Consolidated Leverage Ratio (Net Debt/EBITDA) (a)No more than 4.75 to 1 | | 2.913 to 1 | Consolidated Interest Coverage Ratio (EBITDA/Interest) (b) | No less than 3.0 to 1 | | 10.6 to 1 | | | | | | | | | $750.0 million Credit Facility expires December 2020 and $175.5 million term loans due through January 2022 (issued in October 2012) and $100.0 million term loan due October 2019 (issued March 2017) | | | | | Financial Covenant | Requirement | | Actual Measure | Consolidated Leverage Ratio (Net Debt/EBITDA) (a)
| No more than 3.25 to 1 | | 2.3 to 1 | Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)
| No less than 3.0 to 1 | | 12.0 to 1 | | | | $625.0 million Private Placement Senior Notes due from 2019 to 2024 | | | | | Financial Covenant | Requirement | | Actual Measure | Consolidated Leverage Ratio (Net Debt/EBITDA) (a)
| No more than 3.25 to 1 | | 2.3 to 1 | Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)
| No less than 3.0 to 1 | | 12.0 to 1 | | | (a) | The Consolidated Leverage Ratio is equal to Net Debt/EBITDA as defined in our private placement note purchase agreement and our $750.0 million credit agreement. |
| | (b) | The Consolidated Interest Coverage Ratio is equal to EBITDA/Interest as defined in our private placement note purchase agreement and our $750.0 million credit agreement. | | |
In the event of an acquisition, our debt instruments permit us, at our option, to exceed the(a)The Consolidated Leverage Ratio of 3.25is equal to Net Debt/EBITDA as defined in our $1.15 billion credit agreement. Requirement changes to 4.5 to 1 for upthe second and third quarter of 2022 and to four quarters following4.0 to 1 for the fiscalfourth quarter in which the acquisition event occurs, provided that the Consolidated Leverage Ratio does not exceedof 2022 and 3.5 to 1. 1 thereafter.
(b)The Consolidated Interest Coverage Ratio is equal to EBITDA/Interest as defined in our $1.15 billion credit agreement. Available borrowing capacity under the $750.0 million$1.15 billion credit facility, which is reduced by borrowings and $281.9 million in outstanding letters of credit, was $558.7$759.2 million at December 31, 2017. Teledyne also has a $5.0January 2, 2022. Of the $281.9 million uncommitted credit line which permits credit extensions up to $5.0 million plus an incremental $2.0 million solely for standbyin outstanding letters of credit. This credit, line is utilized, as needed, for periodic cash needs. At December 31, 2017, no amounts were outstanding under this credit line. At January 1, 2017, $3.5$244.6 million was outstanding under thereleased in February 2022. See Note 9, Long-Term Debt to these Consolidated Financial Statements for additional information regarding our credit line.facility and term loan.
Contractual Obligations The following table summarizes our expected cash outflows resulting from financial contracts and commitments at December 31, 2017. We have not included information on our normal recurring purchases of materials for use in our operations. The amounts in the following table are generally consistent from year to year, closely reflect our levels of production and are not long-term in nature:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual obligations (in millions): | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | After 2022 | | Total | Debt obligations | | $ | 2.3 |
| | $ | 136.0 |
| | $ | 105.1 |
| | $ | 102.4 |
| | $ | 482.0 |
| | $ | 240.4 |
| | $ | 1,068.2 |
| Interest expense(a) | | 29.9 |
| | 22.8 |
| | 21.0 |
| | 18.5 |
| | 12.2 |
| | 3.3 |
| | 107.7 |
| Operating lease obligations | | 22.4 |
| | 18.7 |
| | 17.6 |
| | 15.6 |
| | 12.4 |
| | 51.4 |
| | 138.1 |
| Capital lease obligations(b) | | 1.3 |
| | 1.2 |
| | 1.3 |
| | 1.2 |
| | 1.2 |
| | 1.5 |
| | 7.7 |
| Purchase obligations (c) | | 129.9 |
| | 2.6 |
| | 1.9 |
| | 0.9 |
| | 0.9 |
| | 1.9 |
| | 138.1 |
| Total | | $ | 185.8 |
| | $ | 181.3 |
| | $ | 146.9 |
| | $ | 138.6 |
| | $ | 508.7 |
| | $ | 298.5 |
| | $ | 1,459.8 |
|
January 2, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual obligations (in millions): | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | After 2026 | | Total | Debt obligations | | $ | — | | | $ | 300.2 | | | $ | 600.7 | | | $ | 0.1 | | | $ | 930.2 | | | $ | 2,300.1 | | | $ | 4,131.3 | | Interest expense (a) | | 81.6 | | | 80.0 | | | 76.1 | | | 73.6 | | | 63.1 | | | 194.2 | | | 568.6 | | Operating lease obligations (b) | | 33.5 | | | 29.9 | | | 24.3 | | | 21.7 | | | 18.6 | | | 65.4 | | | 193.4 | | | | | | | | | | | | | | | | | Purchase obligations (c) | | 264.4 | | | 10.3 | | | 6.4 | | | 1.2 | | | 0.6 | | | 0.9 | | | 283.8 | | Total | | $ | 379.5 | | | $ | 420.4 | | | $ | 707.5 | | | $ | 96.6 | | | $ | 1,012.5 | | | $ | 2,560.6 | | | $ | 5,177.1 | |
| | (a) | Interest expense related to the credit facility, including facility fees, is assumed to accrue at the rates in effect at year-end 2017 and is assumed to be paid at the end of each quarter with the final payment in December 2020 when the credit facility expires. |
| | (b) | Includes imputed interest and the short-term portion of capital lease obligations. |
| | (c) | Purchase obligations generally include contractual obligations for the purchase of goods and services and capital commitments. |
(a) Interest expense related to the credit facility, including facility fees, is assumed to accrue at the rates in effect at year-end 2021 and is assumed to be paid at the end of each quarter with the final payment in March 2026 when the credit facility expires.
(b) Includes imputed interest and the short-term portion of lease obligations. (c) Purchase obligations generally include contractual obligations for the purchase of goods and services and capital commitments that are enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Unrecognized tax benefits of $26.0$402.0 million and accrued interest and penalties on these tax matters of $160.8 million are not included in the table above. As discussed in Note 10 of the Notes to Consolidated Financial Statements, Teledyne paid $296.4 million in February 2022 for the Swedish tax matter, including accrued interest and penalties. The remaining unrecognized tax benefits and accrued interest and penalties are not included in the table above because $8.0$52.9 million is offset by deferred tax assets, and the remainder cannot be reasonably estimated to be settled in cash due to a lack of prior settlement history and offsetting credits. At December 31, 2017,January 2, 2022, we were not required, and accordingly are not planning, to make any cash contributions to the domestic qualified pension planplans for 2018.2022. Our minimum funding requirements after 2018,2021 as set forth by ERISA, are dependent on several factors as discussed under “Accounting for Pension Plans” in the Critical Accounting Policies section of this Management’s Discussion and Analysis of Financial Condition and Results of Operation. Estimates beyond 20182022 have not been provided due to the significant uncertainty of these amounts, which are subject to change until the Company’s pension assumptions can be updated at the appropriate times. In addition, certain pension contributions are eligible for future recovery through the pricing of products and services to the U.S. government under certain government contracts, therefore, the amounts notedfuture cash contributions are not necessarily indicative of the impact these contributions may have on our liquidity. We also have payments due under our other postretirement benefit plans. These plans are not required to be funded in advance, but are pay as you go. See further discussion in Note 11 of the Notes to our Consolidated Financial Statements. Teledyne intends to continue to monitor and manage its defined benefit pension plans obligation and may take additional actions to manage risk in the future.
Operating Activities In 2017,2021, net cash provided by operating activities was $374.7$824.6 million, compared with $317.0$618.9 million in 20162020 and $210.2$482.1 million in 2015.2019. The higher cash provided by operating activities in 2017,2021, compared with 2016,2020, reflected cash flow from e2v and the impact of higher operatingnet income and the cash flow contribution from FLIR, partially offset by $12.1$9.1 million inof higher income tax payments. The higher cash provided by operating activities in 2016,2020, compared with 2015, reflected $61.92019, was driven by the timing of accounts receivable collections, cash flow from recent acquisitions and $35.6 million inof lower income tax payments, lower annual bonus and regular payroll payments and higher customer advanced payments, partially offset by higher payments for severance, facility closure and relocation costs and lower operating income.payments. Free cash flow (cash provided by operating activities less capital expenditures) was $316.2$723.0 million in 2017,2021, compared with $229.4$547.5 million in 20162020 and $163.2$393.7 million in 2015. Adjusted2019. | | | | | | | | | | | | | | | | | | | | | | | | Free Cash Flow(a) (in millions, brackets indicate use of funds) | | 2021 | | 2020 | | 2019 | Cash provided by operating activities | | $ | 824.6 | | $ | 618.9 | | $ | 482.1 | | | | | | | | Capital expenditures for property, plant and equipment | | (101.6) | | (71.4) | | (88.4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Free cash flow | | $ | 723.0 | | $ | 547.5 | | $ | 393.7 |
a) We define free cash flow reflects utilizationas cash provided by operating activities (a measure prescribed by generally accepted accounting principles) less capital expenditures for property, plant and equipment. We believe that this supplemental non-GAAP information is useful to assist management and the investment community in analyzing our ability to generate cash flow. On January 26, 2022, the Administrative Court of restricted cash fromAppeal in Stockholm, Sweden generally affirmed the saleMarch 2020 ruling of the First Instance Court and determined a former operating facility which funded,tax liability in part, the facility purchase pursuant to a 1031 like-kind exchange and was $316.2 million in 2017, compared with $248.9 million in 2016 and $163.2 million in 2015. amount of SEK 2.765 billion. Teledyne paid the tax on February 2, 2022 totaling $296.4 million.
| | | | | | | | | | | | | | | Free Cash Flow(a) (in millions, brackets indicate use of funds) | | 2017 | | 2016 | | 2015 | Cash provided by operating activities | | $ | 374.7 |
| | $ | 317.0 |
| | $ | 210.2 |
| Capital expenditures for property, plant and equipment, excluding facility purchase | | (58.5 | ) | | (61.6 | ) | | (47.0 | ) | Facility purchase pursuant to 1031 like-kind exchange | | — |
| | (26.0 | ) | | — |
| Total capital expenditures | | (58.5 | ) | | (87.6 | ) | | (47.0 | ) | Free cash flow | | 316.2 |
| | 229.4 |
| | 163.2 |
| Restricted cash utilized for 1031 like-kind exchange facility purchase | | — |
| | 19.5 |
| | — |
| Adjusted free cash flow | | $ | 316.2 |
| | $ | 248.9 |
| | $ | 163.2 |
|
| | a) | We define free cash flow as cash provided by operating activities (a measure prescribed by generally accepted accounting principles) less capital expenditures for property, plant and equipment. Adjusted free cash flow reflects utilization of restricted cash from the sale of a former operating facility which funded, in part, the facility purchase pursuant to a 1031 like-kind exchange. The company believes that this supplemental non-GAAP information is useful to assist management and the investment community in analyzing the company’s ability to generate cash flow. |
Investing Activities Net cash used in investing activities was $831.2$3,824.3 million, $151.0$99.4 million and $109.9$571.9 million for 2017, 20162021, 2020 and 2015,2019, respectively. Cash flows relating to investing activities consistsconsist primarily of cash used for acquisitions and other investments and capital expenditures, except 2016 also includes $9.3 million of cash received from the sale of a business and cash received of $19.5 million from the sale of a former operating facility.expenditures. | | | | | | | | | | | | | | | | | | | | | | Capital expenditures (in millions): | | 2021 | | 2020 | | 2019 | Digital Imaging | | $ | 64.2 | | | $ | 33.4 | | | $ | 45.2 | | Instrumentation | | 13.3 | | | 18.0 | | | 18.9 | | Aerospace and Defense Electronics | | 8.4 | | | 10.4 | | | 19.0 | | Engineered Systems | | 12.9 | | | 7.5 | | | 3.6 | | Corporate | | 2.8 | | | 2.1 | | | 1.7 | | | | $ | 101.6 | | | $ | 71.4 | | | $ | 88.4 | |
| | | | | | | | | | | | | | Capital expenditures (in millions): | | 2017 | | 2016 | | 2015 | Instrumentation | | $ | 13.7 |
| | $ | 50.9 |
| | $ | 20.9 |
| Digital Imaging | | 23.3 |
| | 12.5 |
| | 9.2 |
| Aerospace and Defense Electronics | | 11.0 |
| | 12.6 |
| | 9.1 |
| Engineered Systems | | 5.8 |
| | 5.9 |
| | 5.7 |
| Corporate | | 4.7 |
| | 5.7 |
| | 2.1 |
| | | $ | 58.5 |
| | $ | 87.6 |
| | $ | 47.0 |
|
The higher capital spending amount in 2016, primarily reflected the purchase of an operating facility for $26.0 million. During 20182022, we plan to invest approximately $80.0$100.0 million in capital expenditures, principally to upgrade facilities and capital equipment, reduce manufacturing costs and introduce new products.equipment.
Acquisitions Investing activities used cash for acquisitions and other investments of $774.1$3,723.3 million, $93.4$29.0 million and $66.7$484.0 million, in 2017, 20162021, 2020 and 2015,2019, respectively (see “Recent Acquisitions”). Teledyne funded the acquisitions primarily from borrowings under its credit facilities, issuance of senior notes and term loans, the issuance of Teledyne common stock and cash on hand. For all acquisitions, the results of operations and cash flows are included in our consolidated financial statements from the date of each respective acquisition. Most of e2v’s operations are included in the Digital Imaging and Aerospace and Defense Electronics segments. The Instrumentation segment includes a small portion of e2v’s operations. The CARIS and ICM acquisitions are part of the Digital Imaging segment. All other acquisitions in 2017, 2016 and 2015 are part of the Instrumentation segment.
The following table shows the purchase price (net of cash acquired), goodwill acquired and intangible assets acquired for the acquisitions and other investments made in 20172021 and 20162020 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | Acquisition | | Acquisition date | | Consideration Transferred(a) | | Goodwill Acquired | | Acquired Intangible Assets | FLIR | | May 14, 2021 | | $ | 7,620.9 | | | $ | 5,905.5 | | | $ | 2,490.0 | | | | | | | | | | | | | | | | | | | | (a) Net of cash acquired. The consideration included approximately $3.9 billion of Teledyne shares issued to existing shareholders of the acquired company. This $3.9 billion of equity consideration is a non-cash transaction. An immaterial portion of the cash consideration for certain vested FLIR restricted stock awards was deferred at the election of the award holder and will be paid out in future periods. |
| | | | | | | | | | | | | | | | | | 2017 | Acquisition | | Acquisition Date | | Cash Paid | | Goodwill Acquired | | Acquired Intangible Assets | e2v | | March 28, 2017 | | $ | 740.6 |
| | $ | 490.4 |
| | $ | 172.3 |
| SSI | | July 20, 2017 | | 31.3 |
| | 13.8 |
| | 9.3 |
| Other investments | | | | 2.2 |
| | 0.6 |
| | 0.4 |
| | | | | $ | 774.1 |
| | $ | 504.8 |
| | $ | 182.0 |
| | | | | | | | | | | | 2016 | Acquisition | | Acquisition Date | | Cash Paid (a) | | Goodwill Acquired | | Acquired Intangible Assets | Frontline | | April 6, 2016 | | $ | 13.7 |
| | $ | 11.3 |
| | $ | 2.3 |
| Quantum Data | | April 15, 2016 | | 17.3 |
| | 10.7 |
| | 5.4 |
| CARIS | | May 3, 2016 | | 26.2 |
| | 22.2 |
| | 3.6 |
| IN USA | | November 2, 2016 | | 10.2 |
| | 6.3 |
| | 3.0 |
| Hanson Research | | December 6, 2016 | | 25.0 |
| | 13.5 |
| | 8.4 |
| Other investments | | | | 1.0 |
| | — |
| | — |
| | | | | $ | 93.4 |
| | $ | 64.0 |
| | $ | 22.7 |
| (a) net of any cash acquired and any purchase price adjustments. | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | Acquisition | | Acquisition date | | Cash Paid (a) | | Goodwill Acquired | | Acquired Intangible Assets | OakGate Technology, Inc. | | January 5, 2020 | | $ | 28.5 | | | $ | 16.9 | | | $ | 7.0 | | | | | | | | | | | Purchase price adjustment - Micralyne Inc. (acquired in 2019) | | | | 0.5 | | | — | | | — | | Total | | | | $ | 29.0 | | | $ | 16.9 | | | $ | 7.0 | | (a) Net of cash acquired . | | | | | | | | | | | | | | | | | |
Goodwill resulting from the acquisitions of SSI, Frontline, Quantum Data, IN USAOakGate and CARIS will be deductible for tax purposes. Goodwill resulting from theMicralyne acquisitions of e2v and Hanson Research will not be deductible for tax purposes. Financing Activities Financing activities for 20172021 reflected net proceeds from debt of $393.7$2,834.2 million, compared with net payments on debt of $163.1$98.1 million in 20162020 and net proceeds from debt of $77.4$108.8 million for 2015. Financing activities for 2017 reflected net borrowings from the $750.0 million credit facility of $165.0 million and the proceeds from a $100.0 million term loan and the proceeds from the private placement of €250.0 million of senior unsecured notes. Financing activities in 2016 also included the payment of $11.6 million for an option contract in connection with the e2v acquisition. In 2015, the Company issued $125.0 million of senior unsecured notes. 2019. Fiscal years 2017, 20162021, 2020 and 20152019 reflect proceeds from the exercise of stock options of $24.9$25.4 million, $36.3 million and $34.6 million, respectively. In the first quarter of 2021, Teledyne completed various financing activities related to the then pending acquisition of FLIR. These activities included entering into a $4.5 billion short term stand-by bridge facility on January 4, 2021, as required by the definitive agreement, resulting in debt expense of $17.2 million. In addition, on March 17, 2021 Teledyne called $493.3 million of existing fixed rate senior notes and incurred debt extinguishment expenses of $13.4 million, which is included in interest and debt expense, net. On March 22, 2021, Teledyne completed all permanent financing for the acquisition of FLIR and terminated the $4.5 billion stand-by bridge facility. The permanent financing consists of $3.0 billion investment-grade bonds (the “Notes”), $36.1including $300.0 million aggregate principal amount of 0.65% Notes due 2023, $450.0 million aggregate principal amount of 0.95% Notes due 2024, $450.0 million aggregate principal amount of 1.60% Notes due 2026, $700.0 million aggregate principal amount of 2.25% Notes due 2028 and $19.0$1.1 billion aggregate principal amount of 2.75% Notes due 2031. Teledyne may redeem the $450.0 million, respectively. Financing activities for 2015 also reflected the repurchase of common stock of $243.8 million. Share repurchases totaled 2,561,815 shares0.95% Notes due 2024 at any time or from time to time, in 2015. No repurchases were made in 2017whole or in 2016. See Note 8part, at the Company’s option, from and after April 1, 2022, at a redemption price equal to our Consolidated Financial Statements100% of the principal amount of the Notes redeemed. In addition, we guaranteed FLIR’s $500.0 million, 2.50% Fixed Rate Senior Notes due August 2030.
Previously on March 4, 2021, Teledyne entered into a $1.0 billion Term Loan Credit Agreement (maturing May 2026) and an Amended and Restated Credit Agreement (maturing March 2026) with capacity of $1.15 billion. The terms of the $1.0 billion Term Loan Credit Agreement allow for additional information about our stock repurchase program.prepayments, at the Company’s option, at any time or from time to time, in whole or in part without premium or penalty. Teledyne used the proceeds from the Notes together with the proceeds from the $1.0 billion Term Loan Credit Agreement and cash on hand to pay the cash portion of the consideration for the FLIR acquisition and refinance certain existing debt. Other Matters Pension Plans Teledyne has atwo domestic qualified defined benefit pension planplans covering substantially all U.S. employees hired before January 1, 2004, or approximately 13%6% of Teledyne’s active employees as of December 31, 2017.January 2, 2022. As of January 1, 2004, new U.S. hires participate in a domestic defined contribution plan. In 2017, 20162021, 2020 and 2015, Teledyne’s2019, Teledyne was not required, and did not make any cash contributions to the domestic pension plan was over 100% funded, thus no cash contributions were made.plans. For the Company’s domestic qualified defined benefit pension plan,plans, the discount rate for 20182022 will decreaseincrease to 4.02%an average of 2.97% from 4.54%2.64% in 2017.2021. The Company also has several smallersmall non-qualified domestic and foreign-based defined benefit pension plans. Income Taxes Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense. On a provisional basis, weWe intend to reinvest indefinitely the earnings of our material foreign subsidiaries in our operations outside of the United States. The cash that the Company'sCompany’s foreign subsidiaries hold for indefinite reinvestment is generally used to finance foreign operations and investments, including foreign acquisitions. We estimate that future domestic cash generation will be sufficient to meet future domestic cash requirements. Due to the Tax Act, U.S. federal and applicable state income taxes have been accrued for the deemed repatriation.repatriations. At December 31, 2017,January 2, 2022, the amount of undistributed foreign
earnings was $324.3$619.8 million, for which we have not recorded a deferred tax liability of approximately $1.4$1.3 million for state corporate income taxes which would be due if reinvested foreign earnings were repatriated. Should we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that we would no longer indefinitely reinvest the earnings outside the United States. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amount in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. Based on the Company’s history of operating earnings, expectations of future operating earnings and potential tax planning strategies, management believes that it is possible that some portion of deferred taxes will not be realized as a future tax benefit and therefore has recorded a valuation allowance. We file income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. The Company has substantially concluded on all U.S. federal income tax matters for all years through 2013, United Kingdom and France income tax matters for all years through 2014 and2011, Canadian income tax matters for all years through 2009.2012, Swedish income tax matters for all years through 2011, Norwegian income tax matters for all years through 2016, Belgian income tax matters for all years through 2018, French income tax matters for all years through 2018 and United Kingdom income tax matters for all years through 2019. Costs and Pricing Inflationary trendsInflation has been rising in recent years have been moderate.the markets in which we operate. Current inventory costs, the increasing costs of labor, materials, equipment and other costs are considered in establishing sales pricing policies. The Company emphasizes cost containment and cost reductions in all aspects of its business.
Hedging Activities and Market Risk Disclosures Teledyne transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. The Company’sCompany’s primary foreign currency risk objective is to protect the United StatesU. S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars for our Canadian companies, including DALSA and in British pounds for our UK companies, including e2v.U.K. companies. These contracts are designated and qualify as cash flow hedges. The Company has converted a USU.S. dollar denominated, variable rate and fixed
rate debt obligationobligations of a European subsidiary, into a euro fixed rate obligationobligations using a receive-float,receive float, pay fixed cross currency swap, and a receive fixed, pay fixed cross currency swap. ThisThese cross currency swaps are designated as cash flow hedges. In addition, the Company has converted domestic U.S. variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap. The interest rate swap is also designated as a cash flow hedge. The effectiveness of the cash flow hedge forward contracts, excluding time value,the cross currency swap hedges, and the interest rate swap cash flow hedge is assessed prospectively and retrospectively on a monthly basis using regression analysis, as well as using other timing and probability criteria. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedges and must be highly effective in offsetting changes to future cash flows on hedged transactions. The effective portion of the cash flow hedge forward contracts’ gains or losses resulting from changes in the fair value of these hedges is initially reported, net of tax, as a component of accumulated other comprehensive income/(loss) (“AOCI”(“AOCI”) in stockholders’ equity until the underlying hedged item is reflected in our consolidated statements of income, at which time the effective amount in AOCI is reclassified to cost of salesrevenue in our consolidated statements of income. For the cross currency swap and interest rate cash flow hedges, effective amounts are recorded in AOCI, and reclassified into interest expense in the consolidated statements of income. In addition, for the cross currency swaps an amount is reclassified from AOCI to other income and expense each reporting period, to offset the earnings impact of the remeasurement of the hedged liabilities. Net deferred gainslosses recorded in AOCI, net of tax, for forward contracts that will mature in the next 12 months total $3.2$0.7 million. These gainslosses are expected to be offset by anticipated lossesgains in the value of the forecasted underlying hedged item. Amounts related to the cross currency swaps and interest rate swap expected to be reclassified from AOCI into income in the coming 12 months total $2.2$2.8 million. In the event that the gains or losses in AOCI are deemed to be ineffective, the ineffective portion of gains or losses resulting from changes in fair value, if any, is reclassified to other income and expense. In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or losses on the related cash flow hedges will be reclassified from AOCI to other income and expense. During the current reporting period, all forecasted transactions occurred and, therefore, there were no such gains or losses reclassified to other income and expense. expense, due to missed forecasts.
As of December 31, 2017,January 2, 2022, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling $80.6$148.2 million. These foreign currency forward contracts have maturities ranging from March 20182022 to February 2019. e2v2023. Teledyne had foreign currency forward contracts designated as cash flow hedges to buy British pounds and to sell U.S. dollars totaling $0.6$18.9 million. These foreign currency forward contracts have maturities ranging from March 20182022 to April 2018. Together these contracts had a fair value of $3.8 million. February 2023. The cross currency swap hasswaps have notional amounts of $93.0€113.0 million euros equivalent to $100.0and $125.0 million, and €135.0 million and $150.0 million, and mature in March 2023 and October 2024, respectively. The interest rate swap has a notional amount of $125.0 million and matures in October 2019.March 2023.
In addition, the Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. As of December 31, 2017,January 2, 2022, Teledyne primarily had foreign currency contracts of this type in the following currency pairs (in millions): | | | | | | | | | | | | | | | | | | | Contracts to Buy | | Contracts to Sell | Currency | Amount | | Currency | Amount | Canadian Dollars | C$ | 169.4 | | | U.S. Dollars | US$ | 132.0 | | Euros | € | 147.3 | | | U.S. Dollars | US$ | 167.1 | | Euros | € | 33.5 | | | Canadian Dollars | C$ | 48.4 | | | | | | | Great Britain Pounds | £ | 59.2 | | | U.S. Dollars | US$ | 78.9 | | | | | | | | | | | | U.S. Dollars | US$ | 31.0 | | | Swedish Krona | kr | 280.1 | | | | | | | Danish Krone | Kr. | 395.3 | | | U.S. Dollars | US$ | 60.2 | | Swedish Krona | kr | 355.7 | | | Euros | € | 35.0 | | Norwegian Krone | kr | 228.0 | | | Swedish Krona | kr | 227.1 | | Norwegian Krone | kr | 78.9 | | | U.S. Dollars | US$ | 8.6 | |
| | | | | | | | | | Contracts to Buy | | Contracts to Sell | Currency | Amount | | Currency | Amount | Canadian Dollars | C$ | 165.7 |
| | U.S. Dollars | US$ | 128.4 |
| Euros | € | 20.7 |
| | U.S. Dollars | US$ | 24.8 |
| Great Britain Pounds | £ | 1.5 |
| | Australian Dollars | A$ | 2.7 |
| Great Britain Pounds | £ | 70.3 |
| | U.S. Dollars | US$ | 94.6 |
| Canadian Dollars | C$ | 7.6 |
| | Euros | € | 5.0 |
| U.S. Dollars | US$ | 0.9 |
| | Japanese Yen | ¥ | 100.0 |
| Singapore Dollars | S$ | 2.0 |
| | U.S. Dollars | US$ | 1.5 |
| Danish Krone | Kr. | 44.8 |
| | U.S. Dollars | US$ | 7.2 |
| Swedish Krone | kr | 16.5 |
| | Great Britain Pounds | £ | 1.4 |
| Swiss Franc | Fr. | 1.8 |
| | U.S. Dollars | US$ | 1.8 |
| Euros | € | 29.9 |
| | Great Britain Pounds | £ | 26.3 |
|
The above table includes non-designated hedges derived from terms contained in triggered or previously designated cash flow hedges. These contracts had a positive fair value of $3.8$1.6 million at December 31, 2017.January 2, 2022. The gains and losses on these derivatives which are not designated as hedging instruments, are intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings. All derivatives are recorded on the balance sheet at fair value. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. Teledyne does not use foreign currency forward contracts for speculative or trading purposes. Notwithstanding our efforts to mitigate portions of our foreign currency exchange rate risks, there can be no assurance that our hedging activities will adequately protect us against the risks associated with foreign currency fluctuations. A
hypothetical 10 percent price change of the U.S. dollar from its value at December 31, 2017,January 2, 2022, would result in a decrease or increase in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars by approximately $8.1$14.8 million. A hypothetical 10 percent price change in the U.S. dollar from its value at December 31, 2017January 2, 2022 would result in a decrease in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy British Pounds and to sell U.S. dollars by approximately $1.9 million. A hypothetical 10 percent price change in the U.S. dollar from its value at January 2, 2022 would result in a decrease or increase in the fair value of our Euro/U.S. Dollar cross currency swaps designated as cash flow hedges by approximately $28.7 million. A hypothetical 100 basis point increase in U.S. interest rates at January 3, 2021 would result in an increase in the fair value of our U.S. Dollar interest rate swap designated as a cash flow hedge by approximately $10.2$1.4 million, while a 100 basis point decrease would result in a decrease in its fair value of $0.8 million.
Borrowings under our credit facility are at fixed rates that vary with the term and timing of each loan under the facility. Loans under the facility typically have terms of one, two, three or six months and the interest rate for each such loan is subject to change if the loan is continued or converted following the applicable maturity date. Interest rates are also subject to change based on our debt to earnings before interest, taxes, depreciation and amortization ratio. As of December 31, 2017,January 2, 2022, we had$165.0had $125.0 million outstanding under our $750.0 million$1.15 billion credit facility. Any borrowings under the Company’s revolving credit linefacility are based on a fluctuating market interest rate and, consequently, the fair value of any outstanding debt should not be affected materially by changes in market interest rates. We believe that adequate controls are in place to monitor any hedging activities. Our primary exposure to market risk relates to changes in interest rates and foreign currency exchange rates. We periodically evaluate these risks and have taken measures to mitigate these risks. We own assets and operate facilities in countries that have been politically stable.
Environmental We are subject to various federal, state, local and international environmental laws and regulations which require that we investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. These include sites at which Teledyne has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and comparable state laws. We are currently involved in the investigation and remediation of a number of sites. Reserves for environmental investigation and remediation totaled $5.1$6.3 million at December 31, 2017, and $7.0$6.5 million atas of January 1, 2017.2, 2022 and January 3, 2021, respectively. As investigation and remediation of these sites proceed and new information is received, the Company will adjust accruals to reflect new information. Based on current information, we do not believe that future environmental costs, in excess of those already accrued, will materially and adversely affect our financial condition or liquidity. See also our environmental risk factor disclosure beginning on page 2516 and Notes 2 and 14 to our of the Notes to Consolidated Financial Statements.
Government Contracts We perform work on a number of contracts with the U.S. Department of Defense and other agencies and departments of the U.S. Government including sub-contracts with government prime contractors. Sales under these contracts with the U.S. Government, which included contracts with the U.S. Department of Defense, were approximately 26% of total net sales in both 2021 and 2020 and 24% of total net sales in 2017, 27% of total sales in 2016 and 26% of total sales in 2015.2019. For a summary of sales to the U.S. Government by segment, see Note 12 to ourof the Notes to Consolidated Financial Statements. Sales to the U.S. Department of Defense represented approximately 18%19%, 21%19% and 19%17% of total net sales for 2017, 20162021, 2020 and 2015,2019, respectively. Performance under government contracts has certain inherent risks that could have a material adverse effect on the Company’s business, results of operations and financial condition. Government contracts are conditioned upon the continuing availability of Congressional appropriations, which usually occursare made available on a fiscal year basis even though contract performance may take more than one year. See also our government contracts risks factor disclosure beginning on page 18.12. For information on accounts receivable from the U.S. Government, see Note 5 to ourof the Notes to Consolidated Financial Statements. Estimates and Reserves Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, we evaluate our estimates, including those related to product returns and replacements, allowance for doubtful accounts, inventories, intangible assets, income taxes, warranty obligations, pension and other postretirement benefits, long-term contracts, environmental, workers’ compensation and general liability, employee benefits and other contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances at the time, the results of which form the basis for making our judgments. Actual results may differ materially from these estimates under different assumptions or conditions. In some cases, such differences may be material. See also Critical Accounting Policies.Policies and Estimates.
The following table reflects significant reserves and valuation accounts, which are estimates and based on judgments as described above, at December 31, 2017,January 2, 2022, and January 1, 2017:3, 2021: | | | | | | | | | | | | | | | Reserves and Valuation Accounts (in millions): (a) | | 2021 | | 2020 | Allowance for doubtful accounts | | $ | 13.8 | | | $ | 12.3 | | | | | | | Workers’ compensation and general liability reserves (b) | | $ | 5.9 | | | $ | 6.2 | | | | | | | Environmental reserves (b) | | $ | 6.3 | | | $ | 6.5 | | Other accrued liability reserves (b) | | $ | 12.4 | | | $ | 12.9 | |
| | | | | | | | | | Reserves and Valuation Accounts (in millions): (a) | | 2017 | | 2016 |
| Allowance for doubtful accounts | | $ | 10.3 |
| | $ | 5.2 |
| Reduction to LIFO cost basis | | $ | 10.6 |
| | $ | 13.5 |
| Workers’ compensation and general liability reserves(b) | | $ | 9.7 |
| | $ | 9.3 |
| Environmental reserves(b) | | $ | 5.1 |
| | $ | 7.0 |
| Other accrued liability reserves(b) | | $ | 28.3 |
| | $ | 37.5 |
|
(a) This table should be read in conjunction with the Notes to Consolidated Financial Statements. (b) Includes both long-term and short-term reserves. Some of the Company’s products are subject to standard warranties and the Company provides for the estimated cost of product warranties. We regularly assess the adequacy of our pre-existing warranty liabilities and adjust amounts as necessary based on a review of historichistorical warranty experience with respect to the applicable business or products, as well as the length and actual terms of the warranties, which are typically one year. The product warranty reserve is included in current accrued liabilities and other long-term liabilities on the balance sheet. | | | | | | | | | | | | | | | | | | | | | Warranty Reserve (in millions): | | 2021 | | 2020 | | 2019 | Balance at beginning of year | | $ | 22.4 | | | $ | 24.8 | | | $ | 21.0 | | Product warranty expense | | 11.9 | | | 3.3 | | | 13.1 | | Deductions | | (10.1) | | | (8.2) | | | (14.2) | | Acquisitions | | 25.3 | | | 2.5 | | | 4.9 | | Balance at year-end | | $ | 49.5 | | | $ | 22.4 | | | $ | 24.8 | |
| | | | | | | | | | | | | | Warranty Reserve (in millions): | | 2017 | | 2016 | | 2015 | Balance at beginning of year | | $ | 18.4 |
| | $ | 17.1 |
| | $ | 18.5 |
| Accruals for product warranties charged to expense | | 6.0 |
| | 7.4 |
| | 6.1 |
| Cost of product warranty claims | | (6.4 | ) | | (6.7 | ) | | (7.7 | ) | Acquisitions | | 3.1 |
| | 0.6 |
| | 0.2 |
| Balance at year-end | | $ | 21.1 |
| | $ | 18.4 |
| | $ | 17.1 |
|
Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to the financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Our critical accounting policies are those that are reflective of significant judgment, complexity and uncertainty, and may potentially result in materially different results under different assumptions and conditions. We have identified the following as critical accounting policies: revenue recognition; accounting for pension plans; accounting for business combinations, goodwill and other long-livedacquired intangible assets; accounting for income taxes; and accounting for income taxes.pension plans. For additional discussion of the application of these and other accounting policies, see Note 2 of ourthe Notes to Consolidated Financial Statements. Revenue Recognition Revenue is recognized whenPrior to the earnings process is substantially complete and allacquisition of the following criteria are met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred or services have been rendered; 3) our price to our customer is fixed or determinable; and 4) collectability is reasonably assured.
