 59 | 12,241 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $0, $(152), $(139), respectively | — | (468 | ) | (244 | ) | (712 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net current period other comprehensive income (loss), net of tax of $0, $2,253, $(105), respectively | 7,072 | 4,642 | (185 | ) | 11,529 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance as October 2, 2016, net of tax of $0, $1,749, $(727), respectively | $ | (1,687 | ) | $ | 3,228 | $ | 1,844 | $ | 3,385 | |||||||
|
|
|
|
|
|
|
| |||||||||
Foreign Currency Translation Adjustment | Unrealized Gains (Losses) on Marketable Securities | Retirement Plans Prior Service Credit | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Six Months Ended June 28, 2020 | ||||||||||||||||
Balance at December 31, 2019, net of tax of $0, $946, $(1,124), respectively | $ | (23,514 | ) | $ | 3,480 | $ | 1,180 | $ | (18,854 | ) | ||||||
Other comprehensive income before reclassifications, net of tax of $0, $1,271, $0, respectively | 7,026 | 4,830 | — | 11,856 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(421), $(1), respectively | — | (1,499 | ) | (3 | ) | (1,502 | ) | |||||||||
Net current period other comprehensive income (loss), net of tax of $0, $850, $(1), respectively | 7,026 | 3,331 | (3 | ) | 10,354 | |||||||||||
Balance at June 28, 2020, net of tax of $0, $1,796, $(1,125), respectively | $ | (16,488 | ) | $ | 6,811 | $ | 1,177 | $ | (8,500 | ) | ||||||
Six Months Ended June 30, 2019 | ||||||||||||||||
Balance at December 31, 2018, net of tax of $0, $(521), $(1,081), respectively | $ | (12,523 | ) | $ | (1,845 | ) | $ | 1,328 | $ | (13,040 | ) | |||||
Other comprehensive income before reclassifications, net of tax of $0, $1,256, $0, respectively | 983 | 4,637 | — | 5,620 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(26), $(21), respectively | — | (97 | ) | (74 | ) | (171 | ) | |||||||||
Net current period other comprehensive income (loss), net of tax of $0, $1,230, $(21), respectively | 983 | 4,540 | (74 | ) | 5,449 | |||||||||||
Balance as June 30, 2019, net of tax of $0, $709, $(1,102), respectively | $ | (11,540 | ) | $ | 2,695 | $ | 1,254 | $ | (7,591 | ) | ||||||
Details about Accumulated Other Comprehensive Income Components | For the Three Months Ended | For the Nine Months Ended | Affected Line Item in the Statements of Operations | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||||
| (in thousands) | ||||||||||||||||||
Available-for-sale marketable securities: | ||||||||||||||||||
Unrealized gains, net of tax of $67, $150, $173, $152, respectively | $ | 87 | $ | 334 | $ | 264 | $ | 468 | Interest income | |||||||||
Defined benefit pension and postretirement plans: | ||||||||||||||||||
Amortization of prior service benefit, net of tax of $38, $46, $115, $139, respectively | 68 | 81 | 204 | 244 | (a) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total reclassifications, net of tax of $105, $196, $288, $291, respectively | $ | 155 | $ | 415 | $ | 468 | $ | 712 | Net income | |||||||||
|
|
|
|
|
|
|
| |||||||||||
Details about Accumulated Other Comprehensive Income Components | For the Three Months Ended | For the Six Months Ended | Affected Line Item in the Statements of Operations | |||||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||||||
(in thousands) | ||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Unrealized gains, net of tax of $277, $6, $421, $26, respectively | $ | 983 | $ | 27 | $ | 1,499 | $ | 97 | Interest income | |||||||||||
Defined benefit retirement plans: | ||||||||||||||||||||
Amortization of prior service credit , net of tax of $0, $11, $1, $21, respectively | 2 | 37 | 3 | 74 | (a) | |||||||||||||||
Total reclassifications, net of tax of $277, $17, $422, $47, respectively | $ | 985 | $ | 64 | $ | 1,502 | $ | 171 | Net income | |||||||||||
| (a) | The amortization of prior service |
L.
In 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 had previously contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011) 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 used the income and market approaches to determine the fair value of the Wireless Test reporting unit for step 1 of the goodwill impairment test. With respect to the income approach, Teradyne used the discounted cash flow method, which included seven year future cash flow projections and an estimated terminal value. The cash flow projections were prepared using Teradyne’s forecast, which was based upon underlying estimates of the total market size, and Teradyne’s market share in the wireless test market developed using Teradyne and independent third party data. The estimated terminal value was calculated using the Gordon Growth model. The market approach used a revenue multiple to develop an estimate of fair value. The revenue multiple was estimated using enterprise value as a ratio of next twelve months revenue for comparable companies. Teradyne equally weighted the income and market approaches to determine the fair value of the Wireless Test reporting unit. The carrying amount of the Wireless Test reporting unit exceeded its fair value; therefore, the second step of the goodwill impairment test was performed to calculate implied goodwill and to measure the amount of the impairment loss.
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 goodwill was valued at $8.0 million and recorded an impairment loss of $254.9 million in the second quarter of 2016.
| Industrial Automation | System Test | Wireless Test | Semiconductor Test | Total | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
Balance at December 31, 2016 | ||||||||||||||||||||
Goodwill | $ | 204,851 | $ | 158,699 | $ | 361,819 | $ | 260,540 | $ | 985,909 | ||||||||||
Accumulated impairment losses | — | (148,183 | ) | (353,843 | ) | (260,540 | ) | (762,566 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 204,851 | 10,516 | 7,976 | — | 223,343 | ||||||||||||||||
Foreign currency translation adjustment | 25,934 | — | — | — | 25,934 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at October 1, 2017 | ||||||||||||||||||||
Goodwill | 230,785 | 158,699 | 361,819 | 260,540 | 1,011,843 | |||||||||||||||
Accumulated impairment losses | — | (148,183 | ) | (353,843 | ) | (260,540 | ) | (762,566 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| $ | 230,785 | $ | 10,516 | $ | 7,976 | $ | — | $ | 249,277 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Acquired
Industrial Automation | System Test | Wireless Test | Semiconductor Test | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at December 31, 2019 | ||||||||||||||||||||
Goodwill | $ | 396,483 | $ | 158,699 | $ | 361,819 | $ | 261,996 | $ | 1,178,997 | ||||||||||
Accumulated impairment losses | — | (148,183 | ) | (353,843 | ) | (260,540 | ) | (762,566 | ) | |||||||||||
| 396,483 | 10,516 | 7,976 | 1,456 | 416,431 | ||||||||||||||||
AutoGuide acquisition | (149 | ) | — | — | — | (149 | ) | |||||||||||||
Foreign currency translation adjustment | 5,671 | — | — | 50 | 5,721 | |||||||||||||||
Balance at June 28, 2020 | ||||||||||||||||||||
Goodwill | 402,005 | 158,699 | 361,819 | 262,046 | 1,184,569 | |||||||||||||||
Accumulated impairment losses | — | (148,183 | ) | (353,843 | ) | (260,540 | ) | (762,566 | ) | |||||||||||
| $ | 402,005 | $ | 10,516 | $ | 7,976 | $ | 1,506 | $ | 422,003 | |||||||||||
| October 1, 2017 | ||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Cumulative Foreign Currency Translation Adjustment | Net Carrying Amount | |||||||||||||
| (in thousands) | ||||||||||||||||
Developed technology | $ | 270,877 | $ | (221,051 | ) | $ | 1,057 | $ | 50,883 | |||||||
Customer relationships | 92,741 | (82,286 | ) | 111 | 10,566 | |||||||||||
Tradenames and trademarks | 50,100 | (26,171 | ) | 271 | 24,200 | |||||||||||
Non-compete agreement | 320 | (240 | ) | — | 80 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 414,038 | $ | (329,748 | ) | $ | 1,439 | $ | 85,729 | |||||||
|
|
|
|
|
|
|
| |||||||||
| December 31, 2016 | ||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Cumulative Foreign Currency Translation Adjustment | Net Carrying Amount | |||||||||||||
| (in thousands) | ||||||||||||||||
Developed technology | $ | 270,877 | $ | (206,376 | ) | $ | (5,093 | ) | $ | 59,408 | ||||||
Customer relationships | 92,741 | (76,707 | ) | (538 | ) | 15,496 | ||||||||||
Tradenames and trademarks | 50,100 | (23,435 | ) | (1,308 | ) | 25,357 | ||||||||||
Non-compete agreement | 320 | (180 | ) | — | 140 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 414,038 | $ | (306,698 | ) | $ | (6,939 | ) | $ | 100,401 | ||||||
|
|
|
|
|
|
|
| |||||||||
Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net Carrying Amount | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at June 28, 2020 | ||||||||||||||||
Developed technology | $ | 361,787 | $ | (292,394 | ) | $ | (5,095 | ) | $ | 64,298 | ||||||
Customer relationships | 75,669 | (61,730 | ) | (295 | ) | 13,644 | ||||||||||
Tradenames and trademarks | 70,120 | (39,457 | ) | (1,042 | ) | 29,621 | ||||||||||
Total intangible assets | $ | 507,576 | $ | (393,581 | ) | $ | (6,432 | ) | $ | 107,563 | ||||||
Balance at December 31, 2019 | ||||||||||||||||
Developed technology | $ | 361,787 | $ | (279,000 | ) | $ | (5,709 | ) | $ | 77,078 | ||||||
Customer relationships | 75,669 | (59,077 | ) | (455 | ) | 16,137 | ||||||||||
Tradenames and trademarks | 70,120 | (36,671 | ) | (1,184 | ) | 32,265 | ||||||||||
Backlog | 260 | (260 | ) | — | — | |||||||||||
Total intangible assets | $ | 507,836 | $ | (375,008 | ) | $ | (7,348 | ) | $ | 125,480 | ||||||
Year | Amortization Expense | |||
| (in thousands) | ||||
2017(remainder) | 7,348 | |||
2018 | 29,268 | |||
2019 | 25,295 | |||
2020 | 11,134 | |||
2021 | 3,703 | |||
Thereafter | 8,981 | |||
M.
