Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

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

For the quarterly period ended October 3, 2010

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)

 

 

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files)    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the registrant’s only class of Common Stock as of November 8, 2010 was 181,400,000 shares.

 

 

 


Table of Contents

 

TERADYNE, INC.

INDEX

 

          Page No.  
PART I. FINANCIAL INFORMATION   

Item 1.

  

Financial Statements (unaudited):

  
  

Condensed Consolidated Balance Sheets as of October 3, 2010 and December 31, 2009

     3   
  

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 3, 2010 and October 4, 2009

     4   
  

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October  3, 2010 and October 4, 2009

     5   
  

Notes to Condensed Consolidated Financial Statements

     6   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     26   

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

     40   

Item 4.

  

Controls and Procedures

     40   
PART II. OTHER INFORMATION   

Item 1.

  

Legal Proceedings

     42   

Item 1A.

  

Risk Factors

     42   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     42   

Item 6.

  

Exhibits

     43   

 

2


Table of Contents

 

PART I

 

Item 1: Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     October 3,
2010
    December 31,
2009
 
     (in thousands,
except per share amounts)
 
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 433,915      $ 416,737   

Marketable securities

     263,881        46,933   

Accounts receivable, net of allowance for doubtful accounts of $3,754 and $3,770 at October 3, 2010 and December 31, 2009, respectively

     306,522        125,236   

Inventories:

    

Parts

     67,748        43,691   

Assemblies in process

     24,426        37,161   

Finished goods

     10,674        9,984   
                
     102,848        90,836   

Deferred tax assets

     20,017        18,944   

Prepayments and other current assets

     60,920        63,606   
                

Total current assets

     1,188,103        762,292   

Property, plant, and equipment, at cost

     779,616        782,407   

Less: accumulated depreciation

     547,268        536,045   
                

Net property, plant, and equipment

     232,348        246,362   

Long-term marketable securities

     201,486        55,130   

Intangible assets, net

     130,231        152,192   

Retirement Plan assets

     23,405        —     

Other assets

     16,038        19,361   
                

Total assets

   $ 1,791,611      $ 1,235,337   
                
LIABILITIES     

Current liabilities:

    

Accounts payable

   $ 133,330      $ 66,765   

Accrued employees’ compensation and withholdings

     91,780        55,356   

Deferred revenue and customer advances

     101,584        104,439   

Other accrued liabilities

     57,566        54,640   

Accrued income taxes

     14,625        —     

Current debt

     2,397        2,157   
                

Total current liabilities

     401,282        283,357   

Long-term deferred revenue and customer advances

     80,818        2,318   

Retirement plans liabilities

     68,663        115,101   

Deferred tax liabilities

     10,271        8,041   

Long-term other accrued liabilities

     15,954        20,841   

Long-term debt

     147,287        141,100   
                

Total liabilities

     724,275        570,758   
                

Commitments and contingencies (Note N)

    
SHAREHOLDERS’ EQUITY     

Common stock, $0.125 par value, 1,000,000 shares authorized, 181,327 shares and 174,908 shares issued and outstanding at October 3, 2010 and December 31, 2009, respectively

     22,666        21,864   

Additional paid-in capital

     1,260,911        1,202,426   

Accumulated other comprehensive loss

     (114,225     (138,105

Accumulated deficit

     (102,016     (421,606
                

Total shareholders’ equity

     1,067,336        664,579   
                

Total liabilities and shareholders’ equity

   $ 1,791,611      $ 1,235,337   
                

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, 2009, are an integral part of the condensed

consolidated financial statements.

 

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Table of Contents

 

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     For the Three Months
Ended
    For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
    October 3,
2010
    October 4,
2009
 
     (in thousands, except per share amounts)  

Net revenues:

        

Products

   $ 436,274      $ 205,304      $ 1,095,625      $ 385,187   

Services

     65,812        56,858        190,860        167,163   
                                

Total net revenues

     502,086        262,162        1,286,485        552,350   

Cost of revenues:

        

Cost of products

     191,860        125,116        482,715        273,911   

Cost of services

     34,451        30,291        100,148        91,195   
                                

Total cost of revenues

     226,311        155,407        582,863        365,106   
                                

Gross profit

     275,775        106,755        703,622        187,244   

Operating expenses:

        

Engineering and development

     50,122        38,266        149,567        123,915   

Selling and administrative

     61,109        46,314        175,323        148,944   

Acquired intangible asset amortization

     7,291        8,214        21,960        24,667   

Restructuring and other, net

     (859     5,189        2,105        36,424   
                                

Total operating expenses

     117,663        97,983        348,955        333,950   
                                

Income (loss) from operations

     158,112        8,772        354,667        (146,706

Interest income

     1,466        1,003        5,990        2,920   

Interest expense and other

     (5,562     (4,600     (20,019     (18,475
                                

Income (loss) before income taxes

     154,016        5,175        340,638        (162,261

Income tax provision (benefit)

     6,676        (1,500     21,049        (11,500
                                

Net income (loss)

   $ 147,340      $ 6,675      $ 319,589      $ (150,761
                                

Net income (loss) per common share:

        

Basic

   $ 0.81      $ 0.04      $ 1.78      $ (0.87
                                

Diluted

   $ 0.66      $ 0.04      $ 1.45      $ (0.87
                                

Weighted average common share—basic

     181,239        174,495        179,365        173,216   
                                

Weighted average common share—diluted

     229,389        180,792        229,069        173,216   
                                

 

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, 2009, are an integral part of the condensed

consolidated financial statements.

 

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TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
 
     (in thousands)  

Cash flows from operating activities:

    

Net income (loss)

   $ 319,589      $ (150,761

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Depreciation

     40,055        45,717   

Amortization

     34,740        33,249   

Stock-based compensation

     23,365        18,268   

Provision for excess and obsolete inventory

     5,403        23,681   

Loss on sale and impairment of marketable securities, net

     398        2,000   

Non-cash charge for sale of inventories revalued at the date of acquisition

     —          10,863   

Revolving credit facility issue costs

     —          2,488   

Deferred taxes

     (460     (6,258

Other

     1,643        1,696   

Changes in operating assets and liabilities, net of businesses acquired:

    

Accounts receivable

     (181,286     (30,022

Inventories

     10,794        45,911   

Other assets

     896        (4,685

Deferred revenue and customer advances

     75,645        67,921   

Accounts payable and accrued expenses

     95,460        1,810   

Retirement plan contributions

     (50,849     (5,718

Accrued income taxes

     14,625        —     
                

Net cash provided by operating activities

     390,018        56,160   
                

Cash flows from investing activities:

    

Purchases of property, plant and equipment

     (53,959     (26,583

Purchases of available-for-sale marketable securities

     (478,260     (31,470

Proceeds from sales of available-for-sale marketable securities

     94,846        23,085   

Proceeds from sales of trading marketable securities

     23,750        —     

Proceeds from life insurance

     1,091        1,076   

Acquisition of businesses, net of cash acquired

     —          (3,741
                

Net cash used for investing activities

     (412,532     (37,633
                

Cash flows from financing activities:

    

Issuance of common stock under employee stock option and stock purchase plans

     42,225        15,256   

Payments of long-term debt

     (2,305     (1,069 )

Proceeds from long-term debt

     —          172,914   

Repayment of revolving credit facility principal

     —          (122,500
                

Net cash provided by financing activities

     39,920        64,601   
                

Effect of exchange rate changes on cash and cash equivalents

     (228     908   
                

Increase in cash and cash equivalents

     17,178        84,036   

Cash and cash equivalents at beginning of period

     416,737        322,705   
                

Cash and cash equivalents at end of period

   $ 433,915      $ 406,741   
                

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, 2009, are an integral part of the condensed

consolidated financial statements.

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A. The Company

Teradyne, Inc. (“Teradyne”) is a leading global supplier of automatic test equipment. Teradyne’s automatic test equipment products and services include:

 

   

semiconductor test (“Semiconductor Test”) systems; and

 

   

military/aerospace (“Mil/Aero”) test instrumentation and systems, hard disk drive test (“HDD”) systems, circuit-board test and inspection (“Commercial Board Test”) systems, and automotive diagnostic and test (“Diagnostic Solutions”) systems (collectively these products represent “Systems Test Group”).

B. Accounting Policies

Basis of Presentation

The condensed consolidated interim financial statements include the accounts of Teradyne and its 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 presentation of such interim financial statements. Certain prior year’s amounts were reclassified to conform to the current year presentation. The December 31, 2009 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

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 SEC on March 1, 2010 for the year ended December 31, 2009.

Preparation of Financial Statements

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.

Revenue Recognition

In October 2009, the Financial Accounting Standards Board (“FASB”) amended the accounting standards for revenue recognition to remove tangible products containing non-software and software components that function together to deliver the product’s essential functionality from the scope of industry-specific software revenue recognition guidance. In October 2009, the FASB also amended the accounting standards for arrangements with multiple deliverables. Teradyne elected to early adopt this accounting guidance at the beginning of its first quarter of 2010 on a prospective basis. Adoption had no material impact on Teradyne’s financial position or results of operations in the three and nine months ended October 3, 2010.

Teradyne recognizes revenue when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to Teradyne’s customers upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass upon destination, acceptance or cash payment, Teradyne defers revenue recognition until such events occur.

Teradyne’s equipment has non-software and software components that function together to deliver the equipment’s essential functionality. Revenue is recognized upon shipment or at delivery destination point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require Teradyne to perform tests of the product to ensure that performance meets the published product specifications or customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. Teradyne also defers the portion of the sales price that is not due until acceptance, which represents deferred profit.

 

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Table of Contents

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

For multiple element arrangements, Teradyne allocates revenue to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). For a delivered item to be considered a separate unit, the delivered item must have value to the customer on a standalone basis and the delivery or performance of the undelivered item must be considered probable and substantially in the control of Teradyne.

Teradyne’s post-shipment obligations include installation, training services, one-year standard warranties, and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or tools and can be performed by the customers or other vendors. Installation is typically provided within five days of product shipment and is completed within one to two days thereafter. Training services are optional and do not affect the customers’ ability to use the product. Teradyne defers revenue for the selling price of installation and training.

C. Recently Issued Accounting Pronouncements

In March 2010, FASB issued an Accounting Standards Update (“ASU”) 2010-17, “Milestone Method of Revenue Recognition”, to Accounting Standards Codification (“ASC”) 605, “Revenue Recognition.” The guidance in this consensus allows the milestone method as an acceptable revenue recognition methodology when an arrangement includes substantive milestones. The guidance provides a definition of substantive milestone and should be applied regardless of whether the arrangement includes single or multiple deliverables or units of accounting. The scope of this consensus is limited to the transactions involving milestones relating to research and development deliverables. The guidance includes enhanced disclosure requirements about each arrangement, individual milestones and related contingent consideration, information about substantive milestones and factors considered in the determination. The consensus is effective prospectively to milestones achieved in fiscal years, and interim periods within those years, after June 15, 2010. Early application and retrospective application are permitted. Teradyne will adopt this final consensus prospectively in January 2011 and the adoption is not expected to have a material impact on Teradyne’s financial position or results of operations.