We determine the appropriate method by which we recognize revenue by analyzing the terms and conditionsFLIR, approximately 40% of our contracts or arrangements entered intorevenue was recognized over time, with the remaining 60% of our customers.revenue recognized at a point in time. The majority of ourFLIR revenue relates to product sales and is recognized upon shipmentat a point in time. In future periods, we expect approximately 30% of revenue to be recognized over time, with the customer,remaining 70% recognized at fixed or determinable prices and with a reasonable assurance of collection, passage of titlepoint in time.
Revenue recognized over time relates primarily to the customer and fulfillment of all significant obligations. Revenue is recognized net of estimated sales returns and other allowances. The Company does not offer substantial sales incentives and credits to customers. The remaining revenue is generally associated with long-term contracts to design, develop andand/or manufacture highly engineered products used in both defense and commercial applications. The transaction price in these arrangements may include estimated amounts of variable consideration, including award fees, incentive fees, contract amounts not yet funded, or defense applications. Such contracts are generally accounted for using contract accounting, percentage-of-completion (“POC”) method. The Company’s standard terms of sale are FOB shipping point. For a small percentage of sales where titleother provisions that can either increase or decrease the transaction price. We estimate variable consideration at the amount to which we expect to be entitled, and risk of loss passes at destination point, and assuming all other criteria for revenue recognition are met,we include estimated amounts in the Company recognizes revenue upon deliverytransaction price to the customer. If anyextent it is probable that a significant obligationreversal of cumulative revenue recognized will not occur when the estimation uncertainty is resolved. The estimation of this variable consideration and determination of whether to include estimated amounts in the customer with respecttransaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to a sales transaction remains following shipment, revenue recognition is deferred until such obligations have been fulfilled. In general, our revenue arrangements do not involve acceptance provisions basedus. As control transfers continuously over time on customer specified acceptance criteria. In those circumstances when customer specified acceptance criteria exist, and if we cannot demonstrate that the system meets those specifications prior to the shipment, then revenue is deferred until customer acceptance is obtained.
We have a fewthese contracts, that require the Company to warehouse certain goods, for which revenue is recognized when all risks of loss is borne by the customer and all other criteria for revenue recognition are met.
We also have a small number of multiple elements arrangements (i.e., free product, training, installation, additional parts, etc.). If contract accounting does not apply, we allocate the contract price among the deliverables based on vendor-specific objective evidencethe extent of fair valueprogress towards completion of the performance obligation. The selection of the method to each element in the arrangement. If objectivemeasure progress towards completion requires judgment and reliable evidence of fair value of any element is not available, we use our best estimate of selling price for purposes of allocating the total arrangement consideration among the elements. Also, extended or non-customary warranties do not represent a significant portion of our revenue; however, when our revenue arrangements include an extended or non-customary warranty provision, the revenue is deferred and recognized ratably over the extended warranty period.
For contracts that require substantial performance over a long time period (generally one or more years), revenue is recorded under the POC method. We record net revenue and an estimated profit as work on our contracts progresses. The POC method for these contracts is dependentbased on the nature of the contractproducts or productsservices to be provided. DependingWe generally use the cost-to-cost measure of progress as this measure best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the contract, we may measurecost-to-cost method, the extent of progress towardtowards completion using the units-of-delivery method, cost-to-cost method or upon attainment of scheduled performance contract milestones which could be time, event or expense driven. For example, for cost-reimbursable contracts we use the cost-to-cost method to measure progress toward completion. Under the cost-to-cost method of accounting, we recognize revenue and an estimated profit as allowable costs are incurredis measured based on the proportion thatratio of costs incurred to date to the incurred costs bear to total estimated costs. Another example, for contracts that require us to provide a substantial numbercosts at completion of similar items, we record revenue and an estimated profit on a POC basis using units-of-delivery as the basis to measure progress toward completing the contract. Occasionally, it is appropriate to combine individual customer orders and treat them as one arrangement when the underlying agreement was reached with the customer for a single large project.performance obligation.
Accounting forFor over time contracts using cost-to-cost, we have an Estimate at Completion (“EAC”) process in which management reviews the POC methodprogress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue, anddetermining reasonably dependable cost estimates, and making assumptions for schedule and technical issues. Contract revenue may include estimated amounts not contractually agreed to by the customer, including price redetermination, cost or performance incentives (such as award and incentives fees), un-priced change orders, claims and requests for equitable adjustment. The POC method requires management’s judgment to make reasonably dependable cost estimates generally over a long time period. Since certain contracts extend over a longlonger period of time, the impact of revisions in cost and revenue estimates during the progress of work
may adjust the current period earnings onthrough a cumulative catch-up basis. This method recognizes, in the current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the
current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed at least quarterly. The percentage of Teledyne revenue recognized using any POC method was 28.6 % in 2017, 30.5% in 2016, and 31.2% in 2015. The net aggregate effects of changes in estimates on contracts accounted for under the POC accounting method for 2017 and 2016, were $7.5 million and $1.9 million of unfavorable operating income, respectively, and $3.1 million of favorable operating income for 2015. We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract estimates for 2017, 20162021, 2020 or 20152019 was material to the consolidated statements of income for such annual periods. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which providesrecognized at a single comprehensive model for entities to usepoint in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. We adopted the new guidance effective January 1, 2018. For a discussion of this new accounting standard see Note 2 of our Notes to Consolidated Financial Statements.
Pension Plans
Teledyne has a domestic qualified defined benefit pension plan covering substantially all U.S. employees hired before January 1, 2004, or approximately 13% of Teledyne’s active employees. As of January 1, 2004, new U.S. hires participate in a defined contribution plan only. The Company also has several smaller domestic and foreign-based defined benefit pension plans. At December 31, 2017, the benefit obligation for the domestic defined benefit pension plans totaled $812.3 million and the fair value of the net qualified plan assets totaled $896.0 million. At December 31, 2017, the benefit obligation for the foreign-based pension plans totaled $57.8 million and the fair value of the net plan assets totaled $46.7 million. The Company’s accounting for its defined benefit pension plans requires that amounts recognized in financial statements be determined on an actuarial basis, rather than as contributions are madetime relates primarily to the plan. In consultationsale of standard or minimally customized products, with our actuaries, we determinecontrol transferring to the appropriate assumptions for use in determining the liability for future pension benefits. Net actuarial gains or losses are amortized to expense on a plan-by-plan basis when they exceed the accounting corridor. The accounting corridor is a defined range within which amortization of net gains and losses is not required and is equal to 10 percent of the greater of the market related value of assets or benefit obligations. Gains or losses outside of the corridor are subject to amortization over our average employee future service period of approximately nine years. Significant assumptions used in determining the Company’s pension income or expense is the expected long-term rate of return on plan assets, participant mortality estimates, expected rates of increase in future compensation levels, employee turnover, as well as the assumed discount rate on pension obligations. The Company has assumed, basedcustomer generally upon the typestransfer of securities the domestic qualified pension plan assets are invested in and the long-term historical returns of these investments, that the long-term expected return on the domestic qualified pension plan assets will be 8.0% in 2018 and the assumed discount rate for determining benefit obligations will be 4.02% in 2018. The Company’s long-term expected return on the domestic qualified pension assets used in 2017 was 8.0% and the assumed discount rate used in 2017 was 4.54%. The actual rate of return on the domestic qualified pension plan assets was 15.7% in 2017 and 7.1% in 2016 for its domestic qualified pension plan. If the actual rate of return on pension assets is below the expected rate of return, the Company may be required to make additional contributions to the pension trust. At December 31, 2017, the domestic qualified pension plan is over-funded and contributions are not required. The Company did not make any cash contributions to its domestic qualified pension plan since 2013 when it made a voluntary pretax cash contribution of $83.0 million, before recovery from the U.S. Government. Each year beginning with 2014, the Society of Actuaries has released revised mortality tables, which updated life expectancy assumptions. In consideration of these tables, we updated the mortality assumptions used in determining our pension obligations. Our plan remains over-funded after the impact of the new mortality assumptions, as well as from changes to other relevant assumptions. At year-end 2017, the Company has a $229.5 million non-cash reduction to stockholders’ equity and a long-term additional liability of $366.3 million related to its pension plans. At year-end 2016, the Company had a $249.6 million non-cash reduction to stockholders’ equity and a long-term additional liability of $369.6 million related to its pension plans.
Differences in the discount rate and expected long-term rate of return on assets within the indicated range would have had the following impact on 2017 pension expense (in millions): | | | | | | | | | | | | 0.25 Percentage Point Increase | | 0.25 Percentage Point Decrease | Increase (decrease) to pension expense resulting from: | | | | | Change in discount rate | | $ | (1.4 | ) | | $ | 1.4 |
| Change in long-term rate of return on plan assets | | $ | (2.3 | ) | | $ | 2.3 |
|
title. See Note 112 of ourthe Notes to Consolidated Financial Statements for additional pensionrevenue recognition disclosures.
Business Combinations, Goodwill and Acquired Intangible Assets The results for all acquisitions are included in the Company’s consolidated financial statements from the date of each respective acquisition. Business acquisitions are accounted for under the acquisition method by assigning the purchase price to tangible and intangible assets acquired and liabilities assumed. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill. We determine the fair value of such assets and liabilities, generallyoften in consultation with third-party valuation advisors. Acquired intangible assets with finite lives are amortized over their estimated useful lives. Adjustments to fair value assessments are recorded to goodwill over the purchase price allocation period. Goodwill and acquired intangible assets with indefinite lives are not amortized. We review goodwill and acquired indefinite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company also performs an annual impairment test in the fourth quarter of each year. We test goodwill and acquired indefinite-lived intangible assets for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors. We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. For selected reporting units where we use the qualitative approach, we perform a qualitative evaluation of events and circumstances impacting the reporting unit to determine the likelihood of goodwill impairment. Based on that qualitative evaluation, if we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. Otherwise we perform a quantitative impairment tests completed in 2017, 2016 and 2015, the Company recorded $0.2 million, $1.0 million and $0.5 million impairment to acquired intangible assets, respectively. No impairment of goodwill was indicated in 2017, 2016 or 2015, based on the annual impairmenttest. We perform a quantitative test completed in the fourth quarter offor each year.reporting unit at least once every three years. For goodwill impairment testing using the Company estimatesquantitative approach, we estimate the fair value of the selected reporting units mainlyprimarily through usingthe use of a discounted cash flow model based on our best estimate of amounts and timing of future revenues and cash flows and our most recent business and strategic plans, and compares the estimated fair value to the carrying value of the reporting unit, including goodwill. The discounted cash flow model requires judgmental assumptions about projected revenue growth, future operating margins, discount rates and terminal values over a multi-year period. There are inherent uncertainties related to these assumptions and management’s judgment in applying them to the analysis of goodwill impairment. While the Company believes it haswe believe we have made reasonable estimates and assumptions to calculate the fair value of its reporting units, it is possible a material change could occur. If actual results are not consistent with management’s estimates and assumptions, goodwill may be overstated and a charge would need to be taken against net earnings. As of December 31, 2017, the Company had 12 reporting units for goodwill impairment testing. The carrying value of goodwill included in the Company’s individual reporting units ranges from $1.2 million to $687.6 million. The Company’s analysis in 2017 indicated that in all instances, the fair value of the Company’s reporting units exceeded their carrying values and consequently did not result in an impairment charge. The excess of the estimated fair value over the carrying value (expressed asWhen using a percentage of carrying value of the respective reporting unit) for each of the Company’s reporting units as of the fourth quarter of 2017, the annual testing date, ranged from approximately 29% to 2,124%.
Changesquantitative approach, changes in our projections used in the discounted cash flow model could affect the estimated fair value of certain of the Company’s reporting units and could result in a goodwill impairment charge in a future period. In order to evaluate the sensitivity of the fair value calculations used in the quantitative goodwill impairment test, the Company appliedwill apply a hypothetical 10% decrease to the fair values of each reporting unit subject to a quantitative impairment test and comparedcompare those values to the reporting unit carrying values. Based on this sensitivity analysis, the Company did not identify any goodwill impairment. Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our recorded goodwill, differences in assumptions may have a material effect on the results of our impairment analysis.
As of January 2, 2022, the Company had eleven reporting units for goodwill impairment testing. A qualitative test was performed for all reporting units in the four quarter of 2021. Excluding the FLIR reporting unit, the carrying value of goodwill included in the Company’s individual reporting units ranged from $20.4 million to $885.0 million on the most recent quantitative test date. While goodwill for the FLIR reporting unit is provisional during the measurement period, the provisional acquired goodwill balance is $5,905.5 million. The impairment test for indefinite-lived intangibles other than goodwill (primarily trademarks and trade names) consists of a comparison ofCompany’s analysis in 2021 indicated that in all instances, the fair value of the indefinite-lived intangible asset to theCompany’s reporting units exceeded their carrying value of the asset as of thevalues and consequently did not result in an impairment testing date. The Company estimates the fair value of its indefinite-lived intangibles using a discounted cash flow model based on our best estimate of amounts and timing of future revenues from our most recent business and strategic plans, and compares the estimated fair value to the carrying value of the asset.charge. Income Taxes IncomeWe make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and deferredjudgments occur in the calculation of tax credits, benefits and deductions, and in the calculation of certain tax assets and liabilities reflect management’s assessment of actual future taxes to be paid on items reflectedwhich arise from differences in the timing of recognition of revenue and expense for tax and financial statements. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. Uncertaintystatement purposes. In addition, uncertainty exists regarding tax positions taken in previously filed tax returns still under
examination and positions expected to be taken in the current year and future returns. Deferredreturns which may impact income tax assetsexpense. On a quarterly basis, we provide for income taxes based upon an estimated annual effective tax rate which is dependent on the geographic composition of worldwide earnings, tax regulations governing each region, availability of tax credits, and liabilities arise due to differences between the consolidated financial statement carrying amountseffectiveness of existing assets and liabilities and their respectiveour tax bases and tax carryforwards.planning strategies. Although we believe our income tax expense and deferred tax assets and liabilities areis reasonable, no assurance can be given that the final tax outcome will not be different from that which is reflected in our historical income tax provisions and accruals.provisions. To the extent that the final tax outcome is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. TheAn increase of 100 basis points in our nominal tax rate would have resulted in additional income tax provision for income taxes includes the impactfiscal year ended January 2, 2022, of uncertain$5.3 million. Deferred tax benefits that are considered appropriate, as well asassets and liabilities arise due to differences between the related
net interest.
consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax carryforwards. Significant management judgment is required in determining anywhether deferred tax assets will be realized in full or in part. When it is more-likely-than-not that all or some portion of deferred tax assets may not be realized, a valuation allowance recordedmust be established against the deferred tax assets. In assessing the need for a valuation allowance, we consider all available positive and negative evidence including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations across domestic and foreign jurisdictions. We recordestablish reserves for uncertain tax benefits onpositions when, despite the basisbelief that our tax positions are supportable, there remains uncertainty in a tax position taken in our filed tax returns or planned to be taken in a future tax return or claim. We follow a recognition and measurement approach, considering the facts, circumstances, and information available at the reporting date. Judgment is exercised in determining the level of evidence necessary and appropriate to support its assessment using all available information. The technical merits of a two-step process whereby (1)given tax position are derived from sources of authority in the tax law and their applicability to the facts and circumstances of the position. In measuring the tax position, we determine whetherconsider the amount and probabilities of the outcomes that could be realized upon settlement. When it is more likely than notmore-likely-than-not that thea tax positionsposition will be sustained, onwe record a liability for the basis of the technical merits of the positionsanticipated tax and (2) for those tax positions that meet the “more-likely-than-not” recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realizedinterest due upon ultimate settlement with a taxing authority. Unrecognized tax benefits, including accrued penalties and interest, increased $529.3 million from the related tax authority. On December 22, 2017, the Tax Cuts and Jobs Act was enacted. The Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering corporate income tax rates, implementing the territorial tax system and imposing a tax on deemed repatriation of non-U.S. earnings. As a result of the Tax Act, Teledyne incurred provisional charges of $4.7 million in the fourth quarter of 2017prior year, primarily due to the repatriation tax and the remeasurement of U.S. deferred tax assets and liabilities. In accordance with the Tax Act, the Company will elect to pay the repatriation tax liability over a period of eight years, with the first installment of $3.1 million due in 2018. The remainder of the tax liability is recorded in non-current income tax payable. The repatriation tax resulted in a net tax expense of $26.2 million and the remeasurement of U.S. deferred tax assets and liabilities resulted in a net tax benefit of $21.5 million. The impacts of the Tax Act may differ from this estimate, possibly materially (and the amount of the provisional charge may accordingly be adjusted over the course of 2018), due to changes in interpretations and assumptions Teledyne has made, guidance that may be issued, and actions Teledyne may take as a result of the Tax Act. These adjustments to the provisional charge related to the Tax Act will be recorded quarterly untilFLIR acquisition on May 14, 2021. During the computations are complete which is expected no later than the fourthfirst quarter of 2018.2022, we paid approximately $296.4 million related to an acquired uncertain tax position, refer to Note 3 of the Notes to Consolidated Financial Statements for additional detail. To the extent we prevail in matters for which reserves have been established or are required to pay amounts in excess of reserves, there could be a significant impact on our consolidated financial position and annual results of operations.An increase of 100 basis point increase in our nominal tax rate would have resulted in additional income tax provision for the fiscal year ended December 31, 2017, of $2.9 million. For a description of the Company’s tax accounting policies, refer to Note 2 and Note 10 of ourthe Notes to Consolidated Financial Statements.
Pension Plans The Company’s accounting for its defined benefit pension plans requires that amounts recognized in financial statements be determined on an actuarial basis, rather than as contributions are made to the plan. In consultation with our actuaries, we determine the appropriate assumptions for use in determining the liability for future pension benefits. Net actuarial gains or losses are amortized to expense on a plan-by-plan basis when they exceed the accounting corridor. The accounting corridor is a defined range within which amortization of net gains and losses is not required and is equal to 10 percent of the greater of the market related value of assets or benefit obligations. Gains or losses outside of the corridor are subject to amortization. For our plan which covers mostly inactive participants, gains and losses subject to amortization are amortized over the average participants future life expectancy which is approximately 17 years. This plan represents the majority of the pension obligations. For our other plan, gains and losses subject to amortization are amortized over the average employee future service period which is approximately nine years. Significant assumptions used in determining the our pension income or expense are the expected long-term rate of return on plan assets, participant mortality estimates, expected rates of increase in future compensation levels, employee turnover, as well as the assumed discount rate on pension obligations. Differences in the discount rate and expected long-term rate of return on assets within the indicated range would have had the following impact on 2021 pension expense (in millions): | | | | | | | | | | | | | | | | | 0.25 Percentage Point Increase | | 0.25 Percentage Point Decrease | Increase (decrease) to pension expense resulting from: | | | | | Change in discount rate | | $ | (0.2) | | | $ | 0.2 | | Change in long-term rate of return on plan assets | | $ | (2.1) | | | $ | 2.1 | |
See Note 11 of the Notes to Consolidated Financial Statements for additional pension disclosures.
Recent Accounting Standards For a discussion of recent accounting standards see Note 2 of ourthe Notes to Consolidated Financial Statements. Safe Harbor Cautionary Statement Regarding Forward-Looking Information This Management’s Discussion and Analysis of Financial Condition and Results of OperationAnnual Report on Form 10-K contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, directly and indirectly relating to earnings, growth opportunities, acquisitions and divestitures, product sales, capital expenditures, pension matters, stock option compensation expense, the credit facility, interest expense, severance and relocation costs, statements and goals relating to greenhouse gas emission reductions, environmental remediation cost, stock repurchases, taxes, exchange rate fluctuations and strategic plans. Forward-looking statements involve risks and uncertainties, are based on the current expectations of the management of Teledyne and are subject to uncertainty and changes in circumstances. All statements made in this Management’s Discussion and Analysis of Financial Condition and Results of OperationAnnual Report on Form 10-K that are not historical in nature should be considered forward-looking. Actual results could differ materially from these forward-looking statements. Many factors could change the anticipated results, including: ongoing challenges and uncertainties posed by the COVID pandemic for businesses and governments around the world, including production, supply, contractual and other disruptions, facility closures, furloughs and travel restrictions; the inability to achieve operating synergies with respect to the FLIR acquisition; changes in relevant tax and other laws; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages, higher inflation, including wage competition and higher shipping costs, and labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards; operating results of FLIR being lower than anticipated; disruptions in the global economy; customer and supplier bankruptcies; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; changes in the estimated impact of the Tax Act; and cuts to defense spending resulting from existing and future deficit reduction measures;measures or changes to U.S. and foreign government spending and budget priorities triggered by the COVID pandemic; impacts from the United Kingdom’s planned exit from the European Union; uncertainties related to the policies of the U.S. Presidential administration;Administration; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s export and tax matters; escalating economic and diplomatic tension between China and the United States; the ongoing conflict between Russia and Ukraine; threats to the security of our confidential and proprietary information, including cyber security threats.cybersecurity threats; natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint. Lower oil and natural gas prices, as well as instability in the Middle East or other oil producing regions, and new regulations or restrictions relating to energy production, including with respectthose implemented in response to hydraulic fracturingclimate change, could furthernegatively affect our businesses that supply the oil and gas industry. Increasing fuel costs couldContinued weakness in the commercial aerospace industry will negatively affect the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of ourthe Company’s pension assets. Information regarding the impact of the Tax Act consists of preliminary estimates which are forward-looking statements and are subject to change, possibly materially, as the company completes its financial statements. Information regarding the impact of the Tax Act is based on our current calculations, as well as our current interpretations, assumptions and expectations relating to the Tax Act, which are subject to change.
Changes in the policies of U.S. and foreign governments, including economic sanctions, could result, over time, in reductions or realignment in defense or other government spending and further changes in programs in which the Company participates.
While Teledyne’s growth strategy includes possible acquisitions, we cannot provide any assurance as to when, if or on what terms any acquisitions will be made. Acquisitions involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain key management and customers and achieve identified financial and operating synergies. There are additional risks associated with acquiring, owning and operating businesses outside of the United States, including those arising from U.S. and foreign government policy changes or actions and exchange rate fluctuations. We continue to take action to assure compliance with the internal controls, disclosure controls and other requirements of the Sarbanes-Oxley Act of 2002. While we believe our control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and may not be detected. Additional information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements is contained beginning on page 136 of this Form 10-K under the caption “Risk Factors; Cautionary Statement as to Forward-Looking Statements.” Forward-looking statements are generally accompanied by words such as “estimate”, “project”, “predict”, “believes” or “expect”, that convey the uncertainty of future events or outcomes. We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or otherwise.
| | | | | | Item 7A. Quantitative and Qualitative Disclosures About Market Risk |
The information required by this item is included in this Report on page 4736 under the caption “Other Matters - Hedging Activities; Market Risk Disclosures” of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.”
| | | | | | Item 8. | Financial Statements and Supplementary Data |
The information required by this item is included in this Report on pages 5945 through 100.85. See the “Index to Financial Statements and Related Information” on page 58.45.
| | | | | | Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None. | | | | | | Item 9A. | Controls and Procedures |
Disclosure Controls Teledyne’s disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that it files or submits, under the Securities Exchange Act of 1934, was recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to provide reasonable assurance that information required to be disclosed by us in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s Chairman, President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, with the participation and assistance of other members of management, have evaluated the effectiveness, as of December 31, 2017,January 2, 2022, of the Company’s “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended (“the Exchange Act”). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the disclosure controls and procedures as of December 31, 2017,January 2, 2022, are effective.
Internal Controls See Management Statement on page 5946 for management’s annual report on internal control over financial reporting. See Report of Independent Registered Public Accounting Firm on page 6047 for Deloitte & Touche LLP’s attestation report on the Report of Management on Teledyne Technologies Incorporated'sIncorporated’s Internal Control over Financial Reporting. There was no change in the Company’s “internal control over financial reporting” (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2017,January 2, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. There also were no material weaknesses identified for which corrective action needed to be taken.
Sarbanes-Oxley Disclosure Committee The Company’s Sarbanes-Oxley Disclosure Committee includes the following members: Carl W. Adams, Vice President, Business Risk Assurance Cynthia Belak, Vice President and Controller Stephen F. Blackwood, Senior Vice President, Strategic Sourcing, Tax and Treasurer Melanie S. Cibik, Senior Vice President, General Counsel, Chief Compliance Officer and Secretary Duncan Forsythe, Associate Vice President, Taxation Michael C. Lee, Director, Global Income Tax Accounting Brian A. Levan, Senior Director of Financial Reporting and Assistant Controller Susan L. Main, Senior Vice President and Chief Financial Officer S. Paul Sassalos, Associate Vice President, Associate General Counsel and Assistant Secretary Caleb B. Standafer,Jason VanWees, Vice Chairman
Tyler D. Vernon, Senior Director Taxation and Associate Treasurer Jason VanWees, Senior Vice President, Strategy and Mergers & Acquisitions
Tyler Vernon, Director, SEC/GAAP ComplianceAssistant Controller
Among its tasks, the Sarbanes-Oxley Disclosure Committee discusses and reviews disclosure issues to help us fulfill our disclosure obligations on a timely basis in accordance with SEC rules and regulations and is intended to be used as an additional resource for employees to raise questions regarding accounting, auditing, internal controls and disclosure matters. Our toll-free Ethics Help Line (1-877-666-6968) continues to be an alternative means to communicate concerns to the Company’s management.
| | | | | | Item 9B. | Other Information |
None.
| | | | | | Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
None PART III
Item 10. Directors, Executive Officers and Corporate Governance. In addition to the information set forth under the caption “Executive Management” beginning on page 10 in Part I of this Report, theThe information required by this item is set forth in the 20182022 Proxy Statement under the captions “Executive Management”, “Item 1 on Proxy Card - Election of Directors,” “Board Composition and Practices,” “Corporate Governance,” “Committees of Our Board of Directors - Audit Committee” and “Report of the Audit Committee” and “Stock Ownership - Sections 16(a) Beneficial Ownership Reporting Compliance.”. This information is incorporated herein by reference.
Item 11. Executive Compensation. The information required by this item is set forth in the 20182022 Proxy Statement under the captions “Executive and Director Compensation” “Compensation Committee Interlocks and Insider Participation” and “Personnel and Compensation Committee Report.” This information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Except for the table below, theThe information required by this item is set forth in the 20182022 Proxy Statement under the caption “Stock Ownership Information” and “Securities Authorized for Issuance Under Equity Compensation Plans” and is incorporated herein by reference. The following table summarizes information about our common stock that may be issued upon the exercise of options, warrant and rights under all of our equity compensation plans, as of December 31, 2017:
| | | | | | | | | | | | | | | Plan Category | Number of Securities to be issued upon Exercise of Outstanding Options, Warrants and Rights (a) | | Weighted-Average Exercise Price of Outstanding Options, Warrants or Rights (b) | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans [excluding securities reflected in column (a)] | | Equity compensation plans approved by security holders: | | | | | | | 1999 Incentive Plan(1) | 13,903 |
| | 50.79 |
| | — |
| | 1999 Non-Employee Director Stock Compensation Plan(1) | 272 |
| | 33.13 |
| | — |
| | 2002 Stock Incentive Plan(1) | 12,714 |
| | 52.66 |
| | — |
| | Amended and Restated 2008 Incentive Award Plan(2) | 910,368 |
| | 59.98 |
| | — |
| | Amended and Restated 2014 Incentive Award Plan(3) | 1,348,446 |
| (4 | ) | 100.40 |
| (5 | ) | 3,713,434 |
| (6 | ) | Employee Stock Purchase Plan(6) | — |
| | — |
| | 1,000,000 |
| (7 | ) | Equity Compensation plans not approved by security holders | — |
| | — |
| | — |
| | Total | 2,285,703 |
| | $ | 83.73 |
| | 4,713,434 |
| |
| | | 1) | The 1999 Incentive Plan, the 2002 Stock Incentive Plan and the 1999 Non-Employee Director Stock Compensation Plan terminated following stockholder approval of the 2008 Incentive Award Plan at our 2008 Annual Meeting of Stockholders. No additional awards may be granted under these plans. | 2) | No additional awards may be granted under the Amended and Restated 2008 Incentive Award Plan (2008 Plan). Any shares available under the 2008 Plan on the effective date of the 2014 Plan or that were subject to awards under the 2008 Plan that were forfeited or lapsed following the effective date of the 2014 Plan are automatically transferred to the Amended and Restated 2014 Plan. | 3) | On April 26, 2017, the stockholders of Teledyne approved the amendment and restatement of the 2014 Incentive Award Plan, which increased the shares available by 2,500,000. | 4) | Does not include (i) 93,642 shares of stock reserved for issuance under the 2015-2017 cycle of our PSP, of which 6,481 shares were issued as part of the first installment payment in February 2018 and; and (ii) 22,682 shares subject to restricted stock unit awards issued to employees and directors. | 5) | Does not include the securities described in footnote (4) above, which do not have an exercise price
.
| 6) | The number of shares available for future issuance (i) includes shares transferred from the 2008 Plan (see footnote (2) above); (ii) assumes the issuance of (i) 93,642 shares of stock reserved for issuance under the 2015-2017 cycle of our PSP, of which 6,481 shares were issued as part of the first installment payment in February 2018, and; and (ii) 22,682 shares subject to restricted stock unit awards issued to employees and directors.
| 7) | We maintain an Employee Stock Purchase Plan (commonly known as The Stock Advantage Plan) for eligible employees. It enables employees to invest in our common stock through automatic, after-tax payroll deductions, within specified limits. We add a 25% matching Company contribution up to $1,200 annually. Our contribution is currently paid in cash and the plan administrator purchases shares of our common stock in the open market. Historically, all shares used to fund the Employee Stock Purchase Plan have been purchased on the open market and no new shares have been issued.
|
Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item is set forth in the 20182022 Proxy Statement under the captions “Corporate Governance” and “Certain Transactions” and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services. The information required by this item is set forth in the 20182022 Proxy Statement under the captions “Fees Billed by Independent Registered Public Accounting Firm” and “Audit Committee Pre-Approval Policies” under “Item 2 on Proxy Card - Ratification of Appointment of Independent Registered Public Accounting Firm” and is incorporated herein by reference.
PART IV | | | | | | Item 15. | Exhibits and Financial Statement Schedules |
(a) Exhibits and Financial Statement Schedules: (1) Financial Statements See the “Index to Financial Statements and Related Information” on page 5845 of this Report, which is incorporated herein by reference. (2) Financial Statement Schedules See Schedule II captioned “Valuation and Qualifying Accounts” on page 10085 of this Report, which is incorporated herein by reference. (3) Exhibits A list of exhibits filed with this Form 10-K or incorporated by reference is found in the Exhibit Index immediately following the certifications of this Report and incorporated herein by reference. (b) Exhibits: See Item 15(a)(3) above. (c) Financial Schedules: See Item 15(a)(2) above.
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION | | | | | | | | | Page | Financial Statements and Related Information: | | | |
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| | |
| | |
| Financial Statement Schedule: | | | 100 |
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MANAGEMENT STATEMENT
RESPONSIBILITY FOR PREPARATION OF THE FINANCIAL STATEMENTS AND ESTABLISHING AND MAINTAINING ADEQUATE INTERNAL CONTROL OVER FINANCIAL REPORTING We are responsible for the preparation of the financial statements included in this Annual Report. The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and include amounts that are based on the best estimates and judgments of management. The other financial information contained in this Annual Report is consistent with the financial statements. Our internal control system is designed to provide reasonable assurance concerning the reliability of the financial data used in the preparation of Teledyne financial statements, as well as to safeguard the Company’s assets from unauthorized use or disposition. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement presentation. REPORT OF MANAGEMENT ON TELEDYNE TECHNOLOGIES INCORPORATED’S INTERNAL CONTROL OVER FINANCIAL REPORTING We are also responsible for establishing and maintaining adequate internal control over financial reporting. We conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.January 2, 2022. In making this evaluation, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria) in Internal Control - Integrated Framework.Framework. Our evaluation included reviewing the documentation of our controls, evaluating the design effectiveness of our controls and testing their operating effectiveness. Our evaluation did not include assessing the effectiveness of internal control over financial reporting forexcluded the e2v acquisition andinternal control activities of FLIR Systems, Inc ("FLIR"), which we acquired in May 2021. We have included the SSI assetfinancial results of this acquisition in 2017. These acquisitions, which are included in the 2017our consolidated financial statements from the date of the Company, constitutedacquisition. Total assets (excluding goodwill and intangible assets) and total net sales subject to FLIR’s internal control over financial reporting represented approximately 26%11% and 28% of our consolidated total assets 11% ofand total revenues and 12% of net income of the Companysales as of and for the fiscal year ended December 31, 2017.January 2, 2022, respectively. We did not assess the effectiveness of internal control over financial reporting at thesethis newly acquired entitiesentity due to the insufficient time between the date acquired and year-end and the complexity associated with assessing internal controls during integration efforts making the process impractical. Based on this evaluation we believe that, as of December 31, 2017,January 2, 2022, the Company’s internal controls over financial reporting were effective. Deloitte and Touche LLP, our independent registered public accounting firm, has issued its report on the effectiveness of Teledyne’s internal control over financial reporting. Their report appears on page 6047 of this Annual Report.
Date: February 27, 201825, 2022 | | | | | /s/ ROBERT MEHRABIAN | Robert Mehrabian | Chairman, President and Chief Executive Officer |
Date: February 27, 201825, 2022 | | | | | /s/ SUSAN L. MAIN | Susan L. Main | Senior Vice President and Chief Financial Officer |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors and Stockholders of Teledyne Technologies Incorporated Thousand Oaks, California Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Teledyne Technologies Incorporated and subsidiaries (the “Company”) as of December 31, 2017,January 2, 2022, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,January 2, 2022, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2017,January 2, 2022, of the Company and our report dated February 27, 2018,25, 2022, expressed an unqualified opinion on those financial statements and financial statement schedule. As described in the Report of Management on Teledyne Technologies Incorporated’s Internal Control Overover Financial Reporting, management excluded from its assessment the internal control over financial reporting for e2v technologies plc acquisition and the Scientificat FLIR Systems, Inc. asset acquisition (“the 2017 acquisitions”), which werewas acquired in March and July, respectively,on May 14, 2021, and whose financial statements (excluding goodwill and intangibles assets) constitute approximately 26%11% of total assets 11% of total revenues and 12%28% of net incomesales of the consolidated financial statement amounts as of and for the year ended December 31, 2017.January 2, 2022. Accordingly, our audit did not include the internal control over financial reporting for the 2017 acquisitions.at FLIR Systems, Inc. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Teledyne Technologies Incorporated’s Internal Control Overover Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting 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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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/ Deloitte & Touche LLP Los Angeles, California February 27, 201825, 2022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors and Stockholders of Teledyne Technologies Incorporated Thousand Oaks, California
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Teledyne Technologies Incorporated and subsidiaries (the “Company”) as of December 31, 2017January 2, 2022 and January 1, 2017,3, 2021, the related consolidated statements of income, comprehensive income, shareholders'stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2017, January 1, 2017, and January 3, 2016,2, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017January 2, 2022 and January 1, 20173, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, January 1, 2017, and January 3, 2016,2, 2022, in conformity with the accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017,January 2, 2022, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2018,25, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Acquisitions —FLIR Systems, Inc. – Intangible Assets – Refer to Notes 2 and 3 to the financial statements Critical Audit Matter Description The Company completed the acquisition of FLIR Systems, Inc. (“FLIR”) for total consideration of $7.9 billion on May 14, 2021. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including acquired intangible assets of $2.49 billion primarily from proprietary technology, trademarks, and customer list/relationships. Management estimated the fair value of proprietary technology using the discounted cash flows approach, trademarks using the relief from royalty approach, and customer list/relationships using the multi-period excess earnings approach. The provisional fair value determination of the acquired intangible assets required management to make significant estimates and assumptions related to future revenue projections. Given the fair value determination of the acquired intangibles for FLIR requires management to make significant estimates and assumptions related to the forecasts of future revenue projections, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to revenue projections used to estimate the fair value of the intangible assets acquired included the following, among others: •We tested the effectiveness of management’s controls over the revenue projections used to estimate the fair value of the intangible assets acquired. •We evaluated the reasonableness of the revenue projections by comparing them to (1) FLIR and third-party historical financial data, (2) current economic factors and analyst reports of FLIR and companies in its peer group, (3) the Company’s similar historical acquisitions and reporting units. •We performed a sensitivity analysis by varying projected revenue assumptions. •With the assistance of our fair value specialists, we performed an analysis comparing applicable industry forecasted long-term revenue growth rates to management’s projected revenues used within the valuation models.
