UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-06462
TERADYNE, INC.
(Exact Name of Registrant as Specified in Its Charter)
MASSACHUSETTS
(State or Other Jurisdiction of
Incorporation or Organization)
600 RIVERPARK DRIVE
NORTH READING, MASSACHUSETTS
(Address of Principal Executive Offices)
04-2272148
(I.R.S. Employer
Identification Number)
01864
(Zip Code)
Registrant’s telephone number, including area code: (978) 370-2700
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, par value $0.125 per share
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes ‘ No È
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 such filing requirements for the past 90 days. Yes È 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 proceeding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405) is not
contained herein, and will not be contained to the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or in any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer È Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ‘ No È
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 28, 2013 was
approximately $3.0 billion based upon the closing price of the registrant’s Common Stock on the New York Stock Exchange
on that date.
The number of shares outstanding of the registrant’s only class of Common Stock as of February 21, 2014 was
193,977,544 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement in connection with its 2014 annual meeting of shareholders are incorporated
by reference into Part III.
TERADYNE, INC.
FORM 10-K
PART I
Item 1:
Business
Teradyne, Inc. (the “Company” or “Teradyne”) was founded in 1960 and is a leading global supplier of
automatic test equipment.
We design, develop, manufacture and sell automatic test systems and solutions used to test semiconductors,
wireless products, hard disk drives and circuit boards in the consumer electronics, wireless, automotive,
industrial, computing, communications and aerospace and defense industries. Our automatic test equipment
products and services include:
•
semiconductor test (“Semiconductor Test”) systems;
• wireless test (“Wireless Test”) systems; and
• military/aerospace (“Mil/Aero”) test instrumentation and systems, storage test (“Storage Test”)
systems, and circuit-board test and inspection (“Commercial Board Test”) systems (collectively these
products represent “System Test”).
We have a broad customer base which includes integrated device manufacturers (“IDMs”), outsourced
semiconductor assembly and test providers (“OSATs”), 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, and aerospace and military contractors.
In 2013, we acquired ZTEC Instruments Inc. (“ZTEC”), a supplier of modular wireless test instruments. The
acquisition of ZTEC expands our Wireless Test segment into the design verification test of wireless components
and chipsets.
In 2011, we acquired LitePoint Corporation (“LitePoint”) to expand our product portfolio of test equipment
in the wireless test sector. LitePoint designs, develops, and supports advanced wireless test solutions for the
development and manufacturing of wireless devices, including smart phones, tablets, notebooks, laptops,
personal computer peripherals, and other Wi-Fi, Bluetooth and cellular enabled devices. LitePoint and ZTEC
represent our Wireless Test segment.
In 2009, we entered the High Speed dynamic random access memory (“DRAM”) testing market with our
UltraFlex-M product. High speed DRAM memory devices are used for data storage and high-end graphics
applications in personal computer and gaming consoles.
In 2009, we also entered the market for hard disk drive test systems with our Neptune product. The Neptune
product line is used to test 2.5 inch hard disk drives for laptops, notebooks and consumer electronic storage
devices. In 2013, we expanded our product line to include 3.5 inch hard disk drives which are used in cloud
computing and other applications.
Investor Information
We are a Massachusetts corporation incorporated on September 23, 1960. We are subject to the
informational requirements of the Securities Exchange Act of 1934 (“Exchange Act”). We file periodic reports,
proxy statements and other information with the Securities and Exchange Commission (“SEC”). Such reports,
proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at
100 F Street, N.E., Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other
information regarding issuers that file documents electronically.
1
You can access financial and other information, including the charters of our Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee, our Corporate Governance
Guidelines and Code of Conduct, by clicking the Investors link on our web site at www.teradyne.com. We make
available, free of charge, copies of our filings with the SEC, including our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act through our web site as soon as reasonably practicable
after filing such material electronically or otherwise furnishing it to the SEC.
Products
Semiconductor Test
We design, manufacture, sell and support Semiconductor Test products and services on a worldwide basis.
The test systems we provide are used both for wafer level and device package testing. These chips are used in
automotive, industrial, communications, consumer, and computer and electronic game applications, among
others. Semiconductor devices span a broad range of functionality, from very simple low-cost devices such as
appliance microcontrollers, operational amplifiers or voltage regulators to complex digital signal processors,
microprocessors and high-density as well as high speed memory devices. Semiconductor Test products and
services are sold to integrated device manufacturers (“IDMs”) that integrate the fabrication of silicon wafers into
their business, “Fabless” companies that outsource the manufacturing of silicon wafers, “Foundries” that cater to
the processing and manufacturing of silicon wafers, and outsourced semiconductor assembly and test providers
(“OSATs”) that provide test and assembly services for the final packaged devices to both Fabless companies and
IDMs. Fabless companies perform the design of integrated circuits without manufacturing capabilities, and use
Foundries for wafer manufacturing and OSATs for test and assembly. These customers obtain the overall benefit
of comprehensively testing devices and reducing the total costs associated with testing by using our
Semiconductor Test systems to:
•
improve and control product quality;
• measure and improve product performance;
•
•
reduce time to market; and
increase production yields.
Our FLEX Test Platform architecture advances our core technologies to produce test equipment that is
designed for high efficiency multi-site testing. Multi-site testing involves the simultaneous testing of many
devices and functions in parallel. Leading semiconductor manufacturers are using multi-site testing to
significantly improve their “Cost of Test” economics. The FLEX Test Platform architecture addresses customer
requirements through the following key capabilities:
1) A high efficiency multi-site architecture that eliminates tester overhead such as instrument setup,
synchronization and data movement, and signal processing;
2) The IG-XL™ software operating system which provides fast program development, including instant
conversion from single to multi-site test; and
3) Broad technology coverage by instruments designed to cover the range of test parameters, coupled with a
universal slot test head design that allows easy test system reconfiguration to address changing test needs.
FLEX Test Platform purchases are being made by IDMs, OSATs, Foundries and Fabless customers. The
FLEX Test Platform has become a widely used test solution at OSATs and test houses by providing versatile testers
that can handle the widest range of devices, allowing OSATs to leverage their capital investments. The broad
consumer, automotive and broadband markets have historically driven most of the device volume growth in the
semiconductor industry. These markets include smart phones, cell phones, tablets, set top boxes, HDTVs, game
controllers, computer graphics, and automotive controllers to name a few. These end use markets continue to be
drivers for the FLEX Test Platform family of products because they require a wide range of technologies and
instrument coverage. The introduction of the UltraFLEX-M tester in 2009 extended the FLEX Test Platform into
the High Speed DRAM testing market. The FLEX Test Platform has an installed base of more than 3,800 systems.
2
Our J750™ test system shares the IG-XL software environment with the family of FLEX Test Platform
systems. The J750 is designed to address the highest volume semiconductor devices, such as microcontrollers,
that are central to the functionality of almost every consumer electronics product, from small appliances to
automotive engine controllers. J750 test systems combine compact packaging, high throughput and ease of
production test. We extended the J750 platform technology to create the IP750 Image Sensor™ test system. The
IP750 is focused on testing image sensor devices used in digital cameras and other imaging products. We
continue to invest in the J750 platform with new instrument releases that bring new capabilities to existing
market segments and expand the J750 platform to new devices that include high end microcontrollers and the
latest generation of cameras. In 2013, we introduced the J750 Ex-HD which includes system enhancements and
new high density instruments that enable the J750 test platform to provide higher test cell productivity. The J750
platform has an installed base of over 4,200 systems.
Our acquisition of Nextest Systems Corporation (“Nextest”) in January of 2008 expanded our product
offerings to include the Magnum test platform. The Magnum products address the requirements of mass
production test of memory devices such as flash memory and DRAM. Flash and DRAM memory are widely used
core building blocks in modern electronic products finding wide application in consumer, industrial, and
computing equipment. Magnum II is the newest member of the family. With test rates up to 800 megabits per
second and a versatile architecture designed for maximal throughput, Magnum II tests flash and DRAM devices,
an important advantage for large memory producers that manufacture both types of memory. The Magnum
platform has an installed base of over 1,500 systems.
Our acquisition of Eagle Test Systems, Inc. (“Eagle Test”) in November of 2008 expanded our product
offerings to include the ETS platform. The ETS platform is used by semiconductor manufacturers and assembly
and test subcontractors, primarily in the low pin count analog/mixed signal discrete markets that cover more cost
sensitive applications. Eagle Test’s proprietary SmartPin™ technology enables multiple semiconductor devices
to be tested simultaneously, or in parallel, on an individual test system, permitting greater test throughput.
Semiconductors tested by Eagle Test’s systems are incorporated into a wide range of products in historically
high-growth markets, including digital cameras, MP3 players, cell phones, video/multimedia products,
automotive electronics, computer peripherals, and notebook and desktop computers. In 2013, we introduced
ETS-88, a high performance multiside production test system designed to test a wide variety of high volume
commodity and precision devices. The ETS platform has an installed base of over 3,200 systems.
Wireless Test
Our acquisition of LitePoint in October of 2011 and ZTEC in October of 2013 expanded our product
offerings in the wireless test industry. LitePoint designs, develops, and supports advanced wireless test
equipment for the development and manufacturing of wireless devices, including smart phones, tablets,
notebooks/laptops, personal computer peripherals, and other Wi-Fi, Bluetooth and cellular enabled devices.
LitePoint collaborates with developers, component manufacturers, and industry leaders to create agile systems
capable of analyzing the entire wireless landscape. Using easy-to-deploy, innovative test methodologies running
on software-controlled module designs, LitePoint’s IQ product line is designed for high-volume, low-cost
production test. LitePoint’s products fall into two categories: cellular and connectivity. ZTEC is a supplier of
modular wireless test instruments for the design verification test of wireless components and chipsets.
Cellular
The LitePoint IQxstream™ is an optimized solution for high-speed testing of GSM, EDGE, W-CDMA,
HSPA+, CDMA2000, and LTE technologies—used for calibration and verification of smartphones, tablets, and
embedded cellular modules. As the industry’s first “multi-DUT” test solution, it greatly increases production
output through the implementation of parallel test methods of multiple devices. IQxstream is complemented by
LitePoint’s IQvector™, a turnkey production-optimized testing package that supports the leading cellular chipset
solutions, which allows manufacturers to ramp volume production in a matter of weeks, rather than months.
3
Connectivity
LitePoint offers a comprehensive range of test equipment for connectivity testing. The IQxel™ test systems
enable testing of the latest Wi-Fi standard—802.11ac—taking wireless data rates beyond the gigabit per second
barrier. The IQxel supports multiple bandwidths and channel configurations, MIMO antenna arrangements,
Bluetooth™ 1.0-4.0, as well as legacy 802.11 a/b/g/n/p modes. It is targeted at manufacturers of networking
equipment, Internet access devices, and embedded modules used in smartphones, tablets, and PCs. The LitePoint
IQ2015™ is a one-box solution for multi-connectivity needs, including Wi-Fi (a/b/g/n), Bluetooth (1.0-4.0), GPS/
GLONASS, FM, WiMAX and ZigBee. It is a preferred choice by manufacturers of smartphones and tablets.
LitePoint continues to deliver and support its legacy products, including IQflex™, IQnxn™, IQ2010™, IQnav™,
and IQview™.
LitePoint IQfactPlus™ is a turnkey, chipset specific testing package, enabling rapid volume manufacturing
with a minimum of engineering effort. IQfact solution can be customized for a specific end product and then
deployed on LitePoint test equipment.
System Test
Our System Test segment is comprised of three business units: Mil/Aero, Storage Test and Commercial
Board Test.
Mil/Aero
We are a leading provider of high-performance test systems, subsystems, instruments and service for the
defense and aerospace markets. Our test products are used to ensure the readiness of military and commercial
aerospace electronics systems. New programs, such as tactical aircraft and missile systems, as well as upgrade
programs, continue to fuel the demand for high performance test systems in this market. Our test products are
well-suited to the demands of defense/aerospace electronics manufacturers and repair depots worldwide. Our
leadership in this market is underscored by our success with major Department of Defense programs across all
U.S. military service branches and many allied defense services worldwide.
Storage Test
The Storage Test business unit addresses the high throughput, automated manufacturing test requirement of
hard disk drive (HDD) manufacturers. Our products address the 2.5 inch and 3.5 inch HDD markets. The 2.5 inch
market is driven by the needs of laptop, ultrabook and enterprise storage products. The 3.5 inch HDD market is
driven by the needs of data centers and cloud storage. Our products lead in addressing customer requirements
related to factory density, thermal performance and vibration isolation.
Commercial Board Test
Our test systems are used by electronics manufacturers worldwide to verify that printed circuit boards are
assembled correctly and operational. Fast, accurate and cost-effective test capabilities are hallmark features of
our In-Circuit-Test (ICT) systems, including the TestStation™ and Spectrum™ product families. In 2013, we
introduced new products to address the growing requirements to deliver increased throughput for high volume
applications.
Discontinued Operations
On March 21, 2011, our Diagnostic Solutions business unit was sold to SPX Corporation for $40.2 million
in cash. This business provided electronic test and diagnostic systems to the automotive OEMs and their major
subcontractors. This business unit was in our System Test segment. Diagnostic Solutions has been reflected as
discontinued operations in the accompanying financial statements.
4
Summary of Net Revenues by Reportable Segment
Our three reportable segments accounted for the following percentages of consolidated net revenues for
each of the last three years:
Semiconductor Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wireless Test
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System Test
71% 68% 77%
17
18
15
11
2
21
2013
2012
2011
100% 100% 100%
Sales and Distribution
In 2013 and 2012, revenues from Apple Inc. accounted for 12% and 10%, respectively, of our consolidated
net revenues. Apple Inc. is a customer of our Semiconductor Test and Wireless Test segments. In 2011, no single
customer accounted for 10% or more of our consolidated net revenues. In each of the years 2013, 2012 and 2011,
our three largest customers in aggregate accounted for 26%, 29% and 19% of our consolidated net revenues,
respectively.
Direct sales to United States government agencies accounted for 3%, 2% and 2% of our consolidated net
revenues in 2013, 2012 and 2011, respectively. Approximately 32%, 15% and 8% of System Test’s revenues in
2013, 2012 and 2011, respectively, were to United States government agencies and 24%, 20% and 17% of
System Test’s revenues in 2013, 2012 and 2011, respectively, were to government contractor customers.
We have sales and service offices located throughout North America, Asia and Europe, as our customers
outside the United States are located primarily in these geographic areas. We sell in these areas predominantly
through a direct sales force. Our manufacturing activities are primarily conducted through subcontractors and
outsourced contract manufacturers with a significant operation concentrated in China.
Sales to customers outside the United States were 84%, 86% and 84% of our consolidated net revenues in
2013, 2012 and 2011, respectively. Sales are attributed to geographic areas based on the location of the customer
site.
Sales to customers outside of the United States that accounted for 10% or more of our consolidated net
revenues in any of the previous three years were as follows:
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
2011
23% 21% 13%
18
19
13
8
6
6
4
6
12
10
10
10
See also “Item 1A: Risk Factors” and Note R: “Operating Segment, Geographic and Significant Customer
Information” in Notes to Consolidated Financial Statements.
Competition
We face significant competition throughout the world in each of our reportable segments. Competitors in the
Semiconductor Test segment include, among others, Advantest Corporation and LTX–Credence Corporation.
Competitors in the System Test segment include, among others, Agilent Technologies, Inc. and Xyratex Ltd,
which announced on December 23, 2013 that it has agreed to be acquired by Seagate Technology plc.
5
Competitors in our Wireless Test segment include, among others, Agilent Technologies, Inc., Aeroflex, Inc.,
Anritsu Company, National Instruments Corporation and Rohde & Schwarz GmbH & Co. KG.
Some of our competitors have substantially greater financial and other resources to pursue engineering,
manufacturing, marketing and distribution of their products. In particular, our largest competitor in the
Semiconductor Test segment spends considerably more than us on research and development which may provide
it with a competitive advantage. We also face competition from emerging Asian equipment companies and from
internal suppliers at several of our customers. Some of our competitors have introduced or announced new
products with certain performance characteristics which may be considered equal or superior to those we
currently offer. We expect our competitors to continue to improve the performance of their current products and
to introduce new products or new technologies that provide improved cost of ownership and performance
characteristics. See also “Item 1A: Risk Factors.”
Backlog
At December 31, 2013 and 2012, our backlog of unfilled orders in our three reportable segments was as
follows:
Semiconductor Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wireless Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$233.8
31.2
96.6
$204.2
29.8
120.0
$361.6
$354.0
2013
2012
(in millions)
Of the backlog at December 31, 2013, approximately 98% of the Semiconductor Test backlog, 94% of
System Test backlog, and 65% of Wireless Test backlog, is expected to be delivered in 2014.
Customers may delay delivery of products or cancel orders suddenly and without significant notice, subject
to possible cancellation penalties. Due to possible customer changes in delivery schedules and cancellation of
orders, our backlog at any particular date is not necessarily indicative of the actual sales for any succeeding
period. Delays in delivery schedules or cancellations of backlog during any particular period could have a
material adverse effect on our business, financial condition or results of operations.
Raw Materials
Our products contain electronic and mechanical components that are provided by a wide range of suppliers.
Some of these components are standard products, while others are manufactured to our specifications. We can
experience occasional delays in obtaining timely delivery of certain items. While the majority of our components
are available from multiple suppliers, certain items are obtained from sole sources. We may experience a
temporary adverse impact if any of our sole source suppliers delay or cease to deliver products.
Intellectual Property and Licenses
The development of our products, both hardware and software, is based in significant part on proprietary
information, our brands and technology. We protect our rights in proprietary information, brands and technology
through various methods, such as:
•
•
•
patents;
copyrights;
trademarks;
6
•
•
•
trade secrets;
standards of business conduct and related business practices; and
technology license agreements, software license agreements, non-disclosure agreements, employment
agreements, and other agreements.
However, these protections might not be effective in all circumstances. Competitors might independently
develop similar technology or exploit our proprietary information and our brands in countries where we lack
enforceable intellectual property rights or where enforcement of such rights through the legal system provides an
insufficient deterrent. Also, intellectual property protections can lapse or be invalidated through appropriate legal
processes. We do not believe that any single piece of intellectual property or proprietary rights is essential to our
business.
Employees
As of December 31, 2013, we employed approximately 3,800 people. Since the inception of our business,
we have experienced no work stoppages or other labor disturbances. We have no collective bargaining contracts.
Engineering and Development Activities
The highly technical nature of our products requires a large and continuing engineering and development
effort. Engineering and development expenditures for the years ended December 31, 2013, 2012 and 2011 were
$264.1 million, $255.9 million, and $201.0 million, respectively. These expenditures accounted for
approximately 18.5%, 15.4%, and 14.1% of our consolidated net revenues in 2013, 2012, and 2011, respectively.
Environmental Affairs
We are subject to various federal, state, and local government laws and regulations relating to the protection
of employee health and safety and the environment. We accrue for all known environmental liabilities when it
becomes probable that we will incur cleanup costs and those costs can reasonably be estimated. Estimated
environmental costs are not expected to materially affect the financial position or results of our operations in
future periods. However, estimates of future costs are subject to change due to protracted cleanup periods and
changing environmental remediation laws and regulations.
7
OUR EXECUTIVE OFFICERS
Pursuant to General Instruction G(3) of Form 10-K, the following table is included in Part I of this Annual
Report on Form 10-K in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders.
The table sets forth the names of all of our executive officers and certain other information relating to their
positions held with Teradyne and other business experience. Our executive officers do not have a specific term of
office but rather serve at the discretion of the Board of Directors.
Executive Officer
Age
Position
Business Experience For The Past 5 Years
Mark E. Jagiela . . . . . . . .
Gregory R. Beecher
. . . .
53 Chief Executive Officer,
President and President
of Semiconductor Test
Chief Executive Officer since February 2014;
President of Teradyne since January 2013;
President of Semiconductor Test since 2003; Vice
President of Teradyne from 2001 to 2013.
56 Vice President, Chief
Financial Officer and
Treasurer
Vice President and Chief Financial Officer of
Teradyne since 2001; Treasurer of Teradyne from
2003 to 2005 and since 2006.
Charles J. Gray . . . . . . . .
52 Vice President, General
Counsel and Secretary
Vice President, General Counsel and Secretary of
Teradyne since April 2009; Vice President and
General Counsel of Sonus Networks, Inc. from
2002 to 2008.
Walter G. Vahey . . . . . . .
49
President of System Test President of System Test since July 2012; Vice
President of Teradyne since 2008; General
Manager of Storage Test since 2008; General
Manager of Commercial Board Test since April
2013; General Manager of Mil/Aero from 2004 to
July 2012.
Item 1A: Risk Factors
Risks Associated with Our Business
The risks described below 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.
Our business is impacted by global and industry-specific economic cycles, which are difficult to predict, and
actions we have taken or may take to offset these cycles may not be sufficient.
Capital equipment providers in the electronics and semiconductor industries, such as Teradyne, have, in the
past, been negatively impacted by both sudden slowdowns in the global economies and recurring cyclicality
within those industries. These cycles have resulted in periods of over-supply; a trend we believe will continue to
occur for newer generations of electronic products. Our business and results of operations depend, in significant
part, upon capital expenditures of manufacturers of semiconductors and other electronics, which in turn depend
upon the current and anticipated market demand for those products. Disruption or deterioration in economic
conditions may reduce customer purchases of our products, thereby reducing our revenues and earnings. In
addition, such adverse changes in economic conditions, and resulting slowdowns in the market for our products,
may, among other things, result in increased price competition for our products, increased risk of excess and
obsolete inventories, increased risk in the collectability of our accounts receivable from our customers, potential
reserves for doubtful accounts and write-offs of accounts receivable, increased risk of restructuring charges, and
higher operating costs as a percentage of revenues, which, in each case and together, adversely affect our
operating results. We are unable to predict the likely duration, frequency and severity of disruptions in financial
8
markets, credit availability, and adverse economic conditions throughout the world, and we cannot ensure that
the level of revenues or new orders for a fiscal quarter will be sustained in subsequent quarters. We have taken
actions to address the effects of general economic variability and recurring industry cyclicality, including
implementing cost control and reduction measures. If our businesses experience further downturns, whether due
to a deterioration in global economic conditions or slowdowns in specific markets we serve, we may need to take
further cost control and reduction measures. We cannot predict whether these measures will be sufficient to
offset global or market-specific disruptions that might affect our test businesses.
In 2013, revenue from our Storage Test business unit was significantly lower than 2012 due to lower hard
disk drive demand from lower shipments of personal computers, a trend which is expected to continue. In
response to this lower demand, during the third quarter of 2013, we implemented a headcount reduction in the
Storage Test business unit. It is possible that we may need to take further cost control and reduction measures
including reducing the number of employees and reducing manufacturing capacity. A prolonged slowdown in
hard disk drive demand may result in increased risk of excess and obsolete inventories, asset write-offs and
restructuring charges.
We are subject to intense competition.
We face significant competition throughout the world in each of our reportable segments. Some of our
competitors have substantial financial and other resources to pursue engineering, manufacturing, marketing and
distribution of their products. In particular, our largest competitor in the Semiconductor Test segment spends
considerably more than us on research and development which may provide it with a competitive advantage. We
also face competition from emerging Asian equipment companies and internal development at several of our
customers. Some of our competitors have introduced or announced new products with certain performance
characteristics which may be considered equal or superior to those we currently offer. We expect our competitors
to continue to improve the performance of their current products and to introduce new products or new
technologies that provide improved cost of ownership and performance characteristics. New product
introductions by competitors could cause a decline in revenues or loss of market acceptance of our products.
The market for our products is concentrated, and our business depends, in part, on obtaining orders from a
few significant customers.
The market for our products is concentrated with a limited number of significant customers accounting for a
substantial portion of the purchases of test equipment. In each of the years 2013, 2012 and 2011, our three largest
customers in aggregate accounted for 26%, 29% and 19% of consolidated net revenues, respectively. In any one
reporting period, a single customer or several customers may contribute even a larger percentage of our
consolidated net revenues. In addition, our ability to increase sales will depend, in part, on our ability to obtain
orders from current or new significant customers. The opportunities to obtain orders from these customers may
be limited, which may impair our ability to grow revenues. We expect that sales of our products will continue to
be concentrated with a limited number of significant customers for the foreseeable future. The loss of a
significant customer or any reduction in orders by these customers, including reductions due to market or
competitive conditions, would likely have a material adverse effect on our business, financial condition or results
of operations.
Failure to realize the estimated sales value of equipment leased to our customers may adversely affect our
results of operations.
We occasionally lease equipment to our customers, typically for a term of one year. We expect that the
volume of leasing transactions and the value of equipment under leases to significantly increase in the near term.
In connection with these equipment leases, the cost of the equipment is recorded as an asset on our balance sheet
and depreciated over an estimated useful life of four years. Realization of the leased equipment’s value depends
on numerous factors including: the technological obsolescence of the leased equipment; the general market
9
conditions at the time of expiration of the lease; the customer’s election to renew the lease; and the cost of
comparable new equipment. Our inability to realize the leased equipment’s value could cause a decrease in
revenue and an increase in asset write-offs which would in each case reduce our operating income.
Our operating results are likely to fluctuate significantly.
Our operating results are affected by a wide variety of factors that could materially adversely affect
revenues or profitability. The following factors could impact future operations:
•
•
•
•
•
•
•
•
•
•
•
a worldwide economic slowdown or disruption in the global financial markets;
competitive pressures on selling prices;
our ability to introduce, and the market acceptance of, new products;
changes in product revenues mix resulting from changes in customer demand;
the level of orders received which can be shipped in a quarter because of the tendency of customers to
wait until late in a quarter to commit to purchase due to capital expenditure approvals and constraints
occurring at the end of a quarter, or the hope of obtaining more favorable pricing from a competitor
seeking the business;
engineering and development investments relating to new product introductions, and the expansion of
manufacturing, outsourcing and engineering operations in Asia;
provisions for excess and obsolete inventory relating to the lack of demand for and the discontinuance
of products;
impairment charges for certain long-lived and intangible assets and goodwill;
the leasing of our products to significant customers;
parallel or multi-site testing could lead to a decrease in the ultimate size of the market for our products;
and
the ability of our suppliers and subcontractors to meet product quality or delivery requirements needed
to satisfy customer orders for our products, especially if product demand increases.
As a result of the foregoing and other factors, we have experienced and may continue to experience material
fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect
our business, financial condition, operating results or stock price.
We are subject to risks of operating internationally.
A significant portion of our total revenues is derived from customers outside the United States. Our
international sales and operations are subject to significant risks and difficulties, including:
•
•
•
•
•
•
•
•
unexpected changes in legal and regulatory requirements affecting international markets;
changes in tariffs and exchange rates;
social, political and economic instability, acts of terrorism and international conflicts;
difficulties in protecting intellectual property;
difficulties in accounts receivable collection;
cultural differences in the conduct of business;
difficulties in staffing and managing international operations; and
compliance with customs regulations.
10
In addition, an increasing portion of our products and the products we purchase from our suppliers are
sourced or manufactured in foreign locations, including China, and a large portion of the devices our products
test are fabricated and tested by foundries and subcontractors in Taiwan, Singapore, China and other parts of
Asia. As a result, we are subject to a number of economic and other risks, particularly during times of political or
financial instability in these regions. Disruption of manufacturing or supply sources in these international
locations could materially adversely impact our ability to fill customer orders and potentially result in lost
business.
If we fail to develop new technologies to adapt to our customers’ needs and if our customers fail to accept our
new products, our revenues will be adversely affected.
We believe that our technological position depends primarily on the technical competence and creative
ability of our engineers. In a rapidly evolving market, such as ours, the development or acquisition of new
technologies, commercialization of those technologies into products and market acceptance and customer
demand for those products are critical to our success. Successful product development or acquisition,
introduction and acceptance depend upon a number of factors, including:
•
•
•
•
•
•
•
•
new product selection;
ability to meet customer requirements;
development of competitive products by competitors;
timely and efficient completion of product design;
timely and efficient implementation of manufacturing and manufacturing processes;
timely remediation of product performance issues, if any, identified during testing;
assembly processes and product performance at customer locations;
differentiation of our products from our competitors’ products;
• management of customer expectations concerning product capabilities and product life cycles;
•
•
ability to attract and retain technical talent; and
innovation that does not infringe on the intellectual property rights of third parties.
If our suppliers do not meet product or delivery requirements, we could have reduced revenues and earnings.
Certain components, including semiconductor chips, may be in short supply from time to time because of
high industry demand or the inability of some vendors to consistently meet our quality or delivery requirements.
Approximately 25% of material purchases require some custom work where having multiple suppliers would be
cost prohibitive. If any of our suppliers were to cancel contracts or commitments or fail to meet the quality or
delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer
orders, have significantly decreased revenues and earnings and be subject to contractual penalties, which would
have a material adverse effect on our business, results of operations and financial condition. In addition, we rely
on contract manufacturers for certain subsystems used in our products, and our ability to meet customer orders
for those products depends upon the timeliness and quality of the work performed by these subcontractors, over
whom we do not exercise any control.
To a certain extent, we are dependent upon the ability of our suppliers and contractors to help meet
increased product or delivery requirements. It may be difficult for certain suppliers to meet delivery requirements
in a period of rapid growth, therefore impacting our ability to meet our customers’ demands.
We rely on the financial strength of our suppliers. There can be no assurance that the loss of suppliers either
as a result of financial viability, bankruptcy or otherwise will not have a material adverse effect on our business,
results of operations or financial condition.
11
Our operations may be adversely impacted if our outsourced contract manufacturers or service providers fail
to perform.
We depend on Flextronics International Ltd. (“Flextronics”) to manufacture and test our FLEX and J750
family of products from its facility in China and on other contract manufacturers to manufacture other products.
If for any reason these contract manufacturers cannot provide us with these products in a timely fashion, or at all,
we may not be able to sell these products to our customers until we enter a similar arrangement with an
alternative contract manufacturer. If we experience a problem with our supply of products from Flextronics or
our other contract manufacturers, it may take us significant time to either manufacture the product or find an
alternate contract manufacturer, which could result in substantial expense and disruption to our business.
We have also outsourced a number of our general and administrative functions, including information
technology, to reputable service providers, many of which are in foreign countries, sometimes impacting
communication with them because of language and time differences. Their presence in foreign countries also
increases the risk they could be exposed to political risk. Additionally, there may be difficulties encountered in
coordinating the outsourced operations with existing functions and operations. If we fail in successfully
coordinating and managing the outsourced service providers, it may cause an adverse effect on our operations
which could have a material adverse effect on our business, results of operations or financial condition.
We may not fully realize the benefits of our acquisitions or strategic alliances.
We may acquire businesses, form strategic alliances or create joint ventures with third parties that we
believe will complement or augment our existing businesses. We may not be able to realize the expected
synergies and cost savings from the integration with our existing operations of other businesses or technologies
that we may acquire. In addition, the integration process for our acquisitions may be complex, costly and time
consuming and include unanticipated issues, expenses and liabilities. We may have difficulty in developing,
manufacturing and marketing the products of a newly acquired company in a manner that enhances the
performance of our combined businesses or product lines and allows us to realize value from expected synergies.
Following an acquisition, we may not achieve the revenues or net income levels that justify the acquisition.
Acquisitions may also result in one-time charges (such as acquisition-related expenses, write-offs or restructuring
charges) or in the future, impairment of goodwill, that adversely affect our operating results. Additionally, we
may fund acquisitions of new businesses, strategic alliances or joint ventures by utilizing our cash, raising debt,
issuing shares of our common stock, or by other means.
The value of our common stock may be impacted by settlement of our convertible notes and exercise of the
warrants issued to the convertible note hedge counterparty.
Upon maturity on March 15, 2014 of our 4.50% Convertible Senior Notes (the “Notes”), the Notes will be
“net share settled,” meaning that holders will receive, for each $1,000 in principal amount of Notes, $1,000 in
cash and a number of shares of our common stock equal to 182.65 (subject to anti-dilution adjustment under
certain circumstances) less a number of shares having $1,000 of value, as determined based on the average
trading price of our common stock over a 25-day trading period from February 5, 2014 to March 12, 2014. We
intend to satisfy this obligation through use of cash and by exercise of our call option agreement we entered into
with Goldman, Sachs & Co. (the “hedge counterparty”) at the time of issuance of the Notes. The hedge
counterparty will subsequently be able to exercise warrants with a strike price of $7.67 (an amount 75% higher
than the closing price of our common stock on March 31, 2009). These warrants will be net share settled, with
approximately 534,000 warrants settled on a daily basis over a 65-day trading period from June 17, 2014 to
September 17, 2014. However, we are not obligated to issue more than 34,526,500 shares of our common stock
upon exercise of the warrants (which amount represented less than 19.99% of our outstanding shares of common
stock as of March 31, 2009, without giving effect to any shares of common stock issuable pursuant to the warrant
transaction). While the convertible note hedge is expected to reduce the potential dilution to our common stock
upon settlement of the Notes, the warrant transaction will separately have a dilutive effect to the extent that the
12
market value per share of our common stock upon exercise of the warrants exceeds the applicable strike price of
the warrants, which could impact the value of our stock. The value of our stock may be further impacted by
actions of the hedge counterparty, including derivative transactions it may have entered into with respect to our
common stock, purchases it may have made of shares of our common stock or other securities, including the
Notes, the settlement of these derivative transactions with respect to our common stock, and/or by selling our
common stock or other securities, including the Notes, in secondary market transactions.
We may incur significant liabilities if we fail to comply with environmental regulations.
We are subject to both domestic and international environmental regulations and statutory strict liability
relating to the use, storage, discharge, site cleanup and disposal of hazardous chemicals used in our
manufacturing processes. If we fail to comply with present and future regulations, or are required to perform site
remediation, we could be subject to future liabilities or cost, including penalties or the suspension of production.
Present and future regulations may also:
•
•
•
•
•
restrict our ability to expand facilities;
restrict our ability to ship certain products;
require us to modify our operations logistics;
require us to acquire costly equipment; or
require us to incur other significant costs and expenses.
Pursuant to present regulations and agreements, we are conducting groundwater and subsurface assessment
and monitoring and are implementing remediation and corrective action plans for facilities located in
Massachusetts and New Hampshire which are no longer conducting manufacturing operations. As of
December 31, 2013, we have not incurred material costs as result of the monitoring and remediation steps taken
at the Massachusetts and New Hampshire sites.
On January 27, 2003, the European Union adopted the following directives: (i) the directive on the
Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the “RoHS
Directive”); and (ii) the directive on Waste Electrical and Electronic Equipment (the “WEEE Directive”). The
WEEE Directive became effective August 13, 2005 and the RoHS Directive became effective on July 6, 2006.
Both the RoHS Directive and the WEEE Directive alter the form and manner in which electronic equipment is
imported, sold and handled in the European Union. Other jurisdictions, such as China, have followed the
European Union’s lead in enacting legislation with respect to hazardous substances and waste removal. Ensuring
compliance with the RoHS Directive, the WEEE Directive and similar legislation in other jurisdictions, and
integrating compliance activities with our suppliers and customers could result in additional costs and disruption
to operations and logistics and thus, could have a negative impact on our business, operations or financial
condition.
We currently are, and in the future may be, subject to litigation that could have an adverse effect on our
business.
From time to time, we may be subject to litigation or other administrative and governmental proceedings
that could require significant management time and resources and cause us to incur expenses and, in the event of
an adverse decision, pay damages in an amount that could have a material adverse effect on our financial position
or results of operations.
Third parties may claim we are infringing their intellectual property and we could suffer significant litigation
costs, licensing expenses or be prevented from selling our products.
We have been sued for patent infringement in the past and receive notifications from time to time that we
may be in violation of patents held by others. An assertion of patent infringement against us, if successful, could
have a material adverse effect on our ability to sell our products or it could force us to seek a license to the
13
intellectual property rights of others or alter such products so that they no longer infringe the intellectual property
rights of others. A license could be very expensive to obtain or may not be available at all. Similarly, changing
our products or processes to avoid infringing the rights of others may be costly or impractical. Additionally,
patent litigation could require a significant use of management resources and involve a lengthy and expensive
defense, even if we eventually prevail. If we do not prevail, we might be forced to pay significant damages,
obtain licenses, modify our products, or stop making our products; each of which could have a material adverse
effect on our financial condition or operating results and cash flows.
If we are unable to protect our intellectual property (“IP”), we may lose a valuable asset or may incur costly
litigation to protect our rights.
We protect the technology that is incorporated in our products in several ways, including through patent,
copyright, and trade secret protection and by contractual agreement. However, even with these protections, our IP
may still be challenged, invalidated or subject to other infringement actions. While we believe that our IP has
value in the aggregate, no single element of our IP is in itself essential. If a significant portion of our IP is
invalidated or ineffective, our business could be materially adversely affected.
We may incur higher tax rates than we expect and may have exposure to additional international tax liabilities
and costs.
We are subject to paying income taxes in the United States and various other countries where we operate.
Our effective tax rate is dependent on where our earnings are generated and the tax regulations and the
interpretation and judgment of administrative tax or revenue entities in the United States and other countries. We
have pursued a global tax strategy which could adversely be affected by our failure to expand operations or
earnings in certain countries, the mix of earnings and tax rates in the countries where we operate, changes to tax
laws or an adverse tax ruling by administrative entities. We are also subject to tax audits in the countries where
we operate. Any material assessment resulting from an audit from an administrative tax or revenue entity could
also negatively affect our financial results.
As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both
the United States and various foreign jurisdictions. In certain foreign jurisdictions, we qualify for tax incentives
and tax holidays based on our ability to meet, on a continuing basis, various tests relating to our employment
levels, research and development expenditures and other qualification requirements in a particular foreign
jurisdiction. While we intend to operate in such a manner to maintain and maximize our tax incentives, no
assurance can be given that we have so qualified or that we will so qualify for any particular year or jurisdiction.
If we fail to qualify and to remain qualified for certain foreign tax incentives and tax holidays, we may be subject
to further taxation or an increase in our effective tax rate which would adversely impact our financial results. In
addition, we may incur additional costs, including headcount expenses, in order to obtain or maintain a foreign
tax incentive in a particular foreign jurisdiction.
We have significant guarantees, indemnification and customer confidentiality obligations.
From time to time, we make guarantees to customers regarding the delivery, price and performance of our
products and guarantee certain indebtedness, performance obligations or lease commitments of our subsidiary
and affiliate companies. We also have agreed to provide indemnification to our officers, directors, employees and
agents, to the extent permitted by law, arising from certain events or occurrences while the officer, director,
employee or agent, is or was serving at our request in such capacity. Additionally, we have confidentiality
obligations to certain customers and if breached would require the payment of significant penalties. If we become
liable under any of these obligations, it could materially and adversely affect our business, financial condition or
operating results. For additional information see Note K: “Commitments and Contingencies—Guarantees and
Indemnification Obligations” in Notes to Consolidated Financial Statements.
14
We may discontinue or reduce our quarterly cash dividend.
In January 2014, our Board of Directors initiated a quarterly dividend program and declared an initial
quarterly cash dividend of $0.06 per share to be paid on June 2, 2014 to shareholders of record as of May 9,
2014. Holders of our Common Stock are only entitled to receive dividends when and if they are declared by our
Board of Directors. Payment of future cash dividends will rest within the discretion of our Board of Directors and
will depend, among other things, upon our earnings, capital requirements and financial condition. While we have
declared a quarterly cash dividend on our Common Stock, we are not required to do so and may reduce or
eliminate our cash dividend in the future. The reduction or elimination of our cash dividend could adversely
affect the market price of our Common Stock.
Our business may suffer if we are unable to attract and retain key employees.
Competition for employees with skills we require is intense in the high technology industry. Our success
will depend on our ability to attract and retain key technical employees. The loss of one or more key or other
employees, a decrease in our ability to attract additional qualified employees, or the delay in hiring key personnel
could each have a material adverse effect on our business, results of operations or financial condition.
New regulations related to conflict minerals may adversely affect us.
The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes new disclosure requirements
regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries
in our products, whether or not these products are manufactured by third parties. This new requirement could
affect the pricing, sourcing and availability of minerals used in the manufacture of components we use in our
products. In addition, there will be additional costs associated with complying with the disclosure requirements,
such as costs related to determining the source of any conflict minerals used in our products. Our supply chain is
complex and we may be unable to verify the origins for all metals used in our products. As a result, we may be
unable to certify that our products are conflict free.
Our operations, and the operations of our customers and suppliers, are subject to risks of natural catastrophic
events, widespread health epidemics, acts of war, terrorist attacks and the threat of domestic and international
terrorist attacks, any one of which could result in cancellation of orders, delays in deliveries or other business
activities, or loss of customers and could negatively affect our business and results of operations.
Our business is international in nature, with our sales, service and administrative personnel and our
customers and suppliers located in numerous countries throughout the world. Our operations, and those of our
customers and suppliers, are subject to disruption for a variety of reasons, including work stoppages, acts of war,
terrorism, health epidemics, fires, earthquakes, hurricanes, volcanic eruptions, energy shortages,
telecommunication failures, tsunamis, flooding or other natural disasters. Such disruption could materially
increase our costs and expenses as well as cause delays in, among other things, shipments of products to our
customers, our ability to perform services requested by our customers, or the installation and acceptance of our
products at customer sites. Any of these conditions could have a material adverse effect on our business,
financial conditions or results of operations.
A breach of our operational or security systems could negatively affect our business and results of operations.
A failure in or a breach of our operational or security systems or infrastructure, or those of our suppliers and
other service providers, including as a result of cyber attacks, could disrupt our business, result in the disclosure
or misuse of proprietary or confidential information, damage our reputation, cause losses and increase our costs.
Provisions of our charter and by-laws and Massachusetts law make a takeover of Teradyne more difficult.
There are provisions in our basic corporate documents and under Massachusetts law that could discourage,
delay or prevent a change in control, even if a change in control may be regarded as beneficial to some or all of
our stockholders.
15
Item 1B: Unresolved Staff Comments
None.