D. Financial Instruments and Derivatives

Financial Instruments

Teradyne uses the market and income approach to value its financial instruments and there was no change in valuation techniques used by Teradyne during the nine months ended October 3, 2010 and October 4, 2009. As defined in ASC 820-10, “Fair Value Measurements and Disclosures”, fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10 requires that assets and liabilities are carried at fair value and are classified in one of the following three categories:

Level 1: Quoted prices in active markets for identical assets as of the reporting date.

Level 2: Inputs other than Level 1, that are observable either directly or indirectly as of the reporting date. For example, a common approach for valuing fixed income securities is the use of matrix pricing. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices.

Level 3: Unobservable inputs that are not supported by market data. Unobservable inputs are developed based on the best information available, which might include Teradyne’s own data.

 

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Table of Contents

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

For the right to sell the auction rate securities, held by Teradyne, back to UBS (“UBS Put”), Teradyne elected fair value treatment under ASC 825-10, “Financial Instruments.” The UBS Put was the only instrument of this nature or type that Teradyne held and for which Teradyne has elected the fair value option under ASC 825-10. The UBS Put was exercised in June 2010.

In January 2010, FASB issued ASU 2010-6, “Improving Disclosures about Fair Value Measurement”, which requires interim disclosures regarding significant transfers in and out of Level 1 and Level 2 fair value measurements. Additionally, this ASU requires disclosure for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements. These disclosures are required for fair value measurements that fall in either Level 2 or Level 3. Further, the ASU requires separate presentation of Level 3 activity for the fair value measurements. Teradyne adopted the interim disclosure requirements under this ASU during the quarter ended April 4, 2010, with the exception of the separate presentation in the Level 3 activity rollforward, which is not effective until fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years.

During the nine months ended October 3, 2010, there were no significant transfers in and out of Level 1 and Level 2.

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 October 3, 2010 and December 31, 2009.

 

     October 3, 2010  
     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

           

Available for sale securities:

           

Money market funds

   $ 247,596       $ —         $ —         $ 247,596   

U.S. government agency securities

     —           216,668         —           216,668   

U.S. Treasury securities

     110,260         —           —           110,260   

Corporate debt securities

     —           70,456         —           70,456   

Municipal bonds

     —           55,368         —           55,368   

Commercial paper

     —           51,564         —           51,564   

Certificates of deposit and time deposits

     —           11,683         —           11,683   

Equity and debt mutual funds

     7,423         —           —           7,423   

Non-U.S. government securities

     283         —           —           283   
                                   

Total

     365,562         405,739         —           771,301   

Trading securities:

           

Auction rate securities

     —           —           2,786         2,786   

Derivatives

     —           280         —           280   
                                   

Total

   $ 365,562       $ 406,019       $ 2,786       $ 774,367   
                                   

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

Reported as follows:

 

     (Level 1)      (Level 2)      (Level 3)      Total  
     (in thousands)  

Assets

           

Cash and cash equivalents

   $ 247,596       $ 61,124       $ —         $ 308,720   

Marketable securities

     57,740         206,141         —           263,881   

Long-term marketable securities

     60,226         138,474         2,786         201,486   

Prepayments and other current assets

     —           280         —           280   
                                   
   $ 365,562       $ 406,019       $ 2,786       $ 774,367   
                                   
     December 31, 2009  
     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

           

Available for sale securities:

           

Money market funds

   $ 284,236       $ —         $ —         $ 284,236   

Corporate debt securities

     —           21,224         —           21,224   

U.S. government agency securities

     —           16,418         —           16,418   

Certificates of deposit and time deposits

     —           15,855         —           15,855   

U.S. Treasury securities

     12,010         —           —           12,010   

Commercial paper

     —           8,245         —           8,245   

Equity and debt mutual funds

     7,499         —           —           7,499   

Municipal bonds

     —           528         —           528   

Non-U.S. government securities

     287         —           —           287   
                                   

Total

     304,032         62,270         —           366,302   

Trading securities:

           

Auction rate securities

     —           —           23,649         23,649   

UBS Put

     —           —           2,830         2,830   
                                   

Total

   $ 304,032       $ 62,270       $ 26,479       $ 392,781   
                                   

Liabilities

           

Derivatives

   $ —         $ 143       $ —         $ 143   
                                   

Total

   $ —         $ 143       $ —         $ 143   
                                   

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

Reported as follows:

 

     (Level 1)      (Level 2)      (Level 3)      Total  
     (in thousands)  

Assets

           

Cash and cash equivalents

   $ 284,237       $ 3,651       $ —         $ 287,888   

Marketable securities

     8,001         38,932         —           46,933   

Long-term marketable securities

     11,794         19,687         23,649         55,130   

Other assets

     —           —           2,830         2,830   
                                   
   $ 304,032       $ 62,270       $ 26,479       $ 392,781   
                                   

Liabilities

           

Other accrued liabilities

   $ —         $ 143       $ —         $ 143   
                                   

The following table represents changes in the fair value of Level 3 financial assets:

 

    For the Three Months Ended  
    October 3, 2010     October 4, 2009  
    Long-Term
Auction Rate
Securities
    UBS Put     Long-Term
Auction Rate
Securities
    UBS Put  
    (in thousands)  

Balance at beginning of period

  $ 2,836      $ —        $ 26,186      $ 3,070   

Sale of auction rate securities

    (50     —          (550     —     

Change in unrealized gain included in interest income

    —          —          388        —     

Change in unrealized loss included in interest expense and other

    —          —          —          (128
                               

Balance at end of period

  $ 2,786      $ —        $ 26,024      $ 2,942   
                               
    For the Nine Months Ended  
    October 3, 2010     October 4, 2009  
    Long-Term
Auction Rate
Securities
    UBS Put     Long-Term
Auction Rate
Securities
    UBS Put  
    (in thousands)  

Balance at beginning of period

  $ 23,649      $ 2,830      $ 25,968      $ 3,330   

Sale of auction rate securities and exercise of UBS Put

    (21,063     (2,687     (550     —     

Change in unrealized gain included in interest income

    200        —          1,053        —     

Change in unrealized loss included in interest expense and other

    —          (143     (447     (388
                               

Balance at end of period

  $ 2,786      $ —        $ 26,024      $ 2,942   
                               

During the nine months ended October 3, 2010, Teradyne recorded a net loss of $0.4 million from sales of marketable securities and exercise of UBS Put. During the nine months ended October 4, 2009, Teradyne recorded a net loss of $1.3 million from sales of marketable securities.

During the nine months ended October 4, 2009, Teradyne determined that it did not intend to hold certain marketable securities for a period of time sufficient to allow for recovery in market value and recognized an other-than-temporary impairment loss in the amount of $0.7 million.

Realized losses from sale of marketable securities, decreases in auction rate securities fair value and other-than-temporary impairment losses are included in interest expense and other. Increases in auction rate securities fair value are included in interest income.

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

The carrying amounts and fair values of financial instruments at October 3, 2010 and December 31, 2009 are as follows:

 

     October 3, 2010      December 31, 2009  
     Carrying Value      Fair Value      Carrying Value      Fair Value  
     (in thousands)  

Cash equivalents

   $ 308,720       $ 308,720       $ 287,888       $ 287,888   

Marketable securities

     465,367         465,367         102,063         102,063   

UBS Put

     —           —           2,830         2,830   

Convertible debt(1)

     141,297         412,063         133,554         392,113   

Japan loan

     8,387         8,387         9,703         9,703   

 

(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 feature.

The fair values of cash, accounts receivable, net and accounts payable approximate the carrying amount due to the short term maturities of these instruments.

The following table summarizes available-for-sale marketable securities which are recorded at fair value:

 

    October 3, 2010  
    Available-for-Sale     Fair Market
Value of Investments
with Unrealized  Losses
 
    Cost     Unrealized
Gain
    Unrealized
(Loss)
    Fair Market
Value
   
    (in thousands)  

Money market funds

  $ 247,596      $ —        $ —        $ 247,596      $ —     

U.S. government agency securities

    216,128        548        (8     216,668        22,064   

U.S. Treasury securities

    109,995        265        —          110,260        —     

Corporate debt securities

    70,188        271        (3     70,456        4,976   

Municipal bonds

    55,368        2        (2     55,368        13,836   

Commercial paper

    51,576        —          (12     51,564        9,975   

Certificates of deposit and time deposits

    11,675        8        —          11,683        —     

Equity and debt mutual funds

    6,715        801        (93     7,423        874   

Non-U.S. government securities

    266        17        —          283        —     
                                       
  $ 769,507      $ 1,912      $ (118   $ 771,301      $ 51,725   
                                       

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

Reported as follows:

 

    Cost     Unrealized
Gain
    Unrealized
(Loss)
    Fair Market
Value
    Fair Market
Value of Investments
with Unrealized Losses
 
    (in thousands)  

Cash and cash equivalents

  $ 308,721      $ 1      $ (2   $ 308,720      $ 13,836   

Marketable securities

    263,702        193        (14     263,881        19,537   

Long-term marketable securities

    197,084        1,718        (102     198,700        18,352   
                                       
  $ 769,507      $ 1,912      $ (118   $ 771,301      $ 51,725   
                                       
    December 31, 2009  
    Available-for-Sale     Fair Market
Value of Investments
with Unrealized  Losses
 
    Cost     Unrealized
Gain
    Unrealized
(Loss)
    Fair Market
Value
   
    (in thousands)  

Money market funds

  $ 284,236      $ —        $ —        $ 284,236      $ —     

Corporate debt securities

    21,243        11        (30     21,224        11,091   

U.S. government agency securities

    16,418        5        (5     16,418        6,155   

Certificates of deposit and time deposits

    15,854        1        —          15,855        —     

U.S. Treasury securities

    12,014        —          (4     12,010        10,508   

Commercial paper

    8,246        —          (1     8,245        2,397   

Equity and debt mutual funds

    7,430        622        (553     7,499        4,139   

Municipal bonds

    532        —          (4     528        528   

Non-U.S. government securities

    269        18        —          287        —     
                                       
  $ 366,242      $ 657      $ (597   $ 366,302      $ 34,818   
                                       

Reported as follows:

 

    Cost     Unrealized
Gain
    Unrealized
(Loss)
    Fair Market
Value
    Fair Market
Value of Investments
with Unrealized Losses
 
    (in thousands)  

Cash and cash equivalents

  $ 287,888      $ —        $ —        $ 287,888      $ —     

Short-term marketable securities

    46,928        7        (2     46,933        16,425   

Long-term marketable securities

    31,426        650        (595     31,481        18,393   
                                       
  $ 366,242      $   657      $ (597   $ 366,302      $ 34,818   
                                       

On a quarterly basis, Teradyne reviews its investments to identify and evaluate those that have an indication of a potential other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include:

 

   

The length of time and the extent to which the market value has been less than cost;

 

   

The financial condition and near-term prospects of the issuer; and

 

   

The intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

As of October 3, 2010 and December 31, 2009, the fair market value of investments with unrealized losses totaled $51.7 million and $34.8 million, respectively. Teradyne determined that the unrealized losses in the amount of $0.1 million and $0.6 million, respectively, related to these investments are temporary.