Acquisitions —FLIR Systems, Inc. – Uncertain Tax Positions – Refer to Notes 2 and 3 and 10 to the financial statements Critical Audit Matter Description The Company completed the acquisition of FLIR for total consideration of $7.9 billion on May 14, 2021. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the Company evaluated the FLIR historical domestic and international tax positions to determine whether the ultimate tax determinations are uncertain and therefore represent a liability assumed in the acquisition. A tax position is recorded when a determination is made that it is more likely than not that the position is sustainable upon examination based on the technical merits of the position. We identified the Company’s assessment of technical merits evaluated in the more likely than not analysis for certain uncertain tax positions in foreign taxing jurisdictions in which FLIR operates and the resulting existence as of the acquisition date as a critical audit matter. This critical audit matter required challenging auditor judgment due to the nature and subjectivity of the applicable tax rules and/or their interpretation in each jurisdiction, as well as evaluating whether the information used in the Company’s analysis was known or knowable as of the acquisition date. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to (1) assessment of the technical merits evaluated in the more likely than not analysis for uncertain tax positions, and (2) existence of such uncertain tax positions as of the acquisition date included the following, among others: a.We tested the effectiveness of management’s controls over the determination of meeting the more likely than not threshold on potential uncertain tax positions and resulting existence as of the acquisition date. b.We evaluated the information used in Management’s assessment of the technical merits of the Company’s positions to determine whether such information was known or knowable as of the acquisition date and therefore should be recorded as a liability assumed as part of purchase accounting. c.We inspected external information and correspondence from foreign tax authorities on open tax examinations and tax assessments issued d.We inquired with external counsel through confirmations to understand matters, status, and facts relevant to tax positions. e.We also involved international tax professionals with specialized skills and knowledge in foreign tax law, who assisted in: –inspecting management prepared tax positions and external tax opinion documentation and comparing to interpretation of tax law –performing independent evaluation of tax positions and assumptions and comparing the results to the Company’s position, challenging the need for an uncertain tax position liability and disclosure
/s/ Deloitte & Touche LLP Los Angeles, California February 27, 201825, 2022
We have served as the Company's auditor since 2015.
TELEDYNE TECHNOLOGIES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per-share amounts) | | | | | | | | | | | | | | | | For the Fiscal Year | | | 2017 | | 2016 | | 2015 | Net Sales | | $ | 2,603.8 |
| | $ | 2,149.9 |
| | $ | 2,298.1 |
| Costs and expenses | | | | | | | Cost of sales | | 1,612.2 |
| | 1,318.0 |
| | 1,427.8 |
| Selling, general and administrative expenses | | 656.0 |
| | 578.1 |
| | 588.6 |
| Total costs and expenses | | 2,268.2 |
| | 1,896.1 |
| | 2,016.4 |
| Operating income | | 335.6 |
| | 253.8 |
| | 281.7 |
| Interest and debt expense, net | | (33.1 | ) | | (23.2 | ) | | (23.9 | ) | Other income/(expense), net | | (15.5 | ) | | 10.7 |
| | 0.4 |
| Income before income taxes | | 287.0 |
| | 241.3 |
| | 258.2 |
| Provision for income taxes | | 59.8 |
| | 50.4 |
| | 62.7 |
| Net income | | 227.2 |
| | 190.9 |
| | 195.5 |
| Noncontrolling interest | | — |
| | — |
| | 0.3 |
| Net income attributable to Teledyne | | $ | 227.2 |
| | $ | 190.9 |
| | $ | 195.8 |
| | | | | | | | Basic earnings per common share | | $ | 6.45 |
| | $ | 5.52 |
| | $ | 5.55 |
| Weighted average common shares outstanding | | 35.2 |
| | 34.6 |
| | 35.3 |
| | | | | | | | Diluted earnings per common share | | $ | 6.26 |
| | $ | 5.37 |
| | $ | 5.44 |
| Weighted average diluted common shares outstanding | | 36.3 |
| | 35.5 |
| | 36.0 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Fiscal Year | | | | | | | 2021 | | 2020 | | 2019 | | | | | | | | | Net sales | | $ | 4,614.3 | | | $ | 3,086.2 | | | $ | 3,163.6 | | | | | | | | | | Costs and expenses | | | | | | | | | | | | | | | Cost of sales | | 2,772.9 | | | 1,905.3 | | | 1,920.3 | | | | | | | | | | Selling, general and administrative expenses | | 1,067.8 | | | 662.0 | | | 715.1 | | | | | | | | | | Acquired intangible asset amortization | | 149.3 | | | 38.8 | | | 36.5 | | | | | | | | | | Total costs and expenses | | 3,990.0 | | | 2,606.1 | | | 2,671.9 | | | | | | | | | | Operating income | | 624.3 | | | 480.1 | | | 491.7 | | | | | | | | | | Interest and debt expense, net | | (104.2) | | | (15.3) | | | (21.0) | | | | | | | | | | Non-service retirement benefit income | | 11.2 | | | 12.1 | | | 8.0 | | | | | | | | | | Other income (expense), net | | 2.5 | | | (7.2) | | | (5.0) | | | | | | | | | | Income before income taxes | | 533.8 | | | 469.7 | | | 473.7 | | | | | | | | | | Provision for income taxes | | 88.5 | | | 67.8 | | | 71.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | $ | 445.3 | | | $ | 401.9 | | | $ | 402.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic earnings per common share | | $ | 10.31 | | | $ | 10.95 | | | $ | 11.08 | | | | | | | | | | Weighted average common shares outstanding | | 43.2 | | | 36.7 | | | 36.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Diluted earnings per common share | | $ | 10.05 | | | $ | 10.62 | | | $ | 10.73 | | | | | | | | | | Weighted average diluted common shares outstanding | | 44.3 | | | 37.9 | | | 37.5 | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
TELEDYNE TECHNOLOGIES INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Fiscal Year | | | | | | 2021 | | 2020 | | 2019 | Net income | | | | | $ | 445.3 | | | $ | 401.9 | | | $ | 402.3 | | Other comprehensive income (loss): | | | | | | | | | | Foreign exchange translation adjustment | | | | | (44.4) | | | 65.8 | | | 31.1 | | Hedge activity, net of tax | | | | | (5.7) | | | 4.6 | | | 2.6 | | Pension and postretirement benefit adjustments, net of tax | | | | | 50.2 | | | (24.7) | | | (16.3) | | Other comprehensive income(a) | | | | | 0.1 | | | 45.7 | | | 17.4 | | Comprehensive income | | | | | $ | 445.4 | | | $ | 447.6 | | | $ | 419.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | For the Fiscal Year | | | 2017 | | 2016 | | 2015 | Net income | | $ | 227.2 |
| | $ | 190.9 |
| | $ | 195.5 |
| Other comprehensive income (loss): | | | | | | | Foreign exchange translation adjustment | | 96.8 |
| | (24.6 | ) | | (83.6 | ) | Hedge activity, net of tax | | 3.3 |
| | 3.9 |
| | (1.4 | ) | Pension and postretirement benefit adjustments, net of tax | | 21.8 |
| | (17.3 | ) | | (5.0 | ) | Other comprehensive income (loss)(a) | | 121.9 |
| | (38.0 | ) | | (90.0 | ) | Comprehensive income | | 349.1 |
| | 152.9 |
| | 105.5 |
| Noncontrolling interest | | — |
| | — |
| | 0.3 |
| Comprehensive income attributable to Teledyne, net of tax | | $ | 349.1 |
| | $ | 152.9 |
| | $ | 105.8 |
|
(a) Net of income tax expense of $12.7$11.7 million in 2017,2021, income tax benefit of $8.0$9.8 million for 20162020 and income tax expensebenefit of $3.5$6.6 million for 2015.2019.The accompanying notes are an integral part of these financial statements.
TELEDYNE TECHNOLOGIES INCORPORATED CONSOLIDATED BALANCE SHEETS For the Fiscal Years Ended December 31, 2017January 2, 2022 and January 1, 20173, 2021 (In millions, except share amounts) | | | | | | | | | | | | 2017 | | 2016 | Assets | | | | | Current Assets | | | | | Cash | | $ | 70.9 |
| | $ | 98.6 |
| Accounts receivable, net | | 478.1 |
| | 383.7 |
| Inventories, net | | 400.2 |
| | 314.2 |
| Prepaid expenses and other current assets | | 62.7 |
| | 49.7 |
| Total current assets | | 1,011.9 |
| | 846.2 |
| Property, plant and equipment, net | | 442.8 |
| | 340.8 |
| Goodwill, net | | 1,776.7 |
| | 1,193.5 |
| Acquired intangibles, net | | 398.9 |
| | 234.6 |
| Prepaid pension assets | | 127.2 |
| | 88.5 |
| Other assets, net | | 88.9 |
| | 70.8 |
| Total Assets | | $ | 3,846.4 |
| | $ | 2,774.4 |
| Liabilities and Stockholders’ Equity | | | | | Current Liabilities | | | | | Accounts payable | | $ | 191.7 |
| | $ | 138.8 |
| Accrued liabilities | | 345.3 |
| | 261.0 |
| Current portion of long-term debt, capital leases and other debt | | 3.6 |
| | 102.0 |
| Total current liabilities | | 540.6 |
| | 501.8 |
| Long-term debt and capital leases | | 1,069.3 |
| | 515.8 |
| Other long-term liabilities | | 289.2 |
| | 202.4 |
| Total Liabilities | | 1,899.1 |
| | 1,220.0 |
| Commitments and contingencies | |
| |
| Stockholders’ Equity | | | | | Preferred stock, $0.01 par value; outstanding shares-none | | — |
| | — |
| Common stock, $0.01 par value; authorized 125 million shares; Issued shares: 37,697,865 at December 31, 2017, and 37,697,865 at January 1, 2017; outstanding shares: 35,540,233 at December 31, 2017, and 35,110,762 at January 1, 2017 | | 0.4 |
| | 0.4 |
| Additional paid-in capital | | 337.3 |
| | 335.7 |
| Retained earnings | | 2,139.6 |
| | 1,912.4 |
| Treasury stock, 2,157,632 at December 31, 2017 and 2,587,103 at January 1, 2017 | | (200.7 | ) | | (242.9 | ) | Accumulated other comprehensive loss | | (329.3 | ) | | (451.2 | ) | Total Stockholders’ Equity | | 1,947.3 |
| | 1,554.4 |
| Total Liabilities and Stockholders’ Equity | | $ | 3,846.4 |
| | $ | 2,774.4 |
|
| | | | | | | | | | | | | | | | | 2021 | | 2020 | Assets | | | | | Current Assets | | | | | Cash and cash equivalents | | $ | 474.7 | | | $ | 673.1 | | Accounts receivable, net | | 767.7 | | | 402.0 | | Unbilled receivables, net | | 316.1 | | | 222.1 | | Inventories, net | | 752.9 | | | 347.3 | | | | | | | Prepaid expenses and other current assets | | 118.0 | | | 78.1 | | | | | | | Total Current Assets | | 2,429.4 | | | 1,722.6 | | Property, plant and equipment, net | | 827.5 | | | 489.3 | | Goodwill | | 7,986.7 | | | 2,150.0 | | Acquired intangible assets, net | | 2,741.6 | | | 409.7 | | Prepaid pension assets | | 123.7 | | | 67.9 | | | | | | | Other assets, net | | 321.4 | | | 245.3 | | Total Assets | | $ | 14,430.3 | | | $ | 5,084.8 | | Liabilities and Stockholders’ Equity | | | | | Current Liabilities | | | | | Accounts payable | | $ | 469.5 | | | $ | 229.1 | | Accrued liabilities | | 1,028.9 | | | 434.2 | | Current portion of long-term debt and other debt | | — | | | 97.6 | | | | | | | Total Current Liabilities | | 1,498.4 | | | 760.9 | | Long-term debt | | 4,099.4 | | | 680.9 | | Long-term deferred tax liabilities | | 625.5 | | | 39.0 | | | | | | | Other long-term liabilities | | 585.0 | | | 375.4 | | Total Liabilities | | 6,808.3 | | | 1,856.2 | | Commitments and Contingencies | | 0 | | 0 | Stockholders’ Equity | | | | | Preferred stock, $0.01 par value; authorized 15,000,000 shares; outstanding shares-none | | — | | | — | | Common stock, $0.01 par value; authorized 125,000,000 shares; Issued shares: 47,194,766 at January 2, 2022, and 37,697,865 at January 3, 2021; outstanding shares: 46,692,296 at January 2, 2022, and 36,951,607 at January 3, 2021 | | 0.5 | | | 0.4 | | Additional paid-in capital | | 4,317.1 | | | 389.9 | | Retained earnings | | 3,773.2 | | | 3,327.9 | | Treasury stock, 502,470 at January 2, 2022 and 746,258 at January 3, 2021 | | (38.8) | | | (59.5) | | Accumulated other comprehensive loss | | (430.0) | | | (430.1) | | | | | | | | | | | | Total Stockholders’ Equity | | 7,622.0 | | | 3,228.6 | | Total Liabilities and Stockholders’ Equity | | $ | 14,430.3 | | | $ | 5,084.8 | |
The accompanying notes are an integral part of these financial statements.
TELEDYNE TECHNOLOGIES INCORPORATED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Teledyne Technologies Incorporated Stockholders’ Equity | | Noncontrolling Interest | | Total Stockholders' Equity | Balance, December 28, 2014 | | $ | 0.4 |
| | $ | 326.5 |
| | $ | (102.1 | ) | | $ | 1,525.7 |
| | $ | (323.2 | ) | | $ | 1,427.3 |
| | $ | 41.2 |
| | $ | 1,468.5 |
| Net income (loss) | | — |
| | — |
| | — |
| | 195.8 |
| | — |
| | 195.8 |
| | (0.3 | ) | | 195.5 |
| Other comprehensive loss, net of tax | | — |
| | — |
| | — |
| | — |
| | (90.0 | ) | | (90.0 | ) | | — |
| | (90.0 | ) | Purchase of noncontrolling interest | | — |
| | 17.6 |
| | — |
| | — |
| | — |
| | 17.6 |
| | (39.6 | ) | | (22.0 | ) | Foreign currency translation adjustment - noncontrolling interest | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1.3 | ) | | (1.3 | ) | Treasury stock purchases, net | | — |
| | (36.0 | ) | | (207.8 | ) | | — |
| | — |
| | (243.8 | ) | | — |
| | (243.8 | ) | Stock-based compensation | | — |
| | 13.9 |
| | — |
| | — |
| | — |
| | 13.9 |
| | — |
| | 13.9 |
| Exercise of stock options and other | | — |
| | 23.3 |
| | — |
| | — |
| | — |
| | 23.3 |
| | — |
| | 23.3 |
| Balance, January 3, 2016 | | 0.4 |
| | 345.3 |
| | (309.9 | ) | | 1,721.5 |
| | (413.2 | ) | | 1,344.1 |
| | — |
| | 1,344.1 |
| Net income | | — |
| | — |
| | — |
| | 190.9 |
| | — |
| | 190.9 |
| | — |
| | 190.9 |
| Other comprehensive loss, net of tax | | — |
| | — |
| | — |
| | — |
| | (38.0 | ) | | (38.0 | ) | | — |
| | (38.0 | ) | Treasury stock issued | | — |
| | (67.0 | ) | | 67.0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| Stock-based compensation | | — |
| | 21.3 |
| | — |
| | — |
| | — |
| | 21.3 |
| | — |
| | 21.3 |
| Exercise of stock options and other | | — |
| | 36.1 |
| | — |
| | — |
| | — |
| | 36.1 |
| | — |
| | 36.1 |
| Balance, January 1, 2017 | | 0.4 |
| | 335.7 |
| | (242.9 | ) | | 1,912.4 |
| | (451.2 | ) | | 1,554.4 |
| | — |
| | 1,554.4 |
| Net income | | — |
| | — |
| — |
| — |
| | 227.2 |
| | — |
| | 227.2 |
| | — |
| | 227.2 |
| Other comprehensive income, net of tax | | — |
| | — |
| | — |
| | — |
| | 121.9 |
| | 121.9 |
| | — |
| | 121.9 |
| Treasury stock issued | | — |
| | (42.2 | ) | | 42.2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| Stock-based compensation | | — |
| | 24.9 |
| | — |
| | — |
| | — |
| | 24.9 |
| | — |
| | 24.9 |
| Exercise of stock options and other | | — |
| | 18.9 |
| | — |
| | — |
| | — |
| | 18.9 |
| | — |
| | 18.9 |
| Balance, December 31, 2017 | | $ | 0.4 |
| | $ | 337.3 |
| | $ | (200.7 | ) | | $ | 2,139.6 |
| | $ | (329.3 | ) | | $ | 1,947.3 |
| | $ | — |
| | $ | 1,947.3 |
|
The accompanying notes are an integral part of these financial statements.
TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
| | | | | | | | | | | | | | | | For the Fiscal Year | | | 2017 | | 2016 | | 2015 | Operating Activities | | | | | | | Net income | | $ | 227.2 |
| | $ | 190.9 |
| | $ | 195.5 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | Depreciation and amortization | | 113.0 |
| | 87.3 |
| | 90.3 |
| Deferred income taxes | | (12.3 | ) | | (7.9 | ) | | (7.9 | ) | Stock-based compensation | | 18.8 |
| | 16.2 |
| | 12.2 |
| Change in fair value of derivative instruments | | 6.0 |
| | 5.5 |
| | — |
| Gain on sale of facility | | — |
| | (17.9 | ) | | — |
| Changes in operating assets and liabilities, excluding the effect of businesses acquired: | | | | | | | Accounts receivable | | (19.6 | ) | | (11.4 | ) | | 21.9 |
| Inventories | | (7.4 | ) | | (9.1 | ) | | (6.4 | ) | Prepaid expenses and other assets | | (3.6 | ) | | (1.7 | ) | | (1.3 | ) | Accounts payable | | 12.4 |
| | 2.1 |
| | (26.8 | ) | Accrued liabilities | | 16.2 |
| | 26.8 |
| | (41.1 | ) | Income taxes payable, net | | 40.4 |
| | 23.8 |
| | (21.3 | ) | Long-term assets | | (13.8 | ) | | 1.0 |
| | 3.7 |
| Other long-term liabilities | | 18.3 |
| | 11.4 |
| | (5.0 | ) | Pension benefits | | (19.7 | ) | | 4.0 |
| | 3.3 |
| Postretirement benefits | | (0.8 | ) | | (0.9 | ) | | (2.0 | ) | Other operating, net | | (0.4 | ) | | (3.1 | ) | | (4.9 | ) | Net cash provided by operating activities | | 374.7 |
| | 317.0 |
| | 210.2 |
| Investing Activities | | | | | | | Purchases of property, plant and equipment | | (58.5 | ) | | (87.6 | ) | | (47.0 | ) | Purchase of businesses and other investments, net of cash acquired | | (774.1 | ) | | (93.4 | ) | | (66.7 | ) | Proceeds from the sale of businesses and disposal of fixed assets | | 1.4 |
| | 30.0 |
| | 3.8 |
| Sales proceeds transferred to escrow as restricted cash | | — |
| | (19.5 | ) | | — |
| Sales proceeds transferred from escrow to cash | | — |
| | 19.5 |
| | — |
| Net cash used in investing activities | | (831.2 | ) | | (151.0 | ) | | (109.9 | ) | Financing Activities | | | | | | | Net proceeds (payments) on credit facility | | 165.0 |
| | (147.0 | ) | | 45.5 |
| Proceeds from other debt | | 100.0 |
| | 6.1 |
| | 9.7 |
| Payments on other debt | | (139.3 | ) | | (22.2 | ) | | (102.8 | ) | Proceeds from issuance of senior notes | | 268.0 |
| | — |
| | 125.0 |
| Purchase of treasury stock | | — |
| | — |
| | (243.8 | ) | Proceeds from stock options exercised | | 24.9 |
| | 36.1 |
| | 19.0 |
| Purchase of option contract | | — |
| | (11.6 | ) | | — |
| Other financing | | (4.5 | ) | | (6.4 | ) | | 2.4 |
| Net cash provided by (used in) by financing activities | | 414.1 |
| | (145.0 | ) | | (145.0 | ) | Effect of exchange rate changes on cash | | 14.7 |
| | (7.5 | ) | | (11.6 | ) | Change in cash | | (27.7 | ) | | 13.5 |
| | (56.3 | ) | Cash—beginning of period | | 98.6 |
| | 85.1 |
| | 141.4 |
| Cash—end of period | | $ | 70.9 |
| | $ | 98.6 |
| | $ | 85.1 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 31, 2018 | | $ | 0.4 | | | $ | 343.7 | | | $ | (144.9) | | | $ | 2,523.7 | | | $ | (493.2) | | | $ | 2,229.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | — | | | — | | | — | | | 402.3 | | | — | | | 402.3 | | | | | | | Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | 17.4 | | | 17.4 | | | | | | | Treasury stock issued | | — | | | (48.5) | | | 48.5 | | | — | | | — | | | — | | | | | | | Stock-based compensation | | — | | | 30.7 | | | — | | | — | | | — | | | 30.7 | | | | | | | Exercise of stock options | | — | | | 34.6 | | | — | | | — | | | — | | | 34.6 | | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 29, 2019 | | 0.4 | | | 360.5 | | | (96.4) | | | 2,926.0 | | | (475.8) | | | 2,714.7 | | | | | | | Net income | | — | | | — | | | — | | | 401.9 | | | — | | | 401.9 | | | | | | | Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | 45.7 | | | 45.7 | | | | | | | Treasury stock issued | | — | | | (36.9) | | | 36.9 | | | — | | | — | | | — | | | | | | | Stock-based compensation | | — | | | 30.0 | | | — | | | — | | | — | | | 30.0 | | | | | | | Exercise of stock options | | — | | | 36.3 | | | — | | | — | | | — | | | 36.3 | | | | | | | Balance, January 3, 2021 | | 0.4 | | | 389.9 | | | (59.5) | | | 3,327.9 | | | (430.1) | | | 3,228.6 | | | | | | | Net income | | — | | | — | | | — | | | 445.3 | | | — | | | 445.3 | | | | | | | Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | 0.1 | | | 0.1 | | | | | | | Common stock issued | | 0.1 | | | 3,888.6 | | | — | | | — | | | — | | | 3,888.7 | | | | | | | Treasury stock issued | | — | | | (20.7) | | | 20.7 | | | — | | | — | | | — | | | | | | | Stock-based compensation | | — | | | 33.9 | | | — | | | — | | | — | | | 33.9 | | | | | | | Exercise of stock options | | — | | | 25.4 | | | — | | | — | | | — | | | 25.4 | | | | | | | Balance, January 2, 2022 | | $ | 0.5 | | | $ | 4,317.1 | | | $ | (38.8) | | | $ | 3,773.2 | | | $ | (430.0) | | | $ | 7,622.0 | | | | | | |
The accompanying notes are an integral part of these financial statements.
TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Fiscal Year | | | 2021 | | 2020 | | 2019 | Operating Activities | | | | | | | Net income | | $ | 445.3 | | | $ | 401.9 | | | $ | 402.3 | | | | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | Depreciation and amortization | | 371.8 | | | 116.2 | | | 111.9 | | | | | | | | | Stock-based compensation | | 33.9 | | | 30.0 | | | 30.7 | | Bridge financing and debt extinguishment expense | | 30.5 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | Changes in operating assets and liabilities, excluding the effect of businesses acquired: | | | | | | | Accounts receivable and unbilled receivables | | (158.9) | | | 47.8 | | | (58.8) | | Inventories | | 7.0 | | | 54.3 | | | 12.2 | | Prepaid expenses and other assets | | 11.8 | | | (10.2) | | | (5.3) | | Accounts payable | | 99.1 | | | (46.3) | | | 29.6 | | Accrued expenses and other liabilities | | (5.7) | | | 53.7 | | | 17.8 | | Deferred and income taxes payable, net | | (21.4) | | | (28.8) | | | (53.8) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other, net | | 11.2 | | | 0.3 | | | (4.5) | | | | | | | | | | | | | | | | Net cash provided by operating activities | | 824.6 | | | 618.9 | | | 482.1 | | Investing Activities | | | | | | | Purchases of property, plant and equipment | | (101.6) | | | (71.4) | | | (88.4) | | Purchase of businesses and other investments, net of cash acquired | | (3,723.3) | | | (29.0) | | | (484.0) | | Other, net | | 0.6 | | | 1.0 | | | 0.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash used in investing activities | | (3,824.3) | | | (99.4) | | | (571.9) | | Financing Activities | | | | | | | Net proceeds from credit facility | | — | | | — | | | 96.0 | | Proceeds from issuance of term loans and senior notes, net | | 3,975.9 | | | 2.7 | | | 150.0 | | Payments on other debt | | (1,141.7) | | | (100.8) | | | (137.2) | | | | | | | | | | | | | | | | Proceeds from stock options exercised | | 25.4 | | | 36.3 | | | 34.6 | | Payments for bridge financing and debt extinguishment | | (30.5) | | | — | | | — | | | | | | | | | | | | | | | | Other, net | | (22.0) | | | — | | | (1.7) | | Net cash provided by (used in) financing activities | | 2,807.1 | | | (61.8) | | | 141.7 | | Effect of exchange rate changes on cash and cash equivalents | | (5.8) | | | 15.9 | | | 5.1 | | Change in cash and cash equivalents | | (198.4) | | | 473.6 | | | 57.0 | | Cash and cash equivalents—beginning of period | | 673.1 | | | 199.5 | | | 142.5 | | Cash and cash equivalents—end of period | | $ | 474.7 | | | $ | 673.1 | | | $ | 199.5 | |
The accompanying notes are an integral part of these financial statements.
TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017January 2, 2022
Note 1. Description of Business Teledyne Technologies Incorporated (“Teledyne” or the “Company”), a Delaware company that became an independent public company effective November 29, 1999. Teledyne1999, provides enabling technologies for industrial growth markets that require advanced technology and high reliability. These markets include factory automation and condition monitoring, aerospace and defense, factory automation, air and water quality environmental monitoring, electronics design and development, oceanographic research, deepwater oil and gas exploration and production, medical imaging and pharmaceutical research. The products include digital imagingresearch, oceanographic research, and deepwater energy exploration and production. Following the 2021 acquisition of FLIR Systems, Inc. ( “FLIR”), we further evolved into a global sensing and decision-support technology company: providing specialty sensors, cameras, instrumentation, algorithms and software across the electromagnetic spectrum, as well as unmanned systems, withinin the visible, infraredsubsea, land and X-ray spectra, monitoring and control instrumentation for marine and environmental applications, harsh environment interconnects, electronic test and measurement equipment, aircraft information management systems, and defense electronics and satellite communication subsystems. Teledyne also supplies engineered systems for defense, space, environmental and energy applications. Teledyne differentiates itselfair domains. We differentiate ourselves from many of itsour direct competitors by having a customer and company-sponsoredCompany-sponsored applied research center that augments our product development expertise. We believe that technological capabilities and innovation and the ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we compete. Teledyne consists of the Digital Imaging segment with principal operations in the United States, the United Kingdom, Canada, France, Sweden, the Netherlands, Belgium, Estonia and the United Arab Emirates: the Instrumentation segment with principal operations in the United States, the United Kingdom, Denmark and Denmark; the Digital Imaging segment with principal operations in the United States, Canada, France, the Netherlands and the United Kingdom:France; the Aerospace and Defense Electronics segment with principal operations in the United States and the United Kingdom; and the Engineered Systems segment with principal operations in the United StatesStates. Certain prior year amounts have been reclassified to conform to the current period presentation. The Company now discloses acquired intangible asset amortization on a separate income statement line. Acquired intangible asset amortization was previously included in selling, general and administrative expenses. In addition, the Company now discloses the balance of long-term deferred tax liabilities on a separate balance sheet line. Long-term deferred tax liabilities was previously included in other long-term liabilities. On May 14, 2021, Teledyne completed the acquisition of FLIR, and the United Kingdom.financial results of FLIR have been included since the date of the acquisition. The financial statements of Teledyne contained herein are as of and for the fiscal year ended January 2, 2022, and reflect the results of the Company after giving effect to the acquisition of FLIR. Teledyne acquired the outstanding stock of FLIR for approximately $8.1 billion, comprising of net cash payments of $3.7 billion, Teledyne share issuances of $3.9 billion, and the assumption of FLIR debt of $0.5 billion. See Note 3 to these Notes to Consolidated Financial Statements for information regarding FLIR acquisition. Note 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Teledyne and all wholly-owned andits majority-owned domestic and foreign subsidiaries. Intercompany accounts and transactions have been eliminated. Fiscal Year The Company operates on a 52- or 53-week fiscal year convention ending on the Sunday nearest to December 31. Fiscal year 2017 was a 52-week fiscal year and ended on December 31, 2017. Fiscal year 20162021 was a 52-week fiscal year and ended on January 1, 2017.2, 2022. Fiscal year 20152020 was a 53-week fiscal year and ended on January 3, 2016.2021. Fiscal year 2019 was a 52-week fiscal year and ended on December 29, 2019. References to the years 2017, 20162021, 2020 and 20152019 are intended to refer to the respective fiscal year unless otherwise noted. Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to sales returns and allowances, allowance for doubtful accounts, inventories, goodwill, intangible assets, asset valuations, income taxes, warranty obligations, pension and other postretirement benefits, long-term contracts, environmental, workers’ compensation and general liability, employee benefits and other contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances at the time, the results of which form the basis for making its judgments. Actual results may differ materially from these estimates under different assumptions or conditions. Management believes that the estimates are reasonable.
Accumulated Other Comprehensive Income/Income (Loss) The following table summarizes the changes in accumulated balances of other comprehensive income/income (loss) (“AOCI”) for the fiscal years ended December 31, 2017,January 2, 2022, and January 1, 20173, 2021 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | Foreign Currency Translation | | Cash Flow Hedges and other | | Pension and Postretirement Benefits | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 29, 2019 | $ | (150.4) | | | $ | (2.3) | | | $ | (323.1) | | | $ | (475.8) | | Other comprehensive income (loss) before reclassifications | 65.8 | | | (13.8) | | | — | | | 52.0 | | Amounts reclassified from AOCI | — | | | 18.4 | | | (24.7) | | | (6.3) | | Net other comprehensive income (loss) | 65.8 | | | 4.6 | | | (24.7) | | | 45.7 | | Balance as of January 3, 2021 | (84.6) | | | 2.3 | | | (347.8) | | | (430.1) | | Other comprehensive income (loss) before reclassifications | (44.4) | | | 18.0 | | | — | | | (26.4) | | Amounts reclassified from AOCI | — | | | (23.7) | | | 50.2 | | | 26.5 | | Net other comprehensive income (loss) | (44.4) | | | (5.7) | | | 50.2 | | | 0.1 | | Balance as of January 2, 2022 | $ | (129.0) | | | $ | (3.4) | | | $ | (297.6) | | | $ | (430.0) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Foreign Currency Translation | | Cash Flow Hedges and other | | Pension and Postretirement Benefits | | Total | Balance as of January 3, 2016 | $ | (174.2 | ) | | $ | (6.7 | ) | | $ | (232.3 | ) | | $ | (413.2 | ) | | | | | | | | | Other comprehensive loss before reclassifications | (24.6 | ) | | 1.8 |
| | — |
| | (22.8 | ) | Amounts reclassified from AOCI | — |
| | 2.1 |
| | (17.3 | ) | | (15.2 | ) | Net other comprehensive income (loss) | (24.6 | ) | | 3.9 |
| | (17.3 | ) | | (38.0 | ) | Balance as of January 1, 2017 | (198.8 | ) | | (2.8 | ) | | (249.6 | ) | | (451.2 | ) | | | | | | | | | Other comprehensive income (loss) before reclassifications | 96.8 |
| | (3.0 | ) | | — |
| | 93.8 |
| Amounts reclassified from AOCI | — |
| | 6.3 |
| | 21.8 |
| | 28.1 |
| Net other comprehensive income | 96.8 |
| | 3.3 |
| | 21.8 |
| | 121.9 |
| Balance as of December 31, 2017 | $ | (102.0 | ) | | $ | 0.5 |
| | $ | (227.8 | ) | | $ | (329.3 | ) |
The reclassification out of AOCI for the fiscal years ended December 31, 2017,January 2, 2022, and January 1, 2017,3, 2021, are as follows (in millions): | | | | | | | | | | | December 31, 2017 | | January 1, 2017 | | | Amount reclassified from AOCI | | Amount reclassified from AOCI | Financial Statement Presentation | Loss on cash flow hedges: | | | | | Loss recognized in income on derivatives | $ | 8.5 |
| | $ | 2.8 |
| Cost of sales | Income tax impact | (2.2 | ) | | (0.7 | ) | Income tax benefit | Total | $ | 6.3 |
| | $ | 2.1 |
| | | | | | | Amortization of defined benefit pension and postretirement plan items: | | | | Amortization of prior service cost | $ | (6.1 | ) | | $ | (6.1 | ) | See Note 11 | Amortization of net actuarial loss | 29.2 |
| | 27.2 |
| See Note 11 | Pension adjustments | 10.2 |
| | (47.7 | ) | See Note 11 | Total before tax | 33.3 |
| | (26.6 | ) | | Income tax impact | (11.5 | ) | | 9.3 |
| | Net of tax | $ | 21.8 |
| | $ | (17.3 | ) | |
| | | | | | | | | | | | | | | | January 2, 2022 | | January 3, 2021 | | | Amount reclassified from AOCI | | Amount reclassified from AOCI | Financial Statement Presentation | Gain (loss) on cash flow hedges: | | | | | Gain (loss) recognized in income on derivatives | $ | (31.7) | | | $ | 24.8 | | See Note 2 | Income tax impact | 8.0 | | | (6.4) | | Provision for income taxes | Total | $ | (23.7) | | | $ | 18.4 | | | | | | | | Amortization of defined benefit pension and postretirement plan items: | | | | Amortization of prior service cost | $ | (3.5) | | | $ | (6.0) | | See Note 11 | Amortization of net actuarial loss | 26.8 | | | 22.8 | | See Note 11 | Pension adjustments | 36.6 | | | (49.7) | | See Note 11 | Total before tax | 59.9 | | | (32.9) | | | Income tax impact | (9.7) | | | 8.2 | | | Net of tax | $ | 50.2 | | | $ | (24.7) | | |
Revenue Recognition Revenue is recognized when the earnings process is substantially complete and all of the following criteria are met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred or services have been rendered; 3) our price to our customer is fixed or determinable; and 4) collectability is reasonably assured.