Year | Amortization Expense | |||
(in thousands) | ||||
2020 (remainder) | 11,721 | |||
2021 | 20,804 | |||
2022 | 19,911 | |||
2023 | 19,430 | |||
2024 | 19,123 | |||
Thereafter | 16,574 | |||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
Net income (loss) for basic and diluted net income (loss) per share | $ | 103,420 | $ | 63,794 | $ | 363,616 | $ | (109,767 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares-basic | 197,485 | 202,211 | 198,755 | 203,167 | ||||||||||||
Effect of dilutive potential common shares: | ||||||||||||||||
Restricted stock units | 1,832 | 1,282 | 1,663 | — | ||||||||||||
Incremental shares from assumed conversion of convertible note | 1,144 | — | 632 | — | ||||||||||||
Stock options | 306 | 421 | 337 | — | ||||||||||||
Employee stock purchase plan | 8 | 15 | 26 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Dilutive potential common shares | 3,290 | 1,718 | 2,658 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares-diluted | 200,775 | 203,929 | 201,413 | 203,167 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) per common share-basic | $ | 0.52 | $ | 0.32 | $ | 1.83 | $ | (0.54 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) per common share-diluted | $ | 0.52 | $ | 0.31 | $ | 1.81 | $ | (0.54 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, | June 30, | June 28, | June 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Net income for basic and diluted net income per share | $ | 188,908 | $ | 97,397 | $ | 365,098 | $ | 206,535 | ||||||||
Weighted average common shares-basic | 165,789 | 171,241 | 166,189 | 172,387 | ||||||||||||
Effect of dilutive potential common shares: | ||||||||||||||||
Incremental shares from assumed conversion of convertible notes (1) | 7,599 | 4,364 | 7,466 | 3,275 | ||||||||||||
Convertible note hedge warrant shares (2) | 5,824 | 1,778 | 5,658 | 889 | ||||||||||||
Restricted stock units | 913 | 1,002 | 1,038 | 1,012 | ||||||||||||
Stock options | 132 | 183 | 133 | 202 | ||||||||||||
Employee stock purchase plan | — | 22 | 13 | 16 | ||||||||||||
Dilutive potential common shares | 14,468 | 7,349 | 14,308 | 5,394 | ||||||||||||
Weighted average common shares-diluted | 180,257 | 178,590 | 180,497 | 177,781 | ||||||||||||
Net income per common share-basic | $ | 1.14 | $ | 0.57 | $ | 2.20 | $ | 1.20 | ||||||||
Net income per common share-diluted | $ | 1.05 | $ | 0.55 | $ | 2.02 | $ | 1.16 | ||||||||
| (1) | Incremental shares from assumed conversion of the convertible notes |
| (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 $39.64, multiplied by 14.6 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. |
The computation of diluted net income per common share for the nine months ended October 2, 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.
N.
Test and $0.5 million of acquisition related compensation and expenses.
During the nine months ended October 1, 2017, Teradyne recorded $2.0partially offset by
liability.
O.Test.
obligation at December 31. Teradyne uses a December 31 measurement date for all of its plans.
In the nine months ended October 2, 2016, Teradyne contributed $1.9 million to the U.S. qualified pension plan, $1.9 million to the U.S. supplemental executive defined benefit pension plan and $1.5 million to certain qualified pension plans for non-U.S. subsidiaries.
| For the Three Months Ended | ||||||||||||||||
| October 1, 2017 | October 2, 2016 | |||||||||||||||
| United States | Foreign | United States | Foreign | |||||||||||||
| (in thousands) | ||||||||||||||||
Service cost | $ | 560 | $ | 215 | $ | 575 | $ | 208 | ||||||||
Interest cost | 3,288 | 186 | 3,407 | 209 | ||||||||||||
Expected return on plan assets | (3,002 | ) | (6 | ) | (3,458 | ) | (6 | ) | ||||||||
Amortization of prior service cost | 18 | — | 24 | — | ||||||||||||
Net actuarial loss | — | — | — | 662 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 864 | $ | 395 | $ | 548 | $ | 1,073 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| For the Nine Months Ended | ||||||||||||||||
| October 1, 2017 | October 2, 2016 | |||||||||||||||
| United States | Foreign | United States | Foreign | |||||||||||||
| (in thousands) | ||||||||||||||||
Service cost | $ | 1,679 | $ | 606 | $ | 1,726 | $ | 614 | ||||||||
Interest cost | 9,863 | 527 | 10,222 | 614 | ||||||||||||
Expected return on plan assets | (9,006 | ) | (19 | ) | (10,373 | ) | (17 | ) | ||||||||
Amortization of prior service cost | 53 | — | 72 | — | ||||||||||||
Net Actuarial (gain) loss | (2,732 | ) | 243 | (1,848 | ) | 662 | ||||||||||
Settlement | — | — | — | (184 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (143 | ) | $ | 1,357 | $ | (201 | ) | $ | 1,689 | ||||||
|
|
|
|
|
|
|
| |||||||||
For the Three Months Ended | ||||||||||||||||
June 28, 2020 | June 30, 2019 | |||||||||||||||
United States | Foreign | United States | Foreign | |||||||||||||
(in thousands) | ||||||||||||||||
Service cost | $ | 433 | $ | 208 | $ | 399 | $ | 192 | ||||||||
Interest cost | 1,523 | 119 | 1,799 | 176 | ||||||||||||
Expected return on plan assets | (1,232 | ) | (15 | ) | (1,510 | ) | (7 | ) | ||||||||
Net actuarial loss | 180 | — | 252 | — | ||||||||||||
Total net periodic pension cost | $ | 904 | $ | 312 | $ | 940 | $ | 361 | ||||||||
For the Six Months Ended | ||||||||||||||||
June 28, 2020 | June 30, 2019 | |||||||||||||||
United States | Foreign | United States | Foreign | |||||||||||||
(in thousands) | ||||||||||||||||
Service cost | $ | 866 | $ | 417 | $ | 804 | $ | 381 | ||||||||
Interest cost | 3,045 | 238 | 3,595 | 349 | ||||||||||||
Expected return on plan assets | (2,464 | ) | (31 | ) | (3,021 | ) | (14 | ) | ||||||||
Net actuarial loss | 180 | — | 252 | — | ||||||||||||
Total net periodic pension cost | $ | 1,627 | $ | 624 | $ | 1,630 | $ | 716 | ||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Service cost | $ | 8 | $ | 9 | $ | 25 | $ | 28 | ||||||||
Interest cost | 50 | 54 | 151 | 163 | ||||||||||||
Amortization of prior service benefit | (124 | ) | (151 | ) | (372 | ) | (455 | ) | ||||||||
Actuarial gain | — | — | (15 | ) | (15 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (66 | ) | $ | (88 | ) | $ | (211 | ) | $ | (279 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
P.