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

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 denominated net monetary assets. Teradyne does not use derivative financial instruments for trading or speculative purposes.

To minimize the effect of exchange rate fluctuations associated with the remeasurement of net monetary assets 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 fair value of the net monetary assets denominated in foreign currencies.

The notional amount of foreign exchange contracts hedging monetary assets and liabilities denominated in foreign currencies was $59.6 million and $56.9 million at October 3, 2010 and December 31, 2009, respectively.

The following table summarizes the fair value of derivative instruments as of October 3, 2010 and December 31, 2009.

 

    

Balance Sheet Location

   October 3,
2010
     December 31,
2009
 
          (in thousands)  

Derivatives not designated as hedging instruments:

        

Foreign exchange contracts

   Prepayments and other current assets    $ 280       $ —     

Foreign exchange contracts

   Other accrued liabilities      —           143   
                    
      $ 280       $   143   
                    

The following table summarizes the effect of derivative instruments in the statement of operations recognized during the three and nine months ended October 3, 2010 and October 4, 2009. The table does not reflect the corresponding gain (loss) from the hedged balance sheet.

 

    Location of Gains (Losses)
Recognized in Statement
of Operations
    For the Three Months
Ended
    For the Nine Months
Ended
 
    October 3,
2010
    October 4,
2009
    October 3,
2010
    October 4,
2009
 
          (in thousands)  

Derivatives not designated as hedging instruments:

         

Foreign exchange contracts

    Interest expense and other      $ 209      $ (402   $ (1,054   $ 1,241   
                                 
    $ 209      $ (402   $ (1,054   $ 1,241   
                                 

See Debt footnote E regarding derivatives related to convertible senior notes.

E. Debt

Loan Agreement

On March 31, 2009, Teradyne K.K., Teradyne’s wholly-owned subsidiary in Japan, entered into a loan agreement with a local bank in Japan to borrow approximately $10.0 million. The loan has a term of 5 years and

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

a fixed interest rate of 1.4%. Approximately $6.0 million of the loan is collateralized by a real estate mortgage on Teradyne K.K.’s building and land in Kumamoto, Japan and approximately $4.0 million is unsecured. Teradyne, Inc. has guaranteed payment of the loan obligation. The loan is amortized over the term of the loan with semiannual principal payments of approximately $1.0 million payable on September 30 and March 30 each year. At October 3, 2010, approximately $2.4 million of the outstanding loan principal is included in current debt and approximately $6.0 million is classified as long-term debt.

Convertible Senior Notes

On March 31, 2009, Teradyne entered into an underwriting agreement regarding a public offering of $175 million aggregate principal amount of 4.50% convertible senior notes due March 15, 2014 (the “Notes”). On April 1, 2009, the underwriters exercised their option to purchase an additional $15 million aggregate principal amount of the Notes for a total aggregate principal amount of $190 million. The Notes bear interest at a rate of 4.50% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2009. The Notes will mature on March 15, 2014, unless earlier repurchased by Teradyne or converted. The Notes are senior unsecured obligations and rank equally with all of Teradyne’s existing and future senior debt and senior to any of Teradyne’s subordinated debt.

The Notes may be converted, under certain circumstances and during certain periods, at an initial conversion rate of approximately 182.65 shares of Teradyne’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $5.48, a 25% conversion premium based on the last reported sale price of $4.38 per share of Teradyne’s common stock on March 31, 2009. The conversion rate is subject to adjustment in certain circumstances.

Holders may convert their Notes at their option prior to the close of business on the business day immediately preceding December 15, 2013, under the following circumstances: (1) during the five business-day period after any five consecutive trading day period (the “measurement period”) in which the price per Note for each day of that measurement period was less than 98% of the product of the last reported sale price of Teradyne’s common stock and the conversion rate for such date; (2) during any calendar quarter, if the last reported sale price of Teradyne’s common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; or (3) upon the occurrence of certain specified events. Additionally, the Notes are convertible during the last three months prior to the March 15, 2014 maturity date. Upon conversion, holders will receive, at Teradyne’s option, shares of Teradyne common stock, cash or a combination of cash and shares of Teradyne common stock, subject to Teradyne’s option to irrevocably elect to settle all future conversions in cash up to the principal amount of the Notes and shares of common stock for any excess.

During the three months ended October 3, 2010, the following circumstance that allows holders to convert their Notes at their option prior to December 15, 2013 occurred: the last reported sale price of Teradyne’s common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeded 130% of the conversion price in effect on the last trading day of the immediately preceding calendar quarter. As of November 10, 2010, no holders have exercised their option to convert their Notes.

Teradyne may not redeem the Notes prior to their maturity. Holders of the Notes may require Teradyne to purchase in cash all or a portion of their Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, upon the occurrence of certain fundamental changes involving Teradyne (which include, among

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

others, the liquidation or dissolution of Teradyne, the acquisition of 50% or more of the total voting shares of Teradyne, certain mergers and consolidations, and the delisting of Teradyne’s stock).

Concurrently with the offering of the Notes, Teradyne entered into a convertible note hedge transaction with a strike price equal to the initial conversion price of the Notes, or approximately $5.48. The convertible note hedge allows Teradyne to receive shares of its common stock and/or cash related to the excess conversion value that it would pay to the holders of the Notes upon conversion. The convertible note hedges will cover, subject to customary antidilution adjustments, approximately 34,703,196 shares of Teradyne’s common stock. Teradyne paid approximately $64.6 million for the convertible note hedges.

Separately, Teradyne entered into a warrant transaction with a strike price of approximately $7.67 per share, which is 75% higher than the closing price of Teradyne’s common stock on March 31, 2009. The warrants will be net share settled and will cover, subject to customary antidilution adjustments, approximately 34,703,196 shares of Teradyne’s common stock. Teradyne received approximately $43.0 million for the warrants.

The convertible notes hedge and warrant transaction will generally have the effect of increasing the conversion price of the Notes to approximately $7.67 per share of Teradyne’s common stock, representing a 75% conversion premium based upon the closing price of Teradyne’s common stock on March 31, 2009.

The notes are classified as long-term debt in the balance sheet at October 3, 2010 and December 31, 2009. The below tables represent the components of Teradyne’s convertible senior notes:

 

     October 3,
2010
     December 31,
2009
 
     (in thousands)  

Debt principal

   $ 190,000       $ 190,000   

Unamortized debt discount

     48,703         56,446   
                 

Net carrying amount of the convertible debt

   $ 141,297       $ 133,554   
                 

 

     For the Three Months
Ended
     For the Nine Months
Ended
 
     October 3,
2010
     October 4,
2009
     October 3,
2010
     October 4,
2009
 
     (in thousands)  

Contractual interest expense on the coupon

   $ 2,138       $ 2,090       $ 6,509       $ 4,251   

Amortization of the discount component and debt issue fees

     2,783         2,533         8,263         4,988   
                                   

Total interest expense on the convertible debt

   $ 4,921       $ 4,623       $ 14,772       $ 9,239   
                                   

As of October 3, 2010, the unamortized discount was $48.7 million, which will be amortized over approximately 3.5 years, and the carrying amount of the equity component was $63.4 million. As of October 3, 2010, the conversion rate was equal to the initial conversion price of approximately $5.48 per share and the if-converted value of the Notes was $385.2 million.

Revolving Credit Facility

On April 7, 2009, Teradyne terminated its revolving credit facility agreement. Teradyne used approximately $123.3 million of the net proceeds of the Notes offering to repay $122.5 million of principal and $0.8 million of accrued interest outstanding under the revolving credit facility agreement.

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

F. Deferred Revenue and Customer Advances

Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances.

 

     October 3,
2010
     December 31,
2009
 
     (in thousands)  

Customer advances

   $ 140,980       $ 74,887   

Maintenance, training and extended warranty

     34,960         22,616   

Undelivered elements

     884         5,551   

Acceptance

     2,654         530   

Other

     2,924         3,173   
                 

Total deferred revenue and customer advances

   $ 182,402       $ 106,757   
                 

G. Product Warranty

Teradyne generally provides a one-year warranty on its products commencing upon installation 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 Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
    October 3,
2010
    October 4,
2009
 
     (in thousands)  

Balance at beginning of period

   $ 11,062      $ 5,011      $ 7,086      $ 8,372   

Accruals for warranties issued during the period

     5,299        3,793        14,273        6,967   

Accruals related to pre-existing warranties

     (360     170        (23     (827

Settlements made during the period

     (3,595     (2,288     (8,930     (7,826
                                

Balance at end of period

   $ 12,406      $ 6,686      $ 12,406      $ 6,686   
                                

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 deferred revenue and customer advances and long-term other accrued liabilities.

 

     For the Three Months
Ended
    For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
    October 3,
2010
    October 4,
2009
 
     (in thousands)  

Balance at beginning of period

   $ 5,643      $ 4,647      $ 4,055      $ 6,369   

Deferral of new extended warranty revenue

     2,193        595        5,408        1,472   

Recognition of extended warranty deferred revenue

     (800     (1,210     (2,427     (3,809
                                

Balance at end of period

   $ 7,036      $ 4,032      $ 7,036      $ 4,032   
                                

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

H. Stock-Based Compensation

During the nine months ended October 3, 2010, Teradyne granted service-based restricted stock units to employees, and service-based stock options and service and performance-based restricted stock units to executive officers. The total number of restricted stock units granted was 2.6 million at the weighted average grant date fair value of $9.42. Service-based restricted stock units granted to employees and executive officers vest in equal installments over four years. The percentage level of performance satisfied for performance-based grants is assessed on or near the anniversary of the grant date and, in turn, that percentage level determines the number of performance-based restricted stock units available for vesting over the vesting period; portions of the performance-based grants not available for vesting are forfeited. The total number of stock options granted to executive officers was 0.3 million at the weighted average grant date fair value of $4.10. These stock options vest in equal installments over four years, and have a term of seven years from the date of grant.