We determine the appropriate method by which we recognize revenue by analyzing the nature of the products or services being provided as well as the terms and conditions of our contracts or arrangements entered into with our customers. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. A contract’s transaction price is allocated to each distinct good or service (i.e., performance obligation) identified in the contract, and each performance obligation is valued based on its estimated relative standalone selling price. For standard products or services, list prices generally represent the standalone selling price. For performance obligations where list price is not available, we typically use the expected cost plus a margin approach to estimate the standalone selling price for that performance obligation. Prior to the acquisition of FLIR, approximately 60% of our revenue was recognized at a point in time, with the remaining 40% recognized over time. The majority of ourFLIR revenue relates to product sales and is recognized upon shipmentat a point in time. In future periods, we expect approximately 70% of revenue to be recognized at a point in time, with the remaining 30% recognized over time. Revenue recognized at a point in time relates primarily to the sale of standard or minimally customized products, with control transferring to the customer at fixed or determinable pricesgenerally upon the transfer of title. This type of revenue arrangement is typical for our commercial contracts within the Digital Imaging, Instrumentation, and withAerospace and Defense Electronics segments, and to a reasonable assurance of collection, passage of titlelesser extent for certain commercial contracts within the Engineered Systems segment relating to the customer and fulfillmentsale of all significant obligations. Revenue is recognized net of estimated sales returns and other allowances. The Company does not offer substantial sales incentives and credits to customers. The remaining revenue is generally associated with long-term contracts to design, develop and manufacture highly engineered products used in commercial or defense applications. Such contracts are generally accounted for using contract accounting, percentage-of-completion (“POC”) method. The Company’s standard terms of sale are FOB shipping point. For a small percentage of sales where title and risk of loss passes at destination point, and assuming all other criteria for revenue recognition are met, the Company recognizes revenue upon delivery to the customer. If any significant obligation to the customer with respect to a sales transaction remains following shipment, revenue recognition is deferred until such obligations have been fulfilled.hydrogen/oxygen gas generators. In general, our revenue arrangements do not involve acceptance provisions based on customer specified acceptance criteria. In those
limited circumstances, when customer specified acceptance criteria exist, and ifexist. If we cannot objectively demonstrate that the product meets those specifications prior to the shipment, thenthe revenue is deferred until customer acceptance is obtained. The transaction price in these arrangements can include variable consideration, such as product returns and sales allowances. The estimation of this variable consideration and determination of whether to include estimated amounts as a
reduction in the transaction price is based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. Revenue recognized over time relates primarily to contracts to design, develop and/or manufacture highly engineered products used in both defense and commercial applications. This type of revenue arrangement is typical of our U.S. government contracts and to a lesser extent for certain commercial contracts, with both contract types occurring across all segments. The customer typically controls the work in process as evidenced either by contractual termination clauses or by our right to payment for costs incurred to date plus a reasonable profit for products or services that do not have a fewan alternative use. As control transfers continuously over time on these contracts, that require the Company to warehouse certain goods, for which revenue is recognized when all risks of loss are borne by the customer and all other criteria for revenue recognition are met. We also have a small number of multiple elements arrangements (i.e., free product, training, installation, additional parts, etc.). If contract accounting does not apply, we allocate the contract price among the deliverables based on vendor-specific objective evidencethe extent of fair valueprogress towards completion of the performance obligation. The selection of the method to each element in the arrangement. If objectivemeasure progress towards completion requires judgment and reliable evidence of fair value of any element is not available, we use our best estimate of selling price for purposes of allocating the total arrangement consideration among the elements. Also, extended or non-customary warranties do not represent a significant portion of our revenue; however when our revenue arrangements include an extended or non-customary warranty provision, the revenue is deferred and recognized ratably over the extended warranty period.
For contracts that require substantial performance over a long time period (generally one or more years), revenue is recorded under the POC method. We record net revenue and an estimated profit as work on our contracts progresses. The POC method for these contracts is dependentbased on the nature of the contractproducts or productsservices to be provided. DependingWe generally use the cost-to-cost measure of progress as this measure best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the contract, we may measurecost-to-cost method, the extent of progress towardtowards completion usingis measured based on the units-of-delivery method, cost-to-cost methodratio of costs incurred to date to the total estimated costs at completion of the performance obligation. The transaction price in these arrangements may include estimated amounts of variable consideration, including award fees, incentive fees, contract amounts not yet funded, or upon attainmentother provisions that can either increase or decrease the transaction price. We estimate variable consideration at the amount to which we expect to be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of scheduledcumulative revenue recognized will not occur when the estimation uncertainty is resolved. The estimation of this variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.
The majority of our over time contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Over time contracts are often modified to account for changes in contract milestonesspecifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications on over time contracts are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which could beit relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. For over time event or expense driven. For example, for cost-reimbursable contracts we useusing the cost-to-cost method, to measurewe have an Estimate at Completion (“EAC”) process in which management reviews the progress toward completion. Under the cost-to-cost methodand execution of accounting, we recognize revenue and an estimated profit as allowable costs are incurred based on the proportion that the incurred costs bear to total estimated costs. Another example, for contracts that require us to provide a substantial number of similar items, we record revenue and an estimated profit on a POC basis using units-of-delivery as the basis to measure progress toward completing the contract. Occasionally, it is appropriate to combine individual customer orders and treat them as one arrangement when the underlying agreement was reached with the customer for a single large project. Accounting for contracts using the POC methodour performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue, anddetermining reasonably dependable cost estimates, and making assumptions for schedule and technical issues. Contract revenue may include estimated amounts not contractually agreed to by the customer, including price redetermination, cost or performance incentives (such as award and incentives fees), un-priced change orders, claims and requests for equitable adjustment. The POC method requires management’s judgment to make reasonably dependable cost estimates generally over a long time period. Since certain contracts extend over a longlonger period of time, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings onthrough a cumulative catch-up basis. This method recognizes, in the current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly. The percentagemajority of Teledyne revenue recognized using any POC method was 28.6% in 2017, 30.5% in 2016, and 31.2% in 2015.over time uses an EAC process. The net aggregate effects of these changes in estimates on contracts accounted for under the POC accountingcost-to-cost method for 2017 and 2016, were $7.5 million and $1.9 million of unfavorable operating income, respectively, and $3.1in 2021 was approximately $26.8 million of favorable operating income, primarily within the Digital Imaging operating segment, related to favorable changes in estimates that impacted revenue, and, to a lesser degree, cost of sales. The net aggregate effects of these changes in estimates on contracts accounted for 2015.
We do not believeunder the cost-to-cost method in 2020 was approximately $14.6 million of favorable operating income, primarily within the Digital Imaging operating segment, related to changes in estimates that any discrete event or adjustmentfavorably impacted revenue, and, to ana lesser degree, cost of sales. None of the effects of changes in estimates on any individual contract within the aggregate changes in contract estimates for 2017, 2016 or 2015 waswere material to the consolidated statements of income for such annual periods.any period presented.
While extended or non-customary warranties do not represent a significant portion of our revenue, we recognize warranty services as a separate performance obligations when it is material to the contract. When extended or non-customary warranties represents a separate performance obligation, the revenue is deferred and recognized ratably over the extended warranty period. Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of January 2, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $2,929.0 million. The Company expects approximately 78% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 22% recognized thereafter.
Shipping and Handling Shipping and handling fees reimbursed by customers are classified as revenue while shipping and handling costs incurred by Teledyne are classified as cost of sales in the accompanying consolidated statements of income. Product Warranty Costs Some of the Company’sCompany’s products are subject to standard warranties and the Company reserves for the estimated cost of product warranties on a product-specific basis. Facts and circumstances related to a product warranty matter and cost estimates to return, repair and/or replace the product are considered when establishing a product warranty reserve. The adequacy of the preexisting warranty liabilities is assessed regularly and the reserve is adjusted as necessary based on a review of historichistorical warranty experience with respect to the applicable business or products, as well as the length and actual terms of the warranties, which are typically one year.year. The product warranty reserve is included in current accrued liabilities and long-term liabilities on the balance sheet.
| | | | | | | | | | | | | Warranty Reserve (in millions): | 2017 | | 2016 | | 2015 | Balance at beginning of year | $ | 18.4 |
| | $ | 17.1 |
| | $ | 18.5 |
| Accruals for product warranties charged to expense | 6.0 |
| | 7.4 |
| | 6.1 |
| Cost of product warranty claims | (6.4 | ) | | (6.7 | ) | | (7.7 | ) | Acquisitions | 3.1 |
| | 0.6 |
| | 0.2 |
| Balance at end of period | $ | 21.1 |
| | $ | 18.4 |
| | $ | 17.1 |
|
| | | | | | | | | | | | | | | | | | Warranty Reserve (in millions): | 2021 | | 2020 | | 2019 | Balance at beginning of year | $ | 22.4 | | | $ | 24.8 | | | $ | 21.0 | | Product warranty expense | 11.9 | | | 3.3 | | | 13.1 | | Deductions | (10.1) | | | (8.2) | | | (14.2) | | Acquisitions | 25.3 | | | 2.5 | | | 4.9 | | Balance at end of year | $ | 49.5 | | | $ | 22.4 | | | $ | 24.8 | |
Research and Development and Bid and Proposal Costs Selling, general and administrative expenses include Company-funded research and development and bid and proposal costs which are expensed as incurred and were $177.7$299.3 million in 2017, $167.72021, $196.0 million in 20162020 and $163.7$209.6 million in 2015.2019. The higher amount in 2021 reflected $113.8 million in research and development and bid and proposal costs incurred by FLIR. Income Taxes We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for temporary differences between the tax basis of assets and liabilities and their reported amount in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. Income tax positions must meet a more-likely-than-not recognition in order to be recognized in the financial statements. We recognize potential accrued interest and penalties related to unrecognized tax benefits within operations as income tax expense. As new information becomes available, the assessment of the recognition threshold and the measurement of the associated tax benefit of uncertain tax positions may result in financial statement recognition or derecognition. Net IncomeEarnings Per Common Share
Basic and diluted earnings per common share were computed based on net income attributable to Teledyne.income. The weighted average number of common shares outstanding during the period was used in the calculation of basic earnings per share. This number of shares was increased by contingent shares that could be issued under various compensation plans as well as by the dilutive effect of stock options based on the treasury stock method in the calculation of diluted earnings per common share.
The following table sets forth the computations of basic and diluted earnings per common share (amounts in millions, except per share data): | | | | | | | | | | | | | Net Income Per Common Share: | 2017 | | 2016 | | 2015 | Net income attributable to Teledyne | $ | 227.2 |
| | $ | 190.9 |
| | $ | 195.8 |
| Basic earnings per common share: | | | | | | Weighted average common shares outstanding | 35.2 |
| | 34.6 |
| | 35.3 |
| | | | | | | Basic earnings per common share | $ | 6.45 |
| | $ | 5.52 |
| | $ | 5.55 |
| Diluted earnings per share: | | | | | | Weighted average common shares outstanding | 35.2 |
| | 34.6 |
| | 35.3 |
| Effect of diluted securities | 1.1 |
| | 0.9 |
| | 0.7 |
| Weighted average diluted common shares outstanding | 36.3 |
| | 35.5 |
| | 36.0 |
| | | | | | | Diluted earnings per common share | $ | 6.26 |
| | $ | 5.37 |
| | $ | 5.44 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings Per Common Share: | | | | | 2021 | | 2020 | | 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | $ | 445.3 | | | $ | 401.9 | | | $ | 402.3 | | Basic earnings per common share: | | | | | | | | | | Weighted average common shares outstanding | | | | | 43.2 | | | 36.7 | | | 36.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic earnings per common share | | | | | $ | 10.31 | | | $ | 10.95 | | | $ | 11.08 | | Diluted earnings per share: | | | | | | | | | | Weighted average common shares outstanding | | | | | 43.2 | | | 36.7 | | | 36.3 | | Effect of diluted securities (primarily stock options) | | | | | 1.1 | | | 1.2 | | | 1.2 | | Weighted average diluted common shares outstanding | | | | | 44.3 | | | 37.9 | | | 37.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Diluted earnings per common share | | | | | $ | 10.05 | | | $ | 10.62 | | | $ | 10.73 | |
For 2017, 20162021, 2020 and 2015 no2019, 196,802, 239,422 and less than 3,000 stock options, respectively, were excluded in the computation of diluted earnings per share.share because the effect of their inclusion would have been anti-dilutive. For 2017, 20162021, 2020 and 2015,2019, stock options to purchase 2.31.6 million, 2.21.6 million and 2.42.0 million shares of common stock, respectively, had exercise prices that were less than the average market price of the Company’s common stock during the respective periods and are included in the computation of diluted earnings per share.
In addition, no contingentFor 2021 and 2020, 2,608 and 497 shares, of the Company’s common stockrespectively, under the restricted stock orplan, respectively, were excluded from fully diluted shares outstanding because they did not meet the applicable performance share compensation plansconditions for issuance. No contingent shares under the restricted stock plan were excluded from fully diluted shares outstanding for 2017 or 2016. In 2015, 3,9972019. No contingent shares of the Company’s common stock under the restricted stock or performance share compensation plansplan were excluded from fully diluted shares outstanding.outstanding for 2021, 2020 or 2019.
Cash and Cash Equivalents Cash and cash equivalents totaled $474.7 million at January 2, 2022, of which $294.0 million was held by foreign subsidiaries. Cash equivalentsconsistof highlyliquidmoney-marketmutualfunds andbankdepositswith maturitiesof threemonthsor less when purchased. Accounts Receivable, Unbilled Receivables and Contract Liabilities ReceivablesThe timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities, which are included in accrued liabilities and other long-term liabilities) on the Consolidated Balance Sheet. Under the typical payment terms of our over time contracts, the customer pays us either performance-based payments or progress payments. Amounts billed and due from our customers are classified as receivables on the Consolidated Balance Sheet. We may receive interim payments as work progresses, although for some contracts, we may be entitled to receive an advance payment. We recognize a liability for these interim and advance payments in excess of revenue recognized and present it as a contract liability which is included within accrued liabilities and other long-term liabilities on the Consolidated Balance Sheet, which represented $186.0 million and $25.3 million as of January 2, 2022 and $160.1 million and $14.0 million as of January 3, 2021, respectively. Contract liabilities typically are not considered a significant financing component because these cash advances are used to meet working capital demands that can be higher in the early stages of a contract, and these cash advances protect us from the other party failing to adequately complete some or all of its obligations under the contract. When revenue recognized exceeds the amount billed to the customer, we record an unbilled receivable (contract asset) for the amount we are entitled to receive based on our enforceable right to payment. The unbilled receivable balance increased from the beginning of the year by $99.9 million, or 39.6%, primarily due to the acquisition of FLIR. Contract liabilities increased from the beginning of the year by $37.2 million, or 21.4% primarily due to the acquisition of FLIR. The Company recognized revenue of $114.0 million during the year ended January 2, 2022 from contract liabilities that existed at the beginning of year. The Company recognizes the incremental costs of obtaining or fulfilling a contract as expense when incurred if the amortization period of the asset is one year or less. Incremental costs to obtain or fulfill contracts with an amortization period greater than one year were not material.
Accounts receivable is presented net of an allowance for doubtful accounts of $10.3$13.8 million at December 31, 2017,January 2, 2022, and $5.2$12.3 million at January 1, 2017.3, 2021. Expense recorded for the allowance for doubtful accounts was $4.2$4.5 million, $0.7$4.1 million and $0.9$1.3 million for 2017, 20162021, 2020 and 2015,2019, respectively. An allowance for doubtful accounts is established for losses expected to be incurred on accounts receivable balances. Judgment is required in the estimation of the allowance and we evaluate the collectability of our accounts receivable and contract assets based on a combination of factors. If we become aware of a customer’s inability to meet its financial obligations, a specific allowance is recorded to reduce the net receivable to the amount reasonably believed to be collectible from the customer. For all other customers, we use an aging schedule and recognize
allowances for doubtful accounts based upon specific identification, collection history andon the creditworthiness of the debtor.debtor, the age and status of outstanding receivables, the current business environment and our historical collection experience adjusted for current expectations for the customers or industry. Accounts receivable are written off against the allowance for uncollectible accounts when we determine amounts are no longer collectible. Trade credit is extended based upon evaluations of each customer’s ability to perform its obligations, which are updated periodically. Cash
Cash totaled $70.9 million at December 31, 2017, of which $67.5 million was held by foreign subsidiaries of Teledyne.
Inventories Inventories are stated at the lower of cost or net realizable value, less progress payments.value. The majority of inventory values are valued on an average cost or first-in, first-out method, while the remainderand an immaterial amount of inventory values are stated at cost based on the last-in, first-out method. Costs include direct material, direct labor, applicable manufacturing and engineering overhead, and other direct costs. Additionally, certain inventory costs are also reflective of the estimates used in applying the percentage-of-completion revenue recognition method. Judgment is required when establishing reserves to reduce the carrying amount of inventory to market or net realizable value. Inventory reserves are recorded when inventory is considered to be excess or obsolete based upon an analysis of actual on-hand quantities on a part-level basis to forecasted product demand and historical usage. Property, Plant and Equipment Property, plant and equipment is capitalized at cost. Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are determined using a combination of accelerated and straight-line methods over the estimated useful lives of the various asset classes. Buildings and building improvements are depreciated over periods not exceeding 45 years,, equipment over 5 to 18 years,, computer hardware and software over 3 to 7 years and leasehold improvements over the shorter of the estimated remaining lives or lease terms. Significant improvements are capitalized while maintenance and repairs are charged to expense as incurred. Depreciation expense on property, plant and equipment including assets under capital leases, was $65.9$115.2 million in 2017, $57.62021, $76.6 million in 20162020 and $58.3$74.5 million in 2015. Other income for 2016 included a gain of $17.9 million on the sale of a former operating facility in California.2019.
Goodwill, Acquired Intangible Assets and Other IntangibleLong-lived Assets Business acquisitions are accounted for under the acquisition method by assigning the purchase price to tangible and intangible assets acquired and liabilities assumed. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill. Goodwill and acquired intangible assets with indefinite lives are not amortized, but tested at least annually for impairment. The Company performs an annual impairment test for goodwill and other acquiredindefinite-lived intangible assets in the fourth quarter of each year, or more often as circumstances require. The two-stepCompany uses qualitative and quantitative approaches when testing goodwill for impairment. For selected reporting units under the qualitative approach, the Company performs a qualitative evaluation of events and circumstances impacting the reporting unit to determine the likelihood of goodwill impairment. Based on that qualitative evaluation, if the Company determines it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. Otherwise the Company performs a quantitative impairment test. A quantitative impairment test, if applicable, is used to first identify potential goodwill impairment and then measure the amount of goodwill impairment loss, if any. When it is determined that anThe Company performs quantitative tests for reporting units at least once every three years. However, for certain reporting units the Company may perform a quantitative impairment has occurred, an appropriate charge to operations is recorded. Notest more frequently. The Company performed a qualitative test for all reporting units in 2021. The results of our annual impairment tests of goodwill was indicated that no impairment existed in 2017, 20162021, 2020 or 2015, based on the annual impairment test completed in the fourth quarter of each year. Acquired2019. The Company reviews intangible assets with finite lives are amortized and reflected in the segments operating income over their estimated useful lives. We review intangibleother long-lived assets subject to depreciation or amortization for impairment whenever events or circumstances indicate that the carrying value of the asset may not be recoverable. We assessAcquired intangible assets with finite lives are amortized and reflected in the segment’s operating income over their estimated useful lives. The Company assesses the recoverability of the carrying value of assets held for use based on a review of projected undiscounted cash flows. Impairment losses, where identified, are determined as the excess of the carrying value over the estimated fair value of the long-lived asset. In 2017, 2016 and 2015, the Company recorded $0.2 million, $1.0 million and 0.5 millionRecorded impairment charges to acquired intangible or other long-lived assets respectively.
were not material in 2021, 2020 or 2019.
Deferred Compensation Plan The Company has a non-qualified executive deferred compensation plan that provides supplemental retirement income benefits for a select group of management. This plan permits eligible employees to make salary and bonus deferrals that are 100% vested. We have an unsecured obligation to pay in the future the value of the deferred compensation adjusted to reflect the performance, whether positive or negative, of selected investment measurement options chosen by each participant during the deferral period. In addition, the Company has a separate deferred compensation plan that was acquired in connection with the FLIR acquisition. This plan was frozen at year end 2021. As of December 31, 2017January 2, 2022 and January 1, 2017, $55.33, 2021, $115.5 million and $47.4$68.9 million, respectively, is included in other long-term liabilities related to these deferred compensation liabilities. Additionally, the Company purchased life insurance policies on certain participants to potentially offset these unsecured obligations. These policies are recorded at their cash surrender value as determined by the insurance carrier. The cash surrender value of these policies was $57.2$113.4 million and $48.5$72.6 million, as of December 31, 2017January 2, 2022 and January 1, 2017,3, 2021, respectively, and are recorded in other non-current assets.
Environmental Costs that mitigate or prevent future environmental contamination or extend the life, increase the capacity or improve the safety or efficiency of property utilized in current operations are capitalized. Other costs that relate to current operations or an existing condition caused by past operations are expensed in the period incurred. Environmental liabilities are recorded when the Company’sCompany’s liability is probable and the costs are reasonably estimable, which is generally not later than the completion of the feasibility study or the Company’sCompany’s recommendation of a remedy or commitment to an appropriate plan of action. The accruals are reviewed periodically and, as investigations and remediations proceed, adjustments are made as necessary. Accruals for losses from environmental remediation obligations do not consider the effects of inflation, and anticipated expenditures are not discounted to their present value. The accruals are not reduced by possible recoveries from insurance carriers or other third parties, but do reflect anticipated allocations among potentially responsible parties at federal Superfund sites or similar state-managed sites and an assessment of the likelihood that such parties will fulfill their obligations at such sites. The measurement of environmental liabilities by the Company is based on currently available facts, present laws and regulations, and current technology. Such estimates take into consideration the Company’s prior experience in site investigation and remediation, the data concerning cleanup costs available from other companies and regulatory authorities, and the professional judgment of the Company’s environmental personnel in consultation with outside environmental specialists, when necessary. The Company’s reserves for environmental remediation obligations totaled $5.1$6.3 million and $7.0$6.5 million at December 31, 2017as of January 2, 2022 and January 1, 2017,3, 2021, respectively. The short term amount is included in current accrued liabilities and the long-term amount is included in long-term accrued liabilities. Foreign Currency Translation The Company’sCompany’s foreign entities’entities’ accounts are generally measured using local currency as the functional currency. Assets and liabilities of these entities are translated at the exchange rate in effect at year-end. Revenues and expenses are translated at average month end rates of exchange prevailing during the year. Unrealized translation gains and losses arising from differences in exchange rates from period to period are included as a component of accumulated other comprehensive loss in stockholders’ equity.AOCI. Hedging Activities/Derivative Instruments and Hedging Activities
Teledyne transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. The Company’sCompany’s primary foreign currency risk objective is to protect the United StatesU.S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars for our Canadian companies, including DALSA and in British pounds for our UK companies, including e2v.U.K. companies. These contracts are designated and qualify as cash flow hedges. The Company has also converted a USU.S. dollar denominated, variable rate and fixed rate debt obligationobligations of a European subsidiary, into a euro fixed rate obligationobligations using a receive-float,receive float, pay fixed cross currency swap, and a receive fixed, pay fixed cross currency swap. ThisThese cross currency swaps are designated as cash flow hedges. In addition, the Company has converted domestic U.S. variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap. The interest rate swap is also designated as a cash flow hedge. The effectiveness of the cash flow hedge forward contracts, excluding time value, is assessed prospectively and retrospectively on a monthly basis using regression analysis, as well as using other timing and probability criteria. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedges and must be highly effective in offsetting changes to future cash flows on hedged transactions. The effective portion of the cash flow hedge contracts’contracts’ gains or losses resulting from changes in the fair value of these hedges is initially reported, net of tax, as a component of AOCI in stockholders’ equity until the underlying hedged item is reflected in our consolidated statements of income, at which time the effective amount in AOCI is reclassified to cost of salesrevenue in our consolidated statements of income. Net deferred gainslosses recorded in AOCI, net of tax, for forward contracts that will mature in the next 12 months total $3.2$0.7 million. These gainslosses are expected to be offset by anticipated lossesgains in the value of the forecasted underlying hedged item. Amounts related to the cross currency swaps and interests rate swap expected to be reclassified from AOCI into income in the comingnext 12 months total $2.2$2.8 million.
In the event that the gains or losses in AOCI are deemed to be ineffective, the ineffective portion of gains or losses resulting from changes in fair value, if any, is reclassified to other income and expense. In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or losses on the related cash flow hedges will be reclassified from AOCI to other income and expense. During the current reporting period, all forecasted transactions occurred and, therefore, there were no such gains or losses reclassified to other income and expense. expense, due to missed forecasts.
As of December 31, 2017,January 2, 2022, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling $80.6$148.2 million. These foreign currency forward contracts have maturities ranging from March 20182022 to February 2019.2023. Teledyne had foreign currency forward contracts designated as cash flow hedges to buy British pounds and to sell U.S. dollars totaling $0.6$18.9 million. These foreign currency forward contracts have maturities ranging from March 20182022 to April 2018. Together these contracts has a fair value of $3.8 million. February 2023. The cross currency swapswaps have notional amounts of 93.0€113.0 million euros equivalent to $100.0and $125.0 million, and €135.0 million and $150.0 million, and mature in March 2023 and October 2024, respectively. The interest rate swap has a notional amount of $125.0 million U.S. dollars and matures in October 2019.March 2023.
In addition, the Company utilizes foreign currency forward contracts which are not designated as hedging instruments for accounting purposes to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. As of December 31, 2017,January 2, 2022, Teledyne had foreign currency contracts of this type primarily in the following pairs (in millions): | | Contracts to Buy | Contracts to Buy | | Contracts to Sell | Contracts to Buy | | Contracts to Sell | Currency | Amount | | Currency | Amount | Currency | Amount | | Currency | Amount | Canadian Dollars | C$ | 165.7 |
| | U.S. Dollars | US$ | 128.4 |
| Canadian Dollars | C$ | 169.4 | | | U.S. Dollars | US$ | 132.0 | | Euros | € | 20.7 |
| | U.S. Dollars | US$ | 24.8 |
| Euros | € | 147.3 | | | U.S. Dollars | US$ | 167.1 | | Euros | | Euros | € | 33.5 | | | Canadian Dollars | C$ | 48.4 | | | Great Britain Pounds | £ | 1.5 |
| | Australian Dollars | A$ | 2.7 |
| Great Britain Pounds | £ | 59.2 | | | U.S. Dollars | US$ | 78.9 | | Great Britain Pounds | £ | 70.3 |
| | U.S. Dollars | US$ | 94.6 |
| | Canadian Dollars | C$ | 7.6 |
| | Euros | € | 5.0 |
| | | U.S. Dollars | US$ | 0.9 |
| | Japanese Yen | ¥ | 100.0 |
| U.S. Dollars | US$ | 31.0 | | | Swedish Krona | kr | 280.1 | | Singapore Dollars | S$ | 2.0 |
| | U.S. Dollars | US$ | 1.5 |
| | | Danish Krone | Kr. | 44.8 |
| | U.S. Dollars | US$ | 7.2 |
| Danish Krone | Kr. | 395.3 | | | U.S. Dollars | US$ | 60.2 | | Swedish Krone | kr | 16.5 |
| | Great Britain Pounds | £ | 1.4 |
| | Swiss Franc | Fr. | 1.8 |
| | U.S. Dollars | US$ | 1.8 |
| | Euros | € | 29.9 |
| | Great Britain Pounds | £ | 26.3 |
| | Swedish Krona | | Swedish Krona | kr | 355.7 | | | Euros | € | 35.0 | | Norwegian Krone | | Norwegian Krone | kr | 228.0 | | | Swedish Krona | kr | 227.1 | | Norwegian Krone | | Norwegian Krone | kr | 78.9 | | | U.S. Dollars | US$ | 8.6 | |
The above table includes non-designated hedges derived from terms contained in triggered or previously designated cash flow hedges. The gains and losses on these derivatives which are not designated as hedging instruments, are intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings. All derivatives are recorded on the balance sheet at fair value. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. Teledyne does not use foreign currency forward contracts for speculative or trading purposes. The effect of derivative instruments designated as cash flow hedges for 20172021 and 20162020 was as follows (in millions): | | | | | | | | | | | | | | | | | 2021 | | 2020 | Net gain (loss) recognized in AOCI - foreign exchange contracts (a) | | $ | 23.6 | | | $ | (13.7) | | Net gain recognized in AOCI - interest rate contracts | | $ | 0.4 | | | $ | 4.8 | | Net gain reclassified from AOCI into revenue/cost of sales - foreign exchange contracts | | $ | 9.2 | | | $ | 1.5 | | Net gain reclassified from AOCI into interest expense - foreign exchange contracts | | $ | 3.4 | | | $ | 4.4 | | Net loss reclassified from AOCI into interest expense -interest rate contracts | | $ | (1.6) | | | $ | (1.0) | | Net gain (loss) reclassified from AOCI into other income and expense, net - foreign exchange contracts (b) | | $ | 20.7 | | | $ | (26.7) | | | | | | |
| | | | | | | | | | | | 2017 | | 2016 | Net gain (loss) recognized in AOCI (a) | | $ | (3.8 | ) | | $ | 2.3 |
| Net loss reclassified from AOCI into cost of sales (a) | | $ | (0.9 | ) | | $ | (2.8 | ) | Net gain reclassified from AOCI into interest expense | | $ | 1.3 |
| | $ | — |
| Net loss reclassified from AOCI into other income and expense, net (b) | | $ | (10.7 | ) | | $ | — |
| Net foreign exchange loss recognized in other income and expense, net (c) | | $ | (0.7 | ) | | $ | (0.1 | ) |
(a)Effective portion (b)Amount reclassified to offset earnings impact of liability hedged by cross currency swap (c)Amount excluded from effectiveness testing
The effect of derivative instruments designated as fair value hedges for 2021 and 2020 was as follows (in millions): | | | | | | | | | | | | | | | | | 2021 | | 2020 | Net gain recognized in earnings for effective portion - other income and expense, net - foreign exchange contracts | | $ | 7.9 | | | $ | — | | Net gain recognized in earnings for amounts excluded from effectiveness testing - other income and expense, net - foreign exchange contracts | | $ | 0.2 | | | $ | — | |
The effect of derivative instruments not designated as cash flow hedges recognized in other income and expense for 20172021 and 20162020 was a lossexpense of $2.9$21.9 million and $9.6a gain of $7.4 million, respectively.
The Company has elected to use the income approach to value the derivatives, using observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR and EURIBOR) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR and EURIBOR cash and swap rates, foreign currency forward rates and cross currency basis spreads). Mid-market pricing is used as a practical expedient for fair value measurements. The fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s creditworthiness when in an asset position and the Company’s creditworthiness when in a liability position has also been factored into the fair value measurement of the derivative instruments and did not have a material impact on the fair value of these derivative instruments. Both the counterparty and the Company are expected to continue to perform under the contractual terms of the instruments.
The fair values of the Company’s derivative financial instruments are presented below. All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy (in millions): | | | | | | | | | | | Asset/(Liability) Derivatives | Balance sheet location | | December 31, 2017 | | January 1, 2017 |
| Derivatives designated as hedging instruments: | | | | | | Cash flow forward contracts | Other assets | | $ | 3.8 |
| | $ | — |
| Cash flow cross currency swaps | Other assets | | $ | 2.2 |
| | $ | — |
| Cash flow forward contracts | Accrued liabilities | | $ | — |
| | $ | (1.0 | ) | Cash flow cross currency swaps | Other long-term liabilities | | $ | (13.9 | ) | | $ | — |
| Cash flow forward contracts | Other long-term liabilities | | — |
| | (0.1 | ) | Total derivatives designated as hedging instruments | | | (7.9 | ) | | (1.1 | ) | Derivatives not designated as hedging instruments: | | | | | | Non-designated forward contracts | Other current assets | | 4.9 |
| | 6.4 |
| Non-designated forward contracts | Accrued liabilities | | (1.2 | ) | | (1.0 | ) | Total derivatives not designated as hedging instruments | | | 3.7 |
| | 5.4 |
| Total asset/(liability) derivatives | | | $ | (4.2 | ) | | $ | 4.3 |
|
| | | | | | | | | | | | | | | | | | Asset/(Liability) Derivatives | Balance sheet location | | January 2, 2022 | | January 3, 2021 | Derivatives designated as hedging instruments: | | | | | | Cash flow forward contracts | Other assets | | $ | 0.3 | | | $ | 7.3 | | | | | | | | Interest rate contracts | Other non-current liabilities | | (0.1) | | | (1.8) | | Interest rate contracts | Other current liabilities | | (1.2) | | | (1.5) | | Cash flow forward contracts | Accrued liabilities | | (1.2) | | | — | | Cash flow cross currency swaps | Other current assets | | 3.8 | | | 3.3 | | Cash flow cross currency swaps | Other non-current liabilities | | (9.4) | | | (29.2) | | | | | | | | Cash flow cross currency swaps | Other current assets (accrued interest) | | 0.1 | | | 0.1 | | Total derivatives designated as hedging instruments | | | (7.7) | | | (21.8) | | Derivatives not designated as hedging instruments: | | | | | | Non-designated forward contracts | Other current assets | | 4.7 | | | 6.7 | | Non-designated forward contracts | Accrued liabilities | | (2.1) | | | (1.2) | | Total derivatives not designated as hedging instruments | | | 2.6 | | | 5.5 | | Total liability derivatives | | | $ | (5.1) | | | $ | (16.3) | |
Supplemental Cash Flow Information Cash payments for federal, foreign and state income taxes were $36.7$83.6 million for 2017,2021, which are net of $8.5$22.4 million in tax refunds. Cash payments for federal, foreign and state income taxes were $24.6$74.5 million for 2016,2020, which are net of $1.4$8.1 million in tax refunds. Cash payments for federal, foreign and state income taxes were $86.5$110.1 million for 2015,2019, which are net of $4.8$7.1 million in tax refunds. Cash payments for interest and credit facility fees and other bank charges totaled $32.4$117.2 million, $23.6$19.1 million and $24.2$23.4 million for 2017, 20162021, 2020 and 2015,2019, respectively. The 2021 amount included $30.5 million paid for bond financing and debt extinguishment costs. Fair Value Measurements When determiningFair value is defined as the fair value measurementsprice that would be received for assets and liabilities requiredan asset or permittedthe exit price that would be paid to be recorded at fair value, the Company considerstransfer a liability in the principal or most advantageous market in which it would transact andan orderly transaction between market participants on the measurement date. The Company considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The Company uses the following three levels of inputs in determining the fair value, of the Company’s assets and liabilities, focusing on the most observable inputs when available:
•Level 1-Quoted prices in active markets for identical assets or liabilities. •Level 2-Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. •Level 3-Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy
within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement. Related Party Transactions TheFor all periods presented, the Company had no material related party transactions that are required to be disclosed for all periods presented.disclosure.
Recent Accounting Standards In MarchJune 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation2016-13, Financial Instruments - Stock CompensationCredit Losses (Topic 718), Improvements to Employee Share-Based Payment Accounting.326). The ASU is intended to simplify several aspectsstandard replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted for any entity in any interim or annual period. Teledyne elected to adopt early this ASU in the third quarter of 2016, therefore Teledyne is required to report the material impacts of this standard as though the ASU had been adopted at the beginning of the fiscal year. Accordingly, Teledyne recognized additional income tax benefits as an increase to net income of $8.5 million for 2016. Teledyne has elected to record forfeitures as they occur, which did not have a material impact on the condensed consolidated financial results. The new guidance did not impact any periods prior to our 2016 fiscal year, as the changes were applied on a prospective basis. In May 2014, the FASB issued ASU No. 2014-09 (Topic 606), Revenue from Contracts with Customers, which provides a single comprehensiveforward-looking expected credit loss model for entities to use in accounting for revenue arising from contracts with customersaccounts receivables, loans, and will supersede most current revenue recognition guidance under Topic 605, Revenue Recognition.other financial instruments. The Company adopted the new standard as of January 1, 2018, using therequires a modified retrospective transition method which requiresapproach through a cumulative-effect adjustment as of the date of adoption. Under the new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring control of a good or service to the customer, either at a point in time or over time. The new standard requires expanded disclosures, including how and when we satisfy performance obligations as well as additional disaggregated revenue information to be provided more frequently in the reporting process. We have expanded our reporting process to consider these additional disclosure requirements.
