UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 20213, 2022
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission File No. 
001-06462
 
TERADYNE, INC.
(Exact name of registrant as specified in its charter)
 
Massachusetts
 
04-2272148
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
  
600 Riverpark Drive, North Reading,
Massachusetts
 
01864
(Address of Principal Executive Offices)
 
(Zip Code)
978-370-2700
(Registrant’s Telephone Number, Including Area Code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value $0.125
per share
 
TER
 
Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (232.405
(232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in
Rule 12b-2
of the Exchange Act (check one):
 
Large accelerated filer   Accelerated filer 
    
Non-accelerated
filer
   Emerging growth company 
    
Smaller reporting company      
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  ☒
The number of shares outstanding of the registrant’s only class of Common Stock as of August 2, 20211, 2022 was 156,781,680
shares.
 
was
164,973,199
shares.
 

PART I
 
Item 1:
Financial Statements
TERADYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
   
July 4,

2021
   
December 31,

2020
 
   
(in thousands, except per share amount)
 
ASSETS
          
Current assets:
          
Cash and cash equivalents
  $954,441   $914,121 
Marketable securities
   282,121    522,280 
Accounts receivable, less allowance for credit losses of $1,931 and $2,034 at July 4, 2021 and December 31, 2020, respectively
   868,457    497,506 
Inventories, net
   226,138    222,189 
Prepayments and other current assets
   368,315    259,338 
   
 
 
   
 
 
 
Total current assets
   2,699,472    2,415,434 
Property, plant and equipment, net
   395,395    394,800 
Operating lease right-of-use assets, net
   61,849    54,569 
Marketable securities
   181,560    117,980 
Deferred tax assets
   94,438    87,913 
Retirement plans assets
   17,170    17,468 
Other assets
   21,320    9,384 
Acquired intangible assets, net
   88,121    100,939 
Goodwill
   441,597    453,859 
   
 
 
   
 
 
 
Total assets
  $4,000,922   $3,652,346 
   
 
 
   
 
 
 
LIABILITIES
          
Current liabilities:
          
Accounts payable
  $156,103   $133,663 
Accrued employees’ compensation and withholdings
   205,717    220,321 
Deferred revenue and customer advances
   148,882    134,662 
Other accrued liabilities
   146,484    77,581 
Operating lease liabilities
   20,539    20,573 
Income taxes payable
   93,876    80,728 
Current debt
   213,761    33,343 
   
 
 
   
 
 
 
Total current liabilities
   985,362    700,871 
Retirement plans liabilities
   154,311    151,140 
Long-term deferred revenue and customer advances
   58,534    58,359 
Long-term contingent consideration
   0      7,227 
Long-term other accrued liabilities
   19,387    19,352 
Deferred tax liabilities
   8,961    10,821 
Long-term operating lease liabilities
   49,066    42,073 
Long-term incomes taxes payable
   67,041    74,930 
Debt
   143,618    376,768 
Total liabilities
   1,486,280    1,441,541 
   
 
 
   
 
 
 
Commitments and contingencies
   0    0 
Mezzanine equity:
          
Convertible common shares
   21,386    3,787 
SHAREHOLDERS’ EQUITY
          
Common stock, $0.125 par value, 1,000,000 shares authorized; 165,444 and 166,123 shares issued and outstanding at July 4, 2021 and December 31, 2020, respectively
   20,680    20,765 
Additional paid-in capital
   1,772,302    1,765,323 
Accumulated other comprehensive income
   15,322    33,516 
Retained earnings
   684,952    387,414 
   
 
 
   
 
 
 
Total shareholders’ equity
   2,493,256    2,207,018 
   
 
 
   
 
 
 
Total liabilities, convertible common shares and shareholders’ equity
  $4,000,922   $3,652,346 
   
 
 
   
 
 
 
   
July 3,

2022
  
December 31,
2021
 
        
   
(in thousands,
except per share amount)
 
ASSETS
   
Current assets:
   
Cash and cash equivalents  $572,023  $1,122,199 
Marketable securities   209,846   244,231 
Accounts receivable, less allowance for credit losses of $1,849 and $2,012 at July 3, 2022 and December 31, 2021, respectively   683,739   550,749 
Inventories, net   295,625   243,330 
Prepayments   498,093   406,266 
Other current assets   11,109   9,452 
          
Total current assets   2,270,435   2,576,227 
Property, plant and equipment, net   411,263   387,240 
Operating lease
right-of-use
assets, net
   66,661   68,807 
Marketable securities   111,999   133,858 
Deferred tax assets   126,639   102,428 
Retirement plans assets   14,245   15,110 
Other assets   26,942   24,096 
Acquired intangible assets, net   62,509   75,635 
Goodwill   397,733   426,024 
          
Total assets  $3,488,426  $3,809,425 
          
LIABILITIES         
Current liabilities:         
Accounts payable  $175,606  $153,133 
Accrued employees’ compensation and withholdings   190,506   253,667 
Deferred revenue and customer advances   163,127   146,185 
Other accrued liabilities   133,881   124,187 
Operating lease liabilities   17,770   19,977 
Income taxes payable   106,863   88,789 
Current debt   9,632   19,182 
          
Total current liabilities   797,385   805,120 
Retirement plans liabilities   141,884   151,141 
Long-term deferred revenue and customer advances   50,357   54,921 
Long-term other accrued liabilities   15,530   15,497 
Deferred tax liabilities   3,143   6,327 
Long-term operating lease liabilities   57,600   56,178 
Long-term incomes taxes payable   59,135   67,041 
Debt   64,796   89,244 
          
Total liabilities   1,189,830   1,245,469 
          
Commitments and contingencies (Note Q)       
Mezzanine equity:         
Convertible common shares   —     1,512 
SHAREHOLDERS’ EQUITY         
Common stock, $0.125 par value, 1,000,000 shares authorized; 157,880 and 162,251 shares issued and outstanding at July 3, 2022 and December 31, 2021, respectively   19,735   20,281 
Additional
paid-in
capital
   1,721,586   1,811,545 
Accumulated other comprehensive loss   (52,959  (5,948
Retained earnings   610,234   736,566 
          
Total shareholders’ equity   2,298,596   2,562,444 
          
Total liabilities, convertible common shares and shareholders’ equity  $3,488,426  $3,809,425 
          
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s
Annual Report
on Form
10-K
for the year ended December 31, 2020,2021, are an integral part of the condensed
consolidated financial statements.
 
1

TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
For the Three Months

Ended
  
For the Six Months

Ended
 
   
July 4,

2021
  
June 28,

2020
  
July 4,

2021
  
June 28,

2020
 
   
(in thousands, except per share amount)
 
Revenues:
                 
Products
  $951,945  $734,630  $1,612,453  $1,345,536 
Services
   133,783   104,031   254,881   197,480 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   1,085,728   838,661   1,867,334   1,543,016 
Cost of revenues:
                 
Cost of products
   388,845   322,732   656,629   582,728 
Cost of services
   49,894   44,456   102,098   83,265 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)
   438,739   367,188   758,727   665,993 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
   646,989   471,473   1,108,607   877,023 
Operating expenses:
                 
Selling and administrative
   140,187   113,259   269,984   224,647 
Engineering and development
   110,021   94,102   210,423   179,261 
Acquired intangible assets amortization
   5,402   8,941   10,938   18,832 
Restructuring and other
   2,507   37,222   (4,623  29,616 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total operating expenses
   258,117   253,524   486,722   452,356 
   
 
 
  
 
 
  
 
 
  
 
 
 
Income from operations
   388,872   217,949   621,885   424,667 
Non-operating (income) expense:
                 
Interest income
   (633  (1,368  (1,441  (4,119
Interest expense
   5,566   6,043   11,569   11,594 
Other (income) expense, net
   (87  (4,017  3,738   2,833 
   
 
 
  
 
 
  
 
 
  
 
 
 
Income before income taxes
   384,026   217,291   608,019   414,359 
Income tax provision
   55,707   28,383   74,188   49,261 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net income
  $328,319  $188,908  $533,831  $365,098 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net income per common share:
                 
Basic
  $1.98  $1.14  $3.21  $2.20 
   
 
 
  
 
 
  
 
 
  
 
 
 
Diluted
  $1.76  $1.05  $2.85  $2.02 
   
 
 
  
 
 
  
 
 
  
 
 
 
Weighted average common shares—basic
   165,995   165,789   166,243   166,189 
   
 
 
  
 
 
  
 
 
  
 
 
 
Weighted average common shares—diluted
   186,750   180,257   187,245   180,497 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cash dividend declared per common share
  $0.10  $0.10  $0.20  $0.20 
   
 
 
  
 
 
  
 
 
  
 
 
 
                 
   
For the Three Months

Ended
  
For the Six Months

Ended
 
   
July 3,
  
July 4,
  
July 3,
  
July 4,
 
   
2022
  
2021
  
2022
  
2021
 
              
   
(in thousands, except per share amount)
 
Revenues:                 
Products  $697,954  $951,945  $1,323,829  $1,612,453 
Services   142,812   133,783   272,307   254,881 
                  
Total revenues   840,766   1,085,728   1,596,136   1,867,334 
Cost of revenues:                 
Cost of products   274,674   388,845   517,690   656,629 
Cost of services   59,703   49,894   117,124   102,098 
                  
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)   334,377   438,739   634,814   758,727 
                  
Gross profit   506,389   646,989   961,322   1,108,607 
Operating expenses:                 
Selling and administrative   139,533   140,187   279,718   269,984 
Engineering and development   111,951   110,021   220,067   210,423 
Acquired intangible assets amortization   4,871   5,402   9,934   10,938 
Restructuring and other   2,044   2,507   17,758   (4,623
                  
Total operating expenses   258,399   258,117   527,477   486,722 
                  
Income from operations   247,990   388,872   433,845   621,885 
Non-operating
(income) expense:
                 
Interest income   (951  (633  (1,653  (1,441
Interest expense   913   5,566   1,925   11,569 
Other (income) expense, net   9,436   (87  14,622   3,738 
                  
Income before income taxes   238,592   384,026   418,951   608,019 
Income tax provision   40,805   55,707   59,236   74,188 
                  
Net income  $197,787  $328,319  $359,715  $533,831 
                  
Net income per common share:                 
Basic  $1.24  $1.98  $2.24  $3.21 
                  
Diluted  $1.16  $1.76  $2.07  $2.85 
                  
Weighted average common shares—basic   159,563   165,995   160,805   166,243 
                  
Weighted average common shares—diluted   171,159   186,750   173,367   187,245 
                  
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s
Annual Report on Form
10-K
for the year ended December 31, 2020,2021, are an integral part of the condensed
consolidated financial statements.
 
2
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
   
For the Three Months

Ended
  
For the Six Months

Ended
 
   
July 4,

2021
  
June 28,
2020
  
July 4,
2021
  
June 28,
2020
 
   
(in thousands)
 
Net income
  $328,319  $188,908  $533,831  $365,098 
Other comprehensive income, net of tax:
                 
Foreign currency translation adjustment, net of tax of $0, $0, $0, $0, respectively
   5,150   15,805   (15,974  7,026 
Available-for-sale marketable securities:
                 
Unrealized gains (losses) on marketable securities arising during period, net of tax of $436, $1,084, $(472), $1,271, respectively
   1,494   3,793   (1,776  4,830 
Less: Reclassification adjustment for losses (gains) included in net income, net of tax of $2, $(277), $(121), $(421), respectively
   3   (983  (441  (1,499
   
 
 
  
 
 
  
 
 
  
 
 
 
    1,497   2,810   (2,217  3,331 
Defined benefit post-retirement plan:
                 
Amortization of prior service credit, net of tax of $0, $0, $(1), $(1), respectively
   (2  (2  (3  (3
   
 
 
  
 
 
  
 
 
  
 
 
 
Other comprehensive income (loss)
   6,645   18,613   (18,194  10,354 
   
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive income
  $334,964  $207,521  $515,637  $375,452 
   
 
 
  
 
 
  
 
 
  
 
 
 
                 
   
For the Three Months

Ended
  
For the Six Months

Ended
 
   
July 3,
  
July 4,
  
July 3,
  
July 4,
 
   
2022
  
2021
  
2022
  
2021
 
              
   
(in thousands)
 
Net income  $197,787  $328,319  $359,715  $533,831 
Other comprehensive income, net of tax:                 
Foreign currency translation adjustment, net of tax of $0, $0, $0, $0, respectively   (29,230  5,150   (37,307  (15,974
Available-for-sale
marketable securities:
                 
Unrealized (losses) gains on marketable securities arising during period, net of tax of $(1,240), $436, $(2,573), and $(472), respectively   (4,522  1,494   (9,910  (1,776
Less: Reclassification adjustment for losses (gains) included in net income, net of tax of $77, $2, $59, $(121), respectively   274   3   209   (441
                  
    (4,248  1,497   (9,701  (2,217
Defined benefit post-retirement plan:                 
Amortization of prior service credit, net of tax of $0, $0, $(1), $(1), respectively   (2  (2  (3  (3
                  
Other comprehensive (loss) income   (33,480  6,645   (47,011  (18,194
                  
Comprehensive income  $164,307  $334,964  $312,704  $515,637 
                  
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s
Annual Report on Form
10-K
for the year ended December 31, 2020,2021, are an integral part of the condensed
consolidated financial statements.
 
3

TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE COMMON SHARES
AND SHAREHOLDERS’ EQUITY
(Unaudited)
 
       
Shareholders’ Equity
 
   
Convertible
Common
Shares
Value
   
Common
Stock
Shares
  
Common
Stock Par
Value
  
Additional
Paid-in
Capital
  
Accumulated
Other
Comprehensive
Income (Loss)
  
Retained
Earnings
(Accumulated
Deficit)
  
Total
Shareholders’
Equity
 
       
(in thousands)
 
Three Months Ended July 4, 2021
                              
Balance, April 4, 2021
  $1,233    166,419  $20,802  $1,765,971  $8,677  $529,103  $2,324,553 
Net issuance of common stock under stock-based plans
        215   27   14,283           14,310 
Stock-based compensation expense
                12,515           12,515 
Repurchase of common stock
        (1,190  (149          (155,846  (155,995
Cash dividends ($0.10 per share)
                        (16,624  (16,624
Settlements of convertible notes
        367   46   45,977           46,023 
Exercise of convertible notes hedge call options
        (367  (46  (46,291          (46,337
Convertible common shares
   20,153            (20,153          (20,153
Net income
                        328,319   328,319 
Other comprehensive income
                    6,645       6,645 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance, July 4, 2021
  $21,386    165,444  $20,680  $1,772,302  $15,322  $684,952  $2,493,256 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
        
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 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
        
Six Months Ended July 4, 2021
                              
Balance, December 31, 2020
  $3,787    166,123  $20,765  $1,765,323  $33,516  $387,414  $2,207,018 
Net issuance of common stock under stock-based plans
        885   111   211           322 
Stock-based compensation expense
                25,874           25,874 
Repurchase of common stock
        (1,564  (196          (202,988  (203,184
Cash dividends ($0.20 per share)
                        (33,305  (33,305
Settlements of convertible notes
        1,589   199   203,507           203,706 
Exercise of convertible notes hedge call options
        (1,589  (199  (205,014          (205,213
Convertible common shares
   17,599            (17,599          (17,599
Net income
                        533,831   533,831 
Other comprehensive loss
                    (18,194      (18,194
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance, July 4, 2021
  $21,386    165,444  $20,680  $1,772,302  $15,322  $684,952  $2,493,256 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
        
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 ($0.20 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 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
      
Shareholders’ Equity
 
   
Convertible
Common
Shares
Value
  
Common
Stock Shares
  
Common
Stock Par
Value
  
Additional
Paid-in Capital
  
Accumulated
Other
Comprehensive
(Loss) Income
  
Retained
Earnings
  
Total
Shareholders’
Equity
 
                       
      
(in thousands)
 
For the Three Months Ended July 3, 2022
        
Balance, April 3, 2022  $—      161,053  $20,132  $1,711,690  $(19,479 $762,189  $2,474,532 
Net issuance of common stock under stock-based plans        33   4   (1,675          (1,671
Stock-based compensation expense                11,658           11,658 
Repurchase of common stock        (3,206  (401          (333,933  (334,334
Cash dividends ($0.11 per share)                        (17,561  (17,561
Settlements of convertible notes        495   62   (149          (87
Exercise of convertible notes hedge call options        (495  (62  62           —   
Cumulative-effect of change in accounting principle related to convertible debt                        1,752   1,752 
Net income                        197,787   197,787 
Other comprehensive loss                    (33,480      (33,480
                               
Balance, July 3, 2022  $—      157,880  $19,735  $1,721,586  $(52,959 $610,234  $2,298,596 
                               
For the Three Months Ended July 4, 2021
                              
Balance, April 4, 2021  $1,233    166,419  $20,802  $1,765,971  $8,677  $529,103  $2,324,553 
Net issuance of common stock under stock-based plans        215   27   14,283           14,310 
Stock-based compensation expense                12,515           12,515 
Repurchase of common stock        (1,190  (149          (155,846  (155,995
Cash dividends ($0.10 per share)                        (16,624  (16,624
Settlements of convertible notes        367   46   45,977           46,023 
Exercise of convertible notes hedge call options        (367  (46  (46,291          (46,337
Convertible common shares   20,153            (20,153          (20,153
Net income                        328,319   328,319 
Other comprehensive income                    6,645       6,645 
                               
Balance, July 4, 2021  $21,386    165,444  $20,680  $1,772,302  $15,322  $684,952  $2,493,256 
                               
For the Six Months Ended July 3, 2022
                              
Balance, December 31, 2021  $1,512    162,251  $20,281  $1,811,545  $(5,948 $736,566  $2,562,444 
Net issuance of common stock under stock-based plans        585   73   (16,318          (16,245
Stock-based compensation expense                25,862           25,862 
Repurchase of common stock        (4,956  (619          (545,179  (545,798
Cash dividends ($0.22 per share)                        (35,470  (35,470
Settlements of convertible notes        1,004   125   (306          (181
Exercise of convertible notes hedge call options        (1,004  (125  125           —   
Cumulative-effect of change in accounting principle related to convertible debt   (1,512           (99,322      94,602   (4,720
Net income                        359,715   359,715 
Other comprehensive loss                    (47,011      (47,011
                               
Balance, July 3, 2022  $    157,880  $19,735  $1,721,586  $(52,959 $610,234  $2,298,596 
                               
For the Six Months Ended July 4, 2021
                              
Balance, December 31, 2020  $3,787    166,123  $20,765  $1,765,323  $33,516  $387,414  $2,207,018 
Net issuance of common stock under stock-based plans        885   111   211           322 
Stock-based compensation expense                25,874           25,874 
Repurchase of common stock        (1,564  (196          (202,988  (203,184
Cash dividends ($0.20 per share)                        (33,305  (33,305
Settlements of convertible notes        1,589   199   203,507           203,706 
Exercise of convertible notes hedge call options        (1,589  (199  (205,014          (205,213
Convertible common shares   17,599            (17,599          (17,599
Net income                        533,831   533,831 
Other comprehensive loss                    (18,194      (18,194
                               
Balance, July 4, 2021  $21,386    165,444  $20,680  $1,772,302  $15,322  $684,952  $2,493,256 
                               
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s
Annual Report on Form
10-K
for the year ended December 31, 2020,2021, are an integral part of the condensed
consolidated financial statements.
 