During the nine months ended October 4, 2009, Teradyne granted service-based restricted stock units to employees, and service-based restricted stock units and stock options to executive officers. The total number of restricted stock units granted was 4.2 million at the weighted average grant date fair value of $4.91. The total number of stock options granted was 1.1 million at the weighted average grant date fair value of $1.97. Restricted stock units and stock options vest in equal installments over four years. These stock options have a term of seven years from the date of grant.

The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:

 

     For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
 

Expected life (years)

     4.75        4.75   

Interest rate

     2.4     1.6

Volatility-historical

     48.8     44.9

Dividend yield

     0.0     0.0

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 rate was determined using the U.S. Treasury yield curve in effect at the time of grant.

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

I. Comprehensive Income (Loss)

Comprehensive income (loss) is calculated as follows:

 

    For the Three Months
Ended
    For the Nine Months
Ended
 
    October 3,
2010
    October 4,
2009
    October 3,
2010
    October 4,
2009
 
    (in thousands)  

Net income (loss)

  $ 147,340      $ 6,675      $ 319,589      $ (150,761

Foreign currency translation adjustment

    264        (685     (99     909   

Unrealized gain on investments, net of tax of $0

    1,435        745        1,731        2,452   

Actuarial gains (losses) arising during period, net of tax of $293, $0, $1,540 and $(984)

    342        51        17,929        (10,044

Amortization included in net periodic pension and post-retirements costs:

       

Actuarial losses, net of tax of $21, $29, $109 and $176

    1,333        970        4,040        3,070   

Prior service costs, net of tax of $0

    32        139        278        426   
                               

Comprehensive income (loss)

  $ 150,746      $ 7,895      $ 343,468      $ (153,948
                               

J. Intangible Assets

Amortizable intangible assets consist of the following and are included in intangible assets on the balance sheet:

 

     October 3, 2010  
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
     Weighted
Average
Useful Life
 
     (in thousands)  

Developed technology

   $ 121,055       $ 61,166       $ 59,889         6.1 years   

Customer relationships and service and software maintenance contracts

     91,271         30,109         61,162         8.6 years   

Trade names and trademarks

     14,840         5,660         9,180         11.5 years   
                             

Total intangible assets

   $ 227,166       $ 96,935       $ 130,231         7.6 years   
                             
     December 31, 2009  
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
     Weighted
Average
Useful Life
 
     (in thousands)  

Developed technology

   $ 121,055       $ 47,746       $ 73,309         6.1 years   

Customer relationships and service and software maintenance contracts

     91,271         22,187         69,084         8.6 years   

Trade names and trademarks

     14,840         5,041         9,799         11.5 years   
                             

Total intangible assets

   $ 227,166       $ 74,974       $ 152,192         7.6 years   
                             

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

Aggregate intangible asset amortization expense was $7.3 million and $22.0 million, respectively, for the three and nine months ended October 3, 2010 and $8.2 million and $24.7 million, respectively, for the three and nine months ended October 4, 2009. Estimated intangible asset amortization expense for each of the five succeeding fiscal years is as follows:

 

Year

   Amount
(in thousands)
 

2010 (remainder)

   $ 7,291   

2011

     27,821   

2012

     25,732   

2013

     24,683   

2014

     21,598   

K. Net Income (Loss) per Common Share

The following table sets forth the computation of basic and diluted net income (loss) per common share:

 

     For the Three Months
Ended
     For the Nine Months
Ended
 
     October 3,
2010
     October 4,
2009
     October 3,
2010
     October 4,
2009
 
     (in thousands, except per share amounts)  

Net income (loss) for basic net income (loss) per share

   $ 147,340       $ 6,675       $ 319,589       $ (150,761

Income impact of assumed conversion of convertible notes

     4,438         —           13,203         —     
                                   

Net income (loss) for diluted net income (loss) per share

   $ 151,778       $ 6,675       $ 332,792       $ (150,761

Shares used in net income (loss) per common share-basic

     181,239         174,495         179,365         173,216   

Effect of dilutive potential common shares:

           

Incremental shares from assumed conversion of convertible note

     34,703         —           34,703         —     

Warrants

     8,506         1,769         9,618         —     

Restricted stock units

     2,848         2,153         2,880         —     

Stock options

     2,044         2,327         2,439         —     

Stock purchase rights

     49         48         64         —     
                                   

Dilutive potential common shares

     48,150         6,297         49,704         —     
                                   

Shares used in net income (loss) per common share-diluted

     229,389         180,792         229,069         173,216   
                                   

Net income (loss) per common share-basic

   $ 0.81       $ 0.04       $ 1.78       $ (0.87
                                   

Net income (loss) per common share-diluted

   $ 0.66       $ 0.04       $ 1.45       $ (0.87
                                   

The computation of diluted net income per common share for the three and nine months ended October 3, 2010 excludes the effect of the potential exercise of options to purchase approximately 4.4 million and 5.5 million shares and restricted stock units of 0.1 million and 0.1 million shares, respectively, because the effect would have been anti-dilutive.

The computation of diluted net income per common share for the three months ended October 4, 2009 excludes the effect of the potential exercise of options to purchase approximately 7.7 million shares and restricted stock units of 2.3 million because the effect would have been anti-dilutive. In addition, approximately 34.7 million shares of common stock issuable upon conversion of the Notes were excluded from the calculation of net income per share because the effect would have been anti-dilutive.

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

The computation of diluted net loss per common share for the nine months ended October 4, 2009 excludes all outstanding stock options, restricted stock units and warrants because Teradyne had a net loss and inclusion would be anti-dilutive.

Teradyne’s call option on its common stock (convertible note hedge transaction) is excluded from the calculation of diluted shares because the effect would be anti-dilutive. See Debt footnote E regarding convertible note hedge transaction.

L. Restructuring and Other, Net

Restructuring

In response to a downturn in the industry, Teradyne initiated restructuring activities across all segments to reduce costs, principally through headcount reductions and facility consolidations. The tables below represent activity related to these actions. The remaining accrual for severance and benefits is reflected in the accrued employees’ compensation and withholdings account on the balance sheet and is expected to be paid by the end of 2010. The remaining accrual for lease payments on vacated facilities is reflected in the other accrued liabilities account and the long-term other accrued liabilities account and is expected to be paid over the lease terms, the latest of which expires in 2013. Teradyne expects to pay approximately $2.2 million against the lease accruals over the next twelve months. Teradyne’s future lease commitments are net of expected sublease income of $1.6 million as of October 3, 2010.

Severance and Benefits:

 

     Pre-2009
Actions
    Q1 2009
Actions
    Q2 2009
Actions
    Q1 2010
Actions
    Q2 2010
Actions
    Q3 2010
Actions
    Total  
     (in thousands)  

Balance at December 31, 2008

   $ 5,423      $ —        $ —        $ —        $ —        $ —        $ 5,423   

Provision

     —          17,630        15,940        —          —          —          33,570   

Cash payments

     (5,423     (17,630     (13,035     —          —          —          (36,088
                                                        

Balance at December 31, 2009

     —          —          2,905        —          —          —          2,905   

Provision

     —          —          —          766        —          —          766   

Change in estimate

     —          —          498        —          —          —          498   

Cash payments

     —          —          (2,079     (573     —          —          (2,652
                                                        

Balance at April 4, 2010

     —          —          1,324        193        —          —          1,517   

Provision

     —          —          —          —          845        —          845   

Change in estimate

     —          —          (96     (5     —          —          (101

Cash payments

     —          —          (695     (188     (387     —          (1,270
                                                        

Balance at July 4, 2010

     —          —          533        —          458        —          991   

Provision

     —          —          —          —          209        1,400        1,609   

Change in estimate

     —          —          (118     —          —          —          (118

Cash payments

     —          —          (284     —          (177     (187     (648
                                                        

Balance at October 3, 2010

   $ —        $ —        $ 131      $ —        $ 490      $ 1,213      $ 1,834   
                                                        

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

Facility Exit Costs:

 

     Pre-2009
Actions
    Q3 2009
Actions
    Q2 2010
Actions
     Total  

Balance at December 31, 2008

   $ 9,303      $ —        $ —         $ 9,303   

Provision

     —          4,420        —           4,420   

Change in estimate

     (417     —          —           (417

Cash payments

     (2,645     (285     —           (2,930

Other

     —          100        —           100   
                                 

Balance at December 31, 2009

     6,241        4,235        —           10,476   

Cash payments

     (468     (272     —           (740
                                 

Balance at April 4, 2010

     5,773        3,963        —           9,736   

Provision

     —          —          815         815   

Cash payments

     (553     (264     —           (817
                                 

Balance at July 4, 2010

     5,220        3,699        815         9,734   

Change in estimate

     (2,367     —          —           (2,367

Cash payments

     (1,881     (493     —           (2,374
                                 

Balance at October 3, 2010

   $ 972      $ 3,206      $ 815       $ 4,993   
                                 

During the nine months ended October 3, 2010, Teradyne recorded restructuring charges related to ongoing efforts to lower expenses and its cost structure and an additional charge due to a change in estimated severance benefits related to a prior period activity. The restructuring charges consisted of the following activities:

Q1 2010 Actions:

 

   

$0.8 million of severance charges related to headcount reductions of 14 people, of which $0.4 million and 10 people were in Systems Test Group and $0.4 million and 4 people were in Semiconductor Test.

Q2 2010 Actions:

 

   

$1.1 million of severance charges related to headcount reductions of approximately 10 people in Systems Test Group; and

 

   

$0.8 million of facility charges in Systems Test Group related to the early exit of leased facilities in Kontich, Belgium and Stockport, United Kingdom.

Q3 2010 Actions:

 

   

$1.4 million of severance charges related to headcount reductions of 22 people in Systems Test Group.

Q2 2009 Actions:

 

   

$0.3 million related to a change in the estimated severance benefits related to headcount reduction activities across both segments.

Pre-2009 Actions:

 

   

$(2.4) million credit related to the early exit of previously impaired leased facilities in Westford, Massachusetts.

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

During the nine months ended October 4, 2009, Teradyne recorded restructuring charges related to ongoing efforts to lower expenses and its cost structure in light of the industry wide decline in orders for semiconductor equipment. The restructuring charges consisted of the following activities:

Q3 2009 Actions:

 

   

$4.4 million of charges across both segments related to the early exit of a leased facility in North Reading, Massachusetts and Novi, Michigan.