During the implementation process, the Company performed detailed contract analysis to determine the impact of the new standard to its revenue arrangements, updated its accounting policies and internal controls, continuously updated the impact of the standard and reported the findings and progress to the Audit Committee on a frequent basis over the last two years. Under the new standard, we will continue to recognize revenue over time on most of our contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of our performance obligations, which is similar to the POC cost-to-cost method currently used on certain of these contracts. Therefore, adoption of the new standard primarily impacts our contracts for which revenue is currently recognized using the POC units-of-delivery and milestone methods as we will recognize revenue for these contracts over time under the new standard using the POC cost-to-cost method. These contracts represent approximately half of the revenue currently recognized under the POC method. The percentage of Teledyne revenue recognized using any POC method was 28.6% in 2017, 30.5% in 2016, and 31.2% in 2015. Also impacted but to a much lesser extent, certain ship and bill contracts for custom products and products sold primarily to the U.S. Government, as well as repair contracts, will be recognized over time. Accordingly, revenue will be recognized earlier in the performance period as costs are incurred, as opposed to recognizing revenue when units are delivered, milestones achieved or services completed. The new standard will also impact our backlog and balance sheet presentation with an expected decrease in inventories, an increase in accounts receivable (i.e., unbilled receivables) and a net increase to retained earnings to primarily reflect the impact of converting certain ship and bill contracts and contracts currently applying the units-of-delivery and milestone methods to the cost-to-cost method for recognizing revenue and profits.
Under the modified retrospective transition method, the Company completed an analysis of its backlog as of January 1, 2018 and calculated and recorded the cumulative-effect of adopting the new standard as of January 1, 2018. The cumulative effect of adopting the new standard resulted in an immaterial increase to retained earnings as of January 1, 2018 primarily because we continuethe beginning of the first reporting period in which the guidance is effective. We adopted this ASU as of December 30, 2019 using the modified retrospective approach related to recognize revenue over time on the majority of impacted contracts.our accounts receivables and contract assets, resulting in no cumulative adjustment to retained earnings. The adoption of this standard isguidance did not expected to be material on our consolidated financial statements and financial condition.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new guidance will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability, other than leases that meet the definition of a short-term lease. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. The new guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The new guidance must be adopted using a modified retrospective transition, requiring application at the beginning of the earliest comparative period presented. The
Company is currently evaluating the impact this guidance will have on the consolidated financial statements and footnote disclosures.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, which eliminates the computation of the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record a goodwill impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The new standard, will be effective for the Company prospectively for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We expect the adoption of this standard will reduce the complexity surrounding the evaluation of goodwill for impairment. The impact of this new standard for the Company will depend on the outcomes of future goodwill impairment tests.
In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU requires the service cost component of net benefit costs to be disaggregated from all other components and be reported in the same line item or items as other compensation costs and allow only the service cost component to be eligible for capitalization when applicable. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and before income from operations. This ASU is effective for the Company for interim and annual periods beginning January 1, 2018. Upon adoption, the amendments in this update will be applied retrospectively for the presentation of the components of net benefit cost, and prospectively for the capitalization of the service cost component of net benefit cost. The adoption of this standard will not impact pre-tax income or earnings per share reported for the years ended December 31, 2017 and January 1, 2017 and is not expected to have a material impact on our Consolidated Financial Statements. If this standard was adopted in prior periods, reported operating income would have been $13.9 million and $13.3 million lower and other income would have been $13.9 million and $13.3 million higher than reflected in the Consolidated Statements of Income for the years ended December 31, 2017 and January 1, 2017, respectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In August 2017,October 2021, the FASB issued ASU No. 2017-12, “Derivatives and Hedging2021-08, Business Combinations (Topic 815) Targeted Improvements to805): Accounting for Hedging Activities.” This ASU better alignsContract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an entity’s risk management activitiesacquirer of a business should recognize and financial reporting for hedging relationships. This ASU expandsmeasure contract assets and refines hedge accounting for both nonfinancial and financial risk components, and this ASU simplifies and alignscontract liabilities in a business combination in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606), which we generally expect will result in the recognition and presentationmeasurement of contract assets and contract liabilities in a manner that is consistent with the effectsacquiree. Prior to the adoption of ASU 2021-08, the hedging instrumentCompany measured contract assets and the hedged itemcontract liabilities acquired in business acquisitions at fair value. The Company early adopted ASU 2021-08 in the financial statements. Thisfourth quarter of 2021, with applicability to the accounting for our 2021 business acquisitions and any future business acquisitions. The application of ASU is effective for fiscal years beginning after December 15, 2018 and for interim periods therein, with early adoption permitted. Teledyne is currently evaluating the impact this guidance will2021-08 did not have a material effect on the consolidated financial statementsrecognition and footnote disclosures.measurement of acquired contract assets and contract liabilities associated with our 2021 acquisition. In February 2018, the FASB issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, to address a specific consequence of the Tax Cuts and Jobs Act (“Tax Act”) by allowing a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act reduction of the U.S. federal corporate income tax rate. The guidance is effective for all entities for annual periods beginning after December 15, 2018, with early adoption permitted, and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. Teledyne has not yet completed its assessment of the impact of the guidance on the Company’s Consolidated Financial Statements.
Note 3. Business Acquisitions, Goodwill and Acquired Intangible Assets The Company spent $774.1 million, $93.4 million and $66.7 million on acquisitions and other investments in 2017, 2016 and 2015, respectively, net of any cash acquired.
2017 Acquisitions
On March 28, 2017, Teledyne completed the acquisition of all of the outstanding common stock of e2v technologies plc (“e2v”) for $770.7 million, including stock options and assumed debt, net of $24.4 million of cash acquired. e2v provides high performance image sensors and custom camera solutions and application specific standard products for the machine vision market. In addition, e2v provides high performance space qualified imaging sensors and arrays for space science and astronomy. e2v also produces components and subsystems that deliver high reliability radio frequency power generation for healthcare, industrial and defense applications. Finally, the company provides high reliability semiconductors and board-level solutions for use in aerospace, space and communications applications. Teledyne funded the acquisition of e2v with borrowings under its credit facility and cash on hand as well as $100.0 million in a newly issued term loan.
Most of e2v’s operations are included in the Digital Imaging and Aerospace and Defense Electronics segments. The Instrumentation segment includes a small portion of e2v’s operations. Principally located in Chelmsford, United Kingdom and Grenoble, France, e2v had sales of approximately £236 million for its fiscal year ended March 31, 2016. e2v’s results have
been included since the date of the acquisition and include $274.2 million in net sales and operating income of $37.3 million, which included $8.3 million in acquisition-related costs and $11.2 million in additional intangible asset amortization expense.
Fiscal year 2017 includes pretax charges of $27.0 million related to the acquisition of e2v, which included $13.0 million in transaction costs, including stamp duty, advisory, legal and other consulting fees and other costs recorded to selling, general and administrative expenses, $5.7 million in inventory fair value step-up amortization expense recorded to cost of sales, $2.3 million in bank bridge facility commitment expense recorded to interest expense and $6.0 million related to a foreign currency option contract expense to hedge the e2v purchase price recorded as other expense. Of these amounts, $8.0 million impacted the Digital Imaging segment and $0.3 million impacted the Aerospace and Defense segment operating results. Fiscal year 2016 includes pretax charges of $7.9 million related to the acquisition of e2v, of which, $1.9 million was recorded to selling, general and administrative expenses, $0.5 million was recorded to interest expense and $5.5 million was recorded as other expense.
On July 20, 2017, a subsidiary of Teledyne acquired assets of Scientific Systems, Inc. (“SSI”) for an initial cash payment of $31.0 million. A subsequent cash payment of $0.3 million related to a purchase price adjustment was made in 2017. Headquartered in State College, PA, SSI manufactures precision components and specialized subassemblies used primarily in analytical and diagnostic instrumentation, such as High Performance Liquid Chromatography systems and specific medical devices and is part of the Instrumentation segment.
2016 Acquisitions
On December 6, 2016, Teledyne Instruments, Inc. acquired Hanson Research Corporation (“Hanson Research”) for $25.0 million in cash. Hanson Research, headquartered in Chatsworth, California, specializes in analytical instrumentation for the pharmaceutical industry.
On November 2, 2016, Teledyne Instruments, Inc. acquired assets of IN USA, Inc. (“IN USA”) for $10.2 million in cash. IN USA, headquartered in Norwood, Massachusetts, manufactures a range of ozone generators, ozone analyzers and other gas monitoring instruments utilizing ultraviolet and infrared based technologies. Teledyne intends to relocate and consolidate manufacturing into the new, owned facility of Teledyne Advanced Pollution Instrumentation in San Diego, California.2021 Acquisition
On May 3, 2016,14, 2021, Teledyne DALSA, Inc., a Canadian-based subsidiary, acquired the assetsoutstanding stock of FLIR for approximately $8.1 billion, comprising of net cash payments of $3.7 billion, Teledyne share issuances of $3.9 billion, and businessthe assumption of CARIS, Inc. (“CARIS”)FLIR debt of $0.5 billion. FLIR stockholders received $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share, and Teledyne issued approximately 9.5 million shares at $409.41 per share. See Note 9 to these Notes to Consolidated Financial Statements for information regarding financing activities undertaken in connection with the FLIR acquisition. FLIR is an initial cash paymentindustrial technology company focused on intelligent sensing solutions for defense and industrial applications. FLIR offers a diversified portfolio that serves a number of $26.2 million, net of cash acquired. Basedapplications in Fredericton, New Brunswick, Canada, CARIS is a leading developer of geospatial software designed for the hydrographicgovernment and marine community. On April 15, 2016, Teledyne LeCroy, Inc., a U.S.-based subsidiary, acquired assets of Quantum Data, Inc. (“Quantum Data”) for $17.3 million in cash. Based in Elgin, Illinois, Quantum Data provides electronic testdefense, industrial, and commercial markets. FLIR technologies include thermal imaging systems, visible-light imaging systems, locater systems, measurement instrumentation and is a market leader in video protocol analysis test tools. On April 6, 2016, Teledyne LeCroy, Inc. also acquired Frontline Test Equipment, Inc. (“Frontline”) for $13.7 million in cash. Based in Charlottesville, Virginia, Frontline provides electronic testdiagnostic systems, and measurement instrumentation and is a market leader in wireless protocol analysis test tools. Each of the 2016 acquisitions are part of the Instrumentation segment except for CARIS whichadvanced threat-detection solutions. FLIR is part of the Digital Imaging segment.
2015 Acquisitions2020 Acquisition
On JuneJanuary 5, 2015, Teledyne DALSA BV, a Netherlands-based subsidiary,2020, we acquired ICMOakGate Technology, Inc. (“OakGate”) for $21.8$28.5 million in cash, net of cash acquired. In December 2016, an additional $2.5 million was paid by Teledyne related to an indemnification holdback. Based in Liège, Belgium, ICMLoomis, California, OakGate provides software and hardware designed to test electronic data storage devices from development through manufacturing and end-use applications. The acquired business is part of the Test and Measurement product line of the Instrumentation segment. 2019 Acquisitions On February 5, 2019, we acquired the scientific imaging businesses of Roper Technologies, Inc. for $224.8 million in cash. The acquired businesses include Princeton Instruments, Photometrics and Lumenera. The acquired businesses provide a range of imaging solutions, primarily for life sciences, academic research and customized original equipment manufacturer industrial imaging solutions. Princeton Instruments and Photometrics manufacture state-of-the-art cameras, spectrographs and optics for advanced research in physical sciences, life sciences research and spectroscopy imaging. Applications and markets include materials analysis, quantum technology and cell biology imaging using fluorescence and chemiluminescence. Lumenera primarily provides rugged USB-based customized cameras for markets such as traffic management, as well as life sciences applications. Principally located in the United States and Canada, the acquired businesses are part of the Digital Imaging segment. On August 1, 2019, we acquired the gas and flame detection businesses of 3M Company for $233.5 million in cash. The gas and flame detection businesses includes Oldham, Simtronics, Gas Measurement Instruments, Detcon and select Scott Safety products. The gas and flame detection businesses provides a portfolio of fixed and portable industrial gas and flame detection instruments used in a variety of industries including petrochemical, power generation, oil and gas, food and beverage, mining and waste water treatment. Principally located in France, the United Kingdom and the United States, the acquired businesses are part of the Environmental Instrumentation product line of the Instrumentation segment. On August 30, 2019, we acquired Micralyne Inc. (“Micralyne”) for $25.7 million in cash. Micralyne is a supplier of portable X-ray generatorsfoundry providing MEMS devices. In particular, Micralyne possesses unique microfluidic technology for non-destructive testingbiotech applications, as well as complete X-ray imaging systemscapabilities in non-silicon-based MEMS (e.g. gold, polymers) often required for on-site security screening andhuman body compatibility. Based in Edmonton, Alberta, Canada, the acquired business is part of the Digital Imaging segment. On April 29, 2015, Teledyne DALSA, Inc. acquired the remaining 49% noncontrolling interest in the parent company
On February 2, 2015, Teledyne acquired Bowtech through a U.K.-based subsidiary for $18.9 million in cash, net of cash acquired and including an estimated working capital adjustment. Based in Aberdeen, Scotland, Bowtech designs and manufactures harsh underwater environment vision systems and is part of the Instrumentation segment. Also in 2015, Teledyne made an additional investment in Ocean Aero.
Teledyne funded the purchases from borrowings under its credit facility and cash on hand. The ICM, Bowtech and Optech acquisitions were funded with cash held by foreign subsidiaries. The results of the acquisitions have been included in Teledyne’s results since the dates of the respective acquisition.
The results of these acquisitions have been included in Teledyne’s results since the dates of their respective acquisition.
Other The primary reasons for the aboveFLIR acquisition were to achieve synergies in merging with a business that has the same core business model based on proprietary sensor technologies, but with different products and markets; the opportunity to add new and complementary products with FLIR’s products based on different semiconductor technologies for imaging across different wavelengths than Teledyne products, and the opportunity to serve different customers and applications, with minimal overlapping technologies and markets; the expectation of combining two businesses that both provide sensors, cameras and sensor systems to customers and both business portfolios being balanced among commercial and government markets and geographies, but in the case of thermal imaging, with Teledyne primarily producing extremely high-performance infrared detectors used for astronomy and space-based imaging applications compared to FLIR’s products ranging from air and ground imaging systems to commercial thermography instruments and automotive advanced driver assistance systems; and the opportunity to add FLIR’s suite of imaging sensor products based on different semiconductor technologies for different wavelengths to Teledyne’s offerings. The primary reasons for the 2020 and 2019 acquisitions were to strengthen and expand our core businesses through adding complementary product and service offerings, allowing greater integrated products and services, enhancing our technical capabilities or increasing our addressable markets. Teledyne funded the 2020 and 2019 acquisitions primarily from borrowings under its credit facilities, issuance of senior notes and term loans and cash on hand. The significant factors that resulted in recognition of goodwill were: (a)include the purchase price was based on cash flowacquired businesses’ market positions, growth opportunities in the markets in which they operate, their experienced work force and return on capital projections assuming integration with our businesses and (b) the calculation of the fair value of tangible and intangible assets acquired that qualified for recognition. Teledyne funded the purchases primarily from borrowings under its credit facility and cash on hand.established operating infrastructures. Teledyne’s goodwill was $1,776.7 million at December 31, 2017, and $1,193.5$7,986.7 million at January 1, 2017.2, 2022, and $2,150 million at January 3, 2021. The increase in the balance of goodwill in 20172021 primarily resulted from the goodwill from current year acquisitions, partially offset by the impact of exchange rate changes.FLIR acquisition. Teledyne’s net acquired intangible assets were $398.9 million at December 31, 2017, and $234.6$2,741.6 million at January 1, 2017.2, 2022, and $409.7 million at January 3, 2021. The increase in the balance of acquired intangible assets in 2017 primarily2021 resulted from the FLIR acquisition, of e2v, partially offset by amortization of acquired intangible assets. The Company’s cost to acquire the 20172021 and 2020 acquisitions has been allocated to the assets acquired and liabilities assumed based upon their respective fair values as of the date of the completion of the acquisition. The differences between the fair value of the consideration paid and the estimated fair value of the assets and liabilities acquired has been recorded as goodwill. The fair value of all the acquired identifiable assets and liabilities summarized below for the 2021 FLIR acquisition is provisional pending finalization of the Company’s acquisition accounting, including the measurement of tax basis in certain jurisdictions and the resulting deferred taxes that might arise from book and tax basis differences, if any. The following tables show the purchase price (net of cash acquired), goodwill acquired for the FLIR, OakGate acquisition and other investments made in 2021 and 2020 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | Acquisition | | Acquisition Date | | Consideration Transferred(a) | | Goodwill Acquired | | Acquired Intangible Assets | FLIR | | May 14, 2021 | | $ | 7,620.9 | | | $ | 5,905.5 | | | $ | 2,490.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) Net of cash acquired. The consideration included approximately $3.9 billion of Teledyne shares issued to existing shareholders of the acquired company. This $3.9 billion of equity consideration is a non-cash transaction. An immaterial portion of the cash consideration for certain vested FLIR restricted stock awards was deferred at the election of the award holder and will be paid out in future periods. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | Acquisitions | | Acquisition Date | | Cash Paid (a) | | Goodwill Acquired | | Acquired Intangible Assets | OakGate Technology, Inc. | | January 5, 2020 | | $ | 28.5 | | | $ | 16.9 | | | $ | 7.0 | | | | | | | | | | | Purchase price adjustment - Micralyne Inc. (acquired in 2019) | | | | 0.5 | | | — | | | — | | Total | | | | $ | 29.0 | | | $ | 16.9 | | | $ | 7.0 | | (a) Net of cash acquired. | | | | | | | | |
Goodwill resulting from the OakGate acquisition will not be deductible for tax purposes. The following table presents the preliminary purchase price allocation for FLIR. We are accounting for the FLIR acquisition under the acquisition method and are required to measure identifiable assets acquired and liabilities assumed of the acquiree at the fair values on the closing date. The Company made an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. As of January 2, 2022, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the FLIR acquisition are subject to adjustment until the end of the respective measurement period. The Company is still in the process of specifically identifying the amount to beamounts assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the e2v and SSI acquisitions.FLIR acquisition. The Company made preliminaryis in the process of reviewing a third-party
valuation of certain intangible assets and tangible assets of FLIR. The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. The amounts recorded as of December 31, 2017,January 2, 2022 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis. Goodwill resulting from the FLIR acquisition will not be deductible for tax purposes. | | | | | | | | | | | | Provisional fair values allocated to the assets acquired and liabilities assumed - FLIR (in millions): | | 2021 | | | | Cash and cash equivalents | | $ | 287.7 | | | | | Accounts receivable, net | | 241.3 | | | | | Unbilled receivables, net | | 72.2 | | | | | Inventories, net | | 531.8 | | | | | Prepaid expenses and other current assets | | 55.2 | | | | | Total current assets | | 1,188.2 | | | | | | | | | | | Property, plant and equipment | | 356.3 | | | | | Goodwill | | 5,905.5 | | | | | Acquired intangible assets | | 2,490.0 | | | | | Other long-term assets | | 151.5 | | | | | Total assets acquired | | 10,091.5 | | | | | | | | | | | Accounts payable | | 144.8 | | | | | Accrued liabilities | | 629.5 | | | | | Total current liabilities acquired | | 774.3 | | | | | | | | | | | Long-term debt, net | | 496.8 | | | | | Long-term deferred tax liabilities | | 646.5 | | | | | Other long-term liabilities | | 265.3 | | | | | Total liabilities assumed | | 2,182.9 | | | | | Consideration transferred | | $ | 7,908.6 | | | | | | | | | | | Consideration transferred, net of cash acquired (a) | | $ | 7,620.9 | | | | |
| | | | | | (a) | The consideration included approximately $3.9 billion of Teledyne shares issued to existing shareholders of the acquired company. This $3.9 billion of equity consideration is a non-cash transaction. An immaterial portion of the cash consideration for certain vested FLIR restricted stock awards was deferred at the election of the award holder and will be paid out in future periods. |
With significant operations in the United States, Europe and Canada, FLIR had sales of approximately $1,923.7 million for its fiscal year ended December 31, 2020. FLIR’s results have been included since the date of the acquisition and include $1,273.6 million in net sales and operating income of $80.4 million, which included $242.6 million in acquisition-related costs for 2021 in the Digital Imaging segment. In connection with the FLIR acquisition, in 2021, Teledyne incurred pretax expenses of $350.3 million, consisting of $110.3 million in acquired intangible asset amortization expense, $106.7 million recorded to cost of sales, primarily in acquired inventory step-up expense, and $103.0 million of transaction and integration-related costs, recorded to selling, general and administrative expenses and $30.6 million was recorded to interest and debt expense. Of these amounts, $242.6 million impacted the Digital Imaging segment’s operating income and $77.1 million of transaction and integration-related costs impacted corporate expense. The Company has completedunaudited proforma information below, as required by GAAP, assumes that FLIR had been acquired at the allocationbeginning of all other acquisitions.the 2020 fiscal year and includes the effect of transaction accounting adjustments. These adjustments include the financing and interest costs associated with debt to fund the acquisition, amortization of acquired intangible assets, depreciation of the fair value step-up of acquired property, plant and equipment, amortization of inventory fair value step-up (assumed to be fully amortized in 2020), and tax related effects as well as the issuance of Teledyne common stock in connection with the acquisition. This unaudited proforma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the 2020 fiscal year. In addition, the unaudited proforma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.
The following table presents proforma net sales, net income and earnings per share data assuming e2vFLIR was acquired at the beginning of the 20162020 fiscal year: | | | | | | | | | | | | | | | | | | | | (unaudited - in millions, except per share amounts) | | 2021 (a) | | 2020 (a) | Net sales | | $ | 5,235.6 | | | $ | 5,009.9 | | Net income | | $ | 571.7 | | | $ | 399.6 | | Basic earnings per common share | | $ | 13.23 | | | $ | 8.65 | | Diluted earnings per common share | | $ | 12.91 | | | $ | 8.43 | | (a) The above unaudited proforma information is presented for the FLIR acquisition as it is considered a material acquisition. |
| | | | | | | | | | Fiscal Year (a) | (unaudited - in millions, except per share amounts) | 2017 | | 2016 | Net sales | $ | 2,696.8 |
| | $ | 2,491.8 |
| Net income | $ | 209.8 |
| | $ | 183.6 |
| Basic earnings per common share | $ | 5.96 |
| | $ | 5.31 |
| Diluted earnings per common share | $ | 5.78 |
| | $ | 5.17 |
| a) The above unaudited proforma information is presented for the e2v acquisition as it is considered a material acquisition. |
The following tables showDuring fiscal year 2018, the purchase price (netSwedish Tax Authority (“STA”) issued a reassessment of cash acquired), goodwill acquired and intangible assets acquiredtax for the acquisitionsyear ending December 31, 2012 to one of FLIR’s non-operating subsidiaries in Sweden. The total taxes, penalties and interest levied by the STA totals SEK 3.1 billion ($364.7 million based on exchange rates as of the acquisition date).The reassessment concerns the use of tax credits applied against capital gains pursuant to European Union Council Directive 2009/133/EC, commonly referred to as the EU Merger Directive, and the reassessment levied significant taxes and penalties.In March 2020, FLIR received an adverse judgment from the First Instance Court of Sweden regarding the STA’s reassessment. FLIR appealed the decision to the Administrative Court of Appeal in Stockholm, Sweden (the “ Appellate Court”). After completing an extensive analysis, including consultation with outside specialists, Teledyne recorded a liability for this uncertain tax position that reflects the most likely outcome for this tax matter under the acquisition method for business combinations in the third quarter of 2021, which is included within accrued liabilities on the consolidated balance sheet.Subsequently, the Appellate Court hearing was held on September 15, 2021 and in the subsequent weeks ending on October 22, 2021, the STA and Teledyne submitted additional arguments in writing, including closing arguments. On January 26, 2022, the Administrative Court of Appeal in Stockholm, Sweden generally affirmed the March 2020 ruling of the First Instance Court and determined an estimated tax liability in the amount of SEK 2.765 billion. We paid the tax on February 2, 2022 totaling $296.4 million. We are evaluating the ruling.
The Company is in the process of reviewing and identifying acquisition accounting adjustments for a number of acquired tax positions of FLIR that may meet the definition of an acquired uncertain tax position. In addition to the STA matter described above, the Company has preliminarily recorded $177.5 million of provisional purchase accounting adjustments for the accrual of other uncertain tax positions of FLIR. These amounts are included primarily within other long-term liabilities on the consolidated balance sheet. These preliminary estimates are subject to change as the Company obtains additional information on these matters and as additional information is made in 2017known during the post-acquisition measurement period.The final acquisition accounting adjustments for these tax matter may be materially different, as Teledyne obtains additional information on this matter and 2016 (in millions):as additional information is made known during the post-acquisition measurement period. | | | | | | | | | | | | | | | | | | 2017 | Acquisition | | Acquisition Date | | Cash Paid (a) | | Goodwill Acquired | | Acquired Intangible Assets | e2v | | March 28, 2017 | | $ | 740.6 |
| | $ | 490.4 |
| | $ | 172.3 |
| SSI | | July 20, 2017 | | 31.3 |
| | 13.8 |
| | 9.3 |
| Other Investments | | | | 2.2 |
| | 0.6 |
| | 0.4 |
| | | | | $ | 774.1 |
| | $ | 504.8 |
| | $ | 182.0 |
| (a) net of any cash acquired. | | | | | | | | |
| | | | | | | | | | | | | | | | | | 2016 | Acquisition | | Acquisition Date | | Cash Paid (a) | | Goodwill Acquired | | Acquired Intangible Assets | Frontline | | April 6, 2016 | | $ | 13.7 |
| | $ | 11.3 |
| | $ | 2.3 |
| Quantum Data | | April 15, 2016 | | 17.3 |
| | 10.7 |
| | 5.4 |
| CARIS | | May 3, 2016 | | 26.2 |
| | 22.2 |
| | 3.6 |
| IN USA | | November 2, 2016 | | 10.2 |
| | 6.3 |
| | 3.0 |
| Hanson Research | | December 6, 2016 | | 25.0 |
| | 13.5 |
| | 8.4 |
| Other investments | | | | 1.0 |
| | — |
| | — |
| | | | | $ | 93.4 |
| | $ | 64.0 |
| | $ | 22.7 |
| (a) net of any cash acquired. | | | | | | | | |
| | | | | | | | | | Fair values allocated to the assets acquired and liabilities assumed (in millions): | | 2017 | | 2016 | Current assets, excluding cash acquired | | $ | 152.9 |
| | $ | 11.9 |
| Property, plant and equipment | | 94.5 |
| | 3.9 |
| Goodwill | | 504.8 |
| | 64.0 |
| Acquired intangible assets | | 182.0 |
| | 22.7 |
| Other long-term assets | | 10.1 |
| | 1.2 |
| Total assets acquired | | 944.3 |
| | 103.7 |
| Current liabilities | | (82.1 | ) | | (9.9 | ) | Long-term liabilities | | (88.1 | ) | | (0.4 | ) | Total liabilities assumed | | (170.2 | ) | | (10.3 | ) | Cash paid, net of cash acquired | | $ | 774.1 |
|
| $ | 93.4 |
|
The following table is a summary at the acquisition date of the acquired intangible assets and weighted average useful life in years for the acquisitionsFLIR acquisition made in 2017 and 20162021 (dollars in millions)millions; amounts considered provisional as discussed above): | | | | | | | | | | | | | | | | | | | | | | | 2021 | | | | | Intangibles subject to amortization: | | Intangible Assets | | Weighted average useful life in years | | | | | | | Proprietary technology | | $ | 1,355.0 | | | 9.7 | | | | | | | Customer list/relationships | | 450.0 | | | 14.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total acquired intangibles subject to amortization | | 1,805.0 | | | 10.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Intangibles not subject to amortization:(a) | | | | | | | | | | | Trademarks | | 685.0 | | | n/a | | | | | | | Total acquired intangible assets | | $ | 2,490.0 | | | | | | | | | | | | | | | | | | | | | Goodwill | | $ | 5,905.5 | | | n/a | | | | | | |
| | | | | | | | | | | | | | | | 2017 | | 2016 | Intangibles subject to amortization: | | Intangible Assets | | Weighted average useful life in years | | Intangible Assets | | Weighted average useful life in years | Proprietary technology | | $ | 107.0 |
| | 11.6 | | $ | 10.4 |
| | 9.4 | Customer list/relationships | | 25.2 |
| | 12.9 | | 8.9 |
| | 13.2 | Backlog | | 3.0 |
| | 0.8 | | 0.3 |
| | 0.3 | Trademarks | | — |
| | n/a | | 0.5 |
| | 3.0 | Total intangibles subject to amortization | | 135.2 |
| | 11.6 | | 20.1 |
| | 10.8 | | | | | | | | | | Intangibles not subject to amortization: | | | | | | | | | Trademarks | | 46.8 |
| | n/a | | 2.6 |
| | n/a | | | | | | | | | | Total acquired intangible assets | | $ | 182.0 |
| | n/a | | $ | 22.7 |
| | n/a | | | | | | | | | | Goodwill | | $ | 504.8 |
| | n/a | | $ | 64.0 |
| | n/a |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Goodwill (in millions): | Digital Imaging | | Instrumentation | | Aerospace and Defense Electronics | | Engineered Systems | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 29, 2019 | $ | 962.7 | | | $ | 905.9 | | | $ | 164.3 | | | $ | 17.6 | | | $ | 2,050.5 | | Current year acquisitions | — | | | 16.9 | | | — | | | — | | | 16.9 | | Foreign currency changes and other | 35.1 | | | 46.0 | | | 1.5 | | | — | | | 82.6 | | Balance at January 3, 2021 | 997.8 | | | 968.8 | | | 165.8 | | | 17.6 | | | 2,150.0 | | Current year acquisition | 5,905.5 | | | — | | | — | | | — | | | 5,905.5 | | Foreign currency changes and other | (35.8) | | | (32.9) | | | (0.1) | | | — | | | (68.8) | | Balance at January 3, 2022 | $ | 6,867.5 | | | $ | 935.9 | | | $ | 165.7 | | | $ | 17.6 | | | $ | 7,986.7 | |
Goodwill resulting from the acquisitions of SSI, Frontline, Quantum Data, IN USA and CARIS will be deductible for tax purposes. Goodwill resulting from the acquisitions of e2v and Hanson Research will not be deductible for tax purposes. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | | Gross carrying amount | | Accumulated amortization | | Net carrying amount | | Gross carrying amount | | Accumulated amortization | | Net carrying amount | Acquired intangible assets (in millions): | | | | | | | | | | | | | Proprietary technology | | $ | 1,767.7 | | | $ | 358.2 | | | $ | 1,409.5 | | | $ | 420.3 | | | $ | 242.7 | | | $ | 177.6 | | Customer list/relationships | | 616.2 | | | 141.8 | | | 474.4 | | | 168.3 | | | 112.8 | | | 55.5 | | Patents | | 0.6 | | | 0.6 | | | — | | | 0.7 | | | 0.7 | | | — | | Non-compete agreements | | 0.9 | | | 0.9 | | | — | | | 0.9 | | | 0.9 | | | — | | Trademarks | | 4.5 | | | 3.9 | | | 0.6 | | | 4.5 | | | 3.6 | | | 0.9 | | Backlog | | 16.3 | | | 16.3 | | | — | | | 16.5 | | | 16.5 | | | — | | Acquired intangible assets subject to amortization | | 2,406.2 | | | 521.7 | | | 1,884.5 | | | 611.2 | | | 377.2 | | | 234.0 | | Acquired intangible assets not subject to amortization: | | | | | | | | | | | | | Trademarks | | 857.1 | | | — | | | 857.1 | | | 175.7 | | | — | | | 175.7 | | Total acquired intangible assets | | $ | 3,263.3 | | | $ | 521.7 | | | $ | 2,741.6 | | | $ | 786.9 | | | $ | 377.2 | | | $ | 409.7 | |
| | | | | | | | | | | | | | | | | | | | | | Goodwill (in millions): | | Instrumentation | | Digital Imaging | | Aerospace and Defense Electronics | | Engineered Systems | | Total | Balance at January 3, 2016 | | $ | 680.8 |
| | $ | 292.5 |
| | $ | 143.5 |
| | $ | 23.4 |
| | $ | 1,140.2 |
| Current year acquisitions | | 41.8 |
| | 22.2 |
| | — |
| | — |
| | 64.0 |
| Foreign currency changes | | (9.3 | ) | | 2.7 |
| | (4.1 | ) | | — |
| | (10.7 | ) | Balance at January 1, 2017 | | 713.3 |
| | 317.4 |
| | 139.4 |
| | $ | 23.4 |
| | 1,193.5 |
| Current year acquisitions | | 25.8 |
| | 441.3 |
| | 37.7 |
| | — |
| | 504.8 |
| Foreign currency changes and other | | 17.3 |
| | 56.9 |
| | 4.9 |
| | (0.7 | ) | | 78.4 |
| Balance at December 31, 2017 | | $ | 756.4 |
| | $ | 815.6 |
| | $ | 182.0 |
| | $ | 22.7 |
| | $ | 1,776.7 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | 2016 | | | Gross carrying amount | | Accumulated amortization | | Net carrying amount | | Gross carrying amount | | Accumulated amortization | | Net carrying amount | Other acquired intangible assets (in millions): | | | | | | | | | | | | | Proprietary technology | | $ | 329.6 |
| | $ | 159.4 |
| | $ | 170.2 |
| | $ | 207.2 |
| | $ | 130.1 |
| | $ | 77.1 |
| Customer list/relationships | | 153.2 |
| | 82.7 |
| | 70.5 |
| | 121.9 |
| | 68.3 |
| | 53.6 |
| Patents | | 0.7 |
| | 0.6 |
| | 0.1 |
| | 0.7 |
| | 0.6 |
| | 0.1 |
| Non-compete agreements | | 0.9 |
| | 0.9 |
| | — |
| | 0.9 |
| | 0.9 |
| | — |
| Trademarks | | 3.9 |
| | 2.7 |
| | 1.2 |
| | 3.8 |
| | 2.4 |
| | 1.4 |
| Backlog | | 16.3 |
| | 15.9 |
| | 0.4 |
| | 12.7 |
| | 12.6 |
| | 0.1 |
| Other acquired intangible assets subject to amortization | | 504.6 |
| | 262.2 |
| | 242.4 |
| | 347.2 |
| | 214.9 |
| | 132.3 |
| Other acquired intangible assets not subject to amortization: | | | | | | | | | | | | | Trademarks | | 156.5 |
| | — |
| | 156.5 |
| | 102.3 |
| | — |
| | 102.3 |
| Total other acquired intangible assets | | $ | 661.1 |
| | $ | 262.2 |
| | $ | 398.9 |
| | $ | 449.5 |
| | $ | 214.9 |
| | $ | 234.6 |
|
Amortizable otheracquired intangible assets are amortized on a straight-line basis over their estimated useful lives ranging from one to 15 years.years. Consistent with Teledyne’s growth strategy, we seek to acquire companies in markets characterized by high barriers to entry and that include specialized products not likely to be commoditized. Given our markets and highly engineered nature of our products, the rates of new technology development and customer acquisition and/or attrition are often not volatile. As such, we believe the value of acquired intangible assets decline in a linear, as opposed to an accelerated fashion, and we believe amortization on a straight-line basis is appropriate. The Company recorded $41.4 million, $28.3 million and $30.6 million in amortization expense in 2017, 2016 and 2015, respectively, for other acquired intangible assets. The expected future amortization expense for the next five years is as follows (in millions): 2018 - $38.5; 2019 - $30.6; 2020 - $28.7; 2021 - $27.8; 2022 - $24.9.$211.6; 2023 - $207.7; 2024 - $205.9; 2025 - $200.3; 2026 - $198.1.
