10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended April 2, 2017

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  ☒    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  ☒    No  ☐

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

The number of shares outstanding of the registrant’s only class of Common Stock as of May 8, 2017 was 198,950,727 shares.

TERADYNE, INC.

INDEX

		Page No.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of April  2, 2017 and December 31, 2016		1
	Condensed Consolidated Statements of Operations for the Three months ended April 2, 2017 and April 3, 2016		2
	Condensed Consolidated Statements of Comprehensive Income for the Three months ended April 2, 2017 and April 3, 2016		3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 2, 2017 and April 3, 2016		4
	Notes to Condensed Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		37
Item 4.	Controls and Procedures		38
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		39
Item 1A.	Risk Factors		39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 4.	Mine Safety Disclosures		39
Item 6.	Exhibits		40

PART I

Item 1: Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	April 2,			December 31,
	2017			2016
	(in thousands, except per share information)
ASSETS
Current assets:
Cash and cash equivalents	$	324,746		$	307,884
Marketable securities		895,578			871,024
Accounts receivable, less allowance for doubtful accounts of $2,422 and $2,356 at April 2, 2017 and December 31, 2016, respectively		314,962			192,444
Inventories, net		203,278			135,958
Prepayments		106,987			108,454
Other current assets		8,602			8,039
Total current assets		1,854,153			1,623,803
Property, plant and equipment, net		253,548			253,821
Marketable securities		262,061			433,843
Deferred tax assets		127,918			107,405
Other assets		12,175			12,165
Retirement plans assets		7,517			7,712
Intangible assets, net		94,843			100,401
Goodwill		230,065			223,343
Total assets	$	2,842,280		$	2,762,493
LIABILITIES
Current liabilities:
Accounts payable	$	121,417		$	95,362
Accrued employees’ compensation and withholdings		79,018			109,944
Deferred revenue and customer advances		78,794			84,478
Other accrued liabilities		67,651			51,382
Contingent consideration		21,711			1,050
Accrued income taxes		24,466			30,480
Total current liabilities		393,057			372,696
Retirement plans liabilities		110,069			106,938
Long-term deferred revenue and customer advances		25,983			23,463
Deferred tax liabilities		11,255			12,144
Long-term other accrued liabilities		9,921			28,642
Long-term contingent consideration		16,205			37,282
Long-term debt		355,937			352,669
Total liabilities		922,427			933,834
Commitments and contingencies (See Note P)
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 199,596 and 199,177 shares issued and outstanding at April 2, 2017 and December 31, 2016, respectively		24,950			24,897
Additional paid-in capital		1,605,502			1,593,684
Accumulated other comprehensive loss		(10,901	)		(20,214	)
Retained earnings		300,302			230,292
Total shareholders’ equity		1,919,853			1,828,659
Total liabilities and shareholders’ equity	$	2,842,280		$	2,762,493

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, 2016, are an integral part of the condensed

consolidated financial statements.

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TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands, except per share amounts)
Revenues:
Products	$	373,204		$	358,139
Services		83,709			72,855
Total revenues		456,913			430,994
Cost of revenues:
Cost of products		154,966			167,555
Cost of services		37,014			33,107
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		191,980			200,662
Gross profit		264,933			230,332
Operating expenses:
Engineering and development		76,182			73,464
Selling and administrative		84,906			79,174
Acquired intangible assets amortization		7,952			19,994
Restructuring and other		2,511			1,587
Total operating expenses		171,551			174,219
Income from operations		93,382			56,113
Non-operating (income) expense:
Interest income		(3,520	)		(1,642	)
Interest expense		5,402			710
Other (income) expense, net		(516	)		(147	)
Income before income taxes		92,016			57,192
Income tax provision		6,795			7,206
Net income	$	85,221		$	49,986
Net income per common share:
Basic	$	0.43		$	0.24
Diluted	$	0.42		$	0.24
Weighted average common shares—basic		200,005			204,271
Weighted average common shares—diluted		201,936			205,732
Cash dividend declared per common share	$	0.07		$	0.06

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, 2016, are an integral part of the condensed

consolidated financial statements.

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TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Net income	$	85,221		$	49,986
Other comprehensive income, net of tax:
Foreign currency translation adjustments, net of tax of $0, $0, respectively		8,963			10,271
Available-for-sale marketable securities:
Unrealized gains on marketable securities arising during period, net of tax of $420, $1,253, respectively		513			3,071
Less: Reclassification adjustment for gains included in net income, net of tax of $(64), $11, respectively		(95	)		(83	)
		418			2,988
Defined benefit pension and post-retirement plans:
Amortization of prior service (credit) cost included in net periodic pension and post-retirement expense/income, net of tax of $(38), $(46), respectively		(68	)		(80	)
Other comprehensive income		9,313			13,179
Comprehensive income	$	94,534		$	63,165

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, 2016, 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 Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Cash flows from operating activities:
Net income	$	85,221		$	49,986
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		16,143			16,192
Amortization		11,070			20,470
Stock-based compensation		8,945			7,925
Provision for excess and obsolete inventory		2,726			4,373
Deferred taxes		(3,477	)		(5,496	)
Contingent consideration adjustment		634			1,173
Retirement plans actuarial gains		—			(1,193	)
Other		2			484
Changes in operating assets and liabilities:
Accounts receivable		(123,792	)		(42,552	)
Inventories		(62,152	)		(702	)
Prepayments and other assets		1,104			(1,148	)
Accounts payable and other accrued expenses		(7,553	)		1,346
Deferred revenue and customer advances		(3,333	)		(13,836	)
Retirement plans contributions		(947	)		(1,250	)
Income taxes		14,288			(52	)
Net cash (used for) provided by operating activities		(61,121	)		35,720
Cash flows from investing activities:
Purchases of property, plant and equipment		(22,066	)		(20,334	)
Purchases of available-for-sale marketable securities		(153,317	)		(221,778	)
Proceeds from sales of available-for-sale marketable securities		213,593			239,370
Proceeds from maturities of available-for-sale marketable securities		88,184			73,458
Net cash provided by investing activities		126,394			70,716
Cash flows from financing activities:
Issuance of common stock under stock purchase and stock option plans		15,084			9,140
Repurchase of common stock		(37,730	)		(28,001	)
Dividend payments		(14,021	)		(12,253	)
Payments related to net settlement of employee stock compensation awards		(12,289	)		(8,972	)
Payments of contingent consideration		(1,050	)		(11,697	)
Net cash used for financing activities		(50,006	)		(51,783	)
Effects of exchange rate changes on cash and cash equivalents		1,595			—
Increase in cash and cash equivalents		16,862			54,653
Cash and cash equivalents at beginning of period		307,884			264,705
Cash and cash equivalents at end of period	$	324,746		$	319,358

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, 2016, 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 automation equipment for test and industrial applications. Teradyne designs, develops, manufactures and sells automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s industrial automation products include collaborative robots used by global manufacturing and light industrial customers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Teradyne’s automatic test equipment and industrial automation products and services include:

• semiconductor test (“Semiconductor Test”) systems;

• defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, storage test (“Storage Test”) systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);

• industrial automation (“Industrial Automation”) products; and

• wireless test (“Wireless Test”) systems.

B. ACCOUNTING POLICIES

Basis of Presentation

The consolidated interim financial statements include the accounts of Teradyne and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year amounts were reclassified to conform to the current year presentation. The December 31, 2016 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 U.S. Securities and Exchange Commission (“SEC”) on March 1, 2017, for the year ended December 31, 2016.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates.

Stock-Based Compensation

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Teradyne adopted this ASU in the first quarter of 2017. This ASU changes how Teradyne accounts for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows.

Adoption of this ASU required recognition of a cumulative effect adjustment to retained earnings for any prior year excess tax benefits or tax deficiencies not previously recorded. The cumulative effect adjustment of $39 million was recorded as an increase to retained earnings and deferred tax assets.

This ASU also required a change in how Teradyne recognizes the excess tax benefits or tax deficiencies related to stock-based compensation. Prior to adopting ASU 2016-09, these excess tax benefits or tax deficiencies were credited or charged to additional paid-in capital in Teradyne’s consolidated balance sheets. In accordance with ASU 2016-09, starting in first quarter of 2017, these excess tax benefits or tax deficiencies are recognized as a discrete tax benefit or discrete tax expense to the current income tax provision in Teradyne’s consolidated statements of operations.

5

ASU 2016-09 requires companies to adopt the amendment related to accounting for excess tax benefits or tax deficiencies on a prospective basis. For the three months ended April 2, 2017, Teradyne recognized a discrete tax benefit of $5.2 million related to net excess tax benefit.

In addition, under ASU 2016-09, all excess tax benefits related to share-based payments are reported as cash flows from operating activities. Previously, excess tax benefits from share-based payments arrangements were reported as cash flows from financing activities. The classification amendment was applied prospectively. This ASU also clarifies that all cash payments made to taxing authorities on the employees’ behalf for withheld shares should be presented as financing activities on the statement of cash flows. Previously, Teradyne reported cash payments made to taxing authorities as operating activities on the statement of cash flows. This change was applied retrospectively.

Upon adoption of ASU 2016-09, Teradyne made an accounting policy election to continue accounting for forfeitures by applying an estimated forfeiture rate.

Contingencies and Litigation

Teradyne may be subject to certain legal proceedings, lawsuits and other claims as discussed in Note P. Teradyne accrues for a loss contingency, including legal proceedings, lawsuits, pending claims and other legal matters, when the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. When the reasonable estimate of the loss is within a range of amounts, and no amount in the range constitutes a better estimate than any other amount, Teradyne accrues the amount at the low end of the range. Teradyne adjusts the accruals from time to time as additional information is received, but the loss incurred may be significantly greater than or less than the amount accrued. Loss contingencies are disclosed when they are material and there is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.

C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On March 10, 2017, the FASB issued ASU 2017-07,” Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU provides guidance on presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires the service cost component to be presented in the same line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost such as interest cost, amortization of prior service cost, and actuarial gains or losses, are required to be presented separately outside of income or loss from operations. The presentation of service cost should be applied retrospectively. The guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. This guidance will impact the presentation of Teradyne’s consolidated financial statements. Current presentation of service cost components is consistent with the requirements of the new standard. Upon adoption of the new standard, Teradyne will present interest cost, amortization of prior service cost, and actuarial gains or losses within other (income) expense, net.

On January 26, 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.” The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. The revised guidance will be applied prospectively, and is effective in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. Teradyne is currently evaluating the impact of this ASU on its financial position, results of operations and statements of cash flows.

In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.” Under current Generally Accepted Accounting Principles (“GAAP”), the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance requires recognition of the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does not apply to intra-entity transfers of inventory. The income tax consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party. The new guidance will be effective in fiscal years beginning after December 15, 2017. Early adoption is permitted. The modified retrospective approach will be required for transition to the new guidance, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. Teradyne does not expect this ASU to have a material impact on its financial position, results of operations and statements of cash flows.

6

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The guidance in this ASU supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840, “Leases.” The new standard establishes a right- of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statements of operation. The new standard is effective for annual periods beginning after December 15, 2018 with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Teradyne is currently evaluating the impact of this ASU on our financial position and results of operations.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU provides guidance for the recognition, measurement, presentation, and disclosure of financial instruments. The new pronouncement revises accounting related to equity investments and the presentation of certain fair value changes for financial liabilities measured at fair value. Among other things, it amends the presentation and disclosure requirements of equity securities that do not result in consolidation and are not accounted for under the equity method. Changes in the fair value of these equity securities will be recognized directly in net income. This pronouncement is effective for fiscal years beginning after December 15, 2017. Teradyne is currently evaluating the impact of this ASU on its financial position and results of operations.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to show the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. In August 2015, FASB issued ASU 2015-14, which deferred the effective date of the new revenue standard by one year. For Teradyne, the standard will be effective in the first quarter of 2018. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. Teradyne is in the process of assessing the impact of this ASU, including identification of changes to policies, processes and controls and the presentation necessary to meet the additional disclosure requirements. Teradyne has selected the modified retrospective transition method. Teradyne is still conducting its assessment and will continue to evaluate the impact of this ASU on its financial position and results of operations.

D. INVENTORIES

Inventories, net consisted of the following at April 2, 2017 and December 31, 2016:

	April 2,		December 31,
	2017		2016
	(in thousands)
Raw material	$	62,373	$	58,530
Work-in-process		22,511		22,946
Finished goods		118,394		54,482
	$	203,278	$	135,958

Inventory reserves for the periods ending April 2, 2017 and December 31, 2016 were $115.2 million and $116.0 million, respectively.

E. FINANCIAL INSTRUMENTS

Cash Equivalents

Teradyne considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents.

Marketable Securities

Teradyne accounts for its investments in debt and equity securities in accordance with the provisions of ASC 320-10, “Investments—Debt and Equity Securities.” ASC 320-10 requires that certain debt and equity securities be classified into one of three categories: trading, available-for-sale or held-to-maturity securities. As of April 2, 2017, Teradyne’s investments in debt and equity securities were classified as available-for-sale and recorded at their fair market value.

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;

7

• 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.

Teradyne uses the market and income approach techniques to value its financial instruments and there were no changes in valuation techniques during the three months ended April 2, 2017 and April 3, 2016. 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 carried at fair value be classified and disclosed 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, and is considered a Level 2 input; or

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.

Teradyne’s available-for-sale debt and equity securities are classified as Level 1 and Level 2. Acquisition-related contingent consideration is classified within Level 3. Teradyne determines the fair value of acquisition-related contingent consideration using a Monte Carlo simulation model. Assumptions utilized in the model include forecasted revenues, revenues volatility and discount rate. The vast majority of Level 2 securities are fixed income securities priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.

Realized gains recorded in the three months ended April 2, 2017 and April 3, 2016 were $0.3 million and $0.2 million, respectively. Realized losses recorded in the three months ended April 2, 2017 and April 3, 2016 were $0.2 million and $0.2 million, respectively. Realized gains are included in interest income and realized losses are included in interest expense. Unrealized gains and losses are included in accumulated other comprehensive income (loss). The cost of securities sold is based on the specific identification method.

During the three months ended April 2, 2017 and April 3, 2016, there were no transfers in or out of Level 1, Level 2 or Level 3 financial instruments.

The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of April 2, 2017 and December 31, 2016.

8

	April 2, 2017
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	202,925	$	—	$	—	$	202,925
Cash equivalents		115,578		6,243		—		121,821
Available-for-sale securities:
U.S. Treasury securities		—		854,547		—		854,547
Commercial paper		—		121,065		—		121,065
Corporate debt securities		—		89,731		—		89,731
Certificates of deposit and time deposits		—		50,578		—		50,578
U.S. government agency securities		—		21,149		—		21,149
Equity and debt mutual funds		19,986		—		—		19,986
Non-U.S. government securities		—		583		—		583
Total	$	338,489	$	1,143,896	$	—	$	1,482,385
Derivative assets		—		145		—		145
Total	$	338,489	$	1,144,041	$	—	$	1,482,530
Liabilities
Contingent consideration	$	—	$	—	$	37,916	$	37,916
Derivative liabilities		—		107		—		107
Total	$	—	$	107	$	37,916	$	38,023

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	318,503	$	6,243	$	—	$	324,746
Marketable securities		—		895,578		—		895,578
Long-term marketable securities		19,986		242,075		—		262,061
Prepayments		—		145		—		145
	$	338,489	$	1,144,041	$	—	$	1,482,530
Liabilities		.
Other current liabilities	$	—	$	107	$	—	$	107
Contingent consideration		—		—		21,711		21,711
Long-term contingent consideration		—		—		16,205		16,205
	$	—	$	107	$	37,916	$	38,023

9

	December 31, 2016
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	214,722	$	—	$	—	$	214,722
Cash equivalents		37,458		55,704		—		93,162
Available for sale securities:
U.S. Treasury securities		—		900,038		—		900,038
Commercial paper		—		161,630		—		161,630
Corporate debt securities		—		100,153		—		100,153
Certificates of deposit and time deposits		—		82,133		—		82,133
U.S. government agency securities		—		42,014		—		42,014
Equity and debt mutual funds		18,171		—		—		18,171
Non-U.S. government securities		—		728		—		728
Total	$	270,351	$	1,342,400	$	—	$	1,612,751
Derivative assets		—		1		—		1
Total	$	270,351	$	1,342,401	$	—	$	1,612,752
Liabilities
Contingent consideration	$	—	$	—	$	38,332	$	38,332
Derivative liabilities		—		131		—		131
Total	$	—	$	131	$	38,332	$	38,463

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	252,180	$	55,704	$	—	$	307,884
Marketable securities		—		871,024		—		871,024
Long-term marketable securities		18,171		415,672		—		433,843
Prepayments		—		1		—		1
	$	270,351	$	1,342,401	$	—	$	1,612,752
Liabilities
Other accrued liabilities	$	—	$	131	$	—	$	131
Contingent consideration		—		—		1,050		1,050
Long-term contingent consideration		—		—		37,282		37,282
	$	—	$	131	$	38,332	$	38,463

10

Changes in the fair value of Level 3 contingent consideration for the three months ended April 2, 2017 and April 3, 2016 were as follows:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	38,332		$	37,436
Payments (a)		(1,050	)		(15,000	)
Fair value adjustment (b)		634			1,173
Balance at end of period	$	37,916		$	23,609

(a) In the three months ended April 2, 2017, Teradyne paid $1.1 million of the AIT contingent consideration. In the three months ended April 3, 2016 based on Universal Robots’ calendar year 2015 EBITDA results, Teradyne paid $15.0 million or 100% of the eligible EBITDA contingent consideration amount.

(b) In the three months ended April 2, 2017 and April 3, 2016, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was increased by $0.6 million and $1.2 million, respectively, primarily due to a decrease in the discount rate.

The following table provides quantitative information associated with the fair value measurement of Teradyne’s Level 3 financial instruments:

Liability	April 2, 2017 Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(in thousands)
Contingent consideration (Universal Robots)	$	21,711	Monte Carlo Simulation	Revenues for the period July 1, 2015—December 31, 2017 volatility		12.2	%
				Discount Rate		2.8	%
	$	16,205	Monte Carlo Simulation	Revenues for the period July 1, 2015—December 31, 2018 volatility		12.2	%
				Discount Rate		2.8	%

As of April 2, 2017, the significant unobservable inputs used in the Monte Carlo simulation to fair value the Universal Robots contingent consideration include forecasted revenue, revenue volatility and discount rate. Increases or decreases in the inputs would result in a higher or lower fair value measurement. The maximum payment for each of the two Universal Robots revenue earn-outs is $25.0 million.

The carrying amounts and fair values of Teradyne’s financial instruments at April 2, 2017 and December 31, 2016 were as follows:

	April 2, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	324,746	$	324,746	$	307,884	$	307,884
Marketable securities		1,157,639		1,157,639		1,304,867		1,304,867
Derivative assets		145		145		1		1
Liabilities
Contingent consideration		37,916		37,916		38,332		38,332
Derivative liabilities		107		107		131		131
Convertible debt (1)		355,937		534,750		352,669		486,754

(1) The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the convertible note which includes the equity conversion features.

The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.

11

The following tables summarize the composition of available-for-sale marketable securities at April 2, 2017 and December 31, 2016:

	April 2, 2017
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	856,714	$	37	$	(2,204	)	$	854,547	$	846,287
Commercial paper		121,073		7		(15	)		121,065		76,050
Corporate debt securities		89,164		1,151		(584	)		89,731		56,678
Certificates of deposit and time deposits		50,541		37		—			50,578		—
U.S. government agency securities		21,174		8		(33	)		21,149		10,024
Equity and debt mutual funds		17,472		2,546		(32	)		19,986		1,415
Non-U.S. government securities		578		5		—			583		—
	$	1,156,716	$	3,791	$	(2,868	)	$	1,157,639	$	990,454

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	896,345	$	56	$	(823	)	$	895,578	$	774,974
Long-term marketable securities		260,371		3,735		(2,045	)		262,061		215,480
	$	1,156,716	$	3,791	$	(2,868	)	$	1,157,639	$	990,454

12

	December 31, 2016
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	901,975	$	97	$	(2,034	)	$	900,038	$	572,284
Commercial paper		161,672		24		(66	)		161,630		84,034
Corporate debt securities		99,708		1,065		(620	)		100,153		53,642
Certificates of deposit and time deposits		82,080		54		(1	)		82,133		7,760
U.S. government agency securities		42,026		7		(19	)		42,014		13,461
Equity and debt mutual funds		16,505		1,724		(58	)		18,171		1,661
Non-U.S. government securities		745		6		(23	)		728		137
	$	1,304,711	$	2,977	$	(2,821	)	$	1,304,867	$	732,979

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	871,321	$	134	$	(431	)	$	871,024	$	423,128
Long-term marketable securities		433,390		2,843		(2,390	)		433,843		309,851
	$	1,304,711	$	2,977	$	(2,821	)	$	1,304,867	$	732,979

As of April 2, 2017, the fair market value of investments with unrealized losses totaled $990.5 million. Of this value, $2.2 million had unrealized losses of $0.2 million for greater than one year and $988.3 million had unrealized losses of $2.6 million for less than one year.

As of December 31, 2016, the fair market value of investments with unrealized losses totaled $733.0 million. Of this value, $2.9 million had unrealized losses of $0.3 million for greater than one year and $730.1 million had unrealized losses of $2.5 million for less than one year.

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments at April 2, 2017 and December 31, 2016, were temporary.

The contractual maturities of investments held at April 2, 2017 were as follows:

	April 2, 2017
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	896,345	$	895,578
Due after 1 year through 5 years		190,557		190,252
Due after 5 years through 10 years		12,270		11,812
Due after 10 years		40,072		40,011
Total	$	1,139,244	$	1,137,653

Contractual maturities of investments held at April 2, 2017 exclude equity and debt mutual funds as they do not have contractual maturity dates.

13

Derivatives

Teradyne conducts business in a number of foreign countries, with certain transactions denominated in local currencies. The purpose of Teradyne’s foreign currency management is to minimize the effect of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities. Teradyne does not use derivative financial instruments for trading or speculative purposes.

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

The notional amount of foreign currency forward contracts at April 2, 2017 and December 31, 2016 was $89.2 million and $83.9 million, respectively. The fair value of the outstanding contracts was $0.0 million at April 2, 2017 and a loss of $0.1 million at December 31, 2016.

For the three months ended April 2, 2017 and April 3, 2016, Teradyne recorded net realized losses related to foreign currency forward contracts hedging net monetary assets and liabilities of $1.0 million and $3.3 million, respectively.

Gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in other (income) expense, net.

The following table summarizes the fair value of derivative instruments at April 2, 2017 and December 31, 2016:

	Balance Sheet Location		April 2, 2017			December 31, 2016
			(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts assets		Prepayments	$	145		$	1
Foreign exchange contracts liabilities		Other current liabilities		(107	)		(131	)
Total derivatives			$	38		$	(130	)

The following table summarizes the effect of derivative instruments recognized in the statement of operations during the three months ended April 2, 2017 and April 3, 2016.

	Location of Losses	For the Three Months Ended
	Recognized in	April 2,		April 3,
	Statements of Operations	2017		2016
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other (income) expense, net	$	1,011	$	3,298
Total Derivatives		$	1,011	$	3,298

The table does not reflect the corresponding gains and losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies. For the three months ended April 2, 2017 and April 3, 2016, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.5 million and $3.4 million, respectively.

14

F. DEBT

Convertible Senior Notes

On December 12, 2016, Teradyne completed a private offering of $460.0 million convertible senior unsecured notes (the “Notes”). The Notes will mature on December 15, 2023, unless earlier repurchased or converted. The Notes bear interest from December 12, 2016 at a rate of 1.25% per year payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2017.

Notes will be convertible at the option of the noteholders at any time prior to the close of business on the business day immediately preceding September 15, 2023, under the following circumstances: (1) during any calendar quarter beginning after March 31, 2017 (and only during such calendar quarter), if the closing sale price of the Teradyne’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the closing sale price of the Teradyne’s common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate events. On or after September 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Teradyne may satisfy its conversion obligation by paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s election. The conversion rate for the Notes will initially be 31.4102 shares per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $31.84 per share of Teradyne’s common stock. The conversion rate is subject to adjustment under certain circumstances.

Concurrent with the offering of the Notes, Teradyne entered into convertible note hedge transactions (the “Note Hedge Transactions”) with the initial purchasers or their affiliates (the “Option Counterparties”). The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the common stock that underlie the Notes, with a strike price equal to the initial conversion price of the Notes of $31.84. The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, approximately 14.4 million shares of Teradyne’s common stock.

The convertible note hedge is considered indexed to Teradyne’s stock as the terms of the Note Hedge Transactions do not contain an exercise contingency and the settlement amount equals the difference between the fair value of a fixed number of Teradyne’s shares and a fixed strike price. Because the only variable that can affect the settlement amount is Teradyne’s stock price, which is an input to the fair value of a fixed-for-fixed option contract, the convertible note hedge is considered indexed to Teradyne’s stock.

Separately and concurrent with the pricing of the Notes, Teradyne entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which it sold net-share-settled (or, at its election subject to certain conditions, cash-settled) warrants to the Option Counterparties. The Warrant Transactions cover, subject to customary anti-dilution adjustments, approximately 14.4 million shares of common stock. The strike price of the warrants will initially be $39.95 per share (subject to adjustment). The Warrant Transactions could have a dilutive effect to Teradyne’s common stock to the extent that the market price per share of Teradyne’s common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.

The Note Hedge Transactions are expected to reduce the potential dilution to Teradyne’s common stock upon any conversion of the Notes. However, the Warrant Transactions could separately have a dilutive effect to the extent that the market value per share of Teradyne’s common stock exceeds the applicable strike price of the warrant.

In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, the Option Counterparties have entered into various derivative transactions with respect to Teradyne’s common stock and/or purchased shares of Teradyne’s common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivative transactions with respect to Teradyne’s common stock or by selling Teradyne’s common stock or other securities, including the Notes, in secondary market transactions (and may do so during any observation period related to the conversion of the Notes). These activities could adversely affect the value of Teradyne’s common stock and the Notes.

Teradyne’s effective annual interest rate on the Notes is 5.0%. The Notes are classified as long-term debt in the balance sheet based on their December 15, 2023 maturity date. Debt issuance costs of approximately $7.2 million are being amortized to interest expense over the seven year term of the Notes. As of April 2, 2017, unamortized debt issuance costs were $6.9 million.

15

The notes are classified as long-term debt in the consolidated balance sheets at April 2, 2017 and December 31, 2016. The below tables represent the key components of Teradyne’s convertible senior notes:

	April 2, 2017		December 31, 2016
	(in thousands)
Debt Principal	$	460,000	$	460,000
Unamortized discount		104,063		107,331
Net Carrying amount of convertible debt	$	355,937	$	352,669

	For the Three Months Ended
	April 2, 2017
	(in thousands)
Contractual interest expense on the coupon	$	1,438
Amortization of the discount component and debt issue fees recognized as interest expense		3,268
Total interest expense on the convertible debt	$	4,706

As of April 2, 2017, the remaining unamortized discount was $104.1 million, which will be amortized over 6.8 years using the effective interest rate method. The carrying amount of the equity component was $100.8 million. As of April 2, 2017, the conversion rate was equal to the initial conversion price of approximately $31.84 per share and the if-converted value of the Notes was $449.3 million.

Revolving Credit Facility

On April 27, 2015, Teradyne entered into a Credit Agreement (the “Credit Agreement”) with Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement provides for a five-year, senior secured revolving credit facility of up to $350 million (the “Credit Facility”). The Credit Agreement further provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders incremental commitments under the Credit Facility in an aggregate principal amount not to exceed $150 million.

Proceeds from the Credit Facility may be used for general corporate purposes and working capital. Teradyne incurred $2.3 million in costs related to the revolving credit facility. These costs are being amortized over the five-year term of the revolving credit facility and are included in interest expense in the statement of operations. As of May 12, 2017, Teradyne has not borrowed any funds under the Credit Facility.

The interest rates applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a margin ranging from 0.00% to 1.00% per annum or LIBOR plus a margin ranging from 1.00% to 2.00% per annum, based on the Consolidated Leverage Ratio of Teradyne and its Restricted Subsidiaries. In addition, Teradyne will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from 0.125% to 0.350% per annum, based on the then applicable Consolidated Leverage Ratio.

Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBOR breakage costs.

The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne’s and its Restricted Subsidiaries’ ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarter: a consolidated leverage ratio and an interest coverage ratio. As of May 12, 2017, Teradyne was in compliance with all covenants.

The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.

16

G. PREPAYMENTS

Prepayments consist of the following and are included in prepayments on the balance sheet:

	April 2,		December 31,
	2017		2016
	(in thousands)
Contract manufacturer and supplier prepayments	$	83,398	$	84,473
Prepaid maintenance and other services		7,210		7,676
Prepaid taxes		3,326		4,664
Other prepayments		13,053		11,641
Total prepayments	$	106,987	$	108,454

H. DEFERRED REVENUE AND CUSTOMER ADVANCES

Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:

	April 2,		December 31,
	2017		2016
	(in thousands)
Extended warranty	$	44,053	$	46,753
Equipment maintenance and training		41,995		39,037
Customer advances, undelivered elements and other		18,729		22,151
Total deferred revenue and customer advances	$	104,777	$	107,941

I. PRODUCT WARRANTY

Teradyne generally provides a one-year warranty on its products, commencing upon installation, acceptance, delivery 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 warranty balance below is included in other accrued liabilities on the balance sheet.

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	7,203		$	6,925
Accruals for warranties issued during the period		3,021			3,490
Adjustments related to pre-existing warranties		(471	)		243
Settlements made during the period		(2,699	)		(3,162	)
Balance at end of period	$	7,054		$	7,496

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 extended warranty balance below is included in short and long-term deferred revenue and customer advances on the balance sheet.

17

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	46,753		$	46,499
Deferral of new extended warranty revenue		6,125			6,827
Recognition of extended warranty deferred revenue		(8,825	)		(7,211	)
Balance at end of period	$	44,053		$	46,115

J. STOCK-BASED COMPENSATION

Under Teradyne’s stock compensation plans, Teradyne grants stock options, restricted stock units and performance-based restricted stock units, and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).

Stock options to purchase Teradyne’s common stock at 100% of the fair market value on the grant date vest in equal annual installments over four years from the grant date and have a maximum term of seven years.

Time-based restricted stock unit awards granted to employees vest in equal annual installments over four years. Restricted stock unit awards granted to non-employee directors vest after a one year period, with 100% of the award vesting on the first anniversary of the grant date. Teradyne expenses the cost of the restricted stock unit awards subject to time-based vesting, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restrictions lapse.

Commencing in January 2014, Teradyne granted performance-based restricted stock units (“PRSUs”) to its executive officers with a performance metric based on relative total shareholder return (“TSR”). For TSR grants issued in 2014 and 2015, Teradyne’s three-year TSR performance is measured against the Philadelphia Semiconductor Index. For TSR grants issued in 2016 and 2017, Teradyne’s three-year TSR performance is measured against the New York Stock Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 200% to 0% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the three-year service period. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted below.

In January 2017 and 2016, Teradyne granted PRSUs to its executive officers with a performance metric based on three-year cumulative non-GAAP profit before interest and tax (“PBIT”) as a percent of Teradyne’s revenue. Non-GAAP PBIT is a financial measure equal to GAAP income from operations less restructuring and other, net; amortization of acquired intangible assets; acquisition and divestiture related charges or credits; pension actuarial gains and losses; non-cash convertible debt interest expense; and other non-recurring gains and charges. The final number of PBIT PRSUs that vest will vary based upon the level of performance achieved from 200% to 0% of the target shares. The PBIT PRSUs will vest upon the three-year anniversary of the grant date. Compensation expense is recognized on a straight-line basis over the three-year service period. Compensation expense is recognized based on the number of units that are earned based upon the three-year Teradyne PBIT as a percent of Teradyne’s revenue, provided the executive officer remains an employee at the end of the three-year period subject to the retirement and termination eligibility provisions noted below.

Beginning with PRSUs granted in January 2014, if the recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability or death or (2) retirement or termination other than for cause, after attaining both at least age sixty and at least ten years of service, then all or a portion of the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will vest on the date the performance percentage is determined. Except as set forth in the preceding sentence, no PRSUs will vest if the executive officer is no longer an employee at the end of the three-year period.

18

During the three months ended April 2, 2017 and April 3, 2016, Teradyne granted 0.1 million and 0.1 million TSR PRSUs, respectively, with a grant date fair value of $35.66 and $20.29, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
Risk-free interest rate		1.5	%		1.0	%
Teradyne volatility-historical		26.6	%		27.0	%
NYSE Composite Index volatility-historical		13.4	%		13.1	%
Dividend yield		1.0	%		1.2	%

Expected volatility was based on the historical volatility of Teradyne’s stock and the NYSE Composite Index for the 2017 and 2016 grant over the most recent three year period. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.28 per share for 2017 grants and $0.24 per share for 2016 grants, divided by Teradyne’s stock price on the grant date of $28.56 for the 2017 grant and $19.43 for the 2016 grant.

During the three months ended April 2, 2017 and April 3, 2016, Teradyne granted 0.1 million and 0.1 million, respectively of PBIT PRSUs with a grant date fair value of $27.72 and $18.71, respectively.

During the three months ended April 2, 2017, Teradyne granted 0.8 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $27.86 and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $7.13.

During the three months ended April 3, 2016, Teradyne granted 1.2 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $18.83 and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $5.30.

Restricted stock unit awards granted to employees vest in equal annual installments over four years. Stock options vest in equal annual installments over four years and 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 Three Months Ended
	April 2,			April 3,
	2017			2016
Expected life (years)		5.0			5.0
Risk-free interest rate		2.0	%		1.4	%
Volatility-historical		27.8	%		32.9	%
Dividend yield		1.0	%		1.2	%

Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.28 per share for 2017 grants and $0.24 per share for 2016 grants, divided by Teradyne’s stock price on the grant date, of $28.56 for the 2017 grant and $19.43 for the 2016 grant.

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K. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Changes in accumulated other comprehensive (loss) income, which is presented net of tax, consist of the following:

	Foreign Currency Translation Adjustment			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total
	(in thousands)
Three Months Ended April 2, 2017
Balance at December 31, 2016, net of tax of $0, $209,  $(778)	$	(21,921	)	$	(60	)	$	1,767		$	(20,214	)
Other comprehensive income before reclassifications, net of tax of $0, $420, $0		8,963			513			—			9,476
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(64), $(38)		—			(95	)		(68	)		(163	)
Net current period other comprehensive income (loss), net of tax of $0, $356, $(38)		8,963			418			(68	)		9,313
Balance at April 2, 2017, net of tax of $0, $565, $(816)	$	(12,958	)	$	358		$	1,699		$	(10,901	)
	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total
	(in thousands)
Three Months Ended April 3, 2016
Balance at December 31, 2015, net of tax of $0, $(459), $(622)	$	(8,759	)	$	(1,414	)	$	2,029		$	(8,144	)
Other comprehensive income before reclassifications, net of tax of $0, $1,253, $0		10,271			3,071			—			13,342
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $11, $(46)		—			(83	)		(80	)		(163	)
Net current period other comprehensive income (loss), net of tax of $0, $1,264, $(46)		10,271			2,988			(80	)		13,179
Balance as April 3, 2016, net of tax of $0, $805, $(668)	$	1,512		$	1,574		$	1,949		$	5,035

Reclassifications out of accumulated other comprehensive (loss) income to the statement of operations for the three months ended April 2, 2017 and April 3, 2016 were as follows:

Details about Accumulated Other Comprehensive (Loss) Income Components	For the Three Months Ended				Affected Line Item in the Statements of Operations
	April 2,		April 3,
	2017		2016
	(in thousands)
Available-for-sale marketable securities:
Unrealized gains, net of tax of $64, $(11)	$	95	$	83		Interest income
Defined benefit pension and postretirement plans:
Amortization of prior service benefit, net of tax of $38, $46		68		80		(a)
Total reclassifications, net of tax of $102, $35	$	163	$	163		Net income

(a) The amortization of prior service credit is included in the computation of net periodic pension cost and postretirement benefit; see Note O: “Retirement Plans.”

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L. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Teradyne performs its annual goodwill impairment test as required under the provisions of ASC 350-10, “Intangibles—Goodwill and Other” on December 31 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered impaired when the net book value of a reporting unit exceeds its estimated fair value.

The changes in the carrying amount of goodwill by reportable segments for the three months ended April 2, 2017, were as follows:

	Industrial Automation		System Test			Wireless Test			Semiconductor Test			Total
	(in thousands)
Balance at December 31, 2016
Goodwill	$	204,851	$	158,699		$	361,819		$	260,540		$	985,909
Accumulated impairment losses		—		(148,183	)		(353,843	)		(260,540	)		(762,566	)
		204,851		10,516			7,976			—			223,343
Foreign currency translation adjustment		6,722		—			—			—			6,722
Balance at April 2, 2017
Goodwill		211,573		158,699			361,819			260,540			992,631
Accumulated impairment losses		—		(148,183	)		(353,843	)		(260,540	)		(762,566	)
	$	211,573	$	10,516		$	7,976		$	—		$	230,065

Intangible Assets

Teradyne reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.

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

	April 2, 2017
	Gross Carrying Amount		Accumulated Amortization			Cumulative Foreign Currency Translation Adjustment			Net Carrying Amount
	(in thousands)
Developed technology	$	270,877	$	(211,065	)	$	(3,292	)	$	56,520
Customer relationships		92,741		(79,114	)		(348	)		13,279
Tradenames and trademarks		50,100		(24,331	)		(845	)		24,924
Non-compete agreement		320		(200	)		—			120
Customer backlog		170		(170	)		—			—
Total intangible assets	$	414,208	$	(314,880	)	$	(4,485	)	$	94,843

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	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Cumulative Foreign Currency Translation Adjustment			Net Carrying Amount
	(in thousands)
Developed technology	$	270,877	$	(206,376	)	$	(5,093	)	$	59,408
Customer relationships		92,741		(76,707	)		(538	)		15,496
Tradenames and trademarks		50,100		(23,435	)		(1,308	)		25,357
Non-compete agreement		320		(180	)		—			140
Customer backlog		170		(170	)		—			—
Total intangible assets	$	414,208	$	(306,868	)	$	(6,939	)	$	100,401

Aggregate intangible asset amortization expense was $8.0 million and $20.0 million, respectively, for the three months ended April 2, 2017 and April 3, 2016.

Estimated intangible asset amortization expense for each of the five succeeding fiscal years is as follows:

Year	Amortization Expense
	(in thousands)
2017 (remainder)		21,621
2018		27,475
2019		23,622
2020		10,325
2021		3,504
Thereafter		8,296

M. NET INCOME PER COMMON SHARE

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

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands, except per share amounts)
Net income for basic and diluted net income per share	$	85,221	$	49,986
Weighted average common shares-basic		200,005		204,271
Effect of dilutive potential common shares:
Restricted stock units		1,533		965
Stock options		390		487
Employee stock purchase plan		8		9
Dilutive potential common shares		1,931		1,461
Weighted average common shares-diluted		201,936		205,732
Net income per common share-basic	$	0.43	$	0.24
Net income per common share-diluted	$	0.42	$	0.24

The computation of diluted net income per common share for the three months ended April 2, 2017 excludes the effect of the potential exercise of stock options to purchase approximately 0.1 million shares because the effect would have been anti-dilutive.

The computation of diluted net income per common share for the three months ended April 3, 2016 excludes the effect of the potential exercise of stock options to purchase approximately 0.3 million shares because the effect would have been anti-dilutive.

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N. RESTRUCTURING AND OTHER

During the three months ended April 2, 2017, Teradyne recorded $1.9 million of restructuring charges of which $1.3 million was for a lease impairment of a Wireless Test facility in Sunnyvale, CA and $0.6 million was for employee severance charges. The Sunnyvale, CA lease expires in 2020. The accrual for the future lease payments liability is reflected in other accrued liabilities and is expected to be paid over the term of the lease.

During the three months ended April 2, 2017 and April 3, 2016, Teradyne recorded $0.6 million and $1.2 million, respectively, of other charges for the increase in the fair value of the Universal Robots contingent consideration liability.

During the three months ended April 3, 2016, Teradyne recorded $0.4 million of employee severance charges.

O. RETIREMENT PLANS

ASC 715, “Compensation—Retirement Benefits” requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation.

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 fixed income and equity securities. In addition, Teradyne has an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (“IRC”), as well as unfunded qualified foreign plans.

In the three months ended April 2, 2017, Teradyne contributed $0.6 million to the U.S. supplemental executive defined benefit pension plan and $0.2 million to certain qualified plans for non-U.S. subsidiaries.

For the three months ended April 2, 2017 and April 3, 2016, Teradyne’s net periodic pension cost (income) was comprised of the following:

	For the Three Months Ended
	April 2, 2017						April 3, 2016
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	560		$	185		$	576		$	207
Interest cost		3,312			163			3,414			206
Expected return on plan assets		(3,000	)		(6	)		(3,443	)		(5	)
Amortization of prior service cost		18			—			24			—
Net actuarial gain		—			—			(1,193	)		—
Settlement		—			—			—			(239	)
Total net periodic pension cost (income)	$	890		$	342		$	(622	)	$	169

Postretirement Benefit Plan

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 medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.

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For the three months ended April 2, 2017 and April 3, 2016, Teradyne’s net periodic postretirement income was comprised of the following:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Service cost	$	10		$	10
Interest cost		50			56
Amortization of prior service benefit		(124	)		(150	)
Total net periodic post-retirement benefit	$	(64	)	$	(84	)

P. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of April 2, 2017, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $292.0 million, of which $281.7 million is for less than one year.

Legal Claims

Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business. 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.

Q. INCOME TAXES

The effective tax rate for the three months ended April 2, 2017 and April 3, 2016 was 7.4% and 12.6%, respectively.

The decrease in the effective tax rate from the three months ended April 3, 2016 to the three months ended April 2, 2017 resulted from an increase in the discrete benefit from stock based compensation, a projected shift in the geographic distribution of income which decreased income subject to taxation in the U.S. relative to lower tax rate jurisdictions and a decrease in the discrete benefit from non-taxable foreign exchange gains.

The effective tax rates for the three months ended April 2, 2017 and April 3, 2016 differed from the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the United States.

The tax rate for the three months ended April 2, 2017 and April 3, 2016 was also reduced by the benefit from U.S. research and development tax credits, partially offset by additions to the uncertain tax positions for transfer pricing, both of which are included in the projected annual effective tax rate.

Discrete tax benefits recorded in the three months ended April 2, 2017 amounted to $7.0 million of which $5.5 million resulted from stock based compensation, $0.7 million related to U.S. research and development tax credits and $0.8 million from other discrete tax benefits. The $5.5 million of discrete benefit from stock based compensation included $5.2 million of excess tax benefits recognized pursuant to ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting.”

Discrete tax benefits recorded in the three months ended April 3, 2016 amounted to $2.5 million of which $1.2 million resulted from non-taxable foreign exchange gains, $0.9 million related to marketable securities and $0.4 million from other discrete tax benefits.

On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of April 2, 2017, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more-likely-than-not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.

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As of April 2, 2017 and December 31, 2016, Teradyne had $40.7 million and $39.0 million, respectively, of reserves for uncertain tax positions. The $1.7 million net increase in reserves for uncertain tax positions is primarily composed of additions related to transfer pricing exposures and U.S. research and development tax credits.

As of April 2, 2017, Teradyne estimates that it is reasonably possible that the balance of uncertain tax positions may decrease approximately $0.8 million in the next twelve months, as a result of a lapse of statutes of limitation. The estimated decrease is comprised primarily of reserves relating to U.S. research and development credits.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of April 2, 2017 and December 31, 2016, $0.3 million and $0.4 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the three months ended April 2, 2017, a benefit of $0.1 million was recorded for interest and penalties related to income tax items. For the three months ended April 3, 2016, an expense of $0.3 million was recorded for interest and penalties related to income tax items.

Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the three months ended April 2, 2017 was $4.7 million, or $0.02 per diluted share. The tax savings due to the tax holiday for the three months ended April 3, 2016 was $2.6 million, or $0.01 per diluted share. The tax holiday is scheduled to expire on December 31, 2020.

R. SEGMENT INFORMATION

Teradyne has four operating segments (Semiconductor Test, System Test, Industrial Automation and Wireless Test), which are its reportable segments. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products and services for defense/aerospace instrumentation test, storage test and circuit-board test. The Industrial Automation segment includes operations related to the design, manufacturing and marketing of collaborative robots. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. Each operating segment has a segment manager who is directly accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts, and plans for the segment.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income (loss) before income taxes. The accounting policies of the business segments in effect are described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2016.

