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, 2021~~3, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

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):

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, 2021~~1, 2022 was 156,781,680

shares.

~~was~~

~~164,973,199~~

~~shares.~~

Table of Contents

TERADYNE, INC.

INDEX


			Page No.

		PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements (Unaudited):


		Condensed Consolidated Balance Sheets as of July ~~4, 2021~~3, 2022 and December 31, ~~2020~~2021		1

		Condensed Consolidated Statements of Operations for the Three and Six Months ~~Ended~~ended July 3, 2022 and July 4, 2021 ~~and June 28, 2020~~		2

		Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ~~Ended~~ended July 3, 2022 and July 4, 2021 ~~and June 28, 2020~~		3

		Condensed Consolidated Statements of Convertible Common Shares and Shareholders’ Equity for the Three and Six Months ~~Ended~~ended July 3, 2022 and July 4, 2021 ~~and June 28, 2020~~		4

		Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 3, 2022 and July 4, 2021 ~~and June 28, 2020~~		5

		Notes to Condensed Consolidated Financial Statements		6

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
	28
Item 3.		Quantitative and Qualitative Disclosures about Market Risk		35
	38
Item 4.		Controls and Procedures		3639

		PART II. OTHER INFORMATION
Item 1.		Legal Proceedings
	39
Item 1.1A.		~~Legal Proceedings~~Risk Factors		36
	39
Item ~~1A.~~2.		~~Risk Factors~~		36

~~Item 2.~~		Unregistered Sales of Equity Securities and Use of Proceeds		37
	40
Item 4.		Mine Safety Disclosures		37
	40
Item 6.		Exhibits		3840

Table of Contents

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)		0			0
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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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 ~~were~~may have been reclassified to conform to the current year presentation. The December 31, ~~2020~~2021 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~~

~~, 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”) issued~~Teradyne 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 ~~accounting~~modified 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 entity~~Unsettled shares are recorded in current debt, and there is no recognition of a debt discount, which was previously amortized to ~~use~~interest expense. Teradyne uses the

if-converted

method in the diluted earnings per share (“EPS”) calculation for convertible instruments. ~~This ASU will be effective~~As a result of adoption, Teradyne recorded an increase of $1.4 million to current debt for ~~Teradyne on January 1, 2022. This ASU permits~~unsettled 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 effects~~reclassification 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.

Table of Contents

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.

Table of Contents

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

~~Table of Contents~~

(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 ~~Customers~~Customers.” .”

Table of Contents

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 ~~sells~~sold 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 receivables~~During the three months ended July 3, 2022 and ~~presents cash proceeds as cash provided by operating activities in the consolidated statements of cash flows. Total~~July 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 for~~respectively. 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, 2021~~3, 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, 2021~~3, 2022 and December 31, ~~2020~~2021 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.

Table of Contents

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, 2020~~July 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 ~~were~~wer

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).

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, 2021~~3, 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

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:


	(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

~~Table of Contents~~

Changes in the fair value of Level 3 contingent consideration for the ~~three~~six 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)~~

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)~~

Table of Contents

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, 2021~~3, 2022 and December 31, ~~2020~~2021 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

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

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 ~~market~~ma

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.

~~Table of Contents~~

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, 2021~~3, 2022 and December 31, ~~2020~~2021 were not other than temporary.

The contractual maturities of investments in

available-for-sale

securities held at July ~~4, 2021~~3, 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, 2021~~3, 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.

Table of Contents

To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings and is used to offset the change in value of monetary assets and liabilities denominated in foreign currencies.