The estimated remaining useful lives by asset category as of December 31, 2017,January 2, 2022, are as follows: | | | | | | | | | IntangiblesAcquired intangibles subject to amortization | | Weighted average remaining useful life in years | Proprietary technology | | 6.38.1 | Customer list/relationships | | 6.311.2 | Patents | | 3.31.3 | Backlog | | 0.9 | Trademarks | | 3.85.2 | Total acquired intangibles subject to amortization | | 6.38.7 |
Note 4. Financial Instruments The Company had noan immaterial amount of cash equivalents at December 31, 2017 or January 1, 2017.2, 2022, compared with $471.0 million in cash equivalents at January 3, 2021. The Company has categorized its cash equivalents if any, as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets.The fair value of the Company’s forward currency contracts as of December 31, 2017January 2, 2022 and January 1, 2017,3, 2021, are disclosed in Note 2, “Hedging Activities/Derivativeunder “Derivative Instruments and Hedging Activities,” of the Notes to Consolidated Financial Statements below and are based on Level 2 inputs. Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The fair value of the Company’s senior unsecured notes as described in Note 9, “Long-Term Debt,” of the Notes to Consolidated Financial Statements approximated the carrying value based upon Level 2 inputs and is valued based on observable market data at December 31, 2017January 2, 2022 and January 1, 2017.3, 2021. The fair value of the Company’s credit facility, term loans and other debt, also described in Note 9, at December 31, 2017January 2, 2022 and January 1, 2017, approximates3, 2021, approximated the carrying value due to the variable market rate used to calculate interest
payments. The Company does not have any other significant financial assets or liabilities that are measured at fair value. The carrying value of other on-balance-sheet financial instruments approximates fair value, and the cost, if any, to terminate off-balance sheet financial instruments (primarily letters of credit) is not significant.
Note 5. Accounts Receivable and Unbilled Receivables | | | | | | | | | | | | | | | Accounts Receivable and Unbilled Receivables (in millions): | | Balance at year-end | | | 2021 | | 2020 | Commercial and other billed receivables | | $ | 672.9 | | | $ | 377.4 | | U.S. Government and prime contractors billed receivables | | 108.6 | | | 36.9 | | | | 781.5 | | | 414.3 | | Allowance for doubtful accounts | | (13.8) | | | (12.3) | | Account receivable, net | | $ | 767.7 | | | $ | 402.0 | | | | | | | Commercial and other unbilled receivables, net | | $ | 158.3 | | | $ | 147.1 | | U.S. Government and prime contractors unbilled receivables, net | | 157.8 | | | 75.0 | | Unbilled receivables, net | | $ | 316.1 | | | $ | 222.1 | |
| | | | | | | | | | Accounts receivable (in millions): | | Balance at year-end | | | 2017 | | 2016 | Commercial and other receivables | | $ | 419.8 |
| | $ | 329.1 |
| U.S. Government and prime contractors contract receivables: | | | | | Billed receivables | | 26.2 |
| | 19.2 |
| Unbilled receivables | | 42.4 |
| | 40.6 |
| | | 488.4 |
| | 388.9 |
| Allowance for doubtful accounts | | (10.3 | ) | | (5.2 | ) | Total accounts receivable, net | | $ | 478.1 |
| | $ | 383.7 |
|
The billed contract receivables from the U.S. Government and prime contractors contain $26.2 million and $10.6 million at December 31, 2017, and January 1, 2017, respectively, due to long-term contracts. The unbilled contract receivables from the U.S. Government and prime contractors contain $42.4 million and $36.9 million at December 31, 2017, and January 1, 2017, respectively, due to long-term contracts, generally one to two years.
Unbilled contract receivables represent accumulated costs and profits earned but not yet billed to customers. The Company believes that substantially all such amounts will be billed and collected within one year.
Note 6. Inventories | | | | | | | | | | | | | | | | Inventories (in millions): | | Balance at year-end | | | 2021 | | | 2020 | Raw materials and supplies | | $ | 479.8 | | | | $ | 227.7 | | Work in process | | 123.0 | | | | 57.6 | | Finished goods | | 150.1 | | | | 62.0 | | Total inventories, net | | $ | 752.9 | | | | $ | 347.3 | |
| | | | | | | | | | Inventories (in millions): | | Balance at year-end | | | 2017 | | 2016 | Raw materials and supplies | | $ | 200.2 |
| | $ | 146.0 |
| Work in process | | 157.9 |
| | 147.8 |
| Finished goods | | 54.1 |
| | 43.0 |
| | | 412.2 |
| | 336.8 |
| Progress payments | | (1.4 | ) | | (9.1 | ) | Reduction to LIFO cost basis | | (10.6 | ) | | (13.5 | ) | Total inventories, net | | $ | 400.2 |
| | $ | 314.2 |
|
Inventories at cost determined on the LIFO method were $63.6 million at December 31, 2017, and $68.4 million at January 1, 2017. The remainder of the inventories using average cost or the FIFO methods, were $348.6 million at December 31, 2017, and $268.4 million at January 1, 2017. Certain inventory costs are also reflective of the estimates used in applying the percentage-of-completion revenue recognition method.
The Company recorded $2.9 million in LIFO income in 2017, $0.7 million in LIFO income in 2016 and $1.2 million of LIFO income in 2015.
Inventories, before progress payments, related to long-term contracts were $87.7 million and $87.2 million at December 31, 2017, and January 1, 2017, respectively. Progress payments related to long-term contracts were $1.4 million and $9.1 million at December 31, 2017, and January 1, 2017, respectively. Under the contractual arrangements by which progress payments are received, the customer has an ownership right in the inventories associated with specific contracts.
Note 7. Supplemental Balance Sheet Information | | | | | | | | | | | | | | | Property, plant and equipment (in millions): | | Balance at year-end | | | 2021 | | 2020 | Land | | $ | 105.6 | | | $ | 70.0 | | Buildings | | 448.9 | | | 286.0 | | Equipment and software and other | | 1,016.3 | | | 806.7 | | | | 1,570.8 | | | 1,162.7 | | Accumulated depreciation and amortization | | (743.3) | | | (673.4) | | Total property, plant and equipment, net | | $ | 827.5 | | | $ | 489.3 | |
| | | | | | | | | | Property, plant and equipment (in millions): | | Balance at year-end | | | 2017 | | 2016 | Land | | $ | 61.4 |
| | $ | 37.5 |
| Buildings | | 256.6 |
| | 204.3 |
| Equipment and software | | 656.4 |
| | 567.5 |
| | | 974.4 |
| | 809.3 |
| Accumulated depreciation and amortization | | (531.6 | ) | | (468.5 | ) | Total property, plant and equipment, net | | $ | 442.8 |
| | $ | 340.8 |
|
The following table presents the balance of selected components of Teledyne’s balance sheet components (in millions): | | | | | | | | | | | | | | | | | | | | | Balance sheet items | | Balance sheet location | | January 2, 2022 | | January 3, 2021 | | | | | | | | | | | | | | | | | | | | | | Salaries and wage accruals | | Accrued liabilities | | $ | 215.1 | | | $ | 126.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Balance sheet items | Balance sheet location | | December 31, 2017 | | January 1, 2017 | Salaries and wages | Accrued liabilities | | $ | 121.6 |
| | $ | 90.1 |
| Customer related accruals, deposits and credits | Accrued liabilities | | $ | 109.6 |
| | $ | 72.4 |
| Deferred tax liabilities | Other long-term liabilities | | $ | 61.8 |
| | $ | 26.8 |
|
Note 8. Stockholders’ Equity | | | | | | | | | | | | | | | Common stock and treasury stock activity: | | Common Stock | | Treasury Stock | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 30, 2018 | | 37,697,865 | | | 1,610,568 | | Issued | | — | | | (460,669) | | Balance, December 29, 2019 | | 37,697,865 | | | 1,149,899 | | Issued | | — | | | (403,641) | | Balance, January 3, 2021 | | 37,697,865 | | | 746,258 | | Issued | | 9,496,901 | | | (243,788) | | Balance, January 2, 2022 | | 47,194,766 | | | 502,470 | |
| | | | | | | | Common stock and treasury stock activity: | | Stock | | Treasury Stock | Balance, December 28, 2014 | | 37,697,865 |
| | 1,042,281 |
| Acquired | | — |
| | 2,561,815 |
| Issued | | — |
| | (420,830 | ) | Balance, January 3, 2016 | | 37,697,865 |
| | 3,183,266 |
| Acquired | | — |
| | 138,831 |
| Issued | | — |
| | (734,994 | ) | Balance, January 1, 2017 | | 37,697,865 |
| | 2,587,103 |
| Issued | | — | | (429,471 | ) | Balance, December 31, 2017 | | 37,697,865 |
| | 2,157,632 |
|
In 2021, Teledyne issued approximately 9.5 million shares in connection with the FLIR acquisition. See Note 3 to these Notes to Consolidated Financial Statements for additional information about the FLIR acquisition. Shares issued from treasury stock include stock options exercised as well as shares issued under certain other compensation plans.
Treasury Stock OnIn January 27, 2015,2016, the Company’s Board of Directors authorized a stock repurchase program authorizing the Company to repurchase up to 2,500,000 shares of its common stock. In February 2015, the Company entered into a $142.0 million accelerated share repurchase (“ASR”) agreement with a financial institution (“ASR Counterparty”) in a privately negotiated transaction for 1,500,000 shares of the Company's common stock. Pursuant to the ASR agreement, in February 2015, the Company advanced $142.0 million to the ASR counterparty and received 1,425,000 shares of common stock, which used $134.9 million of the $142.0 million advanced, representing 95% of the estimated shares to be repurchased under the ASR agreement. In November 2015, the February 2015 ASR was settled with the Company making a payment of $1.2 million. In November 2015, the Company entered into a $100.5 million ASR agreement with a financial institution in a privately negotiated transaction for 1,100,000 shares of the Company's common stock. Pursuant to the ASR agreement, the Company advanced $100.5 million to the ASR counterparty and received 1,045,000 shares of common stock, which used $95.5 million of the $100.5 million advanced, representing 95% of the estimated shares to be repurchased under the ASR agreement. In February 2016, the November 2015 ASR was settled and Teledyne received 135,374 shares of common stock.
The up-front payments were accounted for as a reduction to stockholders’ equity in the Company’s Consolidated Balance Sheet in the period the payments were made. The total number of shares of common stock repurchased under each ASR is based on the average of the daily volume-weighted average prices of the common stock during the term of the respective ASR, less a discount. At settlement, the ASR Counterparty may be required to deliver additional shares of the Company’s common stock to the Company or, under certain circumstances, the Company may be required to deliver shares of its common stock or make a cash payment to the ASR Counterparty. The Company has treated the ASRs as a treasury share repurchase of common stock in the period the shares were delivered for purposes of calculating earnings per share and as a forward contract indexed to its own common stock. The ASRs meet all of the applicable criteria for equity classification, and, therefore, is not accounted for as a derivative instrument.
In 2015, the Company spent $243.8 million to repurchase a total of 2,561,815 shares of its common stock. Teledyne has 2,157,632 shares of treasury stock at December 31, 2017.
On January 26, 2016, the Company’s Board of Directors authorized an additional stock repurchase program authorizing the Company to repurchase up to an additional 3,000,000 shares of its common stock. The 2015 and 2016 stock repurchase authorizations are expected to remain open continuously, with respect to the shares remaining thereunder, and the number of shares repurchasedthat we may repurchase will depend on a variety of factors, such as share price, levels of cash and borrowing capacity available, alternative investment opportunities available immediately or longer-term, and other regulatory, market or economic conditions. FutureAlthough we have no current plans to repurchase stock, future repurchases, if any, are expected to be funded with cash on hand and borrowings under the Company’s credit facility. No repurchases were made in 2017 or in 2016.since 2015. Up to approximately 3000000 shares may be repurchased under the stock repurchase program.
Preferred Stock Authorized preferred stock may be issued with designations, powers and preferences designated by the Board of Directors. There were no shares of preferred stock issued or outstanding in 2017, 20162021, 2020 or 2015.2019. Stock Incentive PlanPlans Teledyne has long-term incentive plans which provide its Board of Directors the flexibility to grant restricted stock, restricted stock units, performance shares, non-qualified stock options, incentive stock options and stock appreciation rights to officers and employees of Teledyne. Employee stock options become exercisable in one-third increments on the first, second and third anniversary of the grant and have a maximum 10-year life. Until January 1, 2015, Teledyne also sponsored a stock plan for non-employee directors pursuant to which non-employee directors received annual stock options and received stock or stock options in lieu of their respective retainer and meeting fees. The stock options became exercisable one year after issuance and have a maximum 10-year life.Stock Options
No stock options were granted in 2015. Stock option compensation expense is recorded on a straight line basis over the appropriate vesting period, generally three years. except for stock options that were granted after 2018 to Teledyne’s then President and Chief Executive Officer and Teledyne’s Executive Chairman, which were expensed immediately. The Company recorded $14.2$20.0 million,, $11.6 $24.7 million,, and $12.2$26.1 million for stock option expense, for 2017, 20162021, 2020 and 2015,2019, respectively. The Company issues shares of common stock upon the exercise of stock options. On January 23, 2018, the Company granted 373,468 stock options to its employees at an exercise price of $192.00 per share.
The total pretax intrinsic value of options exercised during 20172021 and 20162020 (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) was $33.1$64.2 million and $36.6$96.9 million, respectively. At December 31, 2017,January 2, 2022, the intrinsic value of stock options outstanding was $224.9$414.0 million and the intrinsic value of stock options exercisable was $161.3$382.7 million. During 20172021 and 2016,2020, the amount of cash received from the exercise of stock options was $24.9$25.4 million and $36.1$36.3 million, respectively. At December 31, 2017,January 2, 2022, there was $22.7$30.9 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 1.41.5 years. The fair value of stock options is determined by using a lattice-based option pricing model. The Company uses a combination of its historical stock price volatility and the volatility of exchange traded options, if any, on the Company stock to compute the expected volatility for purposes of valuing stock options granted. The period used for the historical stock price corresponded to the expected term of the options. The period used for the exchange traded options, if any, included the longest-dated options publicly available, generally three months.months. The expected dividend yield is based on Teledyne’s practice of not paying dividends. The risk-free rate of return is based on the yield of U.S. Treasury Strips with terms equal to the expected life of the options as of the grant date. The expected life in years is based on historical actual stock option exercise experience. | | | | | | | | | | | | | | | | | | | | Stock option valuation assumptions: | | | 2021 | | 2020 | | 2019 | Expected dividend yield | | | n/a | | n/a | | n/a | Expected volatility | | | 27.8% | | 23.7% | | 26.7% | Risk-free interest rate | | | 0.09% to1.58% | | 1.50% to 1.75% | | 2.47% to 2.70% | Expected life in years | | | 5.2 | | 6.6 | | 6.6 |
| | | | | | | Stock option valuation assumptions: | 2017 | | 2016 | Expected dividend yield | — |
| | — |
| Expected volatility | 32.3 | % | | 32.7 | % | Risk-free interest rate | 1.0% to 2.5% |
| | 1.5 | % | Expected life in years | 7.2 |
| | 7.2 |
|
Based on the assumptions used in the valuation of stock options, the grant date weighted average fair value of stock options granted in 20172021, 2020 and 20162019 was $48.45$134.88, $106.26 and $29.95,$72.00, respectively.
Stock option transactions for Teledyne’s stock option plans are summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | | | | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | | | | | | | Beginning balance | 1,819,147 | | $ | 170.10 | | | 1,988,576 | | $ | 130.67 | | | 2,064,740 | | $ | 104.66 | | | | | | | | | Granted | 211,973 | | | $ | 440.48 | | | 247,273 | | | $ | 382.91 | | | 390,789 | | | $ | 217.58 | | | | | | | | | Exercised | (213,384) | | | $ | 118.55 | | | (382,554) | | | $ | 95.22 | | | (429,654) | | | $ | 80.31 | | | | | | | | | Canceled or expired | (23,879) | | | $ | 328.15 | | | (34,148) | | | $ | 252.43 | | | (37,299) | | | $ | 181.62 | | | | | | | | | Ending balance | 1,793,857 | | $ | 206.08 | | | 1,819,147 | | $ | 170.10 | | | 1,988,576 | | $ | 130.67 | | | | | | | | | Options exercisable at end of period | 1,328,191 | | $ | 148.73 | | | 1,242,786 | | $ | 118.57 | | | 1,242,205 | | $ | 94.04 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | Beginning balance | 2,175,442 | | $ | 70.44 |
| | 2,383,870 |
| | $ | 63.74 |
| | 2,850,877 |
| | $ | 62.37 |
| Granted | 543,880 |
| | $ | 123.40 |
| | 520,310 |
| | $ | 78.46 |
| | — |
| | $ | — |
| Exercised | (390,835 | ) | | $ | 63.96 |
| | (687,018 | ) | | $ | 52.54 |
| | (386,679 | ) | | $ | 49.13 |
| Canceled or expired | (42,784 | ) | | $ | 92.79 |
| | (41,720 | ) | | $ | 82.49 |
| | (80,328 | ) | | $ | 85.26 |
| Ending balance | 2,285,703 |
| | $ | 83.73 |
| | 2,175,442 |
| | $ | 70.44 |
| | 2,383,870 |
| | $ | 63.74 |
| Options exercisable at end of period | 1,443,241 |
| | $ | 70.35 |
| | 1,530,847 |
| | $ | 65.52 |
| | 1,907,126 |
| | $ | 57.61 |
|
The following table provides certain information with respect to stock options outstanding and stock options exercisable at December 31, 2017,January 2, 2022, under the stock option plans: | | | | | | | | | | | | | | | | | | | | Stock Options Outstanding | | Stock Options Exercisable | Range of Exercise Prices | | Shares | | Weighted Average Exercise Price | | Remaining life in years | | Shares | | Weighted Average Exercise Price | $15.53-$24.99 | | 5,359 |
| | $ | 21.83 |
| | 1.5 | | 5,359 |
| | $ | 21.83 |
| $25.00-$49.99 | | 351,909 |
| | $ | 43.78 |
| | 2.8 | | 351,909 |
| | $ | 43.78 |
| $50.00-$74.99 | | 260,431 |
| | $ | 63.03 |
| | 4.0 | | 260,431 |
| | $ | 63.03 |
| $75.00-$99.99 | | 1,139,099 |
| | $ | 82.67 |
| | 6.8 | | 825,542 |
| | $ | 84.30 |
| $100.00-$124.99 | | 528,005 |
| | $ | 123.38 |
| | 9.1 | | — |
| | $ | — |
| $125.00-$135.24 | | 900 |
| | $ | 133.88 |
| | 9.2 | | — |
| | $ | — |
| | | 2,285,703 |
| | $ | 83.73 |
| | 6.4 | | 1,443,241 |
| | $ | 70.35 |
|
plans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock Options Outstanding | | Stock Options Exercisable | Range of Exercise Prices | | Shares | | Weighted Average Exercise Price | | Remaining life in years | | Shares | | Weighted Average Exercise Price | $40.70-$99.99 | | 500,916 | | | $ | 82.16 | | | 2.7 | | 500,916 | | | $ | 82.16 | | $100.00-$199.99 | | 558,185 | | | $ | 153.97 | | | 5.6 | | 558,185 | | | $ | 153.97 | | $200.00-$299.99 | | 307,410 | | | $ | 217.71 | | | 7.1 | | 197,353 | | | $ | 217.77 | | $300.00-$399.99 | | 220,180 | | | $ | 382.89 | | | 8.1 | | 71,737 | | | $ | 382.93 | | $400.00-$445.21 | | 207,166 | | | $ | 440.93 | | | 9.7 | | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,793,857 | | | $ | 206.08 | | | 5.8 | | 1,328,191 | | | $ | 148.73 | |
Performance SharesShare Plan Teledyne’s Performance Share Plan (“PSP”) provides grants of performance share units, which key officers and executives may earn if Teledyne meets specified performance objectives over a three-yearthree-year period. Awards are payable in cash and to the extent available, shares of Teledyne common stock. Awards are generally paid to the participants in three3 annual installments after the end of the performance cycle so long as they remain employed by Teledyne (with an exception for retirement). Participants in the performance sharePSP program maycan elect to receive a cash payment in lieu of awarded shares to pay income taxes due with respect to an installment payment. The cash payment with awarded cash, by reducing the numberin lieu of awarded shares or a combination thereof.is based on the then current market value of Teledyne stock. In February 2012, the performance cycle for the three-year period ending December 31, 2014, was set. Under the 2015 to 2017 plan, and based on actual performance, the companyCompany issued 1,9447,673, 8,586 and 6,481 shares of Teledyne common stock in 2015, 864 shares in 20162020, 2019 and 1,883 shares in 2017.
In February 2015, the performance cycle for the three-year period ending December 31, 2017, was set.2018, respectively. Under the 2018 to 2020 plan, and based on actual performance, the Company issued 9,588 shares of Teledyne common stock in 2021. The maximum number of remaining shares that could be issued in three2 equal installments in 2018, 20192022 and 2020,2023, is 48,156.35,082.
The calculatedestimated expense for each plan year was based on the expected cash payout and the expected shares to be issued, valued at the share price at the inception of the performance cycle, except for the shares that can be issued based on a marketmarket-based comparison. The expected expense for these shares was calculated using a Monte-Carlo type simulation which takes into consideration several factors including volatility, risk free interest rates and correlation of Teledyne’s stock price with the comparator, the Russell 2000 Index (for 2018 the comparator is the Russell 1000). No adjustment to the calculated expense for the shares issued based on a market based comparison will be made regardless of the actual performance. The Company recorded $4.6 million, $2.1$6.2 million and $2.3$7.5 million in compensation expense related to the PSP program for fiscal years 2017, 20162020 and 2015,2019, respectively. In 2021, the Company discontinued the PSP. Restricted Stock Under Teledyne’s restricted stock award program selectedkey officers and key executives receive a grant of stock equal to a specified percentage of the participant’s annual base salary at the date of grant. The restricted stock is subject to transfer and forfeiture restrictions during an applicable “restricted period”. The restrictions have both time-based and performance-based components. The restricted period expires (and the restrictions lapse) on the third anniversary of the date of grant, subject to the achievement of stated performance objectives over a specified three-year performance period. If employment is terminated (other than by death, retirement or disability) during the restricted period, the stock grant is forfeited.
The calculatedestimated expense for restricted stock awards to employees is based on a Monte-Carlo typelattice-based simulation which takes into consideration several factors including volatility, risk free interest rates and the correlation of Teledyne’s stock price with the comparator, the S&P 500 Index for awards granted in 2021, the Russell 1000 Index for awards granted from 2018 to 2020 and the Russell 2000 Index (for 2018 the comparator is the Russell 1000). No adjustmentfor awards granted prior to the calculated expense will be made regardless of actual performance.2018. The Company recorded $2.7$3.5 million, $2.7$3.3 million and $2.6$3.0 million in compensation expense related to restricted stock awards to employees, for fiscal years 2017, 20162021, 2020 and 2015,2019, respectively. At December 31, 2017,January 2, 2022, there was $2.6$3.5 million of total estimated unrecognized compensation cost related to non-vested awards which is expected to be recognized over a weighted-average period of approximately 1.31.5 years.
As part of the acquisition of FLIR, the Company assumed certain unvested restricted stock units that were issued by FLIR in March 2021. The unvested restricted stock units were converted to 62,974 Teledyne restricted stock units. The post-acquisition expense for these restricted stock units was $7.8 million for 2021. The expense related to these assumed restricted stock units is included in the Digital Imaging segment results. This amount can be impacted by employee retirements and terminations or other awards granted during the remainder of the year. At January 2, 2022, 49,351 restricted stock units are outstanding and there was $14.4 million of total estimated unrecognized compensation cost related to non-vested awards which is expected to be recognized over a weighted-average period of approximately 2.2 years. The following table shows restricted stock award activity for grants made to both domestic and foreign based employees: | | | | | | | | | | | | | | | Restricted Stock: | | Shares | | Weighted average fair value per share | | | | | | | | | | | | | | | | | | | | | Balance, December 30, 2018 | | 74,220 | | | $ | 108.05 | | Granted | | 17,522 | | | $ | 200.00 | | Issued | | (35,330) | | | $ | 72.91 | | | | | | | Balance, December 29, 2019 | | 56,412 | | | $ | 158.62 | | Granted | | 10,080 | | | $ | 360.33 | | Issued | | (23,087) | | | $ | 114.74 | | | | | | | Balance, January 3, 2021 | | 43,405 | | | $ | 228.80 | | Granted | | 10,227 | | | $ | 334.92 | | Issued | | (15,423) | | | $ | 176.64 | | Forfeited/Canceled | | (380) | | | $ | 176.64 | | Balance, January 2, 2022 | | 37,829 | | | $ | 279.27 | |
| | | | | | | | | Restricted stock: | | Shares | | Weighted average fair value per share | Balance, December 28, 2014 | | 108,726 |
| | $ | 69.55 |
| Granted | | 34,054 |
| | $ | 92.74 |
| Issued | | (29,642 | ) | | $ | 51.38 |
| Forfeited/Canceled | | (13,502 | ) | | $ | 82.33 |
| Balance, January 3, 2016 | | 99,636 |
| | $ | 81.15 |
| Granted | | 37,104 |
| | $ | 72.91 |
| Issued | | (39,357 | ) | | $ | 67.15 |
| Forfeited/Canceled | | (339 | ) | | $ | 79.93 |
| Balance, January 1, 2017 | | 97,044 |
| | $ | 83.68 |
| Granted | | 24,232 |
| | $ | 114.42 |
| Issued | | (30,704 | ) | | $ | 87.98 |
| Forfeited/Canceled | | (2,136 | ) | | $ | 82.53 |
| Balance, December 31, 2017 | | 88,436 |
| | $ | 90.63 |
|
Beginning with the 2015 Annual Meeting, non-employeeNon-employee directors each receivereceived restricted stock units valued at $130,000 in 2021 and $110,000 (orin 2020 and 2019 or valued at $55,000half the amount for a person who becomes a director for the first time after the date of the Annual Meeting).Meeting. The restricted stock units generally vest one year following the date of grant and are settled in shares of common stock on the date of vesting unless a director has elected to defer settlement of the award until his or her separation from Board service. The annual expense related to non-employee directorsdirector’s restricted stock grantsunits was approximately$1.2 million for 2021, $1.1 million for 2020 and $1.0 million for each of 2017, 2016 and 2015. 2019.
The following table shows restricted stock award activity for grants made to non-employee directors: | | | | | | | | | | | | | | | Directors Restricted Stock: | | Shares | | Weighted average fair value per share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 30, 2018 | | 7,752 | | | $ | 170.00 | | Granted | | 4,155 | | | $ | 251.23 | | Issued | | (2,840) | | | $ | 193.39 | | Balance, December 29, 2019 | | 9,067 | | | $ | 199.90 | | Granted | | 3,692 | | | $ | 312.41 | | Issued | | (2,640) | | | $ | 249.72 | | Canceled | | (353) | | | $ | 311.17 | | Balance, January 3, 2021 | | 9,766 | | | $ | 224.94 | | Granted | | 2,592 | | | $ | 450.27 | | Issued | | (5,300) | | | $ | 227.90 | | | | | | | Balance, January 2, 2022 | | 7,058 | | | $ | 308.54 | |
| | | | | | | | | Directors Restricted stock: | | Shares | | Weighted average fair value per share | Balance, December 28, 2014 | | — |
| | $ | — |
| Granted | | 9,534 |
| | $ | 108.95 |
| Balance, January 3, 2016 | | 9,534 |
| | $ | 108.95 |
| Granted | | 10,305 |
| | $ | 96.00 |
| Issued | | (8,532 | ) | | $ | 108.93 |
| Balance, January 1, 2017 | | 11,307 |
| | $ | 97.16 |
| Granted | | 7,371 |
| | $ | 134.26 |
| Issued | | (10,305 | ) | | $ | 96.00 |
| Balance, December 31, 2017 | | 8,373 |
| | $ | 131.25 |
|
In December 2016, Teledyne granted 16,045 restricted stock units with a grant date fair value of $2.0 million to Teledyne’s Chief Executive Officer, which vest in equal annual installments over three years. The calculated expense for restricted stock units is based on the market price of a share of Teledyne common stock at the grant date, which is recognized over the vesting period and was $0.7 million in 2017 and less than $0.1 million in 2016. In December 2017, we issued 2,389 shares under the plan and 2,960 shares were withheld to pay income taxes.
Note 9. Long-Term Debt | | | | | | | | | | | | Long-Term Debt (dollars in millions, except as noted): | January 2, 2022 | | January 3, 2021 | $1.15 billion credit facility, due March 2026, weighted average variable rate of 1.20% at January 2, 2022 and 1.05% at January 3, 2021 | $ | 125.0 | | | $ | 125.0 | | | | | | | | | | | | | | Term loan due October 2024, variable rate of 1.35% at January 2, 2022 and 1.150% at January 3, 2021, swapped to a Euro fixed rate of 0.612% | 150.6 | | | 150.0 | | 0.65% Fixed Rate Senior Notes due April 2023 | 300.0 | | | — | | 0.95% Fixed Rate Senior Notes due April 2024, callable after April 2022 | 450.0 | | | — | | 1.60% Fixed Rate Senior Notes due April 2026 | 450.0 | | | — | | 2.25% Fixed Rate Senior Notes due April 2028 | 700.0 | | | — | | 2.50% Fixed Rate Senior Notes due April 2030 | 500.0 | | | — | | 2.75% Fixed Rate Senior Notes due April 2031 | 1,100.0 | | | — | | Term loan due May 2026, variable rate of 1.35% at January 2, 2022 | 355.0 | | | — | | | | | | 3.09% Fixed Rate Senior Notes due December 2021 | — | | | 95.0 | | 3.28% Fixed Rate Senior Notes due November 2022 | — | | | 100.0 | | 0.70% €50 Million Fixed Rate Senior Notes due April 2022 | — | | | 61.1 | | 0.92% €100 Million Fixed Rate Senior Notes due April 2023 | — | | | 122.1 | | 1.09% €100 Million Fixed Rate Senior Notes due April 2024 | — | | | 122.1 | | Other debt | 0.7 | | | 4.0 | | Debt issuance costs | (31.9) | | | (0.8) | | Total long-term debt | 4,099.4 | | | 778.5 | | Current portion of long-term debt and other debt | — | | | (97.6) | | Total long-term debt, net of current portion | $ | 4,099.4 | | | $ | 680.9 | |
At December 31, 2017, Teledyne had $1,063.9 million inMaturities of long-term debt outstanding. At as of January 1, 2017, Teledyne had $509.7 million in long-term debt outstanding.2, 2022 (in millions): | | | | | | | | | Fiscal year | | | 2022 | | $ | — | | 2023 | | 300.2 | | 2024 | | 600.7 | | 2025 | | 0.1 | | 2026 | | 930.2 | | Thereafter | | 2,300.1 | | Total principal payments | | 4,131.3 | | Debt issuance costs | | (31.9) | | Total debt | | $ | 4,099.4 | |
The Company has no sinking fund requirements. In the first quarter of 2021, Teledyne completed various financing activities related to the then pending acquisition of FLIR. These activities included entering into a $4.5 billion short term stand-by bridge facility on January 4, 2021, as required by the definitive agreement, resulting in debt expense of $17.2 million. In addition, on March 2017,17, 2021 Teledyne called $493.3 million of existing fixed rate senior notes and incurred debt extinguishment expenses of $13.4 million, which is included in interest and debt expense, net. On March 22, 2021, Teledyne completed all permanent financing for the acquisition of FLIR and terminated the $4.5 billion stand-by bridge facility. The permanent financing consists of $3.0 billion investment-grade bonds (the “Notes”), including $300.0 million aggregate principal amount of 0.65% Notes due 2023, $450.0 million aggregate principal amount of 0.95% Notes due 2024, $450.0 million aggregate principal amount of 1.60% Notes due 2026, $700.0 million aggregate principal amount of 2.25% Notes due 2028 and $1.1 billion aggregate principal amount of 2.75% Notes due 2031. Teledyne may redeem the $450.0 million of 0.95% Notes due 2024 at any time or from time to time, in whole or in part, at the Company’s option, from and after April 1, 2022, at a redemption price equal to 100% of the principal amount of the Notes redeemed. In addition, we guaranteed FLIR’s $500.0 million, 2.50% Fixed Rate Senior Notes due August 2030. Previously on March 4, 2021, Teledyne entered into a $100.0 million term loan$1.0 billion Term Loan Credit Agreement (maturing May 2026) and an Amended and Restated Credit Agreement (maturing March 2026) with a maturity datecapacity of October 30, 2019. Subsequently,$1.15 billion. The terms of the $1.0 billion Term Loan Credit Agreement allow for prepayments, at the Company’s option, at any time or from time to time, in March 2017, Teledyne entered into a cross currency swap to effectively convert the $100.0 million term loan to a €93.0 million denominated instrument with a fixed euro interest rate of 0.7055%. The proceeds from the term loan were usedwhole or in connection with the acquisition of e2v. On April 18, 2017, Teledyne entered into a note purchase agreement for a private placement of €250.0 million of senior unsecured notes due through April 2024.part without premium or penalty. Teledyne used the proceeds from the Notes together with the proceeds from the $1.0 billion Term Loan Credit Agreement and cash on hand to pay the cash portion of the private placement, among other things, to repay indebtednessconsideration for the FLIR acquisition and for general corporate purposes.refinance certain existing debt. In December 2016, the Company entered into an amendment relating to term loans
Excluding interest and fees, no payments are due under the $1.15 billion unsecured credit facility (“credit facility”) until it matures. The credit agreements require the Company to comply with various financial and operating covenants, including maintaining certain consolidated leverage and interest coverage ratios.matures in March 2026. Borrowings under our credit facility and term loans are at variable rates which are, at our option, tied to a base rate, Eurocurrency rate equal to LIBOR (London Interbank Offered Rate) plus an applicable rate or a base rateequivalent as defined in our credit agreements. Eurocurrency rate loans may be denominated in U.S. dollars or an alternative currency as defined in the agreement. Eurocurrency or LIBOR-based loans under the facility typically have terms of one, two, three or six months and the interest rate for each such loan is subject to change if the loan is continued or converted following the applicable maturity date. The Company has not drawn any loans with a term longer than three months under the credit facility. Base rate loans have interest rates that primarily fluctuate with changes in the prime rate. Interest rates are also subject to change based on our consolidated leverage ratio as defined in the credit agreement. The credit agreement also provides for facility fees that vary between 0.12% and 0.25% of the credit line, depending on our consolidated leverage ratio as calculated from time to time. Teledyne also has a $5.0 million uncommitted credit line which permits credit extensions up to $5.0 million plus an incremental $2.0 million solely for standby letters of credit. This credit line is utilized, as needed, for periodic cash needs. There were no in outstanding funding advances under the uncommitted credit line at December 31, 2017 and $3.5 million outstanding at January 1, 2017. The Company also has $6.7 million outstanding under capital leases, of which $1.3 million is current. At year-end 2017, Teledyne had $29.6 million in outstanding letters of credit.
