10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No.
001-06462
TERADYNE, INC.
(Exact name of registrant as specified in its charter)
Massachusetts
04-2272148
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
600 Riverpark Drive, North Reading,
Massachusetts
01864
(Address of Principal Executive Offices)
(Zip Code)
978-370-2700
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock, par value $0.125per 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 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in
Rule 12b-2
of the Exchange Act (check one):
Large accelerated filer Accelerated filer
Non-accelerated
filer
Emerging growth company
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the registrant's only class of Common Stock as of August 1, 2022 was 156,781,680
shares.
TERADYNE, INC.
INDEX
Page No.
Item 1.
1
2
3
4
5
6
Item 2.
28
Item 3.
38
Item 4.
39
Item 1.
39
Item 1A.
39
Item 2.
40
Item 4.
40
Item 6.
40
PART I
Item 1:
Financial Statements
TERADYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
July 3,

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

Ended
For the Six Months

Ended
July 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, 2021, are an integral part of the condensed
consolidated financial statements.
2
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months

Ended
For the Six Months

Ended
July 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, 2021, are an integral part of the condensed
consolidated financial statements.
3
TERADYNE, INC.
CONDENSED 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
(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, 2021, are an integral part of the condensed
consolidated financial statements.
4
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
July 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, 2021, are an integral part of the condensed
consolidated financial statements.
5
TERADYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. THE COMPANY
Teradyne, Inc. ("Teradyne") is a leading global supplier of automation equipment for test and industrial applications. Teradyne designs, develops, manufactures and sells automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne's industrial automation products include collaborative robotic arms, autonomous mobile robots, and advanced robotic control software used by global manufacturing, logistics and light industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Teradyne's automatic test equipment and industrial automation products and services include:
semiconductor test ("Semiconductor Test") systems;
storage and system level test ("Storage Test") systems, defense/aerospace ("Defense/Aerospace") test instrumentation and systems, and circuit-board test and inspection ("Production Board Test") systems (collectively these products represent "System Test");
wireless test ("Wireless Test") systems; and
industrial automation ("Industrial Automation") products.
B. ACCOUNTING POLICIES
Basis of Presentation
The consolidated interim financial statements include the accounts of Teradyne and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year amounts may have been reclassified to conform to the current year presentation. The December 31, 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 23, 2022, for the year ended December 31, 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, 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 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.
Convertible Debt
Teradyne 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,
Teradyne accounts 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. Teradyne uses the
if-converted
method in the diluted earnings per share ("EPS") calculation for convertible instruments. As a result of adoption, Teradyne recorded an increase of $1.4 million to current debt for 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 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.
6
C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For the six months ended July 3, 2022, there were no recently issued accounting pronouncements that had, or are expected to have, a material impact to Teradyne's consolidated financial statements.
D. INVESTMENT IN OTHER COMPANY
On June 1, 2021, Teradyne invested $12.0 million in MachineMetrics, Inc. ("MachineMetrics"), a private company that develops and sells products to improve manufacturing performance through automated machine data collection, alerting, and analytics. Teradyne's investment in MachineMetrics aligns with its strategy of providing and investing in leading edge products for automating industrial production processes in growing markets. The investment was recorded at cost and is evaluated for impairment or an indication of changes in fair value resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer on a quarterly basis. At July 3, 2022, the value of the investment was $12.0 million, and there were no changes during the three and six months ended July 3, 2022.
7
E. REVENUE
Disaggregation of Revenue
The following table provides information about disaggregated revenue by timing of revenue recognition, primary geographical market, and major product lines.
Semiconductor Test
Industrial Automation
System
on-a-Chip
Memory
System
Test
Universal
Robots
Mobile
Industrial
Robots
AutoGuide
Wireless

