Teradyne (TER) 10-K risk factor changes: FY2017 vs FY2016

For the fiscal year ended December 31, [removed: 2016][added: 2017]

See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” [added: and “emerging growth company”] in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ [added: Emerging growth company ☐]

The aggregate market value of the voting stock held by non-affiliates of the registrant as of [removed: July 1, 2016] [added: June 30, 2017] was approximately [removed: $3.9] [added: $5.9] billion based upon the closing price of the registrant’s Common Stock on the New York Stock Exchange on that date.

The number of shares outstanding of the registrant’s only class of Common Stock as of February [removed: 24, 2017] [added: 23, 2018] was [removed: 200,302,178] [added: 195,422,673] shares.

Portions of the registrant’s proxy statement in connection with its [removed: 2017] [added: 2018] annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.

| Item 1. | | [removed: [Business](#toc274101_2)] [added: [Business](#toc504255_2)] | | | 1 | |

| Item 1A. | | [Risk [removed: Factors](#toc274101_3)] [added: Factors](#toc504255_3)] | | | [removed: 9] [added: 10] | |

| Item 1B. | | [Unresolved Staff [removed: Comments](#toc274101_4)] [added: Comments](#toc504255_4)] | | | [removed: 19] [added: 20] | |

| [removed: Item 2. | | [Properties](#toc274101_5) | | | 19] [added: Item 2:] | [added: _Properties_] |

| Item 3. | | [Legal [removed: Proceedings](#toc274101_6)] [added: Proceedings](#toc504255_6)] | | | [removed: 19] [added: 21] | |

| [removed: Item 4. |] [added: Item 4:] | [removed: [Mine] [added: _Mine] Safety [removed: Disclosure](#toc274101_7) | | | 19 |] [added: Disclosure_] |

| [PART [removed: II.](#toc274101_8)] [added: II.](#toc504255_8)] | | | | | | [removed: [](#toc274101_8)] [added: [](#toc504255_8)] |

| [removed: Item 5. |] [added: Item 5:] | [removed: [Market] [added: _Market] for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity [removed: Securities](#toc274101_9) | | | 20 |] [added: Securities_] |

| [removed: Item 6. |] [added: Item 6:] | [removed: [Selected] [added: _Selected] Financial [removed: Data](#toc274101_10) | | | 21 |] [added: Data_] |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operation](#toc274101_11)] [added: Operation](#toc504255_11)] | | | [removed: 22] [added: 24] | |

| Item 7A. | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#toc274101_12)] [added: Risk](#toc504255_12)] | | | [removed: 42] [added: 43] | |

| [removed: Item 8. |] [added: Item 8:] | [removed: [Financial] [added: _Financial] Statements and Supplementary [removed: Data](#toc274101_13) | | | 44 |] [added: Data_] |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#toc274101_14)] [added: Disclosure](#toc504255_14)] | | | [removed: 104] [added: 106] | |

| [removed: Item 9A. |] [added: Item 9A:] | [removed: [Controls] [added: _Controls] and [removed: Procedures](#toc274101_15) | | | 104 |] [added: procedures_] |

| Item 9B. | | [Other [removed: Information](#toc274101_16)] [added: Information](#toc504255_16)] | | | [removed: 104] [added: 107] | |

| [PART [removed: III.](#toc274101_17)] [added: III.](#toc504255_17)] | | | | | | [removed: [](#toc274101_17)] [added: [](#toc504255_17)] |

| [removed: Item 10. |] [added: Item 10:] | [removed: [Directors,] [added: _Directors,] Executive Officers and Corporate [removed: Governance](#toc274101_18) | | | 105 |] [added: Governance_] |

| Item 11. | | [Executive [removed: Compensation](#toc274101_19)] [added: Compensation](#toc504255_19)] | | | [removed: 105] [added: 108] | |

| [removed: Item 12. |] [added: Item 12:] | [removed: [Security] [added: _Security] Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#toc274101_20) | | | 105 |] [added: Matters_] |

| [removed: Item 13. |] [added: Item 13:] | [removed: [Certain] [added: _Certain] Relationships and Related Transactions, and Director [removed: Independence](#toc274101_21) | | | 105 |] [added: Independence_] |

| [removed: Item 14. |] [added: Item 14:] | [removed: [Principal] [added: _Principal] Accountant Fees and [removed: Services](#toc274101_22) | | | 105 |] [added: Services_] |

| [PART [removed: IV.](#toc274101_23)] [added: IV.](#toc504255_23)] | | | | | | [removed: [](#toc274101_23)] [added: [](#toc504255_23)] |

| [removed: Item 15. |] [added: Item 15:] | [removed: [Exhibits] [added: _Exhibits] and Financial Statement [removed: Schedule](#toc274101_24) | | | 106 |] [added: Schedule_.] |

| Item 16. | | [Form 10-K [removed: Summary](#toc274101_24a)] [added: Summary](#toc504255_25)] | | | [removed: 107] [added: 110] | |

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

[added: The acquisition of Universal] Robots provides a growth engine to our business and complements our existing System Test and Wireless Test segments.