Available borrowing capacity under the $750.0 million credit facility, which is reduced by borrowings and certain outstanding letters of credit, was $558.7$759.2 million at December 31, 2017.January 2, 2022. The credit agreement and term loans requires the Company to comply with various financial and operating covenants and at December 31, 2017,January 2, 2022, the Company was in compliance with these covenants. At January 2, 2022, Teledyne had $281.9 million in outstanding letters of credit. Of this amount, $244.6 million was released in February 2022. Total interest expense including credit facility fees and other bank charges was $35.5$104.8 million in 2017, $23.62021, $15.8 million in 20162020 and $24.0$22.0 million in 2015.2019. Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The Company’s long-term debt was considered a level 2 fair value hierarchy and is valued based on observable market data. The estimated fair value of Teledyne’s long-term debt at December 31, 2017, and January 1, 2017, approximated the carrying value.
| | | | | | | | | Long-Term Debt (in millions): | December 31, 2017 | | January 1, 2017 | $750.0 million revolving credit facility, due December 2020, weighted average rate of 2.72% at December 31, 2017 | $ | 165.0 |
| | $ | — |
| Term Loans due through January 2022, weighted average rate of 2.94% at December 31, 2017, and 1.90% at January 1, 2017 | 175.5 |
| | 182.5 |
| Term loan due October 2019, variable rate of 2.80% swapped to a Euro fixed rate of 0.7055% at December 31, 2017 | 100.0 |
| | — |
| 4.74% Fixed Rate Senior Notes due and repaid September 2017 | — |
| | 100.0 |
| 2.61% Fixed Rate Senior Notes due December 2019 | 30.0 |
| | 30.0 |
| 5.30% Fixed Rate Senior Notes due September 2020 | 75.0 |
| | 75.0 |
| 2.81% Fixed Rate Senior Notes due November 2020 | 25.0 |
| | 25.0 |
| 3.09% Fixed Rate Senior Notes due December 2021 | 95.0 |
| | 95.0 |
| 3.28% Fixed Rate Senior Notes due November 2022 | 100.0 |
| | 100.0 |
| 0.70% €50 Million Fixed Rate Senior Notes due April 2022 | 60.0 |
| | — |
| 0.92% €100 Million Fixed Rate Senior Notes due April 2023 | 120.0 |
| | — |
| 1.09% €100 Million Fixed Rate Senior Notes due April 2024 | 120.0 |
| | — |
| Other debt at various rates due through 2018 | 2.7 |
| | 4.2 |
| Total long-debt | 1,068.2 |
| | 611.7 |
| Current portion of long-term debt and debt issue costs | (4.3 | ) | | (102.0 | ) | Total long-term debt, net of current portion | $ | 1,063.9 |
| | $ | 509.7 |
|
No minimum principal payments on the $750.0 million revolving credit facility are required until December 2020. The Company began making quarterly minimum principal payments on the term loans in 2015. Future minimum principal payments on long-term debt are as follows: 2018 - $2.3 million; 2019 - $136.0 million; 2020 - $105.1 million; 2021 - $102.4 million; 2022 - $482.0 million; 2023 and beyond - $240.4 million. The Company has no sinking fund requirements.
Note 10. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act was enacted. The Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering corporate income tax rates, implementing the territorial tax system and imposing a tax on deemed repatriation of non-U.S. earnings. As a result of the Tax Act, Teledyne incurred provisional charges of $4.7 million in the fourth quarter of 2017 primarily due to the repatriation tax and the remeasurement of U.S. deferred tax assets and liabilities. In accordance with the Tax Act, the Company will elect to pay the repatriation tax liability over a period of eight years, with the first installment of $3.1 million due in 2018. The remainder of the tax liability is recorded in non-current income tax payable. The repatriation tax resulted in a net tax expense of $26.2 million and the remeasurement of U.S. deferred tax assets and liabilities resulted in a net tax benefit of $21.5 million. The impacts of the Tax Act may differ from this estimate, possibly materially (and the amount of the provisional charge may accordingly be adjusted over the course of 2018), due to changes in interpretations and assumptions Teledyne has made, guidance that may be issued, and actions Teledyne may take as a result of the Tax Act. These adjustments to the provisional charge related to the Tax Act will be recorded quarterly until the computations are complete which is expected no later than the fourth quarter of 2018.
Income before income taxes included income from domestic operations of $187.2$108.0 million for 2017, $195.22021, $289.5 million for 20162020 and $213.8$295.9 million for 2015.2019. Income before taxes included income from foreign operations of $99.8$425.9 million for 2017, $46.12021, $180.2 million for 20162020 and $44.4$177.8 million for 2015. 2019. | | | | | | | | | | | | | | | | | | | | | Income tax provision/(benefit) - (in millions): | | 2021 | | 2020 | | 2019 | Current | | | | | | | Federal | | $ | 43.0 | | | $ | 25.3 | | | $ | 66.0 | | State | | 10.8 | | | 7.0 | | | 10.6 | | Foreign | | 57.5 | | | 39.1 | | | 28.4 | | Total current | | 111.3 | | | 71.4 | | | 105.0 | | Deferred | | | | | | | Federal | | (39.7) | | | (0.5) | | | (37.0) | | State | | (0.1) | | | 2.3 | | | (2.3) | | Foreign | | 17.0 | | | (5.4) | | | 5.7 | | Total deferred | | (22.8) | | | (3.6) | | | (33.6) | | Provision for income taxes | | $ | 88.5 | | | $ | 67.8 | | | $ | 71.4 | |
| | | | | | | | | | | | | | Income tax provision/(benefit) - (in millions): | | 2017 | | 2016 | | 2015 | Current | | | | | | | Federal | | $ | 54.0 |
| | $ | 43.0 |
| | $ | 54.4 |
| State | | 6.4 |
| | 3.9 |
| | 5.3 |
| Foreign | | 22.8 |
| | 3.4 |
| | 4.0 |
| Total current | | 83.2 |
| | 50.3 |
| | 63.7 |
| Deferred | | | | | | | Federal | | (10.7 | ) | | 4.3 |
| | 3.5 |
| State | | (3.6 | ) | | (4.8 | ) | | (2.5 | ) | Foreign | | (9.1 | ) | | 0.6 |
| | (2.0 | ) | Total deferred | | (23.4 | ) | | 0.1 |
| | (1.0 | ) | Provision for income taxes | | $ | 59.8 |
| | $ | 50.4 |
| | $ | 62.7 |
|
The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate: | | | | | | | | | | | Tax rate reconciliation: | | 2017 | | 2016 | | 2015 | U.S. federal statutory tax rate | | 35.0 | % | | 35.0 | % | | 35.0 | % | State and local taxes, net of federal benefit | | 1.8 |
| | 1.6 |
| | 1.9 |
| Research and development tax credits | | (3.2 | ) | | (2.0 | ) | | (3.4 | ) | Investment tax credits | | (1.5 | ) | | (1.8 | ) | | (1.2 | ) | Qualified production activity deduction | | (1.3 | ) | | (1.6 | ) | | (2.2 | ) | Foreign rate differential | | (4.2 | ) | | (2.7 | ) | | (2.1 | ) | Net reversals for unrecognized tax benefits | | (0.8 | ) | | (1.5 | ) | | (2.1 | ) | Stock-based compensation (ASU No. 2016-09) | | (3.1 | ) | | (3.5 | ) | | — |
| Provisional charges related to U.S. tax reform | | 1.6 |
| | — |
| | — |
| Other | | (3.5 | ) | | (2.6 | ) | | (1.6 | ) | Effective income tax rate | | 20.8 | % | | 20.9 | % | | 24.3 | % |
| | | | | | | | | | | | | | | | | | | | | Tax rate reconciliation: | | 2021 | | 2020 | | 2019 | U.S. federal statutory income tax rate | | 21.0 | % | | 21.0 | % | | 21.0 | % | State and local taxes, net of federal benefit | | 1.8 | | | 2.0 | | | 2.2 | | Research and development tax credits | | (3.4) | | | (3.4) | | | (2.2) | | Investment tax credits | | (1.1) | | | (1.0) | | | (1.1) | | | | | | | | | Foreign rate differential | | 1.4 | | | 0.6 | | | 0.7 | | Net reversals for unrecognized tax benefits | | (2.4) | | | 0.7 | | | (0.6) | | Stock-based compensation | | (2.5) | | | (4.5) | | | (3.3) | | U.S. export sales | | (1.3) | | | (2.5) | | | (3.0) | | Acquisition-related costs | | 1.7 | | | — | | | — | | Other | | 1.4 | | | 1.5 | | | 1.4 | | Effective income tax rate | | 16.6% | | 14.4 | % | | 15.1 | % |
Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse.
The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense were as follows (in millions): | | | | | | | | | | | | | | | | | | | | Deferred income tax assets: | | 2021 | | 2020 | Long-term: | | | | | Accrued liabilities | | $ | 52.6 | | | $ | 22.2 | | Inventory valuation | | 41.5 | | | 15.4 | | Accrued vacation | | 9.6 | | | 7.6 | | Deferred compensation and other benefit plans | | 39.1 | | | 39.0 | | Postretirement benefits other than pensions | | 1.7 | | | 1.8 | | Operating lease liabilities | | 38.7 | | | 29.9 | | Capitalization of research and development | | 34.1 | | | 37.1 | | Tax credit and net operating loss carryforward | | 47.4 | | | 44.2 | | | | | | | Valuation allowance | | (12.7) | | | (12.9) | | Total deferred income tax assets | | 252.0 | | | 184.3 | | | | | | | Deferred income tax liabilities: | | | | | Long-term: | | | | | Intangible amortization | | 751.5 | | | 139.4 | | Property, plant and equipment differences | | 37.8 | | | 16.5 | | | | | | | Operating lease right-of-use assets | | 35.0 | | | 27.7 | | Unremitted earnings of foreign subsidiaries | | 15.9 | | | — | | Other | | 7.9 | | | 3.7 | | Total deferred income tax liabilities | | 848.1 | | | 187.3 | | | | | | | Net deferred income tax liabilities | | $ | 596.1 | | | $ | 3.0 | |
| | | | | | | | | | Deferred income tax assets: | | 2017 | | 2016 | Long-term: | | | | | Accrued liabilities | | $ | 16.9 |
| | $ | 36.4 |
| Inventory valuation | | 14.3 |
| | 17.7 |
| Accrued vacation | | 7.6 |
| | 10.7 |
| Deferred compensation and other benefit plans | | 11.6 |
| | 24.5 |
| Postretirement benefits other than pensions | | 3.0 |
| | 4.6 |
| Tax credit and net operating loss carryforward | | 49.8 |
| | 47.7 |
| Valuation allowance | | (8.8 | ) |
| (16.9 | ) | Total deferred income tax assets | | 94.4 |
| | 124.7 |
| Deferred income tax liabilities: | | | | | Long-term: | | | | | Property, plant and equipment differences | | 28.6 |
| | 30.6 |
| Intangible amortization | | 113.4 |
| | 110.7 |
| Other | | 3.4 |
| | 4.8 |
| Total deferred income tax liabilities | | 145.4 |
| | 146.1 |
| Net deferred income tax liabilities | | $ | 51.0 |
| | $ | 21.4 |
|
On a provisional basis, weWe intend to reinvest indefinitely the earnings of our material foreign subsidiaries in our operations outside of the United States. The cash that the Company'sCompany’s foreign subsidiaries hold for indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. We estimate that future domestic cash generation will be sufficient to meet future domestic cash requirements. Due to the Tax Act, U.S. federal and applicable state income taxes have been accrued for the deemed repatriation.repatriations. At December 31, 2017,January 2, 2022, the amount of undistributed foreign earnings was $324.3$619.8 million, for which we have not recorded a deferred tax liability of approximately $1.4$1.3 million for state corporate income taxes which would be due if reinvested foreign earnings were repatriated. Should we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that we would no longer indefinitely reinvest the earnings outside the United States.
In assessing the need for a valuation allowance, we consider all positive and negative evidence, including recent financial performance, scheduled reversals of temporary differences, projected future taxable income, availability of taxable income in carryback periods and tax planning strategies. Based on a review of such information, management believes that it is possible that some portion of deferred tax assets will not be realized as a future benefit and therefore has recorded a valuation allowance. The valuation allowance for deferred tax assets decreased by $8.1$0.2 million in 2017,2021, primarily related to the
utilization of net operating loss carryforward and evidence for future utilization of the remaining investment tax credit and net operating loss carryforwards.credits, offset by acquisition-related valuation allowance.
At December 31, 2017,January 2, 2022, the Company had approximately $60.6$45.3 million of net operating loss carryforward from foreign entities primarily from the Company’s Danish entity,entities in the United Kingdom, Denmark and Norway, of which has$28.8 million have no expiration date.dates and $16.5 million have expiration dates ranging from 2025 to 2040. The Company had foreignCanadian capital loss carryforward in the amount of $2.2$4.2 million which has no expiration date. Also the Company had aggregate Canadian federal and provincial investment tax credits of $19.9$16.9 million, which have expiration dates ranging from 2030 to 2041. The Company had Spanish federal research and development credit carryforward in the amount of 2029$0.4 million, which have expiration dates ranging from 2025 to 2037.2028. In addition, the Company had domestic federal and state net operating loss carryforward of $3.8$28.0 million and $131.1$117.1 million, respectively. Generally, federal net operating loss carryforward amounts are limited in their use by earnings of certain acquired subsidiaries,subsidiaries. Of the $28.0 million federal net operation loss carryforward, $20.6 million have no expiration dates and $7.4 million have expiration dates ranging from 20302024 to 2037 and the2037. The state net operating loss carryforward amounts have expiration dates ranging from 20202022 to 2037.2041. Finally, the Company had federal research and development credit carryforward in the amount of $1.2$0.3 million which will expire between 2032 and 2035has an expiration date of 2037 and state tax credits of $13.8$17.9 million, of which $11.6$14.1 million have no expiration date and $2.2$3.8 million have expiration dates ranging from 20192023 to 2033.2035. | | | | | | | | | | | | | | | | | | | | | Unrecognized tax benefits (in millions): | | 2021 | | 2020 | | 2019 | Beginning of year | | $ | 32.3 | | | $ | 24.5 | | | $ | 25.0 | | Increase due to FLIR acquisition | | 413.8 | | | — | | | — | | Increase for tax positions taken during the current period | | 6.3 | | | 9.4 | | | 4.3 | | Increase in prior year tax positions | | 2.5 | | | 5.1 | | | 4.2 | | Reduction related to settlements with taxing authorities | | (1.6) | | | (1.9) | | | (4.6) | | Reduction related to lapse of the statute of limitations | | (20.7) | | | (4.9) | | | (4.3) | | Impact of exchange rate changes | | (30.6) | | | 0.1 | | | (0.1) | | | | | | | | | End of year | | $ | 402.0 | | | $ | 32.3 | | | $ | 24.5 | |
| | | | | | | | | | | | | | Unrecognized tax benefits (in millions): | | 2017 | | 2016 | | 2015 | Beginning of year | | $ | 24.5 |
| | $ | 28.8 |
| | $ | 32.3 |
| Increase in prior year tax positions (a) | | 0.5 |
| | 1.6 |
| | 2.1 |
| Increase for tax positions taken during the current period | | 9.8 |
| | 1.6 |
| | 1.6 |
| Reduction related to settlements with taxing authorities | | — |
| | — |
| | (1.5 | ) | Reduction related to lapse of the statute of limitations | | (8.8 | ) | | (7.5 | ) | | (5.0 | ) | Impact of exchange rate changes | | — |
| | — |
| | (0.7 | ) | End of year | | $ | 26.0 |
| | $ | 24.5 |
| | $ | 28.8 |
| a) Includes the impact of acquisitions in all years. | | | | | | |
TheIn the next 12 months, the Company anticipates the total unrecognized tax benefit for various federal, state and foreign tax items may be reduced by $4.9$19.1 million due to the expiration of statutes of limitation for various federal, state and foreign tax issues in the next 12 months.issues.
We recognized net tax benefits and expense for interest and penalties related to unrecognized tax benefits within the provision for income taxes in our statements of operations of $0.5$2.4 million $0.2of expense, $0.1 million of expense and $0.2$0.3 million of benefit, for 2017, 20162021, 2020 and 2015,2019, respectively. Interest and penalties in the amount of $1.4$160.8 million, $1.9$1.2 million and $2.1$1.1 million were recognized in the 2017, 20162021, 2020 and 20152019 statement of financial position, respectively. In 2021, interest and penalties of $157.0 million were accrued as a result of the acquisition of FLIR. Substantially all of the unrecognized tax benefits as of December 31, 2017,January 2, 2022, if recognized, would affect our effective tax rate. Current accrued liabilities on the consolidated balance sheet included unrecognized tax benefits including accrued interest and penalties of $341.0 million as of January 2, 2022, compared with no balance as of January 3, 2021. Teledyne paid $296.4 million related to this current accrued liabilities balance on February 2, 2022. We file income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. The Company has substantially concluded on all U.S. federal income tax matters for all years through 2013, United Kingdom and France tax matters for all years through 2014 and2011, Canadian income tax matters for all years through 2009.2012, Swedish income tax matters for all years through 2011, Norwegian income tax matters for all years through 2016, Belgian income tax matters for all years through 2018, French income tax matters for all years through 2018 and United Kingdom income tax matters for all years through 2019. Note 11. Pension Plans and Postretirement Benefits Pension Plans Teledyne has atwo domestic qualified defined benefit pension planplans covering substantially all U.S. employees hired before January 1, 2004, or approximately 13% of Teledyne’s activeexcluding FLIR U.S. employees. All FLIR U.S. employees participate in a defined contribution plan, as FLIR has no legacy U.S. Pension Plans. As of January 1, 2004, new Teledyne hires participate in a defined contribution plan only. The Company also has several smallersmall domestic qualifiednon-qualified and foreign-based defined benefit pension plans. Teledyne’s domestic pension income was $2.9 million in 2017, compared with pension income of $3.0 million in 2016 and pension expense of $2.0 million in 2015. In the first quarter of 2015, Teledyne froze its non-qualified pension plan for top executives which resulted in a one-time gain of $1.2 million. In accordance with U.S. Government Cost Accounting Standards (“CAS”), $13.8 million was recoverable from certain government contracts, for each of 2017, 2016 and 2015. Teledyne did not make any cash contributions to its domestic qualified pension plan since 2013. In 2018, we are not required, and are not planning, to make any cash contributions to the domestic qualified pension plan.
In December 2017, the Company’s U.S. domestic qualified pension plan purchased group annuity contracts from an insurance company and paid a total annuity premium of $19.0 million. This annuity contract transfers the obligation to this insurance company to guarantee the full payment of all annuity payments to approximately 412 existing retired pension plan participants or their surviving beneficiaries. In June and December 2016, the Company’s U.S. domestic qualified pension plan purchased group annuity contracts from two insurance companies and paid a total annuity premium of $27.2 million. These annuity contracts transfer the obligation to these insurance companies to guarantee the full payment of all annuity payments to approximately 1,193 existing retired pension plan participants or their surviving beneficiaries. These annuity contracts assume all investment risk associated with the assets that were delivered as the annuity contract premiums.
The domestic qualified pension plan was amended in 2015 toplans allow participants at retirement to elect a lump-sum payment.payment at retirement. In 2017, 20162021, 2020 and 2015,2019, the Company made lump sum payments of approximately $21.7$24.5 million, $14.6$24.9 million and $10.5$17.2 million, respectively, from the domestic qualified pension planplans assets to certain participants in the plan as a result of these lump sum offers.plan. Each year beginning with 2014, the Society of Actuaries released revised mortality tables, which updated life expectancy assumptions. In consideration of these tables, each year the Company reviews the mortality assumptions used in determining our pension and post-retirement obligations. The Company’s contributions associated with its 401(k) plans were $9.8 million, $9.3 million and $10.1 million, for 2017, 2016 and 2015, respectively.
| | | | | | | | | | | | | | | | | | Domestic | | Foreign | Net periodic benefit (income) expense - in millions: | | Domestic | | Foreign | | | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | Service cost - benefits earned during the period | | $ | 10.2 |
| | $ | 10.4 |
| | $ | 12.4 |
| | $ | 1.0 |
| | $ | 0.8 |
| | $ | 0.9 |
| | Service cost - benefits earned during the period (in millions) | | Service cost - benefits earned during the period (in millions) | | $ | 9.3 | | | $ | 9.3 | | | $ | 8.5 | | | $ | 1.3 | | | $ | 1.1 | | | $ | 0.9 | | | | | | Domestic | | Foreign | Pension non-service (income)/expense (in millions): | | Pension non-service (income)/expense (in millions): | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | Interest cost on benefit obligation | | 35.6 |
| | 38.9 |
| | 37.8 |
| | 1.2 |
| | 1.6 |
| | 1.7 |
| Interest cost on benefit obligation | | 21.6 | | | 26.5 | | | 32.4 | | | 0.7 | | | 0.9 | | | 1.2 | | Expected return on plan assets | | (71.3 | ) | | (72.9 | ) | | (74.4 | ) | | (2.1 | ) | | (2.2 | ) | | (2.2 | ) | Expected return on plan assets | | (55.8) | | | (56.0) | | | (64.8) | | | (1.0) | | | (1.1) | | | (1.4) | | Amortization of prior service cost | | (6.0 | ) | | (6.0 | ) | | (6.0 | ) | | (0.1 | ) | | — |
| | — |
| Amortization of prior service cost | | (3.6) | | | (6.0) | | | (6.0) | | | 0.1 | | | 0.1 | | | 0.1 | | Amortization of actuarial loss | | 28.6 |
| | 26.6 |
| | 33.4 |
| | 0.6 |
| | 0.6 |
| | 0.6 |
| Amortization of actuarial loss | | 26.3 | | | 22.5 | | | 30.6 | | | 0.4 | | | 0.3 | | | 0.3 | | Curtailment | | — |
| | — |
| | (1.2 | ) | | (0.4 | ) | | — |
| | — |
| | Net periodic benefit (income) expense | | $ | (2.9 | ) | | $ | (3.0 | ) | | $ | 2.0 |
| | $ | 0.2 |
| | $ | 0.8 |
| | $ | 1.0 |
| | Settlements/Curtailment | | Settlements/Curtailment | | — | | | — | | | — | | | — | | | — | | | (0.5) | | | Pension non-service (income)/expense | | Pension non-service (income)/expense | | $ | (11.5) | | | $ | (13.0) | | | $ | (7.8) | | | $ | 0.2 | | | $ | 0.2 | | | $ | (0.3) | |
The expected long-term rate of return on plan assets is reviewed annually, taking into consideration the Company’s asset allocation, historical returns on the types of assets held, the current economic environment, and prospective expectations. We determined the discount rate based on a model which matches the timing and amount of expected benefit payments to maturities of high-quality corporate bonds priced as of the pension plan measurement date. The yields on the bonds are used to derive a discount rate for the obligation.
The following assumptions were used to measure the net benefit income/cost within each respective year: | | | | | | | | Pension Plan Assumptions: | | Weighted average discount rate | | Weighted average increase in future compensation levels | | Expected weighted-average long-term rate of return | | | | | | | | Domestic plan - 2017 | | 4.54% | | 2.75% | | 8.00% | Domestic plan - 2016 | | 4.91% | | 2.75% | | 8.00% | Domestic plan - 2015 | | 4.50% | | 2.75% | | 8.25% | | | | | | | | Foreign plans - 2017 |
| 0.60% - 2.50% |
| 1.00% - 2.50% |
| 1.00% - 5.90% | Foreign plans - 2016 |
| 0.90% - 3.60% |
| 1.00% - 2.43% |
| 1.40% - 6.50% | Foreign plans - 2015 |
| 1.20% - 3.50% |
| 1.30% - 2.40% |
| 1.80% - 6.40% |
year for the domestic qualified plans and the foreign plans: | | | | | | | | | | | | | | | | | | | | | Pension Plan Assumptions: | | Weighted average discount rate | | Weighted average increase in future compensation levels | | Expected weighted-average long-term rate of return | | | | | | | | Domestic plan - 2021 | | 2.55% - 2.78% | | 2.75% | | 6.71% - 7.80% | Domestic plan - 2020 | | 3.38% to 3.52% | | 2.75% | | 6.71% - 7.80% | Domestic plan - 2019 | | 4.59% | | 2.75% | | 7.80% | | | | | | | | Foreign plans - 2021 | | 0.10% - 1.20% | | 1.00% - 2.50% | | 0.80% - 2.50% | Foreign plans - 2020 | | 0.20% - 1.80% | | 1.00% - 2.50% | | 1.00% - 3.00% | Foreign plans - 2019 | | 0.90% - 2.60% | | 1.00% - 2.50% | | 1.00% - 3.80% | For its domestic based pension plans the Company is projecting a long-term rate of return on plan assets of 8.00%6.82% in 2018.2022. For its foreign based pension plans the Company is projecting a long-term rate of return on plan assets will range from 1.00% to 4.50%of 2.23% in 2018.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | Foreign | | | 2021 | | 2020 | | 2021 | | 2020 | Changes in benefit obligation (in millions): | | | | | | | | | Benefit obligation - beginning of year | | $ | 846.8 | | | $ | 805.7 | | | $ | 70.4 | | | $ | 60.3 | | Service cost - benefits earned during the year | | 9.3 | | | 9.3 | | | 1.3 | | | 1.1 | | Interest cost on projected benefit obligation | | 21.6 | | | 26.5 | | | 0.7 | | | 0.9 | | Actuarial (gain) loss | | (11.8) | | | 72.5 | | | (7.4) | | | 5.8 | | Benefits paid | | (66.6) | | | (67.2) | | | (2.2) | | | (1.7) | | | | | | | | | | | | | | | | | | | | Other - including foreign currency, settlements/curtailments | | — | | | — | | | (2.6) | | | 4.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Benefit obligation - end of year | | $ | 799.3 | | | $ | 846.8 | | | $ | 60.2 | | | $ | 70.4 | | | | | | | | | | | Accumulated benefit obligation - end of year | | $ | 795.4 | | | $ | 842.0 | | | $ | 55.8 | | | $ | 65.3 | |
| | | | | | | | | | | | | | | | | | | | Domestic | | Foreign | | | 2017 | | 2016 | | 2017 | | 2016 | Changes in benefit obligation (in millions): | | | | | | | | | Benefit obligation - beginning of year | | $ | 810.9 |
| | $ | 820.4 |
| | $ | 51.4 |
| | $ | 56.6 |
| Service cost - benefits earned during the year | | 10.2 |
| | 10.4 |
| | 1.0 |
| | 0.8 |
| Interest cost on projected benefit obligation | | 35.6 |
| | 38.9 |
| | 1.2 |
| | 1.6 |
| Actuarial (gain) loss | | 41.9 |
| | 29.5 |
| | (1.6 | ) | | 6.2 |
| Benefits paid(a) | | (86.3 | ) | | (88.3 | ) | | (2.4 | ) | | (1.8 | ) | Plan amendments | | — |
| | — |
| | — |
| | (0.3 | ) | Settlements/curtailments | | — |
| | — |
| | (3.0 | ) | | (4.6 | ) | Other - including foreign currency | | — |
| | — |
| | 5.7 |
| | (7.1 | ) | Business combinations | | — |
| | — |
| | 5.5 |
| | — |
| Benefit obligation - end of year | | $ | 812.3 |
| | $ | 810.9 |
| | $ | 57.8 |
| | $ | 51.4 |
| | | | | | | | | | Accumulated benefit obligation - end of year | | $ | 809.4 |
| | $ | 807.3 |
| | $ | 53.7 |
| | $ | 49.1 |
|
| | (a) | The 2017, 2016 and 2015 amounts include lump sum payments to certain participants of $21.7 million, $14.6 million and $10.5 million, respectively. In addition, in 2016, the Company’s U.S. domestic qualified pension plan purchased group annuity contracts from two insurance companies and paid a total annuity premium of $27.2 million. |
The key assumptions used to measure the benefit obligation at each respective year-end were: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Key assumptions: | | Domestic Plans | | Foreign Plans | | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | Discount rate | | 2.91% - 3.08% | | 2.55% to 2.78% | | 3.41% | | 0.20% - 1.80% | | 0.10% - 1.20% | | 0.20% - 1.80% | Salary growth rate | | 2.75% | | 2.75% | | 2.75% | | 1.00% - 2.50% | | 1.00% - 2.50% | | 1.00% -2.50% |
| | | | | | | | | | | | | | | | | Key assumptions: | | Domestic Plan | | Foreign Plans | | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | Discount rate | | 4.54 | % | | 4.54 | % | | 4.91 | % | | 0.60% - 2.50% |
| 0.60% - 2.50% |
| 0.90% - 3.60% | Salary growth rate | | 2.75 | % | | 2.75 | % | | 2.75 | % | | 1.00% - 2.50% |
| 1.00% - 2.30% |
| 1.00% - 2.40% |
| | | | Domestic | | Foreign | | | Domestic | | Foreign | | | 2017 | | 2016 | | 2017 | | 2016 | | | 2021 | | 2020 | | 2021 | | 2020 | Changes in plan assets (in millions): | | | | | | | | | Changes in plan assets (in millions): | | | | | | | | | Fair value of net plan assets - beginning of year | | $ | 857.1 |
| | $ | 890.4 |
| | $ | 42.1 |
| | $ | 43.8 |
| Fair value of net plan assets - beginning of year | | $ | 854.5 | | | $ | 835.7 | | | $ | 54.4 | | | $ | 48.0 | | Actual return on plan assets | | 123.1 |
| | 52.9 |
| | 2.5 |
| | 5.8 |
| Actual return on plan assets | | 74.1 | | | 83.5 | | | 0.3 | | | 4.0 | | | Employer contribution - other benefit plan | | 2.1 |
| | 2.1 |
| | 2.6 |
| | 3.4 |
| Employer contribution - other benefit plan | | 2.3 | | | 2.5 | | | 1.9 | | | 1.1 | | Foreign currency changes | | — |
| | — |
| | 4.3 |
| | (5.9 | ) | Foreign currency changes | | — | | | — | | | (1.6) | | | 3.4 | | Benefits paid | | (86.3 | ) | | (88.3 | ) | | (2.4 | ) | | (1.8 | ) | Benefits paid | | (66.6) | | | (67.2) | | | (2.2) | | | (1.7) | | Other | | — |
| | — |
| | (2.4 | ) | | (3.2 | ) | Other | | — | | | — | | | 0.1 | | | (0.4) | | | Fair value of net plan assets - end of year | | $ | 896.0 |
| | $ | 857.1 |
| | $ | 46.7 |
| | $ | 42.1 |
| Fair value of net plan assets - end of year | | $ | 864.3 | | | $ | 854.5 | | | $ | 52.9 | | | $ | 54.4 | |
The measurement date for the Company’s pension plans is December 31.
The following tabletables sets forth the funded status and amounts recognized in the consolidated balance sheets at year-end 20172021 and 20162020 for the domestic qualified and nonqualified pension plans and the foreign-based pension plans for benefits provided to certain employees (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | Foreign | | | 2021 | | 2020 | | 2021 | | 2020 | Funded status | | $ | 65.0 | | | $ | 7.7 | | | $ | (7.3) | | | $ | (16.0) | | | | | | | | | | | Amounts recognized in the consolidated balance sheets: | | | | | | | | | Prepaid pension asset long-term | | $ | 118.9 | | | $ | 67.9 | | | $ | 4.8 | | | $ | — | | Accrued pension obligation long-term | | (44.4) | | | (51.6) | | | (11.7) | | | (15.5) | | Accrued pension obligation short-term | | (3.7) | | | (2.7) | | | (0.4) | | | (0.5) | | Other long-term liabilities | | (5.8) | | | (5.9) | | | — | | | — | | Net amount recognized | | $ | 65.0 | | | $ | 7.7 | | | $ | (7.3) | | | $ | (16.0) | | | | | | | Amounts recognized in accumulated other comprehensive loss: | | | | | | | | | Net prior service cost (credit) | | $ | (3.0) | | | $ | (6.6) | | | $ | 0.6 | | | $ | 0.8 | | Net loss | | 397.7 | | | 454.2 | | | 3.4 | | | 10.6 | | Net amount recognized, before tax effect | | $ | 394.7 | | | $ | 447.6 | | | $ | 4.0 | | | $ | 11.4 | |
| | | | | | | | | | | | | | | | | | | | Domestic | | Foreign | | | 2017 | | 2016 | | 2017 | | 2016 | Funded status | | $ | 83.7 |
| | $ | 46.2 |
| | $ | (11.1 | ) | | $ | (9.3 | ) | | | | | | | | | | Amounts recognized in the consolidated balance sheets: | | | | | | | | | Prepaid pension asset long-term | | $ | 127.2 |
| | $ | 88.5 |
| | $ | — |
| | $ | — |
| Accrued pension obligation long-term | | (35.4 | ) | | (34.5 | ) | | (11.1 | ) | | (9.3 | ) | Accrued pension obligation short-term | | (2.6 | ) | | (2.6 | ) | | — |
| | — |
| Other long-term liabilities | | (5.5 | ) | | (5.2 | ) | | — |
| | — |
| Net amount recognized | | $ | 83.7 |
| | $ | 46.2 |
| | $ | (11.1 | ) | | $ | (9.3 | ) | | | | | | Amounts recognized in accumulated other comprehensive loss: | | | | | | | | | Prior service credit | | $ | (24.7 | ) | | $ | (30.7 | ) | | $ | (0.2 | ) | | $ | (0.5 | ) | Net loss | | 383.0 |
| | 421.5 |
| | 8.2 |
| | 10.3 |
| Net amount recognized, before tax effect | | $ | 358.3 |
| | $ | 390.8 |
| | $ | 8.0 |
| | $ | 9.8 |
|
Amounts for pension plans with accumulated benefit obligations in excess of fair value of plan assets are as follows (in millions): | | | | | | | | | | | | | | 2021 | 2020 | Projected benefit obligation | | $ | 79.2 | | $ | 300.4 | | Accumulated benefit obligation | | $ | 74.9 | | $ | 290.8 | | Fair value of plan assets | | $ | 15.6 | | $ | 224.3 | |
| | | | | | | | | | | 2017 | 2016 | Projected benefit obligation | | $ | 101.3 |
| $ | 93.7 |
| Accumulated benefit obligation | | $ | 97.3 |
| $ | 91.4 |
| Fair value of plan assets | | $ | 46.7 |
| $ | 42.1 |
|
At year-end 20172021 and 20162020 the Company had an accumulated non-cash reduction to stockholders’ equity of $227.8$297.6 million and $249.6$347.8 million, respectively, related to its pension and postretirement plans. The accumulated non-cash reductions to stockholders’ equity did not affect net income and were recorded net of accumulated deferred taxes of $135.8$100.9 million at year end 20172021 and $147.3$110.5 million at year end 2016.2020. At December 31, 2017,January 2, 2022, the estimated amounts of the minimum liability adjustment that are expected to be recognized as components of net periodic benefit cost during 20182022 for the pension plans are: net loss $31.5$22.7 million and net prior service credit $6.1$1.7 million. | | | | | | | | | | | | | | | Estimated future pension plan benefit payments (in millions): | | Domestic | | Foreign | 2022 | | $ | 62.3 | | | $ | 2.2 | | 2023 | | 59.2 | | | 2.3 | | 2024 | | 57.2 | | | 2.3 | | 2025 | | 58.3 | | | 2.4 | | 2026 | | 59.7 | | | 2.6 | | 2027-2031 | | 267.9 | | | 13.0 | | Total | | $ | 564.6 | | | $ | 24.8 | |
| | | | | | | | | | Estimated future pension plan benefit payments (in millions): | | Domestic | | Foreign | 2018 | | $ | 56.7 |
| | $ | 2.9 |
| 2019 | | 56.9 |
| | 2.0 |
| 2020 | | 57.1 |
| | 2.2 |
| 2021 | | 57.8 |
| | 2.3 |
| 2022 | | 58.3 |
| | 2.1 |
| 2023-2027 | | 287.3 |
| | 12.6 |
| Total | | $ | 574.1 |
| | $ | 24.1 |
|
The following table sets forth the percentage of year-end market value by asset class for the pension plans: | | | | | | | | | | | | | | Market value by asset class: | | Domestic Plan Assets % to Total | | Foreign Plan Assets % to Total | | | 2017 | | 2016 | | 2017 | | 2016 | Equity instruments | | 58 | % | | 57 | % | | 46 | % | | 75 | % | Fixed income instruments | | 29 |
| | 30 |
| | 30 |
| | 15 |
| Alternatives and other | | 13 |
| | 13 |
| | 24 |
| | 10 |
| Total | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Market value by asset class: | | Domestic Plan Assets % to Total | | Foreign Plan Assets % to Total | | | 2021 | | 2020 | | 2021 | | 2020 | Equity instruments | | 34 | % | | 38 | % | | 55 | % | | 52 | % | Fixed income instruments | | 55 | | | 49 | | | 25 | | | 25 | | Alternatives and other | | 11 | | | 13 | | | 20 | | | 23 | | Total | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
The Company has an active management policy for a portion of the pension assets in the qualified domestic pension plan. TheAs of January 2, 2022, the long term asset allocation target for the domestic plan consists of 70%approximately 34% in equity instruments, including a portion in alternatives and 30%approximately 55% in fixed income instruments. The balanceinstruments and approximately 11% in equity instruments for the domestic plan can range from 45% to 75% before rebalancing is required under the Company’s policy.alternatives.