Test
Corporate
and
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
(1)
Includes $1.9 million and $4.2 million in 2022 and 2021, 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 2021, respectively, for leases of Teradyne's systems recognized outside ASC 606
"Revenue from Contracts with Customers."
8
Contract Balances
During the three and six months ended July 3, 2022, Teradyne recognized $25.1 million and $60.2 million, respectively, that was previously included within the deferred revenue and customer advances balances at the beginning of the period. During the three and six months ended July 4, 2021, Teradyne recognized $22.0 million and $49.6 million, respectively, that was previously included within the deferred revenue and customer advances balances. 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 3, 2022, Teradyne has $1,574 million of unsatisfied performance obligations. Teradyne expects to recognize 90% of the remaining performance obligations in the next 12 months and 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 sold certain trade accounts receivables on a
non-recourse
basis to third-party financial institutions pursuant to factoring agreements. During the three months ended July 3, 2022 and July 4, 2021, total trade accounts receivable sold under the factoring agreements were $37.6 million and $7.6 million, 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 $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 3, 2022 and December 31, 2021:
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 3, 2022 and December 31, 2021 were $115.5 million and $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 equity and debt mutual funds are classified as Level 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, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.
9
R
ealized gains recorded in the three and six months ended July 3, 2022 were $0.1 million and $0.5 million, respectively. Realized gains recorded in the three and six months ended July 4, 2021 were $0.9 million and $2.0 million, respectively. Realized losses recorded in the three and six months ended July 3, 2022 were $0.4 million and $0.6 million, respectively. No 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. No
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 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 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 3, 2022 and December 31, 2021.
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
1
0
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
Changes in the fair value of Level 3 contingent consideration for the six months ended July 3, 2022, and July 4, 2021 were as follows:
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.
1
1
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.
The carrying amounts and fair values of Teradyne's financial instruments at July 3, 2022 and December 31, 2021 were as follows:
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
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
1
2
The following table summarizes the composition of
available-for-sale
marketable securities at December 31, 2021:
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
$ 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 3, 2022, the fair ma
rket value of investments with unrealized losses less than one year and greater than one year totaled $252.4 million and $10.9 million, respectively. As of December 31, 2021, the fair market value of investments with unrealized losses for less than one year and greater than one year totaled $85.4 million and $6.5 million, respectively.
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 3, 2022 and December 31, 2021 were not other than temporary.
The contractual maturities of investments in
available-for-sale
securities held at July 3, 2022 were as follows:
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 3, 2022 exclude debt mutual funds with a fair market value of $6.5 million, as they do not have a contractual maturity date.
Derivatives
Teradyne conducts business in a number of foreign countries, with certain transactions denominated in local currencies. The purpose of Teradyne's foreign currency management is to minimize the effect of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities. Teradyne does not use derivative financial instruments for trading or speculative purposes.
1
3
To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings and is used to offset the change in value of monetary assets and liabilities denominated in foreign currencies.
At July 3, 2022 and December 31, 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 a loss of $0.1 million and $0.1 million, 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 3, 2022 and December 31, 2021:
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:
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
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.
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
million aggregate principal amount of
1.25
% convertible senior unsecured notes (the "Notes") due December 15, 2023 and received net proceeds, after issuance costs, of approximately $
450.8
million, $
33.0
million of which was used to pay the net cost of the convertible note hedge transactions an
d
14
$
50.1
million of which was used to repurchase
2.0
million shares of Teradyne's common stock under its existing stock repurchase program from purchasers of the Notes in privately negotiated transactions effected through one of the initial purchasers or its affiliates conducted concurrently with the pricing of the Note offering. The Notes will mature on December 15, 2023, unless earlier repurchased or converted. The Notes bear interest at a rate of
1.25
% per year
payable semiannually in arrears on June 15 and December 15 of each year
. The Notes will be convertible at the option of the noteholders at any time prior to the close of business on the business day immediately preceding September 15, 2023, only under the following circumstances: (1) during any calendar quarter beginning after
March 31, 2017
(and only during such calendar quarter), if the closing sale price of Teradyne's common stock, for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than
130
% of the conversion price on each applicable trading day; (2) during the
five
business day period after any
five
consecutive trading day period (the "measurement period") in which the trading price (as defined in the Indenture) per $
1,000
principal amount of Notes for each trading day of the measurement period was less than
98
% of the product of the closing sale price of the Teradyne's common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate events. On or after
September 15, 2023
until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Teradyne may satisfy its 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 for the amount in excess of principal. As of July 3, 2022, the conversion price was approximately $
31.49
per share of Teradyne's common stock. The conversion rate is subject to adjustment under certain circumstances. As of August 5, 2022, one hundred and six holders had exercised the option to convert $
386.4
million worth of 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 $31.49.
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, 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 3, 2022, the strike price of the warrants was approximately $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.
Originally, Teradyne allocated $100.8 million of the $460.0 million principal amount of the Notes to the equity component, which represented a discount to the debt and was amortized to interest expense using the effective interest method through December 2023. Effective January 1, 2022, Teradyne adopted ASC
2020-06
using the 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 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.
On November 4, 2021, Teradyne made an irrevocable election under the Indenture to require the principal portion of the remaining Notes to be settled in cash.
Debt issuance fees of approximately $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.
15
The below tables represent the key components of Teradyne's convertible senior notes:
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 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
(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 3, 2022, the conversion price was approximately $31.49 per share and the
if-converted
value of the notes was $203.5 million.
During the six months ended July 3, 2022, twenty-five debt holders elected to convert $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 1.0 million shares issued to the debt holders were received from exercising the convertible notes hedge call options.
Additional conversions of approximately $9.6 million of debt principal will occur in the third quarter of 2022 and the liability is included in current debt.
Teradyne expects to make principal interest payments of $0.9 million in the next 12 months and $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 provided for a three-year, senior secured revolving credit facility of $400.0 million (the "Credit Facility").
On December 10, 2021, the Credit Agreement 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 amount under the Credit Facility, not to exceed the greater of $200.0 million or 15% of consolidated EBIDTA. The interest rate applicable to loans under the Credit Facility are, at Teradyne's option, equal to either a base rate plus a margin ranging from 0.00% to 0.75% per annum or LIBOR plus a margin ranging from 1.00% to 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 0.15% to 0.25% per annum, based on the then applicable consolidated leverage ratio.
16
Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBOR breakage costs.
The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne's ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarter 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 5, 2022, Teradyne has not borrowed any funds under the credit facility and was in compliance with all covenants.
I. PREPAYMENTS
Prepayments consist of the following:
July 3,
December 31,
2022
2021
(in thousands)
Contract manufacturer and supplier prepayments
$ 460,727 $ 364,478
Prepaid maintenance and other services
17,421 13,660
Prepaid taxes
8,675 15,090
Other prepayments
11,270 13,038
Total prepayments
$ 498,093 $ 406,266
J. 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 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 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