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
(in thousands) | ||||||||||||||||
Service cost | $ | 17 | $ | 11 | $ | 28 | $ | 20 | ||||||||
Interest cost | 58 | 88 | 120 | 173 | ||||||||||||
Amortization of prior service credit | (2 | ) | (48 | ) | (4 | ) | (95 | ) | ||||||||
Net actuarial (gain) loss | (279 | ) | 196 | (279 | ) | 196 | ||||||||||
Total net periodic postretirement benefit (credit) cost | $ | (206 | ) | $ | 247 | $ | (135 | ) | $ | 294 | ||||||
Q.operations.
The
The increase in the effective tax rate from the three and nine months ended October 2, 2016 to the three and nine months ended October 1, 2017 is primarily attributable to a shift in the geographic distribution of income which increased income subject to taxation in the U.S. relative to lower tax rate jurisdictions, the effect of a U.S. non-deductible goodwill impairment charge and decreases in discrete tax benefits.
The effective tax rates for the three and nine months ended October 1, 2017 differed from the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the U.S. The tax rates for the three and nine months ended October 1, 2017 were also reduced by the benefit from U.S. research and development tax credits, partially offset by additions to the uncertain tax positions for transfer pricing, both of which are included in the projected annual effective tax rate.
Discrete tax items recorded in the three and nine months ended October 1, 2017 amounted to expense of $0.3 million and benefit of $6.1 million, respectively. The $0.3 million of discrete tax expense recorded in the three months ended October 1, 2017 was primarily composed of $0.8 million of expense related to non-taxable foreign exchange loss, $0.2 million of benefit from reductions in tax reserves and $0.2 million of benefit from stock based compensation. The $6.1 million of discrete tax benefit recorded in the nine months ended October 1, 2017 was primarily composed of $6.7 million of benefit from stock-based compensation, $1.0 million of expense related to actuarial gains, $0.7 million of benefit related to U.S. research and development tax credits, $0.5 million of benefit from reductions in tax reserves and $1.1 million of expense related to non-taxable foreign exchange loss.
The effective tax rates for the three and nine months ended October 2, 2016 differed from the expected federal statutory rate of 35% as a result of a non-deductible goodwill impairment charge, which reduced the benefit of the U.S. loss before income taxes, and increases in uncertain tax positions for transfer pricing, offset by the effect of lower statutory rates applicable to income earned outside the U.S. and the benefit of U.S. research and development tax credits, all of which were included in the projected annual effective tax rate.
Discrete tax benefits recorded in the three and nine months ended October 2, 2016 amounted to $6.4 million and $13.3 million respectively. The $6.4 million of discrete tax benefits recorded in the three months ended October 2, 2016 included $3.1 million from out-of-period adjustments, $1.6 million related to tax credit carryforwards, $0.7 million from non-taxable foreign exchange gains and $1.0 million of benefit from other discrete tax items. The $13.3 million of discrete tax benefits recorded in the nine months ended October 2, 2016 included $4.1 million from non-taxable foreign exchange gains, $3.1 million from out-of-period adjustments,
$2.6 million of tax reserve releases resulting from the settlement of a U.S. tax audit, $1.6 million related to tax credit carryforwards, $0.9 million related to marketable securities and $1.0 million of benefit from other discrete tax items.
During the three and nine months ended October 2, 2016, Teradyne recorded out-of-period adjustments of approximately $3.1 million to increase deferred tax assets and decrease income tax expense related to alternative minimum tax credits and capitalized inventory costs that should have been recognized previously. The out-of-period adjustments were not material to the relevant prior periods.
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
US statutory federal tax rate | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | ||||||||
Discrete benefit related to release of reserves for uncertain tax positions | 0.1 | (0.3 | ) | 0.1 | (11.5 | ) | ||||||||||
Foreign taxes | (4.6 | ) | (5.8 | ) | (5.1 | ) | (4.7 | ) | ||||||||
International provisions of the U.S. Tax Cuts and Jobs Act of 2017 | (1.9 | ) | 1.9 | (1.1 | ) | 0.8 | ||||||||||
Tax credits | (1.4 | ) | (2.1 | ) | (1.6 | ) | (2.5 | ) | ||||||||
Discrete benefit related to equity compensation | (0.1 | ) | (0.5 | ) | (2.0 | ) | (2.0 | ) | ||||||||
Discrete expense related to U.S. transition tax | — | 11.2 | — | 6.5 | ||||||||||||
Other, net | — | 0.4 | 0.6 | 0.7 | ||||||||||||
Effective tax rate | 13.1 | % | 25.8 | % | 11.9 | % | 8.3 | % | ||||||||
credits generated in the current year.
