Item 8. Financial Statements and Supplementary Data

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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, 2014 and December 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 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) presents 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, 2014, based on criteria established in Internal Control—Integrated Framework (2013) 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 27, 2015

TERADYNE, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2014 and 2013

		2014				2013
		(in thousands, except per share information)
ASSETS
Current assets:
Cash and cash equivalents		$	294,256			$	341,638
Marketable securities			533,787				586,882
Accounts receivable, less allowance for doubtful accounts of $2,491 and $2,912 in 2014 and 2013, respectively			151,034				157,642
Inventories:
Parts			70,821				84,232
Assemblies in process			10,347				15,539
Finished goods			23,961				38,168
			105,129				137,939
Deferred tax assets			57,239				72,478
Prepayments			95,819				136,374
Other current assets			6,582				7,324
Total current assets			1,243,846				1,440,277
Net property, plant and equipment			329,038				275,236
Marketable securities			470,789				271,078
Deferred tax assets			7,494				5,217
Other assets			10,419				14,591
Retirement plans assets			12,896				9,342
Intangible assets, net			190,600				252,291
Goodwill			273,438				361,792
Total assets		$	2,538,520			$	2,629,824
LIABILITIES
Current liabilities:
Accounts payable		$	47,763			$	62,874
Accrued employees’ compensation and withholdings			100,994				95,619
Deferred revenue and customer advances			71,603				55,404
Other accrued liabilities			51,997				63,712
Accrued income taxes			20,049				11,360
Debt			—				186,663
Total current liabilities			292,406				475,632
Long-term deferred revenue and customer advances			19,929				13,756
Retirement plans liabilities			108,460				91,517
Deferred tax liabilities			23,315				40,686
Long-term other accrued liabilities			15,430				23,139
Total liabilities			459,540				644,730
Commitments and contingencies (Note J)
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized, 216,613 and 191,731 shares issued and outstanding at December 31, 2014 and 2013, respectively			27,077				23,966
Additional paid-in capital			1,437,135				1,390,896
Accumulated other comprehensive income			4,689				4,000
Retained earnings			610,079				566,232
Total shareholders’ equity			2,078,980				1,985,094
Total liabilities and shareholders’ equity		$	2,538,520			$	2,629,824

The accompanying notes are an integral part of the consolidated financial statements.

TERADYNE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

		Years Ended December 31,
		2014				2013				2012
		(in thousands, except per share amounts)
Revenues:
Products		$	1,364,024			$	1,154,922			$	1,383,569
Services			283,800				273,011				273,181
Total revenues			1,647,824				1,427,933				1,656,750
Cost of revenues:
Cost of products			640,787				499,030				642,881
Cost of services			128,229				120,102				127,832
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)			769,016				619,132				770,713
Gross profit			878,808				808,801				886,037
Operating expenses:
Engineering and development			291,639				264,055				255,866
Selling and administrative			319,713				279,560				277,016
Goodwill impairment			98,897				—				—
Acquired intangible assets amortization			70,771				72,447				73,508
Restructuring and other			1,365				2,080				(7,721	)
Total operating expenses			782,385				618,142				598,669
Income from operations			96,423				190,659				287,368
Non-operating (income) expenses:
Interest income			(6,259	)			(4,129	)			(4,090	)
Interest expense			6,934				26,097				24,534
Other (income) expense, net			372				(33,231	)			948
Income before income taxes			95,376				201,922				265,976
Provision for income taxes			14,104				36,975				48,927
Net income		$	81,272			$	164,947			$	217,049
Net income per common share:
Basic		$	0.40			$	0.86			$	1.16
Diluted		$	0.37			$	0.70			$	0.94
Weighted average common shares—basic			202,908				190,772				186,878
Weighted average common shares—diluted			222,550				235,599				230,246
Cash dividend declared per common share		$	0.18			$	—			$	—

The accompanying notes are an integral part of the consolidated financial statements.

TERADYNE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		Years Ended December 31,
		2014				2013				2012
		(in thousands)
Net income		$	81,272			$	164,947			$	217,049
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on marketable securities:
Unrealized gains (losses) on marketable securities arising during period, net of tax of $1,449, $216, $370			2,417				(1,097	)			2,009
Less: Reclassification adjustment for gains included in net income, net of tax of $(645), $(257), $(201)			(1,433	)			(447	)			(702	)
			984				(1,544	)			1,307
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 $(169), $(159), $(134)			(295	)			(276	)			(233	)
Other comprehensive income (loss)			689				(1,820	)			1,074
Comprehensive income		$	81,961			$	163,127			$	218,123

The accompanying notes are an integral part of the consolidated financial statements.

TERADYNE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years Ended December 31, 2014, 2013 and 2012

		Common Stock Shares Issued				Common Stock Par Value				Additional Paid-in Capital				Accumulated Other Comprehensive Income				Retained Earnings				Total Shareholders’ Equity
		(in thousands)
Balance, December 31, 2011			183,587			$	22,948			$	1,293,130			$	4,746			$	184,236			$	1,505,060
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $11,582			4,321				540				6,354												6,894
Stock-based compensation expense											39,920												39,920
Tax benefit related to stock options and restricted stock units											8,358												8,358
Net income																			217,049				217,049
Unrealized gain on marketable securities:
Unrealized gain on marketable securities, net of tax of $370															2,009								2,009
Less: reclassification adjustment for gains included in net income, net of tax of $(201)															(702	)							(702	)
Amortization of prior service benefit, net of tax of $(134)															(233	)							(233	)
Balance, December 31, 2012			187,908				23,488				1,347,762				5,820				401,285				1,778,355
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $12,192			3,823				478				4,926												5,404
Stock-based compensation expense											35,612												35,612
Tax benefit related to stock options and restricted stock units											2,596												2,596
Net income																			164,947				164,947
Unrealized loss (gain) on marketable securities:
Unrealized loss on marketable securities, net of tax of $216															(1,097	)							(1,097	)
Less: reclassification adjustment for gains included in net income, net of tax $(257)															(447	)							(447	)
Amortization of prior service benefit, net of tax of $(159)															(276	)							(276	)
Balance, December 31, 2013			191,731				23,966				1,390,896				4,000				566,232				1,985,094
Issuance of stock to employees under benefit plans, net of shares withheld for payroll tax of $12,018			3,661				458				8,815												9,273
Warrant settlement			21,221				2,653				(2,653	)											—
Stock-based compensation expense											39,868												39,868
Tax benefit related to stock options and restricted stock units											209												209
Cash dividends																			(37,425	)			(37,425	)
Net income																			81,272				81,272
Unrealized gain on marketable securities:
Unrealized gain on marketable securities, net of tax of $1,449															2,417								2,417
Less: reclassification adjustment for gains included in net income, net of tax $(645)															(1,433	)							(1,433	)
Amortization of prior service benefit, net of tax of $(169)															(295	)							(295	)
Balance, December 31, 2014			216,613			$	27,077			$	1,437,135			$	4,689			$	610,079			$	2,078,980

The accompanying notes are an integral part of the consolidated financial statements.

TERADYNE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Years Ended December 31,
		2014				2013				2012
		(in thousands)
Cash flows from operating activities:
Net income		$	81,272			$	164,947			$	217,049
Adjustments to reconcile income from operations to net cash provided by operating activities:
Depreciation			73,390				57,317				55,049
Amortization			79,154				93,370				90,465
Stock-based compensation			40,307				36,612				39,920
Goodwill impairment			98,897				—				—
Provision for excess and obsolete inventory			22,193				16,592				26,849
Deferred taxes			(4,411	)			(4,284	)			5,556
Gain from the sale of an equity investment			—				(34,212	)			—
Tax benefit related to stock options and restricted stock units			(535	)			(2,675	)			(8,490	)
Non cash charge for the sale of inventories revalued at the date of acquisition			—				—				6,089
Retirement plans actuarial losses (gains)			46,564				(10,340	)			23,320
Contingent consideration adjustment			(630	)			—				(8,761	)
Other			3,505				1,107				(2,250	)
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable			8,060				(3,656	)			(24,093	)
Inventories			51,172				21,170				17,652
Prepayments and other assets			41,537				(49,572	)			(2,995	)
Accounts payable and other accrued expenses			(45,430	)			15,205				(32,810	)
Deferred revenue and customer advances			22,033				(28,979	)			(14,627	)
Retirement plan contributions			(33,916	)			(5,540	)			(4,778	)
Accrued income taxes			8,900				1,648				19,804
Net cash provided by operating activities			492,062				268,710				402,949
Cash flows from investing activities:
Purchases of property, plant and equipment			(168,982	)			(106,731	)			(119,080	)
Purchases of available-for-sale marketable securities			(1,578,743	)			(1,170,506	)			(748,229	)
Acquisition of businesses, net of cash acquired			(19,419	)			(14,999	)			—
Proceeds from maturities of available-for-sale marketable securities			570,358				516,499				225,085
Proceeds from sales of available-for-sale marketable securities			859,729				458,491				38,284
Proceeds from (purchases of) life insurance			4,184				(307	)			1,451
Proceeds from the sale of an equity investment			—				34,212				—
Net cash used for investing activities			(332,873	)			(283,341	)			(602,489	)
Cash flows from financing activities:
Issuance of common stock under stock option and stock purchase plans			21,291				17,596				18,477
Tax benefit related to stock options and restricted stock units			535				2,675				8,490
Dividend payments			(37,425	)			—				—
Payments of long-term debt			(190,972	)			(2,534	)			(2,533	)
Payments of contingent consideration			—				(388	)			(59,710	)
Net cash (used for) provided by financing activities			(206,571	)			17,349				(35,276	)
(Decrease) increase in cash and cash equivalents			(47,382	)			2,718				(234,816	)
Cash and cash equivalents at beginning of year			341,638				338,920				573,736
Cash and cash equivalents at end of year		$	294,256			$	341,638			$	338,920
Supplementary disclosure of cash flow information:
Cash paid during the year for:
Interest		$	4,294			$	8,590			$	8,602
Income taxes		$	25,893			$	38,156			$	8,084

The accompanying notes are an integral part of the consolidated financial statements.

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

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

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.