Segment information for the three months ended April 2, 2017 and April 3, 2016 is as follows:

	Semiconductor Test		System Test			Industrial Automation			Wireless Test			Corporate and Eliminations			Consolidated
	(in thousands)
Three Months Ended April 2, 2017
Revenues	$	355,528	$	39,845		$	36,272		$	25,268		$	—		$	456,913
Income (loss) before income taxes (1)(2)		97,966		(2,759	)		(2,571	)		1,532			(2,152	)		92,016
Total assets (3)		740,334		106,754			331,016			61,356			1,602,820			2,842,280
Three Months Ended April 3, 2016
Revenues	$	340,264	$	53,670		$	16,746		$	20,314		$	—		$	430,994
Income (loss) before income taxes (1)(2)		73,254		9,492			(7,168	)		(20,140	)		1,754			57,192
Total assets (3)		664,555		90,695			350,589			408,466			1,034,669			2,548,974

(1) Interest income, interest expense, contingent consideration adjustments, pension and post retirement plans actuarial gains and other income (expense) are included in Corporate and Eliminations.

(2) Included in the income (loss) before income taxes for each of the segments are charges and credits related to inventory and other.

(3) Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets.

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Included in the Semiconductor Test segment are charges and credits in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Cost of revenues—inventory charge	$	1,319		$	3,685
Restructuring and other		(265	)		414

Included in the System Test segment are charges in the following line item in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Cost of revenues—inventory charge	$	885	$	—

Included in the Industrial Automation segment are charges in the following line item in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other	$	624	$	—

Included in the Wireless Test segment are charges in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other—lease impairment	$	1,313	$	—
Cost of revenues—inventory charge		522		605

Included in Corporate and Eliminations are charges in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other—Universal Robots contingent consideration adjustment	$	634	$	1,173
Restructuring and other		205		—

S. SHAREHOLDERS’ EQUITY

Stock Repurchase Program

In December 2016, the Board of Directors approved a $500 million share repurchase authorization which commenced on January 1, 2017. Teradyne intends to repurchase at least $200 million in 2017. During the three months ended April 2, 2017, Teradyne repurchased 1.3 million shares of common stock for $37.7 million at an average price of $29.38 per share.

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During the three months ended April 3, 2016, Teradyne repurchased 1.5 million shares of common stock for $28.0 million at an average price of $18.81 per share.

The total price includes commissions and is recorded as a reduction to retained earnings.

Dividend

Holders of Teradyne’s common stock are entitled to receive dividends when they are declared by Teradyne’s Board of Directors.

In January 2017, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.07 per share. Dividend payments for the three months ended April 2, 2017 were $14.0 million.

In January 2016, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.06 per share. Dividend payments for the three months ended April 3, 2016 were $12.3 million.

While Teradyne declared a quarterly cash dividend and authorized a share repurchase program, it may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of Teradyne’s Board of Directors which will consider, among other things, Teradyne’s earnings, capital requirements and financial condition.

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

Statements in this Quarterly Report on Form 10-Q which are not historical facts, so called “forward-looking statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in our filings with the Securities and Exchange Commission. See also Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management’s analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements, except as may be required by law.

Overview

We are a leading global supplier of automation equipment for test and industrial applications. We design, develop, manufacture and sell automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Our industrial automation products include collaborative robots used by global manufacturing and light industrial customers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Our automatic test equipment and industrial automation products and services include:

• semiconductor test (“Semiconductor Test”) systems;

• defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, storage test (“Storage Test”) systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);

• industrial automation (“Industrial Automation”) products; and

• wireless test (“Wireless Test”) systems.

We have a broad customer base which includes integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”), original equipment manufacturers (“OEMs”), wafer foundries, fabless companies that design, but contract with others for the manufacture of integrated circuits (“ICs”), developers of wireless devices and consumer electronics, manufacturers of circuit boards, automotive suppliers, wireless product manufacturers, storage device manufacturers, aerospace and military contractors, and distributors that sell collaborative robots.

The market for our test products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. One customer drives significant demand for our products both through direct sales and sales to the customer’s supply partners. We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future.

In 2015, we acquired Universal Robots A/S (“Universal Robots”), the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Universal Robots is a separate operating and reportable segment, Industrial Automation. The acquisition of Universal Robots provides a growth engine to our business and complements our existing System Test and Wireless Test segments. The total purchase price for Universal Robots was approximately $315 million, which included cash paid of approximately $284 million and $32 million in fair value of contingent consideration payable upon achievement of revenue and earnings targets through 2018. Contingent consideration paid for 2015 was $15 million. The remaining maximum contingent consideration that could be paid is $50 million.

We believe our recent acquisitions have enhanced our opportunities for growth. We intend to continue to invest in our business, grow market share in our markets and expand further our addressable markets while tightly managing our costs.

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 because our customers often delay or accelerate purchases in reaction to changes in their businesses and to demand fluctuations in the semiconductor and electronics industries. Historically, these demand fluctuations have resulted in significant variations in our results of operations. The sharp swings in the semiconductor and electronics industries have generally affected the semiconductor and electronics test equipment and services industries more significantly than the overall capital equipment sector.

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For several years, this cyclical demand became an even/odd year trend where demand increased in even years and decreased in odd years due principally to demand swings in the mobility market of our Semiconductor Test business. We expect the even/odd year demand trend in the mobility market to lessen in 2017 and future years due to slower smart phone unit growth, along with rising device complexity and the reduced impact of parallel test in our Semiconductor Test business.

Critical Accounting Policies and Estimates

We have identified the policies which are critical to understanding our business and our results of operations. There have been no significant changes during the three months ended April 2, 2017 to the items disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

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SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
Percentage of revenues:
Revenues:
Products		82	%		83	%
Services		18			17
Total revenues		100			100
Cost of revenues:
Cost of products		34			39
Cost of services		8			8
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		42			47
Gross profit		58			53
Operating expenses:
Engineering and development		17			17
Selling and administrative		19			18
Acquired intangible assets amortization		2			5
Restructuring and other		1			—
Total operating expenses		38			40
Income from operations		20			13
Non-operating (income) expense:
Interest income		(1	)		—
Interest expense		1			—
Other (income) expense, net		—			—
Income before income taxes		20			13
Income tax provision		1			2
Net income		19	%		12	%

Results of Operations

First Quarter 2017 Compared to First Quarter 2016

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
	April 2,		April 3,
	2017		2016
Semiconductor Test		1.3		0.9
System Test		1.2		0.9
Industrial Automation		1.2		1.1
Wireless Test		1.1		1.0
Total Company		1.3		0.9

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Revenues

Revenues by our four reportable segments were as follows:

	For the Three Months Ended
	April 2,		April 3,		Dollar
	2017		2016		Change
	(in millions)
Semiconductor Test	$	355.5	$	340.3	$	15.2
System Test		39.8		53.7		(13.9	)
Industrial Automation		36.3		16.7		19.6
Wireless Test		25.3		20.3		5.0
	$	456.9	$	431.0	$	25.9

The increase in Semiconductor Test revenues of $15.2 million, or 4.5%, was driven primarily by increased sales in the microcontroller, power management, automotive safety and flash memory test segments. The decrease in System Test revenues of $13.9 million, or 25.9%, was primarily due to lower sales in Storage Test of 3.5” hard disk drive testers for cloud storage. The increase in Industrial Automation revenues of $19.6 million, or 117.4%, was due to higher demand for collaborative robots. The increase in Wireless Test revenues of $5.0 million, or 24.6%, was primarily due to higher demand for connectivity and cellular test systems and increased service revenue.

Revenues by country as a percentage of total revenues were as follows (1):

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
Taiwan		25	%		42	%
China		12			9
United States		12			12
Japan		12			11
Malaysia		9			3
Europe		8			7
Korea		7			6
Philippines		6			2
Singapore		5			4
Thailand		2			3
Rest of World		2			1
		100	%		100	%

(1) Revenues attributable to a country are based on location of customer site.

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Gross Profit

Our gross profit was as follows:

	For the Three Months Ended
	April 2,			April 3,			Dollar/Point
	2017			2016			Change
	(in millions)
Gross profit	$	264.9		$	230.3		$	34.6
Percent of total revenues		58.0	%		53.4	%		4.6

Gross profit as a percent of revenue increased by 4.6 points, as a result of a 3.6 point increase related to favorable product mix in Semiconductor Test, 0.5 points due to higher sales primarily in Industrial Automation and Semiconductor Test and 0.5 points from lower inventory provisions.

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 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 twelve quarters for our Semiconductor Test, System Test and Industrial Automation segments and the next four quarters for our Wireless Test segment, is written-down to estimated net realizable value.

During the three months ended April 2, 2017, we recorded an inventory provision of $2.7 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels. Of the $2.7 million of total excess and obsolete provisions, $1.3 million was related to Semiconductor Test, $0.9 million was related to System Test, and $0.5 million was related to Wireless Test.

During the three months ended April 3, 2016, we recorded an inventory provision of $4.3 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels. Of the $4.3 million of total excess and obsolete provisions, $3.7 million was related to Semiconductor Test, $0.6 million was related to Wireless Test, and $0.1 million was related to System Test.

During the three months ended April 2, 2017 and April 3, 2016, we scrapped $1.8 million and $0.7 million of inventory, respectively. During the three months ended April 2, 2017 and April 3, 2016, we sold $0.8 million and $1.1 million of previously written-down or written-off inventory, respectively. As of April 2, 2017, we had inventory related reserves for inventory which had been written-down or written-off totaling $115.2 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
	April 2,			April 3,			Dollar
	2017			2016			Change
	(in millions)
Engineering and development	$	76.2		$	73.5		$	2.7
Percent of total revenues		16.7	%		17.0	%

The increase of $2.7 million in engineering and development expenses was primarily due to higher variable compensation and additional spending in System Test and Industrial Automation, partially offset by lower spending in Wireless Test.

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Selling and Administrative

Selling and administrative expenses were as follows:

	For the Three Months Ended
	April 2,			April 3,			Dollar
	2017			2016			Change
	(in millions)
Selling and administrative	$	84.9		$	79.2		$	5.7
Percent of total revenues		18.6	%		18.4	%

The increase of $5.7 million in selling and administrative expenses was due primarily to higher variable compensation and higher spending in Industrial Automation, partially offset by lower spending in Wireless Test.

Acquired Intangible Assets Amortization

Acquired intangible assets amortization expense was as follows:

	For the Three Months Ended
	April 2,			April 3,			Dollar
	2017			2016			Change
	(in millions)
Acquired intangible assets amortization	$	8.0		$	20.0		$	(12.0	)
Percent of total revenues		1.7	%		4.6	%

Acquired intangible assets amortization expense decreased primarily in the Wireless Test segment due to the impairment of intangible assets in the second quarter of 2016.

Restructuring and Other

During the three months ended April 2, 2017, we recorded $1.9 million of restructuring charges of which $1.3 million was for a lease impairment of a Wireless Test facility in Sunnyvale, CA and $0.6 million was for employee severance charges. The Sunnyvale, CA lease expires in 2020. The accrual for the future lease payments liability is reflected in other accrued liabilities and is expected to be paid over the term of the lease.

During the three months ended April 2, 2017 and April 3, 2016, we recorded $0.6 million and $1.2 million, respectively, of other charges for the increase in the fair value of the Universal Robots contingent consideration liability.

During the three months ended April 3, 2016, we recorded $0.4 million of employee severance charges.

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Interest and Other

	For the Three Months Ended
	April 2,			April 3,			Dollar
	2017			2016			Change
	(in millions)
Interest income	$	(3.5	)	$	(1.6	)	$	(1.9	)
Interest expense		5.4			0.7			4.7
Other (income) expense, net		(0.5	)		(0.1	)		(0.4	)

Interest income increased by $1.9 million due primarily to higher cash and marketable securities balances in 2017 and higher interest rates in 2017. Interest expense increased by $4.7 million due primarily to interest expense related to our convertible senior notes. Other (income) expense, net included net foreign exchange gains.

Income Before Income Taxes

	For the Three Months Ended
	April 2,			April 3,			Dollar
	2017			2016			Change
	(in millions)
Semiconductor Test	$	98.0		$	73.3		$	24.7
System Test		(2.8	)		9.5			(12.3	)
Industrial Automation		(2.6	)		(7.2	)		4.6
Wireless Test		1.5			(20.1	)		21.7
Corporate (1)		(2.2	)		1.8			(4.0	)
	$	92.0		$	57.2		$	34.8

(1) Included in Corporate are: Interest income, interest expense, contingent consideration adjustments, pension and post retirement plans actuarial gains and other income (expense).

The increase in income before income taxes in Semiconductor Test was driven primarily by increased sales and higher gross margin due to favorable product mix. The decrease in income before income taxes in System Test was primarily due to lower sales in Storage Test of 3.5” hard disk drive testers for cloud storage. The increase in income before income taxes in Industrial Automation was due to higher demand for collaborative robots. The increase in income before income taxes in Wireless Test was primarily due to lower intangible assets amortization, lower operating expenses and higher demand for connectivity and cellular test systems.

Income Taxes

The effective tax rate for the three months ended April 2, 2017 and April 3, 2016 was 7.4% and 12.6%, respectively.

The decrease in the effective tax rate from the three months ended April 3, 2016 to three months ended April 2, 2017 resulted from an increase in the discrete benefit from stock based compensation, a projected shift in the geographic distribution of income which decreased income subject to taxation in the U.S. relative to lower tax rate jurisdictions and a decrease in the discrete benefit from non-taxable foreign exchange gains.

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Contractual Obligations

The following table reflects our contractual obligations as of April 2, 2017:

	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Other
	(in thousands)
Convertible debt	$	460,000	$	—	$	—	$	—	$	460,000	$	—
Purchase obligations		292,037		281,708		10,329		—		—		—
Retirement plans contributions		114,029		5,407		7,884		9,325		91,413		—
Operating lease obligations		69,676		17,300		28,489		15,475		8,412		—
Interest on long-term debt		40,314		5,814		11,500		11,500		11,500		—
Fair value of contingent consideration		37,916		21,711		16,205		—		—		—
Other long-term liabilities reflected on the balance sheet under GAAP (1)		47,159		—		25,983		—		—		21,176
Total	$	1,061,131	$	331,940	$	100,390	$	36,300	$	571,325	$	21,176

(1) Included in Other Long-Term Liabilities are liabilities for customer advances, extended warranty, uncertain tax positions, deferred tax liabilities and other obligations. For certain long-term obligations, we are unable to provide a reasonably reliable estimate of the timing of future payments relating to these obligations and therefore we included these amounts in the column marked “Other.”

Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities balances decreased by $130.4 million in the three months ended April 2, 2017 to $1,482 million.

In the three months ended April 2, 2017, changes in operating assets and liabilities used cash of $182.4 million. This was due to a $184.9 million increase in operating assets and a $2.5 million increase in operating liabilities.

The increase in operating assets was primarily due to a $123.8 million increase in accounts receivable due to the delivery profile of first quarter shipments and a $62.2 million increase in inventories to support increased shipments in the second quarter.

The decrease in operating liabilities was due to a $31.0 million decrease in accrued employee compensation due primarily to first quarter payments related to variable compensation, a $3.3 million decrease in deferred revenue and customer advance payments, a $0.9 million decrease in other accrued liabilities and $0.9 million of retirement plan contributions, partially offset by a $24.3 million increase in accounts payable and a $14.3 million increase in income taxes.

Investing activities during the three months ended April 2, 2017 provided cash of $126.4 million, due to $213.6 million and $88.2 million in proceeds from sales and maturities of marketable securities, respectively, partially offset by $153.3 used for purchases of marketable securities and $22.1 million used for purchases of property, plant and equipment.

Financing activities during the three months ended April 2, 2017 used cash of $50.0 million, due to $37.7 million used for the repurchase of 1.3 million shares of common stock at an average price of $29.38 per share, $14.0 million used for dividend payments, $12.3 million used for payment related to net settlement of employee stock compensation awards and $1.1 million used for a payment related to AIT contingent consideration, partially offset by $15.1 million from the issuance of common stock under employee stock purchase and stock option plans.

In the three months ended April 3, 2016, changes in operating assets and liabilities used cash of $58.2 million. This was due to a $44.4 million increase in operating assets and a $13.8 million decrease in operating liabilities.

The increase in operating assets was primarily due to a $42.6 million increase in accounts receivable due to higher sales.

The decrease in operating liabilities was due to a $42.1 million decrease in accrued employee compensation due primarily to variable compensation, a $13.8 million decrease in customer advance payments and deferred revenue, an $8.3 million decrease in accounts payable and $1.3 million of retirement plan contributions, partially offset by a $51.8 million increase in other accrued liabilities.

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Investing activities during the three months ended April 3, 2016 provided cash of $70.7 million, due to $239.4 million and $73.5 million in proceeds from sales and maturities of marketable securities, respectively, partially offset by $221.8 million used for purchases of marketable securities and $20.3 million used for purchases of property, plant and equipment.

Financing activities during the three months ended April 3, 2016 used cash of $51.8 million, due to $28.0 million used for the repurchase of 1.5 million shares of common stock at an average price of $18.81 per share, $12.3 million used for dividend payments, $11.7 million used for payment related to Universal Robots acquisition contingent consideration and $9.0 million payments related to net settlement of employee stock compensation awards, partially offset by $9.1 million from the issuance of common stock under employee stock purchase and stock option plans.

In January 2017, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.07 per share that was paid on March 20, 2017 to shareholders of record as of February 24, 2017. Dividend payments for the three months ended April 2, 2017 were $14.0 million.

In January 2016, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.06 per share that was paid on March 21, 2016 to shareholders of record as of February 26, 2016. Dividend payments for the three months ended April 3, 2016 were $12.3 million.

In December 2016, the Board of Directors approved a $500 million share repurchase authorization which commenced on January 1, 2017. We intend to repurchase at least $200 million in 2017. During the three months ended April 2, 2017, we repurchased 1.3 million shares of common stock for $37.7 million at an average price of $29.38 per share. The total price includes commissions and is recorded as a reduction to retained earnings.

During the three months ended April 3, 2016, we repurchased 1.5 million shares of common stock for $28.0 million at an average price of $18.81 per share.

While we declared a quarterly cash dividend and authorized a share repurchase program, we may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of our Board of Directors which will consider, among other things, our earnings, capital requirements and financial condition.

We believe our cash, cash equivalents and marketable securities balance will be sufficient to pay our quarterly dividend, execute our authorized share repurchase program and meet our working capital and expenditure needs for at least the next twelve months. The amount of cash, cash equivalents and marketable securities in the U.S. and our operations in the U.S. provide sufficient liquidity to fund our business activities in the U.S. We have $704 million of cash, cash equivalents and marketable securities outside the U.S. that if repatriated would incur additional taxes. Determination of the additional taxes that would be incurred is not practicable due to uncertainty regarding the remittance structure, the mix of earnings and earnings and profit pools in the year of remittance, and overall complexity of the calculation. Inflation has not had a significant long-term impact on earnings.

Equity Compensation Plans

As discussed in Note O: “Stock Based Compensation” in our 2016 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

On March 10, 2017, the FASB issued ASU 2017-07,” Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU provides guidance on presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires the service cost component to be presented in the same line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost such as interest cost, amortization of prior service cost, and actuarial gains or losses, are required to be presented separately outside of income or loss from operations. The presentation of service cost should be applied retrospectively. The guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. This guidance will impact the presentation of our consolidated financial statements. Current presentation of service cost components is consistent with the requirements of the new standard. Upon adoption of the new standard, we will present interest cost, amortization of prior service cost, and actuarial gains or losses within other (income) expense, net.

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On January 26, 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.” The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. The revised guidance will be applied prospectively, and is effective in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. We are currently evaluating the impact of this ASU on our financial position, results of operations and statements of cash flows.

In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.” Under current Generally Accepted Accounting Principles (“GAAP”), the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance requires recognition of the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does not apply to intra-entity transfers of inventory. The income tax consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party. The new guidance will be effective in fiscal years beginning after December 15, 2017. Early adoption is permitted. The modified retrospective approach will be required for transition to the new guidance, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. We do not expect this ASU to have a material impact on our financial position, results of operations and statements of cash flows.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The guidance in this ASU supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840, “Leases.” The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statements of operation. The new standard is effective for annual periods beginning after December 15, 2018 with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the impact of this ASU on our financial position and results of operations.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU provides guidance for the recognition, measurement, presentation, and disclosure of financial instruments. The new pronouncement revises accounting related to equity investments and the presentation of certain fair value changes for financial liabilities measured at fair value. Among other things, it amends the presentation and disclosure requirements of equity securities that do not result in consolidation and are not accounted for under the equity method. Changes in the fair value of these equity securities will be recognized directly in net income. This pronouncement is effective for fiscal years beginning after December 15, 2017. We are currently evaluating the impact of this ASU on our financial position and results of operations.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to show the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. In August 2015, FASB issued ASU 2015-14, which deferred the effective date of the new revenue standard by one year. For Teradyne, the standard will be effective in the first quarter of 2018. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We are in the process of assessing the impact of this ASU, including identification of changes to policies, processes and controls and the presentation necessary to meet the additional disclosure requirements. We have selected the modified retrospective transition method. We are still conducting our assessment and will continue to evaluate the impact of this ASU on our financial position and results of operations.

Item 3: Quantitative and Qualitative Disclosures about Market Risks

For “Quantitative and Qualitative Disclosures about Market Risk” affecting Teradyne, see Part 2 Item 7a, “Quantitative and Qualitative Disclosures about Market Risks,” in our Annual Report on Form 10-K filed with the SEC on March 1, 2017. 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, 2016.

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In addition to market risks described in our Annual Report on Form 10-K, we have an equity price risk related to the fair value of our convertible senior unsecured notes issued in December 2016. In December 2016, Teradyne issued $460 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023. As of April 2, 2017, the Notes had a fair value of $534.8 million. The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end of the first quarter of 2017 and the estimated impact on the fair value of the Notes. The selected scenarios are not predictions of future events, but rather are intended to illustrate the effect such event may have on the fair value of the Notes. The fair value of the Notes is subject to equity price risk due to the convertible feature. The fair value of the Notes will generally increase as Teradyne’s common stock price increases and will generally decrease as the common stock price declines in value. The change in stock price affects the fair value of the convertible senior notes, but does not impact Teradyne’s financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. In connection with the offering of the Notes we also sold warrants to the option counterparties. These transactions have been accounted for as an adjustment to our shareholders’ equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon conversion of the Notes. The warrants along with any shares issuable upon conversion of the Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or Notes, respectively.