Q2 2009 Actions:

 

   

$14.1 million of severance charges related to headcount reductions of 316 people, of which $9.7 million and 267 people were in Semiconductor Test, $2.7 million and 25 people were in Corporate, and $1.7 million and 24 people were in Systems Test Group.

Q1 2009 Actions:

 

   

$17.6 million of severance charges related to headcount reductions of 518 people, of which $14.9 million and 460 people were in Semiconductor Test, $1.9 million and 42 people were in Systems Test Group, and $0.8 million and 16 people were in Corporate.

Other

During the nine months ended October 4, 2009, Teradyne recorded the following activity:

 

   

$1.1 million of long-lived asset impairment charges across both segments primarily related to disposal of fixed assets as a result of the consolidation of Teradyne’s facilities in North Reading, Massachusetts; and

 

   

$(2.0) million of credits related to finalization of certain Eagle Test purchase accounting items.

M. Retirement Plans

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 these plans consist primarily of equity and fixed income securities. In addition, Teradyne has foreign unfunded defined benefit pension plans and 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 and the Internal Revenue Code.

 

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Table of Contents

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

Components of net periodic pension cost for all plans for the three and nine months ended October 3, 2010 and October 4, 2009 were as follows:

 

     For the Three Months
Ended
    For the Nine Months
Ended
 
     October 3, 
2010
    October 4, 
2009
    October 3,
2010
    October 4,
2009
 
     (in thousands)  

Service cost

   $ 792      $ 954      $ 2,782      $ 3,088   

Interest cost

     4,422        4,615        13,227        13,842   

Expected return on plan assets

     (5,020     (4,795     (15,153     (14,508

Amortization of unrecognized:

        

Prior service cost

     182        197        545        601   

Net loss

     1,325        942        4,091        3,076   

Curtailment gain

     —          —          —          (599

Settlement loss

     442        —          442        1,676   
                                

Total net periodic pension cost

   $ 2,143      $ 1,913      $ 5,934      $ 7,176   
                                

In the nine months ended October 3, 2010, Teradyne made $45.0 million of discretionary contributions to the U.S. Qualified Pension Plan.

Post-Retirement Benefit Plans

In addition to receiving pension benefits, U.S. Teradyne employees who meet early retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes death, and 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 (including executive officers) could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.

Components of net periodic post-retirement cost were as follows:

 

     For the Three Months
Ended
    For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
    October 3, 
2010
    October 4, 
2009
 
     (in thousands)  

Service cost

   $ 15      $ 27      $ 42      $ 82   

Interest cost

     138        273        530        819   

Amortization of unrecognized:

        

Prior service benefit

     (150     (58     (267     (176

Net loss

     29        57        58        171   
                                

Total net periodic post-retirement cost

   $ 32      $ 299      $ 363      $ 896   
                                

N. Commitments and Contingencies

Purchase Commitments

As of October 3, 2010, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments are for less than one year and aggregate to approximately $233.0 million.

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

Legal Claims

Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on Teradyne’s results of operations, financial condition or cash flows.

O. Segment Information

Teradyne’s two reportable segments are Semiconductor Test and Systems Test Group. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The Systems Test Group segment includes operations related to the design, manufacturing and marketing of products and services for military/aerospace instrumentation test, hard disk drive test, circuit-board test and inspection, and automotive diagnostic and test.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income before income taxes. The accounting policies of the business segments are the same as those described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2009. Segment information is as follows:

 

    Semiconductor
Test
    Systems
Test Group
    Corporate
and
Eliminations
    Consolidated  
    (in thousands)  

Three months ended October 3, 2010:

       

Net revenues

  $ 448,273      $ 53,813      $ —        $ 502,086   

Income (loss) before income taxes(1)(2)

    158,066        627        (4,677     154,016   

Three months ended October 4, 2009:

       

Net revenues

  $ 173,149      $ 89,013      $ —        $ 262,162   

Loss (income) before income taxes(1)(2)

    (3,486     12,379        (3,718     5,175   

Nine months ended October 3, 2010:

       

Net revenues

  $ 1,151,010      $ 135,475      $ —        $ 1,286,485   

Income (loss) before income taxes(1)(2)

    367,623        (11,966     (15,019     340,638   

Nine months ended October 4, 2009:

       

Net revenues

  $ 354,495      $ 197,855      $ —        $ 552,350   

Loss (income) before income taxes(1)(2)

    (146,649     4,509        (20,121     (162,261

 

(1) Interest income and interest expense and other are included in Corporate and Eliminations.

 

(2) Included in the income before income taxes for each of the segments are charges for the three and nine months ended October 3, 2010 and October 4, 2009 that include restructuring and other, net, inventory step-up amortization and provision for excess and obsolete inventory, as follows:

 

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TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

Included in the Semiconductor Test segment are charges for the following:

 

     For the Three Months
Ended
     For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
     October 3,
2010
    October 4,
2009
 
     (in thousands)  

Cost of revenues—provision for excess and obsolete inventory

   $ 3,500      $ 5,219       $ 3,996      $ 16,953   

Cost of revenues—sale of previously written down inventory

     (871     —           (5,510     —     

Cost of revenues—inventory step-up

     —          5,700         —          10,863   

Restructuring and other, net

     91        4,738         1,172        29,409   
                                 

Total

   $ 2,720      $ 15,657       $ (342   $ 57,225   
                                 

Included in the Systems Test Group segment are charges for the following:

 

     For the Three Months
Ended
     For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
     October 3,
2010
    October 4,
2009
 
     (in thousands)  

Cost of revenues—provision for excess and obsolete inventory

   $ 238      $ 757       $ 1,407      $ 6,728   

Cost of revenues—sale of previously written down inventory

     (441     —           (1,034     —     

Restructuring and other, net

     (866     377         1,053        3,840   
                                 

Total

   $ (1,069   $ 1,134       $ 1,426      $ 10,568   
                                 

Included in the Corporate and Eliminations segment are charges for the following:

 

     For the Three Months
Ended
     For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
     October 3,
2010
    October 4,
2009
 
     (in thousands)  

Restructuring and other, net

   $ (84   $ 74       $ (120   $ 3,175   
                                 

Total

   $ (84   $ 74       $ (120   $ 3,175   
                                 

 

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Table of Contents

 

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements in this Quarterly Report on Form 10-Q which are not historical facts, so called “forward looking statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in Teradyne’s 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, 2009. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management’s analysis only as of the date hereof. Teradyne assumes 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

Teradyne is a leading global supplier of automatic test equipment. We design, develop, manufacture, and sell automatic test systems and solutions used to test complex electronics in the consumer electronics, automotive, computing, telecommunications, and aerospace and defense industries. Our automatic test equipment products and services include:

 

   

semiconductor test (“Semiconductor Test”) systems; and

 

   

military/aerospace (“Mil/Aero”) test instrumentation and systems, hard disk drive test (“HDD”) systems, circuit-board test and inspection (“Commercial Board Test”) systems, and automotive diagnostic and test (“Diagnostic Solutions”) systems (collectively these products represent “Systems Test Group”).

We have a broad customer base which includes integrated device manufacturers (“IDMs”), outsourced sub-assembly and test providers (“OSATs”), wafer foundries, fabless companies that design, but contract with others for the manufacture of integrated circuits (“ICs”), manufacturers of circuit boards, automotive companies, HDD manufacturers, aerospace and military contractors as well as the United States Department of Defense.

The sales of our products and services are dependent, to a large degree, on customers who are subject to cyclical trends in the demand for their products. These cyclical periods have had, and will continue to have, a significant effect on our business since our customers often delay or accelerate purchases in reaction to changes in their businesses and to demand fluctuations in the semiconductor industry. Historically, these demand fluctuations have resulted in significant variations in our results of operations. This was particularly relevant beginning in the fourth quarter of fiscal year 2008 where we saw a significant decrease in revenue in our Semiconductor Test business which was impacted by the deteriorating global economy, which negatively impacted the entire semiconductor industry. The sharp swings in the semiconductor industry in recent years have generally affected the semiconductor test equipment and services industry more significantly than the overall capital equipment sector.

In response to the business downturn, we implemented significant permanent and temporary cost reduction measures. We reduced headcount worldwide, cut capital spending, and imposed temporary salary reductions and furloughs on our workforce. Due to the continued improvement in our business, we removed the temporary salary reductions and furloughs by the end of last year. We believe the permanent cost-cutting measures we took in the last two years will be of long term value.

Commencing in the fourth quarter of 2009, we have experienced improvement in our Semiconductor Test business. We believe our acquisitions of Nextest and Eagle Test and our entry into the high speed memory and HDD markets have enhanced our opportunities for growth. We will continue to invest in our business to expand further our addressable markets while tightly managing our costs. As the last four quarters have demonstrated, with our current cost structure, we can achieve significantly higher profitability than we achieved at comparable revenue levels in the past.

 

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Critical Accounting Policies and Estimates

We have identified the policies which are critical to understanding our business and our results of operations. Except as stated below, management believes that there have been no significant changes during the nine months ended October 3, 2010 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 its Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Revenue Recognition

In October 2009, the Financial Accounting Standards Board (“FASB”) amended the accounting standards for revenue recognition to remove tangible products containing non-software and software components that function together to deliver the product’s essential functionality from the scope of industry-specific software revenue recognition guidance. In October 2009, the FASB also amended the accounting standards for arrangements with multiple deliverables. We elected to early adopt this accounting guidance at the beginning of our first quarter of 2010 on a prospective basis. Adoption had no material impact on our financial position or results of operations in the three and nine months ended October 3, 2010.

We recognize revenue when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass upon destination, acceptance or cash payment, we defer revenue recognition until such events occur.

Our equipment has non-software and software components that function together to deliver the equipment’s essential functionality. Revenue is recognized upon shipment or at delivery destination point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require us to perform tests of the product to ensure that performance meets the published product specifications or customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. We also defer the portion of the sales price that is not due until acceptance, which represents deferred profit.

For multiple element arrangements, we allocate revenue to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). For a delivered item to be considered a separate unit, the delivered item must have value to the customer on a standalone basis and the delivery or performance of the undelivered item must be considered probable and substantially in our control.

Our post-shipment obligations include installation, training services, one-year standard warranties, and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or tools and can be performed by the customers or other vendors. Installation is typically provided within five days of product shipment and is completed within one to two days thereafter. Training services are optional and do not affect the customer’s ability to use the product. We defer revenue for the selling price of installation and training.

