10-Q 1 d300073d10q.htm 10-Q 10-Q
falseP60Y0000097210Q1--12-31Includes $3.1 million and $3.1 million in 2022 and 2021, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.”(a) In the three months ended April 4, 2021, the fair value of contingent consideration for the earn-outs in connection with the acquisition of AutoGuide was reduced to zero, which resulted in a benefit of $7.2 million, primarily due to a decrease in forecasted revenues and earnings before interest and taxes. As of April 3, 2022, the maximum amount of contingent consideration that could be paid in connection with the acquisition of AutoGuide is $87.7 million. The remaining earn-out period ends on December 31, 2022. The sellers of AutoGuide have filed an arbitration claim against Teradyne related to the earn-out alleging non-compliance with the earn-out obligations. In March 2022, both parties reached an agreement to settle it for $26.7 million.(1) The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the convertible note, which includes the equity conversion features.Included in Corporate and Eliminations are: legal fees, contingent consideration fair value adjustments, interest income, interest expense, severance charges, net foreign exchange gains (losses), acquisition related charges and compensation, intercompany eliminations and for the three months ended April 4, 2021, loss on convertible debt conversions.Included in income (loss) before taxes are charges and credits related to restructuring and other, inventory charges and, for the three months ended April 4, 2021, loss on convertible debt conversions.Total assets are attributable to each segment. 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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 April 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 $0.125
 per share
  
TER
  
Nasdaq Stock Market LLC
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(232.405 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 May 2, 2022 was
 160,203,017 shares.
 
 
 
TERADYNE, INC.
INDEX
 
 
  
 
  
Page No.
 
  
PART I. FINANCIAL INFORMATION
  
Item 1.
  
Financial Statements (Unaudited):
  
  
  
 
1
 
  
  
 
2
 
  
  
 
3
 
  
  
 
4
 
  
  
 
5
 
  
  
 
6
 
Item 2.
  
  
 
26
 
Item 3.
  
  
 
33
 
Item 4.
  
  
 
34
 
  
PART II. OTHER INFORMATION
  
Item 1.
  
  
 
34
 
Item 1A.
  
  
 
35
 
Item 2.
  
  
 
35
 
Item 4.
  
  
 
35
 
Item 6.
  
  
 
36
 
PART I
 
Item 1:
Financial Statements
TERADYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
  
April 3,

2022
 
 
December 31,
2021
 
 
  
 
 
 
 
 
 
  
(in thousands,
except per share amount)
 
ASSETS
  
 
 
 
 
 
Current assets:
  
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
    $ 794,603     $ 1,122,199  
Marketable securities
      282,016       244,231  
Accounts receivable, less allowance for credit losses of $1,891 and $2,012 at April 3, 2022 and December 31, 2021, respectively
      546,881       550,749  
Inventories, net
      259,341       243,330  
Prepayments
      479,414       406,266  
Other current assets
      12,127       9,452  
    
 
 
    
 
 
  
Total current assets
      2,374,382       2,576,227  
Property, plant and equipment, net
      399,485       387,240  
Operating lease
right-of-use
assets, net
      67,718       68,807  
Marketable securities
      126,130       133,858  
Deferred tax assets
      113,556       102,428  
Retirement plans assets
      14,669       15,110  
Other assets
      23,480       24,096  
Acquired intangible assets, net
      69,846       75,635  
Goodwill
      419,888       426,024  
    
 
 
    
 
 
  
Total assets
    $ 3,609,154     $ 3,809,425  
  
 
 
 
 
 
 
 
LIABILITIES
  
 
 
 
 
 
Current liabilities:
  
 
Accounts payable
    $ 156,493     $ 153,133  
Accrued employees’ compensation and withholdings
      139,287       253,667  
Deferred revenue and customer advances
      155,761       146,185  
Other accrued liabilities
      118,252       124,187  
Operating lease liabilities
      18,523       19,977  
Income taxes payable
      103,386       88,789  
Current debt
      20,497       19,182  
    
 
 
    
 
 
  