Item 2:
Properties
The following table provides information as to our principal facilities:
Location
Properties Owned:
Operating Segment
Major
Activity+
Approximate
Square Feet of
Floor Space
North Reading, Massachusetts . . . . Semiconductor Test, System Test &
Agoura Hills, California . . . . . . . . Semiconductor Test
Kumamoto, Japan . . . . . . . . . . . . . Semiconductor Test
Corporate
Properties Leased:
Cebu, Philippines . . . . . . . . . . . . . . Semiconductor Test & Corporate
San Jose, California . . . . . . . . . . . . Semiconductor Test
Buffalo Grove, Illinois . . . . . . . . . . Semiconductor Test
Sunnyvale, California . . . . . . . . . . Wireless Test
Shanghai, China . . . . . . . . . . . . . . . Semiconductor Test & System Test
Hsinchu, Taiwan . . . . . . . . . . . . . . Semiconductor Test & System Test
Heredia, Costa Rica . . . . . . . . . . . . Semiconductor Test
Seoul, Korea . . . . . . . . . . . . . . . . . . Semiconductor Test
Singapore, Singapore . . . . . . . . . . . Semiconductor Test & Corporate
1-2-3-4-5-6 422,000
3-5 120,000
79,000
2-3-4-5
621,000
1-2-6 135,000
2-3-4-5 128,000
95,000
2-3-4-5
75,000
2-3-4-5-6
44,000
2-5-6
43,000
5
42,000
2-6
28,000
5
23,000
2-3-5
613,000
+ Major activities have been separated into the following categories: 1. Corporate Administration, 2. Sales
Support and Manufacturing, 3. Engineering and Development, 4. Marketing, 5. Sales and Administration,
6. Storage and Distribution.
Item 3:
Legal Proceedings
We are subject to legal proceedings, claims and investigations that arise in the ordinary course of business
such as, but not limited to, patent, employment, commercial and environmental matters. We believe that we have
meritorious defenses against all pending claims and intend to vigorously contest them. While it is not possible to
predict or determine the outcomes of any pending claims or to provide possible ranges of losses that may arise,
we believe, other than as set forth herein, the potential losses associated with all of these actions are unlikely to
have a material adverse effect on our business, financial position or results of operations.
On May 17, 2013, Boston Semi Equipment (“BSE”) filed a complaint against us for antitrust violations and
unfair business practices alleging that we excluded BSE from competing in the market for the sale of
reconfigured Teradyne equipment and the market for the repair of Teradyne equipment. BSE sought unspecified
damages and an injunction. We filed a motion to dismiss the complaint. On October 18, 2013, the parties settled
the litigation. The settlement included no monetary consideration. The settlement did not and will not have a
material impact on our consolidated financial results.
Item 4: Mine Safety Disclosure: Not Applicable
16
PART II
Item 5: Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities
The following table shows the market range for our common stock based on reported sales price on the
New York Stock Exchange.
Period
2012
2013
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The number of record holders of our common stock at February 21, 2014 was 2,340.
High
Low
$17.50
18.01
16.49
16.90
$17.66
18.57
18.73
17.90
$13.53
13.18
12.95
13.40
$15.44
14.05
15.22
15.75
In January 2014, our Board of Directors initiated a quarterly dividend program and declared an initial
quarterly cash dividend of $0.06 per share to be paid on June 2, 2014 to shareholders of record as of May 9,
2014.
See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for
information on our equity compensation plans and our performance graph.
In November 2010, the Board of Directors authorized a stock repurchase program for up to $200 million.
The cumulative repurchases as of December 31, 2013 totaled 2.6 million shares of common stock for $31.2
million at an average price of $11.84 per share.
The following table includes information with respect to repurchases we made of our common stock during
the quarter ended December 31, 2013 (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
September 30, 2013 – October 27, 2013 . . . .
October 28, 2013 – November 24, 2013 . . . .
November 25, 2013 – December 31, 2013 . . .
—
—
—
$—
$—
$—
—
—
—
$168,825
$168,825
$168,825
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.
17
Item 6:
Selected Financial Data
Consolidated Statement of Operations
Data (1)(2)(3)(4)(5):
Years Ended December 31,
2013
2012
2011
2010
2009
(dollars in thousands, except per share amounts)
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $1,427,933 $1,656,750 $1,429,061 $1,566,162 $ 777,425
Income (loss) from continuing operations . . .
(129,520)
164,947
. . . . . . . . . . . . . . . . . . . . . . $ 164,947 $ 217,049 $ 369,873 $ 384,820 $ (127,994)
Net income (loss)
Income (loss) from continuing
217,049
379,692
343,957
operations per common share—basic . . . . . $
0.86 $
1.16 $
1.86 $
2.11 $
(0.75)
Income (loss) from continuing
operations per common share—diluted . . . $
0.70 $
0.94 $
1.52 $
1.73 $
(0.75)
Net income (loss) per common
share—basic . . . . . . . . . . . . . . . . . . . . . . . . $
0.86 $
1.16 $
2.00 $
2.14 $
(0.74)
Net income (loss) per common
share—diluted . . . . . . . . . . . . . . . . . . . . . . . $
0.70 $
0.94 $
1.63 $
1.75 $
(0.74)
Consolidated Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,629,824 $2,429,345 $2,188,639 $1,810,355 $1,235,337
2,157
186,663
Short-term debt obligations . . . . . . . . . . . . . . .
2,573
— $ 171,059 $ 159,956 $ 150,182 $ 141,100
Long-term debt obligations . . . . . . . . . . . . . . . $
2,328
2,450
(1) The Consolidated Statement of Operations Data for the year ended December 31, 2013 includes
$34.2 million of a gain from the sale of an equity investment.
(2) As a result of the divestiture of Diagnostic Test Solutions in 2011, we are reporting this business unit as
discontinued operations for all periods presented.
(3) The Consolidated Statement of Operations Data for the year ended December 31, 2011 includes the results
of operations of LitePoint from October 5, 2011.
(4) The Consolidated Statement of Operations Data for the year ended December 31, 2011 includes a tax
benefit of $129.5 million due primarily to the release of the deferred tax valuation allowance.
(5) The Consolidated Statement of Operations Data for the year ended December 31, 2009 includes
$32.6 million of severance charges and $3.7 million of facilities charges related to the early exit of leased
facilities.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Statements in this Annual Report on Form 10-K which are not historical facts, so called “forward looking
statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934,
as amended. Investors are cautioned that all forward looking statements involve risks and uncertainties, including
those detailed in Teradyne’s filings with the Securities and Exchange Commission. 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 automatic test equipment. We design, develop, manufacture and sell
automatic test systems and solutions used to test semiconductors, wireless products, hard disk drives and circuit
boards in the consumer electronics, wireless, automotive, industrial, computing, communications and aerospace
and defense industries. Our automatic test equipment products and services include:
•
semiconductor test (“Semiconductor Test”) systems;
18
• wireless test (“Wireless Test”) systems; and
• military/aerospace (“Mil/Aero”) test instrumentation and systems, storage test (“Storage Test”)
systems, circuit-board test and inspection (“Commercial Board Test”) systems (collectively these
products represent “System Test”).
We have a broad customer base which includes integrated device manufacturers (“IDMs”), outsourced
semiconductor assembly and test providers (“OSATs”), 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.
In 2013, we acquired ZTEC Instruments Inc. (“ZTEC”), a supplier of modular wireless test instruments. The
acquisition of ZTEC expands our Wireless Test segment into the design verification test of wireless components
and chipsets.
In 2011, we acquired LitePoint Corporation (“LitePoint”) to expand our product portfolio of test equipment
in the wireless test sector. LitePoint designs, develops, and supports advanced wireless test solutions for the
development and manufacturing of wireless devices, including smart phones, tablets, notebooks, laptops,
personal computer peripherals, and other Wi-Fi, Bluetooth and cellular enabled devices. LitePoint and ZTEC
represent our Wireless Test segment.
We believe our acquisitions of LitePoint and ZTEC have enhanced our opportunities for growth. We will
continue to invest in our business to expand further our addressable markets while tightly managing our costs.
The sales of our products and services are dependent, to a large degree, on customers who are subject to
cyclical trends in the demand for their products. These cyclical periods have had, and will continue to have, a
significant effect on our business since our customers often delay or accelerate purchases in reaction to changes
in their businesses and to demand fluctuations in the semiconductor 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 in recent years have generally affected the semiconductor and
electronics test equipment and services industries more significantly than the overall capital equipment sector.
In 2013, revenue from our Storage Test business unit was significantly lower than 2012 due to lower hard
disk drive demand from lower shipments of personal computers, a trend which is expected to continue. In
response to this lower demand, during the third quarter of 2013, we implemented a headcount reduction in the
Storage Test business unit. It is possible that we may need to take further cost control and reduction measures
including reducing the number of employees and reducing manufacturing capacity. A prolonged slowdown in
hard disk drive demand may result in increased risk of excess and obsolete inventories, asset write-offs and
restructuring charges.
On March 21, 2011, we completed the sale of our Diagnostic Solutions business unit, which was included in
the System Test segment, to SPX Corporation for $40.2 million in cash. We sold this business as its growth
potential as a stand-alone business was significantly less than if it was part of a larger automotive supplier. The
financial information for Diagnostic Solutions has been reclassified to discontinued operations.
Critical Accounting Policies and Estimates
We have identified the policies discussed below as critical to understanding our business and our results of
operations and financial condition. The impact and any associated risks related to these policies on our business
operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of
Operations where such policies affect our reported and expected financial results.
19
Revenue Recognition
We recognize revenues when there is persuasive evidence of an arrangement, title and risk of loss have
passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and
collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers
upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass upon
destination, acceptance or cash payment, we defer revenue recognition until such events occur.
Our equipment has non-software and embedded software components that function together to deliver the
equipment’s essential functionality. Revenue is recognized upon shipment or at delivery destination point,
provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require us to
perform tests of the product to ensure that performance meets the published product specifications or customer
requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be
demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. We also defer
the portion of the sales price that is not due until acceptance, which represents deferred profit.
For multiple element arrangements, we allocate revenue to all deliverables based on their relative selling
prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenue to
deliverables as follows: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party
evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). For a delivered item to be
considered a separate unit, the delivered item must have value to the customer on a standalone basis and the
delivery or performance of the undelivered item must be considered probable and substantially in our control.
Our post-shipment obligations include installation, training services, one-year standard warranties, and
extended warranties. Installation does not alter the product capabilities, does not require specialized skills or
tools and can be performed by the customers or other vendors. Installation is typically provided within five days
of product shipment and is completed within one to two days thereafter. Training services are optional and do not
affect the customers’ ability to use the product. We defer revenue for the selling price of installation and training.
Extended warranties constitute warranty obligations beyond one year and we defer revenue in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-20,
“Separately Priced Extended Warranty and Product Maintenance Contracts” and ASC 605-25, “Revenue
Recognition Multiple-Element Arrangements.” Service revenue is recognized over the contractual period or as
services are performed.
Our products are generally subject to warranty and the related costs of the warranty are provided for in cost
of revenues when product revenue is recognized. We classify shipping and handling costs in cost of revenue.
We do not provide our customers with contractual rights of return for any of our products.
Retirement and Postretirement Plans
Effective January 1, 2012, we changed the method of recognizing actuarial gains and losses for our defined
benefit pension plans and postretirement benefit plan and calculating the expected return on plan assets for our
defined benefit pension plans. Historically, we recognized net actuarial gains and losses in accumulated other
comprehensive income within shareholders’ equity on our consolidated balance sheets on an annual basis and
amortized them into operating results over the average remaining years of service of the plan participants, to the
extent such gains and losses were outside of a range (“corridor”). We elected to immediately recognize net
actuarial gains and losses and the change in the fair value of the plan assets in our operating results in the year in
which they occur or upon any interim remeasurement of the plans. In addition, we used to calculate the expected
return on plan assets using a calculated market-related value of plan assets. Effective January 1, 2012, we elected
to calculate the expected return on plan assets using the fair value of the plan assets.
We believe that this new method is preferable as it eliminates the delay in recognizing gains and losses in
our operating results and it will improve the transparency by faster recognition of the effects of economic and
20
interest rate trends on plan obligations and investments. These actuarial gains and losses are generally measured
annually as of December 31 and, accordingly, will be recorded during the fourth quarter of each year or upon any
interim remeasurement of the plans. In accordance with Financial Accounting Standards Board Accounting
Standards Codification Topic 250, Accounting Changes and Error Corrections, all prior periods presented in this
Annual Report on Form 10-K have been adjusted to apply the new accounting method retrospectively.
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. On a quarterly
basis, we use consistent methodologies to evaluate all inventories for net realizable value. We record a provision
for both excess and obsolete inventory when such write-downs or write-offs are identified through the quarterly
review process. The inventory valuation is based upon assumptions about future demand, product mix, and
possible alternative uses.
Equity Incentive and Stock Purchase Plans
Stock-based compensation expense is based on the grant-date fair value estimated in accordance with the
provisions of ASC 718 “Compensation—Stock Compensation”. As required by ASC 718, we have made an
estimate of expected forfeitures and are recognizing compensation costs only for those stock-based compensation
awards expected to vest.
Income Taxes
On a quarterly basis, we evaluate the realizability of our deferred tax assets by jurisdiction and assess the
need for a valuation allowance. We consider the probability of future taxable income and our historical
profitability, among other factors, in assessing the amount of the realizability of our deferred tax assets. As a
result of this review, undertaken at December 31, 2002, we concluded under applicable accounting criteria that it
was more likely than not that our deferred tax assets would not be realized and established a valuation allowance
in several jurisdictions, most notably the United States. At December 31, 2011, we reassessed this judgment and
concluded that it is more likely than not that a substantial majority of our deferred tax assets will be realized
through consideration of both the positive and negative evidence. The evidence consisted primarily of our three
year U.S. historical cumulative profitability, projected future taxable income, forecasted utilization of the
deferred tax assets and the fourth quarter of 2011 acquisition of LitePoint offset by the volatility of the industries
we operate in, primarily the semiconductor industry. As such, we reduced the valuation allowance by $190.2
million, which was recorded as a tax benefit in the year ended December 31, 2011. At December 31, 2013 and
2012, we maintained a valuation allowance for certain deferred tax assets of $40.4 million and $55.4 million,
respectively, primarily related to state net operating losses and state tax credit carryforwards, due to uncertainty
regarding their realization. Adjustments could be required in the future if we estimate that the amount of deferred
tax assets to be realized is more or less than the net amount we have recorded.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retrospectively
reinstated the research and development tax credit for 2012 and extended it through December 31, 2013. As a
result, in the first quarter of 2013, we recorded a discrete benefit related to 2012 U.S. federal research and
development tax credit of approximately $6.7 million.
Investments
We account for our investments in debt and equity securities in accordance with the provisions of ASC 320-
10, “Investments—Debt and Equity Securities.” On a quarterly basis, we review our 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;
21
• 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.
Goodwill, Intangible and Long-Lived Assets
We assess the impairment of intangible and long-lived assets whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Factors we consider important in the determination of an
impairment include significant underperformance relative to historical or projected future operating results,
significant changes in the manner that we use the acquired asset and significant negative industry or economic
trends. There were no events or circumstances indicating that the carrying value may not be recoverable in 2013,
2012 or 2011. When we determine that the carrying value of intangibles and long-lived assets may not be
recoverable based upon the existence of one or more of the above indicators of impairment, we measure any
impairment based on a projected discounted cash flow method using a discount rate commensurate with the
associated risks. We assess goodwill for impairment at least annually in the fourth quarter, as of December 31, on
a reporting unit basis, or more frequently, when events and circumstances occur indicating that the recorded
goodwill may be impaired. If the book value of a reporting unit exceeds its fair value, the implied fair value of
goodwill is compared with the carrying amount of goodwill. If the carrying amount of goodwill exceeds the
implied fair value, an impairment loss is recorded in an amount equal to that excess. No goodwill impairment
was identified in 2013, 2012 or 2011.
22
SELECTED RELATIONSHIPS WITHIN THE CONSOLIDATED
STATEMENTS OF OPERATIONS
Year Ended December 31,
2013
2012
2011
Percentage of net revenues:
Net revenues:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80.9%
19.1
83.5% 81.2%
16.5
18.8
Total net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0
100.0
100.0
Cost of revenues:
Cost of products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
Operating expenses:
Engineering and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired intangible assets amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations before income taxes . . . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Gain on disposal of discontinued operations (net of tax)
34.9
8.4
43.4
56.6
18.5
19.6
5.1
0.1
43.3
13.4
0.3
(0.5)
14.1
2.6
11.6
—
—
—
—
38.8
7.7
46.5
53.5
15.4
16.7
4.4
(0.5)
36.1
17.3
0.2
1.5
16.1
3.0
13.1
—
—
—
—
40.5
9.7
50.2
49.8
14.1
16.2
2.8
0.5
33.6
16.2
0.5
1.7
15.0
(9.1)
24.1
0.1
0.0
0.1
1.7
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.6%
13.1% 25.9%
Results of Operations
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:
Semiconductor Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wireless Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.0
0.7
1.0
1.0
1.0
1.1
1.6
1.1
1.2
0.7
1.9
1.3
Three months ended December 31,
2013
2012
2011
23
Revenues
Net revenues for our three reportable segments were as follows:
2013
2012
2011
2012-2013
Dollar
Change
2011-2012
Dollar
Change
Semiconductor Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wireless Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,023.0
251.9
153.0
$1,127.7
286.4
242.7
(in millions)
$1,106.2
28.4
294.5
$(104.7)
(34.5)
(89.7)
$ 21.5
258.0
(51.8)
$1,427.9
$1,656.8
$1,429.1
$(228.9)
$227.7
The decrease in Semiconductor Test revenues of $104.7 million or approximately 9% from 2012 to 2013
was primarily due to a decrease in system-on-a-chip (“SOC”) test product sales because of a lower application
processor market, which is a key sector of the mobility applications market, in 2013 compared to 2012, partially
offset by higher memory system sales.
The increase in Semiconductor Test revenues of $21.5 million or approximately 2% from 2011 to 2012 was
primarily due to an increase in SOC test product sales for mobility applications, partially offset by a decrease in
memory system sales.
The decrease in Wireless Test revenues of $34.5 million or approximately 12% from 2012 to 2013 was
primarily due to lower connectivity volume, partially offset by higher cellular volume.
The acquisition of ZTEC, which was completed in October of 2013, added $0.4 million of revenues in 2013.
The acquisition of LitePoint, which was completed in October of 2011, added $286.4 million and $28.4 million
of revenues in 2012 and 2011, respectively. LitePoint and ZTEC represent our Wireless Test segment.
The decrease in System Test revenues of $89.7 million or approximately 37% from 2012 to 2013 was
primarily due to lower product volume in Storage Test systems. The decrease in Storage Test system sales was
due to lower hard disk drive demand primarily from lower shipments of personal computers, a trend which is
expected to continue.
The decrease in System Test revenues of $51.8 million or approximately 18% from 2011 to 2012 was
primarily due to lower product volume in both Storage Test systems and Commercial Board Test systems,
partially offset by an increase in Mil/Aero system and instrument sales.
Our three reportable segments accounted for the following percentages of consolidated net revenues for
each of the last three years:
Semiconductor Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wireless Test
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System Test
71% 68% 77%
17
18
15
11
2
21
2013
2012
2011
100% 100% 100%
24
Net revenues by country as a percentage of total revenues were as follows (1):
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
2011
23% 21% 13%
18
19
14
16
13
8
6
8
5
6
4
6
6
6
7
4
5
2
1
2
12
16
10
6
7
10
10
9
6
1
100% 100% 100%
(1) Revenues attributable to a country are based on location of customer site.
The breakout of product and service revenues for the past three years was as follows:
2013
2012
2011
2012-2013
Dollar
Change
2011-2012
Dollar
Change
Product Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,154.9
273.0
$1,383.6
273.2
(in millions)
$1,160.2
268.9
$(228.7)
(0.2)
$223.4
4.3
$1,427.9
$1,656.8
$1,429.1
$(228.9)
$227.7
Our product revenues decreased $228.7 million or 17% in 2013 from 2012 primarily due to a decrease in
SOC test product sales because of a lower application processor market and due to lower volume in Storage Test
systems.
Service revenues, which are derived from the servicing of our installed base of products and includes
equipment maintenance contracts, repairs, extended warranties, parts sales, and applications support, decreased
$0.2 million or 0.1%.
Our product revenues increased $223.4 million or 19% in 2012 from 2011 primarily due to $254.6 million
of product revenues from the addition of LitePoint, an increase in SOC Semiconductor Test products for mobility
applications and an increase in Mil/Aero systems and instruments. The increase was partially offset by a decrease
in sales in our memory test and Storage Test systems. Service revenues increased $4.3 million or 2%.
In 2013 and 2012, revenues from one customer accounted for 12% and 10%, respectively, of our
consolidated net revenues. In 2011, no single customer accounted for 10% or more of our consolidated net
revenues. In each of the years 2013, 2012 and 2011, our three largest customers in aggregate accounted for 26%,
29% and 19% of our consolidated net revenues, respectively.
Gross Profit
2013
2012
2011
2012-2013
Dollar /
Point
Change
2011-2012
Dollar /
Point
Change
(dollars in millions)
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of Total Net Revenues . . . . . . . . . . . . . . . . . . . . . . . . . .
$808.8
$886.0
$711.8
56.6% 53.5% 49.8%
$(77.2)
3.1
$174.2
3.7
25
Gross profit as a percent of revenue increased from 2012 to 2013 by 3.1 percentage points. This increase
was a result of an increase of 1.7 points related to a favorable product mix in SOC Semiconductor Test and lower
Storage Test system sales compared to 2012, an increase of 1.1 points due to pension income in 2013 compared
to pension expense in 2012, an increase of 1.1 points due to lower excess and obsolete inventory provisions and
increased sales of previously reserved inventory, and an increase of 0.4 points as a result of no purchase
accounting inventory step-up in 2013, partially offset by a decrease of 1.4 points due to lower sales volume
across all segments.
Gross profit as a percentage of revenues increased from 2011 to 2012 by 3.7 percentage points. This
increase was a result of an increase of 4.6 points primarily due to the addition of LitePoint, partially offset by a
decrease of 1.2 points due to higher inventory provisions.
The breakout of product and service gross profit was as follows:
2013
2012
2011
2012-2013
Dollar /
Point
Change
2011-2012
Dollar /
Point
Change
(dollars in millions)
Product Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of Product Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
$655.9
$740.7
$581.2
56.8% 53.5% 50.1%
Service Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of Service Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
$152.9
$145.3
$130.6
56.0% 53.2% 48.6%
$(84.8)
3.3
$ 7.6
2.8
$159.5
3.4
$ 14.7
4.6
We assess the carrying value of our inventory on a quarterly basis by estimating future demand and
comparing that demand against on-hand and on-order inventory positions. Forecasted revenue information is
obtained from the sales and marketing groups and incorporates factors such as backlog and future product
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, is written-down to estimated net realizable value.
During the year ended December 31, 2013, we recorded an inventory provision of $16.6 million included in
cost of revenues, due to the following factors:
— A charge of $12.2 million due to downward revisions to previously forecasted demand levels, of which
$5.2 million was in Semiconductor Test, $4.2 million was in System Test and $2.8 million was in
Wireless Test; and
— A $4.4 million inventory write-down as a result of product transition in Wireless Test.
During the year ended December 31, 2012, we recorded an inventory provision of $26.8 million included in
cost of revenues, due to the following factors:
— A decline in demand compared to previously forecasted demand levels for prior generation Nextest
Magnum testers resulted in an inventory provision of $12.0 million in Semiconductor Test;
— A $5.3 million inventory write-down as a result of product transition related to the Flex Test Platform
in Semiconductor Test;
— A $3.9 million inventory write-down as a result of product transition in Wireless Test.; and
— The remainder of the charge of $5.6 million primarily reflects downward revisions to previously
forecasted demand levels, of which $4.3 million was in System Test, $0.2 million in Wireless Test and
$1.1 million in Semiconductor Test.
During the year ended December 31, 2011, we recorded an inventory provision of $11.6 million included in
cost of revenues, due to the downward revisions to previously forecasted demand levels. Of the $11.6 million of
total excess and obsolete provisions recorded in 2011, $10.4 million was related to Semiconductor Test primarily
due to product transition, $1.1 million was in System Test, and $0.1 million was in Wireless Test.
26
During the years ended December 31, 2013, 2012 and 2011, we scrapped $35.3 million, $9.6 million and
$9.2 million of inventory, respectively, and sold $9.8 million, $4.3 million and $8.1 million of previously
written-down or written-off inventory, respectively. As of December 31, 2013, we had inventory related reserves
for amounts which had been written-down or written-off totaling $115.9 million. We have no pre-determined
timeline to scrap the remaining inventory.
Engineering and Development
Engineering and development expenses were as follows:
2013
2012
2011
2012-2013
Change
2011-2012
Change
(dollars in millions)
Engineering and Development . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of Total Net Revenues . . . . . . . . . . . . . . . . . . . . . . . . . .
$264.1
$255.9
$201.0
$8.2
$54.9
18.5% 15.4% 14.1%
The increase of $8.2 million in engineering and development expenses from 2012 to 2013 was due primarily
to increased spending in Semiconductor Test and Wireless Test, partially offset by pension income in 2013
compared to pension expense in 2012 and lower variable compensation in 2013.
The increase of $54.9 million in engineering and development expenses from 2011 to 2012 was due
primarily to additional costs of $37.1 million related to LitePoint and increased spending in Semiconductor Test.
Selling and Administrative
Selling and administrative expenses were as follows:
2013
2012
2011
2012-2013
Change
2011-2012
Change
(dollars in millions)
Selling and Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of Total Net Revenues . . . . . . . . . . . . . . . . . . . . . . . . . .
$279.6
$277.0
$232.1
$2.6
$44.9
19.6% 16.7% 16.2%
The increase of $2.6 million in selling and administrative expenses from 2012 to 2013 was due primarily to
increased sales and marketing spending in Semiconductor Test and Wireless Test, partially offset by pension
income in 2013 compared to pension expense in 2012.
The increase of $44.9 million in selling and administrative expenses from 2011 to 2012 was due primarily to
additional costs of $49.7 million related to LitePoint.
Acquired Intangible Assets Amortization
Acquired intangible assets amortization expense was as follows:
2013
2012
2011
2012-2013
Change
2011-2012
Change
(dollars in millions)
Acquired Intangible Assets Amortization . . . . . . . . . . . . . . . . . . . .
Percent of Total Net Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$72.4
$73.5
$40.5
$(1.1)
$33.0
5.1% 4.4% 2.8%
Acquired intangible assets amortization expense decreased from 2012 to 2013 due to intangible assets that
became fully amortized during the year, partially offset by increased amortization expense due to the ZTEC
acquisition. The increase of $33.0 million from 2011 to 2012 was due to the LitePoint acquisition.
27
Restructuring and Other
Restructuring
The remaining accrual for severance and benefits of $0.5 million is reflected in the accrued employees’
compensation and withholdings on the balance sheet and is expected to be paid by June 2014.
During the year ended December 31, 2013, we recorded $1.9 million of severance charges related to
headcount reductions of 48 people primarily in System Test and Semiconductor Test and a $(0.4) million credit
in Corporate related to a change in the estimated exit costs related to a leased facility.
During the year ended December 31, 2012, we recorded $1.0 million of severance charges related to
headcount reductions of 19 people primarily in System Test and Semiconductor Test.
During the year ended December 31, 2011, we recorded $1.2 million of charges related to headcount
reductions of 7 people in Semiconductor Test and a $(0.5) million credit primarily in System Test related to a
change in the estimated exit costs related to leased facilities.
Other
During the year ended December 31, 2012, due to a decrease in specified new product revenue through the
December 31, 2012 earn-out period end date, we recorded an $8.8 million fair value adjustment to decrease the
LitePoint acquisition contingent consideration.
During the year ended December 31, 2011, we recorded $5.8 million of other charges of which $4.6 million
related to LitePoint acquisition costs and $1.2 million related to non-U.S. pension settlements.
Interest and Other
2013
2012
2011
2012-2013
Change
2011-2012
Change
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Expense and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4.1
$ 4.1
$(7.1) $25.5
(in millions)
$ 6.6
$23.7
$ —
$(32.6)
$(2.5)
$ 1.8
Interest income decreased by $2.5 million, from $6.6 million in 2011 to $4.1 million in 2012, due to a
decrease in marketable securities which were used to fund the LitePoint acquisition in 2011.
Interest expense and other decreased by $32.6 million, from $25.5 million in net expense in 2012 to $(7.1)
million in net other income in 2013, due primarily to a $34.2 million gain from the sale of an equity investment,
partially offset by higher interest expense from increased convertible debt discount amortization.
Interest expense and other increased by $1.8 million, from $23.7 million in 2011 to $25.5 million in 2012,
due primarily to higher interest expense from increased convertible debt discount amortization.
Income (Loss) from Continuing Operations before Income Taxes
2013
2012
2011
2012-2013
Change
2011-2012
Change
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Semiconductor Test
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wireless Test
System Test
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$153.8
23.1
3.1
21.9
$186.0
83.1
34.2
(37.3)
(in millions)
$219.6
(20.6)
53.3
(37.9)
$(32.2)
(60.0)
(31.1)
59.2
$ (33.6)
103.7
(19.1)
0.6
$201.9
$266.0
$214.4
$(64.1)
$ 51.6
28
The decrease in income from continuing operations before income taxes from 2012 to 2013 was primarily
due to lower revenue in 2013 compared to 2012, a $9.8 million increase in restructuring and other costs, partially
offset by a $34.2 million gain from the sale of an equity investment.
The increase in income from continuing operations before income taxes from 2011 to 2012 was primarily
due to higher revenue in 2012 compared to 2011 and a $14.5 million decrease in restructuring and other costs,
partially offset by a $99.8 million increase in engineering and development and selling and administrative
expenses and a $33.0 million increase in intangible assets amortization.
Income Taxes
The income tax expense from continuing operations for 2013 totaled $37.0 million compared to $48.9
million for 2012. The effective tax rate for 2013 and 2012 was approximately 18%. The decrease in income tax
expense from 2012 to 2013 was due to the reinstatement of the U.S. research and development tax credit in 2013
for fiscal years 2013 and 2012, lower pre-tax income, partially offset by higher tax expense for uncertain tax
positions and state taxes. U.S. research and development tax credits provided a 7.2% reduction to the 2013 U.S.
statutory federal tax rate of 35.0%. The research and development tax credit expired at the end of 2013; therefore
if the credit is not legislatively re-enacted there could be an unfavorable impact on Teradyne’s 2014 effective
income tax rate. The income tax benefit from continuing operations for 2011 totaled $129.5 million primarily due
to the reversal of our deferred tax asset valuation allowance. We considered the weight of both the positive and
negative evidence as of December 31, 2011 and concluded that a substantial majority of the deferred tax assets
will be realized.
Contractual Obligations
The following table reflects our contractual obligations as of December 31, 2013:
Payments Due by Period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Other
(in thousands)
Debt Obligations . . . . . . . . . . . . . . . . . . . . . . .
Interest on Debt . . . . . . . . . . . . . . . . . . . . . . . .
Operating Lease Obligations . . . . . . . . . . . . . .
Purchase Obligations . . . . . . . . . . . . . . . . . . . .
Retirement Plan Contributions . . . . . . . . . . . .
Other Long-Term Liabilities Reflected on the
Balance Sheet under GAAP (1) . . . . . . . . . .
$190,953
4,279
56,810
181,037
95,488
$190,953
4,279
12,843
170,559
5,048
$ — $ — $ — $ —
—
—
—
—
—
20,126
10,478
9,092
—
15,556
—
72,342
—
8,285
—
9,006
77,581
—
13,306
—
—
64,275
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$606,148
$383,682
$53,002
$17,291
$87,898
$64,275
(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”.
29
Liquidity and Capital Resources
Our cash, cash equivalents and marketable securities balance increased $193.3 million from 2012 to 2013,
to $1.2 billion. Cash activity for 2013, 2012 and 2011 was as follows:
2013
2012
2011
2012-2013
Change
2011-2012
Change
(in millions)
Cash provided by operating activities:
Income from continuing operations, adjusted for non cash
items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 317.0
$ 444.9
$ 372.6
$(127.9)
$ 72.3
Change in operating assets and liabilities, net of businesses
sold and acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used for discontinued operations . . . . . . . . . . . . . . . . . .
(49.7)
—
(41.8)
—
(92.9)
(4.8)
(7.9)
—
51.1
4.8
Total cash provided by operating activities . . . . . . . . . . . . . .
$ 267.3
$ 403.1
$ 274.9
$(135.8)
$ 128.2
Cash used for investing activities from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(281.8)
(602.5)
(121.6)
320.7
(480.9)
Cash provided by investing activities from discontinued
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
39.1
—
(39.1)
Total cash used for investing activities . . . . . . . . . . . . . . . . .
$(281.8) $(602.5) $ (82.5) $ 320.7
$(520.0)
Total cash provided by (used for) financing activities . . . . . .
$ 17.3
$ (35.4) $ (16.3) $ 52.7
$ (19.1)
Total increase (decrease) of cash and cash equivalents . . . . .
$
2.7
$(234.8) $ 176.0
$ 237.5
$(410.8)
In 2013, changes in operating assets and liabilities, net of businesses sold and acquired, used cash of $49.7
million. This was due to a $32.1 million increase in operating assets and a $17.7 million decrease in operating
liabilities.
The increase in operating assets was due to a $49.6 million increase in prepayments due primarily to
prepayments to our contract manufacturers and a $3.7 million increase in accounts receivable, partially offset by
a $21.2 million decrease in inventories.
The decrease in operating liabilities was due to a $2.5 million decrease in accrued employee compensation
due primarily to employee stock awards payroll taxes and variable compensation payments, a $28.9 million
decrease in customer advance payments and deferred revenue, and $5.5 million of retirement plan contributions,
partially offset by a $13.9 million increase in other accrued liabilities, a $3.7 million increase in accounts payable
due to higher fourth quarter sales volume, and a $1.6 million increase in accrued income taxes.
Investing activities during 2013 used cash of $281.8 million. In October 2013, we completed the acquisition
of ZTEC for an initial cash purchase price, net of cash acquired, of $15.0 million. Purchases of property, plant
and equipment were $106.7 million. Purchases of marketable securities used cash of $1,168.6 million, partially
offset by proceeds from maturities and sales of marketable securities that provided cash of $516.5 million and
$458.1 million, respectively. The sale of an equity investment provided cash of $34.2 million. Purchases of life
insurance policies used cash of $0.3 million.
Financing activities during 2013 provided cash of $17.3 million, $17.6 million was from the issuance of
common stock under stock option and stock purchase plans, and $2.6 million from the tax benefit related to stock
options and restricted stock units, partially offset by $0.4 million of cash used for payments related to LitePoint
acquisition contingent consideration and $2.5 million of cash used for payments on long-term debt related to the
Japan loan.
In 2012, changes in operating assets and liabilities, net of businesses sold and acquired, used cash of $41.8
million. This was due to a $9.4 million increase in operating assets and a $32.4 million decrease in operating
liabilities.
30
The increase in operating assets was due to a $24.1 million increase in accounts receivable and a $3.0
million increase in prepayments due primarily to supplier prepayments, partially offset by a $17.7 million
decrease in inventories.
The decrease in operating liabilities was due to a $15.7 million decrease in accrued employee compensation
due primarily to employee stock awards payroll taxes and variable compensation payments, a $14.6 million
decrease in customer advance payments and deferred revenue, a $11.5 million decrease in accounts payable due
to lower fourth quarter sales volume, a $5.6 million decrease in other accrued liabilities, and $4.8 million of
retirement plan contributions, partially offset by a $19.8 million increase in accrued income taxes.
Investing activities during 2012 used cash of $602.5 million, due to $748.2 million used for purchases of
marketable securities and $119.1 million used for purchases of property, plant and equipment, partially offset by
proceeds from sales and maturities of marketable securities that provided cash of $38.3 million and $225.1
million, respectively, and proceeds of $1.5 million from life insurance policies.
Financing activities during 2012 used cash of $35.4 million, $18.5 million was from the issuance of
common stock under stock option and stock purchase plans, and $8.4 million from the tax benefit related to stock
options and restricted stock units, partially offset by $59.7 million of cash used for payments related to LitePoint
acquisition contingent consideration and $2.5 million of cash used for payments on long-term debt related to the
Japan loan.
In 2011, changes in operating assets and liabilities, net of businesses sold and acquired, used cash of $92.9
million. This was due to a $44.2 million decrease in operating assets and a $137.1 million decrease in operating
liabilities.
The decrease in operating assets was due to a $66.4 million decrease in accounts receivable resulting from
increased collections, partially offset by a $21.5 million increase in prepayments due primarily to supplier
prepayments and a $0.6 million increase in inventories. The decrease in operating liabilities was due to a $62.6
million decrease in customer advance payments due to shipments of systems prepaid by customers, a $28.2
million decrease in accrued employee compensation due primarily to employee stock awards payroll taxes and
variable compensation payments, a $19.9 million decrease in accounts payable due to decreased sales volume,
$11.9 million of retirement plan contributions, an $8.7 million decrease in accrued income taxes, and a $5.8
million decrease in deferred revenue.
Investing activities during 2011 used cash of $121.6 million. In October 2011, we completed the acquisition
of LitePoint for an initial cash purchase price, net of cash acquired, of $537.5 million. Purchases of property,
plant and equipment were $86.1 million. Proceeds from sales and maturities of marketable securities that
provided cash of $746.8 million and $442.1 million, respectively, partially offset by $685.8 million used for
purchase of marketable securities. Purchases of life insurance policies used cash of $1.1 million. The net
proceeds were used to acquire LitePoint.
Financing activities during 2011 used cash of $16.3 million, due to the repurchase of 2.6 million shares of
common stock for $31.2 million at an average price of $11.84 per share and $2.5 million for payments on long-
term debt related to the Japan loan, partially offset by $17.4 million from the issuance of common stock under
stock option and stock purchase plans.
On April 6, 2009, we completed a registered public offering of $190.0 million aggregate principal amount
convertible senior notes (“Notes”) and settled the related convertible bond hedge and warrant transaction and
received approximately $163.0 million as a result of these financing transactions. The Notes bear interest at a rate
of 4.50% per annum, payable semi- annually in arrears on March 15 and September 15 of each year. The first
interest payment was on September 15, 2009. The Notes will mature on March 15, 2014, unless earlier
repurchased by us or converted. The Notes may be converted, under certain circumstances and during certain
periods, at an initial conversion rate of approximately 182.65 shares of our common stock per $1,000 principal
31
amount of Notes, which is equivalent to an initial conversion price of approximately $5.48. The convertible note
hedge and warrant transaction will generally have the effect of increasing the conversion price of the Notes to
approximately $7.67 per share of our common stock, representing a 75% conversion premium based upon the
closing price of our common stock on March 31, 2009. We may not redeem the Notes prior to their maturity.
Holders of the Notes may require us to purchase in cash all or a portion of their Notes at a price equal to 100% of
the principal amount, plus accrued and unpaid interest, upon the occurrence of certain fundamental changes
involving Teradyne. The Notes are convertible during the last three months, prior to the March 15, 2014 maturity
date. Upon conversion during the last three months prior to the March 15, 2014 maturity date, the Notes will “net
share settle,” meaning that holders will receive, for each $1,000 in principal amount of Notes, $1,000 in cash and
a number of shares of Teradyne common stock equal to 182.65 (subject to anti-dilution adjustment under certain
circumstances) less number of shares having $1,000 of value, as determined based on the average trading price of
the common stock over a 25-day trading period from February 5, 2014 to March 12, 2014.
In January 2014, our Board of Directors declared an initial quarterly cash dividend of $0.06 per share to be
paid on June 2, 2014 to stockholders of record as of May 9, 2014. Holders of our common stock are entitled to
receive dividends if and when they are declared by our Board of Directors. Payment of future cash dividends will
rest within the discretion of our Board of Directors and will depend, among other things, upon 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 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 approximately $340 million of cash
outside the U.S. that if repatriated would incur additional taxes. Determination of the additional taxes that would
be incurred is not practical 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.
Retirement Plans
ASC 715-20, “Compensation – Retirement Benefits – Defined Benefit Plans” requires an employer with
defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet
for the overfunded or underfunded status of the plans as defined by ASC 715-20. The pension asset or liability
represents the difference between the fair value of the pension plan’s assets and the projected benefit obligation
as of December 31. For other postretirement benefit plans, the liability is the difference between the fair value of
the plan’s assets and the accumulated postretirement benefit obligation as of December 31.
Our pension income, which includes the U.S. Qualified Pension Plan (“U.S. Plan”), certain qualified plans
for non-U.S. subsidiaries, and a U.S. Supplemental Executive Defined Benefit Plan, was approximately
$6.0 million for the year ended December 31, 2013. The largest portion of our 2013 pension income was $6.3
million for our U.S. Plan. Pension income is calculated based upon a number of actuarial assumptions. Discount
rate and expected return on assets are two assumptions which are important elements of pension plan expense/
income and asset/liability measurement. We evaluate our discount rate and expected rate of return on assets
assumptions annually on a plan and country specific basis. We evaluate other assumptions related to
demographic factors, such as retirement age, mortality and turnover periodically, and update them to reflect our
experience and expectations for the future.
In developing the expected return on U.S. Plan assets assumption, we evaluated input from our investment
managers and pension consultants, including their review of asset class return expectations. Based on this review,
we believe that 5.0% was an appropriate rate to use for 2013. The December 31, 2013 asset allocation for our
U.S. Plan was 87% invested in fixed income securities, 12% invested in equity securities, and 1% invested in
other securities. Our investment managers regularly review the actual asset allocation and periodically rebalance
the portfolio to ensure alignment with our targeted allocations.
32
Effective January 1, 2012, we elected to immediately recognize net actuarial gains and losses and the
change in the fair value of plans assets in our operating results in the year in which they occur or upon any
interim remeasurement of the plans. In addition, we used to calculate the expected return on plan assets using a
calculated market-related value of plan assets. Effective January 1, 2012, we elected to calculate the expected
return on plan assets using the fair value of the plan assets.
The discount rate that we utilized for determining future pension obligations for the U.S. Plan is based on
the Citigroup Pension Index adjusted for the U.S. Plan’s expected cash flows and was 4.5% at December 31,
2013, up from 3.6% at December 31, 2012. We estimate that in 2014 we will recognize approximately $0.1
million of pension cost for the U.S. Plan. The U.S. Plan related pension cost estimate for 2014 is based on a 4.5%
discount rate and 5.0% return on assets. Future pension expense or income will depend on future investment
performance, changes in future discount rates and various other factors related to the employee population
participating in our pension plans.
As of December 31, 2013, our pension plans had unrecognized pension prior service cost of $0.5 million.
We performed a sensitivity analysis, which expresses the potential U.S. Plan (income) expense for the year
ending December 31, 2014, which would result from changes to either the discount rate or the expected return on
plan assets. The below estimates exclude the impact of any potential actuarial gains or losses. It is difficult to
reliably forecast or predict whether there will be any actuarial gains or losses in 2014 as they are primarily driven
by events and circumstances beyond our control, such as changes in interest rates and the performance of the
financial markets.
Return on Plan Assets
Discount Rate
4.0% 4.5% 5.0%
4.5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in millions)
$ 1.3
0.1
(1.2)
$ 0.8
(0.5)
(1.7)
$ 1.8
0.5
(0.7)
The assets of the U.S. Plan consist substantially of fixed income securities. U.S. Plan assets have decreased
from $278.9 million at December 31, 2012 to $256.4 million at December 31, 2013.