4
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
For the Six Months Ended
 
   
July 4,

2021
  
June 28,
2020
 
   
(in thousands)
 
Cash flows from operating activities:
         
Net income
  $533,831  $365,098 
Adjustments to reconcile net income from operations to net cash provided by operating activities:
         
Depreciation
   45,848   38,305 
Stock-based compensation
   23,231   21,367 
Amortization
   19,343   26,234 
Loss on convertible debt conversion
   5,244   —   
Provision for excess and obsolete inventory
   3,625   9,637 
Contingent consideration adjustment
   (7,227  19,239 
Gains on investments
   (4,650  (469
Deferred taxes
   (800  (7,163
Retirement plans actuarial gains
   (627  (99
Other
   199   523 
Changes in operating assets and liabilities, net of business acquired:
         
Accounts receivable
   (372,698  (331,040
Inventories
   19,908   (3,728
Prepayments and other assets
   (117,416  (49,479
Accounts payable and other liabilities
   86,790   113,578 
Deferred revenue and customer advances
   15,189   28,655 
Retirement plans contributions
   (2,739  (2,501
Income taxes
   (2,628  37,842 
   
 
 
  
 
 
 
Net cash provided by operating activities
   244,423   265,999 
   
 
 
  
 
 
 
Cash flows from investing activities:
         
Purchases of property, plant and equipment
   (73,957  (84,014
Purchases of marketable securities
   (398,086  (299,548
Proceeds from maturities of marketable securities
   460,213   182,984 
Proceeds from sales of marketable securities
   116,112   26,661 
Purchase of investment and acquisition of business
   (12,000  149 
Proceeds from life insurance
   —     546 
   
 
 
  
 
 
 
Net cash provided by (used for) investing activities
   92,282   (173,222
   
 
 
  
 
 
 
Cash flows from financing activities:
         
Issuance of common stock under stock purchase and stock option plans
   32,581   12,757 
Repurchase of common stock
   (196,584  (88,465
Payments of convertible debt principal
   (66,828  —   
Dividend payments
   (33,271  (33,266
Payments related to net settlement of employee stock compensation awards
   (31,794  (22,519
Payments of contingent consideration
   —     (8,852
   
 
 
  
 
 
 
Net cash used for financing activities
   (295,896  (140,345
   
 
 
  
 
 
 
Effects of exchange rate changes on cash and cash equivalents
   (489  (925
   
 
 
  
 
 
 
Increase (decrease) in cash and cash equivalents
   40,320   (48,493
Cash and cash equivalents at beginning of period
   914,121   773,924 
   
 
 
  
 
 
 
Cash and cash equivalents at end of period
  $954,441  $725,431 
   
 
 
  
 
 
 
Non-cash investing activities:
         
Capital expenditures incurred but not yet paid:
  $4,503  $6,281 
   
For the Six Months Ended
 
   
July 3,
  
July 4,
 
   
2022
  
2021
 
        
   
(in thousands)
 
Cash flows from operating activities:   
Net income  $359,715  $533,831 
Adjustments to reconcile net income from operations to net cash provided by operating activities:   
Depreciation   44,460   45,848 
Stock-based compensation   25,122   23,231 
Amortization   10,095   19,343 
Losses (gains) on investments   8,973   (4,650
Provision for excess and obsolete inventory   6,695   3,625 
Deferred taxes   (23,597  (800
Contingent consideration fair value adjustments   —     (7,227
Loss on convertible debt conversions   —     5,244 
Retirement plans actuarial gains   —     (627
Other   522   199 
Changes in operating assets and liabilities   
Accounts receivable   (146,384  (372,698
Inventories   (46,682  19,908 
Prepayments and other assets   (94,751  (117,416
Accounts payable and other liabilities   (43,611  86,790 
Deferred revenue and customer advances   14,163   15,189 
Retirement plans contributions   (2,618  (2,739
Income taxes   10,815   (2,628
         
Net cash provided by operating activities   122,917   244,423 
         
Cash flows from investing activities:   
Purchases of property, plant and equipment   (89,743  (73,957
Purchases of marketable securities   (247,881  (398,086
Proceeds from maturities of marketable securities   139,652   460,213 
Proceeds from sales of marketable securities   143,642   116,112 
Purchase of investment   —     (12,000
         
Net cash (used for) provided by investing activities   (54,330  92,282 
         
Cash flows from financing activities:   
Issuance of common stock under stock purchase and stock option plans   16,536   32,581 
Repurchase of common stock   (532,799  (196,584
Payments of convertible debt principal   (42,292  (66,828
Dividend payments   (35,442  (33,271
Payments related to net settlement of employee stock compensation awards   (32,780  (31,794
         
Net cash used for financing activities   (626,777  (295,896
         
Effects of exchange rate changes on cash and cash equivalents   8,014   (489
(Decrease) increase in cash and cash equivalents   (550,176  40,320 
Cash and cash equivalents at beginning of period   1,122,199   914,121 
         
Cash and cash equivalents at end of period  $572,023  $954,441 
         
Non-cash
investing activities:
   
Capital expenditures incurred but not yet paid:  $1,855  $4,503 
The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s
Annual Report on Form
10-K
for the year ended December 31, 2020,2021, are an integral part of the condensed
consolidated financial statements.
 
5

TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. THE
COMPANY
Teradyne, Inc. (“Teradyne”) is a leading global supplier of automation equipment for test and industrial applications. Teradyne designs, develops, manufactures and sells automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s industrial automation products include collaborative robotic arms, autonomous mobile robots, and advanced robotic control software used by global manufacturing, logistics and light industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Teradyne’s automatic test equipment and industrial automation products and services include:
 
semiconductor test (“Semiconductor Test”) systems;
 
storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);
 
wireless test (“Wireless Test”) systems; and
 
industrial automation (“Industrial Automation”) products.
B. ACCOUNTING POLICIES
Basis of Presentation
The consolidated interim financial statements include the accounts of Teradyne and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year amounts weremay have been reclassified to conform to the current year presentation. The December 31, 20202021 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form
10-K,
filed with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2021,23, 2022, for the year ended December 31, 2020.
2021.
Preparation of Financial Statements and Use of Estimates
The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. On an
on-going
basis, management evaluates its estimates, including those related to inventories, investments, goodwill, intangible and other long-lived assets, accounts receivable, income taxes, deferred tax assets and liabilities, pensions, warranties, contingent consideration liabilities, and loss contingencies. Management bases its estimates on historical experience and on appropriate and customary assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Due to the
COVID-19
pandemic, there has been uncertainty and disruption in the global economy and our markets. Management is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of August 
6
, 2021, the date of issuance of this Quarterly Report on Form
10-Q.
These estimates may change, as new events occur and additional information is obtained. Actual results may differ significantly from these estimates under different assumptions or conditions.
C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Convertible Debt
In August 2020, the Financial Accounting Standards Board (“FASB”) issuedTeradyne adopted Accounting Standards Update (“ASU”) ASU
2020-06
“Debt—
“Debt—Debt with Conversion and Other Options and Derivatives and Hedging - Hedging—Contracts in Entity’s Own Equity,” which simplifies
on January 1, 2022 using the accountingmodified retrospective method of adoption
.
Under ASU
2020-06,
Teradyne accounts for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. This ASU requires a convertible debt instrument to be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. This ASU requires an entityUnsettled shares are recorded in current debt, and there is no recognition of a debt discount, which was previously amortized to useinterest expense. Teradyne uses the
if-converted
method in the diluted earnings per share (“EPS”) calculation for convertible instruments. This ASU will be effectiveAs a result of adoption, Teradyne recorded an increase of $1.4 million to current debt for Teradyne on January 1, 2022. This ASU permitsunsettled shares, an increase of $6.6 million to long-term debt for unamortized debt discount, an increase of $1.8 million to deferred tax assets and an increase to retained earnings of $94.6 million for the use of either the modified retrospective or fully retrospective method of transition. Teradyne is evaluating the effectsreclassification of the adoption of this ASU on its financial statements.equity component. Mezzanine equity representing unsettled shares value was reduced to 0 and additional
paid-in
capital was reduced by $99.3 million.
 
6

C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For the six months ended July 3, 2022, there were no recently issued accounting pronouncements that had, or are expected to have, a material impact to Teradyne’s consolidated financial statements.
D. INVESTMENT IN OTHER COMPANY
On June 1, 2021, Teradyne
invested $12.0 million in MachineMetrics, Inc. (“MachineMetrics”), a private company that develops and sells products to improve manufacturing performance through automated machine data collection, alerting, and analytics. Teradyne’s investment in MachineMetrics aligns with its strategy of providing and investing in leading edge products for automating industrial production processes in growing markets. The investment was recorded at cost and is evaluated for impairment or an indication of changes in fair value resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer on a quarterly basis. At July 4, 2021,3, 2022, the value of the investment was $12.0 million,
and there was
were 0
change changes during the three and six months ended July 4, 2021.3, 2022.
7

E. REVENUE
Disaggregation of Revenue
The following table provides information about disaggregated revenue by timing of revenue recognition, primary geographical market, and major product lines.
  
Semiconductor Test
     
Industrial Automation
          
  
System on-

a-Chip
  
Memory
  
System

Test
  
Universal
Robots
  
Mobile
Industrial
Robots
  
AutoGuide
  
Wireless

Test
  
Corporate

and

Other
  
Total
 
  
(in thousands)
 
For the Three Months Ended July 4, 2021 (1)
         
Timing of Revenue Recognition
         
Point in Time
 $675,958  $84,232  $88,197  $74,412  $15,091  $0
  
  $51,619  $(146 $989,363 
Over Time
  65,712   8,074   16,622   1,665   809   209   3,274   —     96,365 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $741,670  $92,306  $104,819  $76,077  $15,900  $209  $54,893  $(146 $1,085,728 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Geographical Market
                                    
Asia Pacific
 $710,995  $87,151  $61,230  $18,044  $2,439  $—    $45,802  $—    $925,661 
Americas
  21,664   3,672   36,256   24,808   6,897   209   7,107   (146  100,467 
Europe, Middle East and Africa
  9,011   1,483   7,333   33,225   6,564   —     1,984   —     59,600 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $741,670  $92,306  $104,819  $76,077  $15,900  $209  $54,893  $(146 $1,085,728 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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 Six Months Ended July 4, 2021 (2)
                                    
Timing of Revenue Recognition
                                    
Point in Time
 $1,040,148  $186,124  $207,511  $138,419  $29,155  $(120 $89,499  $(289 $1,690,447 
Over Time
  121,752   14,015   30,145   3,259   876   548   6,292   —     176,887 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $1,161,900  $200,139  $237,656  $141,678  $30,031  $428  $95,791  $(289 $1,867,334 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Geographical Market
                                    
Asia Pacific
 $1,098,231  $191,200  $160,750  $35,877  $5,886  $—    $79,334  $—    $1,571,278 
Americas
  42,443   7,092   63,915   42,961   12,050   428   12,876   (289  181,476 
Europe, Middle East and Africa
  21,226   1,847   12,991   62,840   12,095   —     3,581   —     114,580 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $1,161,900  $200,139  $237,656  $141,678  $30,031  $428  $95,791  $(289 $1,867,334 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
   
Semiconductor Test
       
Industrial Automation
           
   
System
on-a-Chip
   
Memory
   
System
Test
   
Universal
Robots
   
Mobile
Industrial
Robots
   
AutoGuide
  
Wireless

Test
   
Corporate
and
Eliminations

  
Total
 
                                   
   
(in thousands)
 
For the Three Months Ended July 3, 2022 (1)
 
            
Timing of Revenue Recognition
                
Point in Time $395,211  $74,790  $118,692  $80,409  $16,730  $1,071  $60,765  $(193 $747,475 
Over Time  64,253   7,094   16,010   2,104   668   73   3,089   —     93,291 
                                     
Total
 $459,464  $81,884  $134,702  $82,513  $17,398  $1,144  $63,854  $(193 $840,766 
                                     
Geographical Market
                                    
Asia Pacific $413,537  $78,996  $95,584  $17,357  $5,317  $—    $44,106  $—    $654,897 
Americas  28,714   2,552   33,409   27,732   6,085   1,144   17,460   (193  116,903 
Europe, Middle East and Africa  17,213   336   5,709   37,424   5,996   —     2,288   —     68,966 
                                     
Total
 $459,464  $81,884  $134,702  $82,513  $17,398  $1,144  $63,854  $(193 $840,766 
                                     
For the Three Months Ended July 4, 2021 (1)
 
                            
Timing of Revenue Recognition
                                    
Point in Time $675,958  $84,232  $88,197  $74,412  $15,091  $—    $51,619  $(146 $989,363 
Over Time  65,712   8,074   16,622   1,665   809   209   3,274   —     96,365 
                                     
Total
 $741,670  $92,306  $104,819  $76,077  $15,900  $209  $54,893  $(146 $1,085,728 
                                     
Geographical Market
                                    
Asia Pacific $710,995  $87,151  $61,230  $18,044  $2,439  $—    $45,802  $—    $925,661 
Americas  21,664   3,672   36,256   24,808   6,897   209   7,107   (146  100,467 
Europe, Middle East and Africa  9,011   1,483   7,333   33,225   6,564   —     1,984   —     59,600 
                                     
Total
 $741,670  $92,306  $104,819  $76,077  $15,900  $209  $54,893  $(146 $1,085,728 
                                     
For the Six Months Ended July 3, 2022 (2)
 
                            
Timing of Revenue Recognition
                                    
Point in Time $718,666  $163,513  $223,981  $163,591  $33,264  $1,281  $109,194  $(539 $1,412,951 
Over Time  127,382   14,127   29,390   4,206   1,342   560   6,178   —     183,185 
                                     
Total
 $846,048  $177,640  $253,371  $167,797  $34,606  $1,841  $115,372  $(539 $1,596,136 
                                     
Geographical Market
                                    
Asia Pacific $754,277  $172,147  $169,369  $35,978  $7,909  $—    $79,052  $—    $1,218,732 
Americas  58,428   4,598   70,017   55,880   13,952   1,841   27,147   (539  231,324 
Europe, Middle East and Africa  33,343   895   13,985   75,939   12,745   —     9,173   —     146,080 
                                     
Total
 $846,048  $177,640  $253,371  $167,797  $34,606  $1,841  $115,372  $(539 $1,596,136 
                                     
For the Six Months Ended July 4, 2021 (2)
 
                            
Timing of Revenue Recognition
                                    
Point in Time $1,040,148  $186,124  $207,511  $138,419  $29,155  $(120 $89,499  $(289 $1,690,447 
Over Time  121,752   14,015   30,145   3,259   876   548   6,292   —     176,887 
                                     
Total
 $1,161,900  $200,139  $237,656  $141,678  $30,031  $428  $95,791  $(289 $1,867,334 
                                     
Geographical Market
                                    
Asia Pacific $1,098,231  $191,200  $160,750  $35,877  $5,886  $—    $79,334  $—    $1,571,278 
Americas  42,443   7,092   63,915   42,961   12,050   428   12,876   (289  181,476 
Europe, Middle East and Africa  21,226   1,847   12,991   62,840   12,095   —     3,581   —     114,580 
                                     
Total
 $1,161,900  $200,139  $237,656  $141,678  $30,031  $428  $95,791  $(289 $1,867,334 
                                     
7
 
(1)
Includes $1.9 million and $4.2 million in 2022 and $2.5 million in 2021, and 2020, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606
“Revenue from Contracts with Customers.”
(2)
Includes $4.2 million and $7.3 million in 2022 and $4.3 million in 2021, and 2020, respectively, for leases of Teradyne’s systems recognized outside ASC 606
Revenue from Contracts with CustomersCustomers.”
.”
8

Contract Balances
During the three and six months ended July 3, 2022, Teradyne recognized $25.1 million and $60.2 million, respectively, that was previously included within the deferred revenue and customer advances balances at the beginning of the period. During the three and six months ended July 4, 2021, Teradyne recognized $22.0 million and $49.6 million, respectively, that was previously included within the deferred revenue and customer advances balances
 at the beginning of the period
. During the three and six months ended June 28, 2020, Teradyne recognized $21.1 million and $60.6 million, respectively, that was previously included within the deferred revenue and customer advances balances. This revenue primarily relates to undelivered hardware, extended warranties, training, application support, and post contract support. Each of these represents a distinct performance obligation. As of July 4, 2021,3, 2022, Teradyne has $1,276.0$1,574 million of unsatisfied performance obligations. Teradyne expects to recognize 94%90% of the remaining performance obligations in the next 12 months
and 6%10% in
1-3
years.
Deferred revenue and customer advances consist of the following at July 3, 2022 and December 31, 2021, and are included in short and long-term deferred revenue and customer advances on the balance sheet:
   
July 3,
   
December 31,
 
   
2022
   
2021
 
         
   
(in thousands)
 
Maintenance, service and training  $83,464   $81,826 
Extended warranty   65,791    64,168 
Customer advances, undelivered elements and other   64,229    55,112 
           
Total deferred revenue and customer advances  $213,484   $201,106 
           
Accounts Receivable
During the three and six months ended July 3, 2022 and July 4, 2021, Teradyne sellssold certain trade accounts receivables on a
non-recourse
basis to third-party financial institutions pursuant to factoring agreements. Teradyne accounts for these transactions as sales of receivablesDuring the three months ended July 3, 2022 and presents cash proceeds as cash provided by operating activities in the consolidated statements of cash flows. TotalJuly 4, 2021, total trade accounts receivable sold under the factoring agreements were $37.6 million and $7.6 million, and $50.0 million for the three months ended July 4, 2021 and June 28, 2020, respectively, and $14.9 million and $96.8 million forrespectively. During the six months ended July 3, 2022 and July 4, 2021, total trade accounts receivable sold under the factoring agreements were $57.1 million and June 28, 2020,$14.9 million, respectively. Factoring fees for the sales of receivables were recorded in interest expense and were not material. Teradyne accounted for these transactions as sales of receivables and presented cash proceeds as cash provided by operating activities in the consolidated statements of cash flows.
F. INVENTORIES
Inventories, net consisted of the following at July 4, 20213, 2022 and December 31, 2020:2021:
 
   
July 4,
2021
   
December 31,
2020
 
   
(in thousands)
 
Raw material
  $117,339   $114,133 
Work-in-process
   37,884    25,408 
Finished goods
   70,915    82,648 
   
 
 
   
 
 
 
   $226,138   $222,189 
   
 
 
   
 
 
 
   
July 3,
   
December 31,
 
   
2022
   
2021
 
         
   
(in thousands)
 
Raw material  $193,907   $155,641 
Work-in-process
   36,184    37,740 
Finished goods   65,534    49,949 
           
   $295,625   $243,330 
           
Inventory reserves at July 4, 20213, 2022 and December 31, 20202021 were $106.9$115.5 million and $110.6$114.1 million, respectively.
G. FINANCIAL INSTRUMENTS
Cash Equivalents
Teradyne considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents.
Marketable Securities
Teradyne’s available-for-sale debt securities are classified as Level 2 and equity and debt mutual funds are classified as Level 1.1 and
available-for-sale
debt securities are classified as Level 2. Contingent consideration is classified as Level 3. The vast majority of Level 2 securities are fixed income securities priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.
During the three and six months ended July 3, 2022 and July 4, 2021, and June 28, 2020, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.
9

R
ealized gains recorded in the three and six months ended July 3, 2022 were $0.1 million and $0.5 million, respectively. Realized gains recorded in the three and six months ended July 4, 2021 were $0.9 million and $2.0 million, respectively. Realized gains recorded in the three and six months ended June 28, 2020 were $1.6 million and $3.0 million, respectively. Realized losses recorded in the three and six months ended June 28, 2020July 3, 2022 were $0.1$0.4 million and $0.2$0.6 million, respectively. NaN realized losses were recorded in the three and six months ended July 4, 2021. Realized gains and losses are included in other (income) expense, net.
Unrealized losses on equity securities recorded in the three and six months ended July 3, 2022 were $6.6 million and $8.8 million, respectively. NaN
unrealized gains on equity securities were recorded in the three and six months ended July 3, 2022. Unrealized gains on equity securities recorded in the three and six months ended July 4, 2021 werewer
e $2.0 million and $3.3 million, respectively. Unrealized losses on equity securities recorded in the three and six months ended July 4, 2021 were $0.7 million. Unrealized gains on equity securities recorded in the three and six months ended June 28, 2020 were $3.7 million. Unrealized losses on equity securities recorded in the six months ended June 28, 2020 were $6.0 million. Unrealized gains and losses on equity securities are included in other (income) expense, net.
Unrealized gains and losses on
available-for-sale
debt securities are included in accumulated other comprehensive income (loss).
8

Table of Contents
The cost of securities sold is based on average cost.
The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of July 4, 20213, 2022 and December 31, 2020.2021.
 