Total current liabilities
      712,199       805,120  
Retirement plans liabilities
      151,697       151,141  
Long-term deferred revenue and customer advances
      51,698       54,921  
Long-term other accrued liabilities
      15,748       15,497  
Deferred tax liabilities
      4,927       6,327  
Long-term operating lease liabilities
      55,934       56,178  
Long-term incomes taxes payable
      67,041       67,041  
Debt
      75,378       89,244  
    
 
 
    
 
 
  
Total liabilities
      1,134,622       1,245,469  
    
 
 
    
 
 
  
Commitments and contingencies (
N
ote
Q
)
             
Mezzanine equity:
                 
Convertible common shares
      —         1,512  
SHAREHOLDERS’ EQUITY
  
 
 
 
 
 
Common stock, $0.125 par value, 1,000,000 shares authorized; 161,053 and 162,251 shares issued and outstanding at April 3, 2022 and December 31, 2021, respectively
      20,132       20,281  
Additional
paid-in
capital
      1,711,690       1,811,545  
Accumulated other comprehensive loss
      (19,479 )      (5,948 ) 
Retained earnings
      762,189       736,566  
    
 
 
    
 
 
  
Total shareholders’ equity
      2,474,532       2,562,444  
    
 
 
    
 
 
  
Total liabilities, convertible common shares and shareholders’ equity
    $ 3,609,154     $ 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
 
 
  
April 3,
2022
 
 
April 4,
2021
 
 
  
 
 
 
 
 
 
  
(in thousands, except per
share amount)
 
 
 
 
 
 
 
 
 
 
Revenues:
                 
Products
    $ 625,875     $ 660,508  
Services
      129,495       121,098  
    
 
 
    
 
 
  
Total revenues
      755,370       781,606  
Cost of revenues:
                 
Cost of products
      243,016       267,784  
Cost of services
      57,421       52,204  
    
 
 
    
 
 
  
Total cost of revenues (exclusive of acquired intangible
assets amortization shown separately below)
      300,437       319,988  
    
 
 
    
 
 
  
Gross profit
      454,933       461,618  
Operating expenses:
                 
Selling and administrative
      140,185       129,797  
Engineering and development
      108,116       100,402  
Acquired intangible assets amortization
      5,063       5,536  
Restructuring and other
      15,714       (7,130 ) 
    
 
 
    
 
 
  
Total operating expenses
      269,078       228,605  
    
 
 
    
 
 
  
Income from operations
      185,855       233,013  
Non-operating
(income) expense:
                 
Interest income
      (703 )      (808 ) 
Interest expense
      1,012       6,004  
Other (income) expense, net
      5,187       3,824  
    
 
 
    
 
 
  
Income before income taxes
      180,359       223,993  
Income tax provision
      18,431       18,481  
    
 
 
    
 
 
  
Net income
    $ 161,928     $ 205,512  
    
 
 
    
 
 
  
Net income per common share:
                 
Basic
    $ 1.00     $ 1.23  
    
 
 
    
 
 
  
Diluted
    $ 0.92     $ 1.09  
    
 
 
    
 
 
  
Weighted average common shares—basic
      162,048       166,491  
    
 
 
    
 
 
  
Weighted average common shares—diluted
      175,575       187,740  
    
 
 
    
 
 
  
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
 
 
  
April 3,
2022
 
 
April 4,
2021
 
 
  
 
 
 
 
 
 
  
(in thousands)
 
Net income
    $ 161,928    
$205,512  
Other comprehensive income, net of tax:
                 
Foreign currency translation adjustment, net of tax of $0 and $0, respectively
      (8,076 )      (21,123 ) 
Available-for-sale
marketable securities:
                 
Unrealized losses on marketable securities arising during period, net of tax of $(1,333) and $(908), respectively
      (5,388 )      (3,270 ) 
Less: Reclassification adjustment for gains included in net income, net of tax of $(18) and $(123), respectively
      (65 )      (444 ) 
    
 
 
    
 
 
  
       (5,453 )      (3,714 ) 
Defined benefit post-retirement plan:
                 