~~The notional amount of foreign currency forward contracts at~~At July ~~4, 2021~~3, 2022 and December 31, ~~2020~~2021, 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 ~~$206.9~~a 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, 2021~~3, 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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~~(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 $50.1~~an

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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

trading days (whether or not consecutive) during a period of

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

business day period after any

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%~~

% 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

~~, 2021, fifty-five~~5, 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’~~

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 ~~represents~~represented a discount to the debt and ~~will be~~was amortized to interest expense using the effective interest method through December 2023. ~~Accordingly, Teradyne’s effective annual interest rate on~~Effective January 1, 2022, Teradyne adopted ASC

2020-06

using the ~~Notes will be approximately 5.0%. The Notes are classified~~modified 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, except~~for unamortized debt discount, and an increase to retained earnings of $94.6 million for the ~~conversions that occurred during~~reclassification of the ~~second quarter~~equity 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 included~~the remaining Notes to be settled in ~~current debt.~~ cash.

Debt issuance ~~costs~~fees 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

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.

~~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, certain~~3, 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 ~~1.6~~1.0 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. The~~2022 and the liability ~~component~~ is included in current ~~debt~~debt.

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 ~~provides~~provided for a three-year, senior secured revolving credit facility of $400.0 million (the “Credit Facility”). ~~The~~

On December 10, 2021, the Credit Agreement ~~further~~was 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 ~~commitments~~amount 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 $3.5~~greater of $200.0 million ~~in costs related to the revolving credit facility. These costs are being amortized over the three-year term~~or 15% of ~~the revolving credit facility and are included in interest expense in the statement of operations. As of August~~

~~, 2021, Teradyne has not borrowed any funds under the Credit Facility.~~

consolidated EBIDTA. The interest ~~rates~~rate 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.

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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

~~, 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


	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

~~Table of Contents~~

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

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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-~~

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~~line~~straight-line basis over the shorter of the

three-year

service period or the period from the grant to the date described in the retirement provisions below. Compensation expense for 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

~~six~~sixtyty

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 ~~0.3~~0.4 million and ~~0.4~~0.3 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.

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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 ~~2021~~2022 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 ~~2020~~2021 grant.

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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 ~~2021~~2022 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 ~~2020~~2021 grant.

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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.”~~

~~Table of Contents~~

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.

Table of Contents

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

201

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, 2020~~July 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 primarily~~liabilities. 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.

P. RETIREMENT PLANS

ASC 715,

~~“Compensation—~~ “Compensation—Retirement ~~Benefits”~~

Benefits,” requires an employer with a defined benefit ~~plan~~plans or other postretirement benefit ~~plan~~plans 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.

Table of Contents

Defined Benefit Pension Plans

Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain

non-U.S.

subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to

make contributions to these plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of the U.S. qualified pension plan consist primarily of fixed income and equity securities. In addition, Teradyne has ~~unfunded qualified foreign plans as well as~~ an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act (“ERISA”) and the Internal Revenue Code ~~(“IRC”~~(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 ~~credit~~cost (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	)

Table of Contents

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.

~~Table of Contents~~

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 ~~seeks~~sought 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,~~

, 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 provisions~~agents 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 hearing~~acquired 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 ~~scheduled~~recorded upon revenue recognition to cost of revenues for ~~March 21, 2022. While it~~estimated warranty expense based upon historical experience. When Teradyne receives revenue for extended warranties beyond the standard duration, the revenue is ~~not possible at this stage~~deferred 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 ~~predict~~extended 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 ~~outcome~~ordinary course of business, Teradyne provides minimum purchase guarantees to certain vendors to ensure continuity of supply against the market demand. Although some of these guarantees provide penalties for cancellations and/or modifications to the purchase commitments as the market demand decreases, most of the ~~arbitration,~~guarantees do not. Therefore, as the market demand decreases, Teradyne

re-evaluates

these guarantees and ~~AutoGuide intend~~determines what charges, if any, should be recorded.

With respect to ~~vigorously defend~~its 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.

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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, 2021~~3, 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 ~~decrease~~increase in reserves for uncertain tax positions ~~is primarily~~consists 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 that~~does not anticipate a material change in the balance of unrecognized tax benefits ~~may decrease approximately $1.6 million in~~during 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, 2021~~3, 2022 and December 31, ~~2020, $1.4~~2021, $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, 2021~~3, 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, 2020~~July 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.