 

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SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

 

     For the Three Months
Ended
    For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
    October 3,
2010
    October 4,
2009
 

Percentage of total net revenues:

        

Net revenue:

        

Products

     87     78     85     70

Services

     13        22        15        30   
                                

Total net revenues

     100        100        100        100   

Cost of revenues:

        

Cost of products

     38        48        38        50   

Cost of services

     7        11        8        16   
                                

Total cost of revenues

     45        59        45        66   
                                

Gross profit

     55        41        55        34   

Operating expenses:

        

Engineering and development

     10        15        12        22   

Selling and administrative

     12        18        14        27   

Acquired intangible asset amortization

     1        3        2        4   

Restructuring and other, net

     0        2        0        7   
                                

Total operating expenses

     23        38        27        60   
                                

Income (loss) from operations

     31        3        28        (26

Interest & other

     (1     (1     (1     (3
                                

Income (loss) before income taxes

     31        2        26        (29

Provision (benefit) for income taxes

     1        (1     2        (2
                                

Net income (loss)

     29     3     25     (27 )% 
                                

Provision/benefit for income taxes as percentage of income (loss) before income taxes

     4     (29 )%      6     (7 )% 

Results of Operations

Third Quarter 2010 Compared to Third Quarter 2009

Book to Bill Ratio

Book to bill ratio is calculated as net bookings divided by net sales. Book to bill ratio by reportable segment was as follows:

 

     For the Three Months
Ended
 
     October 3,
2010
     October 4,
2009
 

Semiconductor Test

     0.6         1.3   

Systems Test Group

     1.7         0.6   

Total Company

     0.7         1.1   

 

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Revenue

Net revenues for our two reportable segments were as follows:

 

     For the Three Months
Ended
     Dollar
Change
 
     October 3,
2010
     October 4,
2009
    
     (in millions)  

Semiconductor Test

   $ 448.3       $ 173.1       $ 275.2   

Systems Test Group

     53.8         89.1         (35.3
                          
   $ 502.1       $ 262.2       $ 239.9   
                          

Net revenues increased by $239.9 million or 92%, primarily due to the increase in Semiconductor Test revenue of $275.2 million or 159%, as a result of higher sales across all System-on-Chip products with power management, microcontroller and mobile/wireless being the strongest. Systems Test Group revenue was down by $35.3 million or 40%, primarily due to the decrease in sales of HDD test systems.

Our revenues by region as a percentage of total net revenue were as follows:

 

     For the Three Months
Ended
 
     October 3,
2010
    October 4
2009
 

Malaysia

     21     15

Taiwan

     15        15   

United States

     13        19   

China

     11        7   

Philippines

     11        2   

Singapore

     9        12   

Korea

     8        5   

Europe

     6        7   

Japan

     5        6   

Thailand

     —          11   

Rest of World

     1        1   
                
     100     100
                

Gross Profit

Our gross profit was as follows:

 

     For the Three Months
Ended
    Dollar/Point
Change
 
     October 3, 
2010
    October 4, 
2009
   
     (in millions)  

Gross Profit

   $ 275.8      $ 106.8      $ 169.0   

Percent of Total Revenue

     54.9     40.7     14.2   

Gross profit as a percentage of revenue increased 14.2 percentage points. This increase was the result of an increase of 8.3 points from higher sales volume and an increase of 7.7 points related to product mix. These increases were partially offset by a decrease of 1.8 points primarily due to higher variable compensation.

We assess the carrying value of our inventory on a quarterly basis by estimating future demand and comparing that demand against on-hand and on-order inventory positions. Forecasted revenue information is obtained from the sales and marketing groups and incorporates factors such as backlog and future revenue

 

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demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next four quarters, is written-down to estimated net realizable value.

During the three months ended October 3, 2010, we recorded an inventory provision of $3.7 million included in cost of revenues, due to the downward revisions to previously forecasted demand levels. Of the $3.7 million of total excess and obsolete provisions recorded in the three months ended October 3, 2010, $3.5 million was related to Semiconductor Test and $0.2 million was related to Systems Test Group.

During the three months ended October 4, 2009, we recorded an inventory provision of $6.0 million included in cost of revenues, due to the following factors:

 

   

Downward revisions to previously forecasted demand levels as a result of economic conditions experienced in the semiconductor industry in the third quarter of 2009 resulted in an inventory provision of $3.5 million for inventory not expected to be consumed; and

 

   

A decline in demand versus forecast for our Liquid Crystal Display (“LCD”) test product due to the global economic downturn, lower product pricing by competitors, the introduction of a new product by a competitor and consolidation among a number of the expected buyers of the product, resulted in an inventory provision of $2.5 million.

Of the $6.0 million of total excess and obsolete provisions recorded in the three months ended October 4, 2009, $5.2 million was related to Semiconductor Test and $0.8 million was related to Systems Test Group.

During the three months ended October 3, 2010 and October 4, 2009, we scrapped $1.6 million and $27.0 million of inventory, respectively. During the three months ended October 3, 2010 and October 4, 2009, we sold $1.3 million and $0.6 million, respectively, of previously written-down or written-off inventory. As of October 3, 2010, we had inventory related reserves for amounts which had been written-down or written-off totaling $127.8 million. We have no pre-determined timeline to scrap the remaining inventory.

Engineering and Development

Engineering and development expenses were as follows:

 

     For the Three Months
Ended
    Dollar
Change
 
     October 3,
2010
    October 4
2009
   
     (in millions)  

Engineering and Development

   $ 50.1      $ 38.3      $ 11.8   

Percent of Total Revenue

     10.0     14.6  

The increase of $11.8 million in engineering and development expenses is due primarily to an $8.5 million increase in variable compensation, $1.5 million due to increased project spending and $1.8 million from the restoration of temporary pay cuts.

Selling and Administrative

Selling and administrative expenses were as follows:

 

     For the Three Months
Ended
    Dollar
Change
 
     October 3,
2010
    October 4,
2009
   
     (in millions)  

Selling and Administrative

   $ 61.1      $ 46.3      $ 14.8   

Percent of Total Revenue

     12.2     17.7  

 

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The increase of $14.8 million in selling and administrative expenses is due primarily to a $13.0 million increase in variable compensation, and $2.9 million from the restoration of temporary pay cuts, partially offset by a $1.1 million decrease in spending related to cost reduction initiatives taken in 2009.

Restructuring and Other, Net

Restructuring

In response to a downturn in the industry, we initiated restructuring activities across all segments to reduce costs, principally through headcount reductions and facility consolidations. The tables below represent activities related to these actions. The remaining accrual for severance and benefits is reflected in the accrued employees’ compensation and withholdings account on the balance sheet and is expected to be paid by the end of 2010. The remaining accrual for lease payments on vacated facilities is reflected in the other accrued liabilities account and the long-term other accrued liabilities account and is expected to be paid over the lease terms, the latest of which expires in 2013. We expect to pay approximately $2.2 million against the lease accruals over the next twelve months. Our future lease commitments are net of expected sublease income of $1.6 million as of October 3, 2010.

Severance and Benefits:

 

     Pre-2009
Actions
    Q1 2009
Actions
    Q2 2009
Actions
    Q1 2010
Actions
    Q2 2010
Actions
    Q3 2010
Actions
    Total  
     (in thousands)  

Balance at December 31, 2008

   $ 5,423      $ —        $ —        $ —        $ —        $ —        $ 5,423   

Provision

     —          17,630        15,940        —          —          —          33,570   

Cash payments

     (5,423     (17,630     (13,035     —          —          —          (36,088
                                                        

Balance at December 31, 2009

     —          —          2,905        —          —          —          2,905   

Provision

     —          —          —          766        —          —          766   

Change in estimate

     —          —          498        —          —          —          498   

Cash payments

     —          —          (2,079     (573     —          —          (2,652
                                                        

Balance at April 4, 2010

     —          —          1,324        193        —          —          1,517   

Provision

     —          —          —          —          845        —          845   

Change in estimate

     —          —          (96     (5     —          —          (101

Cash payments

     —          —          (695     (188     (387     —          (1,270
                                                        

Balance at July 4, 2010

     —          —          533        —          458        —          991   

Provision

     —          —          —          —          209        1,400        1,609   

Change in estimate

     —          —          (118     —          —          —          (118

Cash payments

     —          —          (284     —          (177     (187     (648
                                                        

Balance at October 3, 2010

   $ —        $ —        $ 131      $ —        $ 490      $ 1,213      $ 1,834   
                                                        

 

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Facility Exit Costs:

 

     Pre-2009
Actions
    Q3 2009
Actions
    Q2 2010
Actions
     Total  
     (in thousands)  

Balance at December 31, 2008

   $ 9,303      $ —        $ —         $ 9,303   

Provision

     —          4,420        —           4,420   

Change in estimate

     (417     —          —           (417

Cash payments

     (2,645     (285     —           (2,930

Other

     —          100        —           100   
                                 

Balance at December 31, 2009

     6,241        4,235        —           10,476   

Cash payments

     (468     (272     —           (740
                                 

Balance at April 4, 2010

     5,773        3,963        —           9,736   

Provision

     —          —          815         815   

Cash payments

     (553     (264     —           (817
                                 

Balance at July 4, 2010

     5,220        3,699        815         9,734   

Change in estimate

     (2,367     —          —           (2,367

Cash payments

     (1,881     (493     —           (2,374
                                 

Balance at October 3, 2010

   $ 972      $ 3,206      $ 815       $ 4,993   
                                 

During the three months ended October 3, 2010, we recorded restructuring charges related to ongoing efforts to lower expenses and our cost structure and credits related to an early exit of previously impaired facilities. The restructuring activity consisted of the following:

Q3 2010 Actions:

 

   

$1.4 million of severance charges related to headcount reductions of approximately 22 people in Systems Test Group.

Q2 2010 Actions:

 

   

$0.2 million of additional severance charges related to headcount reductions in Systems Test Group.

Q2 2009 Actions:

 

   

$(0.1) million credits related to a change in the estimated severance benefits related to headcount reduction activities across both segments. Pre-2009 Actions:

 

   

$(2.4) million credit related to the early exit of previously impaired leased facilities in Westford, Massachusetts.

During the three months ended October 4, 2009, Teradyne recorded restructuring charges related to ongoing efforts to lower expenses and its cost structure in light of the industry wide decline in orders for semiconductor equipment. The restructuring charges consisted of the following activities:

Q3 2009 Actions:

 

   

$4.4 million of charges across both segments related to the early exit of leased facilities in North Reading, Massachusetts and Novi, Michigan.

Q2 2009 Actions:

 

   

$1.3 million of additional severance charges related to headcount reductions across both segments.

 

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Table of Contents

 

Other

During the three months ended October 4, 2009, Teradyne recorded $(0.5) million of credits related to finalization of certain Eagle Test purchase accounting items.