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. Revenue associated with the one year standard warranty is recognized at the time product revenue is recognized. 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 revenues when product revenue is recognized. Teradyne classifies shipping and handling costs in cost of revenues. Teradyne generally does not provide its customers with contractual rights of return for any of its products.

As of December 31, 2014 and 2013, deferred revenue and customer advances consisted of the following and are included in the short and long-term deferred revenue and customer advances:

		2014				2013
		(in thousands)
Extended warranty		$	43,300			$	34,909
Equipment maintenance and training			30,500				22,455
Customer advances			8,875				4,825
Undelivered elements			8,857				6,971
Total deferred revenue and customer advances		$	91,532			$	69,160

Product Warranty

Teradyne generally provides a one-year warranty on its products, commencing upon installation, acceptance or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities.

		Amount
		(in thousands)
Balance at December 31, 2011		$	8,153
Accruals for warranties issued during the period			14,704
Accruals related to pre-existing warranties			877
Settlements made during the period			(13,948	)
Balance at December 31, 2012			9,786
Accruals for warranties issued during the period			10,574
Accruals related to pre-existing warranties			(3,534	)
Settlements made during the period			(10,166	)
Balance at December 31, 2013			6,660
Accruals for warranties issued during the period			15,406
Accruals related to pre-existing warranties			(2,008	)
Settlements made during the period			(11,116	)
Balance at December 31, 2014		$	8,942

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.

		Amount
		(in thousands)
Balance at December 31, 2011		$	14,030
Deferral of new extended warranty revenue			22,704
Recognition of extended warranty deferred revenue			(8,690	)
Balance at December 31, 2012			28,044
Deferral of new extended warranty revenue			20,630
Recognition of extended warranty deferred revenue			(13,765	)
Balance at December 31, 2013			34,909
Deferral of new extended warranty revenue			29,519
Recognition of extended warranty deferred revenue			(21,128	)
Balance at December 31, 2014		$	43,300

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.

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, 2014, 2013 and 2012. 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 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.

Prepayments

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

		2014				2013
		(in thousands)
Contract manufacturer prepayments		$	65,972			$	115,388
Prepaid taxes			11,462				3,281
Prepaid maintenance and other services			7,343				6,538
Other prepayments			11,042				11,167
Total prepayments		$	95,819			$	136,374

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 sheet 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 FASB ASC 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.

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-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 of intangible and long-lived assets may not be recoverable in 2013 or 2012. As a result of the Wireless Test segment goodwill impairment charge in the fourth quarter of 2014, Teradyne performed an impairment test of the Wireless Test segment’s intangible and long-lived assets based on a comparison of the estimated undiscounted cash flows to the recorded value of the assets and there was no indication of impairment.

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 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		40 years
Building improvements		5 to 10 years
Leasehold improvements		Lesser of lease term or 10 years
Furniture and fixtures		10 years
Test systems manufactured internally		6 years
Machinery and equipment		3 to 5 years
Software		3 to 5 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. Test systems leased by customers are depreciated over an estimated useful life of approximately four years. The net book value of internally manufactured test systems sold in the years ended December 31, 2014, 2013 and 2012 was $9.7 million, $9.0 million and $6.0 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.

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

Income Taxes

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis 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 it is more likely than not that some or all of the deferred tax assets will not be realized. Teradyne performed the required assessment of positive and negative evidence regarding the realization of the net deferred tax assets in accordance with ASC 740, “Accounting for Income Taxes.” This assessment included the evaluation of scheduled reversals of deferred tax liabilities, estimates of projected future taxable income and tax-planning strategies. Although realization is not assured, based on its assessment, Teradyne concluded that it is more likely than not that such assets, net of the existing valuation allowance, will 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.

Advertising Costs

Teradyne expenses all advertising costs as incurred. Advertising costs were $1.9 million, $1.7 million and $1.6 million in 2014, 2013 and 2012, respectively.

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 other (income) expense, net and were a loss of $0.9 million, $6.9 million and $4.5 million, respectively, for the years ended December 31, 2014, 2013 and 2012. These amounts do not reflect the corresponding gains (losses) from foreign exchange contracts. See Note F: “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 included incremental shares from the assumed conversion of the convertible notes and the convertible notes hedge warrant shares, during the periods the convertible notes and warrants were outstanding. Incremental shares from the assumed conversion of the convertible notes were calculated using the difference between the average Teradyne stock price for the period and the conversion price of $5.48, multiplied by 34.7 million shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period. Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of $7.67, multiplied by 34.7 million shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period. Teradyne’s call option for 34.7 million shares at an exercise price of $5.48 was not used in the GAAP earnings per share calculation as its effect was anti-dilutive.

Teradyne settled its conversion spread (i.e., the intrinsic value of the embedded option feature contained in the convertible debt) in shares. Teradyne accounted 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 was excluded from the determination of diluted earnings per share.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income, unrealized pension and postretirement prior service costs and benefits, unrealized gains and losses on investments in debt and equity marketable securities.

C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to show the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. The new standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. For Teradyne, the standard will be effective in the first quarter of 2017. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. Teradyne has not yet selected a transition method. Teradyne is currently evaluating the impact of this ASU on its financial position and results of operations.

D. ACQUISITIONS

Business

Avionics Interface Technologies, LLC.

On October 31, 2014, Teradyne completed its acquisition of Avionics Interface Technologies, LLC (“AIT”) located in Omaha, Nebraska and Dayton, Ohio. AIT is a supplier of equipment for testing state-of-the-art data communication buses. The acquisition of AIT complements Teradyne’s Defense/Aerospace line of bus test instrumentation for commercial and defense avionics systems. AIT is included in Teradyne’s System Test segment.

The total purchase price of $21.2 million consisted of $19.4 million of cash paid to acquire AIT’s assets and liabilities and $1.8 million in fair value of contingent consideration payable upon achievement of certain revenue and gross margin targets in 2015 and 2016. The maximum amount of contingent consideration that could be paid is $2.1 million.

The valuation of the contingent consideration utilized the following assumptions: (1) probability of meeting each target; (2) expected timing of meeting each target; and (3) discount rate reflecting the risk associated with the expected payments. The probabilities and timing for each target were estimated based on a review of the historical and projected results. A discount rate of 4.7 percent was selected based on the cost of debt for the business, as a significant portion of the risk in achieving the contingent consideration was captured in the probabilities assigned to meeting each target.

The AIT acquisition was accounted for as a business combination and, accordingly, the results have been included in Teradyne’s consolidated results of operations from the date of acquisition. The allocation of the total purchase price of AIT’s 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 $10.5 million was allocated to goodwill, which is deductible for tax purposes.

The purchase price allocation is preliminary pending the final determination of the fair value of certain acquired assets and assumed liabilities.

The following represents the allocation of the purchase price:

		Purchase Price Allocation
		(in thousands)
Goodwill		$	10,516
Intangible assets			9,080
Tangible assets acquired and liabilities assumed:
Other current assets			2,452
Non-current assets			359
Accounts payable and current liabilities			(1,164	)
Total purchase price		$	21,243

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:

		Fair Value				Estimated Useful Life
		(in thousands)				(in years)
Developed technology		$	2,580				4.8
Customer relationships			5,630				5.0
Trademark			380				5.0
Non-competes			320				4.0
Backlog			170				0.3
Total intangible assets		$	9,080				4.8

For the period from October 31, 2014 to December 31, 2014, AIT contributed $0.6 million of revenues and had a $(0.8) million loss from operations before income taxes.

The following unaudited pro forma information gives effect to the acquisition of AIT as if the acquisition occurred on January 1, 2013. 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:

		For the Year Ended
	December 31, 2014				December 31, 2013
		(in thousands, except per share amounts)
Revenues		$	1,655,038				1,434,699
Net income		$	82,169			$	164,087
Income per common share:
Basic		$	0.40			$	0.86
Diluted		$	0.37			$	0.70

ZTEC Instruments, Inc.

On October 25, 2013, Teradyne completed its acquisition of ZTEC Instruments, Inc. (“ZTEC”) located in Albuquerque, New Mexico. ZTEC is a supplier of modular wireless test instruments. The acquisition of ZTEC expands Teradyne’s Wireless Test segment into the design verification test of wireless components and chipsets.

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 target; (2) expected timing of meeting each target; and (3) discount rate reflecting the risk associated with the expected payments. The probabilities and timing for each target 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 target.

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 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.

The following represents the allocation of the purchase price:

		Purchase Price Allocation
		(in thousands)
Goodwill		$	12,520
Intangible assets			4,870
Tangible assets acquired and liabilities assumed:
Cash			79
Other current assets			1,612
Non-current assets			1,757
Accounts payable and current liabilities			(1,811	)
Long-term deferred tax liabilities			(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:

		Fair Value				Estimated Useful Life
		(in thousands)				(in years)
Developed technology		$	3,500				5.0
Customer relationships			1,370				6.0
Total intangible assets		$	4,870				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 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:

		For the Year Ended
	December 31, 2013				December 31, 2012
		(in thousands, except per share amounts)
Revenues		$	1,431,270			$	1,660,758
Net income		$	163,394			$	215,654
Income per common share:
Basic		$	0.86			$	1.15
Diluted		$	0.69			$	0.94

E. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

		2014				2013
		(in thousands)
Land		$	16,561			$	16,561
Buildings			108,671				107,632
Machinery and equipment			659,743				600,848
Furniture and fixtures, and software			77,566				81,994
Leasehold improvements			31,981				30,757
Construction in progress			2,508				622
			897,030				838,414
Less: accumulated depreciation			567,992				563,178
		$	329,038			$	275,236

Depreciation of property, plant and equipment for the years ended December 31, 2014, 2013 and 2012 was $73.4 million, $57.3 million and $55.0 million, respectively. As of December 31, 2014, $66.9 million of gross book value included in machinery and equipment was for internally manufactured test systems being leased by customers. As of December 31, 2014, the accumulated depreciation on these test systems was $10.1 million. As of December 31, 2014, minimum non-cancelable future lease payments for the year ending December 31, 2015, total approximately $13.9 million, in the aggregate. There are no payments due beyond 2015.