   
July 4, 2021
 
   
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
  $568,630   $—     $—     $568,630 
Cash equivalents
   373,113    12,698    —      385,811 
Available-for-sale securities:
                    
Commercial paper
   —      225,415    —      225,415 
U.S. Treasury securities
   —      102,316    —      102,316 
Corporate debt securities
   —      85,294    —      85,294 
Debt mutual funds
   8,030    —      —      8,030 
U.S. government agency securities
   —      4,508    —      4,508 
Certificates of deposit and time deposits
   —      1,344    —      1,344 
Non-U.S. government securities
   —      616    —      616 
Equity securities:
                    
Mutual funds
   36,158    —      —      36,158 
   
 
 
   
 
 
   
 
 
   
 
 
 
   $985,931   $432,191   $—     $1,418,122 
Derivative assets
   —      25    —      25 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $985,931   $432,216   $—     $1,418,147 
   
 
 
   
 
 
   
 
 
   
 
 
 
Liabilities
                    
Derivative liabilities
   —      365    —      365 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $—     $365   $—     $365 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
Reported as follows:                    
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
   
(in thousands)
 
Assets
                    
Cash and cash equivalents
  $941,743   $12,698   $—     $954,441 
Marketable securities
   —      282,121    —      282,121 
Long-term marketable securities
   44,188    137,372    —      181,560 
Prepayments and other current assets
   —      25    —      25 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $985,931   $432,216   $—     $1,418,147 
   
 
 
   
 
 
   
 
 
   
 
 
 
Liabilities
                    
Other current liabilities
  $—     $365   $—     $365 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $—     $365   $—     $365 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
July 3, 2022
 
   
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  $447,312   $—     $—     $447,312 
Cash equivalents   95,068    29,643    —      124,711 
Available-for-sale
securities:
                    
Commercial paper   —      150,443    —      150,443 
U.S. Treasury securities   —      73,100    —      73,100 
Corporate debt securities   —      49,344    —      49,344 
Debt mutual funds   6,514    —      —      6,514 
U.S. government agency securities   —      4,693    —      4,693 
Certificates of deposit and time deposits   —      1,261    —      1,261 
Non-U.S.
government securities
   —      546    —      546 
Equity securities:                    
Mutual funds   35,944    —      —      35,944 
                     
   $584,838   $309,030   $—     $893,868 
Derivative assets   —      103    —      103 
                     
Total  $584,838   $309,133   $—     $893,971 
                     
Liabilities                    
Derivative liabilities  $—     $233   $—     $233 
                     
Total  $—     $233   $—     $233 
                     
Reported as follows:
 
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                 
   
(in thousands)
 
Assets
        
Cash and cash equivalents  $542,380   $29,643   $—     $572,023 
Marketable securities   —      209,846    —      209,846 
Long-term marketable securities   42,458    69,541    —      111,999 
Prepayments and other current assets   —      103    —      103 
                     
Total  $584,838   $309,133   $—     $893,971 
                     
Liabilities   .                
Other current liabilities  $—     $233   $—     $233 
                     
Total  $—     $233   $—     $233 
                     
9
1
0

Table of Contents
   
December 31, 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
  $443,166   $—     $—     $443,166 
Cash equivalents
   347,768    123,187    —      470,955 
Available-for-sale securities:
                  —   
U.S. Treasury securities
   —      258,304    —      258,304 
Commercial paper
   —      254,413    —      254,413 
Corporate debt securities
   —      83,615    —      83,615 
Debt mutual funds
   8,565    —      —      8,565 
U.S. government agency securities
   —      4,339    —      4,339 
Certificates of deposit and time deposits
   —      979    —      979 
Non-U.S. government securities
   —      625    —      625 
Equity securities:
                    
Equity mutual funds
   29,420    —      —      29,420 
   
 
 
   
 
 
   
 
 
   
 
 
 
   $828,919   $725,462   $—     $1,554,381 
Derivative assets
   —      95    —      95 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $828,919   $725,557   $—     $1,554,476 
   
 
 
   
 
 
   
 
 
   
 
 
 
Liabilities
                    
Contingent consideration
  $—     $—     $7,227   $7,227 
Derivative liabilities
   —      504    —      504 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $—     $504   $7,227   $7,731 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
Reported as follows:
                    
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
   
(in thousands)
 
Assets
                    
Cash and cash equivalents
  $790,934   $123,187   $—     $914,121 
Marketable securities
   —      522,280    —      522,280 
Long-term marketable securities
   37,985    79,995    —      117,980 
Prepayments and other current assets
   —      95    —      95 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $828,919   $725,557   $—     $1,554,476 
   
 
 
   
 
 
   
 
 
   
 
 
 
Liabilities
                    
Other accrued liabilities
  $—     $504   $—     $504 
Long-term contingent consideration
   —      —      7,227    7,227 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $—     $504   $7,227   $7,731 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
December 31, 2021
 
   
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  $628,740   $—     $—     $628,740 
Cash equivalents   412,212    81,247    —      493,459 
Available-for-sale
securities:
                  —   
Commercial paper   —      189,620    —      189,620 
U.S. Treasury securities   —      77,789    —      77,789 
Corporate debt securities   —      56,901    —      56,901 
Debt mutual funds   7,971    —      —      7,971 
U.S. government agency securities   —      4,610    —      4,610 
Certificates of deposit and time deposits   —      1,356    —      1,356 
Non-U.S.
government securities
   —      589    —      589 
Equity securities:                    
Mutual Funds   39,253    —      —      39,253 
                     
   $1,088,176   $412,112   $—     $1,500,288 
Derivative assets   —      92    —      92 
                     
Total  $1,088,176   $412,204   $—     $1,500,380 
                     
Liabilities                    
Derivative liabilities   —      118    —      118 
                     
Total  $—     $118   $—     $118 
                     
Reported as follows:
 
10
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                 
   
(in thousands)
 
Assets
        
Cash and cash equivalents  $1,040,952   $81,247   $—     $1,122,199 
Marketable securities   —      244,231    —      244,231 
Long-term marketable securities   47,224    86,634    —      133,858 
Prepayments and other current assets   —      92    —      92 
                     
Total  $1,088,176   $412,204   $—     $1,500,380 
                     
Liabilities                    
Other current liabilities  $—     $118   $—     $118 
                     
Total  $—     $118   $—     $118 
                     

Changes in the fair value of Level 3 contingent consideration for the threesix months ended July 3, 2022, and July 4, 2021 and June 28, 2020 were as follows:
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 4,
2021
   
June 28,
2020
   
July 4,
2021
   
June 28,
2020
 
   
(in thousands)
 
Balance at beginning of period
  $0     $20,472   $7,227   $39,705 
Fair value adjustment (a)(b)
   0      29,259    (7,227   19,239 
Foreign currency impact
   0      6    0      (355
Payments (c)
   0      0      0      (8,852
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at end of period
  $0     $49,737   $0     $49,737 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
   
July 4,
   
July 3,
   
July 4,
 
   
2022
   
2021
   
2022
   
2021
 
                 
   
(in thousands)
 
Balance at beginning of period  $—     $—     $—     $7,227 
Fair value adjustment (a)   —      —      —      (7,227
                     
Balance at end of period  $—     $—     $—     $—   
                     
(a)
In the six months ended July 4, 2021, the fair value of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide was reduced to zero, which resulted in a benefit of $7.2 million, primarily due to a decrease in forecasted revenues and earnings before interest and taxes. As of July 4, 2021, the maximum amount of contingent consideration that could be paid in connection with the acquisition of AutoGuide is $100.2 million. The remaining earn-out periods end on December 31, 2021 and December 31, 2022. The sellers of AutoGuide have filed an arbitration claim against Teradyne related to allegations of non-compliance with its earn-out obligations. The ultimate amount of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide may be affected by the outcome of the arbitration
(see
Note R: “Commitments and Contingencies”). 
(b)
1
1
In the three and six months ended June 28, 2020, the fair value of contingent consideration for the earn-outs in connection with the acquisition of Mobile Industrial Robots (“MiR”) decreased by $0.6 million and $3.6 million, respectively, due to lower forecasted results. In the three and six months ended June 28, 2020, the fair value of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide increased by $29.9 million and $22.8 million, respectively, due to higher forecasted results.
(c)
On March 25, 2022, the arbitration claim filed by Industrial Automation LLC, sellers of AutoGuide, against Teradyne alleging
non-compliance
with the
earn-out
provisions of the Membership Interests Purchase Agreement, dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide was settled f
or $26.7 million. As a result, Teradyne has no remaining
earn-out
obligations.
In the six months ended June 28, 2020, Teradyne paid $8.9 million of contingent consideration for the earn-out in connection with the acquisition of MiR.
The carrying amounts and fair values of Teradyne’s financial instruments at July 4, 20213, 2022 and December 31, 20202021 were as follows:
 
   
July 4, 2021
   
December 31, 2020
 
   
Carrying Value
   
Fair Value
   
Carrying Value
   
Fair Value
 
   
(in thousands)
 
Assets
                    
Cash and cash equivalents
  $954,441   $954,441   $914,121   $914,121 
Marketable securities
   463,681    463,681    640,260    640,260 
Derivative assets
   25    25    95    95 
Liabilities
                    
Contingent consideration
   —      —      7,227    7,227 
Derivative liabilities
   365    365    504    504 
Convertible debt (1)
   357,379    1,595,912    410,111    1,739,553 
   
July 3, 2022
   
December 31, 2021
 
   
Carrying Value
   
Fair Value
   
Carrying Value
   
Fair Value
 
                 
   
(in thousands)
 
Assets
        
Cash and cash equivalents  $572,023   $572,023   $1,122,199   $1,122,199 
Marketable securities   321,845    321,845    378,089    378,089 
Derivative assets   103    103    92    92 
Liabilities                    
Derivative liabilities   233    233    118    118 
Convertible debt   74,428    233,339    108,426    604,648 
(1)
The carrying value represents the bifurcated debt component only, while the level 2 fair value is based on quoted market prices for the convertible note, which includes the equity conversion features.
The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.
The following table summarizes the composition of
available-for-sale
marketable securities at July 3, 2022:
 
   
July 3, 2022
 
   
Available-for-Sale
 
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Commercial paper  $150,695   $
8
   $(260 $150,443   $137,162 
U.S. Treasury securities   75,962    42    (2,904  73,100    71,861 
Corporate debt securities   53,274    147    (4,077  49,344    46,289 
Debt mutual funds   6,783    —      (269  6,514    3,245 
U.S. government agency securities   4,786    —      (93  4,693    4,693 
Certificates of deposit and time deposits   1,261    —      —     1,261    —   
Non-U.S.
government securities
   546    —      —     546    —   
                         
   $293,307   $197   $(7,603 $285,901   $263,250 
                         
11
Reported as follows:
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Marketable securities  $210,598   $8   $(760 $209,846   $195,003 
Long-term marketable securities   82,709    189    (6,843  76,055    68,247 
                         
   $293,307   $197   $(7,603 $285,901   $263,250 
                         
1
2

Table of Contents
The following table summarizes the composition of
available-for-sale marketable securities at July 4, 2021:
   
July 4, 2021
 
   
Available-for-Sale
     
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
   
(in thousands)
 
Commercial paper
  $225,409   $7   $(1 $225,415   $19,194 
U.S. Treasury securities
   102,068    767    (519  102,316    72,750 
Corporate debt securities
   79,586    5,814    (106  85,294    38,694 
Debt mutual funds
   7,956    74    —     8,030    —   
U.S. government agency securities
   4,490    22    (4  4,508    1,308 
Certificates of deposit and time deposits
   1,344    0      —     1,344    —   
Non-U.S. government securities
   616    —      —     616    —   
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
   $421,469   $6,684   $(630 $427,523   $131,946 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Reported as follows:
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
   
(in thousands)
 
Marketable securities
  $282,061   $93   $(33 $282,121   $59,990 
Long-term marketable securities
   139,408    6,591    (597  145,402    71,956 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
   $421,469   $6,684   $(630 $427,523   $131,946 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
The following table summarizes the composition of available-for-sale marketable securities at December 31, 2020:2021:
 
   
December 31, 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
  $257,132   $1,330   $(158 $258,304   $17,243 
Commercial paper
   254,404    10    (1  254,413    12,173 
Corporate debt securities
   76,129    7,539    (53  83,615    39,896 
Debt mutual funds
   8,413    152    —     8,565    —   
U.S. government agency securities
   4,294    46    (1  4,339    1,106 
Certificates of deposit and time deposits
   979    —      —     979    —   
Non-U.S. government securities
   625    —      —     625    —   
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
   $601,976   $9,077   $(213 $610,840   $70,418 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
   
December 31, 2021
 
   
Available-for-Sale
 
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Commercial paper  $189,614   $15   $(9 $189,620   $22,784 
U.S. Treasury securities   77,707    551    (470  77,789    46,435 
Corporate debt securities   52,266    4,863    (227  56,901    19,422 
Debt mutual funds   7,928    43    —     7,971    —   
U.S. government agency securities   4,617    5    (12  4,610    3,296 
Certificates of deposit and time deposits   1,356    —      —     1,356    —   
Non-U.S.
government securities
   589    —      —     589    —   
                         
   $334,077   $5,477   $(718 $338,836   $91,937 
                         
Reported as follows:
 
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
   
(in thousands)
 
Marketable securities
  $522,228   $92   $(40 $522,280   $61,806 
Long-term marketable securities
   79,748    8,985    (173  88,560    8,612 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
   $601,976   $9,077   $(213 $610,840   $70,418 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
   
Cost
   
Unrealized

Gain
   
Unrealized

(Loss)
  
Fair Market

Value
   
Fair Market

Value of

Investments

with Unrealized

Losses
 
                    
   
(in thousands)
 
Marketable securities  $244,213   $64   $(46 $244,231   $54,798 
Long-term marketable securities   89,864    5,413    (672  94,605    37,139 
                         
   $334,077   $5,477   $(718 $338,836   $91,937 
                         
As of July 4, 2021 and December 31, 2020,3, 2022, the fair marketma
rket value of investments with unrealized losses less than one year and greater than one year totaled $130.7$252.4 million and $70.4$10.9 million, respectively. As of July 4,December 31, 2021, the fair market value of investments with unrealized losses for less than one year and greater than one year totaled $1.3 million.$85.4 million and $6.5 million, respectively.
12

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments at July 4, 20213, 2022 and December 31, 20202021 were not other than temporary.
The contractual maturities of investments in
available-for-sale
securities held at July 4, 20213, 2022 were as follows:
 
   
July 4, 2021
 
   
Cost
   
Fair Market

Value
 
   
(in thousands)
 
Due within one year
  $282,061   $282,121 
Due after 1 year through 5 years
   90,625    90,940 
Due after 5 years through 10 years
   6,089    6,585 
Due after 10 years
   34,738    39,847 
   
 
 
   
 
 
 
Total
  $413,513   $419,493 
   
 
 
   
 
 
 
   
July 3, 2022
 
   
Cost
   
Fair Market

Value
 
         
   
(in thousands)
 
Due within one year  $210,598   $209,846 
Due after 1 year through 5 years   32,283    31,069 
Due after 5 years through 10 years   5,055    4,736 
Due after 10 years   38,588    33,736 
           
Total  $286,524   $279,387 
           
Contractual maturities of investments in
available-for-sale
securities held at July 4, 20213, 2022 exclude debt mutual funds with a fair market value of $8.0$6.5 million, as they do not have a contractual maturity date.
Derivatives
Teradyne conducts business in a number of foreign countries, with certain transactions denominated in local currencies. The purpose of Teradyne’s foreign currency management is to minimize the effect of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities. Teradyne does not use derivative financial instruments for trading or speculative purposes.
1
3

To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings and is used to offset the change in value of monetary assets and liabilities denominated in foreign currencies.
The notional amount of foreign currency forward contracts atAt July 4, 20213, 2022 and December 31, 20202021, Teradyne had the following contracts to buy and sell
non-U.S.
currencies for U.S. dollars and other
non-U.S.
currencies with the following notional amounts:
   
July 3, 2022
  
December 31, 2021
 
   
Buy

Position
  
Sell

Position
   
Net

Total
  
Buy

Position
  
Sell

Position
   
Net

Total
 
                      
   
(in millions)
 
Japanese Yen  $(32.5 $—     $(32.5 $(31.4 $—     $(31.4
Taiwan Dollar   (27.2  —      (27.2  (35.1  —      (35.1
Korean Won   (3.1  —      (3.1  (4.2  —      (4.2
British Pound Sterling   (1.0  —      (1.0  (1.8  —      (1.8
Singapore Dollar   —     40.0    40.0   —     61.9    61.9 
Euro   —     39.8    39.8   —     44.9    44.9 
Philippine Peso   —     3.2    3.2   —     3.9    3.9 
Chinese Yuan   —     2.8    2.8   —     2.8    2.8 
                            
Total  $(63.8 $85.8   $22.0  $(72.5 $113.5   $41.0 
                            
The fair value of the outstanding contracts was $206.9a loss of $0.1 million and $152.9$0.1 million, respectively.respectively, at July 3, 2022 and December 31, 2021.
Gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in other (income) expense, net.
The following table summarizes the fair value of derivative instruments as of July 4, 20213, 2022 and December 31, 2020:2021:
 
   
Balance Sheet

Location
   
July 4,
2021
   
December 31,
2020
 
       
(in thousands)
 
Derivatives not designated as hedging instruments:
               
Foreign exchange contracts
   Prepayments   $25   $95 
Foreign exchange contracts
   Other current liabilities    (365   (504
        
 
 
   
 
 
 
Total derivatives
       $(340  $(409
        
 
 
   
 
 
 
   
Balance Sheet

Location
  
July 3,

2022
   
December 31,
2021
 
            
      
(in thousands)
 
Derivatives not designated as hedging instruments:
             
Foreign exchange contracts  Prepayments  $103   $92 
Foreign exchange contracts  Other current liabilities   (233   (118
              
Total derivatives     $(130  $(26
              
The following table summarizes the effect of derivative instruments recognized in the statement of operations for the three and six months ended July 3, 2022 and July 4, 2021 and June 28, 2020:2021:
 
   
Location of Losses (Gains)

Recognized in

Statement of Operations
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 4,

2021
   
June 28,
2020
   
July 4,
2021
   
June 28,
2020
 
       
(in thousands)
 
Derivatives not designated as hedging instruments:
                         
Foreign exchange contracts
   Other (income) expense, net   $1,531   $470   $3,650   $4,481 
   
Location of (Gains) Losses
  
For the Three Months

Ended
   
For the Six Months

Ended
 
   
Recognized in
  
July 3,
   
July 4,
   
July 3,
   
July 4,
 
   
Statement of Operations
  
2022
   
2021
   
2022
   
2021
 
                    
      
(in thousands)
 
Derivatives not designated as hedging instruments:
                    
Foreign exchange contracts  Other (income) expense, net $(1,703  $1,531   $(3,455  $3,650 
 
(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)
The above table does not reflect the corresponding gains and losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the three and six months ended July 3, 2022, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $3.7 million and $8.0 million, respectively. For the three and six months ended July 4, 2021, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $0.1 million and $0.3 million, respectively.
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Table of Contents
(3)
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.
See Note H: “Debt” regarding derivatives related to the convertible senior notes.