months as a result of a lapse of statutes of
R. Teradyne is currently in discussion with the Singapore Economic Development Board with respect to extension of the tax holiday for periods after December
INFORMATIO
| Semiconductor Test | Industrial Automation | System Test | Wireless Test | Corporate and Eliminations | Consolidated | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Three Months Ended October 1, 2017 | ||||||||||||||||||||||||
Revenues | $ | 396,881 | $ | 40,063 | $ | 35,569 | $ | 30,865 | $ | — | $ | 503,378 | ||||||||||||
Income (loss) before income taxes (1)(2) | 116,836 | 3,373 | (3,344 | ) | 7,461 | 3,111 | 127,437 | |||||||||||||||||
Total assets (3) | 598,925 | 508,943 | 100,083 | 61,206 | 1,820,170 | 3,089,327 | ||||||||||||||||||
Three Months Ended October 2, 2016 | ||||||||||||||||||||||||
Revenues | $ | 322,021 | $ | 23,505 | $ | 37,030 | $ | 27,919 | $ | — | $ | 410,475 | ||||||||||||
Income (loss) before income taxes (1)(2) | 67,710 | (4,695 | ) | 1,550 | 1,049 | (5,933 | ) | 59,681 | ||||||||||||||||
Total assets (3) | 522,529 | 340,030 | 90,713 | 65,953 | 1,346,462 | 2,365,687 | ||||||||||||||||||
Nine Months Ended October 1, 2017 | ||||||||||||||||||||||||
Revenues | $ | 1,345,560 | $ | 115,672 | $ | 112,147 | $ | 83,812 | $ | — | $ | 1,657,191 | ||||||||||||
Income (loss) before income taxes (1)(2) | 426,081 | (279 | ) | (11,795 | ) | 13,508 | (1,186 | ) | 426,329 | |||||||||||||||
Total assets (3) | 598,925 | 508,943 | 100,083 | 61,206 | 1,820,170 | 3,089,327 | ||||||||||||||||||
Nine Months Ended October 2, 2016 | ||||||||||||||||||||||||
Revenues | $ | 1,097,608 | $ | 65,353 | $ | 139,640 | $ | 70,660 | $ | — | $ | 1,373,261 | ||||||||||||
Income (loss) before income taxes (1)(2) | 262,127 | (16,364 | ) | 20,033 | (375,596 | ) | (4,145 | ) | (113,945 | ) | ||||||||||||||
Total assets (3) | 522,529 | 340,030 | 90,713 | 65,953 | 1,346,462 | 2,365,687 | ||||||||||||||||||
Semiconductor Test | System Test | Industrial Automation | Wireless Test | Corporate and Other | Consolidated | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Three Months Ended June 28, 2020 | ||||||||||||||||||||||||
Revenues | $ | 659,147 | $ | 71,806 | $ | 58,776 | $ | 49,185 | $ | (253 | ) | $ | 838,661 | |||||||||||
Income (loss) before income taxes (1)(2) | 228,787 | 19,193 | (11,403 | ) | 14,482 | (33,768 | ) | 217,291 | ||||||||||||||||
Total assets (3) | 1,192,355 | 126,164 | 662,103 | 108,066 | 1,160,501 | 3,249,189 | ||||||||||||||||||
Three Months Ended June 30, 2019 | ||||||||||||||||||||||||
Revenues | $ | 374,898 | $ | 73,407 | $ | 74,726 | $ | 41,236 | $ | (89 | ) | $ | 564,178 | |||||||||||
Income before income taxes (1)(2) | 91,355 | 23,535 | (3,730 | ) | 10,930 | 9,087 | 131,177 | |||||||||||||||||
Total assets (3) | 745,073 | 123,460 | 601,676 | 93,232 | 1,108,073 | 2,671,514 | ||||||||||||||||||
Six Months Ended June 28, 2020 | ||||||||||||||||||||||||
Revenues | $ | 1,143,636 | $ | 187,882 | $ | 119,081 | $ | 92,670 | $ | (253 | ) | $ | 1,543,016 | |||||||||||
Income (loss) before income taxes (1)(2) | 382,603 | 67,600 | (26,738 | ) | 24,702 | (33,808 | ) | 414,359 | ||||||||||||||||
Total assets (3) | 1,192,355 | 126,164 | 662,103 | 108,066 | 1,160,501 | 3,249,189 | ||||||||||||||||||
Six Months Ended June 30, 2019 | ||||||||||||||||||||||||
Revenues | $ | 715,751 | $ | 131,627 | $ | 140,862 | $ | 70,277 | $ | (240 | ) | $ | 1,058,277 | |||||||||||
Income (loss) before income taxes (1)(2) | 174,404 | 38,875 | (9,025 | ) | 14,558 | 6,344 | 225,156 | |||||||||||||||||
Total assets (3) | 745,073 | 123,460 | 601,676 | 93,232 | 1,108,073 | 2,671,514 | ||||||||||||||||||
| (1) | Included in Corporate and pension and postretirement plans actuarial (gains) losses, intercompany eliminations and acquisition related charges. |
| (2) | Included in income (loss) before |
| (3) | Total assets are attributable to each segment. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets. |
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Cost of revenues—inventory charge | $ | 743 | $ | 2,351 | $ | 3,686 | $ | 8,270 | ||||||||
Restructuring and other—employee severance | 375 | 2,047 | 242 | 2,798 | ||||||||||||
Included in the Industrial Automation segment are charges in the following line items in the statements of operations:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Cost of revenues—inventory charge | $ | 130 | $ | — | $ | 130 | $ | — | ||||||||
Restructuring and other—employee severance | 206 | 532 | 1,150 | 532 | ||||||||||||
Included in the System Testeach segment are charges and credits in the following line items in the statements of operations:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Cost of revenues—inventory charge | $ | 251 | $ | 121 | $ | 1,609 | $ | 441 | ||||||||
Restructuring and other—employee severance | — | (48 | ) | — | (48 | ) | ||||||||||
Included in the Wireless Test segment are charges and credits in the following line items in the statements of operations:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Cost of revenues—inventory charge | $ | 735 | $ | 561 | $ | 1,729 | $ | 6,437 | ||||||||
Restructuring and other—lease impairment | (393 | ) | — | 900 | — | |||||||||||
Goodwill impairment | — | — | — | 254,946 | ||||||||||||
Acquired intangible assets impairment | — | — | — | 83,339 | ||||||||||||
Restructuring and other—employee severance | — | 1,672 | 31 | 2,639 | ||||||||||||
Included in Corporate and Eliminations are charges and credits in the following line items in the statements of operations:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
| (in thousands) | ||||||||||||||||
Cost of revenues—pension actuarial losses (gains) | $ | — | $ | 364 | $ | (664 | ) | $ | (250 | ) | ||||||
Selling and administrative—pension actuarial losses (gains) | — | 192 | (1,094 | ) | (441 | ) | ||||||||||
Engineering and development—pension actuarial losses (gains) | — | 106 | (746 | ) | (509 | ) | ||||||||||
Restructuring and other—Universal Robots contingent consideration adjustment | (286 | ) | 7,973 | 1,847 | 9,902 | |||||||||||
Restructuring and other—property insurance recovery | (5,064 | ) | — | (5,064 | ) | (5,051 | ) | |||||||||
Restructuring and other—expenses related to Japan earthquake and impairment of fixed assets | 755 | — | 755 | 5,051 | ||||||||||||
Restructuring and other—employee severance | — | — | 530 | — | ||||||||||||
Restructuring and other—AIT contingent consideration adjustment | — | — | — | 550 | ||||||||||||
S.
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Semiconductor Test: | ||||||||||||||||
Contract termination settlement charge | $ | 4,000 | $ | — | $ | 4,000 | $ | — | ||||||||
Cost of revenues—inventory charge | 3,799 | 2,278 | 6,825 | 3,452 | ||||||||||||
Restructuring and other—employee severance | — | — | — | 924 | ||||||||||||
Wireless Test: | ||||||||||||||||
Cost of revenues—inventory charge | 1,582 | 829 | 2,155 | 1,168 | ||||||||||||
Industrial Automation: | ||||||||||||||||
Restructuring and other—acquisition related expenses and compensation | — | — | 790 | 1,695 | ||||||||||||
System Test: | ||||||||||||||||
Cost of revenues—inventory charge | — | — | — | 763 | ||||||||||||
Corporate and Other: | ||||||||||||||||
Restructuring and other—AutoGuide contingent consideration adjustment | 29,927 | — | 22,785 | — | ||||||||||||
Restructuring and other—acquisition related expenses and compensation | 2,974 | — | 3,715 | — | ||||||||||||
Restructuring and other – other | 750 | — | 750 | — | ||||||||||||
Restructuring and other—MiR contingent consideration adjustment | (668 | ) | (11,671 | ) | (3,546 | ) | (8,668 | ) | ||||||||
share. During the ninesix months ended October 2, 2016,June 30, 2019, Teradyne repurchased 4.36.5 million shares of common stock for $247.2 million at an average price of $38.20 per share of $19.69, for a total price of $85.1 million.
share.
Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The market for ourrobots, autonomous mobile robots and wireless test products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. One customer drives significant demand for our products both through direct sales and sales to the customer’s supply partners. We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future.
In 2015, we acquired Universal Robots A/S (“Universal Robots”), the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-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 remaining maximum contingent consideration that could be paid is $50 million.
We believe our recent acquisition has 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.
For several years, this cyclical demand became an even/odd year trend where demand increased in even years and decreased in odd years due principally to demand swings in the mobility market of our Semiconductor Test business. We expect the even/odd year demand trend in the mobility market to lessen in 2017 and future years due to slower smart phone unit growth, along with rising device complexity and the reduced impact of parallel testindustrial applications. Lemsys is included in our Semiconductor Test business.
segment.