Our funding policy is to make contributions to our pension plans in accordance with local laws and to the
extent that such contributions are tax deductible. During 2013, we made contributions of $1.7 million to the U.S.
supplemental executive defined benefit pension plan and $2.5 million to certain qualified plans for non-U.S.
subsidiaries. We expect to contribute approximately $1.8 million to the U.S. supplemental executive defined
benefit pension plan in 2014. Contributions that will be made in 2014 to certain qualified plans for non-U.S.
subsidiaries are based on local statutory requirements and will be approximately $2.2 million. We do not expect
to make any contributions to the U.S. Plan in 2014.
Equity Compensation Plans
In addition to our 1996 Employee Stock Purchase Plan discussed in Note O: “Stock Based Compensation”
in Notes to Consolidated Financial Statements, we have a 2006 Equity and Cash Compensation Incentive Plan
(the “2006 Equity Plan”) under which equity securities are authorized for issuance. The 2006 Equity Plan was
initially approved by stockholders on May 25, 2006.
At our annual meeting of stockholders held May 21, 2013, our stockholders approved an amendment to the
2006 Equity Plan to increase the number of shares issuable thereunder by 10.0 million, for an aggregate of
32.0 million shares issuable thereunder, and our stockholders also approved an amendment to our 1996
Employee Stock Purchase Plan to increase the number of shares issuable thereunder by 5.0 million, for an
aggregate of 30.4 million shares issuable thereunder.
33
The following table presents information about these plans as of December 31, 2013 (share numbers in
thousands):
Plan category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column one)
Equity plans approved by shareholders . . .
Equity plans not approved by
shareholders (3,4,5) . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,406(1)
1,936
7,342
$13.72
$ 3.33
$ 6.29
21,017(2)
—
21,017
(1)
Includes 4,635,622 shares of restricted stock units that are not included in the calculation of the weighted
average exercise price.
(2) Consists of 14,212,944 securities available for issuance under the 2006 Equity Plan and 6,803,613 of
(3)
(4)
(5)
securities available for issuance under the Employee Stock Purchase Plan.
In connection with the acquisition of Nextest (the “Nextest Acquisition”), we assumed the options and
restricted stock units granted under the Nextest Systems Corporation 1998 Equity Incentive Plan, as
amended, and the Nextest Systems Corporation 2006 Equity Incentive Plan (collectively, the “Nextest
Plans”). Upon the consummation of the Nextest Acquisition, these options and restricted stock units were
converted automatically into, respectively, options to purchase and restricted stock units representing, an
aggregate of 4,417,594 shares of our common stock. No additional awards will be granted under the Nextest
Plans. As of December 31, 2013, there were outstanding options exercisable for an aggregate of 576,171
shares of our common stock pursuant to the Nextest Plans, with a weighted average exercise price of $4.11
per share.
In connection with the acquisition of Eagle Test (the “Eagle Acquisition”), we assumed the options granted
under the Eagle Test Systems, Inc. 2003 Stock Option and Grant Plan and the Eagle Test Systems, Inc. 2006
Stock Option and Incentive Plan (collectively, the “Eagle Plans”). Upon the consummation of the Eagle
Acquisition, these options were converted automatically into options to purchase an aggregate of 3,594,916
shares of our common stock. No additional awards will be granted under the Eagle Plans. As of
December 31, 2013, there were outstanding options exercisable for an aggregate of 177,359 shares of our
common stock pursuant to the Eagle Plans, with a weighted average exercise price of $3.92 per share.
In connection with the acquisition of LitePoint Corporation (the “LitePoint Acquisition”), we assumed the
options granted under the LitePoint Corporation 2002 Stock Plan (the “LitePoint Plan”). Upon the
consummation of the LitePoint Acquisition, these options were converted automatically into options to
purchase an aggregate of 2,828,344 shares of our common stock. No additional awards will be granted
under the LitePoint Plan. As of December 31, 2013, there were outstanding options exercisable for an
aggregate of 1,182,192 shares of our common stock pursuant to the LitePoint Plan, with a weighted average
exercise price of $2.86 per share.
The purpose of the 2006 Equity Plan is to motivate employees, officers and directors by providing equity
ownership and compensation opportunities in Teradyne. The aggregate number of shares available under the
2006 Equity Plan as of December 31, 2013 was 14,212,944 shares of our common stock. The 2006 Equity Plan
authorizes the grant of stock-based awards in the form of (1) non-qualified and incentive stock options, (2) stock
appreciation rights, (3) restricted stock awards and restricted stock unit awards, (4) phantom stock, and (5) other
stock-based awards. Awards may be tied to time-based vesting schedules and/or performance-based vesting
measured by reference to performance criteria chosen by the Compensation Committee of the Board of Directors,
which administers the 2006 Equity Plan. Awards may be made to any employee, officer, consultant and advisor
of Teradyne and our subsidiaries, as well as, to our directors. The maximum number of shares of stock-based
awards that may be granted to one participant during any one fiscal year is 2,000,000 shares of common stock.
The 2006 Equity Plan will expire on May 24, 2016.
34
As of December 31, 2013, total unrecognized compensation expense related to non-vested restricted stock
units and options was $51.3 million, and is expected to be recognized over a weighted average period of 2.4
years.
Performance Graph
The following graph compares the change in our cumulative total shareholder return in our common stock
with (i) the Standard & Poor’s 500 Index, (ii) the Philadelphia Semiconductor Index, and (iii) the Morningstar
Semiconductor Equipment & Materials Index. The comparison assumes $100.00 was invested on December 31,
2008 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.
Historic stock price performance is not necessarily indicative of future price performance. This is the last year
that we will compare ourselves to the Morningstar Semiconductor Equipment & Materials Index. Going forward,
we will compare ourselves against the Philadelphia Semiconductor Index as this better aligns us with companies
in the semiconductor industry.
Teradyne, Inc., S&P 500 Index,
Morningstar Semiconductor Equipment & Materials Index,
and Philadelphia Semiconductor Index
Teradyne Inc.
S&P 500 Index
Morningstar Semiconductor Equipment & Materials Index
Philadelphia Semiconductor Index
$450.00
$400.00
$350.00
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
Dec08
Dec09
Dec10
Dec11
Dec12
Dec13
Recently Issued Accounting Pronouncements
In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward
Exists.” Under this ASU, unrecognized tax benefits will be netted against all available same-jurisdiction loss or
other tax carryforwards that would be utilized, rather than only against carryforwards that are created by
unrecognized tax benefits. The provisions of this ASU are effective for interim and annual periods beginning on
or after December 15, 2013. Teradyne does not expect this ASU to have a material impact on its financial
position or results of operations.
Item 7A: Quantitative and Qualitative Disclosures about Market Risks
Concentration of Credit Risk
Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash
equivalents, marketable securities, forward currency contracts and accounts receivable. Our cash equivalents
consist primarily of money market funds invested in U.S. Treasuries and government agencies. Our fixed income
available-for-sale marketable securities have a minimum rating of AA by one or more of the major credit rating
agencies. We place forward currency contracts with high credit-quality financial institutions in order to minimize
credit risk exposure. Concentrations of credit risk with respect to accounts receivable are limited due to the large
35
number of geographically dispersed customers. We perform ongoing credit evaluations of our customers’
financial condition and from time to time may require customers to provide a letter of credit from a bank to
secure accounts receivable.
Exchange Rate Risk Management
We regularly enter into foreign currency forward contracts to hedge the value of our monetary assets and
liabilities in Japanese Yen, British Pound, Korean Won, Taiwan Dollar and Euro. These foreign currency forward
contracts have maturities of approximately one month. These contracts are used to minimize the effect of
exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities. We do not
engage in currency speculation.
We performed a sensitivity analysis assuming a hypothetical 10% fluctuation in foreign exchange rates to
the hedging contracts and the underlying exposures described above. As of December 31, 2013, 2012 and 2011,
the analysis indicated that these hypothetical market movements would not have a material effect on our
consolidated financial position, results of operations or cash flows.
Interest Rate Risk Management
We are exposed to potential losses due to changes in interest rates. Our interest rate exposure is primarily in
the United States in short-term and long-term marketable securities.
In order to estimate the potential loss due to interest rate risk, a fluctuation in interest rates of 25 basis points
was assumed. Market risk for the short and long-term marketable securities was estimated as the potential change
in the fair value resulting from a hypothetical change in interest rates for securities contained in the investment
portfolio. The potential change in fair value from changes in interest rates is immaterial as of December 31, 2013
and 2012.
36
Item 8:
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Teradyne, Inc.:
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)
(1) present fairly, in all material respects, the financial position of Teradyne, Inc. and its subsidiaries at
December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2013 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013,
based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for
these financial statements, for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in “Management’s Annual
Report on Internal Control over Financial Reporting” appearing under Item 9A. Our responsibility is to express
opinions on these financial statements and on the Company’s internal control over financial reporting based on
our integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 28, 2014
37
TERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2013 and 2012
2013
2012
(in thousands, except per
share information)
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance for doubtful accounts of $2,912 and $4,118 in 2013 and
2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 341,638
586,882
$ 338,920
431,516
157,642
153,423
Inventories:
Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assemblies in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84,232
15,539
38,168
137,939
72,478
136,374
7,324
89,598
32,303
17,509
139,410
77,305
90,931
4,556
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,440,277
1,236,061
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement plans assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
275,236
271,078
5,217
14,591
9,342
252,291
361,792
265,782
235,872
5,372
14,837
3,282
318,867
349,272
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,629,824
$2,429,345
Current liabilities:
LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued employees’ compensation and withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue and customer advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current debt
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred revenue and customer advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement plans liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note K)
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized, 191,731 and 187,908 shares issued
and outstanding at December 31, 2013 and 2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,874
95,619
55,404
63,712
11,360
186,663
475,632
13,306
91,517
40,686
23,589
—
644,730
58,324
86,264
81,357
57,249
12,306
2,328
297,828
16,227
94,373
50,201
21,302
171,059
650,990
23,966
1,390,896
4,000
566,232
23,488
1,347,762
5,820
401,285
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,985,094
1,778,355
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,629,824
$2,429,345
The accompanying notes are an integral part of the consolidated financial statements.
38
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
2013
2012
2011
(in thousands, except per share amounts)
Net revenues:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,154,922
273,011
$1,383,569
273,181
$1,160,191
268,870
Total net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,427,933
1,656,750
1,429,061
Cost of revenues:
Cost of products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Engineering and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired intangible assets amortization . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations before income taxes . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposal of discontinued operations (net of tax $4,578) . . . . . . .
499,030
120,102
619,132
808,801
264,055
279,560
72,447
2,080
618,142
190,659
4,129
(7,134)
201,922
36,975
164,947
—
—
—
—
642,881
127,832
770,713
886,037
255,866
277,016
73,508
(7,721)
598,669
287,368
4,090
25,482
265,976
48,927
217,049
—
—
—
—
578,936
138,302
717,238
711,823
201,024
232,093
40,465
6,743
480,325
231,498
6,617
23,694
214,421
(129,536)
343,957
1,278
(267)
1,545
24,371
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 164,947
$ 217,049
$ 369,873
Income from continuing operations per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
0.86
0.70
0.86
0.70
$
$
$
$
1.16
0.94
1.16
0.94
$
$
$
$
1.86
1.52
2.00
1.63
Weighted average common shares—basic . . . . . . . . . . . . . . . . . . . . . . . .
190,772
186,878
184,683
Weighted average common shares—diluted . . . . . . . . . . . . . . . . . . . . . . .
235,599
230,246
226,820
The accompanying notes are an integral part of the consolidated financial statements.
39
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
TERADYNE, INC.
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income, net of tax:
Foreign currency translation reclassification adjustment included in net
Years Ended December 31,
2013
2012
2011
$164,947
(in thousands)
$217,049
$369,873
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
2,266
Unrealized (losses) gains on marketable securities:
Unrealized (losses) gains on marketable securities arising during
period, net of tax of $216, $370, $1,247 . . . . . . . . . . . . . . . . . . . .
Less: Reclassification adjustment for gains included in net income,
net of tax of $(257), $(201), $(581) . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit pension and post-retirement plans:
Amortization of prior service (benefit) cost included in net periodic
pension and post-retirement expense/income, net of tax $(159),
$(134), $9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,097)
2,009
1,409
(447)
(702)
(1,412)
(1,544)
1,307
(3)
(276)
(233)
14
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,820)
1,074
2,277
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$163,127
$218,123
$372,150
The accompanying notes are an integral part of the consolidated financial statements.
40
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended December 31, 2013, 2012 and 2011
Common
Stock
Shares
Issued
Common
Stock Par
Value
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
( Loss) Income
Retained
Earnings
(Accumulated
Deficit)
Total
Shareholders’
Equity
Balance, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,035 $22,755 $1,269,525
4,566
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $12,297 . . . . . . . . . .
32,337
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(17,770)
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options issued in purchase acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,472
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on marketable securities:
(2,633)
4,185
(329)
522
(in thousands)
$ 2,469
Unrealized gain on marketable securities, net of tax of $1,247 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: reclassification adjustment for gains included in net income, net of tax of $(581) . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs, net of tax of $9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
1
Balance, December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,587
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $11,582 . . . . . . . . . .
4,321
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit related to stock options and restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on marketable securities:
Unrealized gain on marketable securities, net of tax of $370 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: reclassification adjustment for gains included in net income, net of tax of $(201) . . . . . . . . . . . . . . . . . .
Amortization of prior service costs, net of tax of $(134) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,908
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $12,192 . . . . . . . . . .
3,823
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit related to stock options and restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on marketable securities, net of tax of $216 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: reclassification adjustment for gains included in net income, net of tax $(257) . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs, net of tax of $(159) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,948
540
1,293,130
6,354
39,920
8,358
23,488
478
1,347,762
4,926
35,612
2,596
1,409
(1,412)
2,266
14
4,746
2,009
(702)
(233)
5,820
(1,097)
(447)
(276)
$(172,561)
(13,076)
369,873
$1,122,188
5,088
32,337
(31,175)
4,472
369,873
184,236
217,049
401,285
164,947
1,409
(1,412)
2,266
14
1,505,060
6,894
39,920
8,358
217,049
2,009
(702)
(233)
1,778,355
5,404
35,612
2,596
164,947
(1,097)
(447)
(276)
Balance, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,731 $23,966 $1,390,896
$ 4,000
$ 566,232
$1,985,094
The accompanying notes are an integral part of the consolidated financial statements.
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2013
2012
2011
(in thousands)
164,947
—
—
164,947
$ 217,049
—
—
$ 369,873
1,545
24,371
217,049
343,957
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Gain on disposal of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile income from continuing operations to net cash provided by
operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for excess and obsolete inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from the sale of an equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit related to stock options and restricted stock units . . . . . . . . . . . . . . . . .
Non cash charge for the sale of inventories revalued at the date of acquisition . . . .
Retirement plans actuarial (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration adjustment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of businesses sold and acquired:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepayments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue and customer advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement plan contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57,317
93,370
36,612
16,592
(4,284)
(34,212)
(2,596)
—
(10,340)
—
(407)
(3,656)
21,170
(49,572)
15,103
(28,877)
(5,540)
1,648
267,275
—
267,275
55,049
90,465
39,920
26,849
5,556
—
(8,358)
6,089
23,320
(8,761)
(2,250)
(24,093)
17,652
(2,995)
(32,810)
(14,627)
(4,778)
19,804
403,081
—
403,081
Cash flows from investing activities:
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of available-for-sale marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of available-for-sale marketable securities . . . . . . . . . . . . . . . .
Proceeds from sales of available-for-sale marketable securities . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of an equity investment
(Purchases of ) proceeds from life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(106,731)
(1,168,621)
(14,999)
516,499
458,120
34,212
(307)
(119,080)
(748,229)
—
225,085
38,284
—
1,451
Net cash used for continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(281,827)
(602,489)
—
—
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(281,827)
(602,489)
(82,548)
Cash flows from financing activities:
Issuance of common stock under stock option and stock purchase plans . . . . . . . . . . . . .
Tax benefit related to stock options and restricted stock units . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,596
2,596
(2,534)
(388)
—
17,270
18,477
8,358
(2,533)
(59,710)
—
(35,408)
17,385
—
(2,518)
—
(31,175)
(16,308)
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,718
338,920
(234,816)
573,736
175,999
397,737
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
341,638
$ 338,920
$ 573,736
Supplementary disclosure of cash flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
8,590
38,156
$
$
8,602
8,084
$
8,645
$ 36,043
The accompanying notes are an integral part of the consolidated financial statements.
42
51,040
55,641
32,337
11,601
(146,949)
—
—
12,178
13,564
—
(794)
66,367
(615)
(21,509)
(48,222)
(68,359)
(11,851)
(8,727)
279,659
(4,804)
274,855
(86,097)
(685,823)
(537,489)
442,080
746,810
—
(1,091)
(121,610)
39,062
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. THE COMPANY
Teradyne, Inc. is a leading global supplier of automatic test equipment. Teradyne’s automatic test
equipment products and services include:
•
•
•
semiconductor test (“Semiconductor Test”) systems;
wireless test (“Wireless Test”) systems; and
military/aerospace (“Mil/Aero”) test instrumentation and systems, storage test (“Storage Test”)
systems, and circuit-board test and inspection (“Commercial Board Test”) systems (collectively these
products represent “System Test”).
B. ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Teradyne and its wholly-owned subsidiaries.
All significant intercompany balances and transactions are eliminated. Certain prior years’ amounts were
reclassified to conform to the current year presentation.
Preparation of Financial Statements and Use of Estimates
The preparation of consolidated financial statements requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
liabilities. On an on-going basis, management evaluates its estimates, including those related to inventories,
investments, goodwill, intangible and other long-lived assets, doubtful accounts, income taxes, deferred tax
assets, pensions, warranties, and loss contingencies. Management bases its estimates on historical experience and
on appropriate and customary assumptions that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ significantly from these estimates.
Revenue Recognition
Teradyne recognizes revenue when there is persuasive evidence of an arrangement, title and risk of loss
have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable
and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to its customers
upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass upon
destination, acceptance or cash payment, Teradyne defers revenue recognition until such events occur.
Teradyne’s equipment has non-software and embedded software components that function together to
deliver the equipment’s essential functionality. Revenue is recognized upon shipment or at delivery destination
point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require
Teradyne to perform tests of the product to ensure that performance meets the published product specifications or
customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be
demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. Teradyne also
defers the portion of the sales price that is not due until acceptance, which represents deferred profit.
For multiple element arrangements, Teradyne allocates revenue to all deliverables based on their relative
selling prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenue to
deliverables as follows: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party
evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). For a delivered item to be
considered a separate unit the delivered item must have value to the customer on a standalone basis and the
delivery or performance of the undelivered item must be considered probable and substantially in Teradyne’s
control.
43
Teradyne’s post-shipment obligations include installation, training services, one-year standard warranties,
and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or
tools and can be performed by the customers or other vendors. Installation is typically provided within five days
of product shipment and is completed within one to two days thereafter. Training services are optional and do not
affect the customers’ ability to use the product. Teradyne defers revenue for the selling price of installation and
training. Extended warranties constitute warranty obligations beyond one year and Teradyne defers revenue in
accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
605-20, “Separately Priced Extended Warranty and Product Maintenance Contracts” and ASC 605-25,
“Revenue Recognition Multiple-Element Arrangements.” Service revenue is recognized over the contractual
period or as services are performed.
Teradyne’s products are generally subject to warranty and related costs of the warranty are provided for in
cost of revenue when product revenue is recognized. Teradyne classifies shipping and handling costs in cost of
revenue. Teradyne generally does not provide its customers with contractual rights of return for any of its
products.
As of December 31, 2013 and 2012, deferred revenue and customer advances consisted of the following and
are included in the short and long-term deferred revenue and customer advances:
Customer advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment maintenance, training and extended warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undelivered elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,825
56,914
6,971
$39,613
51,198
6,773
Total deferred revenue and customer advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$68,710
$97,584
2013
2012
(in thousands)
Retirement and Postretirement Plans
Effective January 1, 2012, Teradyne changed the method of recognizing actuarial gains and losses for its
defined benefit pension plans and postretirement benefit plan and calculating the expected return on plan assets
for its defined benefit pension plans. Historically, Teradyne recognized net actuarial gains and losses in
accumulated other comprehensive income within shareholders’ equity on its consolidated balance sheets on an
annual basis and amortized them into operating results over the average remaining years of service of the plan
participants, to the extent such gains and losses were outside of a range (“corridor”). Teradyne elected to
immediately recognize net actuarial gains and losses and the change in the fair value of the plan assets in its
operating results in the year in which they occur or upon any interim remeasurement of the plans. In addition,
Teradyne used to calculate the expected return on plan assets using a calculated market-related value of plan
assets. Effective January 1, 2012, Teradyne elected to calculate the expected return on plan assets using the fair
value of the plan assets.
Teradyne believes that this new method is preferable as it eliminates the delay in recognizing gains and
losses in its operating results and it will improve the transparency by faster recognition of the effects of economic
and interest rate trends on plan obligations and investments. These actuarial gains and losses are generally
measured annually as of December 31 and, accordingly, will be recorded during the fourth quarter of each year
or upon any interim remeasurement of the plans. In accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 250, Accounting Changes and Error Corrections, all prior periods
presented in this Annual Report on Form 10-K have been adjusted to apply the new accounting method
retrospectively.
44
Product Warranty
Teradyne generally provides a one-year warranty on its products, commencing upon installation or
shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense
based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below
is included in other accrued liabilities.
Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals for warranties issued during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals related to pre-existing warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements made during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals for warranties issued during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals related to pre-existing warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements made during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals for warranties issued during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals related to pre-existing warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements made during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
(in thousands)
$ 9,886
327
13,167
(2,689)
(12,538)
8,153
14,704
877
(13,948)
9,786
10,574
(3,534)
(10,166)
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,660
When Teradyne receives revenue for extended warranties, beyond one year, it is deferred and recognized on
a straight-line basis over the contract period. Related costs are expensed as incurred. The balance below is
included in short and long-term deferred revenue and customer advances.
Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferral of new extended warranty revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition of extended warranty deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferral of new extended warranty revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition of extended warranty deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferral of new extended warranty revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition of extended warranty deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
(in thousands)
$ 8,972
3,151
8,659
(8,040)
12,742
22,344
(8,099)
26,987
20,191
(12,789)
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 34,389
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The volatility of the
industries that Teradyne serves can cause certain of its customers to experience shortages of cash flows, which can
impact their ability to make required payments. Teradyne maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments. Estimated allowances for doubtful
accounts are reviewed periodically taking into account the customer’s recent payment history, the customer’s
current financial statements and other information regarding the customer’s credit worthiness. Account balances are
charged off against the allowance when it is determined the receivable will not be recovered.
45
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. On a quarterly
basis, Teradyne uses consistent methodologies to evaluate all inventories for net realizable value. Teradyne
records a provision for both excess and obsolete inventory when such write-downs or write-offs are identified
through the quarterly review process. The inventory valuation is based upon assumptions about future demand,
product mix and possible alternative uses.
Investments
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. On a
quarterly basis, Teradyne reviews its investments to identify and evaluate those that have an indication of a
potential other-than-temporary impairment. Factors considered in determining whether a loss is other-than-
temporary include:
•
•
•
The length of time and the extent to which the market value has been less than cost;
The financial condition and near-term prospects of the issuer; and
The intent and ability to retain the investment in the issuer for a period of time sufficient to allow for
any anticipated recovery in market value.
As 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. Teradyne uses the market and income approach techniques to value its financial instruments and
there were no changes in valuation techniques during the years ended December 31, 2013, 2012 and 2011. 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 therefore is considered a Level 2 input.
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.
In accordance with ASC 820-10, Teradyne measures its debt and equity investments at fair value.
Teradyne’s debt and equity investments are primarily classified within Level 1 and 2, with the exception of
LitePoint acquisition-related contingent consideration, which was classified within Level 3. Teradyne determines
the fair value of acquisition-related contingent consideration based on assessment of the probability that it would
be required to make such payment.
Goodwill, Intangible and Long-Lived Assets
Teradyne accounts for goodwill and intangible assets in accordance with ASC 350-10, “Intangibles-
Goodwill and Other.” Intangible assets are amortized over their estimated useful economic life and are carried at
cost less accumulated amortization. Goodwill is assessed for impairment at least annually in the fourth quarter, as
of December 31, on a reporting unit basis, or more frequently when events and circumstances occur indicating
that the recorded goodwill may be impaired. In accordance with ASC 350-10, Teradyne has the option to perform
a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is
less than its carrying amount. If Teradyne determines this is the case, Teradyne is required to perform the two-
46
step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill
impairment loss to be recognized. If Teradyne determines that it is more-likely-than-not that the fair value of the
reporting unit is greater than its carrying amounts, the two-step goodwill impairment test is not required.
In accordance with ASC 360-10, “Impairment or Disposal of Long-Lived 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. Each impairment test is based on a comparison of the estimated undiscounted cash flows to the
recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value based
on a discounted cash flow analysis. The cash flow estimates used to determine the impairment, if any, contain
management’s best estimates using appropriate assumptions and projections at that time. There were no events or
circumstances indicating that the carrying value may not be recoverable in 2013, 2012 or 2011.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated over the estimated useful lives of the assets.
Leasehold improvements and major renewals are capitalized and included in property, plant and equipment
accounts while expenditures for maintenance and repairs and minor renewals are charged to expense. When
assets are retired, the assets and related allowances for depreciation and amortization are removed from the
accounts and any resulting gain or loss is reflected in the statement of operations.
Teradyne provides for depreciation of its assets principally on the straight-line method with the cost of the
assets being charged to expense over their useful lives as follows:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesser of lease term or useful life
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Test systems manufactured internally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 years
6 years
3 to 5 years
3 to 5 years
40 years
5 to 10 years
Test systems manufactured internally are used by Teradyne for customer evaluations and manufacturing and
support of its customers. Teradyne depreciates the test systems manufactured internally over a six-year life to
cost of revenues, engineering and development, and selling and administrative expenses. Teradyne often sells
internally manufactured test equipment to customers. Upon the sale of an internally manufactured test system,
the net book value of the system is transferred to inventory and expensed as cost of revenues. The net book value
of internally manufactured test systems sold in the years ended December 31, 2013, 2012 and 2011 was $9.0
million, $6.0 million and $7.8 million, respectively.
Engineering and Development Costs
Teradyne’s products are highly technical in nature and require a large and continuing engineering and
development effort. Software development costs incurred prior to the establishment of technological feasibility
are charged to expense. Software development costs incurred subsequent to the establishment of technological
feasibility are capitalized until the product is available for release to customers. To date, the period between
achieving technological feasibility and general availability of the product has been short and software
development costs eligible for capitalization have not been material. Engineering and development costs are
expensed as incurred and consist primarily of salaries, contractor fees, allocated facility costs, depreciation, and
tooling costs.
47
Stock Compensation Plans and Employee Stock Purchase Plan
Stock-based compensation expense is based on the grant-date fair value estimated in accordance with the
provisions of ASC 718-10 “Compensation—Stock Compensation.” As required by ASC 718-10, Teradyne has
made an estimate of expected forfeitures and is recognizing compensation costs only for those stock-based
compensation awards expected to vest.
Under its stock compensation plans, Teradyne has granted stock options and 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 installments over four years from the grant date and have a maximum term of seven years.
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. A portion of restricted stock unit awards granted to
executive officers is subject to time-based vesting and a portion is subject to performance-based vesting. The
percentage level of performance satisfied for performance-based grants is assessed on or near the anniversary of
the grant date and, in turn, that percentage level determines the number of performance-based restricted stock
units available for vesting over the vesting period; portions of the performance-based grants not available for
vesting will be forfeited. Restricted stock units do not have common stock voting rights, and the shares
underlying the restricted stock units are not considered issued and outstanding until they become vested.
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.
Under the ESPP, eligible employees may purchase shares of common stock through regular payroll
deductions of up to 10% of their eligible compensation, to a maximum of shares with a fair market value of
$25,000 per calendar year, not to exceed 6,000 shares. The price paid for the common stock in 2013 is equal to
85% of the value of Teradyne’s common stock on the last business day of the purchase period. The price paid for
the common stock in 2012 and 2011 was equal to 85% of the lower of the value of Teradyne’s common stock on
the first business day or on the last business day of the purchase period. There are two six-month purchase
periods in each fiscal year.
The effect to income from continuing operations for recording stock-based compensation for the years
ended December 31 was as follows:
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineering and development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,338
12,452
19,822
(in thousands)
$ 6,604
13,589
19,727
$ 7,097
10,001
15,239
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit
36,612
(9,762)
39,920
(9,548)
32,337
(8,509)
Total stock-based compensation expense after income taxes . . . . . . . . . . . . . . . . .
$26,850
$30,372
$23,828
2013
2012
2011
48
Valuation Assumptions
The total number of stock options granted in 2013, 2012 and 2011 were 0.2 million, 0.2 million and
0.1 million, respectively, at the weighted average grant date fair value of $6.09, $6.85 and $6.74, respectively.
The fair value of the stock options at grant date was estimated using the Black-Scholes option-pricing model with
the following assumptions:
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility-historical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
4.00
0.6%
46.8%
0.0%
2012
3.50
0.4%
56.0%
0.0%
2011
4.00
1.5%
52.1%
0.0%
Teradyne determined the stock option’s expected life based upon historical exercise data for executive
officers, the age of executives and the terms of the stock option award. Volatility was determined using historical
volatility for a period equal to the expected life. The interest rate was determined using the U.S. Treasury yield
curve in effect at the time of grant.
The weighted-average fair value of employee stock purchase rights granted pursuant to the ESPP in the first
and last six months of 2012 was $4.09 and $3.42, respectively, and the first and last six months of 2011 was
$3.66 and $4.01, respectively. The fair value of the employees’ purchase rights was estimated using the Black-
Scholes option-pricing model with the following assumptions:
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility-historical
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of December 31, 2013, there were 6.4 million shares available for grant under the ESPP.
2012
2011
0.5
0.5
0.1%
0.1%
42.7% 41.0%
0.0%
0.0%
Income Taxes
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse. The measurement of deferred tax assets is reduced by a valuation
allowance if, based upon weighted available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized. U.S. income taxes are not provided for on the earnings of non-U.S. subsidiaries,
except Japan, which are expected to be reinvested indefinitely in operations outside the U.S. For intra-period tax
allocations, Teradyne first utilizes non-equity related tax attributes, such as net operating losses and credit
carryforwards and then equity-related tax attributes. Teradyne uses the with-and-without method for calculating
excess stock compensation deductions and does not take into account any indirect impacts of excess stock
compensation deductions on its research and development tax credits, domestic production activities deduction,
and other differences between financial reporting and tax reporting.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retrospectively
reinstated the research and development tax credit for 2012 and extended it through December 31, 2013. As a
result, in the first quarter of 2013, Teradyne recorded a discrete benefit related to 2012 U.S. federal research and
development tax credit of approximately $6.7 million.
Advertising Costs
Teradyne expenses all advertising costs as incurred. Advertising costs were $1.7 million, $1.6 million and
$1.0 million in 2013, 2012 and 2011, respectively.
49
Translation of Non-U.S. Currencies
The functional currency for all subsidiaries is the U.S. dollar. All foreign currency denominated monetary
assets and liabilities are remeasured on a monthly basis into the functional currency using exchange rates in
effect at the end of the period. All foreign currency denominated non-monetary assets and liabilities are
remeasured into the functional currency using historical exchange rates. Net foreign exchange gains and losses
resulting from remeasurement are included in interest expense and other and were a loss of $6.9 million, a loss of
$4.5 million and a gain of $0.9 million, respectively, for the years ended December 31, 2013, 2012 and 2011.
These amounts do not reflect the corresponding gain (loss) from foreign exchange contracts. See Note G:
“Financial Instruments” regarding foreign exchange contracts. Revenue and expense amounts are translated using
an average of exchange rates in effect during the period.
Net Income per Common Share
Basic net income per common share is calculated by dividing net income by the weighted average number
of common shares outstanding during the period. Except where the result would be antidilutive, diluted net
income per common share is calculated by dividing net income by the sum of the weighted average number of
common shares plus common stock equivalents, if applicable.
Dilutive potential common shares include incremental shares from assumed conversion of the convertible
notes and the convertible notes hedge warrant shares. Incremental shares from assumed conversion of the
convertible notes are calculated using the difference between the average Teradyne stock price for the period and
the conversion price of $5.48, multiplied by the 34.7 million shares that will be issued upon conversion. The
result of this calculation, representing the total intrinsic value of the convertible debt, is divided by the average
Teradyne stock price for the period. Convertible notes hedge warrant shares are calculated using the difference
between the average Teradyne stock price for the period and the warrant price of $7.67, multiplied by the
34.7 million shares that will be issued upon conversion. The result of this calculation, representing the total
intrinsic value of the warrant, is divided by the average Teradyne stock price for the period. Teradyne’s call
option for 34.7 million shares at an exercise price of $5.48 is not used in the GAAP earnings per share
calculation as its effect would be anti-dilutive.
With respect to Teradyne’s convertible debt, Teradyne intends to settle its conversion spread (i.e., the
intrinsic value of the embedded option feature contained in the convertible debt) in shares. Teradyne accounts for
its conversion spread using the treasury stock method. Teradyne determined that it had the ability and intent to
settle the principal amount of the convertible debt in cash; accordingly, the principal amount has been excluded
from the determination of diluted earnings per share.
Comprehensive (Loss) Income
Comprehensive (loss) income includes net income, unrealized pension and postretirement prior service costs
and benefits, unrealized gains and losses on investments in debt and equity marketable securities and for 2011 a
foreign currency translation reclassification adjustment of $2.3 million as a result of the sale of Teradyne’s
Diagnostics Solutions business unit.
C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward
Exists.” Under this ASU, unrecognized tax benefits will be netted against all available same-jurisdiction loss or
other tax carryforwards that would be utilized, rather than only against carryforwards that are created by
unrecognized tax benefits. The provisions of this ASU are effective for interim and annual periods beginning on
or after December 15, 2013. Teradyne does not expect this ASU to have a material impact on its financial
position or results of operations.
50
D. DISCONTINUED OPERATIONS
On March 21, 2011, Teradyne completed the sale of its Diagnostic Solutions business unit, which was
included in the System Test segment, to SPX Corporation for $40.2 million in cash. Teradyne sold this business
as its growth potential as a stand-alone business within Teradyne was significantly less than if it was part of a
larger automotive supplier. The financial information for Diagnostic Solutions has been reclassified to
discontinued operations for all periods presented. Net revenues and income from discontinued operations for the
years ended December 31, 2013, 2012 and 2011 were as follows:
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
2011
(in thousands)
$— $— $ 9,086
Income from discontinued operation before income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Gain from disposal of discontinued operation before income taxes . . . . . . . . . . . . . . . . . —
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
$— $— $ 1,278
28,949
4,311
—
—
Income from discontinued operations
$— $— $25,916
E. ACQUISITIONS
Business
ZTEC Instruments, Inc.
On October 25, 2013, Teradyne completed its acquisition of ZTEC Instruments, Inc. (“ZTEC”) located in
Albuquerque, New Mexico. The total purchase price of $17.3 million consisted of $15.1 million of cash paid to
acquire the outstanding common and preferred stock of ZTEC and $2.2 million in fair value of contingent
consideration payable upon achievement of certain customer order and revenue targets through 2015. The
maximum amount of contingent consideration that could be paid is $5.0 million. Based on the projected results
for the acquisition, no value was assigned to the revenue component of the contingent consideration.
The valuation of the customer order component of the contingent consideration utilized the following
assumptions: (1) probability of meeting each benchmark; (2) expected timing of meeting each benchmark; and
(3) discount rate reflecting the risk associated with the expected payments. The probabilities and timing for each
benchmark were estimated based on a review of the historical and projected results. A discount rate of 5.2
percent was selected based on the cost of debt for the business, as a significant portion of the risk in achieving the
customer order contingent consideration was captured in the probabilities assigned to meeting each benchmark.
ZTEC is a supplier of modular wireless test instruments. The acquisition of ZTEC expands Teradyne’s
wireless segment into the design verification test of wireless components and chipsets.
The ZTEC acquisition was accounted for as a purchase business combination and, accordingly, the results
have been included in Teradyne’s consolidated results of operation from the date of acquisition. The allocation of
the total purchase price of ZTEC net tangible and identifiable intangible assets was based on their estimated fair
values as of the acquisition date. The purchase price allocation is preliminary pending the final determination of
the fair value of certain acquired assets and assumed liabilities. The excess of the purchase price over the
identifiable intangible and net tangible assets in the amount of $12.5 million was allocated to goodwill, which is
not deductible for tax purposes.
51
The following represents the allocation of the purchase price:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets acquired and liabilities assumed:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase Price Allocation
(in thousands)
$12,520
4,870
79
1,612
1,757
(1,811)
(1,719)
Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,308
Teradyne estimated the fair value of intangible assets using the income approach. Acquired intangible assets
are amortized on a straight-line basis over their estimated useful lives. The following table lists these intangible
assets and their estimated useful lives at the acquisition date:
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
(in thousands)
$3,500
1,370
Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,870
Estimated Useful
Life
(in years)
5.0
6.0
5.3
For the period from October 25, 2013 to December 31, 2013, ZTEC contributed $0.4 million of revenues
and had a $(0.8) million loss from continuing operations before income taxes.
The following unaudited pro forma information gives effect to the acquisition of ZTEC as if the acquisition
occurred on January 1, 2012. The unaudited pro forma results are not necessarily indicative of what actually
would have occurred had the acquisition been in effect for the periods presented:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Year Ended
December 31,
2013
December 31,
2012
(in thousands, except
per share amounts)
$1,431,270
$ 163,394
$1,660,758
$ 215,654
$
$
0.86
0.69
$
$
1.15
0.94
LitePoint Corporation
On October 5, 2011, Teradyne completed its acquisition of LitePoint Corporation (“LitePoint”) located in
Sunnyvale, California. The total purchase price of $646.0 million consisted of $572.7 million of cash paid to
acquire the outstanding common and preferred stock of LitePoint, $68.9 million in fair value of contingent
consideration payable upon achievement of certain revenue targets through 2012 and $4.5 million in fair value of
52
assumed vested stock options, which were converted into stock options to purchase Teradyne’s common stock.
The fair value of stock options was estimated using the following weighted average assumptions:
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2
49.1%
1.3%
0.0%
LitePoint designs, develops, and supports advanced wireless test equipment for the development and
manufacturing of wireless devices, including smart phones, tablets, notebooks/laptops, personal computer
peripherals, and other Wi-Fi, Bluetooth and cellular enabled devices. LitePoint’s IQ product line consists of
cellular and connectivity test equipment used by developers and manufacturers of wireless devices and consumer
electronics. LitePoint and ZTEC represent Teradyne’s Wireless Test operating and reportable segment.
The LitePoint acquisition was accounted for as a purchase business combination and, accordingly, the
results have been included in Teradyne’s consolidated results of operation from the date of acquisition. The
allocation of the total purchase price of LitePoint net tangible and identifiable intangible assets was based on
their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable
intangible and net tangible assets in the amount of $349.3 million was allocated to goodwill, which is not
deductible for tax purposes. The following represents the allocation of the purchase price:
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets acquired and liabilities assumed:
Cash, cash equivalents and short term marketable securities . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase Price Allocation
(in thousands)
$ 349,272
310,500
61,250
75,615
5,838
(37,177)
(115,463)
(3,788)
Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 646,047
Teradyne estimated the fair value of intangible assets using the income and cost approach. Acquired
intangible assets are amortized on a straight-line basis over their estimated useful lives. The following table lists
these intangible assets and their estimated useful lives at the acquisition date:
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradenames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
(in thousands)
$237,100
53,700
19,000
700
Estimated Useful
Life
(in years)
6.4
7.0
7.0
0.3
Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$310,500
6.5
For the period from October 5, 2011 to December 31, 2011, LitePoint contributed $28.4 million of revenues
and had a $(20.6) million loss from continuing operations before income taxes.
53
The following unaudited pro forma information gives effect to the acquisition of LitePoint as if the
acquisition occurred on January 1, 2011. The unaudited pro forma results are not necessarily indicative of what
actually would have occurred had the acquisition been in effect for the periods presented:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
For the Year Ended
December 31,
2011
(in thousands, except
per share amounts)
$1,527,044
$ 357,060
$ 382,976
$
$
$
$
1.93
1.56
2.07
1.67
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures, and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
(in thousands)
$ 16,561
107,632
600,848
81,994
30,757
622
$ 16,561
106,706
606,414
93,683
29,585
3,425
838,414
563,178
856,374
590,592
$275,236
$265,782
Depreciation and amortization of property, plant and equipment for the years ended December 31, 2013,
2012 and 2011 was $57.3 million, $55.0 million and $51.0 million, respectively.
G. FINANCIAL INSTRUMENTS
Cash Equivalents
Teradyne considers all highly liquid investments with original 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. On a
54
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 years ended December 31, 2013, 2012 and 2011. 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 therefore is considered a Level 2 input.
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.
Most of Teradyne’s fixed income securities are classified as Level 2, with the exception of U.S. Treasury
securities and investments in equity and debt mutual funds, which are classified as Level 1, and contingent
consideration, which is classified as Level 3. The majority of Level 2 securities are 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.
There were no realized losses recorded in 2013, 2012 and 2011. Realized gains recorded in 2013, 2012 and
2011 were $1.0 million, $1.4 million and $2.7 million, respectively. Realized gains are included in interest
income. 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 years ended December 31, 2013 and 2012, there were no transfers in or out of Level 1, Level 2
or Level 3 financial instruments.
55
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 December 31, 2013 and 2012.
December 31, 2013
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available for sale securities:
U.S. Treasury securities . . . . . . . . . . . . . . . . . . .
U.S. government agency securities . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . .
Equity and debt mutual funds . . . . . . . . . . . . . .
Certificates of deposit and time deposits . . . . . .
Non-U.S. government securities . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$117,242
165,865
$ —
58,531
$ —
—
$ 117,242
224,396
467,895
—
—
—
13,156
—
—
764,158
—
—
202,588
105,598
65,387
—
3,258
78
435,440
153
—
—
—
—
—
—
—
—
—
467,895
202,588
105,598
65,387
13,156
3,258
78
1,199,598
153
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$764,158
$435,593
$ —
$1,199,751
Liabilities
Contingent consideration . . . . . . . . . . . . . . . . . .
$ —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ —
$ —
$2,230
$2,230
$
$
2,230
2,230
Reported as follows:
Assets
(Level 1)
(Level 2)
(Level 3)
Total
(in thousands)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term marketable securities . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$283,107
371,101
109,950
—
$ 58,531
215,781
161,128
153
$ — $ 341,638
586,882
271,078
153
—
—
—
$764,158
$435,593
$ — $1,199,751
Liabilities
Long-term other accrued liabilities . . . . . . . . . . . . . . . . . . . . .
$ — $ — $2,230
$ — $ — $2,230
$
$
2,230
2,230
56
December 31, 2012
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available for sale securities:
U.S. Treasury securities . . . . . . . . . . . . . . . . . . .