F. FINANCIAL INSTRUMENTS

Cash Equivalents

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

Marketable Securities

Teradyne’s available-for-sale fixed income securities are classified as Level 2. Contingent consideration is classified as Level 3. The vast 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 2014, 2013 and 2012. Realized gains recorded in 2014, 2013 and 2012 were $2.4 million, $1.0 million and $1.4 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, 2014 and 2013, there were no transfers in or out of Level 1, Level 2 or Level 3 financial instruments.

The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2014 and 2013.

		December 31, 2014
		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		$	111,471			$	—			$	—			$	111,471
Cash equivalents			160,218				22,567				—				182,785
Available for sale securities:
U.S. Treasury securities			—				402,154				—				402,154
U.S. government agency securities			—				258,502				—				258,502
Corporate debt securities			—				141,467				—				141,467
Commercial paper			—				140,638				—				140,638
Certificates of deposit and time deposits			—				49,036				—				49,036
Equity and debt mutual funds			12,333				—				—				12,333
Non-U.S. government securities			—				446				—				446
Total		$	284,022			$	1,014,810			$	—			$	1,298,832
Liabilities
Contingent consideration		$	—			$	—			$	3,350			$	3,350
Derivatives			—				149				—				149
Total		$	—			$	149			$	3,350			$	3,499

Reported as follows:

		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	271,689			$	22,567			$	—			$	294,256
Marketable securities			—				533,787				—				533,787
Long-term marketable securities			12,333				458,456				—				470,789
		$	284,022			$	1,014,810			$	—			$	1,298,832
Liabilities
Other current liabilities		$	—			$	149			$	1,750			$	1,899
Long-term other accrued liabilities			—				—				1,600				1,600
		$	—			$	149			$	3,350				3,499

		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		$	117,242			$	—			$	—			$	117,242
Cash equivalents			165,865				58,531				—				224,396
Available for sale securities:
U.S. Treasury securities			—				467,895				—				467,895
U.S. government agency securities			—				202,588				—				202,588
Commercial paper			—				105,598				—				105,598
Corporate debt securities			—				65,387				—				65,387
Equity and debt mutual funds			13,156				—				—				13,156
Certificates of deposit and time deposits			—				3,258				—				3,258
Non-U.S. government securities			—				78				—				78
Total			296,263				903,335				—				1,199,598
Derivatives			—				153				—				153
Total		$	296,263			$	903,488			$	—			$	1,199,751
Liabilities
Contingent consideration		$	—			$	—			$	2,230			$	2,230
Total		$	—			$	—			$	2,230			$	2,230

Reported as follows:

		(Level 1)				(Level 2)				(Level 3)				Total
		(in thousands)
Assets
Cash and cash equivalents		$	283,107			$	58,531			$	—			$	341,638
Marketable securities			—				586,882				—				586,882
Long-term marketable securities			13,156				257,922				—				271,078
Other current assets			—				153				—				153
		$	296,263			$	903,488			$	—			$	1,199,751
Liabilities
Long-term other accrued liabilities		$	—			$	—			$	2,230			$	2,230
		$	—			$	—			$	2,230			$	2,230

Changes in the fair value of Level 3 contingent consideration for the years ended December 31, 2014 and 2013 were as follows:

		Contingent Consideration
		(in thousands)
Balance at December 31, 2012		$	388
Acquisition of ZTEC			2,230
Payments			(388	)
Balance at December 31, 2013			2,230
Fair value adjustment			(630	)
Acquisition of AIT			1,750
Balance at December 31, 2014		$	3,350

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

Liability		December 31, 2014 Fair Value		Valuation Technique		Unobservable Inputs		Weighted Average
		(in thousands)
Contingent consideration (ZTEC)		$1,600		Income approach- discounted cash flow		Revenue earn-out-probability for calendar year 2015 revenue.		0%
				Customer orders-probability of achievement during earn out period (acquisition date through December 31, 2015)		40%
						Discount rate for revenue earn-out		N/A
						Discount rate for customer orders		5.2%

The significant unobservable inputs used in the fair value measurement of contingent consideration are the probabilities of successful achievement of calendar year 2015 revenue, customer orders, and a discount rate. Increases or decreases in the revenue and customer order probabilities and the period in which results will be achieved would result in a higher or lower fair value measurement.

The carrying amounts and fair values of financial instruments at December 31, 2014 and 2013 were as follows:

		December 31, 2014								December 31, 2013
		Carrying Value				Fair Value				Carrying Value				Fair Value
		(in thousands)
Cash and cash equivalents		$	294,256			$	294,256			$	341,638			$	341,638
Marketable securities			1,004,576				1,004,576				857,960				857,960
Convertible debt (1)			—				—				185,708				611,433
Japan loan			—				—				955				955

(1)	The carrying value represented the bifurcated debt component only, while the fair value was based on quoted market prices for the convertible note which included the equity conversion feature.

The fair values of 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, 2014 and 2013:

		December 31, 2014
		Available-for-Sale																Fair Market Value of Investments with Unrealized Losses
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value
		(in thousands)
U.S. Treasury securities		$	402,197			$	362			$	(405	)		$	402,154			$	317,771
U.S. government agency securities			258,452				135				(85	)			258,502				104,642
Corporate debt securities			139,374				2,414				(321	)			141,467				96,998
Commercial paper			140,616				26				(4	)			140,638				41,747
Certificates of deposit and time deposits			49,048				11				(23	)			49,036				20,684
Equity and debt mutual funds			10,492				1,870				(29	)			12,333				1,234
Non-U.S. government securities			446				—				—				446				—
		$	1,000,625			$	4,818			$	(867	)		$	1,004,576			$	583,076

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	533,833			$	99			$	(145	)		$	533,787			$	240,234
Long-term marketable securities			466,792				4,719				(722	)			470,789				342,842
		$	1,000,625			$	4,818			$	(867	)		$	1,004,576			$	583,076

		December 31, 2013
		Available-for-Sale																Fair Market Value of Investments with Unrealized Losses
		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value
		(in thousands)
U.S. Treasury securities		$	468,084			$	94			$	(283	)		$	467,895			$	108,212
U.S. government agency securities			202,573				75				(60	)			202,588				84,498
Commercial paper			105,583				16				(1	)			105,598				7,993
Corporate debt securities			65,747				762				(1,122	)			65,387				40,355
Equity and debt mutual funds			10,463				2,742				(49	)			13,156				702
Certificates of deposit and time deposits			3,258				—				—				3,258				—
Non-U.S. government securities			78				—				—				78				—
		$	855,786			$	3,689			$	(1,515	)		$	857,960			$	241,760

Reported as follows:

		Cost				Unrealized Gain				Unrealized (Loss)				Fair Market Value				Fair Market Value of Investments with Unrealized Losses
		(in thousands)
Marketable securities		$	586,818			$	85			$	(21	)		$	586,882			$	137,670
Long-term marketable securities			268,968				3,604				(1,494	)			271,078				104,090
		$	855,786			$	3,689			$	(1,515	)		$	857,960			$	241,760

As of December 31, 2014, the fair market value of investments with unrealized losses totaled $583.1 million. Of this value, $2.3 million had unrealized losses for greater than one year and $580.8 million had unrealized losses for less than one year.

As of December 31, 2013, the fair market value of investments with unrealized losses totaled $241.8 million. Of this value, $0.9 million had unrealized losses for greater than one year and $240.9 million had unrealized losses for less than one year.

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments, at December 31, 2014 and 2013, were temporary.

The contractual maturities of investments held at December 31, 2014 were as follows:

		Cost				Fair Value
		(in thousands)
Due within one year		$	533,833			$	533,787
Due after 1 year through 5 years			418,732				418,363
Due after 5 years through 10 years			5,735				5,924
Due after 10 years			31,833				34,169
Total		$	990,133			$	992,243

Contractual maturities of investments held at December 31, 2014, exclude equity and debt mutual funds as they do not have a contractual maturity date.

Assets of Teradyne measured at fair value on a non-recurring basis as of December 31, 2014 are summarized as follows:

						Fair Value Measurements at Reporting Period
		December 31, 2014				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Other Unobservable Inputs (Level 3)				Total Losses
		(in thousands)
Assets
Goodwill		$	273,438			$	—			$	—			$	273,438			$	98,897
Definite lived intangible assets			158,237				—				—				158,237				—
Long-lived assets held and used			10,189				—				10,189				—				—
		$	441,864			$	—			$	10,189			$	431,675			$	98,897

In accordance with the provisions of ASC 350-10_, “Intangibles- Goodwill and Other_,” goodwill with a carrying amount of $372.3 million was written down to its implied fair value of $273.4 million, resulting in an impairment charge of $98.9 million in the fourth quarter of 2014. See Note I: “Goodwill and Intangibles” regarding goodwill impairment.

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.

At December 31, 2014 and 2013, 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, 2014												December 31, 2013
		Buy Position				Sell Position				Net Total				Buy Position				Sell Position				Net Total
		(in millions)
Japanese Yen		$	—			$	19.7			$	19.7			$	—			$	32.6			$	32.6
Taiwan Dollar			(0.9	)			5.7				4.8				—				4.0				4.0
British Pound Sterling			—				11.7				11.7				—				6.9				6.9
Korean Won			—				4.4				4.4				—				5.8				5.8
Euro			(30.6	)			—				(30.6	)			(24.8	)			0.7				(24.1	)
Total		$	(31.5	)		$	41.5			$	10.0			$	(24.8	)		$	50.0			$	25.2

The fair value of the outstanding contracts was a loss of $0.1 million at December 31, 2014 and a gain of $0.2 million at December 31, 2013.

In 2014, Teradyne recorded net realized losses of $0.2 million related to foreign currency forward contracts hedging net monetary position. 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. Gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in other (income) expense, net.

The following table summarizes the fair value of derivative instruments as of December 31, 2014 and 2013:

		Balance Sheet Location		December 31, 2014				December 31, 2013
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Other current liabilities		$	149			$	—
Foreign exchange contracts		Other current assets			—				153
Total derivatives				$	149			$	153

The following table summarizes the effect of derivative instruments in the statement of operations recognized for the years ended December 31, 2014, 2013 and 2012. The table does not reflect the corresponding losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies. For the years ended December 31, 2014, 2013, and 2012, losses from the remeasurement of the monetary assets and liabilities denominated in foreign currencies were $0.9 million, $6.9 million, and $4.5 million, respectively.