COVID-19 pandemic.
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 1, 2017 | October 2, 2016 | October 1, 2017 | October 2, 2016 | |||||||||||||
Percentage of revenues: | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | 82 | % | 82 | % | 84 | % | 84 | % | ||||||||
Services | 18 | 18 | 16 | 16 | ||||||||||||
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Total revenues | 100 | 100 | 100 | 100 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Cost of products | 34 | 36 | 36 | 39 | ||||||||||||
Cost of services | 8 | 8 | 7 | 7 | ||||||||||||
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Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 41 | 45 | 43 | 46 | ||||||||||||
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Gross profit | 59 | 55 | 57 | 54 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and administrative | 17 | 19 | 16 | 17 | ||||||||||||
Engineering and development | 15 | 17 | 14 | 16 | ||||||||||||
Acquired intangible assets amortization | 1 | 2 | 1 | 3 | ||||||||||||
Restructuring and other | (1 | ) | 3 | — | 1 | |||||||||||
Goodwill impairment | — | — | — | 19 | ||||||||||||
Acquired intangible assets impairment | — | — | — | 6 | ||||||||||||
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Total operating expenses | 33 | 42 | 31 | 63 | ||||||||||||
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Income (loss) from operations | 26 | 14 | 26 | (9 | ) | |||||||||||
Non-operating (income) expense: | ||||||||||||||||
Interest income | (1 | ) | (1 | ) | (1 | ) | — | |||||||||
Interest expense | 1 | — | 1 | — | ||||||||||||
Other (income) expense, net | — | — | — | — | ||||||||||||
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Income (loss) before income taxes | 25 | 15 | 26 | (8 | ) | |||||||||||
Income tax provision (benefit) | 5 | (1 | ) | 4 | — | |||||||||||
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Net income (loss) | 21 | % | 16 | % | 22 | % | (8 | )% | ||||||||
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For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||||||
Percentage of revenues: | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | 88 | % | 81 | % | 87 | % | 80 | % | ||||||||
Services | 12 | 19 | 13 | 20 | ||||||||||||
Total revenues | 100 | 100 | 100 | 100 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Cost of products | 38 | 34 | 38 | 34 | ||||||||||||
Cost of services | 5 | 8 | 5 | 8 | ||||||||||||
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) | 44 | 43 | 43 | 42 | ||||||||||||
Gross profit | 56 | 57 | 57 | 58 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and administrative | 14 | 19 | 15 | 20 | ||||||||||||
Engineering and development | 11 | 14 | 12 | 15 | ||||||||||||
Acquired intangible assets amortization | 1 | 2 | 1 | 2 | ||||||||||||
Restructuring and other | 3 | (2 | ) | 1 | (1 | ) | ||||||||||
Total operating expenses | 29 | 34 | 29 | 36 | ||||||||||||
Income from operations | 27 | 24 | 28 | 21 | ||||||||||||
Non-operating (income) expense: | ||||||||||||||||
Interest income | — | (1 | ) | — | (1 | ) | ||||||||||
Interest expense | 1 | 1 | 1 | 1 | ||||||||||||
Other (income) expense, net | — | — | — | — | ||||||||||||
Income before income taxes | 26 | 23 | 27 | 21 | ||||||||||||
Income tax provision | 3 | 6 | 3 | 2 | ||||||||||||
Net income | 23 | % | 17 | % | 24 | % | 20 | % | ||||||||
Third
Book to Bill Ratio
Book to bill ratio is calculated as net bookings divided by net sales. Book to bill ratio by reportable segment was as follows:
| For the Three Months Ended | ||||||||
| October 1, 2017 | October 2, 2016 | |||||||
Semiconductor Test | 0.7 | 0.8 | ||||||
Industrial Automation | 1.0 | 1.0 | ||||||
System Test | 1.2 | 2.1 | ||||||
Wireless Test | 1.1 | 1.0 | ||||||
Total Company | 0.8 | 0.9 | ||||||
| For the Three Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Semiconductor Test | $ | 396.9 | $ | 322.0 | $ | 74.9 | ||||||
Industrial Automation | 40.1 | 23.5 | 16.6 | |||||||||
System Test | 35.6 | 37.0 | (1.4 | ) | ||||||||
Wireless Test | 30.9 | 27.9 | 3.0 | |||||||||
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| $ | 503.4 | $ | 410.5 | $ | 92.9 | |||||||
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For the Three Months Ended | ||||||||||||
June 28, 2020 | June 30, 2019 | Dollar Change | ||||||||||
(in millions) | ||||||||||||
Semiconductor Test | $ | 659.1 | $ | 374.9 | $ | 284.2 | ||||||
System Test | 71.8 | 73.4 | (1.6 | ) | ||||||||
Industrial Automation | 58.8 | 74.7 | (15.9 | ) | ||||||||
Wireless Test | 49.2 | 41.2 | 8.0 | |||||||||
Corporate and Other | (0.3 | ) | — | (0.3 | ) | |||||||
| $ | 838.7 | $ | 564.2 | $ | 274.5 | |||||||
WiFi 6 testers.
| For the Three Months Ended | ||||||||
| October 1, 2017 | October 2, 2016 | |||||||
Taiwan | 31 | % | 42 | % | ||||
China | 14 | 10 | ||||||
United States | 13 | 10 | ||||||
Korea | 9 | 7 | ||||||
Europe | 8 | 7 | ||||||
Malaysia | 6 | 6 | ||||||
Japan | 6 | 5 | ||||||
Singapore | 4 | 4 | ||||||
Philippines | 4 | 4 | ||||||
Thailand | 2 | 2 | ||||||
Rest of World | 3 | 3 | ||||||
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For the Three Months Ended | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
Taiwan | 51 | % | 27 | % | ||||
China | 14 | 20 | ||||||
United States | 7 | 14 | ||||||
Japan | 7 | 6 | ||||||
Europe | 6 | 9 | ||||||
Korea | 6 | 9 | ||||||
Thailand | 3 | 4 | ||||||
Singapore | 2 | 3 | ||||||
Philippines | 2 | 2 | ||||||
Malaysia | 1 | 3 | ||||||
Rest of World | 1 | 3 | ||||||
| 100 | % | 100 | % | |||||
| (1) | Revenues attributable to a country are based on location of customer site. |
| For the Three Months Ended | Dollar/ Point Change | |||||||||||
| October 1, 2017 | October 2, 2016 | |||||||||||
| (in millions) | ||||||||||||
Gross profit | $ | 294.8 | $ | 227.4 | $ | 67.4 | ||||||
Percent of total revenues | 58.6 | % | 55.4 | % | 3.2 | |||||||
For the Three Months Ended | ||||||||||||
June 28, | June 30, | Dollar/Point | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Gross profit | $ | 471.5 | $ | 323.9 | $ | 147.6 | ||||||
Percent of total revenues | 56.2 | % | 57.4 | % | (1.2 | ) | ||||||
For the Three Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Selling and administrative | $ | 113.3 | $ | 108.8 | $ | 4.5 | ||||||
Percent of total revenues | 13.5 | % | 19.3 | % | ||||||||
For the Three Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Engineering and development | $ | 94.1 | $ | 81.4 | $ | 12.7 | ||||||
Percent of total revenues | 11.2 | % | 14.4 | % | ||||||||
For the Three Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Interest income | $ | (1.4 | ) | $ | (4.4 | ) | $ | 3.0 | ||||
Interest expense | 6.0 | 5.8 | 0.2 | |||||||||
Other (income) expense, net | (4.0 | ) | 1.4 | (5.4 | ) | |||||||
For the Three Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Semiconductor Test | $ | 228.8 | $ | 91.4 | $ | 137.4 | ||||||
System Test | 19.2 | 23.5 | (4.3 | ) | ||||||||
Wireless Test | 14.5 | 10.9 | 3.6 | |||||||||
Industrial Automation | (11.4 | ) | (3.7 | ) | (7.7 | ) | ||||||
Corporate and Other (1) | (33.8 | ) | 9.1 | (42.9 | ) | |||||||
| $ | 217.3 | $ | 131.2 | $ | 86.1 | |||||||
| (1) | Included in Corporate and Other are the following: contingent consideration adjustments, employee severance, interest (income) and expense, net foreign exchange (gains) and losses, pension and postretirement plans actuarial (gains) losses, intercompany eliminations, and certain acquisition related charges and compensation. |
Automation was primarily due to lower sales due to lower demand for collaborative robotic arms in automotive and manufacturing markets amplified by the impacts of COVID-19.