Amortization of prior service credit, net of tax of $0 and $0, respectively
      (2 )      (2 ) 
    
 
 
    
 
 
  
Other comprehensive loss
      (13,531 )      (24,839 ) 
    
 
 
    
 
 
  
Comprehensive income
   
$148,397    
$180,673  
    
 
 
    
 
 
  
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 April 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
              552       70       (14,644 )                      (14,574 ) 
Stock-based compensation expense
                              14,204                       14,204  
Repurchase of common stock
              (1,750 )      (219 )                      (211,247 )      (211,466 ) 
Cash dividends ($0.11 per share)
                                              (17,908 )      (17,908 ) 
Settlements of convertible notes
              509       64       (157 )                     (93 )
Exercise of convertible notes hedge call options
              (509 )      (64 )      64                       —  
Cumulative-effect of change in accounting principle related to convertible debt
      (1,512 )                      (99,322 )              92,850       (6,472 ) 
Net income
                                              161,928       161,928  
Other comprehensive loss
                                      (13,531 )              (13,531 ) 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Balance, April 3, 2022
    $ —         161,053     $ 20,132     $ 1,711,690     $ (19,479 )    $ 762,189     $ 2,474,532  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
For the Three Months Ended April 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
              670       84       (14,071 )                      (13,987 ) 
Stock-based compensation expense
                              13,359                       13,359  
Repurchase of common stock
              (374 )      (47 )                      (47,141 )      (47,188 ) 
Cash dividends ($0.10 per share)
                                              (16,682 )      (16,682 ) 
Settlements of convertible notes
              1,222       153       157,529                       157,682  
Exercise of convertible notes hedge call options
              (1,222 )      (153 )      (158,723 )                      (158,876 ) 
Convertible common shares
      (2,554 )                      2,554                       2,554  
Net income
                                              205,512       205,512  
Other comprehensive loss
                                      (24,839 )              (24,839 ) 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Balance, April 4, 2021
    $ 1,233       166,419     $ 20,802     $ 1,765,971     $ 8,677     $ 529,103     $ 2,324,553  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
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 Three Months
Ended
 
 
  
April 3,

2022
 
 
April 4,

2021
 
 
  
 
 
 
 
 
 
  
(in thousands)
 
Cash flows from operating activities:
  
 
 
 
 
 
 
 
 
 
 
Net income
    $ 161,928     $ 205,512  
Adjustments to reconcile net income from operations to net cash provided by operating activities:
                 
Depreciation
      22,503       23,910  
Stock-based compensation
      12,894       12,232  
Amortization
      5,233       9,822  
Deferred taxes
      11,288       (1,057 ) 
Losses (gains) on investments
      2,001       (2,491 ) 
Provision for excess and obsolete inventory
      1,590       2,285  
Loss on convertible debt conversion
s
      —         4,069  
Contingent consideration fair value adjustment
s
      —         (7,227 ) 
Other
      177       200  
Changes in operating assets and liabilities
                 
Accounts receivable
      208       (87,512 ) 
Inventories
      (9,480 )      (35,870 ) 
Prepayments and other assets
      (74,305 )      (86,131 ) 
Accounts payable and other accrued expenses
      (124,382 )      (10,571 ) 
Deferred revenue and customer advances
      6,747       7,952  
Retirement plan contributions
      (1,329 )      (1,925 ) 
Income taxes
      (7,611 )      4,941  
    
 
 
    
 
 
  
Net cash provided by operating activities
      7,462       38,139  
    
 
 
    
 
 
  
Cash flows from investing activities:
                 
Purchases of property, plant and equipment
      (43,999 )      (39,250 ) 
Purchases of marketable securities
      (165,977 )      (211,604 ) 
Proceeds from maturities of marketable securities
      96,682       194,228  
Proceeds from sales of marketable securities
      30,581       61,293  
    
 
 
    
 
 
  
Net cash (used for) provided by investing activities
      (82,713 )      4,667  
    
 
 
    
 
 
  
Cash flows from financing activities:
                 