Contingent consideration [removed: paid] for 2015 was $15 [removed: million.][added: million and was paid in February 2016.]

The remaining maximum contingent consideration that could be paid is [removed: $50] [added: $25] million.

[removed: The] [added: Our] acquisition of [removed: AIT] [added: Avionics Interface Technologies, LLC (“AIT”) in 2014] complements our [removed: Defense/Aerospace] line of bus test instrumentation for commercial and defense avionics systems.

Fabless companies perform the design of integrated circuits without manufacturing capabilities, and use [added: Foundries for wafer manufacturing and OSATs for test and assembly.]

The FLEX Test Platform has an installed base of more than [removed: 5,500] [added: 6,000] systems.

The J750 platform has an installed base of over [removed: 5,200] [added: 5,400] systems.

The Magnum platform has an installed base of over [removed: 2,100] [added: 2,200] systems.

[removed: In 2013, we introduced] [added: The newest products from] the [added: platform include the] ETS-88, a high performance multi-site production test system designed to test a wide variety of high volume commodity and precision [removed: devices.][added: devices, and the ETS-800, a high performance multi-site production test system to test high complexity power devices in automotive, industrial and consumer applications.]

10-K 1 d504255d10k.htm 10-K

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

| [PART I.](#toc504255_1) | | | | | | [](#toc504255_1) |

| Item 2. | | [Properties](#toc504255_5) | | | 20 | |

| Item 9A. | | [Controls and Procedures](#toc504255_15) | | | 106 | |

| Item 15. | | [Exhibits and Financial Statement Schedule](#toc504255_24) | | | 109 | |

| | | [Signatures](#toc504255_26) | | | 116 | |

The market for our test products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment.

One customer drives significant demand for our products both through direct sales and sales to the customer’s supply partners.

We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future.

Contingent consideration for the period from July 2015 to December 2017 was $24.5 million and is expected to be paid in March 2018.

During 2017, we developed and shipped a system level test product for the semiconductor production market.

In 2017, LitePoint announced two new cellular products: (1) IQcell, a multi-device cellular signaling test solution which enables user experience testing of LTE cellular devices via over-the-air connections; and (2) IQgig, a fully integrated 5G millimeter wave test solution that enables 5G product developers to validate their designs and accelerate product introductions.

The lab-in-a-box zSeries solution provides simple and fast

| Industrial Automation | | | 14.8 | | | | 6.0 | |

| | | $ | 626.4 | | | $ | 731.9 | |

The above table does not include any adjustments for adoption of the new revenue standard, that was adopted January, 1, 2018.

If the Wireless test backlog were calculated based upon the new revenue standard, the 2017 backlog balance would be $21.3 million with approximately 68% expected to be delivered in 2018.

Backlog for each of the other reportable segments would not be materially affected by adoption of the new revenue standard.

We accrue for all known environmental liabilities when it

within those industries.

We estimate product demand driven by a single OEM customer, combining direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd. and its leasing company, JA Mitsui Leasing, Ltd.), accounted for approximately 22%, 26%, and 23% of our consolidated revenues in 2017, 2016, and 2015, respectively.

An assertion of patent infringement against us, if successful, could

_We may need to adjust estimates resulting from the U.S. Tax Cuts and Jobs Act of 2017._

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”) making significant changes to the Internal Revenue Code.

Among other changes, the Tax Reform Act permanently reduces the U.S. corporate tax rate from 35% to 21% effective for tax years beginning after

December 31, 2017, shifts the U.S. tax regime from a worldwide system to a modified territorial tax system, and requires companies to pay a transition tax on earnings of certain foreign subsidiaries that were previously tax deferred.

U.S. Generally Accepted Accounting Principles (“GAAP”) requires that the impact of tax legislation be recognized in the period in which the law was enacted.