17
K. STOCK-BASED COMPENSATION
Under Teradyne's stock compensation plans, Teradyne grants service-based restricted stock units, performance-based restricted stock units and stock options, and employees are eligible to purchase Teradyne's common stock through its Employee Stock Purchase Plan ("ESPP").
Service-based restricted stock unit awards granted to employees vest in equal annual installments over four years. 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 of 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-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, amortization of acquired intangible assets; acquisition and divestiture related charges or credits; pension actuarial gains and losses; 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 sixtyand 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
% 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, Teradyne granted 0.4 million and 0.3 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $111.21 and $113.23, respectively, and $0.1 million of service-based restricted stock unit awards to
non-employee
directors at a weighted average grant date fair value of $106.91 and $127.77, respectively.
During the six months ended July 3, 2022 and July 4, 2021, Teradyne granted 0.1 million of PBIT PRSUs with a grant date fair value of $110.84 and $113.65, respectively.
18
During the six months ended July 3, 2022 and July 4, 2021, Teradyne granted 0.1 million of TSR PRSUs, with a grant date fair value of $101.06 and $125.02, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:​​​​​​​
For the Six Months

Ended
July 3,
2022
July 4,
2021
Risk-free interest rate
1.4 % 0.2 %
Teradyne volatility-historical
47.1 % 43.9 %
NYSE Composite Index volatility-historical
22.7 % 22.9 %
Dividend yield
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 $0.44 per share divided by Teradyne's stock price on the grant date of $112.12 for the 2022 grant and an estimated annual dividend amount of $0.40 per share divided by Teradyne's stock price on the grant date of $113.48 for the 2021 grant.
During the six months ended July 3, 2022 and July 4, 2021, 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, 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
July 3,
2022
July 4,
2021
Expected life (years)
4.0 5.0
Risk-free interest rate
1.6 % 0.4 %
Volatility-historical
43.7 % 37.8 %
Dividend yield
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 $0.44 per share divided by Teradyne's stock price on the grant date of $112.12 for the 2022 grant and an estimated annual dividend amount of $0.40 per share divided by Teradyne's stock price on the grant date of $113.48 for the 2021 grant.
19