Issuance of common stock under stock purchase and stock option plans
      16,475       17,144  
Repurchase of common stock
      (201,465 )      (45,188 ) 
Payments related to net settlement of employee stock compensation awards
      (31,048 )      (30,675 ) 
Payments of convertible debt principal
      (20,694 )      (51,275 ) 
Dividend payments
      (17,895 )      (16,667 ) 
    
 
 
    
 
 
  
Net cash used for financing activities
      (254,627 )      (126,661 ) 
    
 
 
    
 
 
  
Effects of exchange rate changes on cash and cash equivalents
      2,282       883  
    
 
 
    
 
 
  
Decrease in cash and cash equivalents
      (327,596 )      (82,972 ) 
Cash and cash equivalents at beginning of period
      1,122,199       914,121  
    
 
 
    
 
 
  
Cash and cash equivalents at end of period
    $ 794,603     $ 831,149  
    
 
 
    
 
 
  
Non-cash
investing activities:
                 
Capital expenditures incurred but not yet paid:
    $ 2,500     $ 3,840  
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, and an increase to retained earnings of $92.8 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 three months ended April 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 April 3, 2022, the value of the investment was $12.0 million, and there was no change during the three months ended April 3, 2022.
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 April 3, 2022 (1)
  
  
  
  
  
  
 
  
 
Timing of Revenue Recognition
  
  
  
  
  
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Point in Time
   $ 323,456     $ 88,723     $ 105,288     $ 83,182     $ 16,534     $ 210     $ 48,429     $ (346 )    $ 665,476  
Over Time
     63,129       7,033       13,380       2,102       674       487       3,089       —          89,894  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Total
   $ 386,585     $ 95,756     $ 118,668     $ 85,284     $ 17,208     $ 697     $ 51,518     $ (346 )    $ 755,370  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Geographical Market
                                                                        
Asia Pacific
   $ 340,741     $ 93,151     $ 73,784     $ 18,621     $ 2,592     $ —       $ 34,946     $ —       $ 563,835  
Americas
     29,714       2,046       36,608       28,148       7,867       697       9,687       (346 )      114,421  
Europe, Middle East and
Africa
     16,130       559       8,276       38,515       6,749       —         6,885       —         77,114  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Total
   $ 386,585     $ 95,756     $ 118,668     $ 85,284     $ 17,208     $ 697     $ 51,518     $ (346 )    $ 755,370  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
For the Three Months Ended April 4, 2021 (1)
                                                                        
Timing of Revenue Recognition
                                                                        
Point in Time
   $ 364,190     $ 101,892     $ 119,314     $ 64,007     $ 14,064     $ (120 )    $ 37,880     $ (143 )    $ 701,084  
Over Time
     56,040       5,941       13,523       1,594       67       339       3,018       —         80,522  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Total
   $ 420,230     $ 107,833     $ 132,837     $ 65,601     $ 14,131     $ 219     $ 40,898     $ (143 )    $ 781,606  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Geographical Market
                                                                        
Asia Pacific
   $ 387,236     $ 104,049     $ 99,520     $ 17,833     $ 3,447     $ —       $ 33,532     $ —       $ 645,617  
Americas
     20,779       3,420       27,659       18,153       5,153       219       5,769       (143 )      81,009  
Europe, Middle East and
Africa
     12,215       364       5,658       29,615       5,531       —         1,597       —         54,980  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Total
   $ 420,230     $ 107,833     $ 132,837     $ 65,601     $ 14,131     $ 219     $ 40,898     $ (143 )    $ 781,606  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
 
(1)
Includes $2.3 million and $3.1 million in 2022 and 2021, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606
“Revenue from Contracts with Customers.”
 