For the Six Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Semiconductor Test | $ | 1,143.6 | $ | 715.8 | $ | 427.8 | ||||||
System Test | 187.9 | 131.6 | 56.3 | |||||||||
Industrial Automation | 119.1 | 140.9 | (21.8 | ) | ||||||||
Wireless Test | 92.7 | 70.3 | 22.4 | |||||||||
Corporate and Other | (0.3 | ) | (0.2 | ) | (0.1 | ) | ||||||
| $ | 1,543.0 | $ | 1,058.3 | $ | 484.6 | |||||||
For the Six Months Ended | ||||||||
June 28, | June 30, | |||||||
2020 | 2019 | |||||||
Taiwan | 41 | % | 23 | % | ||||
China | 15 | 19 | ||||||
Korea | 10 | 10 | ||||||
United States | 9 | 14 | ||||||
Europe | 7 | 10 | ||||||
Japan | 7 | 9 | ||||||
Thailand | 4 | 4 | ||||||
Malaysia | 2 | 3 | ||||||
Singapore | 2 | 4 | ||||||
Philippines | 2 | 3 | ||||||
Rest of World | 1 | 1 | ||||||
| 100 | % | 100 | % | |||||
| (1) | Revenues attributable to a country are based on location of customer site. |
For the Six Months Ended | ||||||||||||
June 28, | June 30, | Dollar/Point | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Gross profit | $ | 877.0 | $ | 611.6 | $ | 265.4 | ||||||
Percent of total revenues | 56.8 | % | 57.8 | % | (1.0 | ) | ||||||
Test, and $0.4 million was related to Industrial Automation.
| For the Three Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Selling and administrative | $ | 86.2 | $ | 78.8 | $ | 7.4 | ||||||
Percent of total revenues | 17.1 | % | 19.2 | % | ||||||||
For the Six Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Selling and administrative | $ | 224.6 | $ | 210.8 | $ | 13.8 | ||||||
Percent of total revenues | 14.6 | % | 19.9 | % | ||||||||
Wireless Test and Semiconductor Test.
| For the Three Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Engineering and development | $ | 77.2 | $ | 71.4 | $ | 5.8 | ||||||
Percent of total revenues | 15.3 | % | 17.4 | % | ||||||||
For the Six Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Engineering and development | $ | 179.3 | $ | 158.2 | $ | 21.1 | ||||||
Percent of total revenues | 11.6 | % | 15.0 | % | ||||||||
Acquired Intangible Assets Amortization
Acquired intangible assets amortization expense was as follows:
| For the Three Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Acquired intangible assets amortization | $ | 7.0 | $ | 8.5 | $ | (1.5 | ) | |||||
Percent of total revenues | 1.4 | % | 2.1 | % | ||||||||
Acquired intangible assets amortization expense decreased primarily in the Industrial Automation segment due to intangible assets that became fully amortized in June, 2017.
Restructuring and Other
During the three months ended October 1, 2017, we recorded $5.1a $3.6 million of property insurance recovery related to the Japan earthquake, a $0.4 million credit related to previously impaired lease termination of a Wireless Test facility in Sunnyvale, CA, and a $0.3 million creditgain for the decrease in the fair value of the Universal RobotsMiR contingent consideration liability.
During the three months ended October 2, 2016, we recorded $8.0 million for the increase in the fair value of the Universal Robots contingent consideration liability, and $4.2 million for employee severance charges, primarily in Semiconductor Test and Wireless Test.
| For the Three Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Interest income | $ | (4.5 | ) | $ | (2.9 | ) | $ | (1.6 | ) | |||
Interest expense | 5.4 | 0.6 | 4.8 | |||||||||
Other (income) expense, net | 0.4 | (0.9 | ) | 1.3 | ||||||||
For the Six Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Interest income | $ | (4.1 | ) | $ | (9.4 | ) | $ | 5.3 | ||||
Interest expense | 11.6 | 11.3 | 0.3 | |||||||||
Other (income) expense, net | 2.8 | — | 2.8 | |||||||||
Semiconductor Test Wireless Test Industrial Automation System Test Corporate (1) Total For the Three Months
Ended October 1,
2017 October 2,
2016 Dollar
Change (in millions) $ 116.8 $ 67.7 $ 49.1 7.5 1.1 6.4 3.4 (4.7 ) 8.1 (3.3 ) 1.6 (4.9 ) 3.1 (6.0 ) 9.1 $ 127.4 $ 59.7 $ 67.7
For the Six Months Ended | ||||||||||||
June 28, | June 30, | Dollar | ||||||||||
2020 | 2019 | Change | ||||||||||
(in millions) | ||||||||||||
Semiconductor Test | $ | 382.6 | $ | 174.4 | $ | 208.2 | ||||||
System Test | 67.6 | 38.9 | 28.7 | |||||||||
Wireless Test | 24.7 | 14.6 | 10.1 | |||||||||
Industrial Automation | (26.7 | ) | (9.0 | ) | (17.7 | ) | ||||||
Corporate and Other (1) | (33.8 | ) | 6.3 | (40.1 | ) | |||||||
| $ | 414.4 | $ | 225.2 | $ | 189.2 | |||||||
| (1) | Included in Corporate |
COVID-19.
Nine Months 2017 Compared to Nine Months 2016
Revenues
Revenues by our four reportable segments were as follows:
| For the Nine Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Semiconductor Test | $ | 1,345.6 | $ | 1,097.6 | $ | 248.0 | ||||||
Industrial Automation | 115.7 | 65.4 | 50.3 | |||||||||
System Test | 112.1 | 139.6 | (27.5 | ) | ||||||||
Wireless Test | 83.8 | 70.7 | 13.1 | |||||||||
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Total | $ | 1,657.2 | $ | 1,373.3 | $ | 283.9 | ||||||
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The increase in Semiconductor Test revenues of $248.0 million, or 22.6%, was driven primarily by increased sales in the microcontroller, power management, automotive safety and flash memory test segments
and an increase in service revenue. The increase in Industrial Automation revenues of $50.3 million, or 76.9%, was due to higher demand for collaborative robots. The decrease in System Test revenues of $27.5 million, or 19.7%, was primarily due to lower sales in Storage Test of 3.5” hard disk drive testers for cloud storage. The increase in Wireless Test revenues of $13.1 million, or 18.5%, was primarily due to higher demand for cellular and connectivity test systems and increased service revenue.
Revenues by country as a percentage of total revenues were as follows (1):
| For the Nine Months Ended | ||||||||
| October 1, 2017 | October 2, 2016 | |||||||
Taiwan | 38 | % | 44 | % | ||||
United States | 11 | 11 | ||||||
China | 11 | 9 | ||||||
Japan | 7 | 7 | ||||||
Europe | 7 | 6 | ||||||
Korea | 7 | 6 | ||||||
Malaysia | 6 | 5 | ||||||
Singapore | 5 | 4 | ||||||
Philippines | 5 | 3 | ||||||
Thailand | 2 | 2 | ||||||
Rest of World | 1 | 3 | ||||||
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Gross Profit
Our gross profit was as follows:
| For the Nine Months Ended | Dollar/ Point Change | |||||||||||
| October 1, 2017 | October 2, 2016 | |||||||||||
| (in millions) | ||||||||||||
Gross profit | $ | 950.9 | $ | 740.6 | $ | 210.3 | ||||||
Percent of Total Revenues | 57.4 | % | 53.9 | % | 3.5 | |||||||
Gross profit as a percent of revenue increased by 3.5 points, as a result of a 2.3 point increasebenefit related to favorable product mix in Semiconductor Test and 1.2 points due to higher sales primarily in Semiconductor Test and Industrial Automation.