H. DEBT
Convertible Senior Notes
On December 12, 2016, Teradyne completed a private offering of $460.0$
460.0
 million aggregate principal amount of 1.25%
1.25
% convertible senior unsecured notes (the “Notes”) due
December 15, 2023
and received net proceeds, after issuance costs, of approximately $450.8$
450.8
 million, $33.0$
33.0
 million of which was used to pay the net cost of the convertible note hedge transactions and $50.1an
d
14

$
50.1
 million of which was used to repurchase
2.0
 million shares of Teradyne’s common stock under its existing stock repurchase program from purchasers of the Notes in privately negotiated transactions effected through one of the initial purchasers or its affiliates conducted concurrently with the pricing of the Note offering. The Notes will mature on December 15, 2023, unless earlier repurchased or converted. The Notes bear interest from December 12, 2016 at a rate of 1.25% 
1.25
% per year
payable semiannually in arrears on June 15 and December 15 of each year.
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
(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%
130
% of the conversion price on each applicable trading day; (2) during the
5
5
business day period after any
5
consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 $
1,000
principal amount of Notes for each trading day of the measurement period was less than 98%
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 future conversion obligation by paying cash for the principal amount of the Notes and paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s election.election for the amount in excess of principal. As of July 4, 2021,3, 2022, the conversion price was approximately $31.54 $
31.49
per share of Teradyne’s common stock. The conversion rate is subject to adjustment under certain circumstances. As of August 
6
, 2021, fifty-five5, 2022, one hundred and six holders had exercised the option to convert $302.0$
386.4
 million worth of Notes.notes.
Concurrent with the offering of the Notes, Teradyne entered into convertible note hedge transactions (the “Note Hedge Transactions”) with the initial purchasers or their affiliates (the “Option Counterparties”). The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the common stock that underlie the Notes, with a strike price equal to the conversion price of the Notes of $31.54. The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, approximately 12.5 million shares of Teradyne’s common stock.$31.49.
Separately and concurrent with the pricing of the Notes, Teradyne entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which it sold
net-share-settled (or,
(or, at its election subject to certain conditions, cash-settled) warrants to the Option Counterparties. The Warrant Transactions currently cover, subject to customary anti-dilution adjustments, approximately 14.6 million shares of common stock. As of July 4, 2021,3, 2022, the strike price of the warrants was approximately $39.58$39.52 per share. The strike price is subject to adjustment under certain circumstances. The Warrant Transactions could have a dilutive effect to Teradyne’s common stock to the extent that the market price per share of Teradyne’s common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.
The Note Hedge Transactions are expected to reduce the potential dilution to Teradyne’s common stock upon any conversion of the Notes. However, the Warrant Transactions could separately have a dilutive effect to the extent that the market value per share of Teradyne’s common stock exceeds the applicable strike price of the warrant. The net cost of the Note Hedge Transactions, after being partially offset by the proceeds from the sale of the warrants, was approximately $33.0 million.
In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, the Option Counterparties have entered into various derivative transactions with respect to Teradyne’s common stock and/or purchased shares of Teradyne’s common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivative transactions with respect to Teradyne’s common stock or by selling Teradyne’s common stock or other securities, including the Notes, in secondary market transactions (and may do so during any observation period related to the conversion of the Notes). These activities could adversely affect the value of Teradyne’s common stock and the Notes.
Teradyne considered the guidance of ASC 815-40,
“Derivatives and Hedging—Contracts in Entity’s Own Equity,”
and concluded that the convertible note hedge is both indexed to Teradyne’s common stock and should be classified in stockholders’
14

Table of Contents
equity in its statements of financial position. The convertible note hedge is considered indexed to Teradyne’s common stock as the terms of the Note Hedge Transactions do not contain an exercise contingency and the settlement amount equals the difference between the fair value of a fixed number of Teradyne’s shares and a fixed strike price. Because the only variable that can affect the settlement amount is Teradyne’s stock price, which is an input to the fair value of a fixed-for-fixed option contract, the convertible note hedge is considered indexed to Teradyne’s common stock.
Teradyne assessed whether the convertible note hedge should be classified as equity under ASC 815-40. In the Note Hedge Transactions contract the settlement terms permit net cash settlement or net share settlement, at the option of Teradyne. Therefore, the criteria as set forth in ASC 815-40 were evaluated by Teradyne. In reviewing the criteria, Teradyne noted the following: (1) the convertible note hedge does not require Teradyne to issue shares; (2) there is no requirement to net cash settle the convertible note hedge for failure to make timely filings with the SEC; (3) in the case of termination, the convertible note hedge is settled in the same consideration as the holders of the underlying stock; (4) the counterparty does not have rights that rank higher than those of a shareholder of the stock underlying the convertible note hedge; and (5) there is no requirement to post collateral. Based on its analysis of those criteria, Teradyne concluded that the convertible note hedge should be recorded in equity and no further adjustment should be made in future periods to adjust the value of the convertible note hedge.
Teradyne analyzed the Warrant Transactions under ASC 815-40,
“Derivatives and Hedging—Contracts in Entity’s Own Equity,”
and other relevant literature, and determined that it met the criteria for classification as an equity transaction and is considered indexed to Teradyne’s common stock. As a result, Teradyne recorded the proceeds from the warrants as an increase to additional paid-in capital. Teradyne does not recognize subsequent changes in fair value of the warrants in its financial statements.
The provisions of ASC 470-20, “
Debt with Conversion and Other Options,
” are applicable to the Notes. ASC 470-20 requires Teradyne to separately account for the liability (debt) and equity (conversion feature) components of the Notes in a manner that reflects Teradyne’s nonconvertible debt borrowing rate at the date of issuance when interest cost is recognized in subsequent periods.Originally, Teradyne allocated $100.8 million of the $460.0 million principal amount of the Notes to the equity component, which representsrepresented a discount to the debt and will bewas amortized to interest expense using the effective interest method through December 2023. Accordingly, Teradyne’s effective annual interest rate onEffective January 1, 2022, Teradyne adopted ASC
2020-06
using the Notes will be approximately 5.0%. The Notes are classifiedmodified retrospective method of transition and accounts for the debt as a single liability measured at its amortized cost. As a result of the adoption, Teradyne recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $
1.8
 million to deferred tax assets, an increase of $6.6 million to long-term debt in the balance sheet based on their December 15, 2023 maturity date, exceptfor unamortized debt discount, and an increase to retained earnings of $94.6 million for the conversions that occurred duringreclassification of the second quarterequity component. Mezzanine equity representing unsettled shares value was reduced to 0 and additional
paid-in
capital was reduced by $99.3 million.
On November 4, 2021, Teradyne made an irrevocable election under the Indenture to require the principal portion of 2021, which are includedthe remaining Notes to be settled in current debt. cash.
Debt issuance costsfees of approximately $7.2$0.3 million, at July 3, 2022, are being amortized to interest expense using the effective interest method over the
seven-year
term of the
Notes. As
15

Table of July 4, 2021, debt issuance costs were approximately $2.4 million.Contents
The below tables represent the key components of Teradyne’s convertible senior notes:
 
   
July 4,

2021
   
December 31,

2020
 
   
(in thousands)
 
Debt principal
  $393,142   $459,971 
Unamortized discount
   35,763    49,860 
   
 
 
   
 
 
 
Net carrying amount of convertible debt
  $357,379   $410,111 
   
 
 
   
 
 
 
   
July 3,

2022
   
December 31,
2021
 
         
   
(in thousands)
 
Debt principal  $74,688   $116,980 
Unamortized debt issuance fees (1)   260    8,554 
           
Net Carrying amount of convertible debt  $74,428   $108,426 
           
Reported as follows:
 
   
July 4,

2021
   
December 31,
2020
 
   
(in thousands)
 
Current debt
  $213,761   $33,343 
Long-term debt
   143,618    376,768 
   
 
 
   
 
 
 
Net carrying amount of convertible debt
  $357,379   $410,111 
   
 
 
   
 
 
 
   
July 3,

2022
   
December 31,
2021
 
         
   
(in thousands)
 
Current debt  $9,632   $19,182 
Long-term debt   64,796    89,244 
           
Net carrying amount of convertible debt  $74,428   $108,426 
           
   
For the Three Months

Ended
   
For the Six Months
Ended
 
   
July 3,

2022
   
July 4,

2021
   
July 3,
2022
   
July 4,
2021
 
                 
   
(in thousands)
 
Contractual interest expense on the coupon  $121   $1,072   $432   $2,311 
Amortization of debt issuance fees recognized as interest expense (2)   64    3,511    130    7,347 
                     
Total interest expense on the convertible debt  $185   $4,583   $562   $9,658 
                     
 
   
For the Three Months Ended
   
For the Six Months Ended
 
   
July 4,

2021
   
June 28,

2020
   
July 4,

2021
   
June 28,

2020
 
   
(in thousands)
 
Contractual interest expense on the coupon
  $1,072   $1,438   $2,311   $2,875 
Amortization of the discount component and debt issue fees recognized as interest expense
   3,511    3,839    7,347    7,631 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total interest expense on the convertible debt
  $4,583   $5,277   $9,658   $10,506 
   
 
 
   
 
 
   
 
 
   
 
 
 
(1)
Unamortized debt issuance fees as of December 31, 2021 include unamortized debt discount of $
8.1
 million, which was eliminated with the adoption of ASU
2020-6
on January 1, 2022.
(2)
Three and six months ended July 4, 2021 includes the amortization of debt discount component, which was eliminated with the adoption of ASU
2020-06
on January 1, 2022.
As of July 4, 2021, the remaining unamortized discount was $35.8 million, which will be amortized over 2.5 years using the effective interest rate method. The carrying amount of the equity component was $100.8 million.
15

Table of Contents
As of July 4, 2021,3, 2022, the conversion price was approximately $31.54$31.49 per share and the
if-converted
value of the notes was $1,602.2$203.5 million.
During the six months ended July 4, 2021, certain3, 2022, twenty-five debt holders elected to convert $66.8$42.3 million of debt principal. The conversion of the debt was settled in cash for principal amount and in shares for the excess of conversion value over principal amount. The 1.61.0 million shares issued to the debt holders were received from exercising the convertible notes hedge call options.
Additional conversions of approximately $235.2$9.6 million of debt principal will occur in the third quarter of 2021. The2022 and the liability component is included in current debtdebt.
Teradyne expects to make principal interest payments of $0.9 million in the next 12 months and the equity component is included in convertible common shares.
$0.5 million thereafter.
Revolving Credit Facility
On May 1, 2020, Teradyne entered into a credit agreement (the “Credit Agreement”) with Truist Bank, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement providesprovided for a three-year, senior secured revolving credit facility of $400.0 million (the “Credit Facility”). The
On December 10, 2021, the Credit Agreement furtherwas amended to extend maturity date of the Credit Facility to December 10, 2026. The amended Credit Agreement provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders the available incremental commitmentsamount under the Credit Facility, in an aggregate principal amount not to exceed $150.0 million.
Proceeds from the Credit Facility may be used for general corporate purposes and working capital. Teradyne incurred $3.5greater of $200.0 million in costs related to the revolving credit facility. These costs are being amortized over the three-year termor 15% of the revolving credit facility and are included in interest expense in the statement of operations. As of August 
6
, 2021, Teradyne has not borrowed any funds under the Credit Facility.
consolidated EBIDTA. The interest ratesrate applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a margin ranging from 0.50%0.00% to 1.25%0.75% per annum or LIBOR a minimum of 0.75%, plus a margin ranging from 1.50%1.00% to 2.25%1.75% per annum, based on the consolidated leverage ratio of Teradyne. In addition, Teradyne will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from 0.25%0.15% to 0.40%0.25% per annum, based on the then applicable consolidated leverage ratio.
16

Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBOR breakage costs.
The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne’s ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarter:quarter a consolidated leverage ratio and an interest coverage ratio.
The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.
As of August 
6
, 2021,5, 2022, Teradyne has 0t borrowed any funds under the credit facility and was in compliance with all covenants.
I. PREPAYMENTS
Prepayments consist of the following and are included in prepayments and other assets on the balance sheet:following:
 
   
July 4,

2021
   
December 31,

2020
 
   
(in thousands)
 
Contract manufacturer and supplier prepayments
  $320,111   $212,286 
Prepaid maintenance and other services
   16,848    13,116 
Prepaid taxes
   13,017    9,361 
Other prepayments
   9,434    15,329 
   
 
 
   
 
 
 
Total prepayments
  $359,410   $250,092 
   
 
 
   
 
 
 
16
   
July 3,
   
December 31,
 
   
2022
   
2021
 
         
   
(in thousands)
 
Contract manufacturer and supplier prepayments  $460,727   $364,478 
Prepaid maintenance and other services   17,421    13,660 
Prepaid taxes   8,675    15,090 
Other prepayments   11,270    13,038 
           
Total prepayments  $498,093   $406,266 
           

J. DEFERRED REVENUE AND CUSTOMER ADVANCES
Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:
   
July 4,

2021
   
December 31,

2020
 
   
(in thousands)
 
Maintenance, service and training
  $83,557   $77,654 
Extended warranty
   63,525    51,929 
Customer advances, undelivered elements and other
   60,334    63,438 
   
 
 
   
 
 
 
Total deferred revenue and customer advances
  $207,416   $193,021 
   
 
 
   
 
 
 
K. PRODUCT WARRANTY
Teradyne generally provides a
one-year
warranty on its products, commencing upon installation, acceptance or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities.​​​​​​​​​​​​​​
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 4,

2021
   
June 28,

2020
   
July 4,

2021
   
June 28,

2020
 
   
(in thousands)
 
Balance at beginning of period
  $23,893   $10,971   $16,633   $8,996 
Accruals for warranties issued during the period
   10,197    6,200    22,078    11,267 
Accruals related to pre-existing warranties
   (3,450   356    (3,003   1,412 
Settlements made during the period
   (4,964   (4,511   (10,032   (8,659
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at end of period
  $25,676   $13,016   $25,676   $13,016 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
   
July 4,
   
July 3,
   
July 4,
 
   
2022
   
2021
   
2022
   
2021
 
                 
   
(in thousands)
 
Balance at beginning of period  $20,105   $23,893   $24,577   $16,633 
Accruals for warranties issued during the period   6,429    10,197    10,530    22,078 
Accruals related to
pre-existing
warranties
   (1,611   (3,450   (4,370   (3,003
Settlements made during the period   (8,887   (4,964   (14,701   (10,032
                     
Balance at end of period  $16,036   $25,676   $16,036   $25,676 
                     
When Teradyne receives revenue for extended warranties, beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The balance below is included in short and long-term deferred revenue and customer advances.​​​​​​​​​​​​​​
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 4,

2021
   
June 28,

2020
   
July 4,

2021
   
June 28,

2020
 
   
(in thousands)
 
Balance at beginning of period
  $53,908   $33,503   $51,929   $30,677 
Deferral of new extended warranty revenue
   16,290    11,450    23,805    19,050 
Recognition of extended warranty deferred revenue
   (6,673   (4,775   (12,209   (9,549
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at end of period
  $63,525   $40,178   $63,525   $40,178 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
   
July 4,
   
July 3,
   
July 4,
 
   
2022
   
2021
   
2022
   
2021
 
                 
   
(in thousands)
 
Balance at beginning of period  $65,726   $53,908   $64,168   $51,929 
Deferral of new extended warranty revenue   9,788    16,290    21,563    23,805 
Recognition of extended warranty deferred revenue   (9,723   (6,673   (19,940   (12,209
                     
Balance at end of period  $65,791   $63,525   $65,791   $63,525 
                     

L.17

K. STOCK-BASED COMPENSATION
Under Teradyne’s stock compensation plans, Teradyne grants service-based restricted stock units, performance-based restricted stock units and stock options, and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).
Service-based restricted stock unit awards granted to employees vest in equal annual installments over
four years
.years. Restricted stock unit awards granted to
non-employee
directors vest after a
one-year
period, with 100% of the award vesting on the earlier of (a) the first anniversary of the grant date or (b) the date of the following year’s
annual meeting Annual Meeting of shareholders.
Shareholders. Teradyne expenses the cost of the restricted stock unit awards subject to service-based vesting, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restrictions lapse.
Performance-based restricted stock units (“PRSUs”) granted to Teradyne’s executive officers may have a performance metric based on relative total shareholder return (“TSR”). Teradyne’s
three-year
TSR performance is measured against the New York Stock Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-
17

linestraight-line basis over the shorter of the
three-year
service period or the period from the grant to the date described in the retirement provisions below. Compensation expense for executive officers meeting the retirement provisions prior to the grant date is recognized during the year 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.
PRSUs granted to Teradyne’s executive officers may also have a performance metric based on three-year cumulative
non-GAAP
profit before interest and tax (“PBIT”) as a percent of Teradyne’s revenue.
Non-GAAP
PBIT is a financial measure equal to GAAP income from operations less restructuring and other, net; amortization of acquired intangible assets; acquisition and divestiture related charges or credits; pension actuarial gains and losses; non-cash convertible debt interest expense; and other
non-recurring
gains and charges. The final number of PBIT PRSUs that vest will vary based upon the level of performance achieved from 0% to 200% of the target shares. The PBIT PRSUs will vest upon the three-year anniversary of the grant date. Compensation expense is recognized on a straight-line basis over the shorter of the three-year service period or the period from the grant date 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 year following the grant. Compensation expense is recognized based on the number of units that are earned based upon the three-year Teradyne PBIT as a percent of Teradyne’s revenue, provided the executive officer remains an employee at the end of the three-year period subject to the retirement and termination eligibility provisions noted below.
If a PRSU recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability or death or (2) retirement or termination other than for cause, after attaining both at least age
sixsixtyty
and at least
ten years
of service, then all or a portion of the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will vest on the date the performance percentage is determined. Except as set forth in the preceding sentence, no PRSUs will vest if the executive officer is no longer an employee at the end of the three-year period.
Stock
options to purchase Teradyne’s common stock at 100%
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.
During the six months ended July 3, 2022 and July 4, 2021, and June 28, 2020, Teradyne granted 0.30.4 million and 0.40.3 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $113.23$111.21 and $70.52,$113.23, respectively, and
0.1
$0.1 million of service-based restricted stock unit awards to
non-employee
directors at a weighted average grant date fair value of $
127.77
$106.91 and $
64.99
,$127.77, respectively.
During the six months ended July 3, 2022 and July 4, 2021, and June 28, 2020, Teradyne granted 0.1 million of PBIT PRSUs with a grant date fair value of $110.84 and $113.65, and $70.94, respectively.
18

During the six months ended July 3, 2022 and July 4, 2021, and June 28, 2020, Teradyne granted 0.1 million of TSR PRSUs, with a grant date fair value of $125.02$101.06 and $89.93,$125.02, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:​​​​​​​
 
  
For the Six Months

Ended
  
July 4,

2021
 
June 28,

2020
  
For the Six Months

Ended
 
  
July 3,
2022
 
July 4,
2021
 
Risk-free interest rate
  0.2% 1.5%   1.4  0.2
Teradyne volatility-historical
  43.9% 34.9%   47.1  43.9
NYSE Composite Index volatility-historical
  22.9% 11.4%   22.7  22.9
Dividend yield
  0.4% 0.6%   0.4  0.4
Expected volatility was based on the historical volatility of Teradyne’s stock and the NYSE Composite Index over the most recent three-year period. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.40$0.44 per share divided by Teradyne’s stock price on the grant date of $113.48$112.12 for the 20212022 grant and an estimated annual dividend amount of $0.40 per share divided by Teradyne’s stock price on the grant date of $72.10$113.48 for the 20202021 grant.
18

During the six months ended July 3, 2022 and July 4, 2021, and June 28, 2020, Teradyne granted 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $39.01 and $36.60, and $20.67, respectively.
The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:
 
  
For the Six Months Ended
  
For the Six Months

Ended
 
  
July 4, 2021
  
June 28, 2020
      
  
July 3,
2022
 
July 4,
2021
 
Expected life (years)
  5.0 5.0   4.0   5.0 
Risk-free interest rate
  0.4% 1.6%   1.6  0.4
Volatility-historical
  37.8% 31.6%   43.7  37.8
Dividend yield
  0.4% 0.6%   0.4  0.4
Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.40$0.44 per share divided by Teradyne’s stock price on the grant date of $113.48$112.12 for the 20212022 grant and an estimated annual dividend amount of $0.40 per share divided by Teradyne’s stock price on the grant date of $72.10$113.48 for the 20202021 grant.
19


M.
L. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss), which are presented net of tax, consist of the following:
 
  
Foreign

Currency

Translation

Adjustment
   
Unrealized

Gains

(Losses) on

Marketable

Securities
   
Retirement

Plans Prior

Service

Credit
   
Total
   
Foreign

Currency

Translation

Adjustment
   
Unrealized

Gains

(Losses) on

Marketable

Securities
   
Retirement

Plans Prior

Service

Credit
   
Total
 
  
(in thousands)
                 
  
(in thousands)
 
Six Months Ended July 3, 2022
        
Balance at December 31, 2021, net of tax of $0, $1,055, $(1,128), $0, respectively  $(10,818  $3,704   $1,166   $(5,948
Other comprehensive loss before reclassifications, net of tax of $0, $(2,573), $0, respectively   (37,307   (9,910   —     $(47,217
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $59, $(1), respectively   —      209    (3   206 
                