U.S. government agency securities . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . .
Equity and debt mutual funds . . . . . . . . . . . . . .
Certificates of deposit and time deposits . . . . . .
Non-U.S. government securities . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$139,354
183,039
$ —
16,527
312,116
—
—
—
9,717
—
—
644,226
—
$644,226
—
217,655
70,434
55,755
—
1,627
84
362,082
121
$362,203
$—
—
—
—
—
—
—
—
—
—
—
$—
$ 139,354
199,566
312,116
217,655
70,434
55,755
9,717
1,627
84
1,006,308
121
$1,006,429
Liabilities
Contingent consideration . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ —
$ —
$ —
$388
$388
$
$
388
388
Reported as follows:
Assets
(Level 1)
(Level 2)
(Level 3)
Total
(in thousands)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term marketable securities . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$322,393
239,192
82,641
—
$ 16,527
192,324
153,231
121
$— $ 338,920
431,516
—
235,872
—
121
—
$644,226
$362,203
$— $1,006,429
Liabilities
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ —
$ — $ —
$388
$388
$
$
388
388
Changes in the fair value of Level 3 contingent consideration for the year ended December 31, 2013 and
December 31, 2012 were as follows:
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of ZTEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent Consideration
(in thousands)
$ 68,892
(8,794)
(59,710)
388
2,230
(388)
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,230
57
The carrying amounts and fair values of financial instruments at December 31, 2013 and 2012 were as
follows:
December 31, 2013
December 31, 2012
Carrying Value
Fair Value Carrying Value
Fair Value
(in thousands)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$341,638
857,960
185,708
955
$341,638
857,960
611,433
955
$338,920
667,388
169,896
3,491
$338,920
667,388
589,000
3,491
(1) The carrying value represents the bifurcated debt component only, while the fair value is based on quoted
market prices for the convertible note which includes the equity conversion feature.
The fair values of cash and cash equivalents, accounts receivable, net and accounts payable approximate the
carrying amount due to the short term nature of these instruments.
The following tables summarize the composition of available for sale marketable securities at December 31,
2013 and 2012:
December 31, 2013
Available-for-Sale
Cost
Unrealized
Gain
Unrealized
(Loss)
Fair Market
Value
Fair Market
Value of Investments
with Unrealized Losses
U.S. Treasury securities . . . . . . . . . . . . . . . . . . . $468,084 $
U.S. government agency securities . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . .
Equity and debt mutual funds . . . . . . . . . . . . . . .
Certificates of deposit and time deposits . . . . . .
Non-U.S. government securities . . . . . . . . . . . . .
202,573
105,583
65,747
10,463
3,258
78
94
75
16
762
2,742
—
—
(in thousands)
$ (283) $467,895
202,588
105,598
65,387
13,156
3,258
78
(60)
(1)
(1,122)
(49)
—
—
$855,786 $3,689
$(1,515) $857,960
$108,212
84,498
7,993
40,355
702
—
—
$241,760
Reported as follows:
Cost
Unrealized
Gain
Unrealized
(Loss)
Fair Market
Value
Fair Market
Value of Investments
with Unrealized Losses
Marketable securities . . . . . . . . . . . . . . . . $586,818
268,968
Long-term marketable securities . . . . . . . .
$
85
3,604
(in thousands)
$
(21)
(1,494)
$586,882
271,078
$855,786
$3,689
$(1,515)
$857,960
$137,670
104,090
$241,760
58
December 31, 2012
Available-for-Sale
Cost
Unrealized
Gain
Unrealized
(Loss)
Fair Market
Value
Fair Market
Value of Investments
with Unrealized Losses
U.S. Treasury securities . . . . . . . . . . . . . . . . . . . $311,915 $ 216
262
U.S. government agency securities . . . . . . . . . . .
9
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . .
2,414
Corporate debt securities . . . . . . . . . . . . . . . . . . .
961
Equity and debt mutual funds . . . . . . . . . . . . . . .
—
Certificates of deposit and time deposits . . . . . .
—
Non-U.S. government securities . . . . . . . . . . . . .
217,396
70,431
53,405
8,767
1,627
84
(in thousands)
$ (15)
(3)
(6)
(64)
(11)
—
—
$312,116
217,655
70,434
55,755
9,717
1,627
84
$663,625 $3,862
$ (99)
$667,388
$ 1,018
9,018
25,209
23,255
600
—
—
$59,100
Reported as follows:
Cost
Unrealized
Gain
Unrealized
(Loss)
Fair Market
Value
Fair Market
Value of Investments
with Unrealized Losses
Marketable securities . . . . . . . . . . . . . . . . $431,324
232,301
Long-term marketable securities . . . . . . . .
$ 203
3,659
$663,625
$3,862
(in thousands)
$(11)
(88)
$(99)
$431,516
235,872
$667,388
$41,110
17,990
$59,100
As of December 31, 2013, the fair market value of investments with unrealized losses totaled $241.8
million. Of this value, $0.6 million had unrealized losses for greater than one year and $241.2 million had
unrealized losses for less than one year. As of December 31, 2012, the fair market value of investments with
unrealized losses totaled $59.1 million. As of December 31, 2012, there were no unrealized losses greater 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 December 31, 2013 and 2012, were temporary.
The contractual maturities of investments held at December 31, 2013 were as follows:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due within one year
Due after 1 year through 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after 5 years through 10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after 10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$586,818
231,188
3,924
23,393
$586,882
231,201
3,941
22,780
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$845,323
$844,804
Contractual maturities of investments held at December 31, 2013, exclude equity and debt mutual funds as
Cost
Fair Value
(in thousands)
they do not have a contractual maturity date.
Derivatives
Teradyne conducts business in a number of foreign countries, with certain transactions denominated in local
currencies. The purpose of Teradyne’s foreign currency management is to minimize the effect of exchange rate
fluctuations on certain foreign currency denominated monetary assets and liabilities. Teradyne does not use
derivative financial instruments for trading or speculative purposes.
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 the monetary assets and liabilities denominated in foreign currencies.
59
At December 31, 2013 and 2012, Teradyne had the following contracts to buy and sell non-U.S. currencies
for U.S. dollars and other non-U.S. currencies with the following notional amounts:
December 31, 2013
December 31, 2012
Buy
Position
Sell
Position
Net
Total
Buy
Position
Sell
Position
Net
Total
Japanese Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British Pound Sterling . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korean Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
—
—
—
(24.8)
$32.6
4.0
6.9
5.8
0.7
(in millions)
$ 32.6
4.0
6.9
5.8
(24.1)
$ —
—
—
—
(16.8)
$36.3
4.2
5.5
—
1.3
$ 36.3
4.2
5.5
—
(15.5)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(24.8)
$50.0
$ 25.2
$(16.8)
$47.3
$ 30.5
The fair value of the outstanding contracts was a gain of $0.2 million and $0.1 million at December 31,
2013 and 2012, respectively.
In 2013 and 2012, Teradyne recorded net realized gains of $5.9 million and $4.0 million, respectively,
related to foreign currency forward contracts hedging net monetary positions. In 2011, Teradyne recorded net
realized losses of $1.3 million related to foreign currency forward contracts hedging net monetary positions.
Gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on
monetary assets and liabilities are included in interest expense and other.
The following table summarizes the fair value of derivative instruments as of December 31, 2013 and 2012:
Derivatives not designated as hedging instruments:
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . Other current assets
Total derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
$153
$153
$121
$121
Balance Sheet Location
December 31,
2013
December 31,
2012
The following table summarizes the effect of derivative instruments in the statement of operations
recognized for the years ended December 31, 2013, 2012 and 2011. The table does not reflect the corresponding
(losses) gains from the remeasurement of the monetary assets and liabilities denominated in currencies. For the
years ended December 31, 2013, 2012, and 2011, (losses) gains from the remeasurement of the monetary assets
and liabilities denominated in foreign currencies were $(6.9) million, $(4.5) million, and $0.9 million,
respectively.
Location of Gains (Losses)
Recognized in Statement
of Operations
December 31,
2013
December 31,
2012
December 31,
2011
(in thousands)
Derivatives not designated as hedging
instruments:
Foreign exchange contracts . . . . . . . .
Interest expense and other
Total derivatives . . . . . . . . . . . . . . . . . . . .
$5,933
$5,933
$3,974
$3,974
$(1,327)
$(1,327)
See Note H: “Debt” regarding derivatives related to the convertible senior notes.
60
Concentration of Credit Risk
Financial instruments which potentially subject Teradyne to concentrations of credit risk consist principally
of cash equivalents, marketable securities, forward currency contracts and accounts receivable. Teradyne’s cash
equivalents consist primarily of money market funds invested in U.S. Treasuries and government agencies.
Teradyne’s fixed income available-for-sale marketable securities have a minimum rating of AA by one or more
of the major credit rating agencies. Teradyne places foreign currency forward contracts with high credit-quality
financial institutions in order to minimize credit risk exposure. Concentrations of credit risk with respect to
accounts receivable are limited due to the large number of geographically dispersed customers. Teradyne
performs ongoing credit evaluations of its customers’ financial condition and from time to time may require
customers to provide a letter of credit from a bank to secure accounts receivable.
Equity Interest
On November 1, 2013, in connection with the acquisition of Empirix, Inc. by Thoma Bravo LLC, Teradyne
sold its equity interest in Empirix, Inc., a private company, and received proceeds of $34.2 million. An additional
$5.2 million of proceeds will be held in escrow for 15 months, for potential indemnifications to the buyer. During
the fourth quarter of 2013, Teradyne recorded a gain of $34.2 million in interest expense and other.
H. DEBT
Debt at December 31, 2013 and 2012 consisted of the following:
2013
2012
(in thousands)
Convertible senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$185,708
955
$169,896
3,491
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
186,663
186,663
173,387
2,328
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $171,059
The debt principal payments for the next 5 years and thereafter are as follows:
Payments Due by Period
Debt Principal Payment
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beyond 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
$190,953
—
—
—
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$190,953
Loan Agreement
On March 31, 2009, Teradyne K.K., Teradyne’s wholly-owned subsidiary in Japan, entered into a loan
agreement with a local bank in Japan to borrow approximately $10.0 million (the loan is denominated in
Japanese Yen). The loan has a term of 5 years and a fixed interest rate of 0.8%. Approximately $6.0 million of
the loan was collateralized by a real estate mortgage on Teradyne K.K.’s building and land in Kumamoto, Japan
(which had a net book value of $10.8 million as of December 31, 2013) and approximately $4.0 million was
unsecured. Teradyne, Inc. has guaranteed payment of the loan obligation. The principal is amortized over the
term of the loan with semi-annual principal payments of approximately $1 million payable on September 30 and
March 30 each year. At December 31, 2013, approximately $1.0 million of the outstanding loan principal is
included in current debt.
61
Convertible Senior Notes
On March 31, 2009, Teradyne entered into an underwriting agreement regarding a public offering of
$175.0 million aggregate principal amount of 4.50% convertible senior notes due March 15, 2014 (the “Notes”).
On April 1, 2009, the underwriters exercised their option to purchase an additional $15.0 million aggregate
principal amount of the Notes for a total aggregate principal amount of $190.0 million. The Notes bear interest at
a rate of 4.50% per annum, payable semi-annually in arrears on March 15 and September 15 of each year,
beginning on September 15, 2009. The Notes will mature on March 15, 2014, unless earlier repurchased by
Teradyne or converted. The Notes are senior unsecured obligations and rank equally with all of Teradyne’s
existing and future senior debt and senior to any of Teradyne’s subordinated debt.
The Notes may be converted, under certain circumstances and during certain periods, at an initial conversion
rate of approximately 182.65 shares of Teradyne’s common stock per $1,000 principal amount of Notes, which is
equivalent to an initial conversion price of approximately $5.48, a 25% conversion premium based on the last
reported sale price of $4.38 per share of Teradyne’s common stock on March 31, 2009. The conversion rate is
subject to adjustment in certain circumstances.
The Notes are convertible during the last three months prior to the March 15, 2014 maturity date. Upon
conversion during the last three months prior to March 15, 2014, the Notes will “net share settle,” meaning that
holders will receive, for each $1,000 in principal amount of Notes, $1,000 in cash and a number of shares of
Teradyne common stock equal to 182.65 (subject to anti-dilution adjustment under certain circumstances) less a
number of shares having $1,000 of value, as determined based on the average trading price of the common stock
over a 25 day trading period from February 5, 2014 to March 12, 2014. Prior to December 15, 2013, holders
could have converted their Notes at their option under the following circumstances: (1) during the five business-
day period after any five consecutive trading day period (the “measurement period”) in which the price per Note
for each day of that measurement period was less than 98% of the product of the last reported sale price of
Teradyne’s common stock and the conversion rate for such date; (2) during any calendar quarter, if the last
reported sale price of Teradyne’s common stock for 20 or more trading days in a period of 30 consecutive trading
days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the
applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; or
(3) upon the occurrence of certain specified events.
During each calendar quarter of 2013 and 2012, holders were able to convert their Notes at their option prior
to December 15, 2013 because the last reported sale price of Teradyne’s common stock for 20 or more trading
days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding
calendar quarter exceeded 130% of the conversion price in effect on the last trading day of the immediately
preceding calendar quarter. As of February 27, 2014, one holder exercised the option to convert two thousand
dollars worth of Notes.
Teradyne may not redeem the Notes prior to their maturity. Holders of the Notes may require Teradyne to
purchase in cash all or a portion of their Notes at a price equal to 100% of the principal amount, plus accrued and
unpaid interest, upon the occurrence of certain fundamental changes involving Teradyne (which include, among
others, the liquidation or dissolution of Teradyne, the acquisition of 50% or more of the total voting shares of
Teradyne, certain mergers and consolidations, and the delisting of Teradyne’s stock).
Concurrently with the offering of the Notes, Teradyne entered into a convertible note hedge transaction with
a strike price equal to the initial conversion price of the Notes, or approximately $5.48. The convertible note
hedge allows Teradyne to receive shares of its common stock and/or cash related to the excess conversion value
that it would pay to the holders of the Notes upon conversion. The convertible note hedges will cover, subject to
customary antidilution adjustments, approximately 34,703,196 shares of Teradyne’s common stock and will
expire on March 13, 2014. Teradyne paid approximately $64.6 million for the convertible note hedges.
Separately, Teradyne entered into a warrant transaction with a strike price of approximately $7.67 per share,
which was 75% higher than the closing price of Teradyne’s common stock on March 31, 2009. The warrants will
62
be net share settled, with approximately 534,000 warrants settled on a daily basis over a 65 day trading period
from June 17, 2014 to September 17, 2014. Teradyne received approximately $43.0 million for the warrants.
The convertible note hedge and warrant transaction will generally have the effect of increasing the
conversion price of the Notes to approximately $7.67 per share of Teradyne’s common stock, representing a 75%
conversion premium based upon the closing price of Teradyne’s common stock on March 31, 2009.
On April 6, 2009, Teradyne completed its registered public offering of the $190.0 million aggregate
principal amount convertible senior notes and settled the related convertible bond hedge and warrant transaction
and received approximately $163.0 million as a result of these financing transactions.
Teradyne considered the guidance of ASC 815-40, “Derivatives and Hedging—Contracts in Entity’s Own
Equity” and concluded that the convertible note hedge is both indexed to Teradyne’s stock and should be
classified in stockholders’ equity in its statement of financial position. The convertible note hedge is considered
indexed to Teradyne’s stock as the terms of the convertible note hedge 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.
Teradyne assessed whether the convertible note hedge should be classified as equity under ASC 815-40. In
the convertible note hedge contract the settlement terms permit net cash settlement or net share settlement, at the
option of Teradyne. Therefore, the criteria as set forth in ASC 815-40 were evaluated by Teradyne. In reviewing
the criteria, Teradyne noted the following: (1) the convertible note hedge does not require Teradyne to issue
shares; (2) there are no cash payments for failure to make timely filings with the SEC; (3) in the case of
termination, the convertible note hedge is settled in the same consideration as the holders of the underlying stock;
(4) the counterparty does not have rights that rank higher than those of a shareholder of the stock underlying the
convertible note hedge; and (5) there is no requirement to post collateral. Based on its analysis of those criteria,
Teradyne concluded that the convertible note hedge should be recorded in equity and no further adjustment
should be made in future periods to adjust the value of the convertible note hedge.
Teradyne analyzed the warrant transaction under ASC 815-40, “Derivatives and Hedging—Contracts in
Entity’s Own Equity” and other relevant literature, and determined that it met the criteria for classification as an
equity transaction and is considered indexed to Teradyne’s stock. As a result, Teradyne recorded the proceeds
from the warrants as an increase to additional paid-in capital. Teradyne does not recognize subsequent changes in
fair value of the warrant in its financial statements.
The provisions of ASC 470-20, “Debt with Conversion and Other Options” are applicable to the Notes.
ASC 470-20 requires Teradyne to separately account for the liability (debt) and equity (conversion feature)
components of the Notes in a manner that reflects Teradyne’s nonconvertible debt borrowing rate at the date of
issuance when interest cost is recognized in subsequent periods. Teradyne allocated $63.4 million of the $190.0
million principal amount of the Notes to the equity component, which represents a discount to the debt and will
be amortized into interest expense using the effective interest method through March 2014. Accordingly,
Teradyne’s effective annual interest rate on the Notes will be approximately 14.5%. The Notes are classified as
current debt in the balance sheet based on their March 15, 2014 maturity date. Debt issuance costs of
approximately $4.1 million are being amortized to interest expense over the five year term of the Notes. As of
December 31, 2013, debt issuance costs were approximately $0.2 million.
63
The below tables represent the key components of Teradyne’s convertible senior notes:
Debt principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized discount
$189,998
4,290
$190,000
20,104
Net carrying amount of the convertible debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$185,708
$169,896
December 31,
2013
December 31,
2012
(in thousands)
Contractual interest expense on the coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of the discount component and debt issue fees recognized as interest
For the year ended
December 31,
2013
December 31,
2012
(in thousands)
$ 8,550
$ 8,550
expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,628
14,612
Total interest expense on the convertible debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25,178
$23,162
As of December 31, 2013, the unamortized discount was $4.3 million, which will be amortized during the
first quarter of 2014, and the carrying amount of the equity component was $63.4 million. As of December 31,
2013, the conversion rate was equal to the initial conversion price of approximately $5.48 per share and the if-
converted value of the Notes was $611.5 million.
I. ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in accumulated other comprehensive income, which is presented net of tax, consists of the
following:
Unrealized Gains on
Marketable Securities
Retirement Plans
Prior Service Benefit
Total
(in thousands)
$ 1,618
$3,128
$ 4,746
Balance at December 31, 2011, net of tax of $666, $9 . . . . . .
Other comprehensive income before reclassifications, net of
tax of $370 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other
comprehensive income, net of tax of $(201), $(134) . . . . .
Net current period other comprehensive income, net of tax
of $169, $(134) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012, net of tax of $835, $(125) . .
Other comprehensive income before reclassifications, net of
tax of $216 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other
2,009
(702)
1,307
2,925
(1,097)
—
(233)
(233)
2,895
—
(276)
2,009
(935)
1,074
5,820
(1,097)
(723)
comprehensive income, net of tax of $(257), $(159) . . . . .
(447)
Net current period other comprehensive income, net of tax
of $(41), $(159) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013, net of tax of $794, $(284) . .
(1,544)
$ 1,381
(276)
$2,619
(1,820)
$ 4,000
64
Reclassifications out of accumulated other comprehensive income to the statement of operations for the
years ended December 31, 2013, 2012 and 2011, were as follows:
Details about Accumulated
Other Comprehensive Income
Components
Available-for-sale marketable securities
Unrealized gains, net of tax of $257, $201,
$581 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of defined benefit pension and
postretirement plans
Prior service benefit, net of tax of $159, $134,
$(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the year ended
December 31,
2013
December 31,
2012
December 31,
2011
(in thousands)
Affected Line Item
in the Statements
of Operations
$447
$447
$276
$276
$702
$702
$233
$233
$1,412
$1,412
Interest income
$ (14)
(a)
$ (14)
Total reclassifications, net of tax of $416, $335,
$572 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$723
$935
$1,398
Net income
(a) The amortization of prior service benefit is included in the computation of net periodic pension cost and
postretirement benefit; see Note N: “Retirement Plans.”
J. 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 to be impaired when the net book value of a reporting unit exceeds its estimated
fair value. Fair values are estimated using a discounted cash flow methodology.
Teradyne performed step one of the two step impairment test for 2013 and 2012. Teradyne performed step
zero impairment test for 2011. Annual goodwill impairment test is done at the Wireless Test reporting unit level
which is an operating and reportable segment and the only operating and reportable segment that has goodwill.
There was no impairment.
During 2012, Teradyne recorded a $3.5 million decrease in goodwill and a $3.5 million increase in income
tax receivable.
65
The changes in the carrying amount of goodwill by reporting units for the years ended December 31, 2013
and 2012 are as follows:
Balance at December 31, 2011:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . .
Activity during the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . .
ZTEC acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . .
Semiconductor
Test
System
Test
Wireless
Test
Total
(in thousands)
$ 260,540
(260,540)
$ 148,183
(148,183)
$352,778
—
$ 761,501
(408,723)
—
—
—
—
352,778
(3,506)
352,778
(3,506)
260,540
(260,540)
148,183
(148,183)
—
—
—
—
349,272
—
349,272
12,520
757,995
(408,723)
349,272
12,520
260,540
(260,540)
148,183
(148,183)
361,792
—
770,515
(408,723)
$
—
$
— $361,792
$ 361,792
Intangible Assets
Amortizable intangible assets consist of the following and are included in intangible assets, net on the
balance sheets:
December 31, 2013
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average
Useful Life
(in thousands)
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradenames and trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$362,055
146,341
33,840
1,000
$193,756
81,742
14,447
1,000
$168,299
64,599
19,393
6.3 years
8.0 years
9.0 years
— 0.4 years
Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$543,236
$290,945
$252,291
7.0 years
December 31, 2012
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average
Useful Life
(in thousands)
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradenames and trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$357,555
144,971
33,840
1,000
$143,126
63,464
10,909
1,000
$214,429
81,507
22,931
6.3 years
8.0 years
9.0 years
— 0.4 years
Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$537,366
$218,499
$318,867
7.0 years
During the year ended December 31, 2013, Teradyne recorded intangible assets in the amount of $4.9
million related to its ZTEC acquisition.
66
During the year ended December 31, 2012, Teradyne reduced the gross amount of intangible assets by $0.6
million for the excess tax benefit realized due to the exercise of stock options vested as of the Nextest acquisition
date.
Aggregate intangible assets amortization expense for the years ended December 31, 2013, 2012 and 2011
was $72.4 million, $73.5 million, and $40.5 million, respectively. Estimated intangible assets amortization
expense for each of the five succeeding fiscal years is as follows:
Year
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization Expense
(in thousands)
$70,141
53,391
53,391
47,232
22,691
K. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
As of December 31, 2013, Teradyne had entered into non-cancelable purchase commitments for certain
components and materials. The purchase commitments covered by the agreements aggregate to approximately
$181.0 million.
Commitments
Teradyne leases certain of its office buildings and other facilities under various operating lease
arrangements that include renewal options and escalation clauses for adjusting rent payments to reflect changes
in price indices. Rental expense for leases with fixed escalation clauses is recognized on a straight line basis over
the lease term.
Rental expense for the years ended December 31, 2013, 2012 and 2011 was $16.5 million, $15.5 million and
$13.4 million, respectively.
The following table reflects Teradyne’s non-cancelable operating lease commitments:
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beyond 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cancelable
Lease
Commitments
(in thousands)
$12,843
10,885
9,241
5,023
3,262
15,556
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$56,810
Legal Claims
Teradyne is subject to legal proceedings, claims and investigations that arise in the ordinary course of
business such as, but not limited to, patent, employment, commercial and environmental matters. Teradyne
believes that it has meritorious defenses against all pending claims and intends to vigorously contest them. While
it is not possible to predict or determine the outcomes of any pending claims or to provide possible ranges of
losses that may arise, Teradyne believes the potential losses associated with all of these actions are unlikely to
have a material adverse effect on its business, financial position or results of operations.
67
On May 17, 2013, Boston Semi Equipment (“BSE”) filed a complaint against us for antitrust violations and
unfair business practices alleging that we excluded BSE from competing in the market for the sale of
reconfigured Teradyne equipment and the market for the repair of Teradyne equipment. BSE sought unspecified
damages and an injunction. We filed a motion to dismiss the complaint. On October 18, 2013, the parties settled
the litigation. The settlement included no monetary consideration. The settlement did not and will not have a
material impact on our consolidated financial results.
Guarantees and Indemnification Obligations
Teradyne provides indemnification, to the extent permitted by law, to its officers, directors, employees and
agents for liabilities arising from certain events or occurrences while the officer, director, employee, or agent, is
or was serving, at Teradyne’s request in such capacity. Teradyne has entered into indemnification agreements
with certain of its officers and directors. With respect to acquisitions, Teradyne provides indemnifications to or
assumes indemnification obligations for the current and former directors, officers and employees of the acquired
companies in accordance with the acquired companies’ bylaws and charter. As a matter of practice, Teradyne has
maintained directors’ and officers’ liability insurance coverage including coverage for directors and officers of
acquired companies.
Teradyne enters into agreements in the ordinary course of business with customers, resellers, distributors,
integrators and suppliers. Most of these agreements require Teradyne to defend and/or indemnify the other party
against intellectual property infringement claims brought by a third party with respect to Teradyne’s products.
From time to time, Teradyne also indemnifies customers and business partners for damages, losses and liabilities
they may suffer or incur relating to personal injury, personal property damage, product liability, breach of
confidentiality obligations and environmental claims relating to the use of Teradyne’s products and services or
resulting from the acts or omissions of Teradyne, its employees, authorized agents or subcontractors. On
occasion, Teradyne has also provided guarantees to customers regarding the delivery and performance of its
products in addition to the warranty described below.
As a matter of ordinary business course, Teradyne warrants that its products will substantially perform in
accordance with its standard published specifications in effect at the time of delivery. Most warranties have a one
year duration commencing from installation. A provision is recorded upon revenue recognition to cost of revenue
for estimated warranty expense based upon historical experience. When Teradyne receives revenue for extended
warranties beyond the standard duration, it is deferred and recognized on a straight line basis over the contract
period. Related costs are expensed as incurred. As of December 31, 2013 and 2012, Teradyne had a product
warranty accrual of $6.7 million and $9.8 million, respectively, included in other accrued liabilities, and revenue
deferrals related to extended warranties of $34.4 million and $27.0 million, respectively, included in short and
long-term deferred revenue and customer advances.
In addition, and in the ordinary course of business, Teradyne provides minimum purchase guarantees to
certain vendors to ensure continuity of supply against the market demand. Although some of these guarantees
provide penalties for cancellations and/or modifications to the purchase commitments as the market demand
decreases, most of the guarantees do not. Therefore, as the market demand decreases, Teradyne re-evaluates
these guarantees and determines what charges, if any, should be recorded.
With respect to its agreements covering product, business or entity divestitures and acquisitions, Teradyne
provides certain representations, warranties and covenants to purchasers and agrees to indemnify and hold such
purchasers harmless against breaches of such representations, warranties and covenants. Many of the
indemnification claims have a definite expiration date while some remain in force indefinitely. With respect to its
acquisitions, Teradyne may, from time to time, assume the liability for certain events or occurrences that took
place prior to the date of acquisition.
As a matter of ordinary course of business, Teradyne occasionally guarantees certain indebtedness
obligations of its subsidiary companies, limited to the borrowings from financial institutions, purchase
commitments to certain vendors, and lease commitments to landlords.
68
Based on historical experience and information known as of December 31, 2013 and 2012, except for
product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations as of
December 31, 2013 and 2012 because the amount would be immaterial.
L. NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted net income per common share from
continuing and discontinued operations:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposal of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
2011
(in thousands, except per share amounts)
$343,957
$217,049
$164,947
1,545
—
—
24,371
—
—
Net income for basic and diluted net income per share . . . . . . . . . . . . . . . . . . .
$164,947
$217,049
$369,873
Weighted average common shares-basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of dilutive potential common shares:
Incremental shares from assumed conversion of convertible notes (1) . . . . . . .
Convertible note hedge warrant shares (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock purchase rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
190,772
186,878
184,683
23,341
18,795
1,127
1,528
36
44,827
22,367
17,433
2,291
1,213
64
43,368
21,504
16,224
3,773
566
70
42,137
Weighted average common shares-diluted . . . . . . . . . . . . . . . . . . . . . . . .
235,599
230,246
226,820
Net income per common shares-basic:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per common shares-diluted:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
0.86
—
0.86
0.70
—
0.70
$
$
$
$
1.16
—
1.16
0.94
—
0.94
$
$
$
$
1.86
0.14
2.00
1.52
0.11
1.63
(1)
Incremental shares from assumed conversion of the convertible notes are calculated using the difference
between the average Teradyne stock price for the period and the conversion price of $5.48, multiplied by the
34.7 million shares that will be issued upon conversion. The result of this calculation, representing the total
intrinsic value of the convertible debt, is divided by the average Teradyne stock price for the period.
(2) Convertible notes hedge warrant shares are calculated using the difference between the average Teradyne
stock price for the period and the warrant price of $7.67, multiplied by the 34.7 million shares that will be
issued upon exercise. The result of this calculation, representing the total intrinsic value of the warrant, is
divided by the average Teradyne stock price for the period. Teradyne’s call option on its common stock
(convertible note hedge transaction) is excluded from the calculation of diluted shares because the effect
would be anti-dilutive. See Note H: “Debt” regarding convertible note hedge transaction.
The computation of diluted net income per common share for 2013 excludes the effect of the potential exercise
of stock options to purchase approximately 0.4 million shares because the effect would have been anti-dilutive.
The computation of diluted net income per common share for 2012 excludes the effect of the potential
exercise of stock options to purchase approximately 0.3 million shares and restricted stock units to purchase
approximately 0.3 million shares because the effect would have been anti-dilutive.
69
The computation of diluted net income per common share for 2011 excludes the effect of the potential
exercise of stock options to purchase approximately 0.7 million shares because the effect would have been anti-
dilutive.
With respect to Teradyne’s convertible debt, Teradyne intends to settle its conversion spread (i.e., the
intrinsic value of the embedded option feature contained in the convertible debt) in shares. Teradyne accounts for
its conversion spread using the treasury stock method. Teradyne determined that it had the ability and intent to
settle the principal amount of the convertible debt in cash; accordingly, the principal amount has been excluded
from the determination of diluted earnings per share.
M. RESTRUCTURING AND OTHER
Restructuring
The remaining accrual for severance and benefits of $0.5 million is reflected in the accrued employees’
compensation and withholdings on the balance sheet and is expected to be paid by June 2014.
During the year ended December 31, 2013, Teradyne recorded $1.9 million of severance charges related to
headcount reductions of 48 people primarily in System Test and Semiconductor Test and a $(0.4) million credit
in Corporate related to a change in the estimated exit costs related to a leased facility.
During the year ended December 31, 2012, Teradyne recorded $1.0 million of severance charges related to
headcount reductions of 19 people primarily in System Test and Semiconductor Test.
During the year ended December 31, 2011, Teradyne recorded $1.2 million of charges related to headcount
reductions of 7 people in Semiconductor Test and a $(0.5) million credit primarily in System Test related to a
change in the estimated exit costs related to leased facilities.
Severance
and
Benefits
Facility
Exit
Costs
Total
(in thousands)
Pre-2011 Activities
Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 712
117
155
(984)
$3,263
—
(485)
(916)
$ 3,975
117
(330)
(1,900)
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
1,862
(778)
1,084
(553)
(531)
1,862
(778)
1,084
(553)
(531)
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ — $ —
70
Severance
and
Benefits
Facility
Exit
Costs
Total
(in thousands)
Q1 2011 Activity:
2011 Activities
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 572
$— $ 572
(476)
(476) —
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96
—
(96) —
96
(96)
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$— $ —
Q2 2011 Activities:
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 344
$— $ 344
(115)
(115) —
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
229
—
(229) —
229
(229)
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$— $ —
Q2 2012 Activities:
2012 Activities
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 286
$— $ 286
(4)
(282)
(4) —
(282) —
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$— $ —
Q3 2012 Activity:
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 687
$— $ 687
(444)
(444) —
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
243
—
(243) —
243
(243)
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$— $ —
Q3 2013 Activity:
2013 Activities
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,337
$— $1,337
(966)
(966) —
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 371
$— $ 371
Q4 2013 Activity:
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 600
$— $ 600
(486)
(486) —
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 114
$— $ 114
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 485
$— $ 485
71
Other
During the year ended December 31, 2012, due to a decrease in specified new product revenue through the
December 31, 2012 earn-out period end date, Teradyne recorded an $8.8 million fair value adjustment to
decrease the LitePoint acquisition contingent consideration.
During the year ended December 31, 2011, Teradyne recorded $5.8 million of other charges in which $4.6
million related to acquisition costs and $1.2 million related to a non-U.S pension settlement.
N. RETIREMENT PLANS
ASC 715, “Compensation—Retirement Benefits” requires an employer with defined benefit plans or other
postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or
underfunded status of the plans as defined by ASC 715. The pension asset or liability represents a difference
between the fair value of the pension plan’s assets and the projected benefit obligation at December 31.
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 the 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 (the “IRC”), as well as unfunded qualified
foreign plans.
Teradyne uses a December 31 measurement date for all of its plans. The December 31 balances of these
defined benefit pension plans assets and obligations are shown below:
Assets and Obligations
Change in benefit obligation:
Projected benefit obligation:
2013
2012
(in thousands)
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. currency movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$376,498
3,427
13,266
(32,279)
(16,169)
95
1,256
$390,278
2,787
15,670
31,912
(65,650)
108
1,393
End of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
346,094
376,498
Change in plan assets:
Fair value of plan assets:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. currency movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
302,899
4,260
95
(9,373)
(16,169)
417
339,580
3,306
108
24,621
(65,650)
934
End of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
282,129
302,899
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (63,965) $ (73,599)
72
During the year ended December 31, 2012, Teradyne offered to certain former U.S. employees the option to
receive their vested pension benefit as a one-time, lump sum payment. Approximately 2,000 former employees
elected to receive a lump sum payment. Total lump sum payments were approximately $52.0 million.
The following table provides amounts recorded within the account line items of the statement of financial
position as of December 31:
Retirement plans assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued employees’ compensation and withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement plans liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,342
(2,924)
(70,383)
$ 3,282
(2,810)
(74,071)
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(63,965) $(73,599)
2013
2012
(in thousands)
The following table provides amounts recognized in accumulated other comprehensive income as of
December 31:
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
(in thousands)
$656
$493
321
380
Total recognized in other comprehensive income, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$873
$977
The estimated portion of prior service cost remaining in accumulated other comprehensive income that is
expected to be recognized as a component of net periodic pension cost in 2014 is $0.1 million.
The accumulated benefit obligation for all defined benefit pension plans was $331.2 million and $360.4
million at December 31, 2013 and 2012, respectively.
Information for pension plans with an accumulated benefit obligation in excess of plan assets as of
December 31:
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$74.2
65.5
0.9
$75.6
65.7
0.8
2013
2012
(in millions)
73
Expense
For the years ended December 31, 2013, 2012 and 2011, Teradyne’s net periodic pension (income) cost was
comprised of the following:
Components of Net Periodic Pension (Income) Cost:
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
(in thousands)
2011
$ 3,427
13,266
(14,591)
164
(8,315)
—
$ 2,787 $ 2,735
17,466
(15,602)
621
12,583
1,567
15,670
(15,946)
232
23,237
—
Total net periodic pension (income) cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (6,049) $ 25,980
$ 19,370
Changes in Plan Assets and Benefit Obligations Recognized in Other
Comprehensive Income:
Reversal of amortization items:
Prior service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . .
(164)
(164)
(232)
(232)
(621)
(621)
Total recognized in net periodic pension (income) cost and other
comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (6,213) $ 25,748
$ 18,749
Weighted Average Assumptions to Determine Net Periodic Pension Cost at January 1
United States Plans
Foreign Plans
2013
2012
2011
2013
2012
2011
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salary progression rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.6% 4.2% 5.3% 3.7% 4.9% 5.0%
5.0
3.0
3.5
4.0
5.5
4.0
3.7
3.5
3.1
3.4
5.0
3.0
Weighted Average Assumptions to Determine Pension Obligations at December 31
United States Plans
Foreign Plans
2013
2012
2013
2012
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salary progression rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.5%
3.0
3.6% 3.8% 3.7%
3.5
3.0
3.5
In developing the expected return on plan assets assumption, Teradyne evaluates input from its investment
manager and pension consultants, including their review of asset class return expectations. Based on this review,
Teradyne believes that 5.0% was an appropriate rate to use for fiscal 2013 for the U.S. Qualified Pension Plan
(“U.S. Plan”).
Effective January 1, 2012, Teradyne elected to immediately recognize net actuarial gains and losses and the
change in the fair value of the plan assets in its operating results in the year in which they occur or upon any
interim remeasurement of the plans. In addition, Teradyne used to calculate the expected return on plan assets
using a calculated market-related value of plan assets. Effective January 1, 2012, Teradyne elected to calculate
the expected return on plan assets using the fair value of the plan assets.
74
The discount rate utilized to determine future pension obligations for the U.S. Plan is based on Citigroup
Pension Index adjusted for the plan’s expected cash flows and was 4.5% at December 31, 2013, up from 3.6% at
December 31, 2012.
Plan Assets
As of December 31, 2013, the fair value of Teradyne’s pension plans’ assets totaled $282.1 million of which
$256.4 million was related to the U.S. Plan, $24.8 million was related to the U.K. defined benefit pension plan,
and $0.9 million was related to the Taiwan defined benefit pension plan. Teradyne’s pension plans’ assets
consisted primarily of investments in fixed-income and equity securities. Substantially all our pension plan assets
are held in individual trusts, which were established for the investment of assets of Teradyne’s sponsored
retirement plans.
Teradyne’s weighted average pension asset allocation at December 31, 2013 and 2012, by asset category is
as follows:
United States Plan
Foreign Plans
2013
2012
2013
2012
Fixed Income Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86.7% 85.8% 77.1% 49.2%
12.1
1.2
21.6
1.3
49.6
1.2
13.0
1.2
100.0% 100.0% 100.0% 100.0%
The assets of the U.S. Plan are overseen by the Teradyne Fiduciary Committee which is comprised of
members of senior management drawn from appropriate diversified levels of the management team. The
Fiduciary Committee is responsible for setting the policy that provides the framework for management of the
U.S. Plan assets. In accordance with its responsibilities, the Fiduciary Committee meets on a regular basis to
review the performance of the U.S. Plan assets and compliance with the investment policy. The policy sets forth
an investment structure for managing U.S. Plan assets, including setting the asset allocation ranges, which are
expected to provide an appropriate level of overall diversification required to maximize the long-term return on
plan assets for a prudent and reasonable level of risk given prevailing market conditions, total investment return
over the long term, and preservation of capital, while maintaining sufficient liquidity to pay the benefits of the
U.S. Plan. The investment portfolio will not, at any time, have a direct investment in Teradyne stock. It may have
indirect investment in Teradyne stock, if one of the funds selected by the investment manager invests in
Teradyne stock. In developing the asset allocation ranges, third party asset allocation studies are periodically
performed that consider the current and expected positions of the plan assets and funded status. Based on this
study and other appropriate information, the Fiduciary Committee establishes asset allocation ranges taking into
account acceptable risk targets and associated returns. The investment return objectives are to avoid excessive
volatility and produce a rate of return that at least matches the Policy Index identified below. The manager’s
investment performance is reviewed at least annually. Results for the total portfolio and for each major category
of assets are evaluated in comparison with appropriate market indices and the Policy Index.
The target asset allocation and the index for each asset category for the U.S. Plan, per the investment policy,
is as follows:
Asset Category:
Policy Index:
Passive and Active Fixed Income
Equity (Large cap)
International Equity
Barclays U.S. Long Government/Credit Bond Index
S&P 500 Stock Index
MSCI EAFE Index
Target
Allocation
90%
7
3
75
The assets of Teradyne’s foreign pension plans are invested in funds which seek to combine long-term
growth potential offered through equity exposure with the relative security provided by bonds, and are governed
locally by local management in accordance with specific jurisdictional requirements. Investments in the non-U.S.
plans consist primarily of fixed-income and equity securities. These investments are valued using significant
observable inputs (Level 2). The fair market value of assets for the international pension plans was $25.7 million
as of December 31, 2013. There were no investments with significant unobservable inputs (Level 3) in the non-
U.S. pension plans. During the years ended December 31, 2013 and 2012, there were no transfers of pension
assets in or out of Level 1, Level 2 or Level 3.
Teradyne’s U.S. Plan invests primarily in common trust funds and fixed income securities. Units held in the
common trust funds are valued at the unit price as reported by the investment managers based on the asset value
of the underlying investments; underlying investments in equity securities are valued at the last reported sales
price, and underlying investments in fixed-income securities are generally valued using methods based upon
market transactions for comparable securities. Substantially all of these investments are valued using significant
observable inputs (Level 2). The fair market value of assets for the U.S. Plan was $256.4 million as of
December 31, 2013. There were no investments with significant unobservable inputs (Level 3) in the U.S. Plan.
During the years ended December 31, 2013 and 2012, there were no transfers of pension assets in or out of Level
1, Level 2 or Level 3.
The fair value of pension plan assets by asset category and by level at December 31, 2013 and December 31,
2012 were as follows:
December 31, 2013
Level 1
Level 2
Level 3
Total
(in thousands)
Fixed income securities:
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.K. government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. equity (large cap) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee annuity contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $156,860
21,415
—
—
—
—
—
—
146
41,140 —
19,610 —
2,919 —
21,309 —
14,803 —
2,985 —
906 —
36 —
$ — $156,860
62,555
19,610
2,919
21,309
14,803
2,985
906
182
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,561
$260,568
$ — $282,129
December 31, 2012
Level 1
Level 2
Level 3
Total
(in thousands)
Fixed income securities:
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.K. government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. equity (large cap) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee annuity contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $157,263
23,712
—
—
—
—
—
—
—
58,962 —
8,593 —
2,042 —
23,832 —
23,990 —
3,108 —
839 —
558 —
$ — $157,263
82,674
8,593
2,042
23,832
23,990
3,108
839
558
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$23,712
$279,187
$ — $302,899
76
Contributions
Teradyne’s funding policy is to make contributions to the plans in accordance with local laws and to the
extent that such contributions are tax deductible. During 2013, Teradyne contributed $1.7 million to the U.S.
supplemental executive defined benefit pension plan and $2.5 million to certain qualified plans for non-U.S.
subsidiaries. During 2012, Teradyne contributed $1.7 million to the U.S. supplemental executive defined benefit
pension plan and $1.6 million to certain qualified plans for non-U.S. subsidiaries.