		Location of Losses (Gains) Recognized in Statement of Operations		December 31, 2014				December 31, 2013				December 31, 2012
				(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Other (income) expense, net		$	237			$	(5,933	)		$	(3,974	)
Total derivatives				$	237			$	(5,933	)		$	(3,974	)

See Note G: “Debt” regarding derivatives related to the convertible senior notes.

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 cash proceeds of $34.2 million which was recorded as other income. An additional $4.8 million of cash proceeds that was held in escrow for 15 months, for potential indemnifications to the buyer, was paid to Teradyne in February 2015 and it will be recorded as other income in the first quarter of 2015.

G. DEBT

At December 31, 2014 and 2013, debt consisted of the following:

		2014				2013
		(in thousands)
Convertible senior notes		$	—			$	185,708
Japan loan			—				955
Total debt			—				186,663
Current portion of long-term debt			—				186,663
Long-term debt		$	—			$	—

Loan Agreement

On March 31, 2009, Teradyne K.K., Teradyne’s wholly-owned subsidiary in Japan, entered into a loan agreement with a local bank in Japan to borrow approximately $10.0 million (the loan was denominated in Japanese Yen). The loan had 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 and approximately $4.0 million was unsecured. Teradyne, Inc. had guaranteed payment of the loan obligation. The principal was 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. The final principal and interest payments were made in March 2014.

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 bore 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 had a maturity date of March 15, 2014. Substantially all of the Notes were converted prior to March 15, 2014 and were “net share settled,” meaning that the holders received, for each $1,000 in principal amount of Notes, $1,000 in cash and approximately 131.95 shares of Teradyne common stock (calculated by taking 182.65 shares, being the fixed number specified in the Notes purchase agreement, less 50.7 shares). The 50.7 shares were determined, as specified in the Notes purchase agreement, by dividing the $1,000 principal amount by the $19.74 average trading price of Teradyne’s common stock over the 25 day trading period from February 5, 2014 to March 12, 2014.

Teradyne satisfied the Notes “net share settlement” by paying the aggregate principal amount of $190 million in cash and issuing 25.1 million shares of common stock. On March 13, 2014, Teradyne exercised its call option agreement entered into with Goldman, Sachs & Co. (the “hedge counterparty”) at the time of issuance of the Notes and received 25.1 million shares of Teradyne’s common stock, which Teradyne retired.

From June 17, 2014 to September 17, 2014, the hedge counterparty exercised its warrant agreement entered into with Teradyne at the time of issuance of the Notes. The warrants were net share settled. In 2014, Teradyne issued 21.2 million shares of its common stock for warrants exercised at a weighted average strike price of $7.6348 per share.

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

		December 31, 2014				December 31, 2013
		(in thousands)
Debt principal		$	—			$	189,998
Unamortized discount			—				4,290
Net carrying amount of the convertible debt		$	—			$	185,708

		For the year ended
		December 31, 2014				December 31, 2013
		(in thousands)
Contractual interest expense on the coupon		$	1,757			$	8,550
Amortization of the discount component and debt issue fees recognized as interest expense			4,493				16,628
Total interest expense on the convertible debt		$	6,250			$	25,178

H. 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)
Balance at December 31, 2012, net of tax of $835, $(125)		$	2,925			$	2,895			$	5,820
Other comprehensive income before reclassifications, net of tax of $216			(1,097	)			—				(1,097	)
Amounts reclassified from accumulated other comprehensive income, net of tax of $(257), $(159)			(447	)			(276	)			(723	)
Net current period other comprehensive income, net of tax of $(41), $(159)			(1,544	)			(276	)			(1,820	)
Balance at December 31, 2013, net of tax of $794, $(284)			1,381				2,619				4,000
Other comprehensive income before reclassifications, net of tax of $1,449			2,417				—				2,417
Amounts reclassified from accumulated other comprehensive income, net of tax of $(645), $(169)			(1,433	)			(295	)			(1,728	)
Net current period other comprehensive income, net of tax of $804, $(169)			984				(295	)			689
Balance at December 31, 2014, net of tax of $1,598, $(453)		$	2,365			$	2,324			$	4,689

Reclassifications out of accumulated other comprehensive income to the statement of operations for the years ended December 31, 2014, 2013 and 2012, were as follows:

Details about Accumulated Other Comprehensive Income Components		For the year ended												Affected Line Item in the Statements of Operations
		December 31, 2014				December 31, 2013				December 31, 2012
		(in thousands)
Available-for-sale marketable securities
Unrealized gains, net of tax of $645, $257, $201		$	1,433			$	447			$	702			Interest income
		$	1,433			$	447			$	702
Amortization of defined benefit pension and postretirement plans
Prior service benefit, net of tax of $169, $159, $134		$	295			$	276			$	233			(a)
		$	295			$	276			$	233
Total reclassifications, net of tax of $814, $416, $335		$	1,728			$	723			$	935			Net income

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

I. 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.

Goodwill impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, Teradyne determines the fair value of a reporting unit using a discounted cash flow (“DCF”) analysis. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, perpetual growth rates, and the amount and timing of expected future cash flows. Discount rates are based on a weighted average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity, plus a risk premium. The WACC used to test goodwill is derived from a group of comparable companies. The cash flows employed in the DCF analysis are derived from internal forecasts and external market forecasts. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with its carrying amount of goodwill to measure the amount of impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, whereby the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

As a result of decreased projected demand attributable to an estimated smaller future wireless test market due to reuse of wireless test equipment, price competition and different testing techniques, Teradyne determined that for its Wireless Test reporting unit, the carrying amount of its net assets exceeded its respective fair value, indicating that a potential impairment existed. After completing the second step of the goodwill impairment test, Teradyne recorded a $98.9 million goodwill impairment charge in the fourth quarter of 2014.

The fourth quarter 2014 goodwill impairment test of Teradyne’s Defense/Aerospace reporting unit, which is included in Teradyne’s System Test reportable segment, did not identify any goodwill impairment.

Teradyne performed step one of the two step impairment test for 2013 and 2012. No goodwill impairment was identified in 2013 and 2012.

The changes in the carrying amount of goodwill by reportable segments for the years ended December 31, 2014 and 2013 are as follows:

		Semiconductor Test				System Test				Wireless Test				Total
		(in thousands)
Balance at December 31, 2012:
Goodwill		$	260,540			$	148,183			$	349,272			$	757,995
Accumulated impairment losses			(260,540	)			(148,183	)			—				(408,723	)
			—				—				349,272				349,272
ZTEC acquisition			—				—				12,520				12,520
Balance at December 31, 2013:
Goodwill			260,540				148,183				361,792				770,515
Accumulated impairment losses			(260,540	)			(148,183	)			—				(408,723	)
			—				—				361,792				361,792
ZTEC adjustment			—				—				27				27
AIT acquisition			—				10,516				—				10,516
Balance at December 31, 2014:
Goodwill			260,540				158,699				361,819				781,058
Accumulated impairment losses			(260,540	)			(148,183	)			(98,897	)			(507,620	)
		$	—			$	10,516			$	262,922			$	273,438

Intangible Assets

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

		December 31, 2014
		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Weighted Average Useful Life
		(in thousands)
Developed technology		$	345,513			$	224,059			$	121,454				6.2 years
Customer relationships			146,635				93,998				52,637				7.7 years
Tradenames and trademarks			30,414				14,205				16,209				9.0 years
Non-competes			320				20				300				4.0 years
Customer backlog			170				170				—				0.0 years
Total intangible assets		$	523,052			$	332,452			$	190,600				6.8 years

		December 31, 2013
		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Weighted Average Useful Life
		(in thousands)
Developed technology		$	342,933			$	174,563			$	168,370				6.2 years
Customer relationships			141,497				76,963				64,534				8.0 years
Tradenames and trademarks			30,034				10,647				19,387				9.1 years
Customer backlog			1,000				1,000				—				0.4 years
Total intangible assets		$	515,464			$	263,173			$	252,291				6.9 years

During the year ended December 31, 2014, Teradyne recorded intangible assets in the amount of $9.1 million related to its AIT acquisition.

During the year ended December 31, 2013, Teradyne recorded intangible assets in the amount of $4.9 million related to its ZTEC acquisition.

Aggregate intangible assets amortization expense for the years ended December 31, 2014, 2013 and 2012 was $70.8 million, $72.4 million, and $73.5 million, respectively. Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:

Year		Amortization Expense
		(in thousands)
2015		$	55,231
2016			55,231
2017			49,046
2018			24,405
2019			4,889

J. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of December 31, 2014, Teradyne had entered into non-cancelable purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $151.5 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, 2014, 2013 and 2012 was $16.0 million, $16.5 million and $15.5 million, respectively.

The following table reflects Teradyne’s non-cancelable operating lease commitments:

		Non-cancelable Lease Commitments
		(in thousands)
2015		$	13,521
2016			11,776
2017			6,842
2018			4,535
2019			4,103
Beyond 2019			13,214
Total		$	53,991

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.

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’ by-laws 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, 2014 and 2013, Teradyne had a product warranty accrual of $8.9 million and $6.7 million, respectively, included in other accrued liabilities, and revenue deferrals related to extended warranties of $43.3 million and $34.9 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.

Based on historical experience and information known as of December 31, 2014 and 2013, except for product warranty, Teradyne has not recorded any liabilities for these guarantees and obligations because the amount would be immaterial.