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
(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
Other comprehensive loss before reclassifications, net of tax of $0, $(472), $0, respectively
(15,974 ) (1,776 ) - (17,750 )
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(121), $(1), respectively
- (441 ) (3 ) (444 )
Net current period other comprehensive loss, net of tax of $0, $(593), $(1), respectively
(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
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 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 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."
M. GOODWILL AND ACQUIRED INTANGIBLE ASSETS
Goodwill
Teradyne performs its annual goodwill impairment test as required under the provisions of ASC
350-10,
"Intangibles-Goodwill and Other"
on December 31 of each fiscal year unless interim indicators of impairment exist. In the six months ended July 3, 2022, there were no interim indicators of impairment. Goodwill is considered impaired when the net book value of a reporting unit exceeds its estimated fair value.
2
0
The changes in the carrying amount of goodwill by reportable segments for the six months ended July 3, 2022, were as follows:
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 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.
Estimated intangible asset amortization expense for each of the five succeeding fiscal years and thereafter is as follows:
Year
Amortization Expense
(in thousands)
2022
$ 9,547
2023
18,642
2024
18,336
2025
11,154
2026
2,333
Thereafter
2,497
2
1
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 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, multiplied by
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.
The computation of diluted net income per common share for the three and six months ended 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.
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. Previously, in the three months ended December 31, 2021, Teradyne recorded a charge of $12 million related 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.
P. RETIREMENT PLANS
ASC 715, "Compensation-Retirement Benefits," requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the 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 its plans.
2
2
Defined Benefit Pension Plans
Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain
non-U.S.
subsidiaries. Benefits under these plans are based on employees' years of service and compensation. Teradyne's funding policy is to 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 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 (the "IRC"), as well as unfunded qualified foreign plans.
In the six months ended July 3, 2022 and July 4, 2021, Teradyne contributed $1.6 million and $1.7 million, respectively, to the U.S. supplemental executive defined benefit pension plan, and $0.5 million and $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, Teradyne's net periodic pension cost was comprised of the following:
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, Teradyne's net periodic postretirement benefit cost (credit) was comprised of the following:
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 )
23
Q. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
As of July 3, 2022, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $1,006.8 million, of which $870.5 million is for less than one year.
Legal Claims
Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business 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 sought full acceleration of the maximum
earn-out
amount payable under the Purchase Agreement, or $106.9 million, for the alleged breach of the
earn-out
provisions of the Purchase Agreement. On March
25
, 2022, the arbitration claim was settled for $26.7 million. As a result, Teradyne has no remaining
earn-out
obligations.
Guarantees and Indemnification Obligations
Teradyne provides indemnification, to the extent permitted by law, to its officers, directors, employees and 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 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 recorded upon revenue recognition to cost of revenues for estimated warranty expense based upon historical experience. When Teradyne receives revenue for extended warranties beyond the standard duration, the revenue is 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 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 ordinary course of business, Teradyne provides minimum purchase guarantees to certain vendors to ensure continuity of supply against the market demand. Although some of these guarantees provide penalties for cancellations and/or modifications to the purchase commitments as the market demand decreases, most of the guarantees do not. Therefore, as the market demand decreases, Teradyne
re-evaluates
these guarantees and determines what charges, if any, should be recorded.
With respect to 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 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.
24
Based on historical experience and information known as of July 3, 2022 and December 31, 2021, except for product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.
R. INCOME TAXES
A reconciliation of the United States federal statutory corporate tax rate to Teradyne's effective tax rate was as follows:
For the Three Months

Ended
For the Six Months

Ended
July 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 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 3, 2022 and December 31, 2021, Teradyne had $14.6 million and $14.5 million, respectively, of reserves for uncertain tax positions. The $0.1 million net increase in reserves for uncertain tax positions consists of an increase related to U.S. federal research and development credits generated in the current year partially offset by the release of reserves related to prior year loss carryforwards.
As of July 3, 2022, Teradyne does not anticipate a material change in the balance of unrecognized tax benefits during the next twelve months.
Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of July 3, 2022 and December 31, 2021, $0.3 million and $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, an expense of $0.1 million and $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 3, 2022 was $8.3 million, or $0.05 per diluted share. The tax savings due to the tax holiday for the six months ended July 4, 2021 was $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.
S. SEGMENT INFORMATION
Teradyne has four 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 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.
25
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, 2021.
Segment information for the three and six months ended July 3, 2022 and July 4, 2021 is as follows:
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 Eliminations are: legal
and environmental
fees, contingent consideration fair value adjustments, interest income, interest expense, severance charges, net foreign exchange gains (losses), acquisition related charges and compensation, pension, intercompany eliminations and 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.
(3)
Total assets are attributable to each segment. Corporate assets consist of cash and cash equivalents, marketable securities, and certain other assets.
Included in each segment are charges and credits in the following line items in the statements of operations:
For the Three Months