Expected Future Pension Benefit Payments
Future benefit payments are expected to be paid as follows:
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,607
16,124
16,636
17,370
18,011
98,269
$1,177
1,085
959
1,085
1,140
8,946
United States
Foreign
(in thousands)
Postretirement Benefit Plans
In addition to receiving pension benefits, U.S. Teradyne employees who meet early retirement eligibility
requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes death, and
medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are
available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these
benefits, and the existing benefit obligation relates primarily to those employees.
Teradyne uses a December 31 measurement date for its plan. The December 31 balances of the
postretirement assets and obligations are shown below:
2013
2012
(in thousands)
Assets and Obligations
Change in benefit obligation:
Projected benefit obligation:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,907
75
342
(2,025)
(1,280)
$ 12,793
67
437
82
(1,472)
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,019
11,907
Change in plan assets:
Fair value of plan assets:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,280
(1,280)
—
1,472
(1,472)
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (9,019) $(11,907)
77
The following table provides amounts recorded within the account line items of financial position as of
December 31:
Accrued employees’ compensation and withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement plans liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
(in thousands)
$(1,042) $ (1,322)
(10,585)
(7,977)
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(9,019) $(11,907)
The following table provides amounts recognized in accumulated other comprehensive income as of
December 31:
Prior service credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
(in thousands)
$(2,829) $(3,427)
Total recognized in other comprehensive income before tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,829)
(3,427)
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(664)
(445)
Total recognized in other comprehensive income, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(3,493) $(3,872)
The estimated portion of prior service credit remaining in accumulated other comprehensive income that is
expected to be recognized as a component of net periodic postretirement benefit cost in 2014 is $(0.6) million.
Expense
For the years ended December 31, 2013, 2012 and 2011, Teradyne’s net periodic postretirement benefit
(income) cost was comprised of the following:
2013
2012
2011
(in thousands)
Components of Net Periodic Postretirement Benefit (Income) Cost:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost
Net actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
75
342
(598)
(2,025)
$ 67
437
(599)
83
$
59
539
(598)
981
Total net periodic postretirement benefit (income) cost
. . . . . . . . . . . . . . . . . . . . . . . .
(2,206)
(12)
981
Changes in Plan Assets and Benefit Obligations Recognized in Other
Comprehensive Income:
Reversal of amortization items:
Prior service credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in net periodic postretirement benefit (income) cost and other
598
598
599
599
598
598
comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,608) $ 587
$1,579
78
Weighted Average Assumptions to Determine Net Periodic Postretirement Benefit Cost as of January 1
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial Health Care Cost Trend Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate Health Care Cost Trend Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year in which Ultimate Health Care Cost Trend Rate is reached . . . . . . . . . . . . . . . . . . . . . .
3.1% 3.7% 4.5%
9.0
8.5
5.0
5.0
2020
2020
8.5
5.0
2018
2013
2012
2011
Weighted Average Assumptions to Determine Postretirement Benefit Obligation as of December 31
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial Medical Trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate Health Care Trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical cost trend rate decrease to ultimate rate in year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.1% 3.1% 3.7%
8.5
8.0
5.0
5.0
2020
2020
9.0
5.0
2020
Assumed health care trend rates could have a significant effect on the amounts reported for health care
plans. A one percentage point change in the assumed health care cost trend rates for the year ended December 31,
2013, would have the following effects:
2013
2012
2011
1 Percentage
Point
Increase
1 Percentage
Point
Decrease
(in thousands)
Effect on total service and interest cost components . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on postretirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 13
244
$ (12)
(229)
Expected Future Benefit Payments
Future benefit payments are expected to be paid as follows:
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits Payments
(in thousands)
$1,042
981
969
853
818
3,051
O. STOCK BASED COMPENSATION
Stock Compensation Plans
At Teradyne’s annual meeting of stockholders held May 21, 2013, Teradyne’s stockholders approved an
amendment to Teradyne’s 2006 Equity and Cash Compensation Incentive Plan to increase the number of shares
issuable by 10.0 million for an aggregate of 32.0 million shares issuable thereunder. Teradyne’s stockholders also
approved an amendment to Teradyne’s 1996 Employee Stock Purchase Plan to increase the number of shares
issuable by 5.0 million, for an aggregate of 30.4 million shares issuable thereunder.
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. A portion of the restricted stock unit awards granted to
executive officers is subject to time-based vesting and a portion is subject to performance-based vesting. The
percentage level of performance satisfied for performance-based grants is assessed on or near the anniversary of
79
the grant date and, in turn, that percentage level determines the number of performance-based restricted stock
units available for vesting over the vesting period; portions of the performance-based grants not available for
vesting will be forfeited.
In 2013, 2012 and 2011, Teradyne granted service-based stock options to executive officers. These stock
options vest in equal installments over four years and have a term of seven years.
Stock compensation plan activity for the years 2013, 2012 and 2011 follows:
Restricted Stock Units:
Non-vested at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
2011
(in thousands)
4,970
2,110
(2,322)
(122)
5,840
1,844
(2,510)
(204)
6,963
1,936
(2,624)
(435)
Non-vested at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,636
4,970
5,840
Stock Options:
Outstanding at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed from acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,841
213
—
(1,220)
(104)
(24)
7,194
5,335
151
145
— 2,828
(965)
(1,396)
(203) —
(46)
(3,867)
Outstanding at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,706
3,841
5,335
Vested and expected to vest at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,694
3,785
4,904
Exercisable at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,814
2,004
1,844
Total shares available for the years 2013, 2012 and 2011:
Shares available:
Available for grant at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional shares reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
2011
(in thousands)
6,414
(213)
(2,110)
122
10,000
8,205
(151)
(1,844)
204
—
9,851
(145)
(1,936)
435
—
Available for grant at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,213
6,414
8,205
Weighted-average restricted stock unit award date fair value information for the years 2013, 2012 and 2011
follows:
Non-vested at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12.72
16.53
10.40
15.48
$15.56
$10.01
16.67
9.29
13.32
$12.72
$ 7.92
15.77
8.56
9.24
$10.01
2013
2012
2011
80
Restricted stock unit awards aggregate intrinsic value information at December 31 for the years 2013, 2012
and 2011 follows:
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected to vest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$81,680
77,388
(in thousands)
$83,949
78,718
$79,598
75,860
2013
2012
2011
Restricted stock units weighted average contractual terms (in years) information at December 31, for the
years 2013, 2012 and 2011 follows:
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected to vest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.14
1.13
1.01
1.00
1.04
1.03
2013
2012
2011
Weighted average stock options exercise price information for the years 2013, 2012 and 2011 follows:
Outstanding at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed from acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4.64
16.56
—
3.28
2.57
8.05
6.29
4.55
$ 4.12
16.95
—
3.87
3.11
16.21
4.64
3.70
$16.32
16.23
2.69
4.38
—
26.38
4.12
4.10
2013
2012
2011
Stock option aggregate intrinsic value information for the years ended December 31, 2013, 2012 and 2011
follows:
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and expected to vest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
2011
$16,848
30,673
30,512
23,707
(in thousands)
$17,136
47,051
46,283
26,436
$11,307
51,306
46,655
17,766
Stock options weighted average contractual terms (in years) information at December 31, for the years 2013,
2012 and 2011 follows:
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and Expected to vest
Exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.9
4.9
4.3
5.7
5.6
4.9
6.4
6.2
4.0
2013
2012
2011
81
Significant option groups outstanding at December 31, 2013 and related weighted average price and
remaining contractual life information follow:
Range Of Exercise Prices
Options Outstanding
Options Exercisable
Weighted-
Average Remaining
Contractual Life
(Years)
Weighted-
Average
Exercise Price
Shares
Weighted-
Average
Exercise Price
Shares
$0.94 – $2.58 . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.67 – $2.74 . . . . . . . . . . . . . . . . . . . . . . . . . .
$3.23 – $7.71 . . . . . . . . . . . . . . . . . . . . . . . . . .
$9.34 – $16.95 . . . . . . . . . . . . . . . . . . . . . . . . .
5.97
5.39
3.80
4.64
(shares in thousands)
485
821
674
726
$ 1.83
2.69
5.15
14.39
436
545
590
243
2,706
$ 6.29
1,814
$ 1.79
2.70
5.00
12.58
$ 4.55
As of December 31, 2013, total unrecognized expense related to non-vested restricted stock unit awards and
stock options was $51.3 million, and is expected to be recognized over a weighted average period of 2.4 years.
Employee Stock Purchase Plan
Under the Teradyne 1996 Employee Stock Purchase Plan, eligible employees may purchase shares of
common stock through regular payroll deductions of up to 10% of their compensation, to a maximum of shares
with a fair market value of $25,000 per calendar year, not to exceed 6,000 shares. Under the plan, the price paid
for the common stock, in 2013, is equal to 85% of the stock price on the last business day of the six month
purchase period. In 2012 and 2011, the price paid for the common stock was equal to 85% of the lower of the fair
market value of Teradyne’s common stock on the first business day and the last business day of each six month
purchase period within each year.
In July 2013, 0.4 million shares of common stock were issued to employees who participated in the plan
during the first half of 2013, at the price of $14.94 per share. In January 2014, Teradyne issued 0.4 million shares
of common stock to employees who participated in the plan during the second half of 2013, at the price of $14.98
per share.
In July 2012, 0.6 million shares of common stock were issued to employees who participated in the plan
during the first half of 2012, at the price of $11.69 per share. In January 2013, Teradyne issued 0.6 million shares
of common stock to employees who participated in the plan during the second half of 2012, at the price of $11.91
per share.
In July 2011, 0.6 million shares of common stock were issued to employees who participated in the plan
during the first half of 2011, at the price of $11.65 per share. In January 2012, Teradyne issued 0.6 million shares
of common stock to employees who participated in the plan during the second half of 2011, at the price of $11.59
per share.
P. SAVINGS PLAN
Teradyne sponsors a defined contribution employee retirement savings plan (“Savings Plan”) covering
substantially all U.S. employees. Under the Savings Plan, employees may contribute up to 20% of their
compensation (subject to Internal Revenue Service limitations). In January 2009, Teradyne amended the Savings
Plan to eliminate a fixed formula used to calculate the match and provide for a variable discretionary match to be
determined each year. In 2013, 2012 and 2011, Teradyne matched 100% of eligible employee contributions up to
4% of their compensation for employees not accruing benefits in the U.S. Qualified Pension Plan. There was no
match for employees still actively accruing benefits in the U.S. Qualified Pension Plan. Teradyne’s contributions
vest 25% per year for the first four years of employment, and contributions for those employees with four years
of service vest immediately.
82
In addition Teradyne established an unfunded U.S. Supplemental Savings Plan to provide savings benefits
in excess of those allowed by ERISA and the IRC. The provisions of this plan are the same as the Savings Plan.
Teradyne also established defined contribution savings plans for its foreign employees. Under Teradyne’s
savings plans, amounts charged to the statement of operations for the years ended December 31, 2013, 2012 and
2011 were $12.0 million, $10.6 million and $11.3 million, respectively.
Q.
INCOME TAXES
The components of income from continuing operations before income taxes and the provision (benefit) for
income taxes from continuing operations as shown in the consolidated statements of operations were as follows:
2013
2012
2011
(in thousands)
Income from continuing operations before income taxes:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 79,229
122,693
$112,008
153,968
$ 68,943
145,478
$201,922
$265,976
$ 214,421
Provision (benefit) for income taxes from continuing operations:
Current:
U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 18,051
22,509
(269)
$ 22,695
18,261
(12)
$
40,291
40,944
3,668
23,994
760
28,422
Deferred:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Federal
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,692)
(1,386)
(238)
(3,316)
8,158
5,997
(6,172)
(139,929)
(10,549)
(7,480)
7,983
(157,958)
Total provision (benefit) for income taxes from continuing operations: . . . . .
$ 36,975
$ 48,927
$(129,536)
The total income tax provision (benefit) for the years ended December 31, 2013, 2012 and 2011 was as
follows:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$36,975
—
(in thousands)
$48,927
—
$(129,536)
4,311
Total income tax provision (benefit)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$36,975
$48,927
$(125,225)
2013
2012
2011
For the tax years ended December 31, 2013 and December 31, 2012, the income tax expense from
continuing operations totaled $37.0 million and $48.9 million, respectively, primarily attributable to a U.S.
federal tax provision and tax provisions for foreign taxes. The decrease in income tax expense from 2012 to 2013
was due to the reinstatement of the U.S. research and development tax credit in 2013 for fiscal years 2012 and
2013, lower pre-tax income, partially offset by higher tax expense for uncertain tax positions and state taxes.
For the tax year ended December 31, 2011, the income tax benefit from continuing operations totaled
$129.5 million, primarily attributable to the reduction of Teradyne’s deferred income tax valuation allowance.
83
A reconciliation of the effective tax rate for the years 2013, 2012 and 2011 follows:
2013
2012
2011
U.S. statutory federal tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. research and development credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other U.S. permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
35.0% 35.0% 35.0%
(11.5)
(10.8)
(12.6)
(1.1)
5.7
(86.6)
(7.2) —
1.1
0.4
0.1
(0.3)
(2.8)
(0.5)
(1.7) —
(0.1)
(0.8)
18.3% 18.4% (60.4)%
U.S. research and development tax credits provided a 7.2% reduction to the 2013 U.S. statutory federal tax
rate of 35.0%. The research and development tax credit expired at the end of 2013; therefore if the credit is not
legislatively re-enacted there could be an unfavorable impact on Teradyne’s 2014 effective income tax rate.
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 years ended December 31, 2013, 2012 and 2011 were
$4.7 million or $0.02 per diluted share, $10.9 million or $0.05 per diluted share and $0.2 million or $0.00 per
diluted share, respectively. The tax holiday is currently expected to expire on December 31, 2015.
Teradyne records all interest and penalties related to income taxes as a component of income tax expense.
Accrued interest and penalties related to income tax items at December 31, 2013 were $0.4 million.
Significant components of Teradyne’s deferred tax assets (liabilities) as of December 31, 2013 and 2012
were as follows:
Deferred tax assets:
2013
2012
(in thousands)
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vacation accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 14,679
65,210
38,452
22,966
—
17,828
10,498
7,291
2,613
12,379
$ 36,674
64,123
50,886
28,674
284
14,246
9,355
6,452
282
15,118
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
191,916
226,094
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(40,386)
(55,446)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151,530
170,648
Deferred tax liabilities:
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of tax over book depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(794)
(89,268)
(24,458)
(996)
(114,730)
(22,446)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(114,520)
(138,172)
Net deferred assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 37,010
$ 32,476
84
During 2013, Teradyne reduced both its net operating loss deferred tax asset and related valuation allowance
by approximately $19.5 million which was attributable to pre-2006 windfall stock option deductions, the benefit
of which will be credited to additional paid-in capital if and when realized through a reduction in Teradyne’s
income tax payable. As of December 31, 2013, these windfall stock option deductions will be tracked off balance
sheet in accordance with ASC 718. During 2012, Teradyne’s valuation allowance increased by $4.4 million
primarily due to the increase in the deferred tax assets related to state tax credits generated in 2012. During 2011,
Teradyne’s beginning of the year valuation allowance decreased by $190.2 million due to a release of the
valuation allowance.
As of December 31, 2013 and December 31, 2012, Teradyne evaluated the likelihood that it would realize
the deferred income taxes to offset future taxable income and concluded that it is more likely than not that a
substantial majority of its deferred tax assets will be realized through consideration of both the positive and
negative evidence. At December 3,1 2013 and December 31, 2012, Teradyne maintained a valuation allowance
for certain deferred tax assets of $40.4 million and $55.4 million, respectively, primarily related to state net
operating losses and state tax credit carryforwards, due to the uncertainty regarding their realization. Adjustments
could be required in the future if Teradyne estimates that the amount of deferred tax assets to be realized is more
or less than the net amount recorded.
As of December 31, 2011, Teradyne evaluated the likelihood that it would realize the deferred income taxes
to offset future taxable income and concluded that it is more likely than not that a substantial majority of its
deferred tax assets will be realized through consideration of both the positive and negative evidence. The
evidence consisted primarily of its three year U.S. historical cumulative profitability, projected future taxable
income, forecasted utilization of the deferred tax assets and the fourth quarter of 2011 acquisition of LitePoint,
offset by the volatility of the industries Teradyne operates in, primarily the semiconductor industry. As such,
Teradyne reduced the valuation allowance by $190.2 million, which was recorded as a tax benefit in the year
ended December 31, 2011.
At December 31, 2013, Teradyne had operating loss carryforwards that expire in the following years:
U.S. Federal
Operating Loss
Carryforwards
State Net
Operating Loss
Carryforwards
Foreign Net
Operating Loss
Carryforwards
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019-2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025-2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beyond 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-expiring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
—
—
—
—
16,600
300
2,454
—
$19,354
(in thousands)
$ 335
2
843
831
706
2,791
52
3,673
—
$9,233
$ —
—
—
—
—
—
—
—
10,380
$10,380
Of the U.S. federal operating loss carryforwards, $16.5 million relates to the acquisition of GenRad, Inc.
(“GenRad”) in 2001 and $2.8 million relates to the acquisition of ZTEC in 2013. Both GenRad and ZTEC losses
are limited in the annual amount that can be used as a result of “change in ownership” rules as defined in the
Internal Revenue Code of 1986. The net operating loss carryforward does not include any excess tax deduction
related to stock based compensation which has not been recognized for financial statement purposes.
Teradyne has approximately $133.4 million of tax credit carry forwards. Federal business tax credits of
approximately $27.7 million expire in the years 2017 through 2033. Teradyne has foreign tax credits of
approximately $34.5 million expiring in the years 2018 through 2022 and alternative minimum tax credits of
approximately $6.6 million, which do not expire. In addition, there are state tax credits of $64.6 million which
begin to expire in 2014. Teradyne has federal tax credits of $41.1 million, that are attributable to stock option
85
exercises which will be recorded as an increase in additional paid in capital on the consolidated balance sheet if
and when they are “realized” in accordance with ASC 718-10 “Compensation—Stock Compensation.”
Teradyne’s gross unrecognized tax benefits for the years ended December 31, 2013, 2012 and 2011 were as
follows:
Beginning balance, as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions:
2013
2012
2011
$18,666
(in thousands)
$19,391
$11,777
Tax positions for current year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax positions for prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,586
2,112
—
459
2,259
—
6,131
1,065
1,388
Reductions:
Tax positions for prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,161)
—
(3,443)
—
(970)
—
Ending Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,203
$18,666
$19,391
Current year and prior year additions include assessment of potential transfer pricing issues worldwide,
federal tax credits, state tax credits, and domestic production activities deduction. Reductions for tax positions for
prior years primarily relate to statute expiration and the effective settlement of a state tax audit. Of the $21.2
million of unrecognized tax benefits as of December 31, 2013, $16.0 million would impact the consolidated
income tax rate if ultimately recognized. The remaining $5.2 million would impact the valuation allowance if
recognized.
As of December 31, 2013, Teradyne has open tax years beginning in 2007 for major jurisdictions including
the U.S., Japan, Singapore, Germany and the United Kingdom. Teradyne estimates that it is reasonably possible
that the balance of unrecognized tax benefits as of December 31, 2013 may decrease approximately $1.0 million
in the next twelve months, as a result of a lapse of statutes of limitation and the effective settlement of a tax audit.
As of December 31, 2013, a deferred tax liability has not been established for approximately $320.0 million
of cumulative undistributed earnings of non-U.S. subsidiaries, which are expected to be reinvested indefinitely in
operations outside the U.S. Determination of the unrecognized deferred tax liability on unremitted earnings is not
practical 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.
R. OPERATING SEGMENT, GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION
Teradyne has three operating segments (Semiconductor Test, Wireless Test and System 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 Wireless Test segment includes operations
related to the design, manufacturing and marketing of wireless test products and services. The System Test
segment includes operations related to the design, manufacturing and marketing of products and services for
military/aerospace instrumentation test, storage test and circuit-board test. 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 using several factors, of which the primary financial measure is business
segment income from continuing operations before taxes. The accounting policies of the business segments are
the same as those described in Note B: “Accounting Policies”.
86
Segment information for the years ended December 31, 2013, 2012 and 2011 is as follows:
2013
2012
2011
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before
taxes (1)(2) . . . . . . . . . . . . . . . . . . . . . . . .
Total assets (3) . . . . . . . . . . . . . . . . . . . . . . .
Property additions . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . .
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before
taxes (1)(2) . . . . . . . . . . . . . . . . . . . . . . . .
Total assets (3) . . . . . . . . . . . . . . . . . . . . . . .
Property additions . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . .
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations
before taxes (1)(2) . . . . . . . . . . . . . . . . . .
Total assets (3) . . . . . . . . . . . . . . . . . . . . . . .
Property additions . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . .
Semiconductor
Test
Wireless
Test
Corporate
And
System Test
Eliminations Consolidated
(in thousands)
$1,023,041
$251,871
$153,021
$
— $1,427,933
153,797
632,840
94,303
72,472
23,153
645,001
5,358
51,675
3,115
79,983
7,070
5,180
21,857
1,272,000
—
21,360
201,922
2,629,824
106,731
150,687
$1,127,726
$286,355
$242,669
$
— $1,656,750
185,985
604,127
105,074
73,537
83,077
672,048
7,608
50,362
34,164
71,116
6,398
4,549
(37,250)
1,082,054
—
17,066
265,976
2,429,345
119,080
145,514
$1,106,191
$ 28,390
$294,480
$
— $1,429,061
219,651
581,026
80,606
74,278
(20,579)
725,940
794
13,057
53,298
77,277
4,697
4,192
(37,949)
804,396
—
15,154
214,421
2,188,639
86,097
106,681
(1)
(2)
Interest income, interest expense and other, and pension and postretirement plans actuarial gains and losses
are included in Corporate and Eliminations.
Included in income (loss) from continuing operations before taxes are charges and credits related to
restructuring and other and inventory charges.
(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 accounts:
Cost of revenues—inventory charge (1)
Restructuring and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,218
1,016
(in thousands)
$18,433
386
$10,370
2,142
(1)
Included in the cost of revenues for the years ended December 31, 2012 and 2011 are charges for excess
inventory provisions recorded primarily as a result of product transition.
For the Year Ended December 31,
2013
2012
2011
Included in the System Test segment are charges and credits in the following accounts:
Cost of revenues—inventory charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other
$4,168
1,431
(in thousands)
$4,271
451
$1,090
(300)
For the Year Ended December 31,
2013
2012
2011
87
Included in the Wireless Test segment are charges and credits in the following accounts:
For the Year Ended December 31,
2013
2012
2011
(in thousands)
Cost of revenues—inventory step-up (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues—inventory charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other
$ — $6,089
4,145
236
7,206
82
$12,178
141
—
(2)
Included in the cost of revenues for the years ended December 31, 2012 and 2011 is the cost for purchase
accounting inventory step-up.
Included in the Corporate and Eliminations segment are charges and credits in the following accounts:
For the Year Ended December 31,
2013
2012
2011
(in thousands)
Restructuring and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(449)
$(8,794) $4,901
Information as to Teradyne’s revenues by country is as follows:
2013
2012
2011
(in thousands)
Revenues from customers (1):
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 323,564
272,919
222,731
119,286
114,765
90,797
86,900
81,806
63,392
32,209
19,564
$ 351,335
299,359
238,280
216,445
101,502
77,099
69,064
100,807
111,571
80,518
10,770
$ 180,441
172,700
221,895
145,958
90,622
101,208
138,107
148,699
130,484
80,539
18,408
$1,427,933
$1,656,750
$1,429,061
(1) Revenues attributable to a country are based on location of customer site.
In 2013 and 2012, one customer accounted for 12% and 10%, respectively, of total consolidated revenues.
The customer is a customer of Teradyne’s Wireless Test and Semiconductor Test segments. In 2011, no customer
accounted for 10% or more of total consolidated revenues.
Long-lived assets by geographic area:
December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$211,455
211,422
(in thousands)
$63,781
54,360
$275,236
265,782
United
States
Foreign
Countries
Total
88
S. STOCK REPURCHASE PROGRAM
In November 2010, the Board authorized a stock repurchase program for up to $200 million. In the years
ended December 31, 2013 and December 31, 2012, Teradyne did not repurchase any shares. The cumulative
repurchases under the new program as of December 31, 2013 totaled 2.6 million shares of common stock for
$31.2 million at an average price of $11.84.
T. SUBSEQUENT EVENTS
In January 2014, the Board declared an initial quarterly cash dividend of $0.06 per share to be paid on
June 2, 2014 to shareholders of record as of May 9, 2014. Payments of future cash dividends will rest within the
discretion of the Board and will depend, among other things, upon Teradyne’s earnings, capital requirements and
financial condition.
Michael A. Bradley retired as Chief Executive Officer of Teradyne effective January 31, 2014. Mr. Bradley
will continue to serve on Teradyne’s Board of Directors. In connection with his retirement, Teradyne entered into
an agreement on January 22, 2014 with Mr. Bradley (the “Retirement Agreement”). Under the Retirement
Agreement, Mr. Bradley’s unvested restricted stock units and stock options granted prior to his Retirement Date
will continue to vest in accordance with their terms through January 31, 2017; and any vested options or options
that vest during that period may be exercised for the remainder of the applicable option term. In the Retirement
Agreement, Mr. Bradley agreed to be bound by non-competition and non-solicitation restrictions through January
31, 2017. The Retirement Agreement also includes additional, standard terms and conditions relating to Mr.
Bradley’s separation from Teradyne. Teradyne will record a stock based compensation expense of approximately
$6.6 million in the first quarter of 2014 related to the Retirement Agreement.
89
SUPPLEMENTARY INFORMATION
(Unaudited)
The following sets forth certain unaudited consolidated quarterly statements of operations data for each of
Teradyne’s last eight quarters. In management’s opinion, this quarterly information reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement for the periods presented. Such
quarterly results are not necessarily indicative of future results of operations and should be read in conjunction
with the audited consolidated financial statements of Teradyne and the notes thereto included elsewhere herein.
2013
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
(in thousands, except per share amounts)
(1)(2)
Net revenues:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$214,300
66,067
$363,087
65,802
$365,825
67,551
$211,710
73,591
Total net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
280,367
428,889
433,376
285,301
Cost of revenues:
Cost of products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96,793
30,157
158,411
29,245
150,365
28,717
93,461
31,983
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . .
126,950
187,656
179,082
125,444
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
153,417
241,233
254,294
159,857
Operating expenses:
Engineering and development . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired intangible assets amortization . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,751
67,890
18,036
332
67,773
69,230
18,063
259
68,918
72,917
18,064
889
64,613
69,523
18,284
600
Total operating expenses . . . . . . . . . . . . . . . . . . . . . .
149,009
155,325
160,788
153,020
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,408
1,072
6,906
85,908
903
6,454
(Loss) income from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit) provision for income taxes . . . . . . . . . . . . . . . . . . . .
(1,426)
(8,015)
80,357
13,801
93,506
948
6,902
87,552
18,093
6,837
1,206
(27,396)
35,439
13,096
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per common share—basic . . . . . . . . . . . . . . . . . . .
Net income per common share—diluted . . . . . . . . . . . . . . . . .
$
$
$
6,589
$ 66,556
$ 69,459
$ 22,343
0.03
0.03
$
$
0.35
0.28
$
$
0.36
0.29
$
$
0.12
0.09
(1)
(2)
Interest expense and other includes a $34.2 million gain from the sale of an equity investment.
In the fourth quarter ended December 31, 2013, pension and post retirement net actuarial gains increased
gross profit and net income by $2.7 million and $9.1 million, respectively. See Note B: “Accounting
Policies” for a discussion of our accounting policy.
90
2012
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
(1)
(2)
(3)(4)
(in thousands, except per share amounts)
Net revenues:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$330,891
65,777
$480,578
67,706
$393,037
70,357
$179,063
69,341
Total net revenues . . . . . . . . . . . . . . . . . . . . . . .
396,668
548,284
463,394
248,404
Cost of revenues:
Cost of products . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
174,001
31,741
Total cost of revenues . . . . . . . . . . . . . . . . . . . .
205,742
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
190,926
Operating expenses:
Engineering and development . . . . . . . . . . . . . . . . . .
Selling and administrative . . . . . . . . . . . . . . . . . . . . .
Acquired intangible assets amortization . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . .
61,279
66,633
18,429
(1,825)
Total operating expenses . . . . . . . . . . . . . . . . . .
144,516
Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,410
893
6,059
Income (loss) from continuing operations before income
206,498
32,280
238,778
309,506
67,834
72,064
18,429
(6,262)
152,065
157,441
874
6,323
169,782
33,412
203,194
260,200
63,946
69,030
18,429
683
152,088
108,112
1,067
6,154
92,599
30,400
122,999
125,405
62,807
69,289
18,221
(317)
150,000
(24,595)
1,256
6,946
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . .
41,244
7,680
151,992
40,605
103,025
14,384
(30,285)
(13,742)
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 33,564
$111,387
$ 88,641
$ (16,543)
Net income (loss) per common share—basic . . . . . . . . . .
Net income (loss) per common share—diluted . . . . . . . .
$
$
0.18
0.15
$
$
0.60
0.49
$
$
0.47
0.39
$
$
(0.09)
(0.09)
(1) Restructuring and other includes a ($1.8) million fair value adjustment to decrease the LitePoint acquisition
contingent consideration.
(2) Restructuring and other includes $0.3 million of severance charges related to headcount reductions of 10
(3)
(4)
people in Semiconductor Test and ($6.5) million fair value adjustment to decrease the LitePoint acquisition
contingent consideration.
In the fourth quarter ended December 31, 2012, we corrected prior period income tax provision (benefit)
errors that resulted in a $0.2 million income tax provision. These errors were not individually or in
aggregate material to the fourth quarter of 2012 or any prior period.
In the fourth quarter ended December 31, 2012, pension and postretirement actuarial losses decreased gross
profit and net income by $8.1 million and $18.3 million, respectively. See Note B: “Accounting Policies”
for a discussion of our accounting policy.
91
Item 9:
Changes in and disagreements with accountants on accounting and financial disclosure
None.
Item 9A: Controls and procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, our management, with the participation of our CEO and
CFO, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b)
promulgated under the Exchange Act. Based upon that evaluation, our CEO and CFO 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 by us 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 CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting during the fourth fiscal quarter ended
December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the
participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness
of our internal control over financial reporting based on the framework in Internal Control—Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on our evaluation under the framework in Internal Control—Integrated Framework (1992), our management
concluded that our internal control over financial reporting was effective as of December 31, 2013.
The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited
by PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report
which is included under Item 8 of this Annual Report.
Inherent Limitations on Effectiveness of Controls
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Item 9B: Other Information
None.
92
PART III
Item 10: Directors, Executive Officers and Corporate Governance.
Certain information relating to our directors and executive officers, committee information, reports and
charters, executive compensation, security ownership of certain beneficial owners and management and related
stockholder matters, and certain relationships and related transactions is incorporated by reference herein from
our definitive proxy statement in connection with our Annual Meeting of Shareholders to be held on May 20,
2014. The proxy statement will be filed with the SEC not later than 120 days after the close of the fiscal year. For
this purpose, the Compensation Committee Report included in such proxy statement is specifically not
incorporated herein. Also see “Item 1: Business—Our Executive Officers.”
Item 11: Executive Compensation.
Certain information relating to our directors and executive officers, executive compensation, security
ownership of certain beneficial owners and management and related stockholder matters, and certain
relationships and related transactions is incorporated by reference herein from our definitive proxy statement in
connection with our Annual Meeting of Shareholders to be held on May 20, 2014. The proxy statement will be
filed with the SEC not later than 120 days after the close of the fiscal year. For this purpose, the Compensation
Committee Report included in such proxy statement is specifically not incorporated herein.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Certain information relating to our directors and executive officers, executive compensation, security
ownership of certain beneficial owners and management and related stockholder matters, and certain
relationships and related transactions is incorporated by reference herein from our definitive proxy statement in
connection with our Annual Meeting of Shareholders to be held on May 20, 2014. The proxy statement will be
filed with the SEC not later than 120 days after the close of the fiscal year. For this purpose, the Compensation
Committee Report included in such proxy statement is specifically not incorporated herein. Also see “Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Equity
Compensation Plans.”
Item 13: Certain Relationships and Related Transactions, and Director Independence.
Certain information relating to our directors and executive officers, executive compensation, security
ownership of certain beneficial owners and management and related stockholder matters, and certain
relationships and related transactions is incorporated by reference herein from our definitive proxy statement in
connection with our Annual Meeting of Shareholders to be held on May 20, 2014. The proxy statement will be
filed with the SEC not later than 120 days after the close of the fiscal year. For this purpose, the Compensation
Committee Report included in such proxy statement is specifically not incorporated herein.
Item 14: Principal Accountant Fees and Services.
Certain information relating to audit fees and other of Teradyne’s independent registered public accounting
firm is incorporated by reference herein from our definitive proxy statement in connection with our Annual
Meeting of Shareholders to be held on May 20, 2014. The proxy statement will be filed with the SEC not later
than 120 days after the close of the fiscal year. For this purpose, the Audit Committee Report included in such
proxy statement is specifically not incorporated herein.
93
PART IV
Item 15: Exhibits and Financial Statement Schedules.
15(a)(1) Financial Statements
The following consolidated financial statements are included in Item 8:
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011 . . . . . . . . .
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and
Page
37
38
39
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013, 2012 and
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011 . . . . . . . . .
41
42
15(a)(2) Financial Statement Schedule
The following consolidated financial statement schedule is included in Item 15(c):
Schedule II—Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted since they are either not required or information
is otherwise included.
15(a)(3) Listing of Exhibits
The Exhibits which are filed with this report or which are incorporated by reference herein are set forth in
the Exhibit Index.
15(c) Financial Statement Schedules
94
TERADYNE, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
Column B
Column C
Column D
Column E
Column F
Balance at
Beginning of Period
Additions
Charged to
Cost and Expenses
Other
Deductions
Balance at
End of Period
(in thousands)
Column A
Description
Valuation reserve deducted in the
balance sheet from the asset to
which it applies:
Accounts receivable:
2013 Allowance for doubtful
accounts . . . . . . . . . . . . . . . . . . . .
$4,118
2012 Allowance for doubtful
accounts . . . . . . . . . . . . . . . . . . . .
$4,102
2011 Allowance for doubtful
accounts . . . . . . . . . . . . . . . . . . . .
$3,752
$ 69
$ 78
$—
$—
$1,275(1)
$2,912
$—
$429
$
$
62
79
$4,118
$4,102
(1) Based upon an improvement in the aging of accounts receivables in 2013, Teradyne reduced its allowance
for doubtful accounts by approximately $1 million.
Column A
Description
Column B
Column C
Column D
Column E
Column F
Balance at
Beginning of Period
Additions
Charged to
Cost and Expenses
Other
Deductions
Balance at
End of Period
(in thousands)
Valuation reserve deducted in the
balance sheet from the asset to
which it applies:
Inventory:
2013 Inventory reserve . . . . . . . . . .
$141,838
2012 Inventory reserve . . . . . . . . . .
$123,512
2011 Inventory reserve . . . . . . . . . .
$122,434
$16,592
$26,849
$11,601
$2,568
$45,141
$115,857
$5,353
$13,876
$141,838
$6,815
$17,338
$123,512
95
EXHIBIT INDEX
The following designated exhibits are, as indicated below, either filed herewith or have heretofore been filed
with the Securities and Exchange Commission and are referred to and incorporated by reference to such filings.
Exhibit
No.
Description
SEC Document Reference
3.1
3.2
4.1
Restated Articles of Organization, as amended.
Exhibit 3.01 to Teradyne’s Quarterly Report on
Form 10-Q for the quarter ended July 2,
2000.
Amended and Restated By-laws, as amended.
Exhibit 3.1 to Teradyne’s Quarterly Report on
Form 10-Q for the quarter ended
September 30, 2007.
Indenture dated as of April 6, 2009 between
Exhibit 4.1 to Teradyne’s Current Report on
Teradyne and U.S. Bank National
Association as trustee, together with form of
Note.
Form 8-K filed April 6, 2009.
4.2
Form of Note.
Included in Exhibit 4.1 to Teradyne’s Current
Report on Form 8-K filed April 6, 2009.
10.1†
Standard Manufacturing Agreement entered
into as of November 24, 2003 by and
between Teradyne and Solectron.
Exhibit 10.1 to Teradyne’s Quarterly Report on
Form 10-Q for the quarter ended
September 30, 2007.
10.2†
Amendment 1 to Standard Manufacturing
Exhibit 10.2 to Teradyne’s Quarterly Report on
Agreement, dated as of January 18, 2007, by
and between Teradyne and Solectron.
Form 10-Q for the quarter ended
September 30, 2007.
10.3†
Second Amendment to Standard Manufacturing
Agreement, dated as of August 27, 2007, by
and between Teradyne and Solectron.
Exhibit 10.3 to Teradyne’s Quarterly Report on
Form 10-Q for the quarter ended
September 30, 2007.
10.4
Fifth Amendment to Standard Manufacturing
Exhibit 10.4 to Teradyne’s Annual Report on
Agreement, dated as of July 17, 2009, by and
between Teradyne and Flextronics
Corporation.
Form 10-K for the fiscal year ended
December 31, 2009.
10.5†
Sixth Amendment to Standard Manufacturing
Exhibit 10.5 to Teradyne’s Annual Report on
Agreement, dated as of July 27, 2009, by and
between Teradyne and Flextronics
Corporation.
Form 10-K for the fiscal year ended
December 31, 2009.
10.6
10.7
10.8†
Addendum to Standard Manufacturing
Agreement (Authorized Purchase
Agreement) – Revised July 1, 2010.
Eighth Amendment to Standard Manufacturing
Agreement, dated as of April 13, 2012, by
and between Teradyne and Flextronics Sales
& Marketing North Asia (L) LTD.
Ninth Amendment to Standard Manufacturing
Agreement, dated as of September 17, 2012,
by and between Teradyne and Flextronics
Sales & Marketing North Asia (L) LTD.
Exhibit 10.6 to Teradyne’s Annual Report on
Form 10-K for the fiscal year ended
December 31, 2010.
Exhibit 10.7 to Teradyne’s Annual Report on
Form 10-K for the fiscal year ended
December 31, 2012.
Exhibit 10.8 to Teradyne’s Annual Report on
Form 10-K for the fiscal year ended
December 31, 2012.
96
Exhibit
No.
10.9
Description
SEC Document Reference
2006 Equity and Cash Compensation Incentive
Plan, as amended.*
Appendix A to Teradyne’s Notice and Proxy
Statement on Schedule 14A filed April 11,
2013.
10.10
Form of Performance-Based Restricted Stock
Filed herewith.
10.11
10.12
Unit Agreement for Executive Officers under
2006 Equity and Cash Compensation
Incentive Plan.*
Form of Time-Based Restricted Stock Unit
Agreement for Executive Officers under
2006 Equity and Cash Compensation
Incentive Plan.*
Filed herewith.
Form of Restricted Stock Unit Agreement for
Directors under 2006 Equity and Cash
Compensation Incentive Plan.*
Exhibit 10.10 to Teradyne’s Annual Report on
Form 10-K for the fiscal year ended
December 31, 2010.
10.13
1997 Employee Stock Option Plan, as amended
and restated.*
Exhibit 10.2 to Teradyne’s Quarterly Report on
Form 10-Q for the quarter ended June 30,
2002 and Exhibit 10.5 to Teradyne’s Annual
Report on Form 10-K for the fiscal year
ended December 31, 2006.
10.14
Form of Option Agreement under the 1997
Exhibit 10.47 to Teradyne’s Quarterly Report
Employee Stock Option Plan.*
on Form 10-Q for the quarter ended
October 3, 2004.
10.15
Form of Restricted Stock Unit Agreement for
Exhibit 10.1 to Teradyne’s Current Report on
Executive Officers under the 1997 Employee
Stock Option Plan.*
Form 8-K filed January 30, 2006.
10.16
Form of Restricted Stock Unit Agreement for
Directors under the 1997 Employee Stock
Option Plan.*
Exhibit 10.2 to Teradyne’s Current Report on
Form 8-K filed January 30, 2006.
10.17
1996 Non-Employee Director Stock Option
Exhibit 10.34 to Teradyne’s Annual Report on
Plan, as amended.*
10.18
Form of Option Agreement under 1996 Non-
Employee director Stock Option Plan.*
10.19
1996 Employee Stock Purchase Plan, as
amended.*
Form 10-K for the fiscal year ended
December 31, 2004 and Exhibit 10.4 to
Teradyne’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2006.
Exhibit 10.48 to Teradyne’s Quarterly Report
on Form 10-Q for the quarter ended
October 3, 2004.
Appendix B to Teradyne’s Notice and Proxy
Statement on Schedule 14A filed April 11,
2013.
10.20
Deferral Plan for Non-Employee Directors, as
Exhibit 10.2 to Teradyne’s Quarterly Report on
amended.*
form 10-Q for the quarter ended
September 28, 2008.
10.21
Supplemental Savings Plan, as amended and
Exhibit 10.18 to Teradyne’s Annual Report on
restated.*
Form 10-K for the fiscal year ended
December 31, 2008.
97
Exhibit
No.
10.22
Description
SEC Document Reference
Supplemental Executive Retirement Plan, as
Exhibit 10.19 to Teradyne’s Annual Report on
restated.*
Form 10-K for the fiscal year ended
December 31, 2008.
10.23
Executive Officer Agreement dated January 22,
Filed herewith.
2014 between Teradyne and Michael A.
Bradley.*
10.24
Agreement Regarding Termination Benefits
dated January 22, 2014 between Teradyne
and Mark Jagiela.*
Filed herewith.
10.25
Employment Agreement dated July 30, 2004
between Teradyne and Michael A. Bradley.*
10.26
10.27
10.28
Employment Agreement dated August 9, 2004
between Teradyne and Gregory R. Beecher.*
Employment Agreement dated May 7, 2004
between Teradyne and Mark Jagiela.*
Amended and Restated Executive Officer
Change in Control Agreement dated
December 30, 2008 between Teradyne and
Gregory R. Beecher, as amended.*
Exhibit 10.38 to Teradyne’s Quarterly Report
on Form 10-Q for the quarter ended July 4,
2004.
Exhibit 10.40 to Teradyne’s Quarterly Report
on Form 10-Q for the quarter ended July 4,
2004.
Exhibit 10.37 to Teradyne’s Quarterly Report
on Form 10-Q for the quarter ended July 4,
2004.
Exhibit 10.28 to Teradyne’s Annual Report on
Form 10-K for the fiscal year ended
December 31, 2012.
10.29
Amended and Restated Executive Officer
Filed herewith.
Change in Control Agreement dated January
22, 2014 between Teradyne and Mark
Jagiela, as amended.*
10.30
Amended and Restated Executive Officer
Exhibit 10.30 to Teradyne’s Annual Report on
Change in Control Agreement dated May 26,
2009 between Teradyne and Charles J. Gray,
as amended.