Net current period other comprehensive loss, net of tax of $0, $(2,514), $(1), respectively   (37,307   (9,701   (3   (47,011
                
Balance at July 3, 2022, net of tax of $0, $(1,459), $(1,129), respectively  $(48,125  $(5,997  $1,163   $(52,959
                
Six Months Ended July 4, 2021
                    
Balance at December 31, 2020, net of tax of $0, $1,910, $(1,126), respectively
  $25,389   $6,954   $1,173   $33,516   $25,389   $6,954   $1,173   $33,516 
Other comprehensive loss before reclassifications, net of tax of $0, $(472), $0, respectively
   (15,974   (1,776   0       (17,750   (15,974   (1,776   —      (17,750
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(121), $(1), respectively
   0       (441   (3   (444   —      (441   (3   (444
  
 
   
 
   
 
   
 
                 
Net current period other comprehensive loss, net of tax of $0, $(593), $(1), respectively
   (15,974   (2,217   (3   (18,194   (15,974   (2,217   (3   (18,194
  
 
   
 
   
 
   
 
                 
Balance at July 4, 2021, net of tax of $0, $1,317, $(1,127), respectively
  $9,415   $4,737   $1,170   $15,322   $9,415   $4,737   $1,170   $15,322 
  
 
   
 
   
 
   
 
                 
 
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    0       11,856 
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(421), $(1), respectively
   0       (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
  
 
   
 
   
 
   
 
 
Reclassifications out of accumulated other comprehensive income (loss) to the statement of operations for the three and six months ended July 3, 2022 and July 4, 2021 and June 28, 2020 were as follows:
 
Details about Accumulated Other Comprehensive Income (Loss) Components
  
For the Three Months

Ended
   
For the Six Months

Ended
   
Affected Line Item

in the Statements

of Operations
 
   
July 4,

2021
  
June 28,

2020
   
July 4,

2021
   
June 28,

2020
     
   
(in thousands)
     
Available-for-sale marketable securities:
                        
Unrealized (losses) gains, net of tax of $(2), $277, $121, $421, respectively
  $(3 $983   $441   $1,499    Other (income)
expense, net
 
 
Defined benefit post-retirement plan:
                        
Amortization of prior service credit, net of tax of $0, $0, $1, $1, respectively
   2   2    3    3    (a) 
   
 
 
  
 
 
   
 
 
   
 
 
      
Total reclassifications, net of tax of $(2), $277, $122, $422, respectively
  $(1 $985   $444   $1,502    Net income 
   
 
 
  
 
 
   
 
 
   
 
 
      
Details about Accumulated Other Comprehensive Income (Loss) Components
  
For the Three Months

Ended
  
For the Six Months

Ended
   
Affected Line Item
in the Statements
of Operations
   
July 3,
2022
  
July 4,
2021
  
July 3,
2022
  
July 4,
2021
    
                 
   
(in thousands)
    
Available-for-sale
marketable securities:
       
Unrealized (losses) gains, net of tax of $(77), $(2), $(59), $121, respectively  $(274 $(3 $(209 $441   Other (income)
 
expense, net
Defined benefit postretirement plan:                    
Amortization of prior service credit, net of tax of $0, $0, $1, $1, respectively   2   2   3   3   (a)
                     
Total reclassifications, net of tax of $(77), $(2), $(58), $122, respectively  $(272 $(1 $(206 $444   Net income
                     
 
(a)The amortization of prior service credit is included in the computation of net periodic postretirement benefit cost. See Note P: “Retirement Plans.”
(a) The amortization of prior service credit is included in the computation of net periodic postretirement benefit cost. See Note Q: “Retirement Plans.”
19

N.M. GOODWILL AND ACQUIRED INTANGIBLE ASSETS
Goodwill
Teradyne performs its annual goodwill impairment test as required under the provisions of ASC
350-10,
“Intangibles—Goodwill and Other”
on December 31 of each fiscal year unless interim indicators of impairment exist. In the six months ended July 3, 2022, there were no interim indicators of impairment. Goodwill is considered impaired when the net book value of a reporting unit exceeds its estimated fair value.
2
0
The changes in the carrying amount of goodwill by reportable segments for the six months ended July 4, 2021,3, 2022, were as follows:
 
   
Industrial

Automation
  
System

Test
  
Wireless

Test
  
Semiconductor

Test
  
Total
 
   
(in thousands)
 
Balance at December 31, 2020
                     
Goodwill
  $433,752  $158,699  $361,819  $262,155  $1,216,425 
Accumulated impairment losses
   0      (148,183  (353,843  (260,540  (762,566
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
    433,752   10,516   7,976   1,615   453,859 
Foreign currency translation adjustment
   (12,191  0      0      (71  (12,262
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance at July 4, 2021
                     
Goodwill
   421,561   158,699   361,819   262,084   1,204,163 
Accumulated impairment losses
   0      (148,183  (353,843  (260,540  (762,566
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   $421,561  $10,516  $7,976  $1,544  $441,597 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   
Industrial

Automation
  
Wireless
Test
  
Semiconductor
Test
  
System
Test
  
Total
 
                 
   
(in thousands)
 
Balance at December 31, 2021
                     
Goodwill  $405,971  $361,819  $262,101  $158,699  $1,188,590 
Accumulated impairment losses   —     (353,843  (260,540  (148,183  (762,566
                      
Total Goodwill   405,971   7,976   1,561   10,516   426,024 
                      
Foreign currency translation adjustment   (28,225  —     (66  —     (28,291
                      
Balance at July 3, 2022                     
Goodwill   377,746   361,819   262,035   158,699   1,160,299 
Accumulated impairment losses   —     (353,843  (260,540  (148,183  (762,566
                      
Total Goodwill  $377,746  $7,976  $1,495  $10,516  $397,733 
                      
Intangible Assets
Teradyne reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.
Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheet:
 
   
Gross

Carrying

Amount
   
Accumulated

Amortization
   
Foreign Currency
Translation
Adjustment
   
Net

Carrying

Amount
 
Balance at July 4, 2021
  
 
(in thousands)
 
Developed technology
  $272,547   $(216,820  $(2,779  $52,948 
Customer relationships
   57,739    (47,780   191    10,150 
Tradenames and trademarks
   70,120    (45,187   90    25,023 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total intangible assets
  $400,406   $(309,787  $(2,498  $88,121 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at December 31, 2020
                    
Developed technology
  $272,547   $(210,479  $(1,610  $60,458 
Customer relationships
   66,239    (54,524   305    12,020 
Tradenames and trademarks
   70,120    (42,344   685    28,461 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total intangible assets
  $408,906   $(307,347  $(620  $100,939 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
Gross

Carrying

Amount
   
Accumulated

Amortization
   
Foreign Currency
Translation
Adjustment
   
Net

Carrying

Amount
 
                 
Balance at July 3, 2022
  
(in thousands)
 
Developed technology  $272,547   $(229,766  $(6,182  $36,599 
Customer relationships   57,739    (50,058   149    7,830 
Tradenames and trademarks   59,387    (39,706   (1,601   18,080 
                     
Total intangible assets  $389,673   $(319,530  $(7,634  $62,509 
                     
Balance, December 31, 2021                    
Developed technology  $272,547   $(223,413  $(4,093  $45,041 
Customer relationships   57,739    (48,921   209    9,027 
Tradenames and trademarks   59,387    (37,237   (583   21,567 
                     
Total intangible assets  $389,673   $(309,571  $(4,467  $75,635 
                     
Aggregate intangible asset amortization expense was $4.9 million and $9.9 million, respectively, for the three and six months ended July 3, 2022 and $5.4 million and $10.9 million, respectively, for the three and six months ended July 4, 2021 and $8.9 million and $18.8 million, respectively, for the three and six months ended June 28, 2020.2021.
Estimated intangible asset amortization expense for each of the five succeeding fiscal years and thereafter is as follows:
 
  
Year
  
Amortization Expense
   
Amortization Expense
 
  
(in thousands)
   
(in thousands)
 
2021(remainder)
  $10,636 
2022
   20,570   $9,547 
2023
   20,084    18,642 
2024
   19,776    18,336 
2025
   11,756    11,154 
2026   2,333 
Thereafter
   5,299    2,497 
 
2
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O.N. NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted net income per common share:
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 4,

2021
   
June 28,

2020
   
July 4,

2021
   
June 28,

2020
 
   
(in thousands, except per share amounts)
 
Net income for basic and diluted net income per share
  $328,319   $188,908   $533,831   $365,098 
   
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares-basic
   165,995    165,789    166,243    166,189 
Effect of dilutive potential common shares:
                    
Incremental shares from assumed conversion of convertible notes (1)
   9,578    7,599    9,944    7,466 
Convertible note hedge warrant shares (2)
   10,073    5,824    9,751    5,658 
Restricted stock units
   1,015    913    1,205    1,038 
Stock options
   78    132    93    133 
Employee stock purchase plan
   11    0       9    13 
   
 
 
   
 
 
   
 
 
   
 
 
 
Dilutive potential common shares
   20,755    14,468    21,002    14,308 
   
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares-diluted
   186,750    180,257    187,245    180,497 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net income per common share-basic
  $1.98   $1.14   $3.21   $2.20 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net income per common share-diluted
  $1.76   $1.05   $2.85   $2.02 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
2022
   
July 4,
2021
   
July 3,
2022
   
July 4,
2021
 
                 
   
(in thousands, except per share amounts)
 
Net income for basic and diluted net income per share  $197,787   $328,319   $359,715   $533,831 
                     
Weighted average common shares-basic   159,563    165,995    160,805    166,243 
Effect of dilutive potential common shares:                    
Convertible note hedge warrant shares (1)   9,029    10,073    9,528    9,751 
Incremental shares from assumed conversion of convertible notes (2)   1,900    9,578    2,220    9,944 
Restricted stock units   581    1,015    730    1,205 
Stock options   54    78    61    93 
Employee stock purchase plan   32    11    23    9 
                     
Dilutive potential common shares   11,596    20,755    12,562    21,002 
                     
Weighted average common shares-diluted   171,159    186,750    173,367    187,245 
                     
Net income per common share-basic  $1.24   $1.98   $2.24   $3.21 
                     
Net income per common share-diluted  $1.16   $1.76   $2.07   $2.85 
                     
(1)
Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price, multiplied by
the number of warrant
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.
(2)
Incremental shares from assumed conversion of the convertible notes were calculated using the difference between the average Teradyne stock price for the period and the conversion price, of $31.54, multiplied by 12.7 million
the number of convertible notes
shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period.
(2)
Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of $39.58, 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 three and six months ended June 28, 2020July 3, 2022 excludes the effect of the potential vesting of 0.1 million and 0.2 million, respectively, of restricted stock units because the effect would have been anti-dilutive.
The computation of diluted net income per common share for the three and six months ended July 4, 2021 excludes the effect of the potential vesting of 0.1 million and 0.1 million, respectively, of restricted stock units because the effect would have been anti-dilutive.
P.O. RESTRUCTURING AND OTHER
During the three months ended July 3, 2022 and July 4, 2021, Teradyne recorded a charge of $1.5 million and $1.7 million, respectively, for an increase in environmental and legal liabilities.
During the six months ended July 3, 2022, Teradyne recorded a charge of $14.7 million related to the arbitration claim filed against Teradyne and AutoGuide related to an
earn-out
dispute, which was settled on March 25, 2022 for $26.7 million, and a charge of $2.0 million for an increase in environmental and legal liabilities, $0.4 million of severance charges primarilyliabilities. Previously, in Industrial Automation and $0.4 million for other expenses.
During the three months ended June 28, 2020,December 31, 2021, Teradyne recorded a charge of $29.9$12 million for the increase in the fair value of the AutoGuide contingent consideration liability, a $4.0 million contract termination settlement charge, $3.1 million of acquisition related compensation and expenses, and $0.8 million of other expenses, partially offset by a $0.6 million gain for the decrease in the fair value of the MiR contingent consideration liability.to this
earn-out
dispute.
During the six months ended July 4, 2021, Teradyne recorded a gain of $7.2 million for the decrease in the fair value of the AutoGuide contingent consideration liability, partially offset by a charge of $1.7 million for an increase in environmental and legal liabilities, $0.6 million of severance charges primarily in Industrial Automation and $0.3 million for other expenses.liabilities.
During the six months ended June 28, 2020, Teradyne recorded a $22.8 million charge for the increase in the fair value of the AutoGuide contingent consideration liabilities, $4.5 million of acquisition related compensation and expenses, a $4.0 million contract termination settlement charge, $1.1 million of other expenses, and $0.8 million of severance charges primarily in Semiconductor Test, partially offset by a $3.6 million gain for the decrease in the fair value of the MiR contingent consideration liability.
Q.
P. RETIREMENT PLANS
ASC 715,
“Compensation— “Compensation—Retirement Benefits”
Benefits,” requires an employer with a defined benefit planplans or other postretirement benefit planplans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plan.plans as defined by ASC 715. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation at December 31. Teradyne uses a December 31 measurement date for all of its plans.
2
2

Defined Benefit Pension Plans
Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain
non-U.S.
subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to
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make contributions to these plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of the U.S. qualified pension plan consist primarily of fixed income and equity securities. In addition, Teradyne has unfunded qualified foreign plans as well as an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (“IRC”(the “IRC”)., as well as unfunded qualified foreign plans.
In the six months ended July 3, 2022 and July 4, 2021, and June 28, 2020, Teradyne contributed $1.7$1.6 million and $1.4$1.7 million, respectively, to the U.S. supplemental executive defined benefit pension plan, and $0.5 million and $0.4$0.5 million, respectively, to certain qualified pension plans for
non-U.S.
subsidiaries.
For the three and six months ended July 3, 2022 and July 4, 2021, and June 28, 2020, Teradyne’s net periodic pension cost was comprised of the following:
 
   
For the Three Months Ended
 
   
July 4, 2021
   
June 28, 2020
 
   
United

States
   
Foreign
   
United

States
   
Foreign
 
   
(in thousands)
 
Service cost
  $452   $245   $433   $208 
Interest cost
   1,096    88    1,523    119 
Expected return on plan assets
   (936   (17   (1,232   (15
Net actuarial (gain) loss
   (400   —       180    —    
   
 
 
   
 
 
   
 
 
   
 
 
 
Total net periodic pension cost
  $212   $316   $904   $312 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
   
For the Six Months Ended
 
   
July 4, 2021
   
June 28, 2020
 
   
UnitedStates
   
Foreign
   
UnitedStates
   
Foreign
 
   
(in thousands)
 
Service cost
  $905   $491   $866   $417 
Interest cost
   2,196    175    3,045    238 
Expected return on plan assets
   (1,872   (33   (2,464   (31
Net actuarial (gain) loss
   (400   —       180    —    
   
 
 
   
 
 
   
 
 
   
 
 
 
Total net periodic pension cost
  $829   $633   $1,627   $624 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
For the Three Months Ended
 
   
July 3, 2022
   
July 4, 2021
 
   
United

States
   
Foreign
   
United

States
   
Foreign
 
                 
   
(in thousands)
 
Service cost  $397   $180   $452   $245 
Interest cost   1,221    120    1,096    88 
Expected return on plan assets   (732   (18   (936   (17
Net actuarial gain   (45   —      (400   —   
                     
Total net periodic pension cost  $841   $282   $212   $316 
                     
  
   
For the Six Months Ended
 
   
July 3, 2022
   
July 4, 2021
 
   
United

States
   
Foreign
   
United

States
   
Foreign
 
                 
   
(in thousands)
 
Service cost  $794   $386   $905   $491 
Interest cost   2,443    238    2,196    175 
Expected return on plan assets   (1,463   (38   (1,872   (33
Net actuarial gain   (45   —      (400   —   
                     
Total net periodic pension cost  $1,729   $586   $829   $633 
                     
Postretirement Benefit Plan
In addition to receiving pension benefits, Teradyne employees in the United States who meet early retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.
For the three and six months ended July 3, 2022 and July 4, 2021, and June 28, 2020, Teradyne’s net periodic postretirement benefit creditcost (credit) was comprised of the following:
 
   
For the Three
Months

Ended
   
For the Six Months

Ended
 
   
July 4,

2021
   
June 28,

2020
   
July 4,

2021
   
June 28,

2020
 
   
(in thousands)
 
Service cost
  $17   $17   $33   $28 
Interest cost
   41    58    85    120 
Amortization of prior service credit
   (2   (2   (4   (4
Net actuarial gain
   (228   (279   (228   (279
   
 
 
   
 
 
   
 
 
   
 
 
 
Total net periodic postretirement benefit credit
  $(172  $(206  $(114  $(135
   
 
 
   
 
 
   
 
 
   
 
 
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
2022
   
July 4,
2021
   
July 3,
2022
   
July 4,
2021
 
                 
   
(in thousands)
 
Service cost  $15   $17   $32   $33 
Interest cost   45    41    88    85 
Amortization of prior service credit   (2   (2   (4   (4
Net actuarial loss (gain)   54    (228   54    (228
                     
Total net periodic postretirement benefit cost (credit)  $112   $(172  $170   $(114
                     
R.
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Q. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
As of July 4, 2021,3, 2022, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $770.0$1,006.8 million, of which $754.3$870.5 million is for less than one year.
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Legal Claims
Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Teradyne believes that it has meritorious defenses against all pending claims and intends to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending claims or to provide possible ranges of losses that may arise, Teradyne believes the potential losses associated with all of these actions are unlikely to have a material adverse effect on its business, financial position or results of operations.
On March 8, 2021, Industrial Automation LLC, sellers of AutoGuide, submitted a demand for arbitration against Teradyne and AutoGuide in Wilmington, Delaware alleging that Teradyne and AutoGuide breached certain provisions of the Membership Interests Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide. The arbitration demand seekssought full acceleration of the maximum earnout
earn-out
amount payable under the Purchase Agreement, or $106.9
 million,
,
for the alleged breach of the earnout
earn-out
provisions of the Purchase Agreement. On March 26, 2021,
25
, 2022, the arbitration claim was settled for $26.7 million. As a result, Teradyne has no remaining
earn-out
obligations.
Guarantees and AutoGuide filed an answer denying that Indemnification Obligations
Teradyne provides indemnification, to the extent permitted by law, to its officers, directors, employees and AutoGuide breached any provisionsagents for liabilities arising from certain events or occurrences, while the officer, director, employee, or agent, is or was serving, at Teradyne’s request in such capacity. Teradyne may enter into indemnification agreements with certain of its officers and directors. With respect to acquisitions, Teradyne provides indemnifications to or assumes indemnification obligations for the current and former directors, officers and employees of the Purchase Agreement. The arbitration hearingacquired companies in accordance with the acquired companies’
by-laws
and charters. As a matter of practice, Teradyne has maintained directors’ and officers’ liability insurance coverage, including coverage for directors and officers of acquired companies.
Teradyne enters into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require Teradyne to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to Teradyne’s products. From time to time, Teradyne also indemnifies customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, breach of confidentiality obligations and environmental claims relating to the use of Teradyne’s products and services or resulting from the acts or omissions of Teradyne, its employees, authorized agents or subcontractors. On occasion, Teradyne has also provided guarantees to customers regarding the delivery and performance of its products, in addition to the warranty described below.
As a matter of ordinary course of business, Teradyne warrants that its products will substantially perform in accordance with its standard published specifications in effect at the time of delivery. Most warranties have a
one-year
duration commencing from installation. A provision is scheduledrecorded upon revenue recognition to cost of revenues for March 21, 2022. While itestimated warranty expense based upon historical experience. When Teradyne receives revenue for extended warranties beyond the standard duration, the revenue is not possible at this stagedeferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. As of July 3, 2022 and December 31, 2021,
Teradyne had a product warranty accrual of $16.0 million and $24.6 million, respectively, included in other accrued liabilities, and revenue deferrals related to predictextended warranties of $65.8 million and $64.2 million, respectively, included in short and long-term deferred revenue and customer advances.
In addition, in the outcomeordinary course of business, Teradyne provides minimum purchase guarantees to certain vendors to ensure continuity of supply against the market demand. Although some of these guarantees provide penalties for cancellations and/or modifications to the purchase commitments as the market demand decreases, most of the arbitration,guarantees do not. Therefore, as the market demand decreases, Teradyne
re-evaluates
these guarantees and AutoGuide intenddetermines what charges, if any, should be recorded.
With respect to vigorously defendits agreements covering product, business or entity divestitures and acquisitions, Teradyne provides certain representations, warranties and covenants to purchasers and agrees to indemnify and hold such purchasers harmless against breaches of such representations, warranties and covenants. Many of the Industrial Automation LLC claims.indemnification claims have a definite expiration date while some remain in force indefinitely. With respect to its acquisitions, Teradyne may, from time to time, assume the liability for certain events or occurrences that took place prior to the date of acquisition.
As a matter of ordinary course of business, Teradyne occasionally guarantees certain indebtedness obligations of its subsidiary companies, limited to the borrowings from financial institutions, purchase commitments to certain vendors, and lease commitments to landlords.
S.
24