Ended
For the 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 )
26
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 $750.0 million of its common stock in 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. The cumulative repurchases under the $2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $1,132.8 million at an average price per share of $116.45.
The total price includes commissions and is recorded as a reduction to retained earnings.
Dividend
Holders of Teradyne's common stock are entitled to receive dividends when they are declared by Teradyne's Board of Directors.
In January 2022 and May 2022, Teradyne's Board of Directors declared a quarterly cash dividend
of
$0.11 per share. Dividend payments for the three and six months ended July 3, 2022 were $17.5 million and $35.4 million, respectively.
In January 2021 and May 2021, Teradyne's Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for the three and six months ended July 4, 2021 were $16.6 million and $33.3 million, respectively.
While Teradyne declared a quarterly cash dividend and authorized a share repurchase program, it may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of Teradyne's Board of Directors which will consider, among other things, Teradyne's earnings, capital requirements and financial condition.
2
7
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, 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 automation and AutoGuide, LLC ("AutoGuide"), a maker of high payload AMRs. The market for our 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 continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target 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 stock repurchases and 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
28
impact of
COVID-19,
which will depend on future developments that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, any new surges or new strains or variants of the virus in areas where we do business, the availability and use of vaccinations, any further government actions to contain the virus or treat its impact, continuing shutdowns in China, and how quickly and to what extent normal economic and operating conditions can resume.
Due to the
COVID-19
pandemic, there has been uncertainty and disruption in the global economy and our markets. We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of August 5, 2022, the date of issuance of this Quarterly Report on Form
10-Q.
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, which includes implementing social distancing protocols, limiting employee travel and requiring employees to work 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 2022 financial results or to our future financial results. In addition, the pandemic has disrupted our contract manufacturers and suppliers, and has resulted 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 based on demand and the availability of supply. We are monitoring our operations closely in an effort to avoid any potential productivity losses caused by responses to the
COVID-19
pandemic.
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 2021 and in the first half of 2022, but the
COVID-19
pandemic could cause further 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. 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 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, 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.
29
Impact of Russia's invasion of Ukraine on our Business
Russia's invasion of Ukraine, in February 2022, did not have a significant impact on our business as we have minimal business in Russia and Ukraine, both directly and indirectly. However, following the invasion, the U.S. and other countries imposed significant sanctions against the Russian government and many Russian companies and individuals. Although Teradyne does not have significant operations in Russia, the sanctions and Russia's response to the sanctions, have impacted Teradyne's business in other countries and could have a negative impact on the Company's future revenue and supply chain, either of which could adversely affect Teradyne's business and financial results. In addition, the global economic uncertainty following the invasion, sanctions and Russia's response to the sanctions could impact demand for our products.
See Part II-Item 1A, "Risk Factors," included in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2021 for our risk factors regarding risks associated with both the
COVID-19
pandemic and international conflicts.
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 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, 2021, except as noted below.
Critical accounting estimates are complex and may require significant judgment by management. Changes to the underlying assumptions may have a material impact on our financial condition and results of operations. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ significantly from these estimates under different assumptions or conditions.
Convertible Debt
We adopted Accounting Standards Update ("ASU") ASU
2020-06
-
"Debt-Debt with Conversion and Other Options and Derivatives and Hedging-Contracts in Entity's Own Equity,"
on January 1, 2022 using the modified retrospective method of adoption
.
Under ASU
2020-06,
we account for a convertible debt instrument as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Unsettled shares are recorded in current debt, and there is no recognition of a debt discount, which was previously amortized to interest expense. We use the
if-converted
method in the diluted EPS calculation for convertible instruments. As a result of adoption, we recorded an increase of $1.4 million to current debt for unsettled shares, an increase of $1.8 million to deferred tax assets, an increase of $6.6 million to long-term debt for unamortized debt discount, and an increase to retained earnings of $94.6 million for the reclassification of the equity component. Mezzanine equity representing unsettled shares value was reduced to zero and additional
paid-in
capital was reduced by $99.3 million.
Preparation of Financial Statements and Use of Estimates
The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates under different assumptions or conditions.
30
SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Three Months