As a result of the Tax Reform Act, in the fourth quarter of 2017 we recorded a provisional amount of $186.0 million of additional income tax expense primarily composed of $161.0 million of expense related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings, $33.6 million of expense related to the remeasurement of certain deferred tax assets and liabilities, and a benefit of $10.3 million associated with the impact of correlative adjustments on uncertain tax positions.

The provisional amount represents our best estimate of the impact of the Tax Reform Act in accordance with our understanding of the Tax Reform Act and available guidance as of the date of this filing and may change as additional guidance is provided by tax authorities or as changes are made in accounting standards for income taxes or related interpretations in response to the Tax Reform Act.

Any subsequent adjustment to these amounts will be recorded in 2018.

Adjustments may impact our financial results in a given reporting period.

In January 2018, our Board of Directors approved a new $1.5 billion share repurchase authorization.

We intend to repurchase $750 million in 2018.

The strike price of the warrants is $39.91 per share.

If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the

A failure in or a breach of our operational or security systems or

| | | | | | | | | | 618,500 | |

| | | | | | | | | | 868,000 | |

| First quarter | | $ | 31.21 | | | $ | 25.24 | | | $ | 0.07 | |

10-K 1 d274101d10k.htm FORM 10-K

| --- | --- |

| --- | --- | --- |

| [PART I.](#toc274101_1) | | | | | | [](#toc274101_1) |

| | | [Signatures](#toc274101_25) | | | 113 | |

The acquisition of Universal

In 2014, we acquired Avionics Interface Technologies LLC (“AIT”), a supplier of equipment for testing state-of-the-art data communication buses.

AIT is included in our System Test segment.

The total purchase price for AIT was approximately $21 million, which included cash paid of approximately $19 million and $2 million in fair value of contingent consideration payable upon achievement of revenue and gross margin targets in 2015 and 2016.

The total amount of contingent consideration paid was $1.1 million.

In 2013, we acquired ZTEC Instruments Inc. (“ZTEC”), a supplier of modular wireless test instruments.

The acquisition of ZTEC expands our Wireless Test segment into the design verification test of wireless components and chipsets.

The total purchase price for ZTEC was approximately $17 million, which included cash paid of approximately $15 million and $2 million in fair value of contingent consideration payable upon achievement of certain customer order and revenue targets through 2015.

None of the contingent consideration was paid.

Foundries for wafer manufacturing and OSATs for test and assembly.

In 2013, we introduced the J750 Ex-HD which includes system enhancements and new high density instruments that enable the J750 test platform to provide higher test cell productivity.

In 2015, we introduced the ETS-800, a high performance multi-site production test system to test high complexity power devices in automotive, industrial and consumer applications.

Our acquisition of AIT in 2014 complements our line of bus test instrumentation for commercial and defense avionics systems.

AIT is a supplier of equipment for testing state-of-the-art data communication buses.

UR10, each with different weight carrying capacity and arm reach.

| | | | | | | | | | | | | |

In 2014, no single customer accounted for more than 10% of our consolidated revenues.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | $ | 729.7 | | | $ | 615.7 | |

occur for newer generations of electronic products.

In the fourth quarter of 2014, we performed our annual goodwill impairment test and recorded a goodwill impairment charge of $98.9 million in our Wireless Test segment 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.

We intend to repurchase at least $200 million in 2017.

The strike price of the warrants will initially be $39.95 per share (subject to adjustment), which was approximately 60% above the closing sale price of our common stock on December 6, 2016.

long term best interest, such as, subject to permitted exceptions, making capital expenditures in excess of certain thresholds, making investments, loans and other advances, and prepaying any additional indebtedness while our indebtedness under our senior secured revolving credit facility is outstanding.

In 2016, an earthquake in Japan damaged our building beyond repair and impacted our operations located in Kumamoto, Japan.

We have temporarily transferred the manufacturing operations to other facilities so we do not expect the damage to have a significant impact on our ability to manufacture our products or sell products to our customers.

However, the situation in Kumamoto remains uncertain so the events could have a short-term impact to our business in Japan.

In addition, we may incur significant uninsured costs in order to rebuild our operations which could have an adverse effect on our financial condition and results of operations.

| Item 2: | _Pr__operties_ |

| | | | | | | | | | 621,000 | |

| | | | | | | | | | 870,000 | |

| 2015 | | | | | | | | | | | | |

| First quarter | | $ | 20.15 | | | $ | 17.60 | | | $ | 0.06 | |

| Second quarter | | | 21.33 | | | | 18.03 | | | | 0.06 | |