Based on historical experience and information known as of July 3, 2022 and December 31, 2021, except for product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.
R. INCOME TAXES
A reconciliation of the United States federal statutory corporate tax rate to Teradyne’s effective tax rate was as follows:
 
   
For the Three Months

Ended
  
For the Six Months

Ended
 
   
July 4,

2021
  
June 28,

2020
  
July 4,

2021
  
June 28,

2020
 
U.S. statutory federal tax rate
   21.0  21.0  21.0  21.0
Foreign taxes
   (4.3  (4.6  (4.5  (5.1
International provisions of the U.S. Tax Cuts and Jobs Act of 2017
   (1.7  (1.9  (1.6  (1.1
Tax credits
   (1.2  (1.4  (1.2  (1.6
Discrete benefit related to equity compensation
   (0.2  (0.1  (2.4  (2.0
Other, net
   0.9   0.1   0.9   0.7 
   
 
 
  
 
 
  
 
 
  
 
 
 
Effective tax rate
   14.5  13.1  12.2  11.9
   
 
 
  
 
 
  
 
 
  
 
 
 
   
For the Three Months

Ended
  
For the Six Months

Ended
 
   
July 3,
2022
  
July 4,
2021
  
July 3,
2022
  
July 4,
2021
 
U.S. statutory federal tax rate   21.0  21.0  21.0  21.0
Non-deductible
officers’ compensation
   1.4   0.8   1.3   0.8 
Foreign taxes   (3.2  (4.3  (3.3  (4.5
Tax credits   (2.0  (1.2  (1.8  (1.2
International provisions of the U.S. Tax Cuts and Jobs Act of 2017   (1.0  (1.7  (1.2  (1.6
Discrete benefit related to equity compensation   (0.2  (0.2  (2.9  (2.4
Other, net   1.1   0.1   1.0   0.1 
                  
Effective tax rate   17.1  14.5  14.1  12.2
                  
On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of July 4, 2021,3, 2022, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is
more-likely-than-not
that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.
As of July 4, 20213, 2022 and December 31, 2020,2021, Teradyne had $16.6$14.6 million and $17.9$14.5 million, respectively, of reserves for uncertain tax positions. The $1.3$0.1 million net decreaseincrease in reserves for uncertain tax positions is primarilyconsists of an increase related to U.S. state research and development credits generated in prior years, as well as U.S. federal research and development credits generated in the current year.year partially offset by the release of reserves related to prior year loss carryforwards.
As of July 4, 2021,3, 2022, Teradyne estimates that it is reasonably possible thatdoes not anticipate a material change in the balance of unrecognized tax benefits may decrease approximately $1.6 million induring the next twelve months because of a lapse of statutes of limitation. The estimated decrease relates to loss carryforwards, research credits and U.S. manufacturing activities deductions.months.
Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of July 4, 20213, 2022 and December 31, 2020, $1.42021, $0.3 million and $1.2$0.3 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the six months ended July 3, 2022 and July 4, 2021, and June 28, 2020,an expense of $0.2$0.1 million and $0.3$0.2 million, respectively, was recorded for interest and penalties related to income tax items.
Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the six months ended July 4, 20213, 2022 was $15.9$8.3 million, or $0.08$0.05 per diluted share. The tax savings due to the tax holiday for the six months ended June 28, 2020July 4, 2021 was $13.6$15.9 million, or $0.08 per diluted share. In November 2020, Teradyne entered into an agreement with the Singapore Economic Development Board which extended
its
Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31, 2025.
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T.S. SEGMENT INFORMATION
Teradyne has 4 reportable segments (Semiconductor Test, System Test, Industrial Automation and Wireless Test). Each of the reportable segments is also an individual operating segment.
The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products and services for defense/aerospace instrumentation test, storage and system level test, and circuit-board test. The Industrial Automation segment includes operations related to the design, manufacturing and marketing of collaborative robotic arms, autonomous mobile robots and advanced robotic control software. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. Each operating segment has a segment manager who is directly accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts, and plans for the segment.
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Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income (loss) before income taxes. The accounting policies of the business segments in effect are described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form
10-K
for the year ended December 31, 2020.2021.
Segment information for the three and six months ended July 3, 2022 and July 4, 2021 and June 28, 2020 is as follows:
 
   
Semiconductor

Test
   
System

Test
   
Industrial

Automation
  
Wireless

Test
   
Corporate

and

Other
  
Consolidated
 
   
(in thousands)
 
       
Three Months Ended July 4, 2021
                            
Revenues
  $833,976   $104,819   $92,186  $54,893   $(146 $1,085,728 
Income (loss) before income taxes (1)(2)
   337,302    33,954    (9,837  21,472    1,135   384,026 
Total assets (3)
   1,518,941    146,296    687,022   117,702    1,530,961   4,000,922 
       
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 
       
Six Months Ended July 4, 2021
                            
Revenues
  $1,362,039   $237,656   $172,137  $95,791   $(289 $1,867,334 
Income (loss) before income taxes (1)(2)
   513,670    85,015    (22,804  31,088    1,050   608,019 
Total assets (3)
   1,518,941    146,296    687,022   117,702    1,530,961   4,000,922 
       
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 
                         
   
Semiconductor

Test
   
System

Test
   
Industrial

Automation
  
Wireless

Test
   
Corporate

and

Eliminations
  
Consolidated
 
                       
   
(in thousands)
 
Three Months Ended July 3, 2022
                            
Revenues  $541,348   $134,702   $101,055  $63,854   $(193 $840,766 
Income (loss) before income taxes (1)(2)   177,782    54,042    (6,406  25,393    (12,219  238,592 
Total assets (3)   1,449,878    229,359    644,099   118,445    1,046,645   3,488,426 
Three Months Ended July 4, 2021
                            
Revenues  $833,976   $104,819   $92,186  $54,893   $(146 $1,085,728 
Income (loss) before income taxes (1)(2)   337,302    33,954    (9,837  21,472    1,135   384,026 
Total assets (3)   1,518,941    146,296    687,022   117,702    1,530,961   4,000,922 
Six Months Ended July 3, 2022
                            
Revenues  $1,023,688   $253,371   $204,244  $115,372   $(539 $1,596,136 
Income (loss) before income taxes (1)(2)   327,487    95,365    (11,504  44,012    (36,409  418,951 
Total assets (3)   1,449,878    229,359    644,099   118,445    1,046,645   3,488,426 
Six Months Ended July 4, 2021
                            
Revenues  $1,362,039   $237,656   $172,137  $95,791   $(289 $1,867,334 
Income (loss) before income taxes (1)(2)   513,670    85,015    (22,804  31,088    1,050   608,019 
Total assets (3)   1,518,941    146,296    687,022   117,702    1,530,961   4,000,922 
 
(1)
Included in Corporate and OtherEliminations are: legal
 and environmental
fees, contingent consideration fair value adjustments, loss on convertible debt conversions, interest income, interest expense, severance charges, net foreign exchange gains (losses), acquisition related charges and compensation, pension, intercompany eliminations and acquisition related: (a) charges; (b) legal fees; (c) compensation.for the three and six months ended July 4, 2021, loss on convertible debt conversions.
(2)
Included in income (loss) before taxes are charges and credits related to restructuring and other, inventory charges and, for the three and six months ended July 4, 2021, loss on convertible debt conversions and inventory charges.
conversions.
(3)
Total assets are attributable to each segment. Corporate assets consist of cash and cash equivalents, marketable securities, and certain other assets.
24

Table of Contents
Included in each segment are charges and credits in the following line items in the statements of operations:
 
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 4,

2021
   
June 28,

2020
   
July 4,

2021
   
June 28,

2020
 
   
(in thousands)
 
Semiconductor Test:
                    
Cost of revenues - inventory charge
  $—      $3,799   $1,234   $6,825 
Restructuring and other -
c
ontract termination settlement charge
   —       4,000    —       4,000 
Industrial Automation:
                    
Restructuring and other - acquisition related expenses and compensation
  $—      $—      $550   $790 
Cost of revenues - inventory charge
   —       —       1,285    —    
Wireless:
                    
Cost of revenues - inventory charge
  $—      $1,582   $672   $2,155 
Corporate and Other:
                    
Restructuring and other - other
  $1,700   $750   $1,846   $750 
Other (income) expense, net -
l
oss on convertible debt conversion
   1,175    —       5,244    —    
Restructuring and other - AutoGuide contingent consideration adjustment
   —       29,927    (7,227   22,785 
Restructuring and other - acquisition related expenses and compensation
   —       2,974    (513   3,715 
Restructuring and other - MiR contingent consideration adjustment
   —       (668   —       (3,546
   
For the Three Months

Ended
   
For the Six Months

Ended
 
   
July 3,
2022
   
July 4,
2021
   
July 3,
2022
   
July 4,
2021
 
                 
   
(in thousands)
 
Semiconductor Test:
                    
Cost of revenues—inventory charge  $2,071   $—     $2,315   $1,234 
Industrial Automation:
                    
Cost of revenues—inventory charge  $831   $—     $1,197   $1,285 
Restructuring and other—acquisition related expenses and compensation   —      —      —      550 
Wireless:
                    
Cost of revenues—inventory charge  $2,099   $—     $2,976   $672 
Corporate and Eliminations:

                    
Restructuring and other—other  $1,500   $1,700   $2,000   $1,846 
Restructuring and other—legal settlement charge   —      —      14,700    —   
Other (income) expense, net—loss on convertible debt conversions   —      1,175    —      5,244 
Restructuring and other—AutoGuide contingent consideration adjustment   —      —      —      (7,227
Restructuring and other—acquisition related expenses and compensation   —      —      —      (513
U.
26

Table of Contents
T. SHAREHOLDERS’ EQUITY
Stock Repurchase Program
In January 2021, Teradyne’s Board of Directors cancelled the January 2020 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. Teradyne intends to repurchase a minimum of $600$750.0 million of its common stock in 2021.
2022.
During the six months ended July 3, 2022, Teradyne repurchased 5.0 million shares of common stock for $532.8 million at an average price of $107.50 per share. During the six months ended July 4, 2021, Teradyne repurchased 1.6 million shares of common stock for $196.6 million at an average price of $125.69 per share. DuringThe cumulative repurchases under the six months ended June 28, 2020, Teradyne repurchased 1.5$2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $88.5$1,132.8 million at an average price per share of $58.33 per share.$116.45.
The total price includes commissions and is recorded as a reduction to retained earnings.
Dividend
Holders of Teradyne’s common stock are entitled to receive dividends when they are declared by Teradyne’s Board of Directors.
In January 2022 and May 2022, Teradyne’s Board of Directors declared a quarterly cash dividend
of
$0.11 per share. Dividend payments for the three and six months ended July 3, 2022 were $17.5 million and $35.4 million, respectively.
In January 2021 and May 2021, and 2020, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for each of the three and six months ended July 4, 2021 and June 28, 2020 were $16.6 million and $33.3 million, respectively.
While Teradyne declared a quarterly cash dividend and authorized a share repurchase program, it may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of Teradyne’s Board of Directors which will consider, among other things, Teradyne’s earnings, capital requirements and financial condition.
 
2
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Table of Contents
Item 2:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Statements in this Quarterly Report on Form
10-Q
which are not historical facts, so called “forward-looking statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in our filings with the Securities and Exchange Commission. See also Part II, Item 1A of this Quarterly Report on Form
10-Q
and Part I, Item 1A “Risk Factors” in our Annual Report on Form
10-K
for the year ended December 31, 2020.2021. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management’s analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements, except as may be required by law.
Overview
We are a leading global supplier of automation equipment for test and industrial applications. We design, develop, manufacture and sell automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Our industrial automation products include collaborative robotic arms, autonomous mobile robots (“AMRs”) and advanced robotic control software used by global manufacturing, logistics and light industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Our automatic test equipment and industrial automation products and services include:
 
semiconductor test (“Semiconductor Test”) systems;
 
storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);
 
wireless test (“Wireless Test”) systems; and
 
industrial automation (“Industrial Automation”) products.
The market for our test products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. A few customers drive significant demand for our test products both through direct sales and sales to the customers’ supply partners. We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future. In 2022, we expect lower demand in the mobility and compute segments of our Semiconductor Test business due to end market slowdown in these segments as well as slower technology transition in one of our largest
end-markets.
While there is uncertainty if end markets will recover in 2023, the ramp of 3 nanometer starting in 2023 followed by gate-all-around and increasing multichip packaging remain unaltered drivers of growth. We expect Semiconductor Test demand in the automation and industrial segments to remain strong in 2022.
Our Industrial Automation segment consists of Universal Robots A/S (“UR”), a leading supplier of collaborative robotic arms, Mobile Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial applicationsautomation and AutoGuide, LLC (“AutoGuide”), a maker of high payload AMRs. The market for our industrial automationIndustrial Automation segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (SMEs) throughout the world. We expect our UR and MiR businesses to continue to grow in 2022, while our AutoGuide business will focus on continuing to invest to scale and integrate high payload AMR solutions.
Both our test and industrial automation businesses may continue to be impacted by supply constraints, which will in turn impact our revenue and is expected to, along with inflation, increase costs in 2022. Through the second quarter of 2022, inflation has not had a material impact on our results. In the second quarter 2022, we were unable to supply approximately $40 million of revenue in our test businesses for which we had customer demand. Our third quarter 2022 forecast excludes approximately $50 million of revenue, primarily in our test businesses, due to these continued supply chain constraints.
Our corporate strategy iscontinues to focus on profitably growinggaining market share in our test businesses through the introduction of differentiated products that target growthexpanding segments and accelerating growth through continued investment in our Industrial Automation businesses. We plan to execute on our strategy while balancing capital allocations between returning capital to our shareholders through dividendsstock repurchases and stock repurchasesdividends and using capital for opportunistic acquisitions.
Impact of the
COVID-19
Pandemic on our Business
The novel coronavirus
(COVID-19)
pandemic resulted in government authorities implementing numerous measures in an effort to contain the spread of the virus, such as travel bans and restrictions, limitations on gatherings or social distancing requirements, quarantines,
shelter-in-place
orders, vaccination and testing mandates, and business limitations and shutdowns. These measures have impacted our
day-to-day
operations and disrupted our business, workforce and operations, as well as the operations of our customers, contract manufacturers and suppliers. We are continuing to monitor the rapidly evolving situation regarding the
COVID-19
pandemic, particularly in China, and the availability and impact of vaccinations globally. However, we are unable to accurately predict the full
28

impact of
COVID-19,
which will depend on future developments that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, any new surges or new strains or variants of the virus in areas where we do business, the availability and use of vaccinations, any further government actions to contain the virus or treat its impact, continuing shutdowns in China, and how quickly and to what extent normal economic and operating conditions can resume.
Due to the
COVID-19
pandemic, there has been uncertainty and disruption in the global economy and our markets. We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of August 5, 2022, the date of issuance of this Quarterly Report on Form
10-Q.
26

Health and Safety
In response to the
COVID-19
pandemic, we have taken proactive, aggressive action to protect the health and safety of our employees, customers, contract manufacturers and suppliers, and we have complied with all government orders around the globe. The spread of
COVID-19
has caused us to modify our business practices, includingwhich includes implementing social distancing protocols, suspendinglimiting employee travel and requiring most employees to work remotely, cancelling physical participation in meetings, and extensively and frequently disinfecting our workspaces. Around the world, many of our employees are working from home. However, some of our engineering, operations, supply line and customer support teams must be on-site at our or our customers’ facilities. We are providing those on-site employees with the necessary protective resources and procedures to minimize their exposure risk.remotely. We may take further actions as may be required or recommended by government authorities or that we determine are in the best interests of our employees, customers, contract manufacturers and suppliers.
Operations
We believe the
COVID-19
pandemic, and the numerous measures implemented by authorities in response, has adversely impacted our results of operations, including by increasing costs, but we cannot accurately estimate the amount of the impact to our second quarter of 20212022 financial results or to our future financial results. In addition, the pandemic has disrupted our contract manufacturers and suppliers, and has resulted in some instances insupply constraints and short-term cost increases to meet customer demand. While the duration and severity of the pandemic may further impact our workforce and operations, as well as those of our customers, contract manufacturers and suppliers, we expect that our manufacturing facilities will remain operational, at sufficient capacity to support production demand.based on demand and the availability of supply. We are monitoring our operations closely in an effort to avoid any potential productivity losslosses caused by responses to the
COVID-19
pandemic.
Supply
We have not experienced any significant impacts or interruptions to our supply chain as a result of the COVID-19 pandemic. However, our suppliers have faced and may continue to face difficulties maintaining operations in light of government-ordered restrictions, including social distancing requirements and shelter-in-place mandates. Our supply chain team, and our suppliers, overcame numerous supply, production, and logistics obstacles in 2020 and the first half of 2021, but there is no assurance we or they will be able to do so in the future. Although we regularly monitor the financial health of companies in our supply chain, financial hardship on our suppliers or sub-suppliers caused by the COVID-19 pandemic could disrupt our ability to obtain components required to manufacture our products, adversely affecting our operations and in some instances result in higher costs and delays, both for obtaining components and shipping finished goods to customers, which could harm our profitability, make our products less competitive, or cause our customers to seek alternative suppliers.
Demand
The
COVID-19
pandemic has significantly increased economic uncertainty in our markets. Demand for our Test products in China and other countries was strong throughout 20202021 and in the first half of 2021. Our Industrial Automation business, however, experienced a significant decline in demand through2022, but the first half of 2020 due to
COVID-19 related shutdowns affecting global manufacturing but demand recovered in the second half of 2020 from the low point in the second quarter and continued to recover in the first half of 2021. The COVID-19
pandemic could cause further global economic disruption that could cause demand for our products to decline, which would adversely affect our business.
Liquidity
Although there is continued uncertainty related to the impact of the
COVID-19
pandemic on our future results, we believe our business model and our current cash reserves leave us well-positioned to manage our business through this crisis. We have a strong balance sheet, as well as an operating model that we believe is capable of flexing up and down with extreme demand swings while still remaining profitable. Based on our analysis, we believe our existing balances of cash and cash equivalents and our currently anticipated operating cash flows will be sufficient to meet our working capital needs and other capital and liquidity requirements for the next twelve months. However, due to the uncertainty related to the future impact of the
COVID-19
pandemic, in order to bolster our liquidity position, on May 1, 2020 we entered into a credit agreement providing for a three-year, senior secured revolving credit facility of $400 millionmillion. On December 10, 2021, we amended the credit agreement to extend its maturity to December 10, 2026 as further described in Note H: “Debt.” As of August 6, 2021,5, 2022, we have not borrowed any funds under the credit facility.
We are continuing to monitor the evolving situation regarding the
COVID-19
pandemic, the availability of vaccinations where we do business and guidance from government authorities around the world. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As a result, given the uncertain nature of this situation, we are not able to accurately predict the full extent of the impact of
COVID-19
on our business, financial condition, results of operations, liquidity, or cash flows in the future.
Supply Chain Constraints and Inflationary Pressures
The global supply shortage of electrical components, including semiconductor chips, continued to impact our supply chain in the second quarter of 2022. As a result, we experienced, and expect to continue to experience, increases in our lead times and costs for certain components for certain of our products. In addition, seewhile not material, inflationary pressures contributed to increased costs for product components and wage inflation, impacting our cost of products, gross margin and profit for the quarter. Our supply chain team, and our suppliers, continue to manage numerous supply, production, and logistics obstacles. While not material through the second quarter of 2022, in an effort to mitigate these risks, in some cases, we have incurred higher costs due to investment in supply chain resiliency and to secure available inventory or have extended or placed
non-cancellable
purchase commitments with semiconductor suppliers, which introduces inventory risk if our forecasts and assumptions prove inaccurate. We have also sourced components from additional suppliers and multi-sourced and
pre-ordered
components and finished goods inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced. There is no assurance that these efforts will be successful. In the second quarter 2022, we were unable to supply approximately $40 million of revenue in our test businesses for which we had customer demand. Our third quarter 2022 forecast excludes approximately $50 million of revenue, primarily in our test businesses, due to these continued supply chain constraints.
29