Hypothetical Change in Teradyne Stock Price	Fair Value		Estimated change in fair value			Hypothetical percentage increase (decrease) in fair value
10% increase	$	568,928	$	34,178			6.4	%
No change		534,750		—			—
10% decrease		504,850		(29,900	)		(5.6	)

See Note F: “Debt” for further information.

Item 4: Controls and Procedures

As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) or Rule 15d-15(f) promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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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 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, 2016, 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 December 2016, the Board of Directors approved a $500 million share repurchase authorization which commenced on January 1, 2017. We intend to repurchase at least $200 million in 2017. During the three months ended April 2, 2017, we repurchased 1.3 million shares of common stock for $37.7 million at an average price of $29.38 per share. The total price includes commissions and is recorded as a reduction to retained earnings.

During the three months ended April 3, 2016, we repurchased 1.5 million shares of common stock for $28.0 million at an average price of $18.81 per share.

The following table includes information with respect to repurchases we made of our common stock during the three months ended April 2, 2017 (in thousands except per share price):

Period	(a) Total Number of Shares (or Units) Purchased			(b) Average Price Paid per Share (or Unit)			(c) Total Number of Shares (or Units) Purchased as Part of Publicly  Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs
January 1, 2017 – January 29, 2017		249		$	26.90			—	$	500,000
January 30, 2017 – February 26, 2017		723		$	28.79			531	$	484,727
February 27, 2017 – April 2, 2017		756		$	29.72			754	$	462,270
		1,728	(1)	$	28.93	(1)		1,285

(1) Includes 0.4 million shares at an average price of $27.73 withheld from employees for the payment of taxes.

We satisfy U.S. federal and state minimum withholding tax obligations due upon the vesting and the conversion of restricted stock units into shares of our common stock, by automatically withholding from the shares being issued, a number of shares with an aggregate fair market value on the date of such vesting and conversion that would satisfy the minimum withholding amount due.

Item 4: Mine Safety Disclosures

Not Applicable

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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 of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS	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

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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)

May 12, 2017

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Mark E. Jagiela, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Teradyne, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2017

By:	/S/ MARK E. JAGIELA
	Mark E. Jagiela
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Gregory R. Beecher, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Teradyne, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2017

By:	/S/ GREGORY R. BEECHER
	Gregory R. Beecher
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Teradyne, Inc. (the “Company”) on Form 10-Q for the period ended April 2, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark E. Jagiela, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C (S) 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/S/ MARK E. JAGIELA

Mark E. Jagiela

Chief Executive Officer

May 12, 2017

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Teradyne, Inc. (the “Company”) on Form 10-Q for the period ended April 2, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory R. Beecher, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C (S) 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/S/ GREGORY R. BEECHER

Gregory R. Beecher

Chief Financial Officer

May 12, 2017

XML

Document and Entity Information - shares	3 Months Ended
	Apr. 02, 2017	May 08, 2017
Document Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Apr. 02, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Trading Symbol	TER
Entity Registrant Name	TERADYNE, INC
Entity Central Index Key	0000097210
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		198,950,727

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Apr. 02, 2017		Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 324,746		$ 307,884
Marketable securities	895,578		871,024
Accounts receivable, less allowance for doubtful accounts of $2,422 and $2,356 at April 2, 2017 and December 31, 2016, respectively	314,962		192,444
Inventories, net	203,278		135,958
Prepayments	106,987		108,454
Other current assets	8,602		8,039
Total current assets	1,854,153		1,623,803
Property, plant and equipment, net	253,548		253,821
Marketable securities	262,061		433,843
Deferred tax assets	127,918		107,405
Other assets	12,175		12,165
Retirement plans assets	7,517		7,712
Intangible assets, net	94,843		100,401
Goodwill	230,065		223,343
Total assets	2,842,280	[1]	2,762,493
Current liabilities:
Accounts payable	121,417		95,362
Accrued employees' compensation and withholdings	79,018		109,944
Deferred revenue and customer advances	78,794		84,478
Other accrued liabilities	67,651		51,382
Contingent consideration	21,711		1,050
Accrued income taxes	24,466		30,480
Total current liabilities	393,057		372,696
Retirement plans liabilities	110,069		106,938
Long-term deferred revenue and customer advances	25,983		23,463
Deferred tax liabilities	11,255		12,144
Long-term other accrued liabilities	9,921		28,642
Long-term contingent consideration	16,205		37,282
Long-term debt	355,937		352,669
Total liabilities	922,427		933,834
Commitments and contingencies (See Note P)
SHAREHOLDERS' EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 199,596 and 199,177 shares issued and outstanding at April 2, 2017 and December 31, 2016, respectively	24,950		24,897
Additional paid-in capital	1,605,502		1,593,684
Accumulated other comprehensive loss	(10,901)		(20,214)
Retained earnings	300,302		230,292
Total shareholders' equity	1,919,853		1,828,659
Total liabilities and shareholders' equity	$ 2,842,280		$ 2,762,493

[1] Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016
Accounts receivable, less allowance for doubtful accounts	$ 2,422	$ 2,356
Common stock, par value	$ 0.125	$ 0.125
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, shares issued	199,596,000	199,177,000
Common stock, shares outstanding	199,596,000	199,177,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Apr. 02, 2017	Apr. 03, 2016
Revenues:
Products		$ 373,204	$ 358,139
Services		83,709	72,855
Total revenues		456,913	430,994
Cost of revenues:
Cost of products		154,966	167,555
Cost of services		37,014	33,107
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		191,980	200,662
Gross profit		264,933	230,332
Operating expenses:
Engineering and development		76,182	73,464
Selling and administrative		84,906	79,174
Acquired intangible assets amortization		7,952	19,994
Restructuring and other		2,511	1,587
Total operating expenses		171,551	174,219
Income from operations		93,382	56,113
Non-operating (income) expense:
Interest income		(3,520)	(1,642)
Interest expense		5,402	710
Other (income) expense, net		(516)	(147)
Income before income taxes	[1],[2]	92,016	57,192
Income tax provision		6,795	7,206
Net income		$ 85,221	$ 49,986
Net income per common share:
Basic		$ 0.43	$ 0.24
Diluted		$ 0.42	$ 0.24
Weighted average common shares-basic		200,005	204,271
Weighted average common shares-diluted		201,936	205,732
Cash dividend declared per common share		$ 0.07	$ 0.06

[1] Included in the income (loss) before income taxes for each of the segments are charges and credits related to inventory and other.

[2] Interest income, interest expense, contingent consideration adjustments, pension and post retirement plans actuarial gains and other income (expense) are included in Corporate and Eliminations.

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Net income	$ 85,221	$ 49,986
Other comprehensive income, net of tax:
Foreign currency translation adjustments, net of tax of $0, $0, respectively	8,963	10,271
Available-for-sale marketable securities:
Unrealized gains on marketable securities arising during period, net of tax of $420, $1,253, respectively	513	3,071
Less: Reclassification adjustment for gains included in net income, net of tax of $(64), $11, respectively	(95)	(83)
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax, Total	418	2,988
Defined benefit pension and post-retirement plans:
Amortization of prior service (credit) cost included in net periodic pension and post-retirement expense/income, net of tax of $(38), $(46), respectively	(68)	(80)
Other comprehensive income (loss)	9,313	13,179
Comprehensive income	$ 94,534	$ 63,165

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Foreign currency translation adjustments, tax	$ 0	$ 0
Unrealized (losses) gains on marketable securities arising during period, tax	420	1,253
Reclassification adjustment for gains included in net income, tax	(64)	11
Amortization of net prior service (credit) cost included in net periodic pension and post-retirement expense/income, tax	$ (38)	$ (46)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Cash flows from operating activities:
Net income	$ 85,221	$ 49,986
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	16,143	16,192
Amortization	11,070	20,470
Stock-based compensation	8,945	7,925
Provision for excess and obsolete inventory	2,726	4,373
Deferred taxes	(3,477)	(5,496)
Contingent consideration adjustment	634	1,173
Retirement plans actuarial gains		(1,193)
Other	2	484
Changes in operating assets and liabilities:
Accounts receivable	(123,792)	(42,552)
Inventories	(62,152)	(702)
Prepayments and other assets	1,104	(1,148)
Accounts payable and other accrued expenses	(7,553)	1,346
Deferred revenue and customer advances	(3,333)	(13,836)
Retirement plans contributions	(947)	(1,250)
Income taxes	14,288	(52)
Net cash (used for) provided by operating activities	(61,121)	35,720
Cash flows from investing activities:
Purchases of property, plant and equipment	(22,066)	(20,334)
Purchases of available-for-sale marketable securities	(153,317)	(221,778)
Proceeds from sales of available-for-sale marketable securities	213,593	239,370
Proceeds from maturities of available-for-sale marketable securities	88,184	73,458
Net cash provided by investing activities	126,394	70,716
Cash flows from financing activities:
Issuance of common stock under stock purchase and stock option plans	15,084	9,140
Repurchase of common stock	(37,730)	(28,001)
Dividend payments	(14,021)	(12,253)
Payments related to net settlement of employee stock compensation awards	(12,289)	(8,972)
Payments of contingent consideration	(1,050)	(11,697)
Net cash used for financing activities	(50,006)	(51,783)
Effects of exchange rate changes on cash and cash equivalents	1,595
Increase in cash and cash equivalents	16,862	54,653
Cash and cash equivalents at beginning of period	307,884	264,705
Cash and cash equivalents at end of period	$ 324,746	$ 319,358

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The Company

3 Months Ended

Apr. 02, 2017

The Company

A. THE COMPANY

Teradyne, Inc. (“Teradyne”) is a leading global supplier of automation equipment for test and industrial applications. Teradyne designs, develops, manufactures and sells automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s industrial automation products include collaborative robots used by global manufacturing and light industrial customers to improve quality, increase manufacturing efficiency and decrease manufacturing costs. Teradyne’s automatic test equipment and industrial automation products and services include:

• semiconductor test (“Semiconductor Test”) systems;

• defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, storage test (“Storage Test”) systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);

• industrial automation (“Industrial Automation”) products; and

• wireless test (“Wireless Test”) systems.

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Accounting Policies

3 Months Ended

Apr. 02, 2017

Accounting Policies

B. ACCOUNTING POLICIES

Basis of Presentation

The consolidated interim financial statements include the accounts of Teradyne and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year amounts were reclassified to conform to the current year presentation. The December 31, 2016 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 U.S. Securities and Exchange Commission (“SEC”) on March 1, 2017, for the year ended December 31, 2016.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates.

Stock-Based Compensation

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Teradyne adopted this ASU in the first quarter of 2017. This ASU changes how Teradyne accounts for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows.

Adoption of this ASU required recognition of a cumulative effect adjustment to retained earnings for any prior year excess tax benefits or tax deficiencies not previously recorded. The cumulative effect adjustment of $39 million was recorded as an increase to retained earnings and deferred tax assets.

This ASU also required a change in how Teradyne recognizes the excess tax benefits or tax deficiencies related to stock-based compensation. Prior to adopting ASU 2016-09, these excess tax benefits or tax deficiencies were credited or charged to additional paid-in capital in Teradyne’s consolidated balance sheets. In accordance with ASU 2016-09, starting in first quarter of 2017, these excess tax benefits or tax deficiencies are recognized as a discrete tax benefit or discrete tax expense to the current income tax provision in Teradyne’s consolidated statements of operations.

ASU 2016-09 requires companies to adopt the amendment related to accounting for excess tax benefits or tax deficiencies on a prospective basis. For the three months ended April 2, 2017, Teradyne recognized a discrete tax benefit of $5.2 million related to net excess tax benefit.

In addition, under ASU 2016-09, all excess tax benefits related to share-based payments are reported as cash flows from operating activities. Previously, excess tax benefits from share-based payments arrangements were reported as cash flows from financing activities. The classification amendment was applied prospectively. This ASU also clarifies that all cash payments made to taxing authorities on the employees’ behalf for withheld shares should be presented as financing activities on the statement of cash flows. Previously, Teradyne reported cash payments made to taxing authorities as operating activities on the statement of cash flows. This change was applied retrospectively.

Upon adoption of ASU 2016-09, Teradyne made an accounting policy election to continue accounting for forfeitures by applying an estimated forfeiture rate.

Contingencies and Litigation

Teradyne may be subject to certain legal proceedings, lawsuits and other claims as discussed in Note P. Teradyne accrues for a loss contingency, including legal proceedings, lawsuits, pending claims and other legal matters, when the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. When the reasonable estimate of the loss is within a range of amounts, and no amount in the range constitutes a better estimate than any other amount, Teradyne accrues the amount at the low end of the range. Teradyne adjusts the accruals from time to time as additional information is received, but the loss incurred may be significantly greater than or less than the amount accrued. Loss contingencies are disclosed when they are material and there is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.

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Recently Issued Accounting Pronouncements

3 Months Ended

Apr. 02, 2017

Recently Issued Accounting Pronouncements

C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On March 10, 2017, the FASB issued ASU 2017-07,” Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU provides guidance on presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires the service cost component to be presented in the same line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost such as interest cost, amortization of prior service cost, and actuarial gains or losses, are required to be presented separately outside of income or loss from operations. The presentation of service cost should be applied retrospectively. The guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. This guidance will impact the presentation of Teradyne’s consolidated financial statements. Current presentation of service cost components is consistent with the requirements of the new standard. Upon adoption of the new standard, Teradyne will present interest cost, amortization of prior service cost, and actuarial gains or losses within other (income) expense, net.

On January 26, 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.” The new guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. The revised guidance will be applied prospectively, and is effective in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. Teradyne is currently evaluating the impact of this ASU on its financial position, results of operations and statements of cash flows.

In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.” Under current Generally Accepted Accounting Principles (“GAAP”), the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance requires recognition of the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does not apply to intra-entity transfers of inventory. The income tax consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party. The new guidance will be effective in fiscal years beginning after December 15, 2017. Early adoption is permitted. The modified retrospective approach will be required for transition to the new guidance, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. Teradyne does not expect this ASU to have a material impact on its financial position, results of operations and statements of cash flows.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The guidance in this ASU supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840, “Leases.” The new standard establishes a right- of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statements of operation. The new standard is effective for annual periods beginning after December 15, 2018 with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Teradyne is currently evaluating the impact of this ASU on our financial position and results of operations.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU provides guidance for the recognition, measurement, presentation, and disclosure of financial instruments. The new pronouncement revises accounting related to equity investments and the presentation of certain fair value changes for financial liabilities measured at fair value. Among other things, it amends the presentation and disclosure requirements of equity securities that do not result in consolidation and are not accounted for under the equity method. Changes in the fair value of these equity securities will be recognized directly in net income. This pronouncement is effective for fiscal years beginning after December 15, 2017. Teradyne is currently evaluating the impact of this ASU on its financial position and results of operations.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to show the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. In August 2015, FASB issued ASU 2015-14, which deferred the effective date of the new revenue standard by one year. For Teradyne, the standard will be effective in the first quarter of 2018. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. Teradyne is in the process of assessing the impact of this ASU, including identification of changes to policies, processes and controls and the presentation necessary to meet the additional disclosure requirements. Teradyne has selected the modified retrospective transition method. Teradyne is still conducting its assessment and will continue to evaluate the impact of this ASU on its financial position and results of operations.

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Inventories

3 Months Ended

Apr. 02, 2017

Inventories

D. INVENTORIES

Inventories, net consisted of the following at April 2, 2017 and December 31, 2016:

	April 2,		December 31,
	2017		2016
	(in thousands)
Raw material	$	62,373	$	58,530
Work-in-process		22,511		22,946
Finished goods		118,394		54,482
	$	203,278	$	135,958

Inventory reserves for the periods ending April 2, 2017 and December 31, 2016 were $115.2 million and $116.0 million, respectively.

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Financial Instruments

3 Months Ended

Apr. 02, 2017

Financial Instruments

E. FINANCIAL INSTRUMENTS

Cash Equivalents

Teradyne considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents.

Marketable Securities

Teradyne accounts for its investments in debt and equity securities in accordance with the provisions of ASC 320-10, “Investments—Debt and Equity Securities.” ASC 320-10 requires that certain debt and equity securities be classified into one of three categories: trading, available-for-sale or held-to-maturity securities. As of April 2, 2017, Teradyne’s investments in debt and equity securities were classified as available-for-sale and recorded at their fair market value.

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.

Teradyne uses the market and income approach techniques to value its financial instruments and there were no changes in valuation techniques during the three months ended April 2, 2017 and April 3, 2016. 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 carried at fair value be classified and disclosed 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, and is considered a Level 2 input; or

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.

Teradyne’s available-for-sale debt and equity securities are classified as Level 1 and Level 2. Acquisition-related contingent consideration is classified within Level 3. Teradyne determines the fair value of acquisition-related contingent consideration using a Monte Carlo simulation model. Assumptions utilized in the model include forecasted revenues, revenues volatility and discount rate. The vast majority of Level 2 securities are fixed income securities priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.

Realized gains recorded in the three months ended April 2, 2017 and April 3, 2016 were $0.3 million and $0.2 million, respectively. Realized losses recorded in the three months ended April 2, 2017 and April 3, 2016 were $0.2 million and $0.2 million, respectively. Realized gains are included in interest income and realized losses are included in interest expense. Unrealized gains and losses are included in accumulated other comprehensive income (loss). The cost of securities sold is based on the specific identification method.

During the three months ended April 2, 2017 and April 3, 2016, there were no transfers in or out of Level 1, Level 2 or Level 3 financial instruments.

The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of April 2, 2017 and December 31, 2016.

	April 2, 2017
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	202,925	$	—	$	—	$	202,925
Cash equivalents		115,578		6,243		—		121,821
Available-for-sale securities:
U.S. Treasury securities		—		854,547		—		854,547
Commercial paper		—		121,065		—		121,065
Corporate debt securities		—		89,731		—		89,731
Certificates of deposit and time deposits		—		50,578		—		50,578
U.S. government agency securities		—		21,149		—		21,149
Equity and debt mutual funds		19,986		—		—		19,986
Non-U.S. government securities		—		583		—		583
Total	$	338,489	$	1,143,896	$	—	$	1,482,385
Derivative assets		—		145		—		145
Total	$	338,489	$	1,144,041	$	—	$	1,482,530
Liabilities
Contingent consideration	$	—	$	—	$	37,916	$	37,916
Derivative liabilities		—		107		—		107
Total	$	—	$	107	$	37,916	$	38,023

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	318,503	$	6,243	$	—	$	324,746
Marketable securities		—		895,578		—		895,578
Long-term marketable securities		19,986		242,075		—		262,061
Prepayments		—		145		—		145
	$	338,489	$	1,144,041	$	—	$	1,482,530
Liabilities		.
Other current liabilities	$	—	$	107	$	—	$	107
Contingent consideration		—		—		21,711		21,711
Long-term contingent consideration		—		—		16,205		16,205
	$	—	$	107	$	37,916	$	38,023

	December 31, 2016
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	214,722	$	—	$	—	$	214,722
Cash equivalents		37,458		55,704		—		93,162
Available for sale securities:
U.S. Treasury securities		—		900,038		—		900,038
Commercial paper		—		161,630		—		161,630
Corporate debt securities		—		100,153		—		100,153
Certificates of deposit and time deposits		—		82,133		—		82,133
U.S. government agency securities		—		42,014		—		42,014
Equity and debt mutual funds		18,171		—		—		18,171
Non-U.S. government securities		—		728		—		728
Total	$	270,351	$	1,342,400	$	—	$	1,612,751
Derivative assets		—		1		—		1
Total	$	270,351	$	1,342,401	$	—	$	1,612,752
Liabilities
Contingent consideration	$	—	$	—	$	38,332	$	38,332
Derivative liabilities		—		131		—		131
Total	$	—	$	131	$	38,332	$	38,463

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	252,180	$	55,704	$	—	$	307,884
Marketable securities		—		871,024		—		871,024
Long-term marketable securities		18,171		415,672		—		433,843
Prepayments		—		1		—		1
	$	270,351	$	1,342,401	$	—	$	1,612,752
Liabilities
Other accrued liabilities	$	—	$	131	$	—	$	131
Contingent consideration		—		—		1,050		1,050
Long-term contingent consideration		—		—		37,282		37,282
	$	—	$	131	$	38,332	$	38,463

Changes in the fair value of Level 3 contingent consideration for the three months ended April 2, 2017 and April 3, 2016 were as follows:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	38,332		$	37,436
Payments (a)		(1,050	)		(15,000	)
Fair value adjustment (b)		634			1,173
Balance at end of period	$	37,916		$	23,609

(a) In the three months ended April 2, 2017, Teradyne paid $1.1 million of the AIT contingent consideration. In the three months ended April 3, 2016 based on Universal Robots’ calendar year 2015 EBITDA results, Teradyne paid $15.0 million or 100% of the eligible EBITDA contingent consideration amount.

(b) In the three months ended April 2, 2017 and April 3, 2016, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was increased by $0.6 million and $1.2 million, respectively, primarily due to a decrease in the discount rate.

The following table provides quantitative information associated with the fair value measurement of Teradyne’s Level 3 financial instruments:

Liability	April 2, 2017 Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(in thousands)
Contingent consideration (Universal Robots)	$	21,711	Monte Carlo Simulation	Revenues for the period July 1, 2015—December 31, 2017 volatility		12.2	%
				Discount Rate		2.8	%
	$	16,205	Monte Carlo Simulation	Revenues for the period July 1, 2015—December 31, 2018 volatility		12.2	%
				Discount Rate		2.8	%

As of April 2, 2017, the significant unobservable inputs used in the Monte Carlo simulation to fair value the Universal Robots contingent consideration include forecasted revenue, revenue volatility and discount rate. Increases or decreases in the inputs would result in a higher or lower fair value measurement. The maximum payment for each of the two Universal Robots revenue earn-outs is $25.0 million.

The carrying amounts and fair values of Teradyne’s financial instruments at April 2, 2017 and December 31, 2016 were as follows:

	April 2, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	324,746	$	324,746	$	307,884	$	307,884
Marketable securities		1,157,639		1,157,639		1,304,867		1,304,867
Derivative assets		145		145		1		1
Liabilities
Contingent consideration		37,916		37,916		38,332		38,332
Derivative liabilities		107		107		131		131
Convertible debt (1)		355,937		534,750		352,669		486,754

(1) The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the convertible note which includes the equity conversion features.