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 ~~Other~~Eliminations 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.

~~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	)

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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. ~~During~~The 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

$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.

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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 ~~applications~~automation and AutoGuide, LLC (“AutoGuide”), a maker of high payload AMRs. The market for our ~~industrial automation~~Industrial 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 ~~growing~~gaining market share in our test businesses through the introduction of differentiated products that target ~~growth~~expanding 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 ~~dividends~~stock repurchases and ~~stock repurchases~~dividends 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

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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.

~~Table of Contents~~

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, ~~including~~which includes implementing social distancing protocols, ~~suspending~~limiting 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 ~~2021~~2022 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 in~~supply 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 ~~loss~~losses 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 ~~2020~~2021 and in the first half of ~~2021. Our Industrial Automation business, however, experienced a significant decline in demand through~~2022, 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 ~~million~~million. 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, ~~see~~while 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.

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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, ~~2020~~2021 for our risk factors regarding risks associated with both the

COVID-19 ~~pandemic.~~

pandemic and international conflicts.

~~Table of Contents~~

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, 2021~~3, 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.

~~Due~~Critical accounting estimates are complex and may require significant judgment by management. Changes to the ~~COVID-19 pandemic, there has been uncertainty~~underlying assumptions may have a material impact on our financial condition and ~~disruption in the global economy and our markets. We are not aware~~results 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.

Table of Contents

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	%

~~Table of Contents~~

Results of Operations

Second Quarter ~~2021~~2022 Compared to Second Quarter ~~2020~~2021

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 ~~increase~~decrease in Semiconductor Test revenues of ~~$174.9~~$292.7 million, or ~~26.5%~~35.1%, was driven primarily by ~~a rise in~~lower tester sales ~~driven by~~in high performance compute ~~processors, industrial~~processor and ~~automotive~~mobile applications, and ~~incremental~~lower 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 ~~elevated~~higher 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 ~~improvement~~increase 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 ~~increase~~rise in Wireless Test revenues of ~~$5.7~~$9.0 million, or ~~11.6%~~16.4%, was primarily due to ~~higher demand~~increase in ~~the ultra-wide band wireless~~connectivity test ~~market.~~products.

Table of Contents

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

~~Table of Contents~~

Gross profit as a percent of revenue increased by ~~3.4~~0.6 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 ~~increase~~decrease of ~~$26.9~~$0.7 million in selling and administrative expenses was primarily due to ~~higher~~lower variable ~~compensation, and higher selling and administrative spending across all segments.~~compensation.

Table of Contents

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 segments~~in Semiconductor Test and ~~higher~~Industrial 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 ~~income~~expense decreased by ~~$0.8~~$4.7 million primarily due to ~~lower interest rates~~the 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 ~~decreased~~increased by ~~$3.9~~$9.5 million primarily due to changes in unrealized gains/losses on equity securities, ~~and losses on convertible debt conversions~~from a $1.3 million gain in ~~2021.~~2021 to a $6.6 million loss in 2022.

~~Table of Contents~~

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 ~~increase~~decrease in income before income taxes in Semiconductor Test was driven primarily by ~~a rise~~lower revenues in ~~tester sales driven by high performance~~ compute ~~processors, industrial~~processor and ~~automotive~~mobile applications, and ~~incremental~~lower memory test sales of flash memory ~~testers, partially offset by lower mobile application processor~~ testers. The ~~improvement~~increase in income before income taxes in System Test was primarily due to ~~elevated~~higher 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 ~~increase~~rise in income before ~~income~~ taxes in Wireless Test was driven primarily ~~due to~~by 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.