Impact of Russia’s invasion of Ukraine on our Business
Russia’s invasion of Ukraine, in February 2022, did not have a significant impact on our business as we have minimal business in Russia and Ukraine, both directly and indirectly. However, following the invasion, the U.S. and other countries imposed significant sanctions against the Russian government and many Russian companies and individuals. Although Teradyne does not have significant operations in Russia, the sanctions and Russia’s response to the sanctions, have impacted Teradyne’s business in other countries and could have a negative impact on the Company’s future revenue and supply chain, either of which could adversely affect Teradyne’s business and financial results. In addition, the global economic uncertainty following the invasion, sanctions and Russia’s response to the sanctions could impact demand for our products.
See Part II—Item 1A, “Risk Factors,” included in our Annual Report on Form
10-K
for the fiscal year ended December 31, 20202021 for our risk factors regarding risks associated with both the
COVID-19 pandemic.
pandemic and international conflicts.
27

Critical Accounting Policies and Estimates
We have identified the policies which are critical to understanding our business and our results of operations. There have been no significant changes during the six months ended July 4, 20213, 2022 to the items disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020,2021, except as noted below.
DueCritical accounting estimates are complex and may require significant judgment by management. Changes to the COVID-19 pandemic, there has been uncertaintyunderlying assumptions may have a material impact on our financial condition and disruption in the global economy and our markets. We are not awareresults of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of August 6, 2021, the date of issuance of this Quarterly Report on Form 10-Q.operations. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ significantly from these estimates under different assumptions or conditions.
Convertible Debt
We adopted Accounting Standards Update (“ASU”) ASU
2020-06
“Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity,”
on January 1, 2022 using the modified retrospective method of adoption
.
Under ASU
2020-06,
we account for a convertible debt instrument as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Unsettled shares are recorded in current debt, and there is no recognition of a debt discount, which was previously amortized to interest expense. We use the
if-converted
method in the diluted EPS calculation for convertible instruments. As a result of adoption, we recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $1.8 million to deferred tax assets, an increase of $6.6 million to long-term debt for unamortized debt discount, and an increase to retained earnings of $94.6 million for the reclassification of the equity component. Mezzanine equity representing unsettled shares value was reduced to zero and additional
paid-in
capital was reduced by $99.3 million.
Preparation of Financial Statements and Use of Estimates
The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates under different assumptions or conditions.
30

SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
 
  
For the Three Months

Ended
 
For the Six Months

Ended
 
  
For the Three Months

Ended
 
For the Six Months

Ended
           
  
July 4,

2021
 
June 28,

2020
 
July 4,

2021
 
June 28,

2020
   
July 3,
2022
 
July 4,
2021
 
July 3,
2022
 
July 4,
2021
 
Percentage of revenues:
          
Revenues:
          
Products
   88  88  86  87   83  88  83  86
Services
   12   12   14   13    17   12   17   14 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Total revenues
   100   100   100   100    100   100   100   100 
Cost of revenues:
          
Cost of products
   36   38   35   38    33   36   32   35 
Cost of services
   5   5   5   5    7   5   7   5 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)
   40   44   41   43    40   40   40   41 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Gross profit
   60   56   59   57    60   60   60   59 
Operating expenses:
          
Selling and administrative
   13   14   14   15    17   13   18   14 
Engineering and development
   10   11   11   12    13   10   14   11 
Acquired intangible assets amortization
   —     1   1   1    —     —     1   1 
Restructuring and other
   —     3   —     1    —     —     1   —   
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Total operating expenses
   24   29   26   29    31   24   33   26 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Income from operations
   36   27   33   28    29   36   27   33 
Non-operating (income) expense:
          
Interest income
   —     —     —     —      —     —     —     —   
Interest expense
   1   1   1   1    —     1   —     1 
Other (income) expense, net
   —     —     —     —      1   —     1   —   
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Income before income taxes
   35   26   33   27    28   35   26   33 
Income tax provision
   5   3   4   3    5   5   4   4 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Net income
   30  23  29  24   24  30  23  29
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
28

Results of Operations
Second Quarter 20212022 Compared to Second Quarter 20202021
Revenues
Revenues by our reportable segments were as follows:
 
  
For the Three Months

Ended
     
  
For the Three Months

Ended
       
July 3,
2022
   
July 4,
2021
   
Dollar
Change
 
  
July 4,
        2021        
   
June 28,
        2020        
   
Dollar
        Change        
             
  
(in millions)
   
(in millions)
 
Semiconductor Test
  $834.0   $659.1   $174.9   $541.3   $834.0   $(292.7
System Test
   104.8    71.8    33.0    134.7    104.8    29.9 
Industrial Automation
   92.2    58.8    33.4    101.1    92.2    8.9 
Wireless Test
   54.9    49.2    5.7    63.9    54.9    9.0 
Corporate and Other
   (0.1   (0.3   0.2 
Corporate and Eliminations
   (0.2   (0.1   (0.1
  
 
   
 
   
 
   
 
   
 
   
 
 
  $1,085.7   $838.7   $247.0   $840.8   $1,085.7   $(244.9
  
 
   
 
   
 
   
 
   
 
   
 
 
The increasedecrease in Semiconductor Test revenues of $174.9$292.7 million, or 26.5%35.1%, was driven primarily by a rise inlower tester sales driven byin high performance compute processors, industrialprocessor and automotivemobile applications, and incrementallower memory test sales of flash memory testers, partially offset by lower mobile application processor testers. The increase in System Test revenues of $33.0$29.9 million, or 46.0%28.5%, was primarily due to elevatedhigher sales in Storage Test of system level and hard disk drive and system level testers and greater sales in Production Board Test, due to higher automotive electronics demand, and Defense/Aerospace.testers. The improvementincrease in Industrial Automation revenues of $33.4$8.9 million, or 56.8%9.7%, was driven primarily by higher demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots. The increaserise in Wireless Test revenues of $5.7$9.0 million, or 11.6%16.4%, was primarily due to higher demandincrease in the ultra-wide band wirelessconnectivity test market.products.
31

Revenues by country as a percentage of total revenues were as follows (1):
 
  
For the Three Months

Ended
 
  
For the Three Months

Ended
   
July 3,
2022
 
July 4,
2021
 
  
July 4,
        2021        
 
June 28,
        2020        
       
Taiwan
   44  51   25  44
Korea
   17   9 
United States
   14   9 
China
   15   14    13   15 
United States
   9   7 
Korea
   9   6 
Philippines
   6   2 
Europe
   5   6    8   5 
Japan
   5   7 
Thailand
   3   3    6   3 
Malaysia
   2   1    5   2 
Japan
   5   5 
Philippines
   3   6 
Singapore
   1   2    2   1 
Rest of World
   1   1    2   1 
  
 
  
 
   
 
  
 
 
   100  100   100  100
  
 
  
 
   
 
  
 
 
 
(1)
Revenues attributable to a country are based on location of customer site.
Gross Profit
Our gross profit was as follows:
 
  
For the Three Months

Ended
   
  
For the Three Months

Ended
     
July 3,
2022
 
July 4,
2021
 
Dollar/Point
Change
 
  
July 4,
        2021        
 
June 28,
        2020        
 
Dollar/
Point
Change
         
  
(in millions)
   
(in millions)
 
Gross profit
  $647.0  $471.5  $175.5   $506.4  $647.0  $(140.6
Percent of total revenues
   59.6  56.2  3.4    60.2  59.6  0.6 
29

Gross profit as a percent of revenue increased by 3.40.6 points, primarily due to favorable product mix of higher margin products in Semiconductor Test.Test, partially offset by higher material costs due to inflation.
Selling and Administrative
Selling and administrative expenses were as follows:
 
  
For the Three Months

Ended
   
  
For the Three Months

Ended
     
July 3,
2022
 
July 4,
2021
 
Dollar
Change
 
  
July 4,
        2021        
 
June 28,
        2020        
 
Dollar
        Change        
         
  
(in millions)
   
(in millions)
 
Selling and administrative
  $140.2  $113.3  $26.9   $139.5  $140.2  $(0.7
Percent of total revenues
   12.9  13.5    16.6  12.9 
The increasedecrease of $26.9$0.7 million in selling and administrative expenses was primarily due to higherlower variable compensation, and higher selling and administrative spending across all segments.compensation.
32

Engineering and Development
Engineering and development expenses were as follows:
 
  
For the Three Months

Ended
   
  
For the Three Months

Ended
     
July 3,
2022
 
July 4,
2021
 
Dollar
Change
 
  
July 4,
        2021        
 
June 28,
        2020        
 
Dollar
        Change        
         
  
(in millions)
   
(in millions)
 
Engineering and development
  $110.0  $94.1  $15.9   $112.0  $110.0  $2.0 
Percent of total revenues
   10.1  11.2    13.3  10.1 
The increase of $15.9$2.0 million in engineering and development expenses was primarily due to higher spending across all segmentsin Semiconductor Test and higherIndustrial Automation, partially offset by lower variable compensation.
Restructuring and Other
During the three months ended July 3, 2022 and July 4, 2021, we recorded a charge of $1.5 million and $1.7 million, respectively, for an increase in environmental and legal liabilities, $0.4 million of severance charges primarily in Industrial Automation and $0.4 million for other expenses.
During the three months ended June 28, 2020, we recorded a charge of $29.9 million for the increase in the fair value of the AutoGuide contingent consideration liability, a $4.0 million contract termination settlement charge, $3.1 million of acquisition related compensation and expenses, and $0.8 million of other expenses, partially offset by a $0.6 million gain for the decrease in the fair value of the MiR contingent consideration liability.liabilities.
Interest and Other
 
  
For the Three Months

Ended
     
  
For the Three Months

Ended
  ��    
July 3,
2022
   
July 4,
2021
   
Dollar
Change
 
  
July 4,
        2021        
   
June 28,
        2020        
   
Dollar
        Change        
             
  
(in millions)
   
(in millions)
 
Interest income
  $(0.6  $(1.4  $0.8   $(1.0  $(0.6  $(0.4
Interest expense
   5.6    6.0    (0.4   0.9    5.6   $(4.7
Other (income) expense, net
   (0.1   (4.0   3.9    9.4    (0.1  $9.5 
Interest incomeexpense decreased by $0.8$4.7 million primarily due to lower interest ratesthe January 1, 2022 adoption of ASU
2020-06
which eliminated the amortization of the debt discount which was $3.3 million in 2021 compared to 2020.the three months ended July 4, 2021. Other (income) expense, net decreasedincreased by $3.9$9.5 million primarily due to changes in unrealized gains/losses on equity securities, and losses on convertible debt conversionsfrom a $1.3 million gain in 2021.2021 to a $6.6 million loss in 2022.
30

Income (Loss) Before Income Taxes
 
  
For the Three Months

Ended
     
  
For the Three Months

Ended
       
July 3,
2022
   
July 4,
2021
   
Dollar
Change
 
  
July 4,
        2021        
   
June 28,
        2020        
   
Dollar
        Change        
             
  
(in millions)
   
(in millions)
 
Semiconductor Test
  $337.3   $228.8   $108.5   $177.8   $337.3   $(159.5
System Test
   34.0    19.2    14.8    54.0    34.0    20.0 
Wireless Test
   21.5    14.5    7.0    25.4    21.5    3.9 
Industrial Automation
   (9.8   (11.4   1.6    (6.4   (9.8   3.4 
Corporate and Other (1)
   1.1    (33.8   34.9 
Corporate and Eliminations (1)
   (12.2   1.1    (13.3
  
 
   
 
   
 
   
 
   
 
   
 
 
  $384.0   $217.3   $166.7   $238.6   $384.0   $(145.4
  
 
   
 
   
 
   
 
   
 
   
 
 
 
(1)
Included in Corporate and Other are: contingent consideration adjustments, loss on convertible debt conversions,Eliminations are legal and environmental fees, interest income, interest expense, net foreign exchange gains (losses), pension, intercompany eliminations, acquisition related charges and acquisition related: (a) charges; (b) legal fees; (c) compensation.compensation and for the three months ended July 4, 2021, loss on convertible debt conversions.
The increasedecrease in income before income taxes in Semiconductor Test was driven primarily by a riselower revenues in tester sales driven by high performance compute processors, industrialprocessor and automotivemobile applications, and incrementallower memory test sales of flash memory testers, partially offset by lower mobile application processor testers. The improvementincrease in income before income taxes in System Test was primarily due to elevatedhigher sales in Storage Test of system level and hard disk drive and system level testers and greater sales in Production Board Test, due to higher automotive electronics demand, and Defense/Aerospace.testers. The increaserise in income before income taxes in Wireless Test was driven primarily due toby an increase in connectivity test products. The lower losses before taxes in Industrial Automation was driven primarily by higher demand in the ultra-wide band wireless test market.for UR’s collaborative robotic arms and MiR’s autonomous mobile robots.
33

Income Taxes
The effective tax rate for the three months ended July 3, 2022 and July 4, 2021 was 17.1% and June 28, 2020 was 14.5% and 13.1%, respectively. The increase in the effective tax rate from the three months ended June 28, 2020July 4, 2021 to the three months ended July 4, 20213, 2022 was primarily attributable to a projected shift in the geographic distribution of income, which increases the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, a reduction in the benefit from tax credits, and a reduction in benefit fromrelated to the international provisions of the U.S. Tax Cuts and Jobs Act of 2017.2017 and an increase in
non-deductible
officers’ compensation. These increases in expense were partially offset by an increase in benefit from tax credits.
Six Months 20212022 Compared to Six Months 20202021
Revenues
Revenues by our four reportable segments were as follows:
 
  
For the Six Months

Ended
     
  
For the Six Months

Ended
       
July 3,
2022
   
July 4,
2021
   
Dollar
Change
 
  
July 4,
        2021        
   
June 28,
        2020        
   
Dollar
        Change        
             
  
(in millions)
   
(in millions)
 
Semiconductor Test
  $1,362.0   $1,143.6   $218.4   $1,023.7   $1,362.0   $(338.3
System Test
   237.7    187.9    49.8    253.4    237.7    15.7 
Industrial Automation
   172.1    119.1    53.0    204.2    172.1    32.1 
Wireless Test
   95.8    92.7    3.1    115.4    95.8    19.6 
Corporate and Other
   (0.3   (0.3   —   
Corporate and Eliminations
   (0.5   (0.3   (0.2
  
 
   
 
   
 
   
 
   
 
   
 
 
  $1,867.3   $1,543.0   $324.3   $1,596.1   $1,867.3   $(271.1
  
 
   
 
   
 
   
 
   
 
   
 
 
The increasedecrease in Semiconductor Test revenues of $218.4$338.3 million, or 19.1%24.8%, was driven primarily by a rise inlower tester sales driven byin high performance compute processors, industrialprocessor and automotivemobile applications, and incrementallower memory test sales of flash memory testers, partially offset by lower mobile application processor testers. The increase in System Test revenues of $49.8$15.7 million, or 26.5%6.6%, was primarily due to elevatedhigher sales in Storage Test of hard disk driveDefense/Aerospace and system level testers, and greater sales in Production Board Test due to higher automotive electronics demand.Test. The increase in Industrial Automation revenues of $53.0$32.1 million, or 44.5%18.7%, was driven primarily by higher demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots. The increaserise in Wireless Test revenues of $3.1$19.6 million, or 3.3%20.5%, was primarily due to greater salesincrease in connectivity test products.test.
31

Revenues by country as a percentage of total revenues were as follows (1):
 
  
For the Six Months

Ended
 
  
For the Six Months

Ended
   
July 3,
2022
 
July 4,
2021
 
  
July 4,
        2021        
 
June 28,
        2020        
       
Taiwan
   40  41   22  40
China
   17   15    16   17 
Korea
   15   9 
United States
   9   9    15   9 
Korea
   9   10 
Europe
   6   7    9   6 
Philippines
   5   2 
Thailand
   5   4    5   5 
Japan
   4   7    5   4 
Malaysia
   3   2    5   3 
Philippines
   3   5 
Singapore
   2   2    3   2 
Rest of World
      1    2   —   
  
 
  
 
   
 
  
 
 
   100  100   100  100
  
 
  
 
   
 
  
 
 
 
(1)
Revenues attributable to a country are based on location of customer site.
34

Gross Profit
Our gross profit was as follows:
 
  
For the Six Months

Ended
   
  
July 3,
 
July 4,
 
Dollar/Point
 
  
For the Six Months

Ended
     
2022
 
2021
 
Change
 
  
July 4,
        2021        
 
June 28,
        2020        
 
Dollar/
Point
Change
         
  
(in millions)
   
(in millions)
 
Gross profit
  $1,108.6  $877.0  $231.6   $961.3  $1,108.6  $(147.3
Percent of total revenues
   59.4  56.8  2.6    60.2  59.4  0.8 
Gross profit as a percent of revenue increased by 2.6 point,0.8 points, primarily due to favorable product mix of higher margin products in Semiconductor Test, and operating leveragepartially offset by higher material costs due to higher revenues.inflation.
Selling and Administrative
Selling and administrative expenses were as follows:
 
  
For the Six Months

Ended
   
  
July 3,
 
July 4,
 
Dollar
 
  
For the Six Months

Ended
     
2022
 
2021
 
Change
 
  
July 4,
        2021        
 
June 28,
        2020        
 
Dollar
        Change        
         
  
(in millions)
   
(in millions)
 
Selling and administrative
  $270.0  $224.6  $45.4   $279.7  $270.0  $9.7 
Percent of total revenues
   14.5  14.6    17.5  14.5 
The increase of $45.4$9.7 million in selling and administrative expenses was primarily due to higher spending in Industrial Automation, and Semiconductor Test, partially offset by lower variable compensation and higher selling spending across all segments.compensation.
Engineering and Development
Engineering and development expenses were as follows:
 
  
For the Six Months

Ended
   
  
July 3,
 
July 4,
 
Dollar
 
  
For the Six Months

Ended
     
2022
 
2021
 
Change
 
  
July 4,
        2021        
 
June 28,
        2020        
 
Dollar
        Change        
         
  
(in millions)
   
(in millions)
 
Engineering and development
  $210.4  $179.3  $31.1   $220.1  $210.4  $9.7 
Percent of total revenues
   11.3  11.6    13.8  11.3 
32

The increase of $31.1$9.7 million in engineering and development expenses was primarily due to higher spending across all segmentsprimarily in Semiconductor Test and higherIndustrial Automation, partially offset by lower variable compensation.
Restructuring and Other
During the six months ended July 3, 2022, we recorded a charge of $14.7 million related to the arbitration claim filed against Teradyne and AutoGuide related to an
earn-out
dispute, which was settled on March 25, 2022 for $26.7 million, and a charge of $2.0 million for an increase in environmental and legal liabilities. Previously, in the three months ended December 31, 2021, we recorded a charge of $12.0 million related to this
earn-out
dispute
During the six months ended July 4, 2021, we recorded a gain of $7.2 million for the decrease in the fair value of the AutoGuide contingent consideration liability, partially offset by a charge of $1.7 million for an increase in environmental and legal liabilities, $0.6 million of severance charges primarily in Industrial Automation and $0.3 million for other expenses.liabilities.
During the six months ended June 28, 2020, we recorded a $22.8 million charge for the increase in the fair value
35