The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.

The following tables summarize the composition of available-for-sale marketable securities at April 2, 2017 and December 31, 2016:

	April 2, 2017
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	856,714	$	37	$	(2,204	)	$	854,547	$	846,287
Commercial paper		121,073		7		(15	)		121,065		76,050
Corporate debt securities		89,164		1,151		(584	)		89,731		56,678
Certificates of deposit and time deposits		50,541		37		—			50,578		—
U.S. government agency securities		21,174		8		(33	)		21,149		10,024
Equity and debt mutual funds		17,472		2,546		(32	)		19,986		1,415
Non-U.S. government securities		578		5		—			583		—
	$	1,156,716	$	3,791	$	(2,868	)	$	1,157,639	$	990,454

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	896,345	$	56	$	(823	)	$	895,578	$	774,974
Long-term marketable securities		260,371		3,735		(2,045	)		262,061		215,480
	$	1,156,716	$	3,791	$	(2,868	)	$	1,157,639	$	990,454

	December 31, 2016
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	901,975	$	97	$	(2,034	)	$	900,038	$	572,284
Commercial paper		161,672		24		(66	)		161,630		84,034
Corporate debt securities		99,708		1,065		(620	)		100,153		53,642
Certificates of deposit and time deposits		82,080		54		(1	)		82,133		7,760
U.S. government agency securities		42,026		7		(19	)		42,014		13,461
Equity and debt mutual funds		16,505		1,724		(58	)		18,171		1,661
Non-U.S. government securities		745		6		(23	)		728		137
	$	1,304,711	$	2,977	$	(2,821	)	$	1,304,867	$	732,979

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	871,321	$	134	$	(431	)	$	871,024	$	423,128
Long-term marketable securities		433,390		2,843		(2,390	)		433,843		309,851
	$	1,304,711	$	2,977	$	(2,821	)	$	1,304,867	$	732,979

As of April 2, 2017, the fair market value of investments with unrealized losses totaled $990.5 million. Of this value, $2.2 million had unrealized losses of $0.2 million for greater than one year and $988.3 million had unrealized losses of $2.6 million for less than one year.

As of December 31, 2016, the fair market value of investments with unrealized losses totaled $733.0 million. Of this value, $2.9 million had unrealized losses of $0.3 million for greater than one year and $730.1 million had unrealized losses of $2.5 million for less than one year.

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments at April 2, 2017 and December 31, 2016, were temporary.

The contractual maturities of investments held at April 2, 2017 were as follows:

	April 2, 2017
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	896,345	$	895,578
Due after 1 year through 5 years		190,557		190,252
Due after 5 years through 10 years		12,270		11,812
Due after 10 years		40,072		40,011
Total	$	1,139,244	$	1,137,653

Contractual maturities of investments held at April 2, 2017 exclude equity and debt mutual funds as they do not have contractual maturity dates.

Derivatives

Teradyne conducts business in a number of foreign countries, with certain transactions denominated in local currencies. The purpose of Teradyne’s foreign currency management is to minimize the effect of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities. Teradyne does not use derivative financial instruments for trading or speculative purposes.

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

The notional amount of foreign currency forward contracts at April 2, 2017 and December 31, 2016 was $89.2 million and $83.9 million, respectively. The fair value of the outstanding contracts was $0.0 million at April 2, 2017 and a loss of $0.1 million at December 31, 2016.

For the three months ended April 2, 2017 and April 3, 2016, Teradyne recorded net realized losses related to foreign currency forward contracts hedging net monetary assets and liabilities of $1.0 million and $3.3 million, respectively.

Gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in other (income) expense, net.

The following table summarizes the fair value of derivative instruments at April 2, 2017 and December 31, 2016:

	Balance Sheet Location		April 2, 2017			December 31, 2016
			(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts assets		Prepayments	$	145		$	1
Foreign exchange contracts liabilities		Other current liabilities		(107	)		(131	)
Total derivatives			$	38		$	(130	)

The following table summarizes the effect of derivative instruments recognized in the statement of operations during the three months ended April 2, 2017 and April 3, 2016.

	Location of Losses	For the Three Months Ended
	Recognized in	April 2,		April 3,
	Statements of Operations	2017		2016
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other (income) expense, net	$	1,011	$	3,298
Total Derivatives		$	1,011	$	3,298

The table does not reflect the corresponding gains and losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies. For the three months ended April 2, 2017 and April 3, 2016, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $1.5 million and $3.4 million, respectively.

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Debt

3 Months Ended

Apr. 02, 2017

Debt

F. DEBT

Convertible Senior Notes

On December 12, 2016, Teradyne completed a private offering of $460.0 million convertible senior unsecured notes (the “Notes”). The Notes will mature on December 15, 2023, unless earlier repurchased or converted. The Notes bear interest from December 12, 2016 at a rate of 1.25% per year payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2017.

Notes will be convertible at the option of the noteholders at any time prior to the close of business on the business day immediately preceding September 15, 2023, under the following circumstances: (1) during any calendar quarter beginning after March 31, 2017 (and only during such calendar quarter), if the closing sale price of the Teradyne’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the closing sale price of the Teradyne’s common stock and the conversion rate on each such trading day; and (3) upon the occurrence of specified corporate events. On or after September 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Teradyne may satisfy its conversion obligation by paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock, at Teradyne’s election. The conversion rate for the Notes will initially be 31.4102 shares per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $31.84 per share of Teradyne’s common stock. The conversion rate is subject to adjustment under certain circumstances.

Concurrent with the offering of the Notes, Teradyne entered into convertible note hedge transactions (the “Note Hedge Transactions”) with the initial purchasers or their affiliates (the “Option Counterparties”). The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the common stock that underlie the Notes, with a strike price equal to the initial conversion price of the Notes of $31.84. The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, approximately 14.4 million shares of Teradyne’s common stock.

The convertible note hedge is considered indexed to Teradyne’s stock as the terms of the Note Hedge Transactions do not contain an exercise contingency and the settlement amount equals the difference between the fair value of a fixed number of Teradyne’s shares and a fixed strike price. Because the only variable that can affect the settlement amount is Teradyne’s stock price, which is an input to the fair value of a fixed-for-fixed option contract, the convertible note hedge is considered indexed to Teradyne’s stock.

Separately and concurrent with the pricing of the Notes, Teradyne entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which it sold net-share-settled (or, at its election subject to certain conditions, cash-settled) warrants to the Option Counterparties. The Warrant Transactions cover, subject to customary anti-dilution adjustments, approximately 14.4 million shares of common stock. The strike price of the warrants will initially be $39.95 per share (subject to adjustment). The Warrant Transactions could have a dilutive effect to Teradyne’s common stock to the extent that the market price per share of Teradyne’s common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.

The Note Hedge Transactions are expected to reduce the potential dilution to Teradyne’s common stock upon any conversion of the Notes. However, the Warrant Transactions could separately have a dilutive effect to the extent that the market value per share of Teradyne’s common stock exceeds the applicable strike price of the warrant.

In connection with establishing their initial hedge of these convertible note hedge and warrant transactions, the Option Counterparties have entered into various derivative transactions with respect to Teradyne’s common stock and/or purchased shares of Teradyne’s common stock or other securities, including the Notes, concurrent with, or shortly after, the pricing of the Notes. In addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivative transactions with respect to Teradyne’s common stock or by selling Teradyne’s common stock or other securities, including the Notes, in secondary market transactions (and may do so during any observation period related to the conversion of the Notes). These activities could adversely affect the value of Teradyne’s common stock and the Notes.

Teradyne’s effective annual interest rate on the Notes is 5.0%. The Notes are classified as long-term debt in the balance sheet based on their December 15, 2023 maturity date. Debt issuance costs of approximately $7.2 million are being amortized to interest expense over the seven year term of the Notes. As of April 2, 2017, unamortized debt issuance costs were $6.9 million.

The notes are classified as long-term debt in the consolidated balance sheets at April 2, 2017 and December 31, 2016. The below tables represent the key components of Teradyne’s convertible senior notes:

	April 2, 2017		December 31, 2016
	(in thousands)
Debt Principal	$	460,000	$	460,000
Unamortized discount		104,063		107,331
Net Carrying amount of convertible debt	$	355,937	$	352,669

	For the Three Months Ended
	April 2, 2017
	(in thousands)
Contractual interest expense on the coupon	$	1,438
Amortization of the discount component and debt issue fees recognized as interest expense		3,268
Total interest expense on the convertible debt	$	4,706

As of April 2, 2017, the remaining unamortized discount was $104.1 million, which will be amortized over 6.8 years using the effective interest rate method. The carrying amount of the equity component was $100.8 million. As of April 2, 2017, the conversion rate was equal to the initial conversion price of approximately $31.84 per share and the if-converted value of the Notes was $449.3 million.

Revolving Credit Facility

On April 27, 2015, Teradyne entered into a Credit Agreement (the “Credit Agreement”) with Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement provides for a five-year, senior secured revolving credit facility of up to $350 million (the “Credit Facility”). The Credit Agreement further provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders incremental commitments under the Credit Facility in an aggregate principal amount not to exceed $150 million.

Proceeds from the Credit Facility may be used for general corporate purposes and working capital. Teradyne incurred $2.3 million in costs related to the revolving credit facility. These costs are being amortized over the five-year term of the revolving credit facility and are included in interest expense in the statement of operations. As of May 12, 2017, Teradyne has not borrowed any funds under the Credit Facility.

The interest rates applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a margin ranging from 0.00% to 1.00% per annum or LIBOR plus a margin ranging from 1.00% to 2.00% per annum, based on the Consolidated Leverage Ratio of Teradyne and its Restricted Subsidiaries. In addition, Teradyne will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from 0.125% to 0.350% per annum, based on the then applicable Consolidated Leverage Ratio.

Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBOR breakage costs.

The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne’s and its Restricted Subsidiaries’ ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarter: a consolidated leverage ratio and an interest coverage ratio. As of May 12, 2017, Teradyne was in compliance with all covenants.

The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.

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Prepayments

3 Months Ended

Apr. 02, 2017

Prepayments

G. PREPAYMENTS

Prepayments consist of the following and are included in prepayments on the balance sheet:

	April 2,		December 31,
	2017		2016
	(in thousands)
Contract manufacturer and supplier prepayments	$	83,398	$	84,473
Prepaid maintenance and other services		7,210		7,676
Prepaid taxes		3,326		4,664
Other prepayments		13,053		11,641
Total prepayments	$	106,987	$	108,454

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Deferred Revenue and Customer Advances

3 Months Ended

Apr. 02, 2017

Deferred Revenue and Customer Advances

H. DEFERRED REVENUE AND CUSTOMER ADVANCES

Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:

	April 2,		December 31,
	2017		2016
	(in thousands)
Extended warranty	$	44,053	$	46,753
Equipment maintenance and training		41,995		39,037
Customer advances, undelivered elements and other		18,729		22,151
Total deferred revenue and customer advances	$	104,777	$	107,941

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Product Warranty

3 Months Ended

Apr. 02, 2017

Product Warranty

I. PRODUCT WARRANTY

Teradyne generally provides a one-year warranty on its products, commencing upon installation, acceptance, delivery 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 warranty balance below is included in other accrued liabilities on the balance sheet.

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	7,203		$	6,925
Accruals for warranties issued during the period		3,021			3,490
Adjustments related to pre-existing warranties		(471	)		243
Settlements made during the period		(2,699	)		(3,162	)
Balance at end of period	$	7,054		$	7,496

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 extended warranty balance below is included in short and long-term deferred revenue and customer advances on the balance sheet.

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	46,753		$	46,499
Deferral of new extended warranty revenue		6,125			6,827
Recognition of extended warranty deferred revenue		(8,825	)		(7,211	)
Balance at end of period	$	44,053		$	46,115

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Stock-Based Compensation

3 Months Ended

Apr. 02, 2017

Stock-Based Compensation

J. STOCK-BASED COMPENSATION

Under Teradyne’s stock compensation plans, Teradyne grants stock options, restricted stock units and performance-based restricted stock units, and employees are eligible to purchase Teradyne’s common stock through its Employee Stock Purchase Plan (“ESPP”).

Stock options to purchase Teradyne’s common stock at 100% of the fair market value on the grant date vest in equal annual installments over four years from the grant date and have a maximum term of seven years.

Time-based restricted stock unit awards granted to employees vest in equal annual installments over four years. Restricted stock unit awards granted to non-employee directors vest after a one year period, with 100% of the award vesting on the first anniversary of the grant date. Teradyne expenses the cost of the restricted stock unit awards subject to time-based vesting, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restrictions lapse.

Commencing in January 2014, Teradyne granted performance-based restricted stock units (“PRSUs”) to its executive officers with a performance metric based on relative total shareholder return (“TSR”). For TSR grants issued in 2014 and 2015, Teradyne’s three-year TSR performance is measured against the Philadelphia Semiconductor Index. For TSR grants issued in 2016 and 2017, Teradyne’s three-year TSR performance is measured against the New York Stock Exchange (“NYSE”) Composite Index. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 200% to 0% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the three-year service period. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted below.

In January 2017 and 2016, Teradyne granted PRSUs to its executive officers with a performance metric based on three-year cumulative non-GAAP profit before interest and tax (“PBIT”) as a percent of Teradyne’s revenue. Non-GAAP PBIT is a financial measure equal to GAAP income from operations less restructuring and other, net; amortization of acquired intangible assets; acquisition and divestiture related charges or credits; pension actuarial gains and losses; non-cash convertible debt interest expense; and other non-recurring gains and charges. The final number of PBIT PRSUs that vest will vary based upon the level of performance achieved from 200% to 0% of the target shares. The PBIT PRSUs will vest upon the three-year anniversary of the grant date. Compensation expense is recognized on a straight-line basis over the three-year service period. Compensation expense is recognized based on the number of units that are earned based upon the three-year Teradyne PBIT as a percent of Teradyne’s revenue, provided the executive officer remains an employee at the end of the three-year period subject to the retirement and termination eligibility provisions noted below.

Beginning with PRSUs granted in January 2014, if the recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability or death or (2) retirement or termination other than for cause, after attaining both at least age sixty and at least ten years of service, then all or a portion of the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will vest on the date the performance percentage is determined. Except as set forth in the preceding sentence, no PRSUs will vest if the executive officer is no longer an employee at the end of the three-year period.

During the three months ended April 2, 2017 and April 3, 2016, Teradyne granted 0.1 million and 0.1 million TSR PRSUs, respectively, with a grant date fair value of $35.66 and $20.29, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
Risk-free interest rate		1.5	%		1.0	%
Teradyne volatility-historical		26.6	%		27.0	%
NYSE Composite Index volatility-historical		13.4	%		13.1	%
Dividend yield		1.0	%		1.2	%

Expected volatility was based on the historical volatility of Teradyne’s stock and the NYSE Composite Index for the 2017 and 2016 grant over the most recent three year period. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.28 per share for 2017 grants and $0.24 per share for 2016 grants, divided by Teradyne’s stock price on the grant date of $28.56 for the 2017 grant and $19.43 for the 2016 grant.

During the three months ended April 2, 2017 and April 3, 2016, Teradyne granted 0.1 million and 0.1 million, respectively of PBIT PRSUs with a grant date fair value of $27.72 and $18.71, respectively.

During the three months ended April 2, 2017, Teradyne granted 0.8 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $27.86 and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $7.13.

During the three months ended April 3, 2016, Teradyne granted 1.2 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $18.83 and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $5.30.

Restricted stock unit awards granted to employees vest in equal annual installments over four years. Stock options vest in equal annual installments over four years and 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 Three Months Ended
	April 2,			April 3,
	2017			2016
Expected life (years)		5.0			5.0
Risk-free interest rate		2.0	%		1.4	%
Volatility-historical		27.8	%		32.9	%
Dividend yield		1.0	%		1.2	%

Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.28 per share for 2017 grants and $0.24 per share for 2016 grants, divided by Teradyne’s stock price on the grant date, of $28.56 for the 2017 grant and $19.43 for the 2016 grant.

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Accumulated Other Comprehensive (Loss) Income

3 Months Ended

Apr. 02, 2017

Accumulated Other Comprehensive (Loss) Income

K. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Changes in accumulated other comprehensive (loss) income, which is presented net of tax, consist of the following:

	Foreign Currency Translation Adjustment			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total
	(in thousands)
Three Months Ended April 2, 2017
Balance at December 31, 2016, net of tax of $0, $209,  $(778)	$	(21,921	)	$	(60	)	$	1,767		$	(20,214	)
Other comprehensive income before reclassifications, net of tax of $0, $420, $0		8,963			513			—			9,476
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(64), $(38)		—			(95	)		(68	)		(163	)
Net current period other comprehensive income (loss), net of tax of $0, $356, $(38)		8,963			418			(68	)		9,313
Balance at April 2, 2017, net of tax of $0, $565, $(816)	$	(12,958	)	$	358		$	1,699		$	(10,901	)
	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total
	(in thousands)
Three Months Ended April 3, 2016
Balance at December 31, 2015, net of tax of $0, $(459), $(622)	$	(8,759	)	$	(1,414	)	$	2,029		$	(8,144	)
Other comprehensive income before reclassifications, net of tax of $0, $1,253, $0		10,271			3,071			—			13,342
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $11, $(46)		—			(83	)		(80	)		(163	)
Net current period other comprehensive income (loss), net of tax of $0, $1,264, $(46)		10,271			2,988			(80	)		13,179
Balance as April 3, 2016, net of tax of $0, $805, $(668)	$	1,512		$	1,574		$	1,949		$	5,035

Reclassifications out of accumulated other comprehensive (loss) income to the statement of operations for the three months ended April 2, 2017 and April 3, 2016 were as follows:

Details about Accumulated Other Comprehensive (Loss) Income Components	For the Three Months Ended				Affected Line Item in the Statements of Operations
	April 2,		April 3,
	2017		2016
	(in thousands)
Available-for-sale marketable securities:
Unrealized gains, net of tax of $64, $(11)	$	95	$	83		Interest income
Defined benefit pension and postretirement plans:
Amortization of prior service benefit, net of tax of $38, $46		68		80		(a)
Total reclassifications, net of tax of $102, $35	$	163	$	163		Net income

(a) The amortization of prior service credit is included in the computation of net periodic pension cost and postretirement benefit; see Note O: “Retirement Plans.”

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Goodwill and Intangible Assets

3 Months Ended

Apr. 02, 2017

Goodwill and Intangible Assets

L. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Teradyne performs its annual goodwill impairment test as required under the provisions of ASC 350-10, “Intangibles—Goodwill and Other” on December 31 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered impaired when the net book value of a reporting unit exceeds its estimated fair value.

The changes in the carrying amount of goodwill by reportable segments for the three months ended April 2, 2017, were as follows:

	Industrial Automation		System Test			Wireless Test			Semiconductor Test			Total
	(in thousands)
Balance at December 31, 2016
Goodwill	$	204,851	$	158,699		$	361,819		$	260,540		$	985,909
Accumulated impairment losses		—		(148,183	)		(353,843	)		(260,540	)		(762,566	)
		204,851		10,516			7,976			—			223,343
Foreign currency translation adjustment		6,722		—			—			—			6,722
Balance at April 2, 2017
Goodwill		211,573		158,699			361,819			260,540			992,631
Accumulated impairment losses		—		(148,183	)		(353,843	)		(260,540	)		(762,566	)
	$	211,573	$	10,516		$	7,976		$	—		$	230,065

Intangible Assets

Teradyne reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.

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

	April 2, 2017
	Gross Carrying Amount		Accumulated Amortization			Cumulative Foreign Currency Translation Adjustment			Net Carrying Amount
	(in thousands)
Developed technology	$	270,877	$	(211,065	)	$	(3,292	)	$	56,520
Customer relationships		92,741		(79,114	)		(348	)		13,279
Tradenames and trademarks		50,100		(24,331	)		(845	)		24,924
Non-compete agreement		320		(200	)		—			120
Customer backlog		170		(170	)		—			—
Total intangible assets	$	414,208	$	(314,880	)	$	(4,485	)	$	94,843

	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Cumulative Foreign Currency Translation Adjustment			Net Carrying Amount
	(in thousands)
Developed technology	$	270,877	$	(206,376	)	$	(5,093	)	$	59,408
Customer relationships		92,741		(76,707	)		(538	)		15,496
Tradenames and trademarks		50,100		(23,435	)		(1,308	)		25,357
Non-compete agreement		320		(180	)		—			140
Customer backlog		170		(170	)		—			—
Total intangible assets	$	414,208	$	(306,868	)	$	(6,939	)	$	100,401

Aggregate intangible asset amortization expense was $8.0 million and $20.0 million, respectively, for the three months ended April 2, 2017 and April 3, 2016.

Estimated intangible asset amortization expense for each of the five succeeding fiscal years is as follows:

Year	Amortization Expense
	(in thousands)
2017 (remainder)		21,621
2018		27,475
2019		23,622
2020		10,325
2021		3,504
Thereafter		8,296

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Net Income per Common Share

3 Months Ended

Apr. 02, 2017

Net Income per Common Share

M. NET INCOME PER COMMON SHARE

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

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands, except per share amounts)
Net income for basic and diluted net income per share	$	85,221	$	49,986
Weighted average common shares-basic		200,005		204,271
Effect of dilutive potential common shares:
Restricted stock units		1,533		965
Stock options		390		487
Employee stock purchase plan		8		9
Dilutive potential common shares		1,931		1,461
Weighted average common shares-diluted		201,936		205,732
Net income per common share-basic	$	0.43	$	0.24
Net income per common share-diluted	$	0.42	$	0.24

The computation of diluted net income per common share for the three months ended April 2, 2017 excludes the effect of the potential exercise of stock options to purchase approximately 0.1 million shares because the effect would have been anti-dilutive.

The computation of diluted net income per common share for the three months ended April 3, 2016 excludes the effect of the potential exercise of stock options to purchase approximately 0.3 million shares because the effect would have been anti-dilutive.

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Restructuring and Other

3 Months Ended

Apr. 02, 2017

Restructuring and Other

N. RESTRUCTURING AND OTHER

During the three months ended April 2, 2017, Teradyne recorded $1.9 million of restructuring charges of which $1.3 million was for a lease impairment of a Wireless Test facility in Sunnyvale, CA and $0.6 million was for employee severance charges. The Sunnyvale, CA lease expires in 2020. The accrual for the future lease payments liability is reflected in other accrued liabilities and is expected to be paid over the term of the lease.