Form 10-K for the fiscal year ended
December 31, 2012.
10.31
Employment Agreement dated July 24, 2009
between Teradyne and Charles J. Gray.
Exhibit 10.1 to Teradyne’s Quarterly Report on
Form 10-Q for the quarter ended April 4,
2010.
10.32
Amended and Restated Executive Officer
Exhibit 10.32 to Teradyne’s Annual Report on
Change in Control Agreement dated June 30,
2012 between Teradyne and Walter G.
Vahey, as amended.
Form 10-K for the fiscal year ended
December 31, 2012.
10.33
Employment Agreement dated February 6, 2013
Exhibit 10.33 to Teradyne’s Annual Report on
between Teradyne and Walter G. Vahey
Form 10-K for the fiscal year ended
December 31, 2012.
10.34
Executive Officer Agreement dated June 29,
Exhibit 10.1 to Teradyne’s Quarterly Report on
2012 between Teradyne and Jeffrey
Hotchkiss.
Form 10-Q for the quarter ended July 1,
2012.
98
Exhibit
No.
10.35
Description
SEC Document Reference
Form of Executive Officer Stock Option
Filed herewith.
Agreement under 2006 Equity and Cash
Compensation Incentive Plan, as amended.*
10.36
Form of Indemnification Agreement.*
Exhibit 10.24 to Teradyne’s Annual Report on
Form 10-K for the fiscal year ended
December 31, 2006.
10.37
Nextest Systems Corporation 1998 Equity
Exhibit 10.33 to Teradyne’s Annual Report on
Incentive Plan, as amended.
Form 10-K for the fiscal year ended
December 31, 2008.
10.38
Nextest Systems Corporation 2006 Equity
Exhibit 10.34 to Teradyne’s Annual Report on
Incentive Plan.
Form 10-K for the fiscal year ended
December 31, 2008.
10.39
Eagle Test Systems, Inc. 2003 Stock Option and
Exhibit 10.35 to Teradyne’s Annual Report on
Grant Plan.
Form 10-K for the fiscal year ended
December 31, 2008.
10.40
Eagle Test Systems, Inc. 2006 Stock Option and
Exhibit 10.36 to Teradyne’s Annual Report on
Incentive Plan.
Form 10-K for the fiscal year ended
December 31, 2008.
10.41
Convertible Note Hedge Transaction
Exhibit 10.1 to Current Report on Form 8-K
Confirmation dated as of March 31, 2009
between Teradyne and Goldman, Sachs &
Co.
filed April 6, 2009.
10.42
Warrant Transaction Confirmation dated as of
March 31, 2009 between Teradyne and
Goldman, Sachs & Co.
Exhibit 10.2 to Current Report on Form 8-K
filed April 6, 2009.
10.43
Amendment to Warrant Transaction
Exhibit 10.3 to Current Report on Form 8-K
Confirmation dated as of April 1, 2009
between Teradyne and Goldman, Sachs &
Co.
filed April 6, 2009.
10.44
LitePoint Corporation 2002 Stock Plan
Exhibit 10.42 to Teradyne’s Annual Report on
Form 10-K for the fiscal year ended
December 31, 2011.
21.1
23.1
31.1
31.2
32.1
32.2
Subsidiaries of Teradyne.
Filed herewith.
Consent of PricewaterhouseCoopers LLP.
Filed herewith.
Rule 13a-14(a) Certification of Principal
Filed herewith.
Executive Officer.
Rule 13a-14(a) Certification of Principal
Filed herewith.
Financial Officer.
Section 1350 Certification of Principal
Furnished herewith.
Executive Officer.
Section 1350 Certification of Principal
Furnished herewith.
Financial Officer.
99
Exhibit
No.
Description
SEC Document Reference
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
†
*
-Confidential treatment granted.
-Management contract or compensatory plan.
100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 this 28th day of February, 2014.
TERADYNE, INC.
By:
/S/ GREGORY R. BEECHER
Gregory R. Beecher,
Vice President, Chief Financial Officer and
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ ALBERT CARNESALE
Chair of the Board
February 28, 2014
Albert Carnesale
/S/ MARK E. JAGIELA
Chief Executive Officer (Principal
February 28, 2014
Mark E. Jagiela
Executive Officer)
/S/ GREGORY R. BEECHER
Vice President, Chief Financial Officer
February 28, 2014
Gregory R. Beecher
and Treasurer (Principal
Financial and Accounting Officer)
/S/
JAMES W. BAGLEY
James W. Bagley
Director
February 28, 2014
/S/ MICHAEL A. BRADLEY
Director
February 28, 2014
Michael A. Bradley
/S/ DANIEL W. CHRISTMAN
Director
February 28, 2014
Daniel W. Christman
/S/ EDWIN J. GILLIS
Edwin J. Gillis
Director
February 28, 2014
/S/ TIMOTHY E. GUERTIN
Director
February 28, 2014
Timothy E. Guertin
/S/ PAUL J. TUFANO
Director
February 28, 2014
Paul J. Tufano
/S/ ROY A. VALLEE
Director
February 28, 2014
Roy A. Vallee
101
EXHIBIT 10.10
TERADYNE, INC. 2006 EQUITY AND CASH COMPENSATION INCENTIVE PLAN
NOTICE OF PERFORMANCE-BASED RESTRICTED STOCK UNIT GRANT AND TERMS
FOR U.S. RECIPIENTS
Name:
Employee ID:
In granting restricted stock units, Teradyne, Inc. (“Teradyne”) seeks to provide employees of Teradyne and its subsidiaries with
incentive to help drive Teradyne’s future success and to share in the economic benefits of that success. We all look forward to your
contributions to that effort.
In recognition of your contributions to Teradyne, you have been granted an award consisting of the right to receive a target of xx
shares of Teradyne common stock (“Target Performance-Based Shares”), which final number of shares shall be determined by the
Committee or Teradyne’s Board of Directors and based upon achieving certain Performance Criteria over time (“Actual Performance-
Based Shares”). This grant was approved [
] (the “Effective Date”).
(cid:0)
This award is subject to the Restricted Stock Unit Terms attached hereto and the terms of the Teradyne, Inc. 2006 Equity and Cash
Compensation Incentive Plan (the “Plan”). The shares covered by this award will be delivered upon attainment of certain
Performance Criteria as described in and subject to the vesting conditions of the Restricted Stock Unit Terms.
The Plan prospectus, consisting of a “Participant Information” document that summarizes the Plan and the complete Plan, is available
on “In-Site,” Teradyne’s internal Web site:
http://cms.corp.teradyne.com/insite/FunctionsGroups/GeneralAdministrative/HumanResources/GLOBALPOLICY/
EquityCompensationOptionsRSU%E2%80%99s/index.htm.
Please note that printed versions of the Plan prospectus documents are available to you, at no charge, upon request to the HR Service
Center, Teradyne, Inc., 600 Riverpark Drive, North Reading, MA 01864, (978) 370-3041.
TERADYNE, INC.
Charles J. Gray
V.P., General Counsel and Secretary
(2014 Performance-based RSU)
Grant #
PERFORMANCE-BASED RESTRICTED STOCK UNIT TERMS FOR U.S. RECIPIENTS
1. Award Grant, Vesting and Transfer
(a) Award Grant. Teradyne, Inc. hereby grants to the recipient an award (this “Award”) of performance-based restricted
stock units (the “RSUs”) under the Teradyne, Inc. 2006 Equity and Cash Compensation Incentive Plan (the “Plan”). The RSUs
represent the right of the recipient to receive that number of shares of Teradyne common stock set forth in the Notice of Performance-
Based Restricted Stock Unit Grant and Terms (the “Notice of Grant”) attached hereto upon satisfaction of the terms set forth in this
Agreement. This Award is governed by and subject to the terms of the Plan, the Notice of Grant and this Agreement.
Capitalized terms used but not otherwise defined herein will have the meaning set forth in the Notice of Grant or the Plan.
In the event of any inconsistencies or differences between the Plan and these terms, the Plan shall prevail. The terms governing this
Award are intended to comply with all applicable laws and regulations.
(b) Vesting of Award. None of this grant will be vested on the Effective Date. The number of Actual Performance-Based
Shares that will be allowed to vest is uncertain at the time of the grant but is expected to be determined near the three-year
anniversary of the grant, based on the determination by the Committee or Teradyne’s Board of Directors of the Performance
Percentage. The “Performance Percentage” is a percentage ranging from 0-200% determined using Performance Criteria approved by
the Committee or Teradyne’s Board of Directors for the grant. The Performance Percentage shall be multiplied against the Target
Performance-Based Shares granted to derive the number of Actual Performance-Based Shares. Except as provided in (c) below, this
Award shall vest with respect to 100% of the Actual Performance-Based Shares on the later of the third anniversary of the Effective
Date or the date the Board determines the number of Actual Performance-Based Shares. The portion of the grant that is not allowed to
vest will be forfeited. Subject to the terms of the Plan, the Committee shall have the right to accelerate the date that any installment of
this Award becomes vested, including, but not limited to, events such as disability, death, retirement or upon the acquisition of control
of Teradyne by another entity.
(c) This Award will not vest further after termination of employment or other business relationship except in
limited certain circumstances. This Award will not vest after the recipient’s employment or other business relationship with
Teradyne or its Subsidiaries ends, regardless of the reason, provided, however, that (a) if the recipient’s employment or other business
relationship with Teradyne or one of its Subsidiaries ends on account of permanent disability or death, prior to the determination of
the Performance Percentage, then a pro rated portion of the Actual Performance-Based Shares based on the number of days of
employment or other business relationship during the relevant performance period shall automatically become vested in full on the
date the Performance Percentage is determined by the Committee or the Board of Directors.
Employment or another business relationship shall be considered as continuing uninterrupted during any bona fide leave of
absence (such as those attributable to illness or military obligations) provided that the period of such leave does not exceed 90 days
or, in the case of an employee, if longer, any period during which the employee’s right to reemployment is guaranteed by statute. A
bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment or other
business relationship, provided that such written approval contractually obligates Teradyne or a Subsidiary to continue the
employment or other business relationship of the recipient after the approved period of absence.
(d) No rights as stockholder; Issuance. The recipient shall not have any rights as a stockholder in, to or with respect to
any shares which may be covered by this Award (including but not limited to the right to vote or to receive dividends) until this
Award is settled by issuance of shares to the recipient. All shares issued in respect of this Award will be transferred or issued to the
recipient (or his or her estate, in the event of his or her death) as soon as is practicable after the date the Actual Performance-Based
Shares vest but, in any event, within 2 1⁄2 months following the calendar year in which the Actual Performance-Based Shares become
vested (or any earlier date, after vesting, as required to avoid characterization as non-qualified deferred compensation under
Section 409A of the Code). Teradyne will not be required to transfer or issue any shares upon vesting of the Actual Performance-
Based Shares until arrangements satisfactory to it have been made by the recipient to address any Tax-Related Items (as defined in
Section 4 below) which might arise by reason of the vesting of the Actual Performance-Based Shares and/or transfer or issuance of
shares.
(e) This Award may not be assigned or transferred. Other than as provided in Section 11(a) of the Plan, this Award is
not assignable or transferable (except by will or the laws of descent and distribution).
2
2. Capital Changes and Business Succession. Section 3(c) of the Plan contains provisions for adjusting (or substituting) the
number and class of securities, vesting schedule, and other terms of outstanding stock-based awards granted under the Plan if a
recapitalization, stock split, merger, or other specified event occurs, and the Committee determines that an adjustment (or
substitution) is appropriate. In that event, the recipient of this Award will be notified of the adjustment (or substitution), if any, to this
Award.
3. Employment or Business Relationship. Granting this Award does not imply any right of continued employment or business
relationship with Teradyne or its Subsidiaries, and does not affect the right of the recipient, Teradyne or its Subsidiaries to terminate
the recipient’s employment or a business relationship at any time.
4. Tax Obligations.
(a) Responsibility for Taxes. The recipient acknowledges that, regardless of any action taken by Teradyne or, if different,
the recipient’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax,
payment on account or other tax-related items related to the recipient’s participation in the Plan and legally applicable to the recipient
(“Tax-Related Items”), is and remains the recipient’s responsibility and may exceed the amount actually withheld by Teradyne or the
Employer. The recipient further acknowledges that Teradyne and/or the Employer (1) make no representations or undertakings
regarding the treatment of any Tax-Related Items in connection with any aspect of this Award, including, but not limited to, the grant,
vesting or settlement of the RSUs, the subsequent sale of shares acquired pursuant to such settlement and the receipt of any dividends
or other distributions, and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of this
Award to reduce or eliminate the recipient’s liability for Tax-Related Items or achieve any particular tax result. Further, if the
recipient is subject to Tax-Related Items in more than one jurisdiction between the Effective Date and the date of any relevant taxable
or tax withholding event, as applicable, the recipient acknowledges that Teradyne and/or the Employer (or former employer, as
applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b) Tax Withholding. Prior to any relevant taxable or tax withholding event, as applicable, the recipient agrees to make
adequate arrangements satisfactory to Teradyne and/or the Employer to satisfy all Tax-Related Items. The recipient authorizes
Teradyne or its respective agents to satisfy the obligations with regard to all Tax-Related Items by withholding in shares to be issued
upon settlement of the RSUs; provided, however, that the total Tax-Related Items withholding where shares are being used to satisfy
such tax obligations cannot exceed Teradyne’s minimum statutory withholding obligations. If the obligation for Tax-Related Items is
satisfied by withholding in shares, for tax purposes, the recipient is deemed to have been issued the full number of shares subject to
the vested RSUs, notwithstanding that a number of the shares are held back solely for the purpose of paying the Tax-Related Items. In
the event that such withholding in shares is problematic under applicable tax or securities law or has materially adverse accounting
consequences, by the recipient’s acceptance of this Award, the recipient authorizes and directs Teradyne and any brokerage firm
determined acceptable to Teradyne to sell on the recipient’s behalf a whole number of shares from those shares issuable to the
recipient as Teradyne determines to be appropriate to generate cash proceeds sufficient to satisfy the obligation for Tax-Related
Items. If withholding is performed from proceeds from the sale of shares acquired upon vesting of the RSUs, Teradyne shall withhold
for Tax-Related Items at minimum applicable rates. Alternatively, Teradyne, in its sole discretion and pursuant to such procedures as
it may specify from time to time, may permit or require the recipient to satisfy his or her obligations for Tax-Related Items, in whole
or in part (without limitation) by delivery of cash or check to Teradyne or the Employer, or Teradyne or the Employer may withhold
from the recipient’s wages or other compensation.
5. Retirement. Upon the recipient’s attaining both at least age sixty, and at least ten years of service, the Award shall continue
to vest in accordance with its existing vesting terms upon the recipient’s retirement or termination, other than for cause, as if the
recipient’s employment had not been terminated.
6. Compliance with Laws. Shares to be issued under this Award are currently registered under the United States Securities Act
of 1933, as amended. If such registration is not in effect at the time of vesting, the recipient will be required to represent to Teradyne
that he or she is acquiring such shares as an investment and not with a view to the sale of those shares. Notwithstanding any other
provision of the Plan or the Agreement, unless there is an available exemption from any registration, qualification or other legal
requirement applicable to the shares of common stock, Teradyne shall not be required to deliver any shares of common stock issuable
upon settlement of the RSUs prior to the completion of any registration or qualification of the shares under any local, state, federal or
foreign securities or exchange control law or under rulings or regulations of the United States Securities and Exchange Commission
(“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state,
federal or foreign governmental agency, which registration, qualification or approval Teradyne shall, in its absolute
3
discretion, deem necessary or advisable. The recipient understands that Teradyne is under no obligation to register or qualify the
shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority
for the issuance or sale of the shares. Further, the recipient agrees that Teradyne shall have unilateral authority to amend the Plan and
the Agreement without the recipient’s consent to the extent necessary to comply with securities or other laws applicable to issuance of
shares.
7. Code Section 409A. This Award is intended to be exempt from the application of Section 409A of the Code, and any
ambiguities herein will be interpreted to so comply. Teradyne reserves the right, to the extent Teradyne deems necessary or advisable
in its sole discretion, to amend or modify the terms of this Award (or the Plan) or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take other actions, including any amendments or actions that would
result in a reduction to the benefit payable under this Award, in each case, without the consent of the recipient of the Award, as may
be necessary to ensure that all vesting or settlement provided under this Award are made in a manner that complies with Section 409A
of the Code or to mitigate any additional tax, interest and/or penalties or other adverse tax consequences that may apply under
Section 409A of the Code if compliance is not practical; provided, however, that nothing in this Section 7 creates an obligation on the
part of Teradyne to modify the terms of this Award or the Plan. In that light, Teradyne makes no representation that the terms of this
Award will comply with Section 409A of the Code or that the settlement under Award will not be subject to taxes, interest and
penalties or other adverse tax consequences under Section 409A of the Code. In no event whatsoever shall Teradyne or any of its
affiliates be liable to the recipient of this Award or any other party for any additional tax, interest, penalties or other liability that may
be imposed on the recipient of this Award by Section 409A of the Code or for any action taken by Teradyne with respect thereto.
8. Governing Law and Venue. The Award and the provisions of this Agreement are governed by, and subject to, the laws of
the Commonwealth of Massachusetts, without regard to the conflict of law provisions, as provided in the Plan. For purposes of
litigating any dispute that arises under this Award or this Agreement, the parties hereby submit to and consent to the jurisdiction of
the Commonwealth of Massachusetts, agree that such litigation shall be conducted in the courts of Middlesex County, or the federal
courts for the United States for the District of Massachusetts, where this grant is made and/or to be performed.
9. Electronic Delivery and Acceptance. Teradyne may, in its sole discretion, decide to deliver any documents related to current
or future participation in the Plan by electronic means. The recipient hereby consents to receive such documents by electronic
delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by Teradyne or a
third party designated by Teradyne.
10. Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal
or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
11. Imposition of Other Requirements. Teradyne reserves the right to impose other requirements on the recipient’s
participation in the Plan, on the RSUs and on any shares of common stock acquired under the Plan, to the extent Teradyne determines
it is necessary or advisable for legal or administrative reasons, and to require the recipient to sign any additional agreements or
undertakings that may be necessary to accomplish the foregoing.
12. Waiver. The recipient acknowledges that a waiver by Teradyne of breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the recipient or any
other recipient.
13. No Advice Regarding Grant. Teradyne is not providing any tax, legal or financial advice, nor is Teradyne making any
recommendations regarding the recipient’s participation in the Plan, or the recipient’s acquisition or sale of the underlying shares of
common stock. The recipient is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his
or her participation in the Plan before taking any action related to the Plan.
4
TERADYNE, INC. 2006 EQUITY AND CASH COMPENSATION INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT GRANT AND TERMS FOR U.S. RECIPIENTS
EXHIBIT 10.11
Name:
Employee ID:
Supervisor:
In granting restricted stock units, Teradyne, Inc. (“Teradyne”) seeks to provide employees of Teradyne and its subsidiaries with
incentive to help drive Teradyne’s future success and to share in the economic benefits of that success. We all look forward to your
contributions to that effort.
You have been granted a restricted stock unit award consisting of the right to receive up to xx shares of Teradyne common stock. This
grant was approved effective [
] (the “Effective Date”).
(cid:0)
This award is subject to the Restricted Stock Unit Terms attached hereto and the terms of the Teradyne, Inc. 2006 Equity and Cash
Compensation Incentive Plan (the “Plan”). The shares covered by this award will be delivered over time as described in and subject to
the vesting conditions of the Restricted Stock Unit Terms.
The Plan prospectus, consisting of a “Participant Information” document that summarizes the Plan and the complete Plan, is available
on “In-Site,” Teradyne’s internal Web site:
http://cms.corp.teradyne.com/insite/FunctionsGroups/GeneralAdministrative/HumanResources/GLOBAL
POLICY/EquityCompensationOptionsRSU%E2%80%99s/index.htm.
Please note that printed versions of the Plan prospectus documents are available to you, at no charge, upon request to the HR Service
Center, Teradyne, Inc., 600 Riverpark Drive, North Reading, MA 01864, (978) 370-3041.
TERADYNE, INC
Charles J. Gray
V.P., General Counsel and Secretary
(2014 RSU)
Grant #
RESTRICTED STOCK UNIT TERMS FOR U.S. RECIPIENTS
1. Award Grant, Vesting and Transfer
(a) Award Grant. Teradyne, Inc. hereby grants to the recipient an award (this “Award”) of restricted stock units (the
“RSUs”) under the Teradyne, Inc. 2006 Equity and Cash Compensation Incentive Plan (the “Plan”). The RSUs represent the right of
the recipient to receive that number of shares of Teradyne common stock set forth in the Notice of Restricted Stock Unit Grant and
Terms (the “Notice of Grant”) attached hereto upon satisfaction of the terms set forth in this Agreement. This Award is governed by
and subject to the terms of the Plan, the Notice of Grant and this Agreement.
Capitalized terms used but not otherwise defined herein will have the meaning set forth in the Notice of Grant or the Plan.
In the event of any inconsistencies or differences between the Plan and these terms, the Plan shall prevail. The terms governing this
Award are intended to comply with all applicable laws and regulations.
(b) This Award vests yearly on the anniversary of the Effective Date. None of the RSUs subject to this Award will be
vested on the Effective Date. Except as provided in (c) below, 25% of the RSUs granted will vest on the first and each of the three
subsequent anniversaries of the Effective Date until the total grant is fully vested on the fourth anniversary of the Effective Date. The
Committee shall have the right to accelerate the date that any installment of this Award becomes vested, including, but not limited to
events such as disability, death, retirement or upon the acquisition of control of Teradyne by another entity.
(c) This Award will not vest further after termination of employment or other business relationship except in
limited certain circumstances. This Award will not vest after the recipient’s employment or other business relationship ends,
regardless of the reason, provided, however, that if the recipient’s employment or other business relationship with Teradyne or one of
its Subsidiaries ends on account of permanent disability or death, the unvested portion of this Award which would have vested under
the applicable rule stated in (b) above shall automatically become vested in full on the date of his or her termination of employment or
business relationship on account of permanent disability or death.
Employment or another business relationship shall be considered as continuing uninterrupted during any bona fide leave of
absence (such as those attributable to illness or military obligations) provided that the period of such leave does not exceed 90 days
or, in the case of an employee, if longer, any period during which the employee’s right to reemployment is guaranteed by statute. A
bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment or other
business relationship, provided that such written approval contractually obligates Teradyne or a Subsidiary to continue the
employment or other business relationship of the recipient after the approved period of absence.
(d) No rights as stockholder; Issuance. The recipient shall not have any rights as a stockholder in, to or with respect to
any shares which may be covered by this Award (including but not limited to the right to vote or to receive dividends) until this
Award is settled by issuance of shares to the recipient. All shares issued in respect of this Award will be transferred or issued to the
recipient (or his or her estate, in the event of his or her death) as soon as is practicable after the date the RSUs vest but, in any event,
within 2 1⁄2 months following the calendar year in which the RSUs become vested (or any earlier date, after vesting, as required to
avoid characterization as non-qualified deferred compensation under Section 409A of the Code). Teradyne will not be required to
transfer or issue any shares upon vesting of the RSUs until arrangements satisfactory to it have been made by the recipient to address
any Tax-Related Items (as defined in Section 4 below) which might arise by reason of the vesting of the RSUs and/or transfer or
issuance of shares.
(e) This Award may not be assigned or transferred. Other than as provided in Section 11(a) of the Plan, this Award is
not assignable or transferable (except by will or the laws of descent and distribution).
2. Capital Changes and Business Succession. Section 3(c) of the Plan contains provisions for adjusting (or substituting) the
number and class of securities, vesting schedule and other terms of outstanding stock-based awards granted under the Plan if a
recapitalization, stock split, merger, or other specified event occurs and the Committee determines that an adjustment (or substitution)
is appropriate. In that event, the recipient of this Award will be notified of the adjustment (or substitution), if any, to this Award.
2
3. Employment or Business Relationship. Granting this Award does not imply any right of continued employment or business
relationship with Teradyne or its Subsidiaries, and does not affect the right of the recipient, Teradyne or its Subsidiaries to terminate
the recipient’s employment or a business relationship at any time.
4. Tax Obligations.
(a) Responsibility for Taxes. The recipient acknowledges that, regardless of any action taken by Teradyne or, if different,
the recipient’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax,
payment on account or other tax-related items related to the recipient’s participation in the Plan and legally applicable to the recipient
(“Tax-Related Items”), is and remains the recipient’s responsibility and may exceed the amount actually withheld by Teradyne or the
Employer. The recipient further acknowledges that Teradyne and/or the Employer (1) make no representations or undertakings
regarding the treatment of any Tax-Related Items in connection with any aspect of this Award, including, but not limited to, the grant,
vesting or settlement of the RSUs, the subsequent sale of shares acquired pursuant to such settlement and the receipt of any dividends
or other distributions, and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of this
Award to reduce or eliminate the recipient’s liability for Tax-Related Items or achieve any particular tax result. Further, if the
recipient is subject to Tax-Related Items in more than one jurisdiction between the Effective Date and the date of any relevant taxable
or tax withholding event, as applicable, the recipient acknowledges that Teradyne and/or the Employer (or former employer, as
applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b) Tax Withholding. Prior to any relevant taxable or tax withholding event, as applicable, the recipient agrees to make
adequate arrangements satisfactory to Teradyne and/or the Employer to satisfy all Tax-Related Items. The recipient authorizes
Teradyne or its respective agents to satisfy the obligations with regard to all Tax-Related Items by withholding in shares to be issued
upon settlement of the RSUs; provided, however, that the total Tax-Related Items withholding where shares are being used to satisfy
such tax obligations cannot exceed Teradyne’s minimum statutory withholding obligations. If the obligation for Tax-Related Items is
satisfied by withholding in shares, for tax purposes, the recipient is deemed to have been issued the full number of shares subject to
the vested RSUs, notwithstanding that a number of the shares are held back solely for the purpose of paying the Tax-Related Items. In
the event that such withholding in shares is problematic under applicable tax or securities law or has materially adverse accounting
consequences, by the recipient’s acceptance of this Award, the recipient authorizes and directs Teradyne and any brokerage firm
determined acceptable to Teradyne to sell on the recipient’s behalf a whole number of shares from those shares issuable to the
recipient as Teradyne determines to be appropriate to generate cash proceeds sufficient to satisfy the obligation for Tax-Related
Items. If withholding is performed from proceeds from the sale of shares acquired upon vesting of the RSUs, Teradyne shall withhold
for Tax-Related Items at minimum applicable rates. Alternatively, Teradyne, in its sole discretion and pursuant to such procedures as
it may specify from time to time, may permit or require the recipient to satisfy his or her obligations for Tax-Related Items, in whole
or in part (without limitation) by delivery of cash or check to Teradyne or the Employer, or Teradyne or the Employer may withhold
from the recipient’s wages or other compensation.
5. Compliance with Laws. Shares to be issued under this Award are currently registered under the United States Securities Act
of 1933, as amended. If such registration is not in effect at the time of vesting, the recipient will be required to represent to Teradyne
that he or she is acquiring such shares as an investment and not with a view to the sale of those shares. Notwithstanding any other
provision of the Plan or the Agreement, unless there is an available exemption from any registration, qualification or other legal
requirement applicable to the shares of common stock, Teradyne shall not be required to deliver any shares of common stock issuable
upon settlement of the RSUs prior to the completion of any registration or qualification of the shares under any local, state, federal or
foreign securities or exchange control law or under rulings or regulations of the United States Securities and Exchange Commission
(“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state,
federal or foreign governmental agency, which registration, qualification or approval Teradyne shall, in its absolute discretion, deem
necessary or advisable. The recipient understands that Teradyne is under no obligation to register or qualify the shares with the SEC
or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or
sale of the shares. Further, the recipient agrees that Teradyne shall have unilateral authority to amend the Plan and the Agreement
without the recipient’s consent to the extent necessary to comply with securities or other laws applicable to issuance of shares.
6. Code Section 409A. This Award is intended to be exempt from the application of Section 409A of the Code, and any
ambiguities herein will be interpreted to so comply. Teradyne reserves the right, to the extent Teradyne deems necessary or advisable
in its sole discretion, to amend or modify the terms of this Award (or the Plan) or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take other
3
actions, including any amendments or actions that would result in a reduction to the benefit payable under this Award, in each case,
without the consent of the recipient of the Award, as may be necessary to ensure that all vesting or settlement provided under this
Award are made in a manner that complies with Section 409A of the Code or to mitigate any additional tax, interest and/or penalties
or other adverse tax consequences that may apply under Section 409A of the Code if compliance is not practical; provided, however,
that nothing in this Section 6 creates an obligation on the part of Teradyne to modify the terms of this Award or the Plan. In that light,
Teradyne makes no representation that the terms of this Award will comply with Section 409A of the Code or that the settlement
under Award will not be subject to taxes, interest and penalties or other adverse tax consequences under Section 409A of the Code. In
no event whatsoever shall Teradyne or any of its affiliates be liable to the recipient of this Award or any other party for any additional
tax, interest, penalties or other liability that may be imposed on the recipient of this Award by Section 409A of the Code or for any
action taken by Teradyne with respect thereto.
7. Governing Law and Venue. The Award and the provisions of this Agreement are governed by, and subject to, the laws of
the Commonwealth of Massachusetts, without regard to the conflict of law provisions, as provided in the Plan. For purposes of
litigating any dispute that arises under this Award or this Agreement, the parties hereby submit to and consent to the jurisdiction of
the Commonwealth of Massachusetts, agree that such litigation shall be conducted in the courts of Middlesex County, or the federal
courts for the United States for the District of Massachusetts, where this grant is made and/or to be performed.
8. Electronic Delivery and Acceptance. Teradyne may, in its sole discretion, decide to deliver any documents related to current
or future participation in the Plan by electronic means. The recipient hereby consents to receive such documents by electronic
delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by Teradyne or a
third party designated by Teradyne.
9. Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
10. Imposition of Other Requirements. Teradyne reserves the right to impose other requirements on the recipient’s
participation in the Plan, on the RSUs and on any shares of common stock acquired under the Plan, to the extent Teradyne determines
it is necessary or advisable for legal or administrative reasons, and to require the recipient to sign any additional agreements or
undertakings that may be necessary to accomplish the foregoing.
11. Waiver. The recipient acknowledges that a waiver by Teradyne of breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the recipient or any
other recipient.
12. No Advice Regarding Grant. Teradyne is not providing any tax, legal or financial advice, nor is Teradyne making any
recommendations regarding the recipient’s participation in the Plan, or the recipient’s acquisition or sale of the underlying shares of
common stock. The recipient is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his
or her participation in the Plan before taking any action related to the Plan.
4
EXECUTIVE OFFICER AGREEMENT
EXHIBIT 10.23
This EXECUTIVE OFFICER AGREEMENT is entered into this 22nd day of January, 2014, by and between Teradyne, Inc., a
Massachusetts corporation (“Teradyne” or the “Company”), and Michael A. Bradley, the Chief Executive Officer of Teradyne
(“Executive”).
WHEREAS, the Executive and Teradyne are parties to an Amended and Restated Agreement Regarding Termination Benefits
dated December 30, 2008 and amended as of December 17, 2012 (“Severance Agreement”) under which the Executive is entitled to
severance compensation, continued benefits and continued vesting of equity for 24 months from the date of severance.
WHEREAS, the Executive and the Company’s Board of Directors have worked together on an orderly succession and transition
plan.
WHEREAS, the Executive and the Company’s Board of Directors have agreed that the Executive will retire as Chief Executive
Officer and resign as an employee effective January 31, 2014 (the “Retirement Date”).
WHEREAS, Teradyne recognizes the contributions the Executive has made to the success of the Company and wishes to ensure
the Executive does not engage in any business competitive with the Company following his retirement for the period from the
Retirement Date through three (3) years from the Retirement Date (the “Non-Competition Period”).\
WHEREAS, Teradyne and the Executive desire to set forth certain terms and conditions relating to the Executive’s retirement
from Teradyne.
WHEREAS, Teradyne and the Executive agree that the terms of this agreement shall supersede the terms of the Severance
Agreement between the parties.
NOW THEREFORE, in consideration of the promises and of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. Consideration.
In consideration for Executive’s signing of the Release attached as Attachment A, including the release of his rights under the
Severance Agreement, as well as the promises and covenants including the Non-Competition and Non-Solicitation provision set forth
herein, the Company agrees to the following treatment of the portions of the Executive’s outstanding equity grants which remain
unvested as of the Retirement Date; provided that such treatment shall be subject to compliance by the Executive with Sections 2 and
3 hereof:
a)
b)
Any unvested, time-based restricted stock units granted before the Retirement Date shall continue to vest during the
Non-Competition Period;
Any unvested, performance-based restricted stock units as of the Retirement Date shall continue to vest during the
Non-Competition Period;
c)
d)
Any unvested stock options granted before the Retirement Date shall continue to vest during the Non-Competition
Period; and
Any vested stock options as of the Retirement Date or stock options that become vested during the Non-Competition
Period may be exercised for the remainder of the generally applicable term of such option which in all cases is no
later than seven (7) years from the respective dates of grant.
Schedule A attached hereto and incorporated herein is a complete list of the Executive’s outstanding equity grants from the Company.
The parties agree that, except as otherwise provided herein, the terms of the Executive’s existing equity award agreements shall
continue in effect and that any portion of the Executive’s outstanding equity grants which are not vested by reason of the application
of this Section 1 shall be forfeited as of the last day of the Non-Competition Period or on such earlier date pursuant to Sections 2 or 3.
Notwithstanding the foregoing, upon the vesting of any restricted stock units during the Non-Competition Period, the Company shall
issue to the Executive shares of its common stock in settlement of such vested stock units within thirty (30) days of each vesting date.
Executive acknowledges that he will not be entitled to the consideration described in this Section 1 absent his execution and
non-revocation of this Agreement and the Release, in the form attached as Attachment A. The consideration described in this
Section 1 is in addition to other retirement and/or pension benefits to which the Executive may be entitled associated with the
Executive’s retirement. The parties acknowledge that Executive shall not be entitled to any severance or separation payment or
benefit associated with his retirement, including under the Severance Agreement, other than all accrued wages and unused vacation
time as of the Retirement Date. The Executive acknowledges and agrees that his termination of employment with the Company shall
not be considered a retirement for purposes of his unvested equity grants which are outstanding as of the Retirement Date and that the
settlement or exercise of rights under such grants shall not be accelerated.
2. Conditions to Consideration.
The consideration and entitlements set forth above in Section 1 shall be conditioned on Executive’s signing, and not revoking,
the Release within twenty-one (21) days following the Retirement Date, plus any legally required revocation period. All rights,
benefits, payments and other entitlements contemplated to be provided or paid to Executive under this Agreement shall be forfeited as
of the 60th day following Executive’s Retirement Date if the Executive has not provided Teradyne with a valid, irrevocable release of
claims as of such 60th day.
3. Non-Competition and Non-Solicitation.
During the Non-Competition Period, Executive shall not directly or indirectly:
a)
Engage in any business or enterprise (whether as an owner, partner, officer, employee, executive, director, investor,
lender, consultant, independent contractor or otherwise, except as the holder of not more than 1% of the combined
voting power of the outstanding stock of a publicly held company) that is competitive with Teradyne (including but
not limited to, any business
2
or enterprise that develops, designs, produces, markets, sells or renders any product or service competitive with any
product or service developed, produced, marketed, sold or rendered by Teradyne while Executive was employed by
Teradyne);
Either alone or in association with others, recruit, solicit, hire or engage as an independent contractor, any person
who was employed by Teradyne at any time during the period of Executive’s employment with Teradyne, except for
an individual whose employment with Teradyne has been terminated for a period of six months or longer; or
Either alone or in association with others, solicit, divert or take away, or attempt to divert or to take away, the
business or patronage of any client or customer or entity that was a prospective client or customer of Teradyne
during the Executive’s employment.
b)
c)
If any restriction set forth in this Section 3 is found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or in too broad a geographic area, the parties agree that it
shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be
enforceable.
Executive acknowledges that the restrictions contained in this Section 3 are necessary for the protection of the business and
goodwill of Teradyne and are considered by Executive to be reasonable for such purpose. Executive agrees that any breach of this
Section 3 will cause Teradyne irreparable harm and therefore, in the event of any such breach, in addition to such other remedies that
may be available, Teradyne shall have the right to seek equitable and/or injunctive relief.
The geographic scope of this Section 3 shall extend to anywhere Teradyne or any of its subsidiaries is doing business, has done
business or has plans to do business as of the Retirement Date.
Executive agrees that during the Non-Competition Period, he will make reasonable good faith efforts to give written notice to
Teradyne of each new business activity he plans to undertake, at least (5) business days prior to beginning any such activity.
If Executive violates the provisions of this Section 3, Teradyne shall be entitled to discontinue any continued vesting per
Section 1 above and Executive shall continue to be bound by the restrictions set forth in this Section 3 for an additional period of time
equal to the duration of the violation, such additional period not to exceed 24 months.
4. Deferred Compensation/Section 409A.
Notwithstanding any other provision of this Agreement, if the Executive is a “specified employee” at the time of the Executive’s
“separation from service” as such terms are defined in Section 409A of the Code, all payments, benefits, or removal of restrictions on
the transfer of equity under this Agreement with respect to the Executive’s “separation from service” that
3
constitute compensation deferred under a nonqualified deferred compensation plan as defined in Section 409A of the Code and
regulations thereunder for which an exemption does not apply and to which such the Executive as a “specified employee” would
otherwise be entitled during the first six months following the date of “separation from service” shall be made on the first day of the
seventh month after the date of “separation from service” (or, if earlier, the date of death of the Executive).
For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified
payment for purposes of Section 409A, and any payments that are due within the “short term deferral period” as defined in
Section 409A and regulations there under or payments that are made under separation pay plans as described in Treasury Regulation
Section 1.409A-1(b)(9)(ii), (iii) or (iv), shall not be treated as deferred compensation unless applicable law requires otherwise.
Neither Teradyne nor the Executive shall have the right to accelerate or defer the delivery of any payments or benefits under this
Agreement except to the extent specifically permitted or required by Section 409A.
This Agreement is intended to comply with the provisions of Section 409A and regulations there under and the Agreement shall,
to the extent practicable, be construed and administered in accordance therewith. Terms defined in the Agreement shall have the
meanings given such terms under Section 409A if and to the extent required to comply with Section 409A. In any event, Teradyne
makes no representations or warranty and shall have no liability to the Executive or any other person if any provisions of or payments
under this Agreement are determined to constitute deferred compensation subject to Code Section 409A but not to satisfy the
conditions of that section.
5. Governing Law and Dispute Resolution.
This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of
Massachusetts and this Agreement shall be deemed to be performable in Massachusetts. The Executive and the Company agree that
any dispute, controversy or claim arising between the parties relating to this Agreement shall be resolved by final and binding
arbitration before a single arbitrator, except that the parties may seek equitable relief in court to preserve the status quo pending final
resolution in arbitration. The arbitrator shall be selected in accordance with the Employment Dispute Resolution rules of the
American Arbitration Association (“AAA”) pertaining at the time the dispute arises. The parties agree that such arbitration shall take
place at the offices of the AAA in Boston, Massachusetts. In such arbitration proceedings, the arbitrator shall have the discretion, to
be exercised in accordance with applicable law, to award any damages permitted by law, and to allocate among the parties the
arbitrator’s fees, tribunal and other administrative and litigation costs and, to the prevailing party, reasonable attorneys’ fees. The
award of the arbitrator may be confirmed before and entered as a judgment of any court having jurisdiction of the parties.
6. Severability.
In case any one or more of the provisions contained in this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement and
this Agreement shall be construed to be enforceable to the maximum extent permitted by law.
4
7. Waivers and Modifications.
This Agreement may be modified, and the rights, remedies and obligations contained in any provision hereof may be waived,
only in accordance with this Section 7. No waiver by either party of any breach by the other or any provision hereof shall be deemed
to be a waiver of any later or other breach thereof or as a waiver of any other provision of this Agreement. This Agreement may not
be waived, changed, discharged or terminated orally or by any course of dealing between the parties, but only by an instrument in
writing signed by the party against whom any waiver, change, discharge or termination is sought.
8. Assignment.
This Agreement, and Executive’s and Teradyne’s rights and obligations hereunder, may not be assigned by Executive or
Teradyne; any purported assignment by Executive or Teradyne in violation hereof shall be null and void.
9. Entire Agreement.
This Agreement, including Schedule A and Attachment A, constitutes the entire understanding of the parties relating to the
subject matter hereof and supersedes all agreements, written or oral, made prior to the date hereof between Executive and the
Company relating to the subject matter hereof, including the Severance Agreement. Notwithstanding the foregoing, this Agreement
does not supersede: (a) the attached Release once executed; and (b) the equity award agreements, as modified hereby, between the
Company and the Executive.
10. Notices.
All notices hereunder shall be in writing and shall be delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to Teradyne, to:
Teradyne, Inc.
600 Riverpark Drive
North Reading, MA 01864
Attention: General Counsel
If to Executive, at Executive’s address in his employment file on record with the Human Resources Department.
11. Cooperation.
Executive agrees to cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or
which may be brought in the future against or on behalf of the Company. The Executive’s full cooperation in connection with such
claims or actions shall include, but not be limited to, being available to meet with Company counsel to
5
prepare for trial or discovery or an administrative hearing or alternative dispute resolution and to act as a witness when requested by
the Company at reasonable times designated by the Company.
12. Return of Property.
No later than the Retirement Date, Executive shall return to the Company all Company property in his possession or control,
including all electronic documents
13. Non-Disparagement.
The Executive understands and agrees that in consideration for the covenants, terms and conditions herein, he shall not make
any false, disparaging or derogatory statements to any third person or entity, including any media outlet, in public or private regarding
the Company’s directors, officers, executives, agents, or representatives or the Company’s business affairs and financial condition;
provided the foregoing shall in no way affect the Executive’s obligation to testify truthfully in any legal proceeding. The Company
understands and agrees that in consideration for the covenants, terms and conditions herein, it shall direct its directors and executive
officers to not make any false, disparaging or derogatory statements to any third party or entity, including any media outlet, in public
or private, regarding the Executive.
14. Confidential Information
The Executive acknowledges that the information, observations and data (including trade secrets) obtained by him while
employed by the Company concerning the Company or any affiliate are the property of the Company. The Executive agrees that he
will not use, publish or disclose, at any time after the Retirement Date or in connection with his Board service, any secret or
confidential information or data concerning any discovery, invention, opportunity, product, design, formula, algorithm or process, or
any secret or confidential production, sales or other business information, relating to the Company or any client, subsidiary or affiliate
of the Company which he may have acquired during any period of employment with the Company or any affiliate. The term
“confidential information” shall not include information that is in the public domain at the time of the disclosure. The Executive
further agrees to turn over at or prior to the expiration of his employment all tangible forms of such information in his possession or
under his control, including drawings, specifications, models, customer lists and other documents and records as well as all copies and
reproductions thereof. Prior to or concurrent with his resignation, the Executive shall reduce to writing and deliver to the Company
such information as the Company may reasonably request to the extent that such information pertains to the business and operations
of the Company and its subsidiaries and affiliates and any product or service offered by the Company or its affiliates.