K. NET INCOME PER COMMON SHARE

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

		2014				2013				2012
		(in thousands, except per share amounts)
Net income for basic and diluted net income per share		$	81,272			$	164,947			$	217,049
Weighted average common shares-basic			202,908				190,772				186,878
Effect of dilutive potential common shares:
Incremental shares from assumed conversion of convertible notes (1)			5,013				23,341				22,367
Convertible note hedge warrant shares (2)			12,562				18,795				17,433
Restricted stock units			1,092				1,127				2,291
Stock options			944				1,528				1,213
Employee stock purchase rights			31				36				64
Dilutive potential common shares			19,642				44,827				43,368
Weighted average common shares-diluted			222,550				235,599				230,246
Net income per common share-basic		$	0.40			$	0.86			$	1.16
Net income per common share-diluted		$	0.37			$	0.70			$	0.94

(1)	Incremental shares from the assumed conversion of the convertible notes was calculated using the difference between the average Teradyne stock price for the period and the conversion price of $5.48, multiplied by 34.7 million shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period.

(2)

Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of $7.67, multiplied by 34.7 million shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period. Teradyne’s call option on its common stock (convertible note hedge transaction) was excluded from the calculation of diluted shares because the effect was anti-dilutive. See Note G: “Debt” regarding the convertible note hedge transaction.

The computation of diluted net income per common share for 2014 excludes the effect of the potential exercise of stock options to purchase approximately 0.3 million shares because the effect would have been anti-dilutive.

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.

L. RESTRUCTURING AND OTHER

Restructuring

During the year ended December 31, 2014, Teradyne recorded $0.5 million of charges related to headcount reductions of 8 people in Semiconductor Test, $0.5 million of charges related to headcount reductions of 28 people in Wireless Test, $0.4 million of charges related to headcount reductions of 4 people in System Test, and $0.2 million charges related to headcount reduction of 3 people in Corporate.

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.

The remaining accrual for severance of $0.4 million, as of December 31, 2014, is reflected in the accrued employees’ compensation and withholdings on the balance sheet and is expected to be paid by June 2015.

		Severance and Benefits				Facility Exit Costs				Total
		(in thousands)
Pre-2012 Activities
Balance at December 31, 2012			—				1,084				1,084
Change in estimate			—				(553	)			(553	)
Cash payments			—				(531	)			(531	)
Balance at December 31, 2013		$	—			$	—			$	—
2012 Activities
Q2 2012 Activities:
Provision		$	286			$	—			$	286
Change in estimate			(4	)			—				(4	)
Cash payments			(282	)			—				(282	)
Balance at December 31, 2012		$	—			$	—			$	—
Q3 2012 Activity:
Provision		$	687			$	—			$	687
Cash payments			(444	)			—				(444	)
Balance at December 31, 2012			243				—				243
Cash payments			(243	)			—				(243	)
Balance at December 31, 2013		$	—			$	—			$	—
2013 Activities
Q3 2013 Activity:
Provision		$	1,337			$	—			$	1,337
Cash payments			(966	)			—				(966	)
Balance at December 31, 2013		$	371			$	—			$	371
Cash payments			(371	)			—				(371	)
Balance at December 31, 2014		$	—			$	—			$	—
Q4 2013 Activity:
Provision		$	600			$	—			$	600
Cash payments			(486	)			—				(486	)
Balance at December 31, 2013		$	114			$	—			$	114
Cash payments			(114	)			—				(114	)
Balance at December 31, 2014		$	—			$	—			$	—
2014 Activities
Q2 2014 Activity:
Provision		$	572			$	—			$	572
Cash payments			(572	)			—				(572	)
Balance at December 31, 2014		$	—			$	—			$	—
Q3 2014 Activity:
Provision		$	225			$	—			$	225
Cash payments			(225	)			—				(225	)
Balance at December 31, 2014		$	—			$	—			$	—
Q4 2014 Activity:
Provision		$	826			$	—			$	826
Cash payments			(432	)			—				(432	)
Balance at December 31, 2014		$	394			$	—			$	394
Balance at December 31, 2014		$	394			$	—			$	394

Other

During the year ended December 31, 2014, Teradyne recorded a $0.6 million fair value adjustment to decrease the ZTEC acquisition contingent consideration, partially offset by $0.4 million of acquisition costs related to AIT.

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.

M. RETIREMENT PLANS

ASC 715, “Compensation—Retirement Benefits” requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans as defined by ASC 715. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation at December 31. Teradyne uses a December 31 measurement date for all of its plans.

Defined Benefit Pension Plans

Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain non-U.S. subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to make contributions to 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.

The December 31 balances of these defined benefit pension plans assets and obligations are shown below:

		2014								2013
		United States				Foreign				United States				Foreign
		(in thousands)
Assets and Obligations
Change in benefit obligation:
Projected benefit obligation:
Beginning of year		$	293,912			$	52,182			$	325,118			$	51,380
Service cost			2,218				897				2,393				1,034
Interest cost			12,875				1,837				11,318				1,948
Actuarial loss (gain)			72,596				8,975				(31,259	)			(1,020	)
Benefits paid			(13,982	)			(1,265	)			(13,658	)			(2,511	)
Plan participants’ contributions			—				88				—				95
Non-U.S. currency movement			—				(4,504	)			—				1,256
End of year			367,619				58,210				293,912				52,182
Change in plan assets:
Fair value of plan assets:
Beginning of year			256,373				25,756				278,856				24,043
Company contributions			31,753				1,168				1,738				2,522
Plan participants’ contributions			—				88				—				95
Actual return on plan assets			41,928				5,192				(10,563	)			1,190
Benefits paid			(13,982	)			(1,265	)			(13,658	)			(2,511	)
Non-U.S. currency movement			—				(1,428	)			—				417
End of year			316,072				29,511				256,373				25,756
Funded status		$	(51,547	)		$	(28,699	)		$	(37,539	)		$	(26,426	)

The following table provides amounts recorded within the account line items of the statement of financial position as of December 31:

		2014								2013
		United States				Foreign				United States				Foreign
		(in thousands)
Retirement plans assets		$	3,090			$	9,806			$	4,259			$	5,083
Accrued employees’ compensation and withholdings			(2,492	)			(906	)			(1,781	)			(1,143	)
Retirement plans liabilities			(52,145	)			(37,599	)			(40,017	)			(30,366	)
Funded status		$	(51,547	)		$	(28,699	)		$	(37,539	)		$	(26,426	)

The following table provides amounts recognized in accumulated other comprehensive income as of December 31:

		2014								2013
		United States				Foreign				United States				Foreign
		(in thousands)
Prior service cost, before tax		$	358			$	—			$	493			$	—
Deferred taxes			429				—				380				—
Total recognized in other comprehensive income, net of tax		$	787			$	—			$	873			$	—

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 2015 is $0.1 million.

The accumulated benefit obligation for the United States defined benefit pension plans was $357.0 million and $286.2 million at December 31, 2014 and 2013, respectively. The accumulated benefit obligation for foreign defined benefit pension plans was $49.8 million and $45.0 million at December 31, 2014 and 2013, respectively.

Information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31:

		2014								2013
		United States				Foreign				United States				Foreign
		(in millions)
Projected benefit obligation		$	54.6			$	39.5			$	41.8			$	32.4
Accumulated benefit obligation			48.5				32.7				37.9				27.5
Fair value of plan assets			—				1.0				—				0.9

Expense

For the years ended December 31, 2014, 2013 and 2012, Teradyne’s net periodic pension cost (income) was comprised of the following:

		2014								2013								2012
		United States				Foreign				United States				Foreign				United States				Foreign
		(in thousands)
Components of Net Periodic Pension Cost (Income):
Service cost		$	2,218			$	897			$	2,393			$	1,034			$	2,102			$	686
Interest cost			12,875				1,837				11,318				1,948				13,713				1,956
Expected return on plan assets			(12,500	)			(868	)			(13,632	)			(959	)			(15,248	)			(698	)
Amortization of prior service cost			135				—				164				—				232				—
Net actuarial loss (gain)			43,168				4,651				(7,063	)			(1,252	)			15,458				7,779
Total net periodic pension cost (income)		$	45,896			$	6,517			$	(6,820	)		$	771			$	16,257			$	9,723
Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income:
Reversal of amortization items:
Prior service cost			(135	)			—				(164	)			—				(232	)			—
Total recognized in other comprehensive income			(135	)			—				(164	)			—				(232	)			—
Total recognized in net periodic pension cost (income) and other comprehensive income		$	45,761			$	6,517			$	(6,984	)		$	771			$	16,025			$	9,723

Weighted Average Assumptions to Determine Net Periodic Pension Cost at January 1:

		2014								2013								2012
		United States				Foreign				United States				Foreign				United States				Foreign
Discount rate			4.5	%			3.8	%			3.6	%			3.7	%			4.2	%			4.9	%
Expected return on plan assets			5.0				3.4				5.0				3.7				5.0				3.1
Salary progression rate			3.0				3.5				3.0				3.5				3.0				3.4

Weighted Average Assumptions to Determine Pension Obligations at December 31:

		2014								2013
		United States				Foreign				United States				Foreign
Discount rate			3.7	%			2.6	%			4.5	%			3.8	%
Salary progression rate			2.9				3.2				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 2014 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.

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 3.7% at December 31, 2014, down from 4.5% at December 31, 2013.

Plan Assets

As of December 31, 2014, the fair value of Teradyne’s pension plans’ assets totaled $345.6 million of which $316.1 million was related to the U.S. Plan, $28.5 million was related to the U.K. defined benefit pension plan, and $1.0 million was related to the Taiwan defined benefit pension plan. Substantially all Teradyne’s pension plans’ 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, 2014 and 2013, by asset category is as follows:

		2014								2013
		United States				Foreign				United States				Foreign
Fixed Income Securities			83.3	%			78.2	%			86.7	%			77.1	%
Equity Securities			15.4				20.7				12.1				21.6
Other			1.3				1.1				1.2				1.3
			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, are as follows:

Asset Category:		Policy Index:		Target Allocation
Passive and Active Fixed Income		Barclays U.S. Long Government/Credit Bond Index			85	%
Equity (Large cap)		S&P 500 Stock Index			10
International Equity		MSCI EAFE Index			5

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.

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. The target asset allocation for the U.K. defined benefit pension plan, per the investment policy, is 80% fixed-income securities and 20% equity securities.