Interest and Other
 
  
For the Six Months

Ended
     
  
July 3,
   
July 4,
   
Dollar
 
  
For the Six Months

Ended
       
2022
   
2021
   
Change
 
  
July 4,
        2021        
   
June 28,
        2020        
   
Dollar
        Change        
             
  
(in millions)
   
(in millions)
 
Interest income
  $(1.4  $(4.1  $2.7   $(1.7  $(1.4  $(0.3
Interest expense
   11.6    11.6    —      1.9    11.6    (9.7
Other (income) expense, net
   3.7    2.8    0.9    14.6    3.7    10.9 
Interest incomeexpense decreased by $2.7$9.7 million primarily due to lower interest rates and a lower marketable securities balancethe January 1, 2022 adoption of ASU
2020-06
which eliminated the amortization of the debt discount which was $6.9 million in 2021 compared to 2020.the six months ended July 4, 2021. Other (income) expense, net increased by $0.9$10.9 million primarily due to losses on convertible debt conversions in 2021, partially offset by the changechanges in unrealized gains/losses on equity securities, from a $2.6 million gain in 2021 to an $8.8 million loss in 2022, partially offset by lower losses in 2020 to gains in 2021.
on convertible debt early conversions.
Income (Loss) Before Income Taxes
 
  
For the Six Months

Ended
     
  
July 3,
   
July 4,
   
Dollar
 
  
For the Six Months

Ended
       
2022
   
2021
   
Change
 
  
July 4,
        2021        
   
June 28,
        2020        
   
Dollar
        Change        
             
  
(in millions)
   
(in millions)
 
Semiconductor Test
  $513.7   $382.6   $131.1   $327.5   $513.7   $(186.2
System Test
   85.0    67.6    17.4    95.4    85.0    10.4 
Wireless Test
   31.1    24.7    6.4    44.0    31.1    12.9 
Industrial Automation
   (22.8   (26.7   3.9    (11.5   (22.8   11.3 
Corporate and Other (1)
   1.1    (33.8   34.9 
Corporate and Eliminations (1)
   (36.4   1.1    (37.5
  
 
   
 
   
 
   
 
   
 
   
 
 
  $608.0   $414.4   $193.6   $419.0   $608.0   $(189.0
  
 
   
 
   
 
   
 
   
 
   
 
 
 
(1)
Included in Corporate and OtherEliminations are legal and environmental fees, contingent consideration adjustments, loss on convertible debt conversions, interest income, interest expense, net foreign exchange gains (losses), pension, intercompany eliminations, acquisition related charges and acquisition related: (a) charges; (b) legal fees; (c) compensation.compensation and for the six months ended July 4, 2021, loss on convertible debt conversions.
The increasedecrease in income before income taxes in Semiconductor Test was driven primarily by a riselower revenues in tester sales driven by high performance compute processors, industrialprocessor and automotivemobile applications, and incrementallower memory test sales of flash memory testers, partially offset by lower mobile applications processor testers. The improvementincrease in income before income taxes in System Test was primarily due to elevatedhigher sales in Storage Test of hard disk driveDefense/Aerospace and system level testers, and greater sales in Production Board Test due to higher automotive electronics demand.Test. The increaserise in income before taxes in Wireless Test was driven primarily due to higher salesby an increase in connectivity test products. The reduction in losses before taxes in Industrial Automation was driven primarily by higher demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots. The loss before income taxes in Corporate and Eliminations was primarily due to legal settlement charges related to litigation for the
earn-out
dispute in connection with the AutoGuide acquisition.
Income Taxes
The effective tax rate for the six months ended July 3, 2022 and July 4, 2021 was 14.1% and June 28, 2020 was 12.2% and 11.9%, respectively. The increase in the effective tax rate from the six months ended June 28, 2020July 4, 2021 to the six months ended July 4, 20213, 2022 was primarily attributable to a projected shift in the geographic distribution of income, which increases the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, and a reduction in the benefit from tax credits, partially offset by increases in benefit fromrelated to the international provisions of the U.S. Tax Cuts and Jobs Act of 2017 and an increase in
non-deductible
officers’ compensation. These increases in expense were partially offset by increases in benefit from tax credits and discrete benefit related to equity compensation.
33

Contractual Obligations
There have been no changes outside of the ordinary course of business to our contractual obligations as disclosed in our Annual Report on Form
10-K
for the year ended December 31, 2020.2021.
36

Liquidity and Capital Resources
Our cash, cash equivalents, and marketable securities balances decreased by $136.3$606.4 million in the six months ended July 4, 20213, 2022 to $1,418.1$893.9 million.
Operating activities during the six months ended July 3, 2022 provided cash of $122.9 million. Changes in operating assets and liabilities used cash of $309.1 million. This was due to a $287.8 million increase in operating assets and a $21.3 million decrease in operating liabilities.
The increase in operating assets was due to a $146.4 million increase in accounts receivable, a $94.8 million prepayments and other assets due to prepayments to our contract manufacturers, and a $46.7 million increase in inventories.
The decrease in operating liabilities was due to a $61.7 million decrease in accrued employee compensation, a $6.9 million decrease in other accrued liabilities, and $2.6 million of retirement plan contributions, partially offset by a $25.0 million increase in accounts payable, a $14.2 million increase in deferred revenue and customer advance payments, and a $10.8 million increase in income taxes.
Investing activities during the six months ended July 3, 2022 used cash of $54.3 million due to $247.9 million used for purchases of marketable securities, and $89.7 million used for purchases of property, plant and equipment, partially offset by $139.7 million and $143.6 million in proceeds from maturities and sales of marketable securities, respectively.
Financing activities during the six months ended July 3, 2022 used cash of $626.8 million due to $532.8 million used for the repurchase of 5.0 million shares of common stock at an average price of $107.5 per share, $42.3 million used for payments of convertible debt principal, $35.4 million used for dividend payments, and $32.8 million used for payment related to net settlements of employee stock compensation awards, partially offset by $16.5 million from the issuance of common stock under employee stock purchase and stock option plans.
Operating activities during the six months ended July 4, 2021 provided cash of $244.4 million. Changes in operating assets and liabilities used cash of $373.6 million. This was due to a $470.2 million increase in operating assets and a $96.6 million increase in operating liabilities.
The increase in operating assets was due to a $372.7 million increase in accounts receivable due to greater sales, a $117.4 million increase in prepayments and other assets due to prepayments to our contract manufacturers as a result of higher forecasted revenues, partially offset by a $19.9 million decrease in inventories.
The change in operating liabilities was due to increases of $78.5 million in other accrued liabilities, $22.3 million in accounts payable, and $15.2 million in deferred revenue and customer advance payments, partially offset by a $14.0 million decrease in accrued employee compensation, $2.7 million of retirement plan contributions, and a $2.6 million decrease in income taxes.
Investing activities during the six months ended July 4, 2021 provided cash of $92.3 million due to $460.2 million and $116.1 million in proceeds from maturities and sales of marketable securities, respectively, partially offset by $398.1 million used for purchases of marketable securities, $74.0 million used for purchases of property, plant and equipment and $12.0 million used for an investment in MachineMetrics, Inc.(“MachineMetrics”).
Financing activities during the six months ended July 4, 2021 used cash of $295.9 million due to $66.8 million used for payments of convertible debt principal, $196.6 million used for the repurchase of 1.6 million shares of common stock at an average price of $125.69 per share, $31.8 million used for payments related to net settlements of employee stock compensation awards, and $33.3 million used for dividend payments, partially offset by $32.6 million from the issuance of common stock under employee stock purchase and stock option plans.
Operating activities duringIn January 2022 and May 2022, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.11 per share. Dividend payments for the three and six months ended June 28, 2020 provided cash of $266.0 million. Changes in operating assets and liabilities used cash of $206.7 million due to a $384.2 million increase in operating assets and a $177.6 million increase in operating liabilities.
The increase in operating assets was due to a $331.0 million increase in accounts receivable due to increased sales, a $49.5 million increase in prepayments and other assets, and a $3.7 million increase in inventories.
The increase in operating liabilities was due to a $54.9 million increase in accounts payable, a $47.2 million increase in other accrued liabilities, a $37.8 million increase in income taxes, a $28.7 million increase in deferred revenue and customer advance payments, an $11.4 million increase in accrued employee compensation, partially offset by $2.5 million of retirement plan contributions.
Investing activities during the six months ended June 28, 2020 used cash of $173.2 million due to $299.5 million used for purchases of marketable securities, and $84.0 million used for purchases of property, plant and equipment, partially offset by $183.0July 3, 2022 were $17.5 million and $26.7$35.4 million, in proceeds from maturities and sales of marketable securities, respectively, and proceeds from life insurance of $0.5 million related to the 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.
Financing activities during the six months ended June 28, 2020 used cash of $140.3 million due to $88.5 million used for the repurchase of 1.5 million shares of common stock at an average price of $58.33 per share, $22.5 million used for payments related to net settlements of employee stock compensation awards, $33.3 million used for dividend payments, and $8.9 million used for a payment related to MiR acquisition contingent consideration, partially offset by $12.8 million from the issuance of common stock under employee stock purchase and stock option plans.respectively.
In January 2021 and May 2021, and 2020, ourTeradyne’s Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for each of the three and six months ended July 4, 2021 were $16.6 million and June 28, 2020 were $33.3 million.million, respectively.
 
3437

In January 2021, our Board of Directors cancelled the January 2020 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. Unless terminated by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the share repurchase program. We intend to repurchase a minimum of $600$750.0 million in 2021.2022.
During the six months ended July 3, 2022, Teradyne repurchased 5.0 million shares of common stock for $532.8 million at an average price of $107.5 per share. During the six months ended July 4, 2021, weTeradyne repurchased 1.6 million shares of common stock for $196.6 million at an average price of $125.69 per share. DuringThe cumulative repurchases under the six months ended June 28, 2020, we repurchased 1.5$2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $88.5$1,132.8 million at an average price per share of $58.33 per share.$116.45.
While we declared a quarterly cash dividend and authorized a share repurchase program, we may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of our Board of Directors, which will consider, among other things, our earnings, capital requirements and financial condition.
On May 1, 2020, we entered into a credit agreement providing for a three-year, senior secured revolving credit facility of $400 million. On December 10, 2021, the credit agreement was amended to extend the senior secured revolving credit facility to December 10, 2026. As of August 6, 2021,5, 2022, we have not borrowed any funds under the credit facility.
We believe our cash, cash equivalents and marketable securities balance will be sufficient to pay our quarterly dividend and meet our working capital and expenditure needs for at least the next twelve months. Inflation has not had a significant long-term impact on earnings. At this time, the
COVID-19
pandemic has not had an impact on our liquidity, but there is no assurance that continued impacts resulting from the pandemic will not have an adverse effect in the future.
Equity Compensation Plans
As discussed in Note Q: “Stock-Based Compensation” in our 20202021 Annual Report on Form
10-K,
we have a 1996 Employee Stock Purchase Plan and a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”).
The purpose of the 1996 Employee Stock Purchase Plan is to encourage stock ownership by all eligible employees of Teradyne. The purpose of the 2006 Equity Plan is to provide equity ownership and compensation opportunities in Teradyne to our employees, officers, directors, consultants and/or advisors. Both plans were approved by our shareholders.
Recently Issued Accounting Pronouncements
In August 2020,For the FASBsix months ended July 3, 2022, there were no recently issued ASU 2020-06 – “Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity,” which simplifies the accounting for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion featurespronouncements that could be recognized separately from the primary contract. This ASU requireshad, or are expected to have, a convertible debt instrumentmaterial impact to be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. This ASU requires an entity to use the if-converted method in the diluted earnings per share calculation for convertible instruments. This ASU will be effective for Teradyne on January 1, 2022. This ASU permits the use of either the modified retrospective or fully retrospective method of transition. We are evaluating the effects of the adoption of this ASU on our consolidated financial statements.
 
Item 3:
Quantitative and Qualitative Disclosures about Market Risks
For “Quantitative and Qualitative Disclosures about Market Risk” affecting Teradyne, see Part 2 Item 7A, “Quantitative and Qualitative Disclosures about Market Risks,” in our Annual Report on Form
10-K
filed with the SEC on February 22, 2021.23, 2022. There were no material changes in our exposure to market risk from those set forth in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020.2021.
In addition to market risks described in our Annual Report on Form
10-K,
we have an equity price risk related to the fair value of our convertible senior unsecured notes issued in December 2016. In December 2016, Teradyne issued $460 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023. As of July 4, 2021,3, 2022, $74.7million of principal remained outstanding and the Notes had a fair value of $1,595.9$233.3 million. The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end of the second quarter of 20212022 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,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
35

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
  $1,756,039   $160,127    10.0
No Change
   1,595,912    —      —   
10% Decrease
   1,435,785    (160,127   (10.0
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Hypothetical Change in Teradyne Stock Price
  
Fair Value
   
Estimated change
in fair value
   
Hypothetical
percentage
increase (decrease)
in

fair value
 
             
10% Increase
  $253,683   $20,344    8.7
No Change
   233,339    —      —   
10% Decrease
   212,995    (20,344   (8.7
 
Item 4:
Controls and Procedures
As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule
13a-15(b)
or Rule 15d-15
15d-15(f)
(b) 
promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There have
been no changes in our internal control over financial reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) during the three months ended July 4, 20213, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
 
Item 1:
Legal Proceedings
We are subject to various legal proceedings and claims which have arisen in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. We believeTeradyne believes that we haveit has meritorious defenses against all pending claims and intendintends to vigorously contest them. While it is not possible to predict or determine the outcomes of any pending claims or to provide possible ranges of losses that may arise, we believeTeradyne believes the potential losses associated with all of these actions are unlikely to have a material adverse effect on ourits business, financial position or results of operations.
On March 8, 2021, Industrial Automation LLC submitted a demand for arbitration against Teradyne and AutoGuide in Wilmington, Delaware alleging that Teradyne and AutoGuide breached certain provisions of the Membership Interests Purchase Agreement (the “Purchase Agreement”), dated as of October 18, 2019, among Industrial Automation LLC, Teradyne and AutoGuide. The arbitration demand seekssought full acceleration of the maximum earnout
earn-out
amount payable under the Purchase Agreement, or $106.9 million, for the alleged breach of the earnout
earn-out
provisions of the Purchase Agreement. On March 26, 2021, Teradyne and AutoGuide filed an answer denying that Teradyne and AutoGuide breached any provisions of the Purchase Agreement. The arbitration hearing is scheduled for March 21, 2022. While it is not possible at this stage to predict the outcome of25, 2022, the arbitration claim was settled for $26.7 million. As a result, Teradyne and AutoGuide intend to vigorously defend against the Industrial Automation LLC claims.has no remaining
earn-out
obligations.
 
Item 1A:
Risk Factors
In addition to other information set forth in this Form
10-Q,
including the risk discussed below, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form
10-K
for the year ended December 31, 2020,2021, which could materially affect our business, financial condition or future results. The risk factors described in our Annual Report on Form
10-K
remain applicable to our business and many of these risks could be further increased due to the
COVID-19
pandemic.
The risks described in our Annual Report on Form
10-K
are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
 
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The global supply shortage of electrical components may impactand inflationary cost increases has impacted our ability to meet customer demand.demand and could adversely affect our business and financial results
There is currently a global supply shortage of electrical components, including semiconductor chips. As a result, we have experienced, and expect to continue to experience, increases in our lead times and costs for certain components for certain products and delays in the delivery of some orders placed by our customers. At this time,While not material, year to date 2022, in an effort to mitigate these risks, in some cases, we have incurred higher costs due to investment in supply chain challengesresiliency and to secure available inventory or have not had a materialextended or placed
non-cancellable
purchase commitments with semiconductor suppliers, which introduces inventory risk if our forecasts and assumptions prove inaccurate. We have also sourced components from additional suppliers and multi-sourced and
pre-ordered
components and finished goods inventory in some cases in an effort to reduce the impact on our business, results of operations or financial condition.the adverse supply chain conditions we have experienced. However, if we are unable to secure manufacturing capacities from our current or new suppliers and contract manufacturers, on acceptable terms or at all, or successfully manage our purchase commitments and inventory for components, our ability to deliver our products to our customers in the desired quantities, at competitive prices or in a timely manner may be negatively impacted.impacted for the remainder of 2022 and into 2023. In the second quarter 2022, we were unable to supply approximately $40 million of revenue in our test businesses for which we had customer demand. Our third quarter 2022 forecast excludes approximately $50 million of revenue, primarily in our test businesses, due to these continued supply chain constraints. Also, our suppliers and contract manufacturers have increased their prices, which increased our cost of products. We have been and may increase their fees, which would result in an increase incontinue to be, affected by wage inflation. We have, and may continue to attempt to, offset the effect of these inflationary pressures by increasing the prices of our manufacturing costs, whichproducts. However, we may not be fully able to pass additional costs on to our customers, which could have a negative impact on our results of operations and financial condition. Additionally, if any of our suppliers and contract manufacturers were to cancel contracts or commitments or fail to meet the quality or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders, have significantly decreased revenues and earnings and be subject to contractual penalties, which would have a material adverse effect on our business, results of operations and financial condition.
 
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
In January 2020, Teradyne’s Board of Directors authorized a new stock repurchase program for up to $1.0 billion of common stock. Effective April 1, 2020, Teradyne suspended its share repurchase program. In January 2021, Teradyne’s Board of Directors cancelled the January 2020 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. During the six months ended July 3, 2022, Teradyne repurchased 5.0 million shares of common stock for $532.8 million at an average price of $107.5 per share. During the six months ended July 4, 2021, weTeradyne repurchased 1.6 million shares of common stock for $196.6 million at an average price of $125.69 per share. DuringThe cumulative repurchases under the six months ended June 28, 2020, we repurchased 1.5$2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $88.5$1,132.8 million at an average price per share of $58.33 per share.$116.45.
The following table includes information with respect to repurchases we made of our common stock during the three months ended July 4, 20213, 2022 (in thousands except per share price):
 
Period
  
(a) Total

Number of

Shares

(or Units)

Purchased
      
(b) Average

Price Paid per

Share (or Unit)
      
(c) Total Number of

Shares (or Units)

Purchased as Part of

Publicly Announced

Plans or Programs
   
(d) Maximum Number

(or Approximate Dollar

Value) of Shares (or

Units) that may Yet Be

Purchased Under the

Plans or Programs
 
April 5, 2021 - May 2, 2021
   155       $129.70        154   $1,934,813 
May 3, 2021 – May 30, 2021
   431       $123.16        424   $1,882,615 
May 31, 2021 – July 4, 2021
   613       $129.49        612   $1,803,416 
   
 
 
       
 
 
       
 
 
      
    1,199    (1 $127.25    (1  1,190      
   
 
 
       
 
 
       
 
 
      
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
 
               
April 4, 2022 - May 1, 2022
   853  $111.53   852   $1,103,537 
May 2, 2022 - May 29, 2022
   989  $104.60   974   $1,001,700 
May 30, 2022 - July 3, 2022
   1,381  $97.45   1,380   $867,202 
  
 
 
  
 
 
  
 
 
   
   3,223 (1)  $103.37 (1)   3,206   
  
 
 
  
 
 
  
 
 
   
 
(1)
Includes approximately nineseventeen thousand shares at an average price of $126.20$109.12 withheld from employees for the payment of taxes.
We satisfy U.S. federal and state minimum withholding tax obligations due upon the vesting and the conversion of restricted stock units into shares of our common stock, by automatically withholding from the shares being issued, a number of shares with an aggregate fair market value on the date of such vesting and conversion that would satisfy the minimum withholding amount due.
 
Item 4:
Mine Safety Disclosures
Not Applicable
 
37


Exhibit

Number
Description
32.1  Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2  Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS  Inline XBRL Instance Document
101.SCH  Inline XBRL Taxonomy Extension Schema Document
101.CAL  Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF  Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB  Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE  Inline XBRL Taxonomy Extension Presentation Linkbase Document
104  Cover Page Interactive Data File (formatted as Inline XBRL, and contained in Exhibit 101)
 
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
TERADYNE, INC.
Registrant
/
S
/s/ S
ANJAY
M
EHTA
Sanjay Mehta
Vice President,
Chief Financial Officer and Treasurer
(Duly Authorized Officer
and Principal Financial Officer)
August 6, 20215, 2022
 
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