Ended
For the Six Months

Ended
July 3,
2022
July 4,
2021
July 3,
2022
July 4,
2021
Percentage of revenues:
Revenues:
Products
83 % 88 % 83 % 86 %
Services
17 12 17 14
Total revenues
100 100 100 100
Cost of revenues:
Cost of products
33 36 32 35
Cost of services
7 5 7 5
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)
40 40 40 41
Gross profit
60 60 60 59
Operating expenses:
Selling and administrative
17 13 18 14
Engineering and development
13 10 14 11
Acquired intangible assets amortization
- - 1 1
Restructuring and other
- - 1 -
Total operating expenses
31 24 33 26
Income from operations
29 36 27 33
Non-operating
(income) expense:
Interest income
- - - -
Interest expense
- 1 - 1
Other (income) expense, net
1 - 1 -
Income before income taxes
28 35 26 33
Income tax provision
5 5 4 4
Net income
24 % 30 % 23 % 29 %
Results of Operations
Second Quarter 2022 Compared to Second Quarter 2021
Revenues
Revenues by our reportable segments were as follows:
For the Three Months

Ended
July 3,
2022
July 4,
2021
Dollar
Change
(in millions)
Semiconductor Test
$ 541.3 $ 834.0 $ (292.7 )
System Test
134.7 104.8 29.9
Industrial Automation
101.1 92.2 8.9
Wireless Test
63.9 54.9 9.0
Corporate and Eliminations
(0.2 ) (0.1 ) (0.1 )
$ 840.8 $ 1,085.7 $ (244.9 )
The decrease in Semiconductor Test revenues of $292.7 million, or 35.1%, was driven primarily by lower tester sales in high performance compute processor and mobile applications, and lower memory test sales of flash memory testers. The increase in System Test revenues of $29.9 million, or 28.5%, was primarily due to higher sales in Storage Test of system level and hard disk drive testers. The increase in Industrial Automation revenues of $8.9 million, or 9.7%, was driven primarily by higher demand for UR's collaborative robotic arms and MiR's autonomous mobile robots. The rise in Wireless Test revenues of $9.0 million, or 16.4%, was primarily due to increase in connectivity test products.
31
Revenues by country as a percentage of total revenues were as follows (1):
For the Three Months

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

Ended
July 3,
2022
July 4,
2021
Dollar/Point
Change
(in millions)
Gross profit
$ 506.4 $ 647.0 $ (140.6 )
Percent of total revenues
60.2 % 59.6 % 0.6
Gross profit as a percent of revenue increased by 0.6 points, primarily due to favorable product mix in Semiconductor 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
July 3,
2022
July 4,
2021
Dollar
Change
(in millions)
Selling and administrative
$ 139.5 $ 140.2 $ (0.7 )
Percent of total revenues
16.6 % 12.9 %
The decrease of $0.7 million in selling and administrative expenses was primarily due to lower variable compensation.
32
Engineering and Development
Engineering and development expenses were as follows:
For the Three Months

Ended
July 3,
2022
July 4,
2021
Dollar
Change
(in millions)
Engineering and development
$ 112.0 $ 110.0 $ 2.0
Percent of total revenues
13.3 % 10.1 %
The increase of $2.0 million in engineering and development expenses was primarily due to higher spending in Semiconductor Test and 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.
Interest and Other
For the Three Months

Ended
July 3,
2022
July 4,
2021
Dollar
Change
(in millions)
Interest income
$ (1.0 ) $ (0.6 ) $ (0.4 )
Interest expense
0.9 5.6 $ (4.7 )
Other (income) expense, net
9.4 (0.1 ) $ 9.5
Interest expense decreased by $4.7 million primarily due to the January 1, 2022 adoption of ASU
2020-06
which eliminated the amortization of the debt discount which was $3.3 million in the three months ended July 4, 2021. Other (income) expense, net increased by $9.5 million primarily due to changes in unrealized gains/losses on equity securities, from a $1.3 million gain in 2021 to a $6.6 million loss in 2022.
Income (Loss) Before Income Taxes
For the Three Months