During the years ended December 31, 2014 and 2013, 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, 2014 and December 31, 2013 were as follows:

		December 31, 2014
		United States																Foreign
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
		(in thousands)
Fixed income securities:
Corporate debt securities		$	—			$	193,741			$	—			$	193,741			$	—			$	—			$	—			$	—
U.S. government securities			—				65,830				—				65,830				—				—				—				—
U.K. government securities			—				—				—				—				—				22,811				—				22,811
Asset backed securities			—				3,747				—				3,747				—				—				—				—
U.S. equity (large cap)			—				33,970				—				33,970				—				—				—				—
International equity			—				14,631				—				14,631				—				5,610				—				5,610
Guarantee annuity contract			—				2,990				—				2,990				—				—				—				—
Other			—				65				—				65				—				957				—				957
Cash and cash equivalents			1,098				—				—				1,098				133				—				—				133
Total		$	1,098			$	314,974			$	—			$	316,072			$	133			$	29,378			$	—			$	29,511

		December 31, 2013
		United States																Foreign
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
		(in thousands)
Fixed income securities:
Corporate debt securities		$	—			$	156,860			$	—			$	156,860			$	—			$	—			$	—			$	—
U.S. government securities			—				62,555				—				62,555				—				—				—				—
U.K. government securities			—				—				—				—				—				19,610				—				19,610
Asset backed securities			—				2,919				—				2,919				—				—				—				—
U.S. equity (large cap)			—				21,309				—				21,309				—				—				—				—
International equity			—				9,599				—				9,599				—				5,204				—				5,204
Guarantee annuity contract			—				2,985				—				2,985				—				—				—				—
Other			—				—				—				—				—				906				—				906
Cash and cash equivalents			146				—				—				146				—				36				—				36
Total		$	146			$	256,227			$	—			$	256,373			$	—			$	25,756			$	—			$	25,756

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 2014, Teradyne contributed $30.0 million to the U.S Plan, $1.8 million to the U.S. supplemental executive defined benefit pension plan and $1.2 million to certain qualified plans for non-U.S. subsidiaries. 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.

Expected Future Pension Benefit Payments

Future benefit payments are expected to be paid as follows:

		United States				Foreign
		(in thousands)
2015		$	24,407			$	1,018
2016			23,399				862
2017			23,129				1,069
2018			22,455				1,076
2019			21,826				1,230
2020-2024			112,546				9,349

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, 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.

The December 31 balances of the postretirement assets and obligations are shown below:

		2014				2013
		(in thousands)
Assets and Obligations
Change in benefit obligation:
Projected benefit obligation:
Beginning of year		$	9,019			$	11,907
Service cost			59				75
Interest cost			335				342
Actuarial (gain) loss			(1,255	)			(2,025	)
Benefits paid			(996	)			(1,280	)
End of year			7,162				9,019
Change in plan assets:
Fair value of plan assets:
Beginning of year			—				—
Company contributions			996				1,280
Benefits paid			(996	)			(1,280	)
End of year			—				—
Funded status		$	(7,162	)		$	(9,019	)

The following table provides amounts recorded within the account line items of financial position as of December 31:

		2014				2013
		(in thousands)
Accrued employees’ compensation and withholdings		$	(780	)		$	(1,042	)
Retirement plans liability			(6,382	)			(7,977	)
Funded status		$	(7,162	)		$	(9,019	)

The following table provides amounts recognized in accumulated other comprehensive income as of December 31:

		2014				2013
		(in thousands)
Prior service credit, before tax		$	(2,230	)		$	(2,829	)
Deferred taxes			(882	)			(664	)
Total recognized in other comprehensive income, net of tax		$	(3,112	)		$	(3,493	)

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 (income) expense in 2015 is $(0.6) million.

Expense

For the years ended December 31, 2014, 2013 and 2012, Teradyne’s net periodic postretirement benefit income was comprised of the following:

		2014				2013				2012
		(in thousands)
Components of Net Periodic Postretirement Benefit Income:
Service cost		$	59			$	75			$	67
Interest cost			335				342				437
Amortization of prior service cost			(598	)			(598	)			(599	)
Net actuarial (gain) loss			(1,255	)			(2,025	)			83
Total net periodic postretirement benefit income			(1,459	)			(2,206	)			(12	)
Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income:
Reversal of amortization items:
Prior service credit			598				598				599
Total recognized in other comprehensive income			598				598				599
Total recognized in net periodic postretirement benefit income and other comprehensive income		$	(861	)		$	(1,608	)		$	587

Weighted Average Assumptions to Determine Net Periodic Postretirement Benefit Income as of January 1:

		2014				2013				2012
Discount rate			4.1	%			3.1	%			3.7	%
Initial Health Care Cost Trend Rate			8.0				8.5				9.0
Ultimate Health Care Cost Trend Rate			5.0				5.0				5.0
Year in which Ultimate Health Care Cost Trend Rate is reached			2020				2020				2020

Weighted Average Assumptions to Determine Postretirement Benefit Obligation as of December 31:

		2014				2013				2012
Discount rate			3.5	%			4.1	%			3.1	%
Initial Medical Trend			7.5				8.0				8.5
Ultimate Health Care Trend			5.0				5.0				5.0
Medical cost trend rate decrease to ultimate rate in year			2022				2020				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, 2014, would have the following effects:

		1 Percentage Point Increase				1 Percentage Point Decrease
		(in thousands)
Effect on total service and interest cost components		$	6			$	(6	)
Effect on postretirement benefit obligations			87				(83	)

Expected Future Benefit Payments

Future benefit payments are expected to be paid as follows:

		Benefits Payments
		(in thousands)
2015		$	780
2016			738
2017			657
2018			599
2019			535
2020-2024			2,045

N. 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.

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

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

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

For grants prior to January 2014, performance-based restricted stock units (“PRSUs”) granted to executive officers were subject to time-based vesting and performance-based vesting. The percentage level of performance satisfied for performance-based grants was assessed on or near the anniversary of the grant date and, in turn, that percentage level determined the number of performance-based restricted stock units available for vesting over a four-year vesting period; portions of the performance-based grants not available for vesting were forfeited.

Commencing in January 2014, Teradyne granted PRSUs to its executive officers with a performance metric based on relative total shareholder return (“TSR”). Teradyne’s three-year TSR performance will be measured against the Philadelphia Semiconductor Index, which consists of thirty companies in the semiconductor device and capital equipment industries. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 200% of the target shares to 0% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. No TSR PRSUs will vest if the executive officer is no longer an employee at the end of the three-year period. Beginning with PRSUs granted in January 2014, if the recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability or death or (2) retirement or termination other than for cause, after attaining both at least age sixty and at least ten years of service, then the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will vest on the date the performance percentage is determined.

The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the three-year service period. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted above. During the year ended December 31, 2014, Teradyne granted 0.1 million TSR PRSUs with a grant date fair value of $22.06 per unit. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:

		2014
Risk-free interest rate			0.75	%
Teradyne volatility-historical			36.1	%
Philadelphia Semiconductor Index volatility-historical			24.6	%
Dividend yield			1.25	%

Expected volatility was based on the historical volatility of Teradyne’s stock and the Philadelphia Semiconductor Index over the most recent three year period. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.24 per share divided by $19.16, Teradyne’s stock price on January 24, 2014, the date the awards were granted.

Stock Options Valuation Assumptions:

The total number of stock options granted in 2014, 2013 and 2012 were 0.1 million, 0.2 million and 0.2 million, respectively, at the weighted average grant date fair value of $5.49, $6.09 and $6.85 per share, respectively. The fair value of the stock options at grant date was estimated using the Black-Scholes option-pricing model with the following assumptions:

		2014				2013				2012
Expected life (years)			4.00				4.00				3.50
Risk-free interest rate			1.2	%			0.6	%			0.4	%
Volatility-historical			38.8	%			46.8	%			56.0	%
Dividend yield			1.25	%			0.0	%			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.

Stock compensation plan activity for the years 2014, 2013 and 2012 follows:

		2014				2013				2012
		(in thousands)
Restricted Stock Units:
Non-vested at January 1			4,636				4,970				5,840
Awarded			1,870				2,110				1,844
Vested			(1,965	)			(2,322	)			(2,510	)
Forfeited			(190	)			(122	)			(204	)
Non-vested at December 31			4,351				4,636				4,970
Stock Options:
Outstanding at January 1			2,706				3,841				5,335
Granted			89				213				151
Exercised			(1,248	)			(1,220	)			(1,396	)
Forfeited			(38	)			(104	)			(203	)
Cancelled			(2	)			(24	)			(46	)
Outstanding at December 31			1,507				2,706				3,841
Vested and expected to vest at December 31			1,507				2,694				3,785
Exercisable at December 31			1,089				1,814				2,004

Total shares available for the years 2014, 2013 and 2012:

		2014				2013				2012
		(in thousands)
Shares available:
Available for grant at January 1			14,213				6,414				8,205
Options granted			(89	)			(213	)			(151	)
Restricted stock units awarded			(1,870	)			(2,110	)			(1,844	)
Restricted stock units forfeited			189				122				204
Additional shares reserved			—				10,000				—
Available for grant at December 31			12,443				14,213				6,414

Weighted-average restricted stock unit award date fair value information for the years 2014, 2013 and 2012 follows:

		2014				2013				2012
Non-vested at January 1		$	15.56			$	12.72			$	10.01
Awarded			19.30				16.53				16.67
Vested			14.38				10.40				9.29
Forfeited			17.21				15.48				13.32
Non-vested at December 31		$	17.58			$	15.56			$	12.72

Restricted stock unit awards aggregate intrinsic value information at December 31 for the years 2014, 2013 and 2012 follows:

		2014				2013				2012
		(in thousands)
Outstanding		$	86,113			$	81,680			$	83,949
Expected to vest			81,582				77,388				78,718

Restricted stock units weighted average remaining contractual terms (in years) information at December 31, for the years 2014, 2013 and 2012 follows:

		2014				2013				2012
Outstanding			1.11				1.14				1.01
Expected to vest			1.10				1.13				1.00

Weighted average stock options exercise price information for the years 2014, 2013 and 2012 follows:

		2014				2013				2012
Outstanding at January 1		$	6.29			$	4.64			$	4.12
Options granted			19.16				16.56				16.95
Options exercised			5.34				3.28				3.87
Options forfeited			3.59				2.57				3.11
Options cancelled			2.21				8.05				16.21
Outstanding at December 31			7.89				6.29				4.64
Exercisable at December 31			5.00				4.55				3.70

Stock option aggregate intrinsic value information for the years ended December 31, 2014, 2013 and 2012 follows:

		2014				2013				2012
		(in thousands)
Exercised		$	17,847			$	16,848			$	17,136
Outstanding			17,936				30,673				47,051
Vested and expected to vest			17,936				30,512				46,283
Exercisable			16,101				23,707				26,436

Stock options weighted average remaining contractual terms (in years) information at December 31, for the years 2014, 2013 and 2012 follows:

		2014				2013				2012
Outstanding			4.5				4.9				5.7
Vested and Expected to vest			4.5				4.9				5.6
Exercisable			4.2				4.3				4.9

Significant option groups outstanding at December 31, 2014 and related weighted average price and remaining contractual life information follow:

		Options Outstanding												Options Exercisable
Range Of Exercise Prices		Weighted- Average Remaining Contractual Life (Years)				Shares				Weighted- Average Exercise Price				Shares				Weighted- Average Exercise Price
		(shares in thousands)
$1.48 – $2.58			5.07				269			$	1.91				269			$	1.91
$2.67 – $2.74			4.40				462				2.69				429				2.69
$3.23 – $16.23			3.61				370				8.47				306				7.69
$16.56 – $19.16			4.99				406				17.25				85				16.79
							1,507			$	7.89				1,089			$	5.00

As of December 31, 2014, 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.