7
Contract Balances
During the three months ended April 3, 2022 and April 4, 2021, Teradyne recognized $35.0 million and $27.8 million, respectively, that was previously included within the deferred revenue and customer advances balances at the beginning of the period. 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 April 3, 2022, Teradyne has $1,417.4 million of unsatisfied performance obligations. Teradyne expects to recognize 89% of the remaining performance obligations in the next 12 months
 
and
11% in
1-3
years.
Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:
 
 
  
April 3,

2022
 
  
December 31,
2021
 
 
  
(in thousands)
 
Maintenance, service and training
  
$
83,212
 
  
$
81,826
 
Customer advances, undelivered elements and other
  
 
58,521
 
  
 
55,112
 
Extended warranty
  
 
65,726
 
  
 
64,168
 
 
  
 
 
 
  
 
 
 
Total deferred revenue and customer advances
  
$
207,459
 
  
$
201,106
 
 
  
 
 
 
  
 
 
 
Accounts Receivable
During the three months ended April 3, 2022 and April 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 April 3, 2022 and April 4, 2021, total trade accounts receivable sold under the factoring agreements were
$19.4 million and $7.3 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 April 3, 2022 and December 31, 2021:
 
 
  
April 3,
2022
 
  
December 31,
2021
 
 
  
 
 
  
 
 
 
  
(in thousands)
 
 
 
 
 
 
 
 
 
 
Raw material
    $ 187,856      $ 155,641  
Work-in-process
      30,877        37,740  
Finished goods
      40,608        49,949  
    
 
 
     
 
 
  
     $ 259,341      $ 243,330  
    
 
 
     
 
 
  
Inventory reserves at April 3, 2022 and December 31, 2021 were $112.8 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
available-for-sale
debt securities are classified as Level 2 and equity and debt mutual funds are classified as Level 1. 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 months ended April 3, 2022 and April 4, 2021, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.
 
8
Realized gains recorded in the three months ended April 3, 2022 and April 4, 2021 were $0.4 million and $1.2 million, respectively. Realized losses recorded in the three months ended April 3, 2022 were $0.2 million. No realized losses were recorded in the three months ended April 4, 2021. Realized gains and losses are included in other (income) expense, net.
Unrealized losses on equity securities recorded in the three months ended April 3, 2022 were $2.2 million. Unrealized gains on equity securities recorded in the three months ended April 4, 2021 were $1.4 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 April 3, 2022 and December 31, 2021.
 
 
  
April 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
    $ 508,245      $ —        $ —        $ 508,245  
Cash equivalents
      212,647        73,711        —          286,358  
Available-for-sale
securities:
                                    
Commercial paper
      —          179,481        —          179,481  
U.S. Treasury securities
      —          119,837        —          119,837  
Corporate debt securities
      —          53,161        —          53,161  
Debt mutual funds
      7,030        —          —          7,030  
U.S. government agency securities
      —          4,714        —          4,714  
Certificates of deposit and time deposits
      —          1,312        —          1,312  
Non-U.S.
government securities
      —          578        —          578  
Equity securities:
                                    
Mutual funds
      42,033        —          —          42,033  
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ 769,955      $ 432,794      $ —        $ 1,202,749  
Derivative assets
      —          9        —          9  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 769,955      $ 432,803      $ —        $ 1,202,758  
    
 
 
     
 
 
     
 
 
     
 
 
  
Liabilities
                                    
Derivative liabilities
    $ —        $ 469      $ —        $ 469  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ —        $ 469      $ —        $ 469  
    
 
 
     
 
 
     
 
 
     
 
 
  
Reported as follows:
  
      
  
      
  
      
  
      
         
 
  
(Level 1)
 
  
(Level 2)
 
  
(Level 3)
 
  
Total
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
(in thousands)
 
Assets
  
      
  
      
  
      
  
      
Cash and cash equivalents
    $ 720,892      $ 73,711      $ —        $ 794,603  
Marketable securities
      —          282,016        —          282,016  
Long-term marketable securities
      49,063        77,067        —          126,130  
Prepayments
      —          9        —          9  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 769,955      $ 432,803      $ —        $ 1,202,758  
    
 
 
     
 
 
     
 
 
     
 
 
  
Liabilities
                                    
Other current liabilities
    $ —        $ 469      $ —        $ 469  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ —        $ 469      $ —        $ 469  
    
 
 
     
 
 
     
 
 
     
 
 
  
 
9
 
  
December 31, 2