15. Change in Control.
In the event of a Change in Control (as defined below) during the Non-Competition Period, all of Executive’s outstanding equity
grants which remain unvested as of the date of the Change in Control shall automatically become fully vested and exercisable, as
applicable, as of the day immediately prior to the effective date of the Change in Control and all stock options shall remain
exercisable for the remainder of the generally applicable term of such option which in all cases is no later than seven (7) years from
the respective dates of grant.
6
A “Change in Control” shall be deemed to have occurred upon the occurrence of any of the following events: (i) any
consolidation, cash tender offer, reorganization, recapitalization, merger or plan of share exchange following which the holders of
capital stock of Teradyne outstanding immediately prior to such transaction hold less than a majority of the combined voting power of
the then-outstanding securities of the combined corporation or ultimate parent thereof immediately after such transaction; (ii) any
sale, lease, exchange or other transfer of all or substantially all of Teradyne’s assets; (iii) the date a majority of the Board of Directors
of Teradyne is replaced during any 12-month period by directors whose appointment is not endorsed by a majority of the Board of
Directors of Teradyne before the date of appointment or election; or (iv) any person (as that term is used in Section 13(d)(3) or
Section 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes beneficial owner of 30% or more of the combined
voting power of Teradyne’s outstanding voting securities, other than (A) as a result of a consolidation, reorganization,
recapitalization, merger or plan of share exchange following which the holders of capital stock of Teradyne outstanding immediately
prior to such transaction hold at least a majority of combined voting power of the then-outstanding securities of the combined
corporation or ultimate parent thereof immediately after such transaction, (B) by any trustee or other fiduciary holding securities
under an employee benefit plan of Teradyne, or (C) by a person temporarily acquiring beneficial ownership in its capacity as an
underwriter (as defined pursuant to Section 2(a)(11) of the Securities Act of 1933, as amended) in connection with a public offering
of Teradyne securities.
16. Executive’s Death.
In the event of Executive’s death during the Non-Competition Period, all of Executive’s outstanding equity grants which remain
unvested as of the date of his death shall automatically become fully vested and exercisable, as applicable, and all stock options shall
remain exercisable for the remainder of the generally applicable term of such option which in all cases is no later than seven (7) years
from the respective dates of grant.
17. Release of the Company’s Claims
In consideration for, among other terms, the Executive’s signing of the Release attached as Attachment A, the Company
voluntarily releases and forever discharges the Executive generally from all claims that, as of the date when the Company signs this
Agreement, the Company has, ever had, now claims to have or ever claimed to have had against the Executive, including, without
limitation, all claims relating to the Executive’s employment by and retirement from the Company; provided that the Company does
not release the Executive from: (a) any criminal offenses; (b) any claim for breach of fiduciary duty; (c) any claim related to violation
of securities laws; and (d) any civil claim that is based on conduct that also satisfies the elements of a criminal offense, such as a civil
claim for fraud (the “Excepted Claims”). The Company has no knowledge or reason to believe that the Company has any Excepted
Claims against the Executive.
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
TERADYNE, INC.
/s/ Roy Vallee
By:
Name: Roy Vallee
Title: Director
MICHAEL A. BRADLEY
/s/ Michael A. Bradley
8
SCHEDULE A
(Outstanding Equity Grants as of Retirement Date)
Product Type Name
Restricted Units
Restricted Units
Restricted Units
Restricted Units
Restricted Units
Restricted Units
Stock Options
Stock Options
Stock Options
Stock Options
Stock Options
Plan ID Product ID
Plan Name
TERADYNE RESTRICTED STOCK TERRU 2006USPF10 RSU
TERADYNE RESTRICTED STOCK TERRU 2006USPF10 RSU
TERADYNE RESTRICTED STOCK TERRU 2006USPF10 RSU
TERADYNE RESTRICTED STOCK TERRU 2006USRU10 RSU
TERADYNE RESTRICTED STOCK TERRU 2006USRU10 RSU
TERADYNE RESTRICTED STOCK TERRU 2006USRU10 RSU
TERADYNE STOCK OPTION PLN TEROP 2006EESO10 NQ
TERADYNE STOCK OPTION PLN TEROP 2006EESO10 NQ
TERADYNE STOCK OPTION PLN TEROP 2006EESO10 NQ
TERADYNE STOCK OPTION PLN TEROP 2006EMPSO NQ
TERADYNE STOCK OPTION PLN TEROP 2006EMPSO NQ
Grant Type Grant Date Grant Price QTY - Granted QTY - Vested QTY - Unvested QTY - Outstanding
25632
52254
97827
12816
26127
48914
61721
64650
88670
57983
139024
1/28/2011
1/27/2012
1/25/2013
1/28/2011
1/27/2012
1/25/2013
1/28/2011
1/27/2012
1/25/2013
1/30/2009
1/29/2010
102528
104508
130436
51264
52254
65218
61721
64650
88670
462500
139024
0
0
0
0
0
0
46290
32325
22167
57983
139024
25632
52254
97827
12816
26127
48914
15431
32325
66503
0
0
0
0
0
0
0
0
16.23
16.95
16.56
4.81
9.34
9
ATTACHMENT A
Release
In consideration of the payments and benefits described in the Executive Officer Agreement dated January , 2014 between me
and Teradyne, Inc. (the “Company”), all of which I acknowledge I would not otherwise be entitled to receive, I hereby fully, forever,
irrevocably and unconditionally release, remise and discharge the Company, its successors and assigns and their respective
employees, officers, directors, stockholders, corporate affiliates, subsidiaries, parent companies and agents (each in their individual
and corporate capacities) (collectively, all of the foregoing, the “Released Parties”) from any and all claims, charges, complaints,
demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements,
promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys’ fees and costs), of every
kind and nature which I ever had or now have against the Released Parties arising out of my employment with and/or termination or
separation from the Company or relating to my relationship as an officer or in any other capacity for the Company, including, but not
limited to, all employment discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Americans With Disabilities Act of 1990, 42 U.S.C., §12101 et seq.,
the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq., and the Massachusetts Fair Employment Practices Act., M.G.L. c.151B,
§1 et seq., all as amended; all claims arising out of the Fair Credit Reporting Act, 15 U.S.C. §1681 et seq., the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et seq., the Massachusetts Civil Rights Act, M.G.L. c.12 §§11H and 11I,
the Massachusetts Equal Rights Act, M.G.L. c.93, §102 and M.G.L. c.214, §1C, the Massachusetts Labor and Industries Act, M.G.L.
c.149, §1 et seq., the Massachusetts Privacy Act, M.G.L. c. 214, §1B, and the Massachusetts Maternity Leave Act, M.G.L. c. 149,
§105(d), all as amended; all common law claims including, but not limited to, actions in tort (including fraud, misrepresentation and
wrongful discharge), defamation and breach of contract; all claims to any non-vested ownership interest in the Company, contractual
or otherwise, including but not limited to claims to stock or stock options; and any claim or damage arising out of my employment
with, termination or separation from the Company (including a claim for retaliation) under any common law theory or any federal,
state or local statute or ordinance not expressly referenced above; provided, however, that notwithstanding the foregoing, the
Company agrees and hereby acknowledges that this Release is not intended to and does not (i) apply to any claims I may bring to
enforce the terms of the Executive Officer Agreement, (ii) release the Company of any obligation it may have pursuant to a written
agreement, the Company’s articles of organization or bylaws, or as mandated by statute to indemnify me as an officer of the
Company; and (iii) release the Company of any obligation to provide and/or pay benefits to me or my estate, conservator or
designated beneficiary(ies) under and in accordance with the terms of any applicable Company benefit plan and/or program; provided
further, that nothing in this Release prevents me from filing, cooperating with, or participating in any proceeding before the EEOC or
a state Fair Employment Practices Agency (except that I acknowledge and agree that I may not be able to recover any monetary
benefits in connection with any such claim, charge or proceeding).
Waiver of Rights and Claims Under the Age Discrimination in Employment Act of 1967: Because I am 40 years of age or older,
I have been informed that I have or may have specific rights and/or claims under the Age Discrimination in Employment Act of 1967
(“ADEA”) and I agree that:
in consideration for the payments and benefits described in the Executive Officer Agreement, which I am not otherwise
entitled to receive, I specifically and voluntarily waive such rights and/or claims under the ADEA I might have against the
Released Parties to the extent such rights and/or claims arose prior to the date this Release was executed;
10
I understand that rights or claims under the ADEA which may arise after the date this Release is executed are not waived by
me;
I was advised that I have at least 21 days within which to consider the terms of this Release and to consult with or seek advice
from an attorney of my choice or any other person of my choosing prior to executing this Release;
I have carefully read and fully understand all of the provisions of this Release, and I knowingly and voluntarily agree to all of
the terms set forth in this Release; and
In entering into this Release, I am not relying on any representation, promise or inducement made by the Company or its
attorneys with the exception of those promises described in this document.
Period for Review and Consideration:
I acknowledge that I was informed and understand that I have twenty-one (21) days to review this Release and consider its terms
before signing it.
The 21-day review period will not be affected or extended by any revisions, whether material or immaterial, that might be made
to this Release.
Accord and Satisfaction
The amounts set forth in the Executive Officer Agreement shall be complete and unconditional payment, settlement, accord
and/or satisfaction with respect to all obligations and liabilities of the Released Parties to me, including, without limitation, all claims
for back wages, salary, vacation pay, draws, incentive pay, bonuses, cash awards, equity awards, commissions, severance pay,
reimbursement of expenses, any and all other forms of compensation or benefits, attorney’s fees, or other costs or sums.
Revocation Period
I may revoke this Release at any time during the seven-day period immediately following my execution hereof. As a result, this
Release shall not become effective or enforceable and the Company shall have no obligation to make any payments or provide any
benefits described herein until the seven-day revocation period has expired. In order to revoke the Release, you must submit a written
notice of revocation to Charles Gray, General Counsel located at 600 Riverpark Drive, North Reading, MA 01864. This written notice
may be sent by mail, email or hand-delivery, but must be received by Mr. Gray no later than the close of business on the seventh day.
Name:
Witness
Date
Date
11
IF YOU DO NOT WISH TO USE THE 21-DAY PERIOD,
PLEASE CAREFULLY REVIEW AND SIGN THIS DOCUMENT
I, , acknowledge that I was informed and understand that I have 21 days within which to consider the attached
Release, have been advised of my right to consult with an attorney regarding such Release and have considered carefully every
provision of the Release, and that after having engaged in those actions, I prefer to and have requested that I enter into the Release
prior to the expiration of the 21 day period.
Dated:
Dated:
Name:
Witness
12
EXHIBIT 10.24
AGREEMENT REGARDING TERMINATION BENEFITS
This Agreement Regarding Termination Benefits (“Agreement”) is entered into as of January 22, 2014 (the “Effective Date”) by and
between Teradyne, Inc., a Massachusetts corporation with a principal office at 600 Riverpark Drive, North Reading, MA 01864 (the
“Company”) and Mark E. Jagiela, the Chief Executive Officer and President of the Company (“Executive”).
WHEREAS, the Company and Executive have agreed on certain Termination Benefits in the event the Executive’s employment with
the Company terminates under the conditions described herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the Company and
the Executive agree as follows:
1. Effective Date and Term: This Agreement shall become effective as of the date set forth in the opening paragraph. Subject to the
provisions of Sections 4 and 9 below and unless earlier terminated as permitted herein, this Agreement shall continue in effect for a
period of three (3) years from the Effective Date (“Term”) and thereafter, the Term shall be extended for additional one-year periods
unless, not later than sixty (60) days prior to the end of the then current Term, the Company shall have given notice to the Executive
not to extend the then current Term.
2. Definitions: For purposes of this Agreement, capitalized terms shall be defined as follows:
“Model Compensation” shall mean the Executive’s annual “model compensation” as determined by the Company’s
Compensation Committee or Board of Directors, which consists of (a) a fixed annual salary and (b) a target annual variable amount.
“Cause” shall mean conduct involving one or more of the following: (i) the substantial and continuing failure of the Executive,
after notice thereof, to render services to Company in accordance with the terms or requirements of his employment, as established by
the Company Board of Directors from time to time and communicated to the Executive; (ii) the Executive’s disloyalty, gross
negligence, willful misconduct, dishonesty, fraud or breach of fiduciary duty to the Company each in connection with the Executive’s
employment by the Company; (iii) the Executive’s deliberate disregard of the rules or policies of, or breach of an agreement with,
Company which results in direct or indirect material loss, damage or injury to the Company; (iv) the intentional, unauthorized
disclosure by the Executive of any trade secret or confidential information of the Company; (v) the commission by the Executive of
an act which constitutes unfair competition with the Company or (vi) the conviction of, or the entry of a plea of guilty or nolo
contendere by the Executive, to any crime involving moral turpitude or any felony. [In the event that the Company determines that
Cause may exist pursuant to clauses (i), (iii) and (v) above, the Company shall give the Executive written notice of the facts
constituting such Cause and the Executive shall have thirty (30) days following receipt of such notice to remedy such Cause.
“Change in Control” shall be deemed to have occurred upon the occurrence of any of the following events: (i) any consolidation,
cash tender offer, reorganization, re-capitalization, merger or plan of share exchange following which the capital stock of the
Company immediately prior to such transaction constitutes less than a majority of the combined voting power of the then-outstanding
securities of the combined corporation or person immediately after such transaction; (ii) any sale, lease, exchange or other transfer of
all or substantially all of the Company’s assets; (iii) the adoption by the Board of Directors of Company of any plan or proposal for
the liquidation or dissolution of the Company; (iv) a change in the majority of the Board of Directors of the Company through one or
more contested elections occurring within a three year period; or (v) any person (as that term is used in Section 13(d)(3) or Section 14
(d)(2) of the Exchange Act of 1934, as amended) becomes beneficial owner of 30% or more of the combined voting power of the
Company’s outstanding voting securities other than (A) as a result of a consolidation, reorganization, recapitalization, merger or plan
of share exchange following which the capital stock of the Company outstanding immediately prior to such transaction constitutes at
least a majority of the combined voting power of the then-outstanding securities of the combined corporation or person immediately
after such transaction, (B) by any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or
(C) by a person temporarily acquiring beneficial ownership in its capacity as an underwriter (as defined pursuant to Section 2(a)(11)
of the Securities Act of 1933, as amended) in connection with a public offering of the Company’s securities.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Company” shall mean “Teradyne, Inc. and shall include its successors and assigns, and any corporation or other entity which is
the surviving or continuing entity following a merger, consolidation, or sale of all or substantially all of the Company’s assets or
stock.
“Competitor” includes, but is not limited to, any business or enterprise that develops, designs, produces, markets, sells, or
renders any product or service developed, produced, marketed, sold or rendered by the Company, including actual or demonstrably
anticipated research or development.
“Date of Termination” shall mean the last day of Executive’s employment with the Company.
“Disability” shall mean an illness, injury or other incapacitating condition as a result of which the Executive is absent from full
time performance of his duties with the Company or is unable to perform his duties and responsibilities for a period of sixty
(60) consecutive days during the Term or a period or periods aggregating to more than ninety (90) days in any consecutive six
(6) month period but shall not include death.
2
“Equity Awards” shall mean the equity ownership, participation or appreciation opportunities provided by the Company to the
Executive pursuant to incentive plans that the Company maintains, including but not limited to its 2006 Equity and Cash
Compensation Incentive Plan, the Teradyne, Inc. 1991 Employee Stock Option Plan and the Teradyne, Inc. 1997 Employee Stock
Option Plan, and any stock options, restricted stock units, restricted stock, stock appreciation rights, phantom stock and other stock-
based awards granted thereunder.
“Restricted Activities” shall include the following:
a)
b)
c)
d)
e)
Recruiting, soliciting, hiring or engaging, as an employee or independent contractor, any employees or former employees
(excluding any former employee whose employment with the Company or its subsidiaries has been terminated for a period
of six months or longer) of the Company or its subsidiaries;
Soliciting, enticing, or encouraging employees of the Company or its subsidiaries to leave employment with the Company
or its subsidiaries;
Soliciting (for the purpose of providing a product or service that is competitive with the Company) any customer or
prospective customer of the Company or its subsidiaries;
Soliciting, enticing, advising, encouraging, or inducing (i) customers of the Company or its subsidiaries to discontinue or
alter their business relationship or (ii) customers or prospective customers to refrain from entering into a business
relationship with the Company or its subsidiaries;
Entering the employment, rendering any professional services or taking a position as an officer, director, partner, owner,
consultant, independent contractor, advisory board or committee member, principal, agent, employee or 10% or more
shareholder with or to any individual, partnership, association or corporation which is a Competitor of the Company or its
subsidiaries; but this clause (e) shall not preclude the Executive from rendering services to an entity that competes with an
entity that has acquired Teradyne, Inc. (an “Acquirer”) so long as (i) the Executive’s services do not involve products or
services that are competitive to those that were produced, marketed, sold or rendered by Teradyne, Inc. or any of its
subsidiaries (including actual or demonstratively anticipated research or development) before the acquisition (“Teradyne
Product/Services”) and (ii) the Executive is not retained as an Officer of the Acquirer following the consummation of the
acquisition to render services involving the Acquirer’s products and services which are not Teradyne Products/Services.
f)
Establishing, funding, purchasing or managing a business which is competitive with the business of the Company or its
subsidiaries.
3
3. Employment & Agreement Consideration: In consideration of (a) the Executive’s “at-will” employment with the Company and the
compensation payments made to the Executive as CEO and President and (b) the Company’s willingness to enter into an agreement
regarding termination benefits, specifically this Agreement, the Executive covenants and agrees that during the Term of this
Agreement and for three (3) years after the Executive’s Date of Termination resulting from the Executive’s resignation, retirement or
a termination by the Company for Cause, the Executive will not directly or indirectly engage in any of the Restricted Activities.
4. Termination Benefits and Covenants:
4.1 For the Executive: In consideration of, and as condition to, the performance by the Executive of the covenants, undertakings
and other agreements set forth in Section 4.3 below, and for so long as the Executive performs such obligations, the Company shall
provide the Termination Benefits described in subsections (a)-(f) below to the Executive if his employment with the Company is
terminated by the Company for any reason other than for death, Disability, or Cause, provided that such termination by the Company
does not trigger or entitle the Executive to any payments or benefits under the Executive Officer Change in Control Agreement dated
January , 2014 (the “Executive Officer Change in Control Agreement”). If the Executive’s employment with the Company is
terminated within twenty-four (24) months following a Change in Control or within three (3) months prior to an actual Change in
Control, then the terms and conditions of the Executive Officer Change in Control Agreement shall govern such employment
termination and the Executive shall not be entitled to the payments and benefits described below. Subject to Section 4.1(b)(i) of this
Agreement but notwithstanding any other provision of this Agreement to the contrary, payment or provision of the Executive’s
Termination Benefits that are subject to Section 409A of the Code shall commence on the 60th day following the Date of Termination
provided the Executive has complied with the requirements of Section 4.3 of this Agreement and the release of claims has become
irrevocable under applicable law no later than on the 60th day following his Date of Termination. All Termination Benefits shall be
forfeited as of the 60th day following the Executive’s Date of Termination if the Executive has not provided the Company with a
valid, irrevocable release of claims as of such 60th day.
(a) Continued Payments: Unless otherwise required under Section 4.1(b) below, the Company shall pay monthly to the
Executive an amount equal to 1/12th of his current annual Model Compensation as of the Date of Termination for a period of
twenty-four (24) months from the Date of Termination (the “Severance Period”). Except as otherwise expressly provided herein,
under no circumstances shall the Executive receive more than a total of twenty-four (24) months of payments under this
Agreement. All such continued payments shall be in accord with the Company’s customary pay practices.
4
(b) Deferred Compensation/Section 409A.
(i) Notwithstanding any other provision of this Agreement, if the Executive is a “specified employee” at the time of
Executive’s “separation from service,” as defined in Section 409A of the Code, all payments, benefits, or removal of
restrictions on the transfer of equity under this Agreement with respect to Executive’s separation from service that
constitute compensation deferred under a nonqualified deferred compensation plan as defined in Section 409A of the Code
to which such specified employee would otherwise be entitled during the first six months following the date of separation
from service shall be made on the first day of the seventh month after the date of separation from service (or, if earlier, the
date of death of the Executive).
(ii) For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate
identified payment for purposes of Section 409A, and any payments that are due within the “short term deferral period” as
defined in Section 409A or payments that are made under separation pay plans as described in Treasury Regulation
Section 1.409A-1(b)(ii), (iii) or (iv), shall not be treated as deferred compensation unless applicable law requires otherwise.
Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any payments or benefits
under this Agreement except to the extent specifically permitted or required by Section 409A.
(iii) This Agreement is intended to comply with the provisions of Section 409A and the Agreement shall, to the extent
practicable, be construed in accordance therewith. Terms defined in the Agreement shall have the meanings given such
terms under Section 409A if and to the extent required to comply with Section 409A. In any event, the Company makes no
representations or warranty and shall have no liability to Executive or any other person if any provisions of or payments
under this Agreement are determined to constitute deferred compensation subject to Code Section 409A but not to satisfy
the conditions of that section.
(c) Benefits: During the Severance Period, the Company shall arrange or provide for continued health, dental and vision
insurance plan coverage for the Executive at the same levels of coverage in existence prior to the Date of Termination subject to
the Company and Executive each contributing to the applicable insurance premium payments on the same basis and in the same
proportions as in existence at the Date of Termination. If the Executive is not eligible for continued health, dental and vision
insurance plan coverage for any portion of the Severance Period, the Company shall provide or reimburse the Executive for
comparable individual insurance and, if such provision or reimbursement constitutes taxable income to the Executive, such
additional amount as is necessary to place the Executive in substantially the same after tax position as he was while an employee
of the Company with respect to such insurance plan coverages. All other benefits, including but not limited to
5
flex/vacation time accrual, short and long term disability insurance, life insurance, contributions (including company matches)
into savings plan and savings plan plus, profit sharing payments and participation in the employee stock purchase plan shall
cease as of the Date of Termination.
To the extent that amounts paid by the Company to provide benefits under this paragraph (c), are deemed to be deferred
compensation subject to Section 409A, then such payments shall be made monthly and to the extent any such benefits are
reimbursements of expenses incurred by the Executive then the expenses eligible for reimbursement in one taxable year may not
effect the expenses eligible for reimbursement in another taxable year; such reimbursement must be made on or before the last
day of the year following the year in which the expenses are incurred; and the right to reimbursement is not subject to
liquidation or exchange for another benefit.
(d) Equity Awards: All unvested, non performance-based Equity Awards held by the Executive as of the date of the
Executive’s termination by the Company shall continue to vest during the Severance Period as if the Executive’s employment
had not been terminated. Unvested performance-based Equity Awards shall continue to vest for thirty-six (36) months as if the
Executive’s employment had not been terminated. Except as modified in this Section 1(d), the terms of the applicable equity
Plan(s) and Equity Award Agreements (including any successor plans and agreements) under which the Equity Awards were
granted to the Executive shall continue to govern all of the Executive’s Equity Awards.
(e) Taxes and Withholdings: All payments made by the Company to the Executive under this Agreement shall be net of
any applicable taxes (whether local, state, federal, provincial or otherwise) or other required or voluntary withholdings or
deductions.
(f) Notwithstanding anything to the contrary herein, in the event the Executive dies after (i) his employment with the
Company has been terminated for any reason other than Death, Disability and Cause and (ii) his right to the Termination
Benefits stated in Section 4.1 has attached, the Company agrees that the Executive’s estate, conservator or designated
beneficiary(ies), as the case may be, shall be entitled to the remainder of the Executive’s Termination Benefits described in
Section 4.1.
4.2 Notwithstanding the preceding Section 4.1 and in consideration of, and as condition to, the Executive providing to the
Company the covenants and agreements set forth in Section 4.3 below, the Company agrees that if the Executive’s employment with
the Company is terminated by the Company for Disability, the Company shall, unless otherwise required under Section 4.1(b) above:
(a) provide the monthly payments described in Section 4.1(a) above, as reduced pursuant to 4.2(b) below, to the Executive
for each month during the
6
two (2) year period following his termination during which the Executive does not receive or is no longer eligible to receive any
Company disability insurance benefits under the applicable insurance policy or program(s), other than as a result of Executive’s
intentional malfeasance or death; and
(b) under this Section 4.2, reduce each monthly payment described in Section 4.1(a) above to the Executive by any
compensation received by the Executive from other employment, consulting or the rendition of services outside the Restricted
Activities.
The Executive agrees to use his best efforts to obtain and maintain any benefits from any disability policy or program under which he
is an insured party or participant.
4.3 Executive’s Covenants: In consideration of, and as a condition to, the Company providing to the Executive the Termination
Benefits set forth in Sections 4.1 and 4.2, the Executive covenants and agrees:
(a) that during the Term of this Agreement and for three (3) years after the Executive’s Date of Termination resulting from
a termination by the Company for any reason other than for Death or Disability and so long as such termination does not trigger
or entitle the Executive to any payments or benefits under the Executive Officer Change in Control Agreement, the Executive
will not directly or indirectly engage in any of the Restricted Activities.
(b) to sign a valid, binding, irrevocable general release of any claims he has or may have against the Company, including
its subsidiaries, in connection with or relating to his employment by and/or termination from employment with the Company in
the form attached hereto as Attachment A, within twenty-one (21) days of his Date of Termination resulting from a termination
by the Company. Notwithstanding the foregoing, the Company agrees and hereby acknowledges that the Release contained in
Attachment A is not intended to and does not (i) apply to any claims the Executive may bring to enforce the terms of this
Agreement, the Executive Officer Change in Control Agreement, or any outstanding Equity Award Agreement and applicable
equity Plan; (ii) release the Company of any obligation it may have pursuant to a written agreement, the Company’s articles or
organization or bylaws or as mandated by statute to indemnify the Executive as an officer or director of the Company; and
(iii) release the Company of any obligation to provide and/or pay benefits to the Executive or the Executive’s estate, conservator
or designated beneficiary (ies) under and in accordance with the terms of any applicable Company benefit plan and/or program.
7
(c) to continue to comply with any post-termination obligations he may have to the Company arising from this Agreement
or any other agreement the Executive has with the Company, its subsidiaries, affiliates or divisions, including but not limited to
the following:
•
•
•
All Outstanding Equity Award Agreements
Employment Agreement
Executive Officer Change in Control Agreement
(d) to cooperate with and provide all reasonable assistance to the Company, with respect to any civil, criminal or
administrative investigations, actions and/or proceedings involving the Company and relating in any way to Executive’s
positions, duties and responsibilities while at the Company or to any matters which the Executive handled, participated in or had
knowledge of while employed by the Company.
(e) not to make any false or disparaging or derogatory statements or remarks to any person or entity about the Company’s
(including its subsidiaries’) business affairs, financial condition, or about any Company or subsidiary directors, officers,
employees, stockholders and agents.
4.4 Return of Property: Within sixty (60) days of the Executive’s termination of employment, for any reason, or his resignation
or retirement, the Executive shall (a) return to the Company all Company property in his possession or control, including all
electronic documents; and (b) submit all documentation for any reimbursements owed to the Executive for business expenses incurred
prior to the Date of Termination.
4.5 No Termination Benefits: Except as expressly stated otherwise in Section 4.2, the Executive shall not be eligible for or
receive any of the Termination Benefits described in Section 4.1 above upon the occurrence of any one of the following: (a) the
Executive’s resignation of or retirement from employment with the Company, or (b) the termination of Executive’s employment with
the Company resulting from Death or Disability, or (c) the termination of Executive’s employment by the Company for Cause; or
(d) the Executive’s failure to perform or breach of any of the covenants, undertakings or other agreements set forth in Section 4.3; or
(e) the Executive’s entitlement to receive payments or benefits under the Executive Officer Change in Control Agreement.
5. Termination Notice: Any termination of the Executive’s employment by the Company (other than by reason of Death) shall
(a) be in writing; (b) indicate the basis for termination (such as with or without Cause, Disability, etc…) and with respect to a
termination for Cause indicate the basis for termination in reasonable detail and (c) be delivered to the Executive in accordance with
Section 17 below.
6. Resignation or Retirement Notice: Any resignation or retirement by Executive shall be (a) in writing, (b) explain the
resignation or retirement and (c) be delivered to the Company at least ninety (90) days in advance of the resignation or retirement date
and otherwise in accordance with Section 17 below.
7. Resignation as a Director: Upon termination of Executive’s employment by the Company for any reason or the resignation of
or retirement from employment by
8
the Executive, the Executive shall provide the Chairman of the Board with his written resignation from the Company’s Board and all
subsidiary Boards, and the Board may choose to accept or reject the Executive’s resignation as a Company Board member.
8. No Third Party Beneficiaries: Except as otherwise provided in Section 4.1(f) above and in the Executive Officer Change in
Control Agreement, nothing in this Agreement shall confer upon any person or entity not a party to this Agreement, or the legal
representative, executor, administrator or heir of such person or entity, any rights or remedies of any nature or kind whatsoever under
or by reason of this Agreement.
9. No Obligation of Employment. Nothing in this Agreement shall be construed as an express or implied contract of employment
between the Executive and the Company (or its subsidiaries, affiliate or divisions) or as a commitment on the part of the Company to
retain Executive in any capacity for any period of time. Executive understands that the employment relationship between the
Executive and the Company will be “at will” and the Executive understands that the Company may terminate Executive with or
without “Cause” at any time (including prior to a Change in Control) or for any or no reason. Following any Change in Control, the
Company may also terminate Executive with or without “Cause” at any time subject to the terms of this Agreement and the
Executive’s rights and the Company’s obligations specified in the Executive Officer Change in Control Agreement.
10. Specific Performance: Executive acknowledges that (a) the services to be rendered under this Agreement and the obligations
of the Executive assumed herein are of a special, unique and extraordinary character, (b) it would be difficult or impossible to replace
such services and obligations, (c) the Company, its subsidiaries and affiliates will be irreparably harmed, and (d) the award of
monetary damages will not adequately protect the Company, its subsidiaries and affiliates in the event of a breach hereof by the
Executive. As a result, the Executive agrees and consents that if he violates any of the provisions of this Agreement, the Company
shall, without any bond or other security, being required and without the necessity of proving monetary damages, be entitled to
temporary and/or permanent injunctive relief to be issued by a court of competent jurisdiction restraining the Executive from
committing or continuing any violation of this Agreement or any other appropriate decree of specific performance. Such remedies
shall not be exclusive and shall be in addition to any other remedy the Company may have whether at law or in equity.
11. Dispute Resolution: Except for the equitable relief provisions set forth in Section 10, the Executive and the Company agree
that any dispute, controversy or claim arising between the parties relating to this Agreement, otherwise relating in any way to
Executive’s employment with and/or termination from the Company, or relating to Executive’s relationship as a director or in any
other capacity for the Company (whether such dispute arises under any federal, state or local statute or regulation, or at common law),
shall be resolved by final and binding arbitration before a single arbitrator. The arbitrator shall be selected in accordance with the
Employment Dispute Resolution Rules of the American Arbitration Association (“AAA”) pertaining at the time the dispute
9
arises. The parties agree that such arbitration shall take place at the offices of the AAA in Boston, Massachusetts. In such arbitration
proceedings, the arbitrator shall have the discretion, to be exercised in accordance with applicable law, to allocate among the parties
the arbitrator’s fees, tribunal and other administrative and litigation costs and, to the prevailing party, reasonable attorneys’ fees. The
award of the arbitrator may be confirmed before and entered as a judgment of any court having jurisdiction of the parties.
12. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts and this Agreement shall be deemed to be performable in Massachusetts.
13. Severability. In case any one or more of the provisions contained in this Agreement for any reason shall be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of
this Agreement and this Agreement shall be construed to the maximum extent permitted by law.
14. Waivers and Modifications. This Agreement may be modified, and the rights, remedies and obligations contained in any
provision hereof may be waived, only in accordance with this Section 14. No waiver by either party of any breach by the other or any
provision hereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of this
Agreement. This Agreement may not be waived, changed, discharged or terminated orally or by any course of dealing between the
parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought.
15. Assignment. Executive may not assign any of his rights or delegate any of his duties or obligations under this Agreement.
The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon, the
successors and assigns of the Company.
16. Entire Agreement. This Agreement constitutes the entire understanding of the parties relating to the subject matter hereof
and supersedes and cancels all agreements, written or oral, made prior to the date hereof between Executive and the Company relating
to the subject matter hereof ; provided, however, that the following Executive Agreements, as may be modified herein, shall remain in
effect in accordance with their terms.
a)
b)
c)
d)
e)
All Outstanding Equity Award Agreements
Employment Agreement between the Company and the Executive
Executive Officer Change in Control Agreement dated January , 2014
Any written indemnification Agreements signed by the Company
The Release, Attachment A hereto, once executed between the Company and the Executive.
10
17. Notices. All notices hereunder shall be in writing and shall be delivered (a) in person, (b) mailed by U.S. certified or
registered mail, return receipt requested, postage prepaid, (c) sent via facsimile with a confirmed facsimile transmission receipt, or
(d) sent via overnight delivery with a confirmed receipt of delivery; in each instance addressed, if to the Executive or the Company, as
the case may be at the address noted below or to such other address as either party may furnish to the other in writing in accordance
herewith, except that notice of a change of address shall be effective only upon actual receipt.
To the Company:
Teradyne, Inc.
600 Riverpark Drive
North Reading, MA 01864
Attention: General Counsel
To the Executive:
Executive’s address in his employment file on record
with the Human Resources Department
18. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same instrument.
19. Section Headings. The descriptive section headings herein have been inserted for convenience only and shall not be deemed
to define, limit, or otherwise affect the construction of any provision hereof.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by a duly authorized director,
and by the Executive.
TERADYNE, INC.
EXECUTIVE
/s/ Roy Vallee
Name: Roy A. Vallee
Title: Chair, Compensation Committee
/s/ Mark E. Jagiela
Mark E. Jagiela
President & Chief Executive Officer
11
ATTACHMENT A
Release
In consideration of the payment and receipt of the Termination Benefits described in the “Agreement Regarding Termination
Benefits” dated January , 2014 between me and Teradyne, Inc. of 600 Riverpark Drive, North Reading, MA 01864 (the
“Company”), all of which I acknowledge I would not otherwise be entitled to receive and except as otherwise expressly excluded
under Section 4.3(b) of said Agreement, I hereby fully, forever, irrevocably and unconditionally release, remise and discharge the
Company, its successors and assigns and their respective officers, directors, stockholders, corporate affiliates, subsidiaries, parent
companies, agents and employees (each in their individual and corporate capacities) (hereinafter, the “Released Parties”) from any
and all claims, charges, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts,
reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses
(including attorneys’ fees and costs), of every kind and nature which I ever had or now have against the Released Parties arising out
of my employment with and/or termination or separation from the Company or relating to my relationship as a Director, Officer or in
any other capacity for the Company, including, but not limited to, all employment discrimination claims under Title VII of the Civil
Rights Act of 1964, 42 U.S.C. §2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Americans
With Disabilities Act of 1990, 42 U.S.C., §12101 et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq., and the
Massachusetts Fair Employment Practices Act., M.G.L. c.151B, §1 et seq., all as amended; all claims arising out of the Fair Credit
Reporting Act, 15 U.S.C. §1681 et seq., the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et seq.,
the Massachusetts Civil Rights Act, M.G.L. c.12 §§11H and 11I, the Massachusetts Equal Rights Act, M.G.L. c.93, §102 and M.G.L.
c.214, §1C, the Massachusetts Labor and Industries Act, M.G.L. c.149, §1 et seq., the Massachusetts Privacy Act, M.G.L. c. 214,
§1B, and the Massachusetts Maternity Leave Act , M.G.L. c. 149, §105(d), all as amended; all common law claims including, but not
limited to, actions in tort, defamation and breach of contract; all claims to any non-vested ownership interest in the Company,
contractual or otherwise, including but not limited to claims to stock or stock options; and any claim or damage arising out of my
employment with, termination or separation from the Company (including a claim for retaliation) under any common law theory or
any federal, state or local statute or ordinance not expressly referenced above; provided, however, that notwithstanding the foregoing,
the Company agrees and hereby acknowledges that this Release Agreement is not intended to and does not (i) apply to any claims I
may bring to enforce the terms of this Agreement, the Executive Officer Change in Control Agreement, or any outstanding Equity
Award Agreement and equity Plan; (ii) release the Company of any obligation it may have pursuant to a written agreement, the
Company’s articles of organization or bylaws, or as mandated by statute to indemnify me as an officer or director of the Company;
and (iii) release the Company of any obligation to provide and/or pay benefits to me or my estate, conservator or designated
beneficiary(ies) under and in accordance with the terms of any applicable Company benefit plan and/or program; provided further,
that nothing in this Release Agreement prevents me from filing, cooperating with, or participating in any proceeding before the EEOC
or a state Fair Employment Practices Agency (except that I acknowledge that I may not be able to recover any monetary benefits in
connection with any such claim, charge or proceeding).
12
Waiver of Rights and Claims Under the Age Discrimination in Employment Act of 1967:
Since I am 40 years of age or older, I have been informed that I have or may have specific rights and/or claims under the Age
Discrimination in Employment Act of 1967 (ADEA) and I agree that:
(a) in consideration for the severance payments and benefits described in Section 4.1 of the Agreement Regarding Termination
Benefits, which I am not otherwise entitled to receive, I specifically and voluntarily waive such rights and/or claims under the ADEA
I might have against the Released Parties to the extent such rights and/or claims arose prior to the date this Release Agreement was
executed;
(b) I understand that rights or claims under the ADEA which may arise after the date this Release Agreement is executed are not
waived by me;
(c) I was advised that I have at least 21 days within which to consider the terms of this Release Agreement and to consult with or
seek advice from an attorney of my choice or any other person of your choosing prior to executing this Release Agreement;
(d) I have carefully read and fully understand all of the provisions of this Release Agreement, and I knowingly and voluntarily
agree to all of the terms set forth in this Release Agreement; and
(e) in entering into this Release Agreement I am not relying on any representation, promise or inducement made by the
Company or its attorneys with the exception of those promises described in this document.
Period for Review and Consideration of Agreement:
I acknowledge that I was informed and understand that I have twenty-one (21) days to review this Release Agreement and consider its
terms before signing it.
The 21-day review period will not be affected or extended by any revisions, whether material or immaterial, that might be made to
this Agreement.
Accord and Satisfaction: The amounts set forth in the Agreement Regarding Termination Benefits shall be complete and
unconditional payment, settlement, accord and/or satisfaction with respect to all obligations and liabilities of the Released Parties to
me, including, without limitation, all claims for back wages, salary, vacation pay, draws, incentive pay, bonuses, cash awards, Equity
Awards, commissions, severance pay, reimbursement of expenses, any and all other forms of compensation or benefits, attorney’s
fees, or other costs or sums.
Revocation Period: I may revoke this Release Agreement at any time during the seven-day period immediately following my
execution hereof. As a result, this Release Agreement shall not become effective or enforceable and the Company shall have no
obligation to make any payments or provide any benefits described herein until the seven-day revocation period has expired.
Mark E. Jagiela
Witness
Date
Date
13
IF YOU DO NOT WISH TO USE THE 21-DAY PERIOD,
PLEASE CAREFULLY REVIEW AND SIGN THIS DOCUMENT
I, Mark E. Jagiela, acknowledge that I was informed and understand that I have 21 days within which to consider the attached
Release Agreement, have been advised of my right to consult with an attorney regarding such Agreement and have considered
carefully every provision of the Agreement, and that after having engaged in those actions, I prefer to and have requested that I enter
into the Agreement prior to the expiration of the 21 day period.
Dated:
Dated:
Mark E. Jagiela
Witness
14
EXECUTIVE OFFICER CHANGE IN CONTROL AGREEMENT
EXECUTIVE OFFICER CHANGE IN CONTROL AGREEMENT entered into this 22nd day of January, 2014 by and between
Teradyne, Inc., a Massachusetts corporation (“Teradyne”), and the undersigned executive officer of Teradyne (“Employee”).
EXHIBIT 10.29
WITNESSETH:
WHEREAS, Teradyne and Employee desire to set forth certain terms and conditions relating to the termination of Employee’s
employment upon the occurrence of a Change in Control (as hereinafter defined) of Teradyne.
NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. Entitlements Upon a Termination Event. If, within twenty-four (24) months following a Change in Control or in
contemplation of a Change in Control, there is a Termination Event, and subject to the conditions set forth herein and the performance
by Employee of the undertakings and duties set forth herein, Employee shall be entitled to the rights, payments and other benefits set
forth below:
(a) Treatment of Awards. Equity Awards that are not subject to Performance Criteria shall be governed by Section 1(b)
below, and Cash Awards and Equity Awards that are subject to Performance Criteria shall be governed by Section 1(c) below. The
parties hereto acknowledge that, except as otherwise provided herein, the terms of this Agreement are intended to modify the terms of
Employee’s existing Cash Award and Equity Award agreements and to be a supplement to Cash Award and Equity Award
agreements granted on or subsequent to the date hereof.
(b) Acceleration of Equity Awards. All of Employee’s unvested or unexercisable Equity Awards or Equity Awards subject
to restrictions on transfer imposed by Teradyne or repurchase rights in favor of Teradyne, as applicable, granted prior to, on, or after
the date hereof (but only (I) such Equity Awards as have been granted to Employee by Teradyne as of the date of the Change in
Control or (II) such Equity Awards as have been assumed by an acquiring company at the time of a Change in Control or such new
cash and equity awards that have been substituted by an acquiring company for Equity Awards existing at the time of a Change in
Control, each pursuant to the terms of any Teradyne incentive plan) shall automatically become fully vested, exercisable or free of
restrictions on transfer imposed by Teradyne or repurchase rights in favor of Teradyne, as applicable, as of the date of such
Termination Event, and all Equity Awards granted on or after the date hereof shall, to the extent applicable, remain exercisable for the
remainder of the generally applicable term of such Equity Award.
(c) Satisfaction of Performance Criteria. All of Employee’s Cash Awards and Equity Awards that are subject to
Performance Criteria shall be settled and paid in the following manner: Employee shall be deemed to have satisfied the necessary
percentage of the Performance Criteria to which such Cash Awards and Equity Awards are subject as of the date
of the Termination Event, that will provide Employee with the target level of such Cash Awards and Equity Awards; and Employee
shall be entitled to receive that portion of each Cash Award and Equity Award payable, at the target level. For purposes of the Cash
Awards, the payment shall be multiplied by a fraction, the numerator of which shall be the number of calendar months that have
passed during the period in which the Performance Criteria are to be measured (treating the month in which the Termination Event
occurs as a full calendar month) and the denominator of which shall be the total number of calendar months in such period. For
purposes of this Agreement, “target level” is that percentage of the Performance Criteria established at the beginning of each calendar
year in order for the Employee to achieve Model Compensation. Unless otherwise required under Section 1(e) below, such Cash
Awards and Equity Awards shall be paid to Employee or the restrictions on transfer removed not later than 10 days following the
Termination Event.