Effective January 31, 2014, Michael Bradley retired as Chief Executive Officer of Teradyne. Mr. Bradley will continue to serve on Teradyne’s Board of Directors. On January 22, 2014, Teradyne entered into an agreement (the “Retirement Agreement”) with Mr. Bradley. 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. In January 2014, Teradyne recorded a one-time charge to stock-based compensation expense of $6.6 million related to the Retirement Agreement.

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 2014 and 2013, is equal to 85% of the stock price on the last business day of the six month purchase period. In 2012, 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.

Employee Stock Purchase Rights Valuation Assumptions:

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. The fair value of the employees’ purchase rights was estimated using the Black-Scholes option-pricing model with the following assumptions:

		2012
Expected life (years)			0.5
Risk-free interest rate			0.1	%
Volatility-historical			42.7	%
Dividend yield			0.0	%

In July 2014, 0.5 million shares of common stock were issued to employees who participated in the plan during the first half of 2014, at the price of $16.66 per share. In January 2015, Teradyne issued 0.5 million shares of common stock to employees who participated in the plan during the second half of 2014, at the price of $16.82 per share.

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.

As of December 31, 2014, there were 5.3 million shares available for grant under the ESPP.

The effect to income from operations for recording stock-based compensation for the years ended December 31 was as follows:

		2014				2013				2012
		(in thousands)
Cost of revenues		$	3,675			$	4,338			$	6,604
Engineering and development			10,146				12,452				13,589
Selling and administrative			26,486				19,822				19,727
Stock-based compensation			40,307				36,612				39,920
Income tax benefit			(11,537	)			(9,762	)			(9,548	)
Total stock-based compensation expense after income taxes		$	28,771			$	26,850			$	30,372

O. 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 2014, 2013 and 2012, 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.

In addition Teradyne established an unfunded U.S. Supplemental Savings Plan to provide savings benefits in excess of those allowed by Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. 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, 2014, 2013 and 2012 were $12.8 million, $12.0 million and $10.6 million, respectively.

P. INCOME TAXES

The components of income (loss) before income taxes and the provision for income taxes as shown in the consolidated statements of operations were as follows:

		2014				2013				2012
		(in thousands)
Income (loss) before income taxes:
U.S.		$	(151,889	)		$	79,229			$	112,008
Non-U.S.			247,265				122,693				153,968
		$	95,376			$	201,922			$	265,976
Provision (benefit) for income taxes:
Current:
U.S. Federal		$	5,197			$	18,051			$	22,695
Non-U.S.			28,157				22,509				18,261
State			678				(269	)			(12	)
			34,032				40,291				40,944
Deferred:
U.S. Federal			(20,449	)			(1,692	)			8,158
Non-U.S.			(404	)			(1,386	)			5,997
State			925				(238	)			(6,172	)
			(19,928	)			(3,316	)			7,983
Total provision for income taxes:		$	14,104			$	36,975			$	48,927

For the years ended December 31, 2014, 2013 and 2012, income tax expense totaled $14.1 million, $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 2013 to 2014 was primarily attributable to a shift in the geographic distribution of income which decreased income subject to taxation in the United States relative to lower tax rate jurisdictions partially offset by an increase in income tax expense associated with uncertain tax positions and a reduction in the benefit from U.S. research and development tax credits. The decrease in income tax expense from 2012 to 2013 resulted from the reinstatement of the U.S. research and development tax credit in 2013 for fiscal years 2012 and 2013 and lower pre-tax income, partially offset by higher tax expense for uncertain tax positions and state taxes.

A reconciliation of the effective tax rate for the years 2014, 2013 and 2012 follows:

		2014				2013				2012
U.S. statutory federal tax rate			35.0	%			35.0	%			35.0	%
Foreign taxes			(58.1	)			(11.4	)			(10.5	)
Goodwill impairment			36.3				—				—
U.S. research and development credit			(7.9	)			(7.2	)			—
Uncertain tax positions			7.9				4.2				(1.2	)
Other permanent items			3.4				(0.1	)			(2.8	)
Valuation allowance			—				0.4				(0.5	)
State income taxes, net of federal tax benefit			(0.1	)			0.1				(1.7	)
Other, net			(1.7	)			(2.7	)			0.1
			14.8	%			18.3	%			18.4	%

U.S. research and development tax credits provided a 7.9% and 7.2% reduction to the 2014 and 2013 U.S. statutory federal tax rate of 35.0%, respectively. The research and development tax credit expired at the end of 2014.

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 attributable to the tax holiday for the years ended December 31, 2014, 2013 and 2012 were $13.2 million or $0.06 per diluted share, $4.7 million or $0.02 per diluted share and $10.9 million or $0.05 per diluted share, respectively. The tax holiday is currently expected to expire on December 31, 2015. Teradyne is in discussions with the Singapore Economic Development Board with respect to extension of the tax holiday for periods after 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, 2014 and 2013 amounted to $0.6 million and $0.4 million respectively. For the years ended December 31, 2014, 2013 and 2012 expense of $0.2 million, $0.2 million and $0.1 million respectively, was recorded for interest and penalties related to income tax items.

Significant components of Teradyne’s deferred tax assets (liabilities) as of December 31, 2014 and 2013 were as follows:

		2014				2013
		(in thousands)
Deferred tax assets:
Net operating loss carryforwards		$	10,989			$	14,679
Tax credits			50,554				65,210
Pension liability			30,036				22,966
Inventory valuations			29,105				38,452
Accruals			23,323				17,828
Equity compensation			11,131				10,498
Deferred revenue			10,242				12,379
Vacation accrual			7,425				7,291
Other			1,725				2,613
Gross deferred tax assets			174,530				191,916
Less: valuation allowance			(41,737	)			(40,386	)
Total deferred tax assets			132,793				151,530
Deferred tax liabilities:
Marketable securities			(1,599	)			(794	)
Intangible assets			(64,871	)			(89,268	)
Excess of tax over book depreciation			(24,905	)			(24,458	)
Total deferred tax liabilities			(91,375	)			(114,520	)
Net deferred assets		$	41,418			$	37,010

During 2014, Teradyne’s valuation allowance increased by $1.3 million primarily due to the increase in the deferred tax assets related to state tax credits generated in 2014. 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 based compensation 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, 2014 and 2013, these windfall stock option deductions were tracked off balance sheet in accordance with ASC 718, “Compensation—Stock Compensation.”

As of December 31, 2014 and 2013, 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 31, 2014 and 2013, Teradyne maintained a valuation allowance for certain deferred tax assets of $41.7 million and $40.4 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.

At December 31, 2014, Teradyne had operating loss carryforwards that expire in the following years:

		U.S. Federal Operating Loss Carryforwards				State Operating Loss Carryforwards				Foreign Operating Loss Carryforwards
		(in thousands)
2015		$	—			$	1			$	—
2016			—				56				—
2017			—				738				—
2018			—				679				—
2019			—				133				—
2020-2025			10,698				2,686				—
2026-2028			—				676				—
Beyond 2028			806				3,055				115
Non-expiring			—				—				8,460
Total		$	11,504			$	8,024			$	8,575

Of the U.S. federal operating loss carryforwards, $10.7 million relates to the acquisition of GenRad, Inc. (“GenRad”) in 2001 and $0.8 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 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 $140.8 million of tax credit carry forwards. Federal business tax credits of approximately $37.0 million expire in the years 2017 through 2034. Teradyne has foreign tax credits of approximately $27.5 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 $69.7 million which begin to expire in 2015. Teradyne has federal tax credits of $46.6 million, that are attributable to stock based compensation deductions 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, 2014, 2013 and 2012 were as follows:

		2014				2013				2012
		(in thousands)
Beginning balance, as of January 1		$	21,203			$	18,666			$	19,391
Additions:
Tax positions for current year			8,414				4,586				459
Tax positions for prior years			3,781				2,112				2,259
Reductions:
Tax positions for prior years			(2,480	)			(4,161	)			(3,443	)
Settlements with tax authorities			(500	)			—				—
Ending Balance as of December 31		$	30,418			$	21,203			$	18,666

Current year and prior year additions include assessment of potential transfer pricing issues worldwide, federal and state tax credits and incentives, capitalization rules, and domestic production activities deductions.

Reductions for tax positions for prior years primarily relate to statute expiration, stock-based compensation deduction in a foreign jurisdiction, and the settlement of a foreign tax audit. Of the $30.4 million of unrecognized tax benefits as of December 31, 2014, $24.1 million would impact the consolidated income tax rate if ultimately recognized. The remaining $6.3 million would impact the valuation allowance if recognized. Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits as of December 31, 2014 may decrease approximately $0.8 million in the next twelve months, as a result of a lapse of statutes of limitation and the settlement of a tax audit. The estimated decrease is composed primarily of reserves relating to state tax credits and transfer pricing.