We assess the carrying valuerelease of our inventory on a quarterly basis by estimating future demand and comparing that demand against on-hand and on-order inventory positions. Forecasted revenue information is obtained from sales and marketing groups and incorporates factors such as backlog and future revenue demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next twelve quarters for our Semiconductor Test, System Test and Industrial Automation segments and the next four quarters for our Wireless Test segment, is written-down to estimated net realizable value.
During the nine months ended October 1, 2017, we recorded an inventory provision of $7.2 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels for certain
products. Of the $7.2 million of total excess and obsolete provisions, $3.7 million was related to Semiconductor Test, $1.7 million was related to Wireless Test, $1.6 million was related to System Test, and $0.1 million was related to Industrial Automation.
During the nine months ended October 2, 2016, we recorded an inventory provision of $15.1 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels for certain products. Of the $15.1 million of total excess and obsolete provisions, $8.3 million was related to Semiconductor Test, $6.4 million was related to Wireless Test, and $0.4 million was related to System Test.
During the nine months ended October 1, 2017 and October 2, 2016, we scrapped $4.1 million and $6.8 million of inventory, respectively. During the nine months ended October 1, 2017 and October 2, 2016, we sold $6.4 million and $8.0 million of previously written-down or written-off inventory, respectively. As of October 1, 2017, we had inventory related reserves for inventory which had been written-down or written-off totaling $112.2 million. We have no pre-determined timeline to scrap the remaining inventory.
Selling and Administrative
Selling and administrative expenses were as follows:
| For the Nine Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Selling and administrative | $ | 260.3 | $ | 239.4 | $ | 20.9 | ||||||
Percent of Total Revenues | 15.7 | % | 17.4 | % | ||||||||
The increase of $20.9 million in selling and administrative expenses was due primarily to higher variable compensation and higher spending in Industrial Automation,uncertain tax positions partially offset by lower spendinga reduction in Wireless Test.
Engineering and Development
Engineering and development expenses were as follows:
| For the Nine Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Engineering and development | $ | 235.1 | $ | 221.0 | $ | 14.1 | ||||||
Percent of Total Revenues | 14.2 | % | 16.1 | % | ||||||||
The increase of $14.1 million in engineering and development expenses was primarily due to higher variable compensation and higher spending in System Test and Industrial Automation, partially offset by lower spending in Wireless Test.
Acquired Intangible Assets Amortization
Acquired intangible assets amortizationdiscrete expense was as follows:
| For the Nine Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Acquired intangible assets amortization | $ | 23.1 | $ | 44.7 | $ | (21.6 | ) | |||||
Percent of Total Revenues | 1.4 | % | 3.3 | % | ||||||||
Acquired intangible assets amortization expense decreased primarily in the Wireless Test segment due to the impairment of acquired intangible assets in the second quarter of 2016 and in the Industrial Automation segment due to intangible assets that became fully amortized in June, 2017.
Goodwill Impairment
We assess goodwill for impairment at least annually, in the fourth quarter, as of December 31, or on an interim basis between annual tests when events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. 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 had previously contributed between 51% and 73% of annual Wireless Test sales since the LitePoint acquisition in 2011) 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 in the second quarter of 2016.
Acquired Intangible Assets Impairment
We review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. As a result of the Wireless Test segment goodwill impairment review in the second quarter of 2016, we performed an impairment test of the Wireless Test segment’s intangible and long-lived assets based on a comparison of the estimated undiscounted cash flows to the recorded value of the assets. If undiscounted cash flows for the asset are less than the carrying amount, the asset 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. As a result of the analysis, we recorded an $83.3 million impairment charge in the second quarter of 2016.
Restructuring and Other
During the nine months ended October 1, 2017, we recorded $2.0 million for employee severance charges, primarily in Industrial Automation and Corporate, $1.8 million for the increase in the fair value of the Universal Robots contingent consideration liability, $0.9 million for a lease impairment of a Wireless Test facility in Sunnyvale, CA, which was terminated in September 2017, and $0.8 million of Japan earthquake related expenses, partially offset by $5.1 million of property insurance recovery related to the Japan earthquake.
During the nine months ended October 2, 2016, we recorded $10.5 million for the increase in the fair value of contingent consideration liability, of which $9.9 million was related to Universal Robots and $0.6 million was related to AIT, $5.9 million for employee severance charges, primarily in Semiconductor Test and Wireless Test, $4.2 million for an impairment of fixed assets, and $0.9 million for Japan earthquake related expenses, partially offset by $5.1 million of property insurance recovery related to the Japan earthquake.
Interest and Other
| For the Nine Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Interest income | $ | (11.3 | ) | $ | (6.2 | ) | $ | (5.1 | ) | |||
Interest expense | 16.3 | 2.0 | 14.3 | |||||||||
Other (income) expense, net | 0.7 | (1.1 | ) | 1.8 | ||||||||
Interest income increased by $5.1 million due primarily to higher cash and marketable securities balances and higher interest rates in 2017. Interest expense increased by $14.3 million due primarily to interest expense related to our convertible senior notes. Other (income) expense, net included net foreign exchange losses in the nine months ended October 1, 2017 and net foreign exchange gains in the nine months ended October 2, 2016.
Income (Loss) Before Income Taxes
| For the Nine Months Ended | ||||||||||||
| October 1, 2017 | October 2, 2016 | Dollar Change | ||||||||||
| (in millions) | ||||||||||||
Semiconductor Test | $ | 426.1 | $ | 262.2 | $ | 163.9 | ||||||
Wireless Test | 13.5 | (375.6 | ) | 389.1 | ||||||||
Industrial Automation | (0.3 | ) | (16.4 | ) | 16.1 | |||||||
System Test | (11.8 | ) | 20.0 | (31.8 | ) | |||||||
Corporate (1) | (1.2 | ) | (4.1 | ) | 2.9 | |||||||
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Total | $ | 426.3 | $ | (113.9 | ) | $ | 540.2 | |||||
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The increase in income before income taxes in Semiconductor Test was driven primarily by increased sales and higher gross margin due to favorable product mix. The increase in income before income taxes in Wireless Test was primarily due to goodwill and intangible assets impairment charges in 2016 and lower intangible assets amortization, lower operating expenses and higher demand for cellular and connectivity test systems in 2017. The increase in income before income taxes in Industrial Automation was due to higher demand for collaborative robots. The decrease in income before income taxes in System Test was primarily due to lower sales in Storage Test of 3.5” hard disk drive testers for cloud storage and increased spending for new product development.