(d) Salary Continuation. Unless otherwise required under Section 1 (e) below, Teradyne shall pay Employee monthly an
amount equal to 1/12th of Employee’s current annual Model Compensation as of the Termination Event for a period of 24 months
following the date of the Termination Event (the “Salary Continuation Period”). In the event a Termination Event constitutes
termination for Good Reason on account of a material reduction in Model Compensation, the payment obligation pursuant to this
Section 1(d) shall be calculated without giving effect to any such reductions in Model Compensation. All such continued payments
shall be made in accordance with Teradyne’s customary pay practices. Subject to Section 1(e)(i) of this Agreement but
notwithstanding any other provision of this Agreement to the contrary, the continued payments to Employee contemplated by this
Section 1(d) and any benefits provided to Employee that are subject to Section 409A of the Code shall commence on the 60th day
following the Termination Event provided Employee has complied with the requirements of Section 1(g) of this Agreement and the
release of claims has become irrevocable under applicable law no later than on the 60th day following his Termination Event.
(e) Deferred Compensation/Section 409A.
(i) Notwithstanding any other provision of this Agreement, if the Employee is a “ specified employee” at the time of
the Employee’s “separation from service” as defined in Section 409A of the Code , all payments, benefits, or removal of restrictions
on the transfer of equity under this Agreement with respect to the Employee’s “separation from service” that constitute compensation
deferred under a nonqualified deferred compensation plan as defined in Section 409A of the Code to which such specified employee
would otherwise be entitled during the first six months following the date of separation from service shall be made on the first day of
the seventh month after the date of separation from service (or, if earlier, the date of death of the Employee).
(ii) For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a
separate identified payment for purposes of Section 409A, and any payments that are due within the “short term deferral period” as
defined in Section 409A or payments that are made under separation pay plans as described in Treasury Regulation Section 1.409A-1
(b)(9)(ii), (iii) or (iv), shall not be treated as deferred compensation unless applicable law requires otherwise. Neither Teradyne nor
the Employee shall have the right to accelerate or defer the delivery of any payments or benefits under this Agreement except to the
extent specifically permitted or required by Section 409A.
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(iii) This Agreement is intended to comply with the provisions of Section 409A and the Agreement shall, to the
extent practicable, be construed in accordance therewith. Terms defined in the Agreement shall have the meanings given such terms
under Section 409A if and to the extent required to comply with Section 409A. In any event, Teradyne makes no representations or
warranty and shall have no liability to Employee or any other person if any provisions of or payments under this Agreement are
determined to constitute deferred compensation subject to Code Section 409A but not to satisfy the conditions of that section.
(iv) If any amount is payable under the provisions of paragraph (f), below, as a reimbursement of Employee’s
expenses, under the provisions of Section 2 and 13, or any other provision of this Agreement that constitutes a reimbursement of
expenses under Section 409A then, notwithstanding the other provisions of this Agreement with respect to the payment of such
reimbursement, the following limitations shall apply; (A) the expenses eligible for reimbursement may not affect the expenses eligible
for reimbursement in any other taxable year; (B) such reimbursement must be made on or before the last day of the year following the
year in which the expenses are incurred; (C) the right to reimbursement is not subject to liquidation or exchange for another benefit;
and (D) in connection with reimbursements under Section 13 the period during which such expenses can be incurred extends to the
end of the period permitted for such claims under the applicable statute of limitations.
(f) Benefit Continuation. During the Salary Continuation Period, Teradyne shall arrange or provide for continued health,
dental and vision insurance plan coverage for the Employee at the same levels of coverage in existence prior to the Termination Event
subject to Teradyne and Employee each contributing to the applicable insurance premium payments on the same basis and in the same
proportions as in existence at the date of the Termination Event. If the Employee is not eligible for continued health, dental and vision
insurance plan coverage for any portion of the twenty-four (24) month period defined herein, Teradyne shall provide or reimburse
Employee for comparable individual insurance and, if such provision or reimbursement constitutes taxable income to the Employee,
such additional amount as is necessary to place the Employee in substantially the same after tax position as he was while an employee
of Teradyne with respect to such insurance plan coverages. All other benefits, including but not limited to flex/vacation time accrual,
short and long term disability insurance, life insurance, contributions (including company matches) into savings plan and “savings
plan plus”, profit sharing payments and participation in the Employee stock purchase plan shall cease as of the date of the
Termination Event.
To the extent that amounts paid by Teradyne to provide the benefits under this paragraph (f) are deemed to be deferred
compensation subject to Section 409A, then such payments shall be made monthly and any payment to preserve the Employee’s after
tax position shall be made within 60 days after the end of each calendar year in which the taxable provision or reimbursement occurs.
(g) Release. Notwithstanding any other provision of this Agreement to the contrary, no payment, benefit or removal of
restriction on the transfer of equity provided for
3
under or by virtue of the provisions of this Agreement shall be paid or otherwise made available unless Teradyne shall have first
received from Employee a valid, binding and irrevocable general release, in the form of Attachment A to this Agreement within
twenty-one (21) days of the date of the Termination Event. Employee shall sign such release within twenty-one (21) days of a
Termination Event subsequent to a Change in Control. Teradyne agrees to provide Employee an estimate relating to payments to be
made under this Agreement upon Employee’s written request. All rights, benefits, payments and other entitlements contemplated to
be provided or paid to Employee under this Agreement shall be forfeited as of the 60th day following Employee’s Termination Event
if Employee has not provided Teradyne with a valid, irrevocable release of claims as of such 60th day.
(h) Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
“Cash Awards” shall mean any cash-based bonus, cash incentive or other cash awards provided by Teradyne to Employee
pursuant to incentive plans that Teradyne maintains, including but not limited to its 2006 Equity and Cash Compensation Incentive
Plan.
“Cause” shall mean conduct involving one or more of the following: (i) the substantial and continuing failure of Employee,
after notice thereof, to render services to Teradyne in accordance with the terms or requirements of his or her employment as
established by the Teradyne Board of Directors from time to time and communicated to the Employee; (ii) Employee’s disloyalty,
gross negligence, willful misconduct, dishonesty, fraud or breach of fiduciary duty to Teradyne, each in connection with Employee’s
employment by Teradyne; (iii) Employee’s deliberate disregard of the rules or policies of, or breach of an agreement with, Teradyne
which results in direct or indirect material loss, damage or injury to Teradyne; (iv) the intentional unauthorized disclosure by
Employee of any trade secret or confidential information of Teradyne; (v) the commission by Employee of an act which constitutes
unfair competition with Teradyne; or (vi) the conviction of, or the entry of a plea of guilty or nolo contendere by the Employee, to any
crime involving moral turpitude or any felony. In the event that Teradyne determines that Cause may exist pursuant to clauses (i),
(iii) and (v) above, Teradyne shall give Employee written notice of the facts constituting such Cause and Employee shall have 30 days
following receipt of such notice to remedy such Cause.
A “Change in Control” shall be deemed to have occurred upon the occurrence of any of the following events: (i) any
consolidation, cash tender offer, reorganization, recapitalization, merger or plan of share exchange following which the capital stock
of Teradyne outstanding immediately prior to such transaction constitutes less than a majority of the combined voting power of the
then-outstanding securities of the combined corporation or person immediately after such transaction; (ii) any sale, lease, exchange or
other transfer of all or substantially all of Teradyne’s assets; (iii) the adoption by the Board of Directors of Teradyne of any plan or
proposal for the liquidation or dissolution of Teradyne; (iv) a change in the majority of the Board of Directors of Teradyne through
one or more contested elections occurring within a three-year period; or (v) any person (as that term is used in Section 13(d)(3) or
Section 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes beneficial owner of 30% or more of the combined
voting power of Teradyne’s outstanding voting securities, other
4
than (A) as a result of a consolidation, reorganization, recapitalization, merger or plan of share exchange following which the capital
stock of Teradyne outstanding immediately prior to such transaction constitutes at least a majority of combined voting power of the
then-outstanding securities of the combined corporation or person immediately after such transaction, (B) by any trustee or other
fiduciary holding securities under an employee benefit plan of Teradyne, or (C) by a person temporarily acquiring beneficial
ownership in its capacity as an underwriter (as defined pursuant to Section 2(a)(11) of the Securities Act of 1933, as amended) in
connection with a public offering of Teradyne securities.
“Equity Awards” shall mean the equity ownership, participation or appreciation opportunities provided by Teradyne to
Employee pursuant to incentive plans that Teradyne maintains, including but not limited to its 2006 Equity and Cash Compensation
Incentive Plan, the Teradyne, Inc. 1991 Employee Stock Option Plan and the Teradyne, Inc. 1997 Employee Stock Option Plan, and
any stock options, restricted stock units, restricted stock, stock appreciation rights, phantom stock and other stock-based awards
granted thereunder.
“Good Reason” shall mean any one or more of the following: (i) any material reduction of Employee’s responsibilities
(other than for Cause or as a result of death or disability) as they shall exist on the date of the consummation of the Change in
Control; (ii) any material reduction in Employee’s Model Compensation as in effect on the date of the consummation of the Change
in Control, or as the same may be increased from time to time, or any failure by Teradyne to pay to Employee any bonus accrued, but
not yet paid, upon written notice by Employee to Teradyne, within 45 days; (iii) a material reduction in the value of Employee’s
benefit package from the value of Employee’s benefit package on the date of the consummation of the Change in Control; or (iv) a
requirement that Employee be based at an office that is greater than 50 miles from the location of Employee’s office immediately
prior to the Change in Control except for required travel on Teradyne’s business to an extent substantially consistent with the business
travel obligations which Employee undertook on behalf of Teradyne prior to the date of the consummation of the Change in Control.
In the event of a Termination Event in contemplation of a Change in Control, the applicable baseline measurement date shall be six
months prior to such Termination Event and not the date of the consummation of the Change in Control.
“Model Compensation” shall mean Employee’s annual “Model Compensation” as determined by Teradyne’s
Compensation Committee or Board of Directors, which consists of (i) a fixed annual salary and (ii) a target annual variable amount.
“Performance Criteria” shall have the meaning ascribed to that term in the Teradyne, Inc. 2006 Equity and Cash
Compensation Incentive Plan.
“Termination Event” shall mean (i) any termination of Employee by Teradyne without Cause or (ii) any voluntary
termination by Employee for Good Reason; provided, that it shall not be a Termination Event merely because Employee ceases to be
employed by Teradyne and becomes employed by a successor to Teradyne involved in the Change in Control that assumes or is
otherwise bound by this Agreement as provided in Section 7(a). It is expressly understood that no Termination Event shall be deemed
to have occurred merely because, upon
5
the occurrence of a Change in Control, Employee ceases to be employed by Teradyne and does not become employed by a successor
to Teradyne after the Change in Control if the successor makes an offer to employ Employee on terms and conditions which, if
imposed by Teradyne, would not give Employee a basis on which to terminate employment for Good Reason.
(i) Termination in Contemplation of a Change in Control. For purposes of this Agreement, including without limitation,
this Section 1, a Termination Event occurring “in contemplation of a Change in Control” means a Termination Event occurring within
3 months prior to an actual Change in Control at the request or direction of a person who enters or has entered into an agreement the
consummation of which would cause a Change in Control or who conditions the entry into such an agreement on the Employee’s
termination whether or not such person actually enters into such an agreement. A termination by the Employee for Good Reason shall
constitute a Termination Event in contemplation of a Change in Control if the actions constituting Good Reason were taken at the
request or direction of a person who has entered into an agreement the consummation of which would cause a Change in Control.
2. Reduction of Payments
(a) Notwithstanding any other provision of this Agreement, in the event that the Company undergoes a Change in
Ownership or Control (as defined below), the Company shall not be obligated to provide to the Executive a portion of any
“Contingent Compensation Payments” (as defined below) that the Executive would otherwise be entitled to receive to the extent
necessary to eliminate any “excess parachute payments” (as defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as
amended (the “Code”)) for the Executive. For purposes of this Section 2, the Contingent Compensation Payments so eliminated shall
be referred to as the “Eliminated Payments” and the aggregate amount (determined in accordance with Treasury Regulation
Section 1.280G-1, Q/A-30 or any successor provision) of the Contingent Compensation Payments so eliminated shall be referred to as
the “Eliminated Amount.”
(b) For purposes of this Section 2, the following terms shall have the following respective meanings:
(i)
(ii)
“Change in Ownership or Control” shall mean a change in the ownership or effective control of the Company
or in the ownership of a substantial portion of the assets of the Company determined in accordance with
Section 280G(b)(2) of the Code.
“Contingent Compensation Payment” shall mean any payment (or benefit) in the nature of compensation that is
made or made available (under this Agreement or otherwise) to a “disqualified individual” (as defined in
Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the
Code) on a Change in Ownership or Control of the Company.
6
(c) If and to the extent that any Contingent Compensation Payments are required to be treated as Eliminated Payments
pursuant to this Section 2, then the Payments shall be reduced or eliminated, as determined by the Company, in the following order
(i) any cash payments, (ii) any taxable benefits, (iii) any nontaxable benefits and (iv) any vesting of equity awards, in each case in
reverse order beginning with the payments or benefits that are to be paid the farthest in time from the date that triggers the
applicability of the excise tax, to the extent necessary to maximize the Eliminated Payments.
3. (a) Non-Competition and Non-Solicitation. From the Termination Event through the end of the Salary Continuation Period,
Employee shall not directly or indirectly:
(i) Engage in any business or enterprise (whether as an owner, partner, officer, employee, director, investor,
lender, consultant, independent contractor or otherwise, except as the holder of not more than 1% of the
combined voting power of the outstanding stock of a publicly held company) that is competitive with Teradyne
(including but not limited to, any business or enterprise that develops, designs, produces, markets, sells or
renders any product or service competitive with any product or service developed, produced, marketed, sold or
rendered by Teradyne while Employee was employed by Teradyne);
(ii) Either alone or in association with others, recruit, solicit, hire or engage as an independent contractor, any
person who was employed by Teradyne at any time during the period of Employee’s employment with
Teradyne, except for an individual whose employment with Teradyne has been terminated for a period of six
months or longer; and
(iii) Either alone or in association with others, solicit, divert or take away, or attempt to divert or to take away, the
business or patronage of any client or customer or entity that was a prospective client or customer of Teradyne
during the Employee’s employment.
(b) If any restriction set forth in this Section 3 is found by any court of competent jurisdiction to be unenforceable because
it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be
enforceable.
(c) Employee acknowledges that the restrictions contained in this Section 3 are necessary for the protection of the business
and goodwill of Teradyne and are considered by Employee to be reasonable for such purpose. Employee agrees that any breach
of this Section 3 will cause Teradyne irreparable harm and therefore, in the event of any such breach, in addition to such other
remedies that may be available, Teradyne shall have the right to seek equitable and/or injunctive relief.
7
(d) The geographic scope of this Section 3 shall extend to anywhere Teradyne or any of its subsidiaries is doing business,
has done business or has plans to do business.
(e) Employee agrees that during the Salary Continuation Period, he/she will make reasonable good faith efforts to give
verbal notice to Teradyne of each new business activity he/she plans to undertake, at least (5) business days prior to beginning
any such activity.
(f) If Employee violates the provisions of this Section 3, Teradyne shall be entitled to suspend and recoup any salary
continuation payment made per Section 1 (d) above and Employee shall continue to be bound by the restrictions set forth in this
Section 3 for an additional period of time equal to the duration of the violation, such additional period not to exceed 24 months.
3A. No Obligation of Employment. Employee understands that the employment relationship between Employee and Teradyne
will be “at will” and Employee understands that, prior to any Change in Control, Teradyne may terminate Employee with or without
“Cause” at any time, including in contemplation of a Change in Control. Following any Change in Control, Teradyne may also
terminate Employee with or without “Cause” at any time subject to Employee’s rights and Teradyne’s obligations specified in this
Agreement.
4. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts and this Agreement shall be deemed to be performable in Massachusetts.
5. Severability. In case any one or more of the provisions contained in this Agreement for any reason shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this
Agreement and this Agreement shall be construed to the maximum extent permitted by law.
6. Waivers and Modifications. This Agreement may be modified, and the rights, remedies and obligations contained in any
provision hereof may be waived, only in accordance with this Section 6. No waiver by either party of any breach by the other or any
provision hereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of this
Agreement. This Agreement may not be waived, changed, discharged or terminated orally or by any course of dealing between the
parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought.
7. Assignment. (a) Teradyne shall require any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of Teradyne expressly to assume and agree to perform under the terms of
this Agreement in the same manner and to the same extent that Teradyne and its affiliates would be required to perform it if no such
succession had taken place (provided that such a requirement to perform which arises by operation of law shall be deemed to satisfy
the requirements for such an express assumption and agreement), and in such event Teradyne (as constituted prior to such succession)
shall have no further obligation under or with respect to this Agreement. Failure of Teradyne to obtain such assumption and
agreement with respect to Employee prior to the effectiveness of any such succession shall be a breach of the terms of this Agreement
with respect to Employee and shall entitle Employee to compensation from Teradyne (as constituted prior to such
8
succession) in the same amount and on the same terms as Employee would be entitled to hereunder were Employee’s employment
terminated for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date of the Termination Event. As used in this Agreement,
“Teradyne” shall mean Teradyne as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and
agrees (or is otherwise required) to perform this Agreement. Nothing in this Section 7(a) shall be deemed to cause any event or
condition which would otherwise constitute a Change in Control not to constitute a Change in Control.
(b) Notwithstanding Section 7(a), Teradyne shall remain liable to Employee upon a Termination Event after a Change in Control
if Employee is not offered continuing employment by a successor to Teradyne or is offered continuing employment by a successor to
Teradyne only on a basis which would constitute Good Reason for termination of employment hereunder.
(c) This Agreement, and Employee’s and Teradyne’s rights and obligations hereunder, may not be assigned by Employee or,
except as provided in Section 7(a), Teradyne, respectively; any purported assignment by Employee or Teradyne in violation hereof
shall be null and void.
(d) The terms of this Agreement shall inure to the benefit of and be enforceable by the personal or legal representatives,
executors, administrators, permitted successors, heirs, distributees, devisees and legatees of Employee. If Employee shall die while an
amount would still be payable to Employee hereunder if they had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to Employee’s devisee, legatee or other designee or, if there is no
such designee, Employee’s estate.
8. Entire Agreement. This Agreement constitutes the entire understanding of the parties relating to the subject matter hereof and
supersedes and cancels all agreements, written or oral, made prior to the date hereof between Employee and Teradyne relating to the
subject matter hereof; provided, however, that Employee’s existing Cash Award and Equity Award agreements, as modified hereby,
shall remain in effect. This Agreement shall not limit any right of Employee to receive any payments or benefits under an employee
benefit or Employee compensation plan of Teradyne, initially adopted as of or after the date hereof, which are expressly contingent
thereunder upon the occurrence of a Change in Control (including, but not limited to, the acceleration of any rights or benefits
thereunder); provided that in no event shall Employee be entitled to any payment or benefit under this Agreement which duplicates a
payment or benefit received or receivable by Employee under any severance or similar plan or policy of Teradyne, and in any such
case Employee shall only be entitled to receive the greater of the two payments.
9
9. Notices. All notices hereunder shall be in writing and shall be delivered in person or mailed by certified or registered mail,
return receipt requested, addressed as follows:
If to Teradyne, to:
Teradyne, Inc.
600 Riverpark Drive
MS NR600-2-2 (Legal Department)
North Reading, MA 01864
Attention: General Counsel
If to Employee, at Employee’s address in his employment file on record with the Human Resources Department.
10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same instrument.
11. Section Headings. The descriptive section headings herein have been inserted for convenience only and shall not be deemed
to define, limit, or otherwise affect the construction of any provision hereof.
12. Term. The term of this Agreement (the “Term”) shall commence upon the Effective Date hereof and terminate upon the
earlier of (i) twenty-four (24) months following any Change in Control of Teradyne, (ii) the date prior to any Change in Control of
Teradyne that Employee for any reason ceases to be an employee of Teradyne (other than a Termination Event in contemplation of a
Change in Control) and (iii) the date following any Change in Control of Teradyne that Employee is terminated for Cause or
voluntary terminates his employment (other than for Good Reason).
13. Expenses. All reasonable legal fees and expenses incurred in a legal proceeding by Employee in seeking to obtain or enforce
any right or benefit provided by this Agreement against a successor to Teradyne shall be the responsibility of and paid for by the
successor to Teradyne (but not Teradyne as constituted prior to such succession). Such payments are to be made within twenty (20)
days after Employee’s request for payment accompanied with such evidence of fees and expenses incurred as Teradyne’s successor
reasonably may require; provided that if Employee institutes a proceeding and the judge or other decision-maker presiding over the
proceeding affirmatively finds that Employee has failed to prevail substantially, Employee shall pay Employee’s own costs and
expenses (and, if applicable, return any amounts theretofore paid on Employee’s behalf under this Section 13).
14. Payments. Any payments hereunder shall be made out of the general assets of Teradyne. The Employee shall have the status
of general unsecured creditor of Teradyne, and this Agreement constitutes a mere promise by Teradyne to make payments under this
Agreement in the future as and to the extent provided herein. Unless otherwise determined by Teradyne in an applicable plan or
arrangement, no amounts payable hereunder upon a Termination Event shall be deemed salary or compensation for the purpose of
computing benefits under any employee benefit plan or other arrangement of Teradyne for the benefit of its employees. Teradyne
shall be entitled to withhold from any payments or deemed payments any amount of tax withholding required by law.
10
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
TERADYNE, INC.
/s/ Roy A. Vallee
By:
Name: Roy A. Vallee
Title: Chair, Compensation Committee
EMPLOYEE
/s/ Mark E. Jagiela
Name: Mark E. Jagiela
11
ATTACHMENT A
Release
In consideration of the payments and benefits described in the Executive Officer Change in Control Agreement dated
January , 2014 between me and Teradyne, Inc. (the “Company”), all of which I acknowledge I would not otherwise be entitled to
receive, I hereby fully, forever, irrevocably and unconditionally release, remise and discharge the Company, its successors and
assigns and their respective officers, directors, stockholders, corporate affiliates, subsidiaries, parent companies, agents and
employees (each in their individual and corporate capacities) (hereinafter, the “Released Parties”) from any and all claims, charges,
complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts,
agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys’ fees and
costs), of every kind and nature which I ever had or now have against the Released Parties arising out of my employment with and/or
termination or separation from the Company or relating to my relationship as an officer or in any other capacity for the Company,
including, but not limited to, all employment discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e
et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Americans With Disabilities Act of 1990, 42 U.S.C.,
§12101 et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq., and the Massachusetts Fair Employment Practices Act.,
M.G.L. c.151B, §1 et seq., all as amended; all claims arising out of the Fair Credit Reporting Act, 15 U.S.C. §1681 et seq., the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et seq., the Massachusetts Civil Rights Act, M.G.L.
c.12 §§11H and 11I, the Massachusetts Equal Rights Act, M.G.L. c.93, §102 and M.G.L. c.214, §1C, the Massachusetts Labor and
Industries Act, M.G.L. c.149, §1 et seq., the Massachusetts Privacy Act, M.G.L. c. 214, §1B, and the Massachusetts Maternity Leave
Act, M.G.L. c. 149, §105(d), all as amended; all common law claims including, but not limited to, actions in tort, defamation and
breach of contract; all claims to any non-vested ownership interest in the Company, contractual or otherwise, including but not
limited to claims to stock or stock options; and any claim or damage arising out of my employment with, termination or separation
from the Company (including a claim for retaliation) under any common law theory or any federal, state or local statute or ordinance
not expressly referenced above; provided, however, that notwithstanding the foregoing, the Company agrees and hereby
acknowledges that this Release Agreement is not intended to and does not (i) apply to any claims Executive may bring to enforce the
terms of the Executive Officer Change in Control Agreement, (ii) release the Company of any obligation it may have pursuant to a
written agreement, the Company’s articles of organization or bylaws, or as mandated by statute to indemnify me as an officer of the
Company; and (iii) release the Company of any obligation to provide and/or pay benefits to me or my estate, conservator or
designated beneficiary(ies) under and in accordance with the terms of any applicable Company benefit plan and/or program; provided
further, that nothing in this Release Agreement prevents me from filing, cooperating with, or participating in any proceeding before
the EEOC or a state Fair Employment Practices Agency (except that I acknowledge that I may not be able to recover any monetary
benefits in connection with any such claim, charge or proceeding).
Waiver of Rights and Claims Under the Age Discrimination in Employment Act of 1967: Since I am 40 years of age or older, I
have been informed that I have or may have specific rights and/or claims under the Age Discrimination in Employment Act of 1967
(ADEA) and I agree that:
in consideration for the payments and benefits described in the Executive Officer Change in Control Agreement, which I am
not otherwise entitled to receive, I specifically and voluntarily waive such rights and/or claims under the ADEA I might have
against the Released Parties to the extent such rights and/or claims arose prior to the date this Release Agreement was
executed;
I understand that rights or claims under the ADEA which may arise after the date this Release Agreement is executed are not
waived by me;
I was advised that I have at least 21 days within which to consider the terms of this Release Agreement and to consult with or
seek advice from an attorney of my choice or any other person of your choosing prior to executing this Release Agreement;
I have carefully read and fully understand all of the provisions of this Release Agreement, and I knowingly and voluntarily
agree to all of the terms set forth in this Release Agreement; and in entering into this Release Agreement I am not relying on
any representation, promise or inducement made by the Company or its attorneys with the exception of those promises
described in this document.
Period for Review and Consideration of Agreement:
I acknowledge that I was informed and understand that I have twenty-one (21) days to review this Release Agreement and
consider its terms before signing it.
The 21-day review period will not be affected or extended by any revisions, whether material or immaterial, that might be made
to this Agreement.
Accord and Satisfaction: The amounts set forth in the Executive Officer Change in Control Agreement shall be complete and
unconditional payment, settlement, accord and/or satisfaction with respect to all obligations and liabilities of the Released Parties to
me, including, without limitation, all claims for back wages, salary, vacation pay, draws, incentive pay, bonuses, cash awards, equity
awards, commissions, severance pay, reimbursement of expenses, any and all other forms of compensation or benefits, attorney’s
fees, or other costs or sums.
Revocation Period: I may revoke this Release Agreement at any time during the seven-day period immediately following my
execution hereof. As a result, this Release Agreement shall not become effective or enforceable and the Company shall have no
obligation to make any payments or provide any benefits described herein until the seven-day revocation period has expired.
Name: Mark E. Jagiela
Witness
Date
Date
2
IF YOU DO NOT WISH TO USE THE 21-DAY PERIOD,
PLEASE CAREFULLY REVIEW AND SIGN THIS DOCUMENT
I, Mark E. Jagiela, acknowledge that I was informed and understand that I have 21 days within which to consider the attached
Release Agreement, have been advised of my right to consult with an attorney regarding such Agreement and have considered
carefully every provision of the Agreement, and that after having engaged in those actions, I prefer to and have requested that I enter
into the Agreement prior to the expiration of the 21 day period.
Dated:
Dated:
Name: Mark E. Jagiela
Witness
3
TERADYNE, INC. 2006 EQUITY AND CASH COMPENSATION INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT AND TERMS FOR U.S. RECIPIENTS
EXHIBIT 10.35
Name:
Employee ID:
In granting stock options, Teradyne, Inc. (“Teradyne”) seeks to provide employees with incentive to help drive Teradyne’s future
success and to share in the economic benefits of that success. We all look forward to your contributions to that effort.
In recognition of your contributions to Teradyne, you have been granted a stock option award consisting of the right to receive up to
xx shares of Teradyne common stock upon exercise of this option in accordance with its terms. This stock option grant was approved
effective [
] (the “Effective Date”). The Stock Option Grant Details applicable to this stock option grant are listed below.
(cid:0)
This stock option grant is subject to the Stock Option Terms attached hereto and the terms of the Teradyne, Inc. 2006 Equity and
Cash Compensation Incentive Plan (the “Plan”). Stock options covered by this award will be exercisable over time as described in
and subject to the vesting conditions of the attached Stock Option Terms.
The Plan prospectus, consisting of a “Participant Information” document that summarizes the Plan and the complete Plan, is available
on “In-Site,” Teradyne’s internal Web site. To access the information, go to
http://cms.corp.teradyne.com/insite/FunctionsGroups/GeneralAdministrative/HumanResources/GLOBALPOLICY/
EquityCompensationOptionsRSU%E2%80%99s/index.htm.
Please note that printed versions of the Plan prospectus documents are available to you, at no charge, upon request to HR Service
Center, Teradyne, Inc., 600 Riverpark Drive, North Reading, MA 01864, (978) 370-3041.
Stock Option Grant Details:
Grant Date/Effective Date: [
Number of Shares under Option: [xx]
Per Share Option Price/FMV on Grant Date: [$
(cid:0)
]
TERADYNE, INC.
(cid:0)
]
(2014 Stock Option)
Grant #
Charles J. Gray
V.P., General Counsel and Secretary
STOCK OPTION TERMS FOR U.S. RECIPIENTS
1. Option Grant, Exercise and Vesting.
(a) Option Grant. Teradyne, Inc. hereby grants to the recipient an award (this “Award”) of nonstatutory stock options (the
“Stock Options”) under the Teradyne, Inc. 2006 Equity and Cash Compensation Incentive Plan (the “Plan”). The Stock Options
represent the right of the recipient to purchase that number of shares of Teradyne common stock set forth in the Notice of Stock
Option Grant and Terms (the “Notice of Grant”) attached hereto upon satisfaction of the terms set forth in this Agreement. This
Award is governed by and subject to the terms of the Plan, the Notice of Grant and this Agreement.
Capitalized terms used but not otherwise defined herein will have the meaning set forth in the Notice of Grant or the Plan.
In the event of any inconsistencies or differences between the Plan and these terms, the Plan shall prevail. The terms governing this
Award are intended to comply with all applicable laws and regulations.
(b) These Stock Options vest and become exercisable yearly on the anniversary of the Effective Date. None of the
Stock Options subject to this Award will be vested or exercisable on the Effective Date. Except as provided in (d) below, 25% of the
Stock Options granted will vest and become exercisable on the first and each of the three subsequent anniversaries of the Effective
Date until the total grant is fully vested and exercisable on the fourth anniversary of the Effective Date. The Committee shall have the
right to accelerate the date that any installment of this Award becomes vested and exercisable, including, but not limited to events
such as disability, death, retirement or upon the acquisition of control of Teradyne by another entity.
(c) After Stock Options become exercisable, they can be exercised at any time prior to and on the Option Expiration
Date. This Award expires at the close of business at Teradyne’s headquarters on the date that is seven years from the Effective Date
(the “Option Expiration Date”). This Award may expire earlier if the recipient’s employment or other business relationship
terminates, as described below.
(d) This Award will not vest further after termination of employment or other business relationship except in
limited certain circumstances. If the recipient’s employment or business relationship with Teradyne or any Subsidiary terminates
for any reason except disability or death, then this Award will not vest after the recipient’s employment or other business relationship
ends and this Award will automatically expire at the close of business at Teradyne’s headquarters on the date ninety (90) days after
the recipient’s termination date, or if earlier, the Option Expiration Date. If the recipient’s employment or other business relationship
with Teradyne or a Subsidiary ends on account of permanent disability or death, the unvested portion of this Award which would
have vested under the applicable rule stated in (b) above shall automatically become vested in full on the date of the recipient’s
termination of employment or business relationship on account of permanent disability or death and the vested portion of this Award
may be exercised in accordance with Section 11(a) of the Plan until the earlier of the close of business at Teradyne’s headquarters on
the date that is one year subsequent to the recipient’s termination due to permanent disability or death or the Option Expiration Date.
Employment or another business relationship shall be considered as continuing uninterrupted during any bona fide leave of
absence (such as those attributable to illness or military obligations) provided that the period of such leave does not exceed 90 days
or, in the case of an employee, if longer, any period during which the employee’s right to reemployment is guaranteed by statute. A
bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment or other
business relationship, provided that such written approval contractually obligates Teradyne or a Subsidiary to continue the recipient’s
employment or other business relationship after the approved period of absence.
2. Procedure for Exercising Stock Options.
(a) Stock Options are exercised by giving written notice to Teradyne in the form (or by such other procedures as) specified
by the Committee stating the election to exercise, specifying the number of shares as to which Stock Options are being exercised and
paying Teradyne the full option price for such shares, plus any applicable Tax-Related Items (as defined in Section 6 below). Payment
can be made to Teradyne by a combination of cash, certified or
2
bank check, or personal check (in each case in United States dollars), or by delivery of shares of Teradyne common stock having a
Fair Market Value equal as of the date of the exercise to the cash exercise price of the Option, provided that such shares were not
acquired by the Participant in the prior six months, or through a broker-dealer sale and remittance procedure pursuant to which the
recipient shall provide written irrevocable instructions to a brokerage firm to effect the immediate sale of some or all of the purchased
shares and remit to Teradyne sufficient funds to cover the aggregate exercise price payable for the purchased shares, plus any
applicable Tax-Related Items designated by Teradyne, and shall provide written directives to Teradyne to deliver the purchased
shares directly to such brokerage firm to complete the sale transaction, provided that such process is consistent with and permissible
under applicable law.
(b) The recipient shall not have any rights as a stockholder in, to or with respect to any shares which may be covered by
this Award (including but not limited to the right to vote or to receive dividends) until the issuance of shares to the recipient upon
exercise of the Stock Options. All shares issuable upon exercise of the Stock Options will be transferred or issued to the recipient (or
his or her estate, in the event of death) promptly upon exercise.
(c) With regard to any Stock Option exercises, Teradyne will not be required to transfer or issue any shares until
arrangements satisfactory to it have been made to address any Tax-Related Items and withholding requirements which might arise by
reason of the Stock Option exercise. Teradyne will pay any transfer or issue tax and deliver the shares purchased.
3. Assignment and Transferability. This Stock Option may not be assigned or transferred (except by will or the laws of
descent and distribution) other than as provided in Section 11(a) of the Plan.
4. Capital Changes and Business Succession. Section 3(c) of the Plan contains provisions for adjusting (or substituting) the
number and class of securities, vesting schedule, exercise price and other terms of outstanding stock-based awards granted under the
Plan if a recapitalization, stock split, merger, or other specified event occurs and the Committee determines that an adjustment (or
substitution) is appropriate. In that event, the recipient will be notified of the adjustment (or substitution), if any, to this Award.
5. Employment or Business Relationship. Granting this Award does not imply any right of continued employment or business
relationship with Teradyne or its Subsidiaries, and does not affect the right of the recipient, Teradyne or its Subsidiaries to terminate
the recipient’s employment or a business relationship at any time.
6. Tax Obligations.
(a) Responsibility for Taxes. The recipient acknowledges that, regardless of any action taken by Teradyne or, if different,
the recipient’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax,
payment on account or other tax-related items related to the recipient’s participation in the Plan and legally applicable to the recipient
(“Tax-Related Items”), is and remains the recipient’s responsibility and may exceed the amount actually withheld by Teradyne or the
Employer. The recipient further acknowledges that Teradyne and/or the Employer (1) make no representations or undertakings
regarding the treatment of any Tax-Related Items in connection with any aspect of the Stock Options, including, but not limited to,
the grant, vesting or exercise of the Stock Options, the subsequent sale of shares acquired pursuant to such exercise and the receipt of
any dividends or other distributions, and (2) do not commit to and are under no obligation to structure the terms of the grant or any
aspect of the Stock Option to reduce or eliminate the recipient’s liability for Tax-Related Items or achieve any particular tax result.
Further, if the recipient is subject to Tax-Related Items in more than one jurisdiction between the Effective Date and the date of any
relevant taxable or tax withholding event, as applicable, the recipient acknowledges that Teradyne and/or the Employer (or former
employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b) Tax Withholding. Prior to the relevant taxable or tax withholding event, as applicable, the recipient agrees to make
adequate arrangements satisfactory to Teradyne and/or the Employer to satisfy all Tax-Related Items. In this regard, the recipient
authorizes Teradyne and/or the Employer, or their respective agents to satisfy the obligations with regard to all Tax-Related Items by
withholding from proceeds of the sale of shares acquired at exercise of the Stock Options. Teradyne shall withhold or account for
Tax-Related Items at minimum applicable rates. Alternatively, Teradyne, in its sole discretion and pursuant to such procedures as it
may specify from time to time, may permit or require the recipient to satisfy the recipient’s obligations for Tax-Related Items, in
whole or in part (without limitation) by delivery of cash or check to Teradyne or the Employer.
3
7. Compliance with Laws. Shares to be issued under this Award are currently registered under the United States Securities Act
of 1933, as amended. If such registration is not in effect at the time of vesting, the recipient will be required to represent to Teradyne
that the recipient is acquiring such shares as an investment and not with a view to the sale of those shares. Notwithstanding any other
provision of the Plan or the Agreement, unless there is an available exemption from any registration, qualification or other legal
requirement applicable to the shares of common stock, Teradyne shall not be required to deliver any shares of common stock issuable
upon exercise of the Stock Options prior to the completion of any registration or qualification of the shares under any local, state,
federal or foreign securities or exchange control law or under rulings or regulations of the United States Securities and Exchange
Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any
local, state, federal or foreign governmental agency, which registration, qualification or approval Teradyne shall, in its absolute
discretion, deem necessary or advisable. The recipient understands that Teradyne is under no obligation to register or qualify the
shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority
for the issuance or sale of the shares. Further, the recipient agrees that Teradyne shall have unilateral authority to amend the Plan and
the Agreement without the recipient’s consent to the extent necessary to comply with securities or other laws applicable to issuance of
shares.
8. Governing Law and Venue. The Award and the provisions of this Agreement are governed by, and subject to, the laws of
the Commonwealth of Massachusetts, without regard to the conflict of law provisions, as provided in the Plan. For purposes of
litigating any dispute that arises under this Award or this Agreement, the parties hereby submit to and consent to the jurisdiction of
the Commonwealth of Massachusetts, agree that such litigation shall be conducted in the courts of Middlesex County, or the federal
courts for the United States for the District of Massachusetts, where this grant is made and/or to be performed.
9. Electronic Delivery and Acceptance. Teradyne may, in its sole discretion, decide to deliver any documents related to current
or future participation in the Plan by electronic means. The recipient hereby consents to receive such documents by electronic
delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by Teradyne or a
third party designated by Teradyne.
10. Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal
or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
11. Imposition of Other Requirements. Teradyne reserves the right to impose other requirements on the recipient’s
participation in the Plan, on the Stock Options and on any shares of common stock acquired under the Plan, to the extent Teradyne
determines it is necessary or advisable for legal or administrative reasons, and to require the recipient to sign any additional
agreements or undertakings that may be necessary to accomplish the foregoing.
12. Waiver. The recipient acknowledges that a waiver by Teradyne of breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the recipient or any
other recipient.
13. No Advice Regarding Grant. Teradyne is not providing any tax, legal or financial advice, nor is Teradyne making any
recommendations regarding the recipient’s participation in the Plan, or the recipient’s acquisition or sale of the underlying shares of
common stock. The recipient is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his
or her participation in the Plan before taking any action related to the Plan.
4
Present Subsidiaries
State or Jurisdiction Of
Incorporation
India
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . United Kingdom
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
Italy
Japan
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Korea
Entity Name:
Teradyne (Asia) Pte., Ltd.
Teradyne Canada Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Teradyne de Costa Rica S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costa Rica
Teradyne Diagnostic Solutions Ltd.
Teradyne GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Teradyne (India) Engineering Private Ltd.
Teradyne International Holdings B.V. . . . . . . . . . . . . . . . . . . . . . The Netherlands
Teradyne Italia SrL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Teradyne K.K.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Teradyne Korea Ltd.
Teradyne Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
. . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysia
Teradyne Malaysia Sdn. Bhd.
Teradyne Philippines Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Teradyne SAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Teradyne (Shanghai) Co., Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . Peoples Republic of China
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Teradyne Taiwan Ltd.
Teradyne Thailand Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
GenRad, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Herco Technology Corp.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California
P.L.S.T., Inc. (f/k/a Perception Laminates, Inc.) . . . . . . . . . . . . . California
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Eagle Test Systems, Inc.
Eagle Test Systems (Philippines) LLC . . . . . . . . . . . . . . . . . . . . Delaware
Nextest Systems Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Nextest Systems (Philippines) Corp. . . . . . . . . . . . . . . . . . . . . . . Philippines
LitePoint Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
LitePoint Europe A/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denmark
LitePoint Technology Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . Hong Kong
LitePoint Technology (Shanghai) Company Ltd.
LitePoint Japan K.K.
LitePoint Design Test, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Mexico
. . . . . . . . . . . . Peoples Republic of China
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan
* Indirect subsidiaries whose voting securities are 100% controlled by Teradyne, Inc.
Exhibit 21.1
Percentage of Voting
Securities Owned
100%*
100%
100%
100%*
100%*
100%*
100%
100%*
100%
100%
100%*
99%*
100%
100%
100%*
100%
100%
100%
100%
100%
100%
100%*
100%
99.9%*
100%
100%*
100%*
100%*
100%*
100%*
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3
(No. 333-158282) and Form S-8 (Nos. 333-188824; 333-177246; 333-159723; 333-155564; 333-149017;
333-143231; 333-134519; 333-116632; 333-101983; 333-68074; 333-56373; 333-32547; and 333-07177) of
Teradyne, Inc. of our report dated February 28, 2014 relating to the consolidated financial statements, financial
statement schedule and the effectiveness of internal control over financial reporting, which appears in this
Form 10-K.
Exhibit 23.1
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 28, 2014
EXHIBIT 31.1
CERTIFICATIONS
I, Mark E. Jagiela, certify that:
1. I have reviewed this annual report on Form 10-K 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 officers 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 officers 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 functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls
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: February 28, 2014
By:
/S/ MARK E. JAGIELA
Mark E. Jagiela
Chief Executive Officer
EXHIBIT 31.2
I, Gregory R. Beecher, certify that:
1. I have reviewed this annual report on Form 10-K 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 officers 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 officers 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 functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls
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: February 28, 2014
By:
/S/ GREGORY R. BEECHER
Gregory R. Beecher
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of Teradyne, Inc. (the “Company”) on Form 10-K for the period
ending December 31, 2013 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
Section 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.
/S/ MARK E. JAGIELA
Mark E. Jagiela
Chief Executive Officer
February 28, 2014
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of Teradyne, Inc. (the “Company”) on Form 10-K for the period
ending December 31, 2013 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
Section 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.
/S/ GREGORY R. BEECHER
Gregory R. Beecher
Chief Financial Officer
February 28, 2014