Interest and Other

Interest income increased by $0.5 million from the third quarter of 2009 to 2010. Interest expense and other increased by $1.0 million from the third quarter of 2009 to 2010. Interest expense and other for the third quarter of 2010 included $4.9 million of interest expense related to our convertible debt. Interest expense and other for the third quarter of 2009 included $4.3 million of interest expense related to our convertible debt.

Income Taxes

For the three months ended October 3, 2010, we recorded a tax provision of $6.7 million, which consisted primarily of foreign taxes. For the three months ended October 4, 2009, we recorded a tax benefit of $1.5 million primarily due to tax refunds recorded for U.S. loss carrybacks. Due to the continued uncertainty of realization, we have maintained our valuation allowance at October 3, 2010 for deferred tax assets in the U.S. and Singapore. We do not expect to significantly reduce our valuation allowance until sufficient positive evidence exists, including sustained profitability, that realization is more likely than not.

Nine Months of 2010 Compared to Nine Months of 2009

Revenue

Net revenues for our two reportable segments were as follows:

 

     For the Nine Months
Ended
     Dollar
Change
 
     October 3,
2010
     October 4,
2009
    
     (in millions)  

Semiconductor Test

   $ 1,151.0       $ 354.5       $ 796.5   

Systems Test Group

     135.5         197.9         (62.4
                          
   $ 1,286.5       $ 552.4       $ 734.1   
                          

Net revenues increased by $734.1 million or 133%, primarily due to the increase in Semiconductor Test revenue of $796.5 million or 225%, as a result of higher sales across all System-on-Chip products with power management, microcontroller and mobile/wireless being the strongest. System Test Group revenue was down by $62.4 million or 32%, primarily due to the decrease in sales of HDD test systems and Mil/Aero test instrumentation.

 

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Table of Contents

 

Our revenues by region as a percentage of total net revenue were as follows:

 

     For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
 

Taiwan

     20     13

United States

     14        26   

Malaysia

     13        9   

Philippines

     11        3   

Singapore

     10        10   

China

     9        5   

Europe

     7        10   

Korea

     7        4   

Japan

     5        7   

Thailand

     3        11   

Rest of World

     1        2   
                
     100     100
                

Gross Profit

Our gross profit was as follows:

 

     For the Nine Months
Ended
    Dollar/Point
Change
 
     October 3,
2010
    October 4,
2009
   
     (in millions)  

Gross Profit

   $ 703.6      $ 187.2      $ 516.4   

Percent of Total Revenue

     54.7     33.9     20.8   

Gross profit as a percentage of revenue increased 20.8 percentage points. This increase was the result of an increase of 13.9 points from higher sales volume and an increase of 8.2 points related to product mix. These increases were partially offset by a decrease of 1.3 points primarily due to higher variable compensation.

We assess the carrying value of our inventory on a quarterly basis by estimating future demand and comparing that demand against on-hand and on-order inventory positions. Forecasted revenue information is obtained from the sales and marketing groups and incorporates factors such as backlog and future revenue demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next four quarters, is written-down to estimated net realizable value.

During the nine months ended October 3, 2010, we recorded an inventory provision of $5.4 million included in cost of revenues, due to the downward revisions to previously forecasted demand levels. Of the $5.4 million of total excess and obsolete provisions recorded in the nine months ended October 3, 2010, $4.0 million was related to Semiconductor Test and $1.4 million was related to Systems Test Group.

During the nine months ended October 4, 2009, we recorded an inventory provision of $23.7 million included in cost of revenues, due to the following factors:

 

   

Downward revisions to previously forecasted demand levels as a result of worsening economic conditions experienced in the semiconductor and automotive industries in the first nine months of 2009 resulted in an inventory provision of $15.1 million for inventory not expected to be consumed; and

 

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A decline in demand versus forecast for our Liquid Crystal Display (“LCD”) test product due to the global economic downturn, lower product pricing by competitors, the introduction of a new product by a competitor and consolidation among a number of the expected buyers of the product, resulted in an inventory provision of $5.9 million; and

 

   

During late 2008, we introduced the next versions of our Nextest Magnum memory test product. At that time, it was anticipated that demand would continue for the existing version of the product within its installed base of customers. An overall decline in the memory market combined with a portion of our customers accelerating their purchasing of the newer version of the product resulted in an inventory provision of $2.7 million.

Of the $23.7 million of total excess and obsolete provisions recorded in the nine months ended October 4, 2009, $17.0 million was related to Semiconductor Test and $6.7 million was related to Systems Test Group.

During the nine months ended October 3, 2010 and October 4, 2009, we scrapped $3.7 million and $29.0 million of inventory, respectively. During the nine months ended October 3, 2010, we sold $6.5 million of previously written-down or written-off inventory. As of October 3, 2010, we had inventory related reserves for amounts which had been written-down or written-off totaling $127.8 million. We have no pre-determined timeline to scrap the remaining inventory.

Engineering and Development

Engineering and development expenses were as follows:

 

     For the Nine Months
Ended
    Dollar
Change
 
     October 3,
2010
    October 4,
2009
   
     (in millions)  

Engineering and Development

   $ 149.6      $ 123.9      $ 25.7   

Percent of Total Revenue

     11.6     22.4  

The increase of $25.7 million in engineering and development expenses is due primarily to a $19.5 million increase in variable compensation and $6.2 million increase from the restoration of temporary pay cuts.

Selling and Administrative

Selling and administrative expenses were as follows:

 

     For the Nine Months
Ended
    Dollar
Change
 
     October 3,
2010
    October 4,
2009
   
     (in millions)  

Selling and Administrative

   $ 175.3      $ 148.9      $ 26.4   

Percent of Total Revenue

     13.6     27.0  

The increase of $26.4 million in selling and administrative expenses is due primarily to a $27.6 million increase in variable compensation and $9.9 million from the restoration of temporary pay cuts, offset by an $11.1 million decrease in other spending related to workforce reductions and other cost reduction initiatives taken in 2009.

Restructuring and Other, Net

Restructuring

In response to a downturn in the industry, we initiated restructuring activities across all segments to reduce costs, principally through headcount reductions and facility consolidations. The tables below represent activity

 

35


Table of Contents

related to these actions. The remaining accrual for severance and benefits is reflected in the accrued employees’ compensation and withholdings account on the balance sheet and is expected to be paid by the end of 2010. The remaining accrual for lease payments on vacated facilities is reflected in the other accrued liabilities account and the long-term other accrued liabilities account and is expected to be paid over the lease terms, the latest of which expires in 2013. We expect to pay approximately $2.2 million against the lease accruals over the next twelve months. Our future lease commitments are net of expected sublease income of $1.6 million as of October 3, 2010.

Severance and Benefits:

 

     Pre-2009
Actions
    Q1 2009
Actions
    Q2 2009
Actions
    Q1 2010
Actions
    Q2 2010
Actions
    Q3 2010
Actions
    Total  
     (in thousands)  

Balance at December 31, 2008

   $ 5,423      $ —        $ —        $ —        $ —        $ —        $ 5,423   

Provision

     —          17,630        15,940        —          —          —          33,570   

Cash payments

     (5,423     (17,630     (13,035     —          —          —          (36,088
                                                        

Balance at December 31, 2009

     —          —          2,905        —          —          —          2,905   

Provision

     —          —          —          766        —          —          766   

Change in estimate

     —          —          498        —          —          —          498   

Cash payments

     —          —          (2,079     (573     —          —          (2,652
                                                        

Balance at April 4, 2010

     —          —          1,324        193        —          —          1,517   

Provision

     —          —          —          —          845        —          845   

Change in estimate

     —          —          (96     (5     —          —          (101

Cash payments

     —          —          (695     (188     (387     —          (1,270
                                                        

Balance at July 4, 2010

     —          —          533        —          458        —          991   

Provision

     —          —          —          —          209        1,400        1,609   

Change in estimate

     —          —          (118     —          —          —          (118

Cash payments

     —          —          (284     —          (177     (187     (648
                                                        

Balance at October 3, 2010

   $ —        $ —        $ 131      $ —        $ 490      $ 1,213      $ 1,834   
                                                        

Facility Exit Costs:

 

     Pre-2009
Actions
    Q3 2009
Actions
    Q2 2010
Actions
     Total  
     (in thousands)  

Balance at December 31, 2008

   $ 9,303      $ —        $ —         $ 9,303   

Provision

     —          4,420        —           4,420   

Change in estimate

     (417     —          —           (417

Cash payments

     (2,645     (285     —           (2,930

Other

     —          100        —           100   
                                 

Balance at December 31, 2009

     6,241        4,235        —           10,476   

Cash payments

     (468     (272     —           (740
                                 

Balance at April 4, 2010

     5,773        3,963        —           9,736   

Provision

     —          —          815         815   

Cash payments

     (553     (264     —           (817
                                 

Balance at July 4, 2010

     5,220        3,699        815         9,734   

Change in estimate

     (2,367     —          —           (2,367

Cash payments

     (1,881     (493     —           (2,374
                                 

Balance at October 3, 2010

   $ 972      $ 3,206      $ 815       $ 4,993   
                                 

 

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During the nine months ended October 3, 2010, we recorded restructuring charges related to ongoing efforts to lower expenses and our cost structure and an additional charge due to a change in estimated severance benefits related to a prior period activity. The restructuring charges consisted of the following activities:

Q1 2010 Actions:

 

   

$0.8 million of severance charges related to headcount reductions of approximately 14 people, of which $0.4 million and 10 people were in Systems Test Group and $0.4 million and 4 people were in Semiconductor Test.

Q2 2010 Actions:

 

   

$1.0 million of severance charges related to headcount reductions of approximately 10 people in Systems Test Group; and

 

   

$0.8 million of facility charges in Systems Test Group related to the early exit of leased facilities in Kontich, Belgium and Stockport, United Kingdom.

Q3 2010 Actions:

 

   

$1.4 million of severance charges related to headcount reductions of approximately 22 people in Systems Test Group.

Q2 2009 Actions:

 

   

$0.3 million related to a change in the estimated severance benefits related to headcount reduction activities across both segments.

Pre-2009 Actions:

 

   

$(2.4) million credit related to the early exit of previously impaired leased facilities in Westford, Massachusetts.

During the nine months ended October 4, 2009, we recorded restructuring charges related to ongoing efforts to lower expenses and our cost structure in light of the industry wide decline in orders for semiconductor equipment. The restructuring charges consisted of the following activities:

Q3 2009 Actions:

 

   

$4.4 million of charges across both segments related to the early exit of a leased facilities in North Reading, Massachusetts and Novi, Michigan.

Q2 2009 Actions:

 

   

$14.1 million of severance charges related to headcount reductions of approximately 316 people, of which $9.7 million and 267 people were in Semiconductor Test, $2.7 million and 25 people were in Corporate, and $1.7 million and 24 people were in Systems Test Group.