Ended
July 3,
2022
July 4,
2021
Dollar
Change
(in millions)
Semiconductor Test
$ 177.8 $ 337.3 $ (159.5 )
System Test
54.0 34.0 20.0
Wireless Test
25.4 21.5 3.9
Industrial Automation
(6.4 ) (9.8 ) 3.4
Corporate and Eliminations (1)
(12.2 ) 1.1 (13.3 )
$ 238.6 $ 384.0 $ (145.4 )
(1)
Included in Corporate and Eliminations are legal and environmental fees, interest income, interest expense, net foreign exchange gains (losses), pension, intercompany eliminations, acquisition related charges and compensation and for the three months ended July 4, 2021, loss on convertible debt conversions.
The decrease in income before income taxes in Semiconductor Test was driven primarily by lower revenues in compute processor and mobile applications, and lower memory test sales of flash memory testers. The increase in income before income taxes in System Test was primarily due to higher sales in Storage Test of system level and hard disk drive testers. The rise in income before taxes in Wireless Test was driven primarily by an increase in connectivity test products. The lower losses before taxes in Industrial Automation was driven primarily by higher demand for UR's collaborative robotic arms and MiR's autonomous mobile robots.
33
Income Taxes
The effective tax rate for the three months ended July 3, 2022 and July 4, 2021 was 17.1% and 14.5%, respectively. The increase in the effective tax rate from the three months ended July 4, 2021 to the three months ended July 3, 2022 was primarily attributable to a 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 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 an increase in benefit from tax credits.
Six Months 2022 Compared to Six Months 2021
Revenues
Revenues by our reportable segments were as follows:
For the Six Months

Ended
July 3,
2022
July 4,
2021
Dollar
Change
(in millions)
Semiconductor Test
$ 1,023.7 $ 1,362.0 $ (338.3 )
System Test
253.4 237.7 15.7
Industrial Automation
204.2 172.1 32.1
Wireless Test
115.4 95.8 19.6
Corporate and Eliminations
(0.5 ) (0.3 ) (0.2 )
$ 1,596.1 $ 1,867.3 $ (271.1 )
The decrease in Semiconductor Test revenues of $338.3 million, or 24.8%, was driven primarily by lower tester sales in high performance compute processor and mobile applications, and lower memory test sales of flash memory testers. The increase in System Test revenues of $15.7 million, or 6.6%, was primarily due to higher sales in Defense/Aerospace and in Production Board Test. The increase in Industrial Automation revenues of $32.1 million, or 18.7%, was driven primarily by higher demand for UR's collaborative robotic arms and MiR's autonomous mobile robots. The rise in Wireless Test revenues of $19.6 million, or 20.5%, was primarily due to increase in connectivity test.
Revenues by country as a percentage of total revenues were as follows (1):
For the Six Months

Ended
July 3,
2022
July 4,
2021
Taiwan
22 % 40 %
China
16 17
Korea
15 9
United States
15 9
Europe
9 6
Thailand
5 5
Japan
5 4
Malaysia
5 3
Philippines
3 5
Singapore
3 2
Rest of World
2 -
100 % 100 %
(1)
Revenues attributable to a country are based on location of customer site.
34
Gross Profit
Our gross profit was as follows:
For the Six Months

Ended
July 3,
July 4,
Dollar/Point
2022
2021
Change
(in millions)
Gross profit
$ 961.3 $ 1,108.6 $ (147.3 )
Percent of total revenues
60.2 % 59.4 % 0.8
Gross profit as a percent of revenue increased by 0.8 points, primarily due to favorable product mix in Semiconductor Test, partially offset by higher material costs due to inflation.
Selling and Administrative
Selling and administrative expenses were as follows:
For the Six Months

Ended
July 3,
July 4,
Dollar
2022
2021
Change
(in millions)
Selling and administrative
$ 279.7 $ 270.0 $ 9.7
Percent of total revenues
17.5 % 14.5 %
The increase of $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.
Engineering and Development
Engineering and development expenses were as follows:
For the Six Months

Ended
July 3,
July 4,
Dollar
2022
2021
Change
(in millions)
Engineering and development
$ 220.1 $ 210.4 $ 9.7
Percent of total revenues
13.8 % 11.3 %
The increase of $9.7 million in engineering and development expenses was due to higher spending primarily in Semiconductor Test and 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.
35
Interest and Other
For the Six Months