During the three months ended April 2, 2017 and April 3, 2016, Teradyne recorded $0.6 million and $1.2 million, respectively, of other charges for the increase in the fair value of the Universal Robots contingent consideration liability.

During the three months ended April 3, 2016, Teradyne recorded $0.4 million of employee severance charges.

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Retirement Plans

3 Months Ended

Apr. 02, 2017

Retirement Plans

O. RETIREMENT PLANS

ASC 715, “Compensation—Retirement Benefits” requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation.

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 fixed income and equity securities. In addition, Teradyne has an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (“IRC”), as well as unfunded qualified foreign plans.

In the three months ended April 2, 2017, Teradyne contributed $0.6 million to the U.S. supplemental executive defined benefit pension plan and $0.2 million to certain qualified plans for non-U.S. subsidiaries.

For the three months ended April 2, 2017 and April 3, 2016, Teradyne’s net periodic pension cost (income) was comprised of the following:

	For the Three Months Ended
	April 2, 2017						April 3, 2016
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	560		$	185		$	576		$	207
Interest cost		3,312			163			3,414			206
Expected return on plan assets		(3,000	)		(6	)		(3,443	)		(5	)
Amortization of prior service cost		18			—			24			—
Net actuarial gain		—			—			(1,193	)		—
Settlement		—			—			—			(239	)
Total net periodic pension cost (income)	$	890		$	342		$	(622	)	$	169

Postretirement Benefit Plan

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 medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.

For the three months ended April 2, 2017 and April 3, 2016, Teradyne’s net periodic postretirement income was comprised of the following:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Service cost	$	10		$	10
Interest cost		50			56
Amortization of prior service benefit		(124	)		(150	)
Total net periodic post-retirement benefit	$	(64	)	$	(84	)

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Commitments and Contingencies

3 Months Ended

Apr. 02, 2017

Commitments and Contingencies

P. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of April 2, 2017, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $292.0 million, of which $281.7 million is for less than one year.

Legal Claims

Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business. 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.

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Income Taxes

3 Months Ended

Apr. 02, 2017

Income Taxes

Q. INCOME TAXES

The effective tax rate for the three months ended April 2, 2017 and April 3, 2016 was 7.4% and 12.6%, respectively.

The decrease in the effective tax rate from the three months ended April 3, 2016 to the three months ended April 2, 2017 resulted from an increase in the discrete benefit from stock based compensation, a projected shift in the geographic distribution of income which decreased income subject to taxation in the U.S. relative to lower tax rate jurisdictions and a decrease in the discrete benefit from non-taxable foreign exchange gains.

The effective tax rates for the three months ended April 2, 2017 and April 3, 2016 differed from the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the United States.

The tax rate for the three months ended April 2, 2017 and April 3, 2016 was also reduced by the benefit from U.S. research and development tax credits, partially offset by additions to the uncertain tax positions for transfer pricing, both of which are included in the projected annual effective tax rate.

Discrete tax benefits recorded in the three months ended April 2, 2017 amounted to $7.0 million of which $5.5 million resulted from stock based compensation, $0.7 million related to U.S. research and development tax credits and $0.8 million from other discrete tax benefits. The $5.5 million of discrete benefit from stock based compensation included $5.2 million of excess tax benefits recognized pursuant to ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting.”

Discrete tax benefits recorded in the three months ended April 3, 2016 amounted to $2.5 million of which $1.2 million resulted from non-taxable foreign exchange gains, $0.9 million related to marketable securities and $0.4 million from other discrete tax benefits.

On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of April 2, 2017, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more-likely-than-not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.

As of April 2, 2017 and December 31, 2016, Teradyne had $40.7 million and $39.0 million, respectively, of reserves for uncertain tax positions. The $1.7 million net increase in reserves for uncertain tax positions is primarily composed of additions related to transfer pricing exposures and U.S. research and development tax credits.

As of April 2, 2017, Teradyne estimates that it is reasonably possible that the balance of uncertain tax positions may decrease approximately $0.8 million in the next twelve months, as a result of a lapse of statutes of limitation. The estimated decrease is comprised primarily of reserves relating to U.S. research and development credits.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of April 2, 2017 and December 31, 2016, $0.3 million and $0.4 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the three months ended April 2, 2017, a benefit of $0.1 million was recorded for interest and penalties related to income tax items. For the three months ended April 3, 2016, an expense of $0.3 million was recorded for interest and penalties related to income tax items.

Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the three months ended April 2, 2017 was $4.7 million, or $0.02 per diluted share. The tax savings due to the tax holiday for the three months ended April 3, 2016 was $2.6 million, or $0.01 per diluted share. The tax holiday is scheduled to expire on December 31, 2020.

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Segment Information

3 Months Ended

Apr. 02, 2017

Segment Information

R. SEGMENT INFORMATION

Teradyne has four operating segments (Semiconductor Test, System Test, Industrial Automation and Wireless Test), which are its reportable segments. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products and services for defense/aerospace instrumentation test, storage test and circuit-board test. The Industrial Automation segment includes operations related to the design, manufacturing and marketing of collaborative robots. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. Each operating segment has a segment manager who is directly accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts, and plans for the segment.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income (loss) before income taxes. The accounting policies of the business segments in effect are described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2016.

Segment information for the three months ended April 2, 2017 and April 3, 2016 is as follows:

	Semiconductor Test		System Test			Industrial Automation			Wireless Test			Corporate and Eliminations			Consolidated
	(in thousands)
Three Months Ended April 2, 2017
Revenues	$	355,528	$	39,845		$	36,272		$	25,268		$	—		$	456,913
Income (loss) before income taxes (1)(2)		97,966		(2,759	)		(2,571	)		1,532			(2,152	)		92,016
Total assets (3)		740,334		106,754			331,016			61,356			1,602,820			2,842,280
Three Months Ended April 3, 2016
Revenues	$	340,264	$	53,670		$	16,746		$	20,314		$	—		$	430,994
Income (loss) before income taxes (1)(2)		73,254		9,492			(7,168	)		(20,140	)		1,754			57,192
Total assets (3)		664,555		90,695			350,589			408,466			1,034,669			2,548,974

(1) Interest income, interest expense, contingent consideration adjustments, pension and post retirement plans actuarial gains and other income (expense) are included in Corporate and Eliminations.

(2) Included in the income (loss) before income taxes for each of the segments are charges and credits related to inventory and other.

(3) Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets.

Included in the Semiconductor Test segment are charges and credits in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Cost of revenues—inventory charge	$	1,319		$	3,685
Restructuring and other		(265	)		414

Included in the System Test segment are charges in the following line item in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Cost of revenues—inventory charge	$	885	$	—

Included in the Industrial Automation segment are charges in the following line item in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other	$	624	$	—

Included in the Wireless Test segment are charges in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other—lease impairment	$	1,313	$	—
Cost of revenues—inventory charge		522		605

Included in Corporate and Eliminations are charges in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other—Universal Robots contingent consideration adjustment	$	634	$	1,173
Restructuring and other		205		—

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Shareholders' Equity

3 Months Ended

Apr. 02, 2017

Shareholders' Equity

S. SHAREHOLDERS’ EQUITY

Stock Repurchase Program

In December 2016, the Board of Directors approved a $500 million share repurchase authorization which commenced on January 1, 2017. Teradyne intends to repurchase at least $200 million in 2017. During the three months ended April 2, 2017, Teradyne repurchased 1.3 million shares of common stock for $37.7 million at an average price of $29.38 per share.

During the three months ended April 3, 2016, Teradyne repurchased 1.5 million shares of common stock for $28.0 million at an average price of $18.81 per share.

The total price includes commissions and is recorded as a reduction to retained earnings.

Dividend

Holders of Teradyne’s common stock are entitled to receive dividends when they are declared by Teradyne’s Board of Directors.

In January 2017, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.07 per share. Dividend payments for the three months ended April 2, 2017 were $14.0 million.

In January 2016, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.06 per share. Dividend payments for the three months ended April 3, 2016 were $12.3 million.

While Teradyne declared a quarterly cash dividend and authorized a share repurchase program, it may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of Teradyne’s Board of Directors which will consider, among other things, Teradyne’s earnings, capital requirements and financial condition.

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Accounting Policies (Policies)

3 Months Ended

Apr. 02, 2017

Basis of Presentation

Basis of Presentation

The consolidated interim financial statements include the accounts of Teradyne and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year amounts were reclassified to conform to the current year presentation. The December 31, 2016 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 U.S. Securities and Exchange Commission (“SEC”) on March 1, 2017, for the year ended December 31, 2016.

Preparation of Financial Statements and Use of Estimates

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates.

Stock-Based Compensation

Stock-Based Compensation

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Teradyne adopted this ASU in the first quarter of 2017. This ASU changes how Teradyne accounts for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows.

Adoption of this ASU required recognition of a cumulative effect adjustment to retained earnings for any prior year excess tax benefits or tax deficiencies not previously recorded. The cumulative effect adjustment of $39 million was recorded as an increase to retained earnings and deferred tax assets.

This ASU also required a change in how Teradyne recognizes the excess tax benefits or tax deficiencies related to stock-based compensation. Prior to adopting ASU 2016-09, these excess tax benefits or tax deficiencies were credited or charged to additional paid-in capital in Teradyne’s consolidated balance sheets. In accordance with ASU 2016-09, starting in first quarter of 2017, these excess tax benefits or tax deficiencies are recognized as a discrete tax benefit or discrete tax expense to the current income tax provision in Teradyne’s consolidated statements of operations.

ASU 2016-09 requires companies to adopt the amendment related to accounting for excess tax benefits or tax deficiencies on a prospective basis. For the three months ended April 2, 2017, Teradyne recognized a discrete tax benefit of $5.2 million related to net excess tax benefit.

In addition, under ASU 2016-09, all excess tax benefits related to share-based payments are reported as cash flows from operating activities. Previously, excess tax benefits from share-based payments arrangements were reported as cash flows from financing activities. The classification amendment was applied prospectively. This ASU also clarifies that all cash payments made to taxing authorities on the employees’ behalf for withheld shares should be presented as financing activities on the statement of cash flows. Previously, Teradyne reported cash payments made to taxing authorities as operating activities on the statement of cash flows. This change was applied retrospectively.

Upon adoption of ASU 2016-09, Teradyne made an accounting policy election to continue accounting for forfeitures by applying an estimated forfeiture rate.

Contingencies and Litigation

Contingencies and Litigation

Teradyne may be subject to certain legal proceedings, lawsuits and other claims as discussed in Note P. Teradyne accrues for a loss contingency, including legal proceedings, lawsuits, pending claims and other legal matters, when the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. When the reasonable estimate of the loss is within a range of amounts, and no amount in the range constitutes a better estimate than any other amount, Teradyne accrues the amount at the low end of the range. Teradyne adjusts the accruals from time to time as additional information is received, but the loss incurred may be significantly greater than or less than the amount accrued. Loss contingencies are disclosed when they are material and there is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.

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Inventories (Tables)

3 Months Ended

Apr. 02, 2017

Composition of Inventories, Net

Inventories, net consisted of the following at April 2, 2017 and December 31, 2016:

	April 2,		December 31,
	2017		2016
	(in thousands)
Raw material	$	62,373	$	58,530
Work-in-process		22,511		22,946
Finished goods		118,394		54,482
	$	203,278	$	135,958

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Financial Instruments (Tables)

3 Months Ended

Apr. 02, 2017

Schedule of Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of April 2, 2017 and December 31, 2016.

	April 2, 2017
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	202,925	$	—	$	—	$	202,925
Cash equivalents		115,578		6,243		—		121,821
Available-for-sale securities:
U.S. Treasury securities		—		854,547		—		854,547
Commercial paper		—		121,065		—		121,065
Corporate debt securities		—		89,731		—		89,731
Certificates of deposit and time deposits		—		50,578		—		50,578
U.S. government agency securities		—		21,149		—		21,149
Equity and debt mutual funds		19,986		—		—		19,986
Non-U.S. government securities		—		583		—		583
Total	$	338,489	$	1,143,896	$	—	$	1,482,385
Derivative assets		—		145		—		145
Total	$	338,489	$	1,144,041	$	—	$	1,482,530
Liabilities
Contingent consideration	$	—	$	—	$	37,916	$	37,916
Derivative liabilities		—		107		—		107
Total	$	—	$	107	$	37,916	$	38,023

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	318,503	$	6,243	$	—	$	324,746
Marketable securities		—		895,578		—		895,578
Long-term marketable securities		19,986		242,075		—		262,061
Prepayments		—		145		—		145
	$	338,489	$	1,144,041	$	—	$	1,482,530
Liabilities		.
Other current liabilities	$	—	$	107	$	—	$	107
Contingent consideration		—		—		21,711		21,711
Long-term contingent consideration		—		—		16,205		16,205
	$	—	$	107	$	37,916	$	38,023

	December 31, 2016
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	214,722	$	—	$	—	$	214,722
Cash equivalents		37,458		55,704		—		93,162
Available for sale securities:
U.S. Treasury securities		—		900,038		—		900,038
Commercial paper		—		161,630		—		161,630
Corporate debt securities		—		100,153		—		100,153
Certificates of deposit and time deposits		—		82,133		—		82,133
U.S. government agency securities		—		42,014		—		42,014
Equity and debt mutual funds		18,171		—		—		18,171
Non-U.S. government securities		—		728		—		728
Total	$	270,351	$	1,342,400	$	—	$	1,612,751
Derivative assets		—		1		—		1
Total	$	270,351	$	1,342,401	$	—	$	1,612,752
Liabilities
Contingent consideration	$	—	$	—	$	38,332	$	38,332
Derivative liabilities		—		131		—		131
Total	$	—	$	131	$	38,332	$	38,463

Reported as follows:

	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	252,180	$	55,704	$	—	$	307,884
Marketable securities		—		871,024		—		871,024
Long-term marketable securities		18,171		415,672		—		433,843
Prepayments		—		1		—		1
	$	270,351	$	1,342,401	$	—	$	1,612,752
Liabilities
Other accrued liabilities	$	—	$	131	$	—	$	131
Contingent consideration		—		—		1,050		1,050
Long-term contingent consideration		—		—		37,282		37,282
	$	—	$	131	$	38,332	$	38,463

Schedule of Changes in Fair Value of Level 3 Contingent Consideration

Changes in the fair value of Level 3 contingent consideration for the three months ended April 2, 2017 and April 3, 2016 were as follows:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	38,332		$	37,436
Payments (a)		(1,050	)		(15,000	)
Fair value adjustment (b)		634			1,173
Balance at end of period	$	37,916		$	23,609

(a) In the three months ended April 2, 2017, Teradyne paid $1.1 million of the AIT contingent consideration. In the three months ended April 3, 2016 based on Universal Robots’ calendar year 2015 EBITDA results, Teradyne paid $15.0 million or 100% of the eligible EBITDA contingent consideration amount.

(b) In the three months ended April 2, 2017 and April 3, 2016, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was increased by $0.6 million and $1.2 million, respectively, primarily due to a decrease in the discount rate.

Quantitative Information Associated With Fair Value Measurement of Level 3 Financial Instrument

The following table provides quantitative information associated with the fair value measurement of Teradyne’s Level 3 financial instruments:

Liability	April 2, 2017 Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average
	(in thousands)
Contingent consideration (Universal Robots)	$	21,711	Monte Carlo Simulation	Revenues for the period July 1, 2015—December 31, 2017 volatility		12.2	%
				Discount Rate		2.8	%
	$	16,205	Monte Carlo Simulation	Revenues for the period July 1, 2015—December 31, 2018 volatility		12.2	%
				Discount Rate		2.8	%

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of Teradyne’s financial instruments at April 2, 2017 and December 31, 2016 were as follows:

	April 2, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	324,746	$	324,746	$	307,884	$	307,884
Marketable securities		1,157,639		1,157,639		1,304,867		1,304,867
Derivative assets		145		145		1		1
Liabilities
Contingent consideration		37,916		37,916		38,332		38,332
Derivative liabilities		107		107		131		131
Convertible debt (1)		355,937		534,750		352,669		486,754

(1) The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the convertible note which includes the equity conversion features.

Schedule of Available-for-Sale Marketable Securities

The following tables summarize the composition of available-for-sale marketable securities at April 2, 2017 and December 31, 2016:

	April 2, 2017
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	856,714	$	37	$	(2,204	)	$	854,547	$	846,287
Commercial paper		121,073		7		(15	)		121,065		76,050
Corporate debt securities		89,164		1,151		(584	)		89,731		56,678
Certificates of deposit and time deposits		50,541		37		—			50,578		—
U.S. government agency securities		21,174		8		(33	)		21,149		10,024
Equity and debt mutual funds		17,472		2,546		(32	)		19,986		1,415
Non-U.S. government securities		578		5		—			583		—
	$	1,156,716	$	3,791	$	(2,868	)	$	1,157,639	$	990,454

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	896,345	$	56	$	(823	)	$	895,578	$	774,974
Long-term marketable securities		260,371		3,735		(2,045	)		262,061		215,480
	$	1,156,716	$	3,791	$	(2,868	)	$	1,157,639	$	990,454

	December 31, 2016
	Available-for-Sale
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	901,975	$	97	$	(2,034	)	$	900,038	$	572,284
Commercial paper		161,672		24		(66	)		161,630		84,034
Corporate debt securities		99,708		1,065		(620	)		100,153		53,642
Certificates of deposit and time deposits		82,080		54		(1	)		82,133		7,760
U.S. government agency securities		42,026		7		(19	)		42,014		13,461
Equity and debt mutual funds		16,505		1,724		(58	)		18,171		1,661
Non-U.S. government securities		745		6		(23	)		728		137
	$	1,304,711	$	2,977	$	(2,821	)	$	1,304,867	$	732,979

Reported as follows:

	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	871,321	$	134	$	(431	)	$	871,024	$	423,128
Long-term marketable securities		433,390		2,843		(2,390	)		433,843		309,851
	$	1,304,711	$	2,977	$	(2,821	)	$	1,304,867	$	732,979

Contractual Maturities of Investments Held

The contractual maturities of investments held at April 2, 2017 were as follows:

	April 2, 2017
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	896,345	$	895,578
Due after 1 year through 5 years		190,557		190,252
Due after 5 years through 10 years		12,270		11,812
Due after 10 years		40,072		40,011
Total	$	1,139,244	$	1,137,653

Schedule of Derivative Instruments in Statement of Financial Position at Fair Value

The following table summarizes the fair value of derivative instruments at April 2, 2017 and December 31, 2016:

	Balance Sheet Location		April 2, 2017			December 31, 2016
			(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts assets		Prepayments	$	145		$	1
Foreign exchange contracts liabilities		Other current liabilities		(107	)		(131	)
Total derivatives			$	38		$	(130	)

Schedule of Effect of Derivative Instruments on Statement of Operations Recognized

The following table summarizes the effect of derivative instruments recognized in the statement of operations during the three months ended April 2, 2017 and April 3, 2016.

	Location of Losses	For the Three Months Ended
	Recognized in	April 2,		April 3,
	Statements of Operations	2017		2016
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other (income) expense, net	$	1,011	$	3,298
Total Derivatives		$	1,011	$	3,298

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Debt (Tables)

3 Months Ended

Apr. 02, 2017

Components of Convertible Senior Notes

The below tables represent the key components of Teradyne’s convertible senior notes:

	April 2, 2017		December 31, 2016
	(in thousands)
Debt Principal	$	460,000	$	460,000
Unamortized discount		104,063		107,331
Net Carrying amount of convertible debt	$	355,937	$	352,669

	For the Three Months Ended
	April 2, 2017
	(in thousands)
Contractual interest expense on the coupon	$	1,438
Amortization of the discount component and debt issue fees recognized as interest expense		3,268
Total interest expense on the convertible debt	$	4,706

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Prepayments (Tables)

3 Months Ended

Apr. 02, 2017

Schedule of Prepayments

Prepayments consist of the following and are included in prepayments on the balance sheet:

	April 2,		December 31,
	2017		2016
	(in thousands)
Contract manufacturer and supplier prepayments	$	83,398	$	84,473
Prepaid maintenance and other services		7,210		7,676
Prepaid taxes		3,326		4,664
Other prepayments		13,053		11,641
Total prepayments	$	106,987	$	108,454

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Deferred Revenue and Customer Advances (Tables)

3 Months Ended

Apr. 02, 2017

Deferred Revenue and Customer Advances

Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:

	April 2,		December 31,
	2017		2016
	(in thousands)
Extended warranty	$	44,053	$	46,753
Equipment maintenance and training		41,995		39,037
Customer advances, undelivered elements and other		18,729		22,151
Total deferred revenue and customer advances	$	104,777	$	107,941

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Product Warranty (Tables)

3 Months Ended

Apr. 02, 2017

Other Accrued Liabilities

The warranty balance below is included in other accrued liabilities on the balance sheet.

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	7,203		$	6,925
Accruals for warranties issued during the period		3,021			3,490
Adjustments related to pre-existing warranties		(471	)		243
Settlements made during the period		(2,699	)		(3,162	)
Balance at end of period	$	7,054		$	7,496

Extended Product Warranty of Short and Long-Term Deferred Revenue and Customer Advances

The extended warranty balance below is included in short and long-term deferred revenue and customer advances on the balance sheet.