Q1 2009 Actions:

 

   

$17.6 million of severance charges related to headcount reductions of approximately 518 people, of which $14.9 million and 460 people were in Semiconductor Test, $1.9 million and 42 people were in Systems Test Group, and $0.8 million and 16 people were in Corporate.

Other

During the nine months ended October 4, 2009, we recorded the following activity:

 

   

$1.1 million of long-lived asset impairment charges across both segments primarily related to disposal of fixed assets as a result of the consolidation of our facilities in North Reading, Massachusetts; and

 

   

$(2.0) million of credits related to finalization of certain Eagle Test purchase accounting items.

 

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Interest and Other

Interest income increased by $3.1 million from the first nine months of 2009 to 2010 due primarily to a gain from the sale of auction rate securities of $2.7 million. Interest expense and other increased by $1.5 million from the first nine months of 2009 to 2010 due primarily to a loss of $2.7 million on the exercise of the auction rate securities related UBS Put and $5.4 million increase in interest expense related to our convertible note, partially offset by a $0.7 million decrease in realized and other–than-temporary impairment losses on our marketable securities and $1.4 million decrease in foreign exchange losses. In addition, the first nine months of 2009 included $2.1 million of interest expense related to the revolving credit facility and $2.5 million other expense related to the write off of the remaining debt issue costs due to the termination of our revolving credit facility agreement.

Income Taxes

For the nine months ended October 3, 2010, we recorded a tax provision of $21.0 million, which consisted primarily of foreign taxes. For the nine months ended October 4, 2009, we recorded a tax benefit of $11.5 million primarily due to benefiting operating losses in foreign jurisdictions. Due to the continued uncertainty of realization, we have maintained our valuation allowance at October 3, 2010 for deferred tax assets in the U.S. and Singapore. We do not expect to significantly reduce our valuation allowance until sufficient positive evidence exists, including sustained profitability, that realization is more likely than not.

Contractual Obligations

The following table reflects our contractual obligations as of October 3, 2010:

 

Payments Due by Period

   Purchase
Commitments
     Non-cancelable
Lease
Commitments(1)
     Debt      Interest
on Debt
     Pension
Contributions
     Total  
     (in thousands)  

2010

   $ 232,900       $ 4,035       $ —         $ —         $ 1,172       $ 238,107   

2011

     —           11,556         2,396         8,658         —           22,610   

2012

     —           9,632         2,396         8,625         —           20,653   

2013

     —           6,324         2,396         8,592         —           17,312   

2014

     —           4,889         191,198         4,307         —           200,394   

Beyond 2014

     —           4,811         —           —           —           4,811   
                                                     

Total

   $ 232,900       $ 41,247       $ 198,386       $ 30,182       $ 1,172       $ 503,887   
                                                     

 

(1) Non-cancelable lease payments have not been reduced by sublease income of $1.6 million due in the future under non-cancelable sublease agreements.

As of October 3, 2010, the total amount of unrecognized tax benefit for uncertain tax positions and the accrual for the related interest, net of the federal benefit, was $9.1 million and $1.4 million, respectively, and was included in long-term other accrued liabilities. We are unable to make a reasonably reliable estimate of when a cash settlement will occur with tax authorities as the timing of examinations and ultimate resolutions of those examinations is uncertain.

 

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Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities balance increased by $380.5 million in the first nine months of 2010 to $899.3 million. Cash activity for the first nine months of 2010 and 2009 was as follows:

 

     For the Nine Months
Ended
 
     October 3,
2010
    October 4,
2009
 
     (in millions)  

Cash provided by operating activities:

    

Net income (loss), adjusted for non-cash items

   $ 424.7      $ (19.1

Change in operating assets and liabilities, net of businesses acquired

     (34.7     75.2   
                

Total cash provided by operating activities

     390.0        56.1   
                

Total cash used for investing activities

     (412.5     (37.6
                

Total cash provided by financing activities

     39.9        64.6   
                

Effects on exchange rate changes on cash and cash equivalents

     (0.2     0.9   
                

Increase in cash and cash equivalents

   $ 17.2      $ 84.0   
                

In the nine months ended October 3, 2010, changes in operating assets and liabilities, net of businesses acquired, used cash of $34.7 million. This was due to a $169.6 million increase in operating assets and a $134.9 million increase in operating liabilities. The increase in operating assets was due to an increase in accounts receivable of $181.3 million due to higher sales volume, partially offset by a $10.8 million decrease in inventories, and a decrease in other current assets of $0.9 million. The increase in operating liabilities was due to a $68.4 million increase in customer advance payments, a $7.2 million increase in deferred revenue, a $50.8 million decrease in pension liabilities due to pension contributions, a $4.3 million decrease in other accrued expenses due to convertible note interest payments, partially offset by a $66.6 million increase in accounts payable, a $30.1 million increase in accrued employee compensation due to higher variable compensation, a $14.6 million increase in accrued income taxes, and a $6.6 million increase in other accrued liabilities.

Investing activities during the nine months ended October 3, 2010 used cash of $412.5 million, due to $478.3 million used for purchases of marketable securities and $54.0 million used for purchases of property, plant and equipment, partially offset by proceeds from sales of marketable securities that provided cash of $118.6 million, and proceeds from life insurance that provided cash of $1.1 million.

Financing activities during the nine months ended October 3, 2010 provided cash of $39.9 million, $42.2 million was from the issuance of common stock under stock option and stock purchase plans which was offset by $2.3 million of cash used for a payment on a long-term debt related to the Japan loan.

In the nine months ended October 4, 2009, changes in operating assets and liabilities, net of businesses acquired, provided cash of $75.2 million. This was due to a decrease in operating assets of $11.2 million and an increase in operating liabilities of $64.0 million. The decrease in operating assets consisted mainly of a decrease in inventory of $45.9 million partially offset by an increase of $30.0 million in accounts receivable due to higher sales volume. The increase in operating liabilities consisted of an increase in advanced customer payments, accounts payable, deferred revenue and other accrued expenses of $69.7 million partially offset by retirement plan contributions of $5.7 million.

Investing activities in the nine months ended October 4, 2009 used cash of $37.6 million due to investments in property, plant and equipment of $26.6 million, payment of transaction fees related to the Eagle Test acquisition of $3.7 million and purchases of marketable securities of $31.5 million, partially offset by sales of marketable securities that provided cash of $23.1 million and proceeds from life insurance policies that provided cash of $1.1 million.

 

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During the nine months ended October 4, 2009, financing activities provided cash of $64.6 million due to approximately $163.0 million of net proceeds from the issuance of the senior convertible notes, $10.0 million of long-term debt proceeds from a loan in Japan and $15.3 million from the issuance of common stock under stock option and stock purchase plans. These increases were partially offset by $122.5 million of cash used for the repayment of our revolving credit facility and $1.1 million of cash used for principal payment on long-term debt.

We believe our cash, cash equivalents and marketable securities balance of $899.3 million will be sufficient to meet working capital and expenditure needs for at least the next twelve months. Inflation has not had a significant long-term impact on earnings.

Equity Compensation Plans

As discussed in “Note N: Stock Based Compensation” in our 2009 Form 10-K, we have a 1996 Employee Stock Purchase Plan and a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”).

The purpose of the 1996 Employee Stock Purchase Plan is to encourage stock ownership by all eligible employees of Teradyne. The purpose of the 2006 Equity Plan is to provide equity ownership and compensation opportunities in Teradyne to our employees, officers, directors, consultants and/or advisors. Both plans were approved by our shareholders.

Recently Issued Accounting Pronouncements

In March 2010, FASB issued an Accounting Standards Update 2010-17, “Milestone Method of Revenue Recognition”, to Accounting Standards Codification 605, “Revenue Recognition.” The guidance in this consensus allows the milestone method as an acceptable revenue recognition methodology when an arrangement includes substantive milestones. The guidance provides a definition of substantive milestone and should be applied regardless of whether the arrangement includes single or multiple deliverables or units of accounting. The scope of this consensus is limited to the transactions involving milestones relating to research and development deliverables. The guidance includes enhanced disclosure requirements about each arrangement, individual milestones and related contingent consideration, information about substantive milestones and factors considered in the determination. The consensus is effective prospectively to milestones achieved in fiscal years, and interim periods within those years, after June 15, 2010. Early application and retrospective application are permitted. We will adopt this final consensus prospectively in January 2011 and the adoption is not expected to have a material impact on our financial position or results of operations.

 

Item 3: Quantitative and Qualitative Disclosures about Market Risk

For “Quantitative and Qualitative Disclosures about Market Risk” affecting Teradyne, see Item 7a. “Quantitative and Qualitative Disclosures about Market Risks,” in our Annual Report on Form 10-K filed with the SEC on March 1, 2010. There were no material changes in our exposure to market risk from those set forth in our Annual Report for the fiscal year ended December 31, 2009.

 

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) 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.

 

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During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

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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. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our results of operations, financial condition or cash flows.

 

Item 1A: Risk Factors

In addition to the other information set forth in this Form 10-Q, 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, 2009, 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. 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.

 

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

In November 2007, Teradyne’s Board of Directors (the “Board”) authorized a $400 million stock repurchase program. During the three months ended October 3, 2010, Teradyne did not repurchase any shares of common stock. The cumulative repurchases as of October 3, 2010 total 8.5 million shares of common stock for $102.6 million at an average price of $12.14 per share. As of November 4, 2008, the Board suspended the stock repurchase program.

The following table includes information with respect to repurchases we made of our common stock during the quarter ended October 3, 2010 (in thousands):

 

Period

   (a) Total
Number of
Shares
(or units)
Purchased
     (b) Average
Price Paid per
Share (or Unit)
     (c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
     (d) Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that may Yet Be
Purchased Under the
Plans or Programs
 

July 5, 2010 – August 1, 2010

     —         $   —           —         $ 297,375   

August 2, 2010 – August 29, 2010

     —         $   —           —         $ 297,375   

August 30, 2010 – October 3, 2010

     —         $   —           —         $ 297,375   

 

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Item 6: Exhibits

 

Exhibit
Number

  

Description

31.1    Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2    Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1    Certification 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 pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS*    XBRL Instance Document
101.SCH*    XBRL Taxonomy Extension Schema Document
101.CAL*    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*    XBRL Taxonomy Extension Label Linkbase Document
101.PRE*    XBRL Taxonomy Extension Presentation Linkbase Document

 

* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

TERADYNE, INC.
Registrant

/s/    GREGORY R. BEECHER        

Gregory R. Beecher

Vice President,

Chief Financial Officer and Treasurer

(Duly Authorized Officer
and Principal Financial Officer)

November 10, 2010

 

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