Income Taxes
The effective tax rate for the nine months ended October 1, 2017 and October 2, 2016 was 14.7% and 3.7%, respectively. The increase in the effective tax rate is primarily attributable to a shift in the geographic distribution of income which increased income subject to taxation in the U.S. relative to lower tax rate jurisdictions, the effect of a U.S. non-deductible goodwill impairment charge and decreases in discrete tax benefits.
| Payments Due by Period | ||||||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Other | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Convertible debt | $ | 460,000 | $ | — | $ | — | $ | — | $ | 460,000 | $ | — | ||||||||||||
Purchase obligations | 234,228 | 226,280 | 7,948 | — | — | — | ||||||||||||||||||
Retirement plans contributions | 118,263 | 4,019 | 8,060 | 8,791 | 97,393 | — | ||||||||||||||||||
Operating lease obligations | 66,788 | 16,862 | 26,463 | 15,337 | 8,126 | — | ||||||||||||||||||
Interest on long-term debt | 37,375 | 5,750 | 11,500 | 11,500 | 8,625 | — | ||||||||||||||||||
Fair value of contingent consideration | 39,129 | 21,818 | 17,311 | — | — | — | ||||||||||||||||||
Other long-term liabilities reflected on the balance sheet under GAAP (1) | 53,833 | — | 31,686 | — | — | 22,147 | ||||||||||||||||||
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Total | $ | 1,009,616 | $ | 274,729 | $ | 102,968 | $ | 35,628 | $ | 574,144 | $ | 22,147 | ||||||||||||
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Payments Due by Period | ||||||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Other | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Purchase obligations | $ | 544,225 | $ | 534,282 | $ | 9,943 | $ | — | $ | — | $ | — | ||||||||||||
Convertible debt | 459,987 | — | — | 459,987 | — | — | ||||||||||||||||||
Retirement plans contributions | 130,826 | 5,216 | 10,386 | 10,318 | 104,906 | — | ||||||||||||||||||
Transition tax payable (1) | 88,157 | 13,227 | 15,795 | 34,539 | 24,596 | — | ||||||||||||||||||
Operating lease obligations | 77,692 | 23,956 | 31,508 | 13,367 | 8,861 | — | ||||||||||||||||||
Interest on long-term debt | 20,125 | 5,750 | 11,500 | 2,875 | — | — | ||||||||||||||||||
Fair value of contingent consideration | 49,737 | 16,789 | 32,948 | — | — | — | ||||||||||||||||||
Other long-term liabilities reflected on the balance sheet under GAAP (2) | 90,336 | — | 47,470 | 7,700 | 464 | 34,702 | ||||||||||||||||||
Total | $ | 1,461,085 | $ | 599,220 | $ | 159,550 | $ | 528,786 | $ | 138,827 | $ | 34,702 | ||||||||||||
| (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.” |
In
assets, and a $3.7 million increase in inventories.
cash surrender value from the cancellation of a Teradyne owned life insurance policy, and $0.1 million, net of cash acquired, for the acquisition of AutoGuide.
In
payable.
cash surrender value from the cancellation of a Teradyne owned life insurance policy.
plans.
share. During the ninesix months ended October 2, 2016,June 30, 2019, we repurchased 4.36.5 million shares of common stock for $247.2 million at an average price of $19.69, for a total cost of $85.1 million.
$38.20 per share.
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.
At this time, the
Recently Issued Accounting Pronouncements
On March 10, 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU provides guidance on presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires the service cost component to be presented in the same line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost such as interest cost, amortization of prior service cost, and actuarial gains or losses, are required to be presented separately outside of income or loss from operations. The presentation of service cost should be applied retrospectively. The guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. This guidance will impact the presentation of our consolidated financial statements. Upon adoption of the new standard, we will present interest cost, amortization of prior service cost, and actuarial gains or losses within other (income) expense, net.
On January 26, 2017, the FASB issued ASU 2017-04,“Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.” The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. The revised guidance will be applied prospectively, and is effective in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. We are currently evaluating the impact of this ASU on our financial position, results of operations and statements of cash flows.
In October 2016, the FASB issued ASU 2016-16,“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 asset 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 the pre-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 ASU to have a material impact on our financial position, results of operations and statements of cash flows.
In February 2016, the FASB issued ASU 2016-02,“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 a right-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 operations. 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 ASU 2016-01,“Financial Instruments—Overall (Subtopic 825-10): 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 beginning after December 15, 2017. We are currently evaluating the impact of this ASU on our financial position and results of operations.
In May 2014, the FASB issued ASU 2014-09,“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 ASU 2015-14, which deferred the effective date of the new revenue standard by one year. For us, 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 have completed our preliminary assessment of the financial statement impact of the new standard and do not expect this ASU to have a material impact on our financial position or results of operations. This preliminary assessment is based on a review of the types and number of revenue arrangements currently in place including the review of individual customer contracts related to these revenue streams. The exact impact of the new standard will be dependent on facts and circumstances at adoption and could vary from quarter to quarter. Based on our preliminary assessment we do not expect any major changes to be made to existing accounting systems or internal controls. We will be required to record cumulative effect adjustments to retained earnings upon adopting the new standard in the first quarter of 2018.
Item 3: | Quantitative and Qualitative Disclosures about Market Risks |
2019.
“Notes” “Notes”) due December 15, 2023. As of October 1, 2017,June 28, 2020, the Notes had a fair value of $613.2$1,198.7 million. The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end of the thirdsecond quarter of 20172020 and the estimated impact on the fair value of the Notes. The selected scenarios are not predictions of future events, but rather are intended to illustrate the effect such event may have on the fair value of the Notes. The fair value of the Notes is subject to equity price risk due to the convertible feature. The fair value of the Notes will generally increase as Teradyne’s common stock price increases and will generally decrease as the common stock price declines in value. The change in stock price affects the fair value of the convertible senior notes, but does not impact Teradyne’s financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. In connection with the offering of the Notes we also sold warrants to the option counterparties. These transactions have been accounted for as an adjustment to our shareholders’ equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon conversion of the Notes. The warrants along with any shares issuable upon conversion of the Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or Notes, respectively.
Hypothetical Change in Teradyne Stock Price | Fair Value | Estimated Change in Fair Value | Hypothetical Percentage Increase (Decrease) in Fair Value | |||||||||
10% Increase | $ | 655,362 | $ | 42,124 | 6.9 | % | ||||||
No Change | 613,238 | — | — | |||||||||
10% Decrease | 573,327 | (39,911 | ) | (6.5 | ) | |||||||
See Note F: “Debt” for further information.
Hypothetical Change in Teradyne Stock Price | Fair Value | Estimated change in fair value | Hypothetical percentage increase (decrease) in fair value | |||||||||
10% Increase | $ | 1,314,002 | $ | 115,333 | 9.6 | % | ||||||
No Change | 1,198,669 | — | — | |||||||||
10% Decrease | 1,085,067 | (113,602 | ) | (9.5 | ) | |||||||
Item 4: | Controls and Procedures |
Item 1: | Legal Proceedings |
Item 1A: | Risk Factors |
business and many of these risks could be further increased due to the
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds |
share. During the ninesix months ended October 2, 2016,June 30, 2019, we repurchased 4.36.5 million shares of common stock for $247.2 million at an average price of $19.69, for a total cost of $85.1 million.
$38.20 per share.
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||
July 3, 2017 – July 30, 2017 | 524 | $ | 32.68 | 522 | $ | 388,600 | ||||||||||||||||||
July 31, 2017 – August 27, 2017 | 528 | $ | 34.08 | 527 | $ | 370,641 | ||||||||||||||||||
August 28, 2017 – October 1, 2017 | 632 | $ | 35.62 | 631 | $ | 348,178 | ||||||||||||||||||
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Total | 1,684 | (1 | ) | $ | 34.22 | (1 | ) | 1,680 | ||||||||||||||||
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|
| |||||||||||||||||||
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs | ||||||||||||
March 30, 2020 – April 26, 2020 | 174 | $ | 54.57 | 173 | $ | 911,535 | ||||||||||
April 27, 2020 – May 24, 2020 | 5 | $ | 57.88 | — | $ | 911,535 | ||||||||||
May 25, 2020 – June 28, 2020 | 1 | $ | 69.05 | — | $ | 911,535 | ||||||||||
| 180 | (1) | $ | 54.78 | (1) | 173 | |||||||||||
| (1) | Includes |
Item 4: | Mine Safety Disclosures |
Item 6: | Exhibits |
TERADYNE, INC. Registrant /s/ SANJAY MEHTA |
|
Sanjay Mehta Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer) |
August 3, 2020 |
51