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Balance at beginning of period	$	46,753		$	46,499
Deferral of new extended warranty revenue		6,125			6,827
Recognition of extended warranty deferred revenue		(8,825	)		(7,211	)
Balance at end of period	$	44,053		$	46,115

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Stock-Based Compensation (Tables)

3 Months Ended

Apr. 02, 2017

Schedule of Estimated Fair Value of TSR Performance-Based Restricted Stock Unit Awards Assumptions

The fair value was estimated using the Monte Carlo simulation model with the following assumptions:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
Risk-free interest rate		1.5	%		1.0	%
Teradyne volatility-historical		26.6	%		27.0	%
NYSE Composite Index volatility-historical		13.4	%		13.1	%
Dividend yield		1.0	%		1.2	%

Stock Options

Fair Value of Stock Options Using Assumptions

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

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
Expected life (years)		5.0			5.0
Risk-free interest rate		2.0	%		1.4	%
Volatility-historical		27.8	%		32.9	%
Dividend yield		1.0	%		1.2	%

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Accumulated Other Comprehensive (Loss) Income (Tables)

3 Months Ended

Apr. 02, 2017

Changes in Accumulated Other Comprehensive (Loss) Income

Changes in accumulated other comprehensive (loss) income, which is presented net of tax, consist of the following:

	Foreign Currency Translation Adjustment			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total
	(in thousands)
Three Months Ended April 2, 2017
Balance at December 31, 2016, net of tax of $0, $209,  $(778)	$	(21,921	)	$	(60	)	$	1,767		$	(20,214	)
Other comprehensive income before reclassifications, net of tax of $0, $420, $0		8,963			513			—			9,476
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(64), $(38)		—			(95	)		(68	)		(163	)
Net current period other comprehensive income (loss), net of tax of $0, $356, $(38)		8,963			418			(68	)		9,313
Balance at April 2, 2017, net of tax of $0, $565, $(816)	$	(12,958	)	$	358		$	1,699		$	(10,901	)
	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total
	(in thousands)
Three Months Ended April 3, 2016
Balance at December 31, 2015, net of tax of $0, $(459), $(622)	$	(8,759	)	$	(1,414	)	$	2,029		$	(8,144	)
Other comprehensive income before reclassifications, net of tax of $0, $1,253, $0		10,271			3,071			—			13,342
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $11, $(46)		—			(83	)		(80	)		(163	)
Net current period other comprehensive income (loss), net of tax of $0, $1,264, $(46)		10,271			2,988			(80	)		13,179
Balance as April 3, 2016, net of tax of $0, $805, $(668)	$	1,512		$	1,574		$	1,949		$	5,035

Reclassifications Out of Accumulated Other Comprehensive (Loss) Income to Statements of Operations

Reclassifications out of accumulated other comprehensive (loss) income to the statement of operations for the three months ended April 2, 2017 and April 3, 2016 were as follows:

Details about Accumulated Other Comprehensive (Loss) Income Components	For the Three Months Ended				Affected Line Item in the Statements of Operations
	April 2,		April 3,
	2017		2016
	(in thousands)
Available-for-sale marketable securities:
Unrealized gains, net of tax of $64, $(11)	$	95	$	83		Interest income
Defined benefit pension and postretirement plans:
Amortization of prior service benefit, net of tax of $38, $46		68		80		(a)
Total reclassifications, net of tax of $102, $35	$	163	$	163		Net income

(a) The amortization of prior service credit is included in the computation of net periodic pension cost and postretirement benefit; see Note O: “Retirement Plans.”

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Apr. 02, 2017

Changes in Carrying Amount of Goodwill by Segment

The changes in the carrying amount of goodwill by reportable segments for the three months ended April 2, 2017, were as follows:

	Industrial Automation		System Test			Wireless Test			Semiconductor Test			Total
	(in thousands)
Balance at December 31, 2016
Goodwill	$	204,851	$	158,699		$	361,819		$	260,540		$	985,909
Accumulated impairment losses		—		(148,183	)		(353,843	)		(260,540	)		(762,566	)
		204,851		10,516			7,976			—			223,343
Foreign currency translation adjustment		6,722		—			—			—			6,722
Balance at April 2, 2017
Goodwill		211,573		158,699			361,819			260,540			992,631
Accumulated impairment losses		—		(148,183	)		(353,843	)		(260,540	)		(762,566	)
	$	211,573	$	10,516		$	7,976		$	—		$	230,065

Schedule of Estimated Intangible Asset Amortization Expense

Estimated intangible asset amortization expense for each of the five succeeding fiscal years is as follows:

Year	Amortization Expense
	(in thousands)
2017 (remainder)		21,621
2018		27,475
2019		23,622
2020		10,325
2021		3,504
Thereafter		8,296

Wireless Test

Schedule of Amortizable Intangible Assets

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

	April 2, 2017
	Gross Carrying Amount		Accumulated Amortization			Cumulative Foreign Currency Translation Adjustment			Net Carrying Amount
	(in thousands)
Developed technology	$	270,877	$	(211,065	)	$	(3,292	)	$	56,520
Customer relationships		92,741		(79,114	)		(348	)		13,279
Tradenames and trademarks		50,100		(24,331	)		(845	)		24,924
Non-compete agreement		320		(200	)		—			120
Customer backlog		170		(170	)		—			—
Total intangible assets	$	414,208	$	(314,880	)	$	(4,485	)	$	94,843

	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Cumulative Foreign Currency Translation Adjustment			Net Carrying Amount
	(in thousands)
Developed technology	$	270,877	$	(206,376	)	$	(5,093	)	$	59,408
Customer relationships		92,741		(76,707	)		(538	)		15,496
Tradenames and trademarks		50,100		(23,435	)		(1,308	)		25,357
Non-compete agreement		320		(180	)		—			140
Customer backlog		170		(170	)		—			—
Total intangible assets	$	414,208	$	(306,868	)	$	(6,939	)	$	100,401

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Net Income per Common Share (Tables)

3 Months Ended

Apr. 02, 2017

Computation of Basic and Diluted Net Income Per Common Share

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

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands, except per share amounts)
Net income for basic and diluted net income per share	$	85,221	$	49,986
Weighted average common shares-basic		200,005		204,271
Effect of dilutive potential common shares:
Restricted stock units		1,533		965
Stock options		390		487
Employee stock purchase plan		8		9
Dilutive potential common shares		1,931		1,461
Weighted average common shares-diluted		201,936		205,732
Net income per common share-basic	$	0.43	$	0.24
Net income per common share-diluted	$	0.42	$	0.24

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Retirement Plans (Tables)

3 Months Ended

Apr. 02, 2017

Defined Benefit Pension Plans

Net Periodic Pension and Postretirement Cost (Income)

For the three months ended April 2, 2017 and April 3, 2016, Teradyne’s net periodic pension cost (income) was comprised of the following:

	For the Three Months Ended
	April 2, 2017						April 3, 2016
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	560		$	185		$	576		$	207
Interest cost		3,312			163			3,414			206
Expected return on plan assets		(3,000	)		(6	)		(3,443	)		(5	)
Amortization of prior service cost		18			—			24			—
Net actuarial gain		—			—			(1,193	)		—
Settlement		—			—			—			(239	)
Total net periodic pension cost (income)	$	890		$	342		$	(622	)	$	169

Postretirement Benefit Plans

Net Periodic Pension and Postretirement Cost (Income)

For the three months ended April 2, 2017 and April 3, 2016, Teradyne’s net periodic postretirement income was comprised of the following:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Service cost	$	10		$	10
Interest cost		50			56
Amortization of prior service benefit		(124	)		(150	)
Total net periodic post-retirement benefit	$	(64	)	$	(84	)

XML

Segment Information (Tables)

3 Months Ended

Apr. 02, 2017

Segment Information

Segment information for the three months ended April 2, 2017 and April 3, 2016 is as follows:

	Semiconductor Test		System Test			Industrial Automation			Wireless Test			Corporate and Eliminations			Consolidated
	(in thousands)
Three Months Ended April 2, 2017
Revenues	$	355,528	$	39,845		$	36,272		$	25,268		$	—		$	456,913
Income (loss) before income taxes (1)(2)		97,966		(2,759	)		(2,571	)		1,532			(2,152	)		92,016
Total assets (3)		740,334		106,754			331,016			61,356			1,602,820			2,842,280
Three Months Ended April 3, 2016
Revenues	$	340,264	$	53,670		$	16,746		$	20,314		$	—		$	430,994
Income (loss) before income taxes (1)(2)		73,254		9,492			(7,168	)		(20,140	)		1,754			57,192
Total assets (3)		664,555		90,695			350,589			408,466			1,034,669			2,548,974

(1) Interest income, interest expense, contingent consideration adjustments, pension and post retirement plans actuarial gains and other income (expense) are included in Corporate and Eliminations.

(2) Included in the income (loss) before income taxes for each of the segments are charges and credits related to inventory and other.

(3) Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets.

Wireless Test

Schedule of Segment Reporting Information by Segment Charges

Included in the Wireless Test segment are charges in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other—lease impairment	$	1,313	$	—
Cost of revenues—inventory charge		522		605

Semiconductor Test

Schedule of Segment Reporting Information by Segment Charges

Included in the Semiconductor Test segment are charges and credits in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,			April 3,
	2017			2016
	(in thousands)
Cost of revenues—inventory charge	$	1,319		$	3,685
Restructuring and other		(265	)		414

System Test

Schedule of Segment Reporting Information by Segment Charges

Included in the System Test segment are charges in the following line item in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Cost of revenues—inventory charge	$	885	$	—

Industrial Automation

Schedule of Segment Reporting Information by Segment Charges

Included in the Industrial Automation segment are charges in the following line item in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other	$	624	$	—

Corporate And Eliminations

Schedule of Segment Reporting Information by Segment Charges

Included in Corporate and Eliminations are charges in the following line items in the statements of operations:

	For the Three Months Ended
	April 2,		April 3,
	2017		2016
	(in thousands)
Restructuring and other—Universal Robots contingent consideration adjustment	$	634	$	1,173
Restructuring and other		205		—

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Accounting Policies - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
New Accounting Pronouncements or Change in Accounting Principle
Income tax provision (benefit)	$ 6,795	$ 7,206
ASU 2016-09
New Accounting Pronouncements or Change in Accounting Principle
Cumulative effect adjustment to increase retained earnings and deferred tax assets	39,000
Income tax provision (benefit)	$ (5,200)

XML

Composition of Inventories, Net (Detail) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016
Inventory [Line Items]
Raw material	$ 62,373	$ 58,530
Work-in-process	22,511	22,946
Finished goods	118,394	54,482
Inventories, net	$ 203,278	$ 135,958

XML

Inventories - Additional Information (Detail) - USD ($) $ in Millions	Apr. 02, 2017	Dec. 31, 2016
Inventory [Line Items]
Inventory reserves	$ 115.2	$ 116.0

XML

Financial Instruments - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Apr. 02, 2017	Apr. 03, 2016	Apr. 02, 2017	Dec. 31, 2016
Financial Instruments and Fair Value [Line Items]
Available-for-sale securities, realized loss	$ 200,000	$ 200,000
Available-for-sale securities, realized gain	300,000	200,000
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	990,454,000		$ 990,454,000	$ 732,979,000
Fair market value of investments with unrealized losses greater than one year	2,200,000		2,200,000	2,900,000
Aggregate loss of investments with unrealized losses greater than one year			200,000	300,000
Fair market value of investments with unrealized losses less than one year	988,300,000		988,300,000	730,100,000
Aggregate loss of investments with unrealized losses less than one year			2,600,000	2,500,000
Gains (losses) on foreign currency transactions	1,500,000	3,400,000
Realized (losses) gains on foreign currency contracts	(1,000,000)	$ (3,300,000)
Universal Robots
Financial Instruments and Fair Value [Line Items]
Maximum payment per earn-out	25,000,000
Foreign Exchange Contracts
Financial Instruments and Fair Value [Line Items]
Notional amount of foreign currency forward contracts	89,200,000		$ 89,200,000	83,900,000
Gains (losses) on foreign currency transactions	$ 0			$ (100,000)

XML

Schedule of Fair Value of Financial Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	$ 1,157,639	$ 1,304,867
U.S. Treasury Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	854,547	900,038
Corporate Debt Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	89,731	100,153
Certificates of Deposit and Time Deposits
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	50,578	82,133
Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	121,065	161,630
U.S. Government Agency Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	21,149	42,014
Equity And Debt Mutual Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	19,986	18,171
Non-U.S. Government Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	583	728
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Total	1,482,385	1,612,751
Derivative assets	145	1
Total	1,482,530	1,612,752
Contingent consideration	37,916	38,332
Derivative liabilities	107	131
Total	38,023	38,463
Fair Value, Measurements, Recurring | Cash
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Cash and cash equivalents	202,925	214,722
Fair Value, Measurements, Recurring | Cash Equivalents
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Cash and cash equivalents	121,821	93,162
Fair Value, Measurements, Recurring | U.S. Treasury Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	854,547	900,038
Fair Value, Measurements, Recurring | Corporate Debt Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	89,731	100,153
Fair Value, Measurements, Recurring | Certificates of Deposit and Time Deposits
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	50,578	82,133
Fair Value, Measurements, Recurring | Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	121,065	161,630
Fair Value, Measurements, Recurring | U.S. Government Agency Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	21,149	42,014
Fair Value, Measurements, Recurring | Equity And Debt Mutual Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	19,986	18,171
Fair Value, Measurements, Recurring | Non-U.S. Government Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	583	728
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Total	338,489	270,351
Total	338,489	270,351
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Fair Value, Measurements, Recurring | Cash
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Cash and cash equivalents	202,925	214,722
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Fair Value, Measurements, Recurring | Cash Equivalents
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Cash and cash equivalents	115,578	37,458
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Fair Value, Measurements, Recurring | Equity And Debt Mutual Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	19,986	18,171
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Total	1,143,896	1,342,400
Derivative assets	145	1
Total	1,144,041	1,342,401
Derivative liabilities	107	131
Total	107	131
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Cash Equivalents
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Cash and cash equivalents	6,243	55,704
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | U.S. Treasury Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	854,547	900,038
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Corporate Debt Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	89,731	100,153
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Certificates of Deposit and Time Deposits
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	50,578	82,133
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	121,065	161,630
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | U.S. Government Agency Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	21,149	42,014
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Non-U.S. Government Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available for sale securities	583	728
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent consideration	37,916	38,332
Total	$ 37,916	$ 38,332

XML

Schedule of Reported Financial Assets and Liabilities (Detail) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	$ 1,482,530	$ 1,612,752
Liabilities	38,023	38,463
Other Current Liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities	107
Other Accrued Liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities		131
Cash and Cash Equivalents
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	324,746	307,884
Marketable securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	895,578	871,024
Long-term marketable securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	262,061	433,843
Prepayments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	145	1
Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities	21,711	1,050
Long Term Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities	16,205	37,282
Quoted Prices in Active Markets for Identical Instruments (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	338,489	270,351
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Cash and Cash Equivalents
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	318,503	252,180
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Long-term marketable securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	19,986	18,171
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	1,144,041	1,342,401
Liabilities	107	131
Significant Other Observable Inputs (Level 2) | Other Current Liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities	107
Significant Other Observable Inputs (Level 2) | Other Accrued Liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities		131
Significant Other Observable Inputs (Level 2) | Cash and Cash Equivalents
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	6,243	55,704
Significant Other Observable Inputs (Level 2) | Marketable securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	895,578	871,024
Significant Other Observable Inputs (Level 2) | Long-term marketable securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	242,075	415,672
Significant Other Observable Inputs (Level 2) | Prepayments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Assets	145	1
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities	37,916	38,332
Significant Unobservable Inputs (Level 3) | Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities	21,711	1,050
Significant Unobservable Inputs (Level 3) | Long Term Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities	$ 16,205	$ 37,282

XML

Schedule of Changes in Fair Value of Level 3 Contingent Consideration (Detail) - USD ($) $ in Thousands		3 Months Ended
		Apr. 02, 2017	Apr. 03, 2016
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance at beginning of period		$ 38,332	$ 37,436
Payments	[1]	(1,050)	(15,000)
Fair value adjustment	[2]	634	1,173
Ending Balance		$ 37,916	$ 23,609

[1] In the three months ended April 2, 2017, Teradyne paid $1.1 million of the AIT contingent consideration. In the three months ended April 3, 2016 based on Universal Robots' calendar year 2015 EBITDA results, Teradyne paid $15.0 million or 100% of the eligible EBITDA contingent consideration amount.

[2] In the three months ended April 2, 2017 and April 3, 2016, the fair value of contingent consideration for the earn-out in connection with the acquisition of Universal Robots was increased by $0.6 million and $1.2 million, respectively, primarily due to a decrease in the discount rate.

XML

Schedule of Changes in Fair Value of Level 3 Contingent Consideration (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Payments of contingent consideration	$ 1,050	$ 11,697
Increase(decrease)in contingent consideration	634	1,173
Universal Robots
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Payments of contingent consideration	1,100	$ 15,000
EBITDA contingent consideration amount, percentage		100.00%
Increase(decrease)in contingent consideration	$ 600	$ 1,200

XML

Quantitative Information Associated With Fair Value Measurement of Level 3 Financial Instrument (Detail) - Monte Carlo Simulation $ in Thousands	3 Months Ended
	Apr. 02, 2017 USD ($)
Significant Unobservable Inputs (Level 3)
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Contingent consideration	$ 16,205
Significant Unobservable Inputs (Level 3) | Universal Robots
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Contingent consideration	$ 21,711
Revenues for the period July 1, 2015-December 31, 2017 | Universal Robots
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Target achievement, volatility	12.20%
Discount Rate	2.80%
Revenues for the period July 1, 2015-December 31, 2018 | Universal Robots
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Target achievement, volatility	12.20%
Discount Rate	2.80%

XML

Schedule of Carrying Amounts and Fair Values of Financial Instruments (Detail) - USD ($) $ in Thousands		Apr. 02, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Marketable securities		$ 1,157,639	$ 1,304,867
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Cash and cash equivalents		324,746	307,884
Marketable securities		1,157,639	1,304,867
Derivative assets		145	1
Contingent consideration		37,916	38,332
Derivative liabilities		107	131
Convertible debt	[1]	534,750	486,754
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Cash and cash equivalents		324,746	307,884
Marketable securities		1,157,639	1,304,867
Derivative assets		145	1
Contingent consideration		37,916	38,332
Derivative liabilities		107	131
Convertible debt	[1]	$ 355,937	$ 352,669

[1] The carrying value represents the bifurcated debt component only, while the fair value is based on quoted market prices for the convertible note which includes the equity conversion features.

XML

Schedule of Available for Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	$ 1,156,716	$ 1,304,711
Available-for-sale marketable securities, Unrealized Gain	3,791	2,977
Available-for-sale marketable securities, Unrealized (Loss)	(2,868)	(2,821)
Available-for-sale marketable securities, Fair Market Value	1,157,639	1,304,867
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	990,454	732,979
U.S. Treasury Securities
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	856,714	901,975
Available-for-sale marketable securities, Unrealized Gain	37	97
Available-for-sale marketable securities, Unrealized (Loss)	(2,204)	(2,034)
Available-for-sale marketable securities, Fair Market Value	854,547	900,038
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	846,287	572,284
Corporate Debt Securities
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	89,164	99,708
Available-for-sale marketable securities, Unrealized Gain	1,151	1,065
Available-for-sale marketable securities, Unrealized (Loss)	(584)	(620)
Available-for-sale marketable securities, Fair Market Value	89,731	100,153
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	56,678	53,642
U.S. Government Agency Securities
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	21,174	42,026
Available-for-sale marketable securities, Unrealized Gain	8	7
Available-for-sale marketable securities, Unrealized (Loss)	(33)	(19)
Available-for-sale marketable securities, Fair Market Value	21,149	42,014
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	10,024	13,461
Certificates of Deposit and Time Deposits
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	50,541	82,080
Available-for-sale marketable securities, Unrealized Gain	37	54
Available-for-sale marketable securities, Unrealized (Loss)		(1)
Available-for-sale marketable securities, Fair Market Value	50,578	82,133
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses		7,760
Commercial Paper
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	121,073	161,672
Available-for-sale marketable securities, Unrealized Gain	7	24
Available-for-sale marketable securities, Unrealized (Loss)	(15)	(66)
Available-for-sale marketable securities, Fair Market Value	121,065	161,630
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	76,050	84,034
Equity And Debt Mutual Funds
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	17,472	16,505
Available-for-sale marketable securities, Unrealized Gain	2,546	1,724
Available-for-sale marketable securities, Unrealized (Loss)	(32)	(58)
Available-for-sale marketable securities, Fair Market Value	19,986	18,171
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	1,415	1,661
Non-U.S. Government Securities
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	578	745
Available-for-sale marketable securities, Unrealized Gain	5	6
Available-for-sale marketable securities, Unrealized (Loss)		(23)
Available-for-sale marketable securities, Fair Market Value	$ 583	728
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses		$ 137

XML

Schedule of Reported Available for Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	$ 1,156,716	$ 1,304,711
Available-for-sale marketable securities, Unrealized Gain	3,791	2,977
Available-for-sale marketable securities, Unrealized (Loss)	(2,868)	(2,821)
Available-for-sale marketable securities, Fair Market Value	1,157,639	1,304,867
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	990,454	732,979
Marketable securities
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	896,345	871,321
Available-for-sale marketable securities, Unrealized Gain	56	134
Available-for-sale marketable securities, Unrealized (Loss)	(823)	(431)
Available-for-sale marketable securities, Fair Market Value	895,578	871,024
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	774,974	423,128
Long-term marketable securities
Schedule of Available-for-sale Securities
Available-for-sale marketable securities, Cost	260,371	433,390
Available-for-sale marketable securities, Unrealized Gain	3,735	2,843
Available-for-sale marketable securities, Unrealized (Loss)	(2,045)	(2,390)
Available-for-sale marketable securities, Fair Market Value	262,061	433,843
Available-for-sale marketable securities, Fair Market Value of Investments with Unrealized Losses	$ 215,480	$ 309,851

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Contractual Maturities of Investments Held (Detail) $ in Thousands	Apr. 02, 2017 USD ($)
Schedule of Available-for-sale Securities
Due within one year, cost	$ 896,345
Due after 1 year through 5 years, cost	190,557
Due after 5 years through 10 years, cost	12,270
Due after 10 years, cost	40,072
Total, cost	1,139,244
Due within one year, fair market value	895,578
Due after 1 year through 5 years, fair market value	190,252
Due after 5 years through 10 years, fair market value	11,812
Due after 10 years, fair market value	40,011
Total, fair market value	$ 1,137,653

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Schedule of Derivative Instruments in Statement of Financial Position at Fair Value (Detail) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016
Derivatives, Fair Value [Line Items]
Derivative assets (liabilities), net	$ 38	$ (130)
Not Designated as Hedging Instrument | Foreign Exchange Contracts | Prepayments
Derivatives, Fair Value [Line Items]
Derivative assets	145	1
Not Designated as Hedging Instrument | Foreign Exchange Contracts | Other Current Liabilities
Derivatives, Fair Value [Line Items]
Derivative liabilities	$ (107)	$ (131)

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Schedule of Effect of Derivative Instruments in Statement of Operations Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Losses on derivatives recognized in statements of operations	$ 1,011	$ 3,298
Other (income) expense, net
Derivative Instruments, Gain (Loss) [Line Items]
Losses on derivatives recognized in statements of operations	$ 1,011	$ 3,298