Table of Contents

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, 2020~~July 4, 2021 to the three months ended July ~~4, 2021~~3, 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 from~~related 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 ~~2021~~2022 Compared to Six Months ~~2020~~2021

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 ~~increase~~decrease in Semiconductor Test revenues of ~~$218.4~~$338.3 million, or ~~19.1%~~24.8%, was driven primarily by ~~a rise in~~lower tester sales ~~driven by~~in high performance compute ~~processors, industrial~~processor and ~~automotive~~mobile applications, and ~~incremental~~lower 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 ~~elevated~~higher sales in ~~Storage Test of hard disk drive~~Defense/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 ~~increase~~rise in Wireless Test revenues of ~~$3.1~~$19.6 million, or ~~3.3%~~20.5%, was primarily due to ~~greater sales~~increase in connectivity ~~test products.~~test.

~~Table of Contents~~

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.

Table of Contents

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 leverage~~partially 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	%

~~Table of Contents~~

The increase of ~~$31.1~~$9.7 million in engineering and development expenses was ~~primarily~~ due to higher spending ~~across all segments~~primarily in Semiconductor Test and ~~higher~~Industrial 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~~

Table 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.Contents

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 ~~income~~expense decreased by ~~$2.7~~$9.7 million primarily due to ~~lower interest rates and a lower marketable securities balance~~the 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 change~~changes 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 ~~Other~~Eliminations 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 ~~increase~~decrease in income before income taxes in Semiconductor Test was driven primarily by ~~a rise~~lower revenues in ~~tester sales driven by high performance~~ compute ~~processors, industrial~~processor and ~~automotive~~mobile applications, and ~~incremental~~lower memory test sales of flash memory ~~testers, partially offset by lower mobile applications processor~~ testers. The ~~improvement~~increase in income before income taxes in System Test was primarily due to ~~elevated~~higher sales in ~~Storage Test of hard disk drive~~Defense/Aerospace and ~~system level testers, and greater sales~~ in Production Board ~~Test due to higher automotive electronics demand.~~Test. The ~~increase~~rise in income before taxes in Wireless Test was driven primarily ~~due to higher sales~~by 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, 2020~~July 4, 2021 to the six months ended July ~~4, 2021~~3, 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 from~~related 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.

~~Table of Contents~~

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.

Table of Contents

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, 2021~~3, 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 during~~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 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, our~~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 were $16.6 million and ~~June 28, 2020 were~~ $33.3 ~~million.~~million, respectively.

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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. ~~During~~The 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 ~~2020~~2021 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 ~~FASB~~six 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 features~~pronouncements that ~~could be recognized separately from the primary contract. This ASU requires~~had, or are expected to have, a ~~convertible debt instrument~~material 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 ~~2021~~2022 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

~~Table of Contents~~

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 )

Table of Contents


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, 2021~~3, 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 believe~~Teradyne believes that ~~we have~~it has meritorious defenses against all pending claims and ~~intend~~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, ~~we believe~~Teradyne believes the potential losses associated with all of these actions are unlikely to have a material adverse effect on ~~our~~its 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 ~~seeks~~sought 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 impact~~and 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 ~~challenges~~resiliency and to secure available inventory or have ~~not had a material~~extended or placed

non-cancellable

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 in~~continue 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, which~~products. 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. ~~During~~The 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, 2021~~3, 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 ~~nine~~seventeen 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

~~Table of Contents~~

Item 6:

Exhibits


Exhibit Number		Description

~~3.1~~		~~Restated Articles of Organization of Teradyne, Inc., effective May 7, 2021 filed as Exhibit 3.1 to Teradyne’s Current Report on Form 8-K filed on May 13, 2021~~

~~10.1~~		~~1996 Employee Stock Purchase Plan, as amended, filed as Exhibit 10.1 to Teradyne’s Current Report on form 8-K filed May 13, 2021~~

~~10.2~~		~~2006 Equity and Cash Compensation Incentive Plan, as amended, filed as Exhibit 10.2 to Teradyne’s Current Report on Form 8-K filed May 13, 2021~~

31.1		Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2		Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

Table of Contents


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

ANJAY

EHTA

Sanjay Mehta

Vice President,

Chief Financial Officer and Treasurer

(Duly Authorized Officer

and Principal Financial Officer)

August ~~6, 2021~~5, 2022

3942


	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


			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


	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


	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


	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


	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	)


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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