Ended
July 3,
July 4,
Dollar
2022
2021
Change
(in millions)
Interest income
$ (1.7 ) $ (1.4 ) $ (0.3 )
Interest expense
1.9 11.6 (9.7 )
Other (income) expense, net
14.6 3.7 10.9
Interest expense decreased by $9.7 million primarily due to the January 1, 2022 adoption of ASU
2020-06
which eliminated the amortization of the debt discount which was $6.9 million in the six months ended July 4, 2021. Other (income) expense, net increased by $10.9 million primarily due to 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 on convertible debt early conversions.
Income (Loss) Before Income Taxes
For the Six Months

Ended
July 3,
July 4,
Dollar
2022
2021
Change
(in millions)
Semiconductor Test
$ 327.5 $ 513.7 $ (186.2 )
System Test
95.4 85.0 10.4
Wireless Test
44.0 31.1 12.9
Industrial Automation
(11.5 ) (22.8 ) 11.3
Corporate and Eliminations (1)
(36.4 ) 1.1 (37.5 )
$ 419.0 $ 608.0 $ (189.0 )
(1)
Included in Corporate and Eliminations are legal and environmental fees, contingent consideration adjustments, interest income, interest expense, net foreign exchange gains (losses), pension, intercompany eliminations, acquisition related charges and compensation and for the six months ended July 4, 2021, loss on convertible debt conversions.
The decrease in income before income taxes in Semiconductor Test was driven primarily by lower revenues in compute processor and mobile applications, and lower memory test sales of flash memory testers. The increase in income before income taxes in System Test was primarily due to higher sales in Defense/Aerospace and in Production Board Test. The rise in income before taxes in Wireless Test was driven primarily 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 12.2%, respectively. The increase in the effective tax rate from the six months ended July 4, 2021 to the six months ended July 3, 2022 was primarily attributable to a 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 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.
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, 2021.
36
Liquidity and Capital Resources
Our cash, cash equivalents, and marketable securities balances decreased by $606.4 million in the six months ended July 3, 2022 to $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.
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.
In January 2022 and May 2022, Teradyne's Board of Directors declared a quarterly cash dividend of $0.11 per share. Dividend payments for the three and six months ended July 3, 2022 were $17.5 million and $35.4 million, respectively.
In January 2021 and May 2021, Teradyne's Board of Directors declared a quarterly cash dividend of $0.10 per share. Dividend payments for the three and six months ended July 4, 2021 were $16.6 million and $33.3 million, respectively.
37
In January 2021, our Board of Directors 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 $750.0 million in 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, Teradyne repurchased 1.6 million shares of common stock for $196.6 million at an average price of $125.69 per share. The cumulative repurchases under the $2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $1,132.8 million at an average price per share of $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 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 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. 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 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
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 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 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, 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 3, 2022, $74.7million of principal remained outstanding and the Notes had a fair value of $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 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 Notes, but does not impact Teradyne's financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. In connection with the offering of the Notes we also sold warrants to the option counterparties. These transactions have been accounted for as an adjustment to our shareholders' equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon conversion of the Notes. The warrants along with any shares issuable upon conversion of the Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or Notes, respectively.
38
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(f)
promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
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 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. 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 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 sought full acceleration of the maximum
earn-out
amount payable under the Purchase Agreement, or $106.9 million, for the alleged breach of the
earn-out
provisions of the Purchase Agreement. On March 25, 2022, the arbitration claim was settled for $26.7 million. As a result, Teradyne 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, 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.
39
The global supply shortage of electrical components and inflationary cost increases has impacted our ability to meet customer 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. 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 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. 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 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 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 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.
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
In January 2021, Teradyne's Board of Directors 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, Teradyne repurchased 1.6 million shares of common stock for $196.6 million at an average price of $125.69 per share. The cumulative repurchases under the $2.0 billion common stock repurchase program as of July 3, 2022 were 9.7 million shares of common stock for $1,132.8 million at an average price per share of $116.45.
The following table includes information with respect to repurchases we made of our common stock during the three months ended July 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 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 seventeen thousand shares at an average price of $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
Item 6:
Exhibits
Exhibit

Number
Description
31.1 Certification of Principal Executive Officer, pursuant to Rule13a-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 Rule13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
40
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)
41
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
M
EHTA
Sanjay Mehta
Vice President,
Chief Financial Officer and Treasurer
(Duly Authorized Officer
and Principal Financial Officer)
August 5, 2022
42

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Teradyne Inc. published this content on 05 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 August 2022 18:35:10 UTC.