Teradyne is subject to U.S. federal income tax, as well as income tax in multiple state, local and foreign jurisdictions. As of December 31, 2014, all material state and local income tax matters have been concluded through 2009, all material federal income tax matters have been concluded through 2010 and all material foreign income tax matters have been concluded through 2008. However, in some jurisdictions, including the United States, operating losses and tax credits may be subject to adjustment until such time as they are utilized and the year of utilization is closed to adjustment.

As of December 31, 2014, a deferred tax liability has not been established for approximately $556.9 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 practicable due to uncertainty regarding the remittance structure, the mix of earnings and earnings and profit pools in the year of remittance, and overall complexity of the calculation.

Q. 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 defense/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 operations before taxes. The accounting policies of the business segments are the same as those described in Note B: “Accounting Policies.”

Segment information for the years ended December 31, 2014, 2013 and 2012 is as follows:

		Semiconductor Test				Wireless Test				System Test				Corporate And Eliminations				Consolidated
		(in thousands)
2014
Revenues		$	1,300,790			$	184,535			$	162,499			$	—			$	1,647,824
Income (Loss) before taxes (1)(2)			255,803				(116,196	)			12,116				(56,347	)			95,376
Total assets (3)			580,501				478,974				95,105				1,383,940				2,538,520
Property additions			159,783				3,730				5,469				—				168,982
Depreciation and amortization expense			84,990				53,308				5,399				8,847				152,544
2013
Revenues		$	1,023,041			$	251,871			$	153,021			$	—			$	1,427,933
Income before taxes (1)(2)			153,797				23,153				3,115				21,857				201,922
Total assets (3)			632,840				645,001				79,983				1,272,000				2,629,824
Property additions			94,303				5,358				7,070				—				106,731
Depreciation and amortization expense			72,472				51,675				5,180				21,360				150,687
2012
Revenues		$	1,127,726			$	286,355			$	242,669			$	—			$	1,656,750
Income (Loss) before taxes (1)(2)			185,985				83,077				34,164				(37,250	)			265,976
Total assets (3)			604,127				672,048				71,116				1,082,054				2,429,345
Property additions			105,074				7,608				6,398				—				119,080
Depreciation and amortization expense			73,537				50,362				4,549				17,066				145,514

(1)	Interest income, interest expense, other (income) expense, net and pension and postretirement plans actuarial gains and losses are included in Corporate and Eliminations.

(2)	Included in income (loss) before taxes are charges and credits related to restructuring and other, inventory charges and goodwill impairment 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:

		For the Year Ended December 31,
		2014				2013				2012
		(in thousands)
Cost of revenues—inventory charge (1)		$	14,389			$	5,218			$	18,433
Restructuring and other			490				1,016				386

(1)	Included in the cost of revenues for the years ended December 31, 2014 and 2012 are charges for excess inventory provisions recorded primarily as a result of product transition.

Included in the System Test segment are charges and credits in the following accounts:

		For the Year Ended December 31,
		2014				2013				2012
		(in thousands)
Cost of revenues—inventory charge		$	2,125			$	4,168			$	4,271
Restructuring and other			742				1,431				451

Included in the Wireless Test segment are charges and credits in the following accounts:

		For the Year Ended December 31,
		2014				2013				2012
		(in thousands)
Cost of revenues—inventory step-up (2)		$	—			$	—			$	6,089
Cost of revenues—inventory charge			5,679				7,206				4,145
Restructuring and other			565				82				236
Goodwill impairment charge			98,897				—				—

(2)	Included in the cost of revenues for the years ended December 31, 2012 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,
		2014				2013				2012
		(in thousands)
Restructuring and other		$	(432	)		$	(449	)		$	(8,794	)

Information as to Teradyne’s revenues by country is as follows:

		2014				2013				2012
		(in thousands)
Revenues from customers (1):
Taiwan		$	495,942			$	265,472			$	299,359
China			292,145				323,564				351,335
United States			213,104				230,178				238,280
Korea			145,608				119,286				216,445
Singapore			119,421				114,765				101,502
Europe			111,043				90,797				77,099
Malaysia			83,910				86,900				69,064
Philippines			68,662				63,392				111,571
Japan			63,761				81,806				100,807
Thailand			44,117				32,209				80,518
Rest of the World			10,111				19,564				10,770
		$	1,647,824			$	1,427,933			$	1,656,750

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

In 2014, no single customer accounted for more than 10% of total consolidated revenues. In 2013 and 2012, one customer of Teradyne’s Wireless Test and Semiconductor Test segments, accounted for 12% and 10%, respectively, of total consolidated revenues.

Long-lived assets by geographic area:

		United States				Foreign(1)				Total
		(in thousands)
December 31, 2014		$	206,334			$	122,704			$	329,038
December 31, 2013		$	211,455			$	63,781			$	275,236

(1)	As of December 31, 2014 and 2013, long-lived assets attributable to Singapore were $99.2 million and $42.5 million, respectively.

R. STOCK REPURCHASE PROGRAM

In November 2010, the Board authorized a stock repurchase program for up to $200 million. In the years ended December 31, 2014, 2013 and 2012, Teradyne did not repurchase any shares. The cumulative repurchases under the 2010 program as of December 31, 2014 totaled 2.6 million shares of common stock for $31.2 million at an average price of $11.84. In January 2015, the Board of Directors cancelled the 2010 stock repurchase program.

S. SUBSEQUENT EVENTS

In January 2015, Teradyne’s Board of Directors declared a quarterly dividend of $0.06 per share to be paid on March 24, 2015 to shareholders of record as of February 27, 2015.

In January 2015, Teradyne’s Board of Directors authorized Teradyne to repurchase up to $500 million of common stock, $300 million of which Teradyne intends to repurchase in 2015. The cumulative repurchases under the 2015 program as of February 25, 2015 totaled 0.9 million shares of common stock for $16.9 million at an average price of $19.44.

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

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.

		2014
		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
						(1)				(1)(2)				(1)(3)(4)
		(in thousands, except per share amounts)
Revenues:
Products		$	255,386			$	452,488			$	402,987			$	253,162
Services			65,624				73,079				75,023				70,074
Total revenues			321,010				525,567				478,010				323,236
Cost of revenues:
Cost of products			124,448				202,411				182,591				131,337
Cost of services			29,515				32,743				34,298				31,673
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)			153,963				235,154				216,889				163,010
Gross profit			167,047				290,413				261,121				160,226
Operating expenses:
Engineering and development			67,085				73,414				71,953				79,188
Selling and administrative			78,003				77,489				73,064				91,157
Goodwill impairment			—				—				—				98,897
Acquired intangible assets amortization			18,271				18,271				18,271				15,957
Restructuring and other			—				572				(405	)			1,198
Total operating expenses			163,359				169,746				162,883				286,397
Income (loss) from operations			3,688				120,667				98,238				(126,171	)
Non-operating (income) expenses:
Interest income			(1,036	)			(1,266	)			(1,922	)			(2,035	)
Interest expense			6,417				159				144				214
Other (income) expense, net			180				382				(654	)			463
(Loss) income before income taxes			(1,873	)			121,392				100,670				(124,813	)
(Benefit) provision for income taxes			(2,802	)			20,187				17,721				(21,002	)
Net income (loss)		$	929			$	101,205			$	82,949			$	(103,811	)
Net income (loss) per common share—basic		$	0.00			$	0.52			$	0.40			$	(0.48	)
Net income (loss) per common share—diluted		$	0.00			$	0.47			$	0.38			$	(0.48	)
Cash dividend declared per common share		$	0.00			$	0.06			$	0.06			$	0.06

(1)	Dividends declared by Teradyne’s Board of Directors were paid in each of the second, third and fourth quarters of 2014.

(2)	Restructuring and other includes a $(0.6) million fair value adjustment to decrease the ZTEC acquisition contingent consideration.

(3)	In the fourth quarter ended December 31, 2014, Teradyne recorded pension and post retirement net actuarial losses of $46.6 million. See Note B: “Accounting Policies” for a discussion of our accounting policy.

(4)	In the fourth quarter ended December 31, 2014, Teradyne recorded a goodwill impairment charge of $98.9 million in its Wireless Test segment.

		2013
		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
														(1)(2)
		(in thousands, except per share amounts)
Revenues:
Products		$	214,300			$	363,087			$	365,825			$	211,710
Services			66,067				65,802				67,551				73,591
Total revenues			280,367				428,889				433,376				285,301
Cost of revenues:
Cost of products			96,793				158,411				150,365				93,461
Cost of services			30,157				29,245				28,717				31,983
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)			126,950				187,656				179,082				125,444
Gross profit			153,417				241,233				254,294				159,857
Operating expenses:
Engineering and development			62,751				67,773				68,918				64,613
Selling and administrative			67,890				69,230				72,917				69,523
Acquired intangible assets amortization			18,036				18,063				18,064				18,284
Restructuring and other			332				259				889				600
Total operating expenses			149,009				155,325				160,788				153,020
Income from operations			4,408				85,908				93,506				6,837
Non-operating (income) expenses:
Interest income			(1,072	)			(903	)			(948	)			(1,206	)
Interest expense			6,403				6,435				6,488				6,771
Other (income) expense, net			503				19				414				(34,168	)
(Loss) income from operations before income taxes			(1,426	)			80,357				87,552				35,439
(Benefit) provision for income taxes			(8,015	)			13,801				18,093				13,096
Net income		$	6,589			$	66,556			$	69,459			$	22,343
Net income per common share—basic		$	0.03			$	0.35			$	0.36			$	0.12
Net income per common share—diluted		$	0.03			$	0.28			$	0.29			$	0.09
Cash dividend declared per common share		$	0.0			$	0.0			$	0.0			$	0.0

(1)	Other (income) expense, net includes a $34.2 million gain from the sale of an equity investment.

(2)	In the fourth quarter ended December 31, 2013, Teradyne recorded pension and post retirement net actuarial gains of $9.0 million. See Note B: “Accounting Policies” for a discussion of our accounting policy.