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Debt - Additional Information (Detail) $ / shares in Units, shares in Millions			3 Months Ended
	Apr. 02, 2017 USD ($) $ / shares	Apr. 27, 2015 USD ($)	Apr. 02, 2017 USD ($) d $ / shares shares	Dec. 31, 2016 USD ($)	Dec. 12, 2016 USD ($)
Debt Instrument
Term of loan, years		5 years
Pledge percentage of capital stock		65.00%
1.25% Convertible Senior Unsecured Notes Due December 15, 2023
Debt Instrument
Debt instrument, interest rate, stated percentage					1.25%
Aggregate principal amount	$ 460,000,000		$ 460,000,000	$ 460,000,000	$ 460,000,000
Senior notes maturity date	Dec. 15, 2023
Trading days measurement period | d			20
Consecutive trading days measurement period			30 days
Percentage of conversion price			130.00%
Debt instrument conversion ratio			0.314102
Initial debt conversion price | $ / shares	$ 31.84		$ 31.84
Shares that would be issued upon conversion | shares			14.4
Strike price per share of warrant | $ / shares			$ 39.95
Debt instrument, effective annual interest rate	5.00%		5.00%
Financing cost	$ 6,900,000		$ 6,900,000		$ 7,200,000
Debt issuance costs, amortization period			7 years
Unamortized discount	104,100,000		$ 104,100,000
Debt Instrument, convertible, remaining discount amortization period			6 years 9 months 18 days
Debt instrument, convertible, carrying amount of equity component	100,800,000		$ 100,800,000
Value of notes converted			$ 449,300,000
Conversion option two
Debt Instrument
Trading days measurement period | d			5
Consecutive trading days measurement period			5 days
Percentage of closing sale price of common stock and conversion rate product			98.00%
Maximum
Debt Instrument
Aggregate principal amount		$ 150,000,000
Commitment fee percentage of unused portion of credit facility		0.35%
Minimum
Debt Instrument
Commitment fee percentage of unused portion of credit facility		0.125%
Base Rate | Maximum
Debt Instrument
Debt instrument, basis spread on variable rate		1.00%
Base Rate | Minimum
Debt Instrument
Debt instrument, basis spread on variable rate		0.00%
London Interbank Offered Rate (LIBOR) | Maximum
Debt Instrument
Debt instrument, basis spread on variable rate		2.00%
London Interbank Offered Rate (LIBOR) | Minimum
Debt Instrument
Debt instrument, basis spread on variable rate		1.00%
Revolving Credit Facility
Debt Instrument
Financing cost	$ 2,300,000		$ 2,300,000
Financing cost, amortization term			5 years
Revolving Credit Facility | Maximum
Debt Instrument
Credit facility, borrowing capacity		$ 350,000,000

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Components of Convertible Senior Notes (Detail) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016	Dec. 12, 2016
Debt Instrument
Net Carrying amount of convertible debt	$ 355,937	$ 352,669
1.25% Convertible Senior Unsecured Notes Due December 15, 2023
Debt Instrument
Debt Principal	460,000	460,000	$ 460,000
Unamortized discount	104,063	107,331
Net Carrying amount of convertible debt	$ 355,937	$ 352,669

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Interest Expense on Convertible Senior Notes (Detail) $ in Thousands	3 Months Ended
	Apr. 02, 2017 USD ($)
Debt Instrument
Contractual interest expense on the coupon	$ 1,438
Amortization of the discount component and debt issue fees recognized as interest expense	3,268
Total interest expense on the convertible debt	$ 4,706

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Schedule of Prepayments (Detail) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016
Prepaid And Other Current Assets [Line Items]
Contract manufacturer and supplier prepayments	$ 83,398	$ 84,473
Prepaid maintenance and other services	7,210	7,676
Prepaid taxes	3,326	4,664
Other prepayments	13,053	11,641
Total prepayments	$ 106,987	$ 108,454

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Deferred Revenue and Customer Advances (Detail) - USD ($) $ in Thousands	Apr. 02, 2017	Dec. 31, 2016	Apr. 03, 2016	Dec. 31, 2015
Deferred Revenue Arrangement
Extended warranty	$ 44,053	$ 46,753	$ 46,115	$ 46,499
Equipment maintenance and training	41,995	39,037
Customer advances, undelivered elements and other	18,729	22,151
Total deferred revenue and customer advances	$ 104,777	$ 107,941

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Warranty Accrual Included in Other Accrued Liabilities (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Product Warranty Liability [Line Items]
Balance at beginning of period	$ 7,203	$ 6,925
Accruals for warranties issued during the period	3,021	3,490
Adjustments related to pre-existing warranties	(471)	243
Settlements made during the period	(2,699)	(3,162)
Balance at end of period	$ 7,054	$ 7,496

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Extended Product Warranty Included in Short and Long-Term Deferred Revenue and Customer Advances (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Product Warranty Liability [Line Items]
Balance at beginning of period	$ 46,753	$ 46,499
Deferral of new extended warranty revenue	6,125	6,827
Recognition of extended warranty deferred revenue	(8,825)	(7,211)
Balance at end of period	$ 44,053	$ 46,115

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Stock-Based Compensation - Additional Information (Detail) - $ / shares shares in Millions	1 Months Ended		3 Months Ended
	Jan. 31, 2016	Jan. 31, 2014	Apr. 02, 2017	Apr. 03, 2016
Share-based Compensation Arrangement by Share-based Payment Award
Stock options term			7 years
Service-Based Restricted Stock Units | Employees
Share-based Compensation Arrangement by Share-based Payment Award
Restricted stock unit awards granted			0.8	1.2
Weighted average grant date fair value of restricted stock units granted			$ 27.86	$ 18.83
Service-Based Restricted Stock Units | Director
Share-based Compensation Arrangement by Share-based Payment Award
Restricted stock unit awards granted				0.1
Service-Based Restricted Stock Units | Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award
Restricted stock unit awards granted			0.1
Weighted average grant date fair value of restricted stock units granted			$ 7.13	$ 5.30
Restricted Stock Units | Employees
Share-based Compensation Arrangement by Share-based Payment Award
Period of stock granted to employees and executive officers vest in equal annual installments			4 years
Restricted Stock Units | Director
Share-based Compensation Arrangement by Share-based Payment Award
Period of stock granted to employees and executive officers vest in equal annual installments			1 year
Percentage of awards vesting on the first anniversary of grant date			100.00%
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award
Percentage of common stock price paid			100.00%
Period of stock granted to employees and executive officers vest in equal annual installments			4 years
Stock options term			7 years
TSR Performance-Based Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award
Total shareholder return performance measurement period	3 years
Minimum age of retirement to be eligible for PRSUs		60 years
Minimum years of service for retirement to be eligible for PRSUs		10 years
Restricted stock unit awards granted			0.1	0.1
Weighted average grant date fair value of restricted stock units granted			$ 35.66	$ 20.29
Estimated annual dividend amount per share			0.28	0.24
Stock price			$ 28.56	$ 19.43
TSR Performance-Based Restricted Stock Units | Share-based Compensation Award, Tranche One
Share-based Compensation Arrangement by Share-based Payment Award
Percentage of vesting of target shares upon performance achieved	200.00%
TSR Performance-Based Restricted Stock Units | Share-based Compensation Award, Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award
Percentage of vesting of target shares upon performance achieved	0.00%
PBIT Performance-Based Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award
Total shareholder return performance measurement period	3 years
Restricted stock unit awards granted			0.1	0.1
Weighted average grant date fair value of restricted stock units granted			$ 27.72	$ 18.71
PBIT Performance-Based Restricted Stock Units | Share-based Compensation Award, Tranche One
Share-based Compensation Arrangement by Share-based Payment Award
Percentage of vesting of target shares upon performance achieved	200.00%
PBIT Performance-Based Restricted Stock Units | Share-based Compensation Award, Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award
Percentage of vesting of target shares upon performance achieved	0.00%

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Schedule of Estimated Fair Value of TSR Performance-Based Restricted Stock Unit Awards Assumptions (Detail) - TSR Performance-Based Restricted Stock Units	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Share-based Compensation Arrangement by Share-based Payment Award
Risk-free interest rate	1.50%	1.00%
Expected historical volatility	26.60%	27.00%
Dividend yield	1.00%	1.20%
New York Stock Exchange Composite Index
Share-based Compensation Arrangement by Share-based Payment Award
Expected historical volatility	13.40%	13.10%

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Schedule of Estimated Fair Value of Stock Options Grant Using Black Scholes Option Pricing Model (Detail) - Stock Options	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Share-based Compensation Arrangement by Share-based Payment Award
Expected life (years)	5 years	5 years
Risk-free interest rate	2.00%	1.40%
Volatility-historical	27.80%	32.90%
Dividend yield	1.00%	1.20%

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Changes in Accumulated Other Comprehensive (Loss) Income (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ 1,828,659
Other comprehensive income before reclassifications, net of tax	9,476	$ 13,342
Amounts reclassified from accumulated other comprehensive income, net of tax	(163)	(163)
Other comprehensive income (loss)	9,313	13,179
Ending balance	1,919,853
Foreign currency translation reclassification adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(21,921)	(8,759)
Other comprehensive income before reclassifications, net of tax	8,963	10,271
Other comprehensive income (loss)	8,963	10,271
Ending balance	(12,958)	1,512
Unrealized Gains (Losses) on Marketable Securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(60)	(1,414)
Other comprehensive income before reclassifications, net of tax	513	3,071
Amounts reclassified from accumulated other comprehensive income, net of tax	(95)	(83)
Other comprehensive income (loss)	418	2,988
Ending balance	358	1,574
Amortization of prior service credit
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	1,767	2,029
Amounts reclassified from accumulated other comprehensive income, net of tax	(68)	(80)
Other comprehensive income (loss)	(68)	(80)
Ending balance	1,699	1,949
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(20,214)	(8,144)
Amounts reclassified from accumulated other comprehensive income, net of tax	(163)	(163)
Ending balance	$ (10,901)	$ 5,035

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Changes in Accumulated Other Comprehensive (Loss) Income (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016	Dec. 31, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Amounts reclassified from accumulated other comprehensive income, tax	$ (102)	$ (35)
Foreign currency translation adjustments, tax	0	0	$ 0	$ 0
Unrealized gains on marketable securities, tax	565	805	209	(459)
Retirement plans prior service benefit, tax	(816)	(668)	$ (778)	$ (622)
Foreign currency translation reclassification adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive (loss) income before reclassifications, tax	0	0
Amounts reclassified from accumulated other comprehensive income, tax	0	0
Other comprehensive income (loss), tax	0	0
Unrealized Gains (Losses) on Marketable Securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive (loss) income before reclassifications, tax	420	1,253
Amounts reclassified from accumulated other comprehensive income, tax	(64)	11
Other comprehensive income (loss), tax	356	1,264
Amortization of prior service credit
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive (loss) income before reclassifications, tax	0	0
Amounts reclassified from accumulated other comprehensive income, tax	(38)	(46)
Other comprehensive income (loss), tax	$ (38)	$ (46)

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Reclassifications Out of Accumulated Other Comprehensive (Loss) Income to Statements of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income	$ (3,520)	$ (1,642)
Reclassifications, net of tax	163	163
Unrealized Gains (Losses) on Marketable Securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassifications, net of tax	95	83
Amortization of prior service credit
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassifications, net of tax	68	80
Accumulated Other Comprehensive Income (Loss)
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassifications, net of tax	163	163
Reclassification out of Accumulated Other Comprehensive Income | Unrealized Gains (Losses) on Marketable Securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income	$ 95	$ 83

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Reclassifications Out of Accumulated Other Comprehensive (Loss) Income to Statements of Operations (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassifications, tax	$ 102	$ 35
Unrealized Gains (Losses) on Marketable Securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassifications, tax	64	(11)
Amortization of prior service credit
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassifications, tax	$ 38	$ 46

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Changes in Carrying Amount of Goodwill by Segment (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Dec. 31, 2016
Goodwill [Line Items]
Foreign currency translation adjustment	$ 6,722
Goodwill	992,631	$ 985,909
Accumulated impairment losses	(762,566)	(762,566)
Goodwill	230,065	223,343
Wireless Test
Goodwill [Line Items]
Goodwill	361,819	361,819
Accumulated impairment losses	(353,843)	(353,843)
Goodwill	7,976	7,976
Industrial Automation
Goodwill [Line Items]
Foreign currency translation adjustment	6,722
Goodwill	211,573	204,851
Goodwill	211,573	204,851
System Test
Goodwill [Line Items]
Goodwill	158,699	158,699
Accumulated impairment losses	(148,183)	(148,183)
Goodwill	10,516	10,516
Semiconductor Test
Goodwill [Line Items]
Goodwill	260,540	260,540
Accumulated impairment losses	$ (260,540)	$ (260,540)

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Schedule of Amortizable Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Apr. 02, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets
Gross Carrying Amount	$ 414,208	$ 414,208
Accumulated Amortization	(314,880)	(306,868)
Cumulative Foreign Currency Translation Adjustment	(4,485)	(6,939)
Net Carrying Amount	94,843	100,401
Developed technology
Finite-Lived Intangible Assets
Gross Carrying Amount	270,877	270,877
Accumulated Amortization	(211,065)	(206,376)
Cumulative Foreign Currency Translation Adjustment	(3,292)	(5,093)
Net Carrying Amount	56,520	59,408
Customer Relationships
Finite-Lived Intangible Assets
Gross Carrying Amount	92,741	92,741
Accumulated Amortization	(79,114)	(76,707)
Cumulative Foreign Currency Translation Adjustment	(348)	(538)
Net Carrying Amount	13,279	15,496
Trademarks and tradenames
Finite-Lived Intangible Assets
Gross Carrying Amount	50,100	50,100
Accumulated Amortization	(24,331)	(23,435)
Cumulative Foreign Currency Translation Adjustment	(845)	(1,308)
Net Carrying Amount	24,924	25,357
Non-compete Agreements
Finite-Lived Intangible Assets
Gross Carrying Amount	320	320
Accumulated Amortization	(200)	(180)
Net Carrying Amount	120	140
Customer backlog
Finite-Lived Intangible Assets
Gross Carrying Amount	170	170
Accumulated Amortization	$ (170)	$ (170)

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Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Goodwill and Intangible Assets Disclosure [Line Items]
Acquired intangible assets amortization	$ 7,952	$ 19,994

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Schedule of Estimated Intangible Asset Amortization Expense (Detail) $ in Thousands	Apr. 02, 2017 USD ($)
Finite-Lived Intangible Assets
2017 (remainder)	$ 21,621
2018	27,475
2019	23,622
2020	10,325
2021	3,504
Thereafter	$ 8,296

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Computation of Basic and Diluted Net Income Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Net Income Loss Per Common Share
Net income for basic and diluted net income per share	$ 85,221	$ 49,986
Weighted average common shares-basic	200,005	204,271
Employee stock purchase plan	8	9
Dilutive potential common shares	1,931	1,461
Weighted average common shares-diluted	201,936	205,732
Net income per common share-basic	$ 0.43	$ 0.24
Net income per common share-diluted	$ 0.42	$ 0.24
Restricted Stock Units
Net Income Loss Per Common Share
Incremental shares attributable to share based payment arrangements	1,533	965
Stock Options
Net Income Loss Per Common Share
Incremental shares attributable to share based payment arrangements	390	487

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Net Income per Common Share - Additional Information (Detail) - shares shares in Millions	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Net Income Loss Per Common Share
Exercise of stock options	0.1	0.3

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Restructuring and Other - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Restructuring Cost and Reserve
Restructuring charges	$ 1,900
Lease expiration year	2020
Contingent consideration adjustment	$ 634	$ 1,173
Wireless Test
Restructuring Cost and Reserve
Lease impairment	1,300
Universal Robots
Restructuring Cost and Reserve
Contingent consideration adjustment	600	1,200
Semiconductor Test and Wireless Test
Restructuring Cost and Reserve
Severance benefit and charges	$ 600
Semiconductor Test
Restructuring Cost and Reserve
Severance benefit and charges		$ 400

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Retirement Plans - Additional Information (Detail) $ in Millions	3 Months Ended
	Apr. 02, 2017 USD ($)
U.S. Supplemental Executive Defined Benefit Pension Plan
Defined Benefit Plan Disclosure
Contribution to defined benefit pension plans	$ 0.6
Non-United States Subsidiaries
Defined Benefit Plan Disclosure
Contribution to defined benefit pension plans	$ 0.2

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Schedule of Net Periodic Pension and Postretirement Cost (Income) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Defined Benefit Plan Disclosure
Net actuarial gain		$ (1,193)
United States Pension Plans, Defined Benefit
Defined Benefit Plan Disclosure
Service cost	$ 560	576
Interest cost	3,312	3,414
Expected return on plan assets	(3,000)	(3,443)
Amortization of prior service cost	18	24
Net actuarial gain		(1,193)
Total net periodic pension cost (income)	890	(622)
Foreign Pension Plans, Defined Benefit
Defined Benefit Plan Disclosure
Service cost	185	207
Interest cost	163	206
Expected return on plan assets	(6)	(5)
Settlement		(239)
Total net periodic pension cost (income)	342	169
Postretirement Benefit Plans
Defined Benefit Plan Disclosure
Service cost	10	10
Interest cost	50	56
Amortization of prior service benefit	(124)	(150)
Total net periodic pension cost (income)	$ (64)	$ (84)

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Commitments and Contingencies - Additional Information (Detail) $ in Millions	Apr. 02, 2017 USD ($)
Purchase Commitment, Excluding Long-term Commitment
Aggregate purchase commitments	$ 292.0
Purchase commitments less than one year	$ 281.7

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Income Taxes - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Apr. 02, 2017	Apr. 02, 2017	Apr. 03, 2016	Dec. 31, 2016
Income Taxes [Line Items]
Effective tax rate		7.40%	12.60%
U.S. statutory federal tax rate		35.00%	35.00%
Discrete tax benefits		$ 7.0	$ 2.5
Discrete tax benefits, stock based compensation		5.5
Discrete tax benefits, U.S. research and development tax credits		0.7
Discrete tax benefits, other		0.8	0.4
Discrete tax benefits, non-taxable foreign exchange gains			1.2
Discrete tax benefits, marketable securities			0.9
Uncertain tax positions	$ 40.7	40.7		$ 39.0
Net Increase in uncertain tax positions		1.7
Decrease in uncertain tax position resulting from expiration of statutes of limitations	0.8
Accrued interest and penalties	$ 0.3	0.3		$ 0.4
Interest and penalties related to income tax, expense (benefit)		(0.1)	0.3
Tax savings due to the tax holiday		$ 4.7	$ 2.6
Tax savings due to the tax holiday, per share		$ 0.02	$ 0.01
Tax holiday expiration date		December 31, 2020
ASU 2016-09
Income Taxes [Line Items]
Discrete tax benefits, stock based compensation		$ 5.2

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Segment Information - Additional Information (Detail)	3 Months Ended
	Apr. 02, 2017 Segment
Segment Reporting Information [Line Items]
Operating segments	4

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Schedule of Segment Information (Detail) - USD ($) $ in Thousands		3 Months Ended
		Apr. 02, 2017		Apr. 03, 2016		Dec. 31, 2016
Segment Reporting Information [Line Items]
Revenues		$ 456,913		$ 430,994
Income (loss) before income taxes	[1],[2]	92,016		57,192
Total assets		2,842,280	[3]	2,548,974	[3]	$ 2,762,493
Semiconductor Test
Segment Reporting Information [Line Items]
Revenues		355,528		340,264
Income (loss) before income taxes	[1],[2]	97,966		73,254
Total assets	[3]	740,334		664,555
System Test
Segment Reporting Information [Line Items]
Revenues		39,845		53,670
Income (loss) before income taxes	[1],[2]	(2,759)		9,492
Total assets	[3]	106,754		90,695
Wireless Test
Segment Reporting Information [Line Items]
Revenues		25,268		20,314
Income (loss) before income taxes	[1],[2]	1,532		(20,140)
Total assets	[3]	61,356		408,466
Industrial Automation
Segment Reporting Information [Line Items]
Revenues		36,272		16,746
Income (loss) before income taxes	[1],[2]	(2,571)		(7,168)
Total assets	[3]	331,016		350,589
Corporate And Eliminations
Segment Reporting Information [Line Items]
Income (loss) before income taxes	[1],[2]	(2,152)		1,754
Total assets	[3]	$ 1,602,820		$ 1,034,669

[1] Included in the income (loss) before income taxes for each of the segments are charges and credits related to inventory and other.

[2] Interest income, interest expense, contingent consideration adjustments, pension and post retirement plans actuarial gains and other income (expense) are included in Corporate and Eliminations.

[3] Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets.

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Schedule of Segment Reporting Information by Segment Charges (Detail) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2017	Apr. 03, 2016
Segment Reporting Information [Line Items]
Restructuring and other	$ 2,511	$ 1,587
Contingent consideration adjustment	634	1,173
Universal Robots
Segment Reporting Information [Line Items]
Contingent consideration adjustment	600	1,200
Semiconductor Test
Segment Reporting Information [Line Items]
Cost of revenues-inventory charge	1,319	3,685
Restructuring and other	(265)	414
Corporate And Eliminations
Segment Reporting Information [Line Items]
Restructuring and other	205
Corporate And Eliminations | Universal Robots | Restructuring and other
Segment Reporting Information [Line Items]
Contingent consideration adjustment	634	1,173
Industrial Automation
Segment Reporting Information [Line Items]
Restructuring and other	624
Wireless Test
Segment Reporting Information [Line Items]
Cost of revenues-inventory charge	522	$ 605
Restructuring and other	$ 1,313

XML

Schedule of Segment Reporting Information by Segment Charges and Credit (Detail) $ in Thousands	3 Months Ended
	Apr. 02, 2017 USD ($)
System Test
Segment Reporting Information [Line Items]
Cost of revenues-inventory charge	$ 885

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Shareholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, shares in Millions	3 Months Ended		12 Months Ended
	Apr. 02, 2017	Apr. 03, 2016	Dec. 31, 2017	Jan. 31, 2017	Dec. 31, 2016	Jan. 31, 2016
Stockholders Equity Note Disclosure [Line Items]
Stock repurchase program, authorized amount					$ 500,000,000
Repurchase of stock, value		$ 28,000,000
Cumulative repurchases, shares	1.3
Cumulative repurchases, value	$ 37,700,000
Common stock average price	$ 29.38	$ 18.81
Repurchase of stock, shares		1.5
Dividends payable, amount per share				$ 0.07		$ 0.06
Dividend payment	$ 14,021,000	$ 12,253,000
Minimum | Scenario, Forecast
Stockholders Equity Note Disclosure [Line Items]
Repurchase of stock, value			$ 200,000,000