The pension plan’s investments are stated at fair value. Plan investments that are considered a level 1 fair value hierarchy and are valued at quoted market prices in active markets. Plan investments that are considered a level 2 fair value hierarchy and are valued based on observable market data. Plan investments that would be considered a level 3 fair value hierarchy are valued based on management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Certain investments measured at fair value using net asset values as a practical expedient are not required to be categorized in the fair value hierarchy table listed below. As such, the total fair value of these net asset values based investments has been included in the table below to permit reconciliation to the plan asset amounts previously disclosed. The fair values of the Company’s net pension assets, by fair value hierarchy, for both the U.S. and foreign pension plans as of December 31, 2017,January 2, 2022, by asset category are as follows (in millions): | | | | | | | | | | | | | | | | | | Asset category:(a) | | Level 1 | | Level 2 | | Level 3 | | Total | Cash and cash equivalents (b) | | $ | — |
| | $ | 40.9 |
| | $ | — |
| | $ | 40.9 |
| Equity securities | | 131.8 |
| | 253.5 |
| | — |
| | 385.3 |
| U.S. government securities and futures | | 69.5 |
| | — |
| | — |
| | 69.5 |
| Corporate bonds | | — |
| | 86.7 |
| | — |
| | 86.7 |
| Insurance contracts related to foreign plans | | — |
| | 12.3 |
| | — |
| | 12.3 |
| Fair value of net plan assets at the end of the year | | $ | 201.3 |
| | $ | 393.4 |
| | $ | — |
| | $ | 594.7 |
| | | | | | | | | | Investments measured at net asset value: | | | | | | | | | Alternatives | | | | | | | | $ | 159.5 |
| Mutual funds (c) | | | | | | | | 157.0 |
| Senior secured loans | | | | | | | | 0.2 |
| Mortgage-backed securities | | | | | | | | 17.3 |
| High yield bonds | | | | | | | | 14.0 |
| Fair value of net plan assets at the end of the year | | | | | | | | $ | 348.0 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset category:(a) | | Level 1 | | Level 2 | | Level 3 | | Total | Cash and cash equivalents (b) | | $ | — | | | $ | 69.0 | | | $ | — | | | $ | 69.0 | | | | | | | | | | | | | | | | | | | | Equity securities | | 2.4 | | | 230.0 | | | — | | | 232.4 | | | | | | | | | | | | | | | | | | | | U.S. government securities and futures | | 242.8 | | | 13.0 | | | — | | | 255.8 | | | | | | | | | | | Corporate bonds | | — | | | 33.3 | | | — | | | 33.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Insurance contracts related to foreign plans | | — | | | 15.5 | | | — | | | 15.5 | | Fair value of net plan assets at the end of the year | | $ | 245.2 | | | $ | 360.8 | | | $ | — | | | $ | 606.0 | | | | | | | | | | | Investments measured at net asset value: | | | | | | | | | | | | | | | | | | | | | | | | | | | Alternatives | | | | | | | | $ | 211.8 | | Mutual funds (c) | | | | | | | | 7.3 | | | | | | | | | | | | | | | | | | | | Mortgage-backed securities | | | | | | | | 54.7 | | High yield bonds | | | | | | | | 37.4 | | Fair value of net plan assets at the end of the year | | | | | | | | $ | 311.2 | |
a) There were no transfers of plan assets between the three levels of the fair value hierarchy during the year. b) Reflects cash and cash equivalents held in overnight cash investments. c) 29% ofThe mutual funds invest in fixed income types of securities; 71% investare invested in equity securities.
The fair values of the Company’s net pension assets, by fair value hierarchy, for both the U.S. and foreign pension plans as of January 1, 2017,3, 2021, by asset category are as follows (in millions): | | | | | | | | | | | | | | | | | | Asset category: (a) | | Level 1 | | Level 2 | | Level 3 | | Total | Cash and cash equivalents (b) | | $ | — |
| | $ | 39.5 |
| | $ | — |
| | $ | 39.5 |
| Equity securities | | 152.0 |
| | 78.2 |
| | — |
| | 230.2 |
| U.S. government securities and futures | | 46.2 |
| | 0.1 |
| | — |
| | 46.3 |
| Corporate bonds | | — |
| | 84.8 |
| | — |
| | 84.8 |
| Insurance contracts related to foreign plans | | — |
| | 12.7 |
| | — |
| | 12.7 |
| Fair value of net plan assets at the end of the year | | $ | 198.2 |
| | $ | 215.3 |
| | $ | — |
| | $ | 413.5 |
| | | | | | | | | | Investments measured at net asset value: | | | | | | | | | Equity securities | | | | | | | | $ | 147.2 |
| Alternatives | | | | | | | | 148.5 |
| Mutual funds (c) | | | | | | | | 136.4 |
| Corporate bonds | | | | | | | | 19.4 |
| Senior secured loans | | | | | | | | 4.4 |
| Mortgage-backed securities | | | | | | | | 16.5 |
| High yield bonds | | | | | | | | 13.2 |
| Fair value of net plan assets at the end of the year | | | | | | | | $ | 485.6 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset category: (a) | | Level 1 | | Level 2 | | Level 3 | | Total | Cash and cash equivalents (b) | | $ | — | | | $ | 55.0 | | | $ | — | | | $ | 55.0 | | | | | | | | | | | Equity securities | | 44.6 | | | 218.9 | | | — | | | 263.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | U.S. government securities and futures | | 202.1 | | | 13.3 | | | — | | | 215.4 | | | | | | | | | | | Corporate bonds | | — | | | 48.8 | | | — | | | 48.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Insurance contracts related to foreign plans | | — | | | 16.9 | | | — | | | 16.9 | | Fair value of net plan assets at the end of the year | | $ | 246.7 | | | $ | 352.9 | | | $ | — | | | $ | 599.6 | | | | | | | | | | | Investments measured at net asset value: | | | | | | | | | | | | | | | | | | | | | | | | | | | Alternatives | | | | | | | | $ | 202.9 | | Mutual funds (c) | | | | | | | | 16.8 | | | | | | | | | | | | | | | | | | | | Mortgage-backed securities | | | | | | | | 52.5 | | High yield bonds | | | | | | | | 37.1 | | Fair value of net plan assets at the end of the year | | | | | | | | $ | 309.3 | |
(a) There were no of transfers of plan assets between the three levels of the fair value hierarchy during the year. (b) Reflects cash and cash equivalents held in overnight cash investments. (c) 29% ofThe mutual funds invest in fixed income types of securities; 71% investare invested in equity securities.
U.S. equities are valued at the closing price reported in an active market on which the individual securities are traded. U.S. equities and non-U.S. equities are also valued at the net asset value provided by the independent administrator or custodian of the commingled fund. The net asset value is based on the value of the underlying equities, which are traded on an active market. Corporate bonds are valued using inputs such as the closing price reported, if traded on an active market, values derived from comparable securities of issuers with similar credit ratings, or under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments. Fixed income investments are also valued at the net asset value provided by the independent administrator or custodian of the fund. The net asset value is based on the underlying assets, which are valued using inputs such as the closing price reported, if traded on an active market, values derived from comparable securities of issuers with similar credit ratings, or under a discounted cash flow approach that utilizes observable inputs, such as
current yields of similar instruments. Alternative investments are primarily valued at the net asset value as determined by the independent administrator or custodian of the fund. The net asset value is based on the underlying investments, which are valued using inputs such as quoted market prices of identical instruments or values derived from comparable securities of issuers with similar credit ratings, or under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments. The Company’s contributions associated with its 401(k) plans were $15.2 million, $13.8 million and $13.4 million, for 2021, 2020 and 2019, respectively. Postretirement Plans The Company sponsors several postretirement defined benefit plans covering certain salaried and hourly employees. The plans provide health care and life insurance benefits for certain eligible retirees. | | | | | | | | | | | | | | | | | Net period postretirement benefit expense (in millions): | | 2017 | | 2016 | | 2015 | Service cost - benefits earned during the period | | $ | — |
| | $ | — |
| | $ | — |
| Interest cost on benefit obligation | | 0.4 |
| | 0.5 |
| | 0.5 |
| Amortization of prior service cost | | — |
| | — |
| | — |
| Amortization of actuarial gain | | (0.4 | ) | | (0.4 | ) | | (0.2 | ) | Net periodic benefit expense | | $ | — |
| | $ | 0.1 |
| | $ | 0.3 |
|
| | | | | | | | | | | | 2017 | | 2016 | Changes in benefit obligation (in millions): | | | | | Benefit obligation - beginning of year | | $ | 9.8 |
| | $ | 10.7 |
| Interest cost on projected benefit obligation | | 0.4 |
| | 0.5 |
| Actuarial loss | | 0.8 |
| | 0.1 |
| Benefits paid | | (1.3 | ) | | (1.5 | ) | Benefit obligation - end of year | | $ | 9.7 |
| | $ | 9.8 |
|
The measurement date Total cost for the Company’s postretirementthese plans is December 31.
| | | | | | Future postretirement plan benefit payments (in millions): | | | 2018 | | $ | 1.1 |
| 2019 | | 1.0 |
| 2020 | | 0.9 |
| 2021 | | 0.9 |
| 2022 | | 0.8 |
| 2023-2027 | | 3.4 |
| Total | | $ | 8.1 |
|
The following table sets forth the funded status and amounts recognized in Teledyne’s consolidated balance sheets for the postretirement plans at year-end 2017 and 2016 (in millions):
| | | | | | | | | | | | 2017 | | 2016 | Funded status: | | | | | Funded status | | $ | (9.7 | ) | | $ | (9.8 | ) | Unrecognized net gain | | (2.7 | ) | | (3.8 | ) | Accrued benefit cost | | $ | (12.4 | ) | | $ | (13.6 | ) | | | | | | Amounts recognized in the consolidated balance sheets: | | | | | Accrued postretirement benefits (long-term) | | $ | (8.7 | ) | | $ | (8.7 | ) | Accrued postretirement benefits (short-term) | | (1.0 | ) | | (1.1 | ) | Accumulated other comprehensive income | | (2.7 | ) | | (3.8 | ) | Net amount recognized | | $ | (12.4 | ) | | $ | (13.6 | ) |
At December 31, 2017, the amounts in the AOCI that have not yet been recognized as components of net periodic benefit income for the retiree medical plans are: net gain $2.7 million and net prior service credit ofwas less than $0.1 million. At December 31, 2017, the estimated amortization from AOCI expected to be recognized as components of net periodic benefit income during 2018 for the retiree medical plans are: net gain $0.3 million and net prior service cost of less than $0.1 million.
The annual assumed rate of increase in the per capita cost of covered benefits (the health care cost trend rate) for health care plans is 6.5% in 2018 and was assumed to decrease to 5.0% by the year 2024 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point increase in the assumed health care cost trend rates would result in an increase in the annual service and interest costs by less than $0.1$1.0 million for 2017each fiscal year 2021, 2020 and would result in an increase in the postretirement benefit obligation by $0.3 million at December 31, 2017. A one percentage point decrease in the assumed health care cost trend rates would result in a decrease in the annual service and interest costs by less than $0.1 million for 2017 and would result in a decrease in the postretirement benefit obligation by $0.2 million at December 31, 2017.2019.
Note 12. Business Segments The Company has four4 reportable segments: Instrumentation; Digital Imaging; Instrumentation; Aerospace and Defense Electronics; and Engineered Systems. The Company manages, evaluates and aggregates its operating segments for segment reporting purposes primarily on the basis of product and service type, production process, distribution methods, type of customer, management organization, sales growth potential and long-term profitability. The Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other applications, electronic test and measurement equipment and harsh environment interconnect products. The Digital Imaging segment includes high-performance sensors, cameras and systems, within the visible, infrared and X-ray spectra for use in industrial, government and medical applications, as well as micro electro-mechanicalelectromechanical systems (“MEMS”) and high-performance, high-reliability semiconductors including analog-to-digital and digital-to-analog converters. ItThis segment also includes our sponsored and centralized research laboratories benefitingwhich benefit government programs and commercial businesses. Teledyne acquired FLIR in May 2021, which is reported in the Digital Imaging segment. FLIR offers a diversified portfolio that serves a number of applications in government and defense, industrial, and commercial markets. FLIR technologies include thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and advanced threat-detection solutions. The Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other applications, electronic test and measurement equipment and harsh environment interconnect products. The Aerospace and Defense Electronics segment provides sophisticated electronic components and subsystems and communications products, including defense electronics, harsh environment interconnects, data acquisition and communications equipment for aircraft and components and subsystems for wireless and satellite communications, as well as general aviation batteries. In the third quarter of 2016, Teledyne completed the disposition of the net assets of its PCT business for $9.3 million in cash resulting in no gain or loss. PCT, which was part of the Aerospace and Defense Electronics segment, had sales of $10.1 million and $16.6 million for 2016 and 2015, respectively. For 2016, PCT reported a pretax loss of $3.1 million and $3.9 million for 2016 and 2015, respectively. The Engineered Systems segment provides innovative systems engineering and integration, advanced technology application, software development and manufacturing solutions for defense, space, environmental and energy applications. The Engineered Systems segment also designs and manufactures electrochemical energy systems and smallsystems. Teledyne exited the cruise missile turbine engines.engine business in the first quarter of 2021. Segment results include net sales and operating income by segment but excludes noncontrolling interest, equity income or loss, unusual non-recurring legal matter settlements, interest income and expense, gains and losses on the disposition of assets, sublease rental income and non-revenue licensing and royalty income, domestic and foreign income taxes and corporate office expenses. Corporate expense includes various administrative expenses relating to the corporate office and certain nonoperating expenses not allocated to our segments. As part of a continuing effort to reduce costs and improve operating performance, as well as to respond to the impact of the COVID pandemic, beginning in 2020 the Company may taketook actions to consolidate and relocate certain facilities and reduce headcount across various businesses, reducing our exposure to weak end markets, such as commercial aerospace. We also exited certain facilities no longer needed. In 2021, we took actions to integrate FLIR into our businesses resulting in higher severance and high cost locations.facility closure costs in the Digital Imaging segment. At January 2, 2022, an immaterial amount remains to be paid related to these actions. The following pre-tax charges were incurred related to severance and facility consolidations (in millions): | | | | | | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | Digital Imaging | | $ | 23.9 | | | $ | 2.9 | | | $ | 1.1 | | Instrumentation | | 1.3 | | | 5.9 | | | 1.5 | | Aerospace and Defense Electronics | | 0.7 | | | 11.1 | | | 0.5 | | Engineered Systems | | 0.4 | | | 0.5 | | | 0.1 | | Corporate | | 0.1 | | | 0.4 | | | — | | Total | | $ | 26.4 | | | $ | 20.8 | | | $ | 3.2 | |
| | | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | Instrumentation | | $ | 2.1 |
| | $ | 10.6 |
| | $ | 3.9 |
| Digital Imaging | | — |
| | 2.0 |
| | 3.2 |
| Aerospace and Defense Electronics | | 2.1 |
| | 4.6 |
| | 1.2 |
| Engineered Systems | | — |
| | 0.1 |
| | 0.1 |
| Total | | $ | 4.2 |
| | $ | 17.3 |
| | $ | 8.4 |
|
At December 31, 2017, $1.5 million remains to be paid related to these actions.
Information on the Company’s business segments was as follows (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net sales: | 2021 | | 2020 | | 2019 | | | | | | | | | | | | | Digital Imaging | $ | 2,412.9 | | | $ | 986.0 | | | $ | 992.9 | | | | | | | | | | | | | | Instrumentation | 1,166.9 | | | 1,094.5 | | | 1,105.1 | | | | | | | | | | | | | | Aerospace and Defense Electronics | 628.7 | | | 589.4 | | | 690.1 | | | | | | | | | | | | | | Engineered Systems | 405.8 | | | 416.3 | | | 375.5 | | | | | | | | | | | | | | Total net sales | $ | 4,614.3 | | | $ | 3,086.2 | | | $ | 3,163.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income: | 2021 | | 2020 | | 2019 | | | | | | | | | | | | | Digital Imaging | $ | 325.6 | | | $ | 192.8 | | | $ | 176.5 | | | | | | | | | | | | | | Instrumentation | 253.7 | | | 213.2 | | | 200.4 | | | | | | | | | | | | | | Aerospace and Defense Electronics | 133.2 | | | 80.8 | | | 143.4 | | | | | | | | | | | | | | Engineered Systems | 48.6 | | | 50.1 | | | 36.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate expense | (136.8) | | | (56.8) | | | (65.1) | | | | | | | | | | | | | | Total operating income | $ | 624.3 | | | $ | 480.1 | | | $ | 491.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation and amortization: | | 2021 | | 2020 | | 2019 | Digital Imaging | | $ | 309.2 | | | $ | 49.2 | | | $ | 48.5 | | Instrumentation | | 38.1 | | | 38.3 | | | 35.9 | | Aerospace and Defense Electronics | | 13.2 | | | 13.7 | | | 14.3 | | Engineered Systems | | 7.2 | | | 9.2 | | | 6.0 | | Corporate | | 4.1 | | | 5.8 | | | 7.2 | | Total depreciation and amortization | | $ | 371.8 | | | $ | 116.2 | | | $ | 111.9 | |
| | | | | | | | | | | | | Net sales: | 2017 | | 2016 | | 2015 | Instrumentation | $ | 953.9 |
| | $ | 876.7 |
| | $ | 1,051.1 |
| Digital Imaging | 693.5 |
| | 398.7 |
| | 379.0 |
| Aerospace and Defense Electronics | 670.2 |
| | 615.9 |
| | 593.4 |
| Engineered Systems | 286.2 |
| | 258.6 |
| | 274.6 |
| Total net sales | $ | 2,603.8 |
| | $ | 2,149.9 |
| | $ | 2,298.1 |
| | | | | | | Operating income: | 2017 | | 2016 | | 2015 | Instrumentation | $ | 127.4 |
| | $ | 109.8 |
| | $ | 171.0 |
| Digital Imaging | 108.4 |
| | 45.9 |
| | 40.0 |
| Aerospace and Defense Electronics | 124.9 |
| | 112.1 |
| | 84.8 |
| Engineered Systems | 37.7 |
| | 32.1 |
| | 26.1 |
| Corporate expense | (62.8 | ) | | (46.1 | ) | | (40.2 | ) | Total operating income | $ | 335.6 |
| | $ | 253.8 |
| | $ | 281.7 |
|
| | | | | | | | | | | | | | | | | | | | | Capital expenditures: | | 2021 | | 2020 | | 2019 | Digital Imaging | | $ | 64.2 | | | $ | 33.4 | | | $ | 45.2 | | Instrumentation | | 13.3 | | | 18.0 | | | 18.9 | | Aerospace and Defense Electronics | | 8.4 | | | 10.4 | | | 19.0 | | Engineered Systems | | 12.9 | | | 7.5 | | | 3.6 | | Corporate | | 2.8 | | | 2.1 | | | 1.7 | | Total capital expenditures | | $ | 101.6 | | | $ | 71.4 | | | $ | 88.4 | |
| | | | | | | | | | | | | | Depreciation and amortization: | | 2017 | | 2016 | | 2015 | Instrumentation | | $ | 38.2 |
| | $ | 37.3 |
| | $ | 41.2 |
| Digital Imaging | | 48.5 |
| | 26.2 |
| | 26.1 |
| Aerospace and Defense Electronics | | 15.7 |
| | 14.4 |
| | 15.0 |
| Engineered Systems | | 4.0 |
| | 4.1 |
| | 3.5 |
| Corporate | | 6.6 |
| | 5.3 |
| | 4.5 |
| Total depreciation and amortization | | $ | 113.0 |
| | $ | 87.3 |
| | $ | 90.3 |
|
| | | | | | | | | | | | | | Capital expenditures: | | 2017 | | 2016 | | 2015 | Instrumentation | | $ | 13.7 |
| | $ | 50.9 |
| | $ | 20.9 |
| Digital Imaging | | 23.3 |
| | 12.5 |
| | 9.2 |
| Aerospace and Defense Electronics | | 11.0 |
| | 12.6 |
| | 9.1 |
| Engineered Systems | | 5.8 |
| | 5.9 |
| | 5.7 |
| Corporate | | 4.7 |
| | 5.7 |
| | 2.1 |
| Total capital expenditures | | $ | 58.5 |
| | $ | 87.6 |
| | $ | 47.0 |
|
Identifiable assets are those assets used in the operations of the segments. Corporate assets primarily consist of cash and cash equivalents, deferred taxes, net pension assets/liabilitiesassets and other assets. | | | | | | | | | | | | | | | | | | | | | Identifiable assets: | | 2021 | | 2020 | | 2019 | Digital Imaging | | $ | 11,756.8 | | | $ | 2,000.8 | | | $ | 1,874.6 | | Instrumentation | | 1,640.3 | | | 1,676.2 | | | 1,680.2 | | Aerospace and Defense Electronics | | 536.3 | | | 567.6 | | | 618.3 | | Engineered Systems | | 179.2 | | | 175.1 | | | 143.4 | | Corporate | | 317.7 | | | 665.1 | | | 263.3 | | | | | | | | | Total identifiable assets | | $ | 14,430.3 | | | $ | 5,084.8 | | | $ | 4,579.8 | | |
| | | | | | | | | | | | | | Identifiable assets: | | 2017 | | 2016 | | 2015 | Instrumentation | | $ | 1,413.6 |
| | $ | 1,361.0 |
| | $ | 1,339.6 |
| Digital Imaging | | 1,496.4 |
| | 671.1 |
| | 634.9 |
| Aerospace and Defense Electronics | | 605.5 |
| | 449.4 |
| | 451.6 |
| Engineered Systems | | 107.0 |
| | 93.9 |
| | 92.2 |
| Corporate (a) | | 223.9 |
| | 199.0 |
| | 198.8 |
| Total identifiable assets | | $ | 3,846.4 |
| | $ | 2,774.4 |
| | $ | 2,717.1 |
| (a) The amount for 2017, 2016 and 2015 includes $127.2 million, $88.5 million and $111.0 million prepaid pension asset, respectively. |
Information on the Company’s sales by country of origin and long-lived assets by major geographic area was as follows (in millions):follows: | | | | | | | | | | | | | | | | | | | | | Sales by country of origin: | | 2021 | | 2020 | | 2019 | United States | | $ | 2,932.1 | | | $ | 2,078.7 | | | $ | 2,179.6 | | Canada | | 458.1 | | | 333.7 | | | 301.0 | | United Kingdom | | 286.3 | | | 237.5 | | | 251.7 | | Belgium | | 227.3 | | | 10.7 | | | 10.2 | | The Netherlands | | 127.0 | | | 105.5 | | | 134.2 | | All other countries | | 583.5 | | | 320.1 | | | 286.9 | | Total sales | | $ | 4,614.3 | | | $ | 3,086.2 | | | $ | 3,163.6 | |
| | | | | | | | | | | | | | Sales by country of origin: | | 2017 | | 2016 | | 2015 | United States | | $ | 1,834.6 |
| | $ | 1,645.7 |
| | $ | 1,797.1 |
| Canada | | 266.1 |
| | 209.2 |
| | 208.8 |
| United Kingdom | | 197.5 |
| | 109.6 |
| | 124.6 |
| France | | 36.1 |
| | 7.9 |
| | 8.3 |
| All other countries | | 269.5 |
| | 177.5 |
| | 159.3 |
| Total sales | | $ | 2,603.8 |
| | $ | 2,149.9 |
| | $ | 2,298.1 |
|
| | | | | | | | | | | | | | Long-lived assets: | | 2017 | | 2016 | | 2015 | United States | | $ | 1,495.4 |
| | $ | 1,404.9 |
| | $ | 1,329.1 |
| Canada | | 288.2 |
| | 273.5 |
| | 249.9 |
| United Kingdom | | 487.9 |
| | 103.3 |
| | 127.3 |
| France | | 370.2 |
| | 3.2 |
| | 3.4 |
| All other countries | | 182.0 |
| | 138.1 |
| | 139.3 |
| Total long-lived assets | | $ | 2,823.7 |
| | $ | 1,923.0 |
| | $1,849.0 |
| | | | | | | | | | | | | | | | | | | | | Long-lived assets: | | 2021 | | 2020 | | 2019 | United States | | $ | 9,446.3 | | | $ | 1,707.0 | | | $ | 1,839.4 | | Canada | | 763.5 | | | 372.9 | | | 355.0 | | United Kingdom | | 622.4 | | | 539.5 | | | 492.2 | | France | | 463.7 | | | 505.1 | | | 367.1 | | All other countries | | 679.3 | | | 201.7 | | | 195.6 | | Total long-lived assets | | $ | 11,975.2 | | | $ | 3,326.2 | | | $3,249.3 |
Long-lived assets consist of property, plant and equipment, goodwill, acquired intangible assets, prepaid pension assets and other long-term assets including deferred compensation assets but excluding any deferred tax assets. Until purchase accounting for the FLIR acquisition is finalized, provisional amounts for goodwill and intangible assets are primarily included in the United States. The all other countries category primarily consists of Teledyne’s other operations in Europe.
Product Lines The Instrumentation segment includes three3 product lines: Environmental Instrumentation, Marine Instrumentation and Test and Measurement Instrumentation. All other segments each contain one1 product line. The tables below provide a summary of the sales by product line for the Instrumentation segment (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Instrumentation: | | 2021 | | 2020 | | 2019 | | | | | | | | | | Environmental Instrumentation | | $ | 446.3 | | | $ | 411.3 | | | $ | 391.4 | | | | | | | | | | | Marine Instrumentation | | 424.1 | | | 426.3 | | | 450.2 | | | | | | | | | | | Test and Measurement Instrumentation | | 296.5 | | | 256.9 | | | 263.5 | | | | | | | | | | | Total | | $ | 1,166.9 | | | $ | 1,094.5 | | | $ | 1,105.1 | | | | | | | | | | |
| | | | | | | | | | | | | | Instrumentation: | | 2017 | | 2016 | | 2015 | Environmental Instrumentation | | $ | 314.3 |
| | $ | 270.1 |
| | $ | 268.7 |
| Marine Instrumentation | | 430.7 |
| | 418.7 |
| | 614.0 |
| Test and Measurement Instrumentation | | 208.9 |
| | 187.9 |
| | 168.4 |
| Total | | $ | 953.9 |
| | $ | 876.7 |
| | $ | 1,051.1 |
|
Sales to the U.S. Government included sales to the U.S. Department of Defense of $479.7$876.6 million in 2017, $449.42021, $578.4 million in 2016,2020, and $447.2$545.5 million in 2015.2019. Total sales to international customers were $1,208.5$2,147.9 million in 2017, $919.42021, $1,385.3 million in 2016,2020, and $1,020.4$1,391.6 million in 2015.2019. Of these amounts, sales by operations in the United States to customers in other countries were $555.5$723.9 million in 2017, $539.42021, $546.8 million in 2016,2020, and $628.2$638.0 million in 2015.2019. There were no sales to individual countries outside of the United States in excess of 10 percent of the Company’s sales. Sales between business segments generally were priced at prevailing market prices and were $22.8 million, $20.2 million, $23.4 million and $19.4$30.3 million for 2017, 20162021, 2020 and 2015,2019, respectively. We also disaggregate our revenue from contracts with customers by customer type and geographic region for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. With the exception of the Engineered Systems segment, net sales in our segments is primarily derived from fixed price contracts. Net sales in the Engineered Systems segment is typically between 45% and 55% fixed price contracts in a given reporting period, with the balance of net sales derived from cost type contracts. For the year ended January 2, 2022, approximately 47% of net sales in the Engineered Systems segment was derived from fixed price contracts.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal Year Ended January 2, 2022 | | Fiscal Year Ended January 3, 2021 | | Fiscal Year Ended December 29, 2019 | | Customer Type | | | | Customer Type | | | | Customer Type | | | (in millions) | United States Government (a) | | Other, Primarily Commercial | | Total | | United States Government (a) | | Other, Primarily Commercial | | Total | | United States Government (a) | | Other, Primarily Commercial | | Total | Net Sales: | | | | | | | | | | | | | | | | | | Digital Imaging | $ | 515.9 | | | $ | 1,897.0 | | | $ | 2,412.9 | | | $ | 120.9 | | | $ | 865.1 | | | $ | 986.0 | | | $ | 107.4 | | | $ | 885.5 | | | $ | 992.9 | | Instrumentation | 91.6 | | | 1,075.3 | | | 1,166.9 | | | 80.6 | | | 1,013.9 | | | 1,094.5 | | | 80.4 | | | 1,024.7 | | | 1,105.1 | | Aerospace and Defense Electronics | 227.2 | | | 401.5 | | | 628.7 | | | 229.9 | | | 359.5 | | | 589.4 | | | 225.3 | | | 464.8 | | | 690.1 | | Engineered Systems | 358.4 | | | 47.4 | | | 405.8 | | | 386.8 | | | 29.5 | | | 416.3 | | | 338.9 | | | 36.6 | | | 375.5 | | Total | $ | 1,193.1 | | | $ | 3,421.2 | | | $ | 4,614.3 | | | $ | 818.2 | | | $ | 2,268.0 | | | $ | 3,086.2 | | | $ | 752.0 | | | $ | 2,411.6 | | | $ | 3,163.6 | |
a) Includes sales as a prime contractor or subcontractor.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal Year Ended January 2, 2022 | | Fiscal Year Ended January 3, 2021 | | Fiscal Year Ended December 29, 2019 | | Geographic Region (a) | | | | Geographic Region (a) | | | | Geographic Region (a) | | | (in millions) | United States | | Europe | | All other | | Total | | United States | | Europe | | All other | | Total | | United States | | Europe | | All other | | Total | Net sales: | | | | | | | | | | | | | | | | | | | | | | | | Digital Imaging | $ | 1,144.9 | | | $ | 642.7 | | | $ | 625.3 | | | $ | 2,412.9 | | | $ | 309.3 | | | $ | 272.9 | | | $ | 403.8 | | | $ | 986.0 | | | $ | 316.1 | | | $ | 299.4 | | | $ | 377.4 | | | $ | 992.9 | | Instrumentation | 857.9 | | | 248.2 | | | 60.8 | | | 1,166.9 | | | 844.4 | | | 204.4 | | | 45.7 | | | 1,094.5 | | | 899.7 | | | 164.8 | | | 40.6 | | | 1,105.1 | | Aerospace and Defense Electronics | 523.5 | | | 105.2 | | | — | | | 628.7 | | | 508.7 | | | 80.1 | | | 0.6 | | | 589.4 | | | 588.3 | | | 100.8 | | | 1.0 | | | 690.1 | | Engineered Systems | 405.8 | | | — | | | — | | | 405.8 | | | 416.3 | | | — | | | — | | | 416.3 | | | 375.5 | | | — | | | — | | | 375.5 | | Total | $ | 2,932.1 | | | $ | 996.1 | | | $ | 686.1 | | | $ | 4,614.3 | | | $ | 2,078.7 | | | $ | 557.4 | | | $ | 450.1 | | | $ | 3,086.2 | | | $ | 2,179.6 | | | $ | 565.0 | | | $ | 419.0 | | | $ | 3,163.6 | |
a) Net sales by geographic region of origin. Note 13. Lease Commitments Lease Commitments We determine if an arrangement is a lease at inception. Operating leases are recorded as right-of-use assets, other long-term lease liabilities and current accrued liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, current accrued liabilities, and other long-term liabilities in our consolidated balance sheets. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and use an implicit rate when readily available. Since most of our leases do not provide an implicit rate, we use the incremental borrowing rate to determine the present value of lease payments. The rate will take into consideration the underlying asset’s economic environment, including the length of the lease term and currency that the lease is payable in. Our lease agreements whichmay include options to extend the lease term at either a fixed cost, fixed increase or market value adjustment. We evaluate the likelihood of exercising each renewal option based on many factors, including the length of the renewal option and the future new lease cost, if known, or the estimated future new lease cost if it is not a fixed amount and will include those renewal options that are reasonably certain to be exercised for purposes of calculating the lease liability and corresponding right-of-use asset. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Operating Leases Teledyne has approximately 165 long-term operating lease agreements for manufacturing facilities and office spacespace. These agreements frequently include 1 or more renewal options and may require the Company to pay for non-lease components such as utilities, taxes, insurance and maintenance expense. We account for lease and non-lease components as a single lease component when the payments are fixed. Variable payments included in the lease agreement are expensed as incurred. No lease agreement imposes a restriction on the Company’s ability to engage in financing transactions or enter into further lease agreements. At January 2, 2022, Teledyne has right-of-use assets of $144.5 million included in other long-term other assets on the balance sheet. At December 31, 2017,January 2, 2022, future minimum lease payments for capital leases and for operating leases with non-cancelable terms of more than one year were as follows (in millions): | | | | | | | | | | | Operating lease commitments: | | | | | 2022 | | $ | 33.5 | | | | 2023 | | 29.9 | | | | 2024 | | 24.3 | | | | 2025 | | 21.7 | | | | 2026 | | 18.6 | | | | Thereafter | | 65.4 | | | | Total minimum lease payments | | 193.4 | | | | Less: | | | | | Imputed interest | | (27.1) | | | | Current portion (included in current accrued liabilities) | | (28.3) | | | | Present value of minimum lease payments, net of current portion | | $ | 138.0 | | | |
| | | | | | | | | | Lease Commitments: | | Capital | | Operating | 2018 | | $ | 1.3 |
| | $ | 22.4 |
| 2019 | | 1.2 |
| | 18.7 |
| 2020 | | 1.3 |
| | 17.6 |
| 2021 | | 1.2 |
| | 15.6 |
| 2022 | | 1.2 |
| | 12.4 |
| Thereafter | | 1.5 |
| | 51.4 |
| Total minimum lease payments | | 7.7 |
| | $ | 138.1 |
| Less: | | | | | Imputed interest | | (1.0 | ) | | | Current portion | | (1.3 | ) | | | Present value of minimum capital lease payments, net of current portion | | $ | 5.4 |
| | |
The 2017 property, plantweighted average remaining lease term for operating leases is approximately 7.8 years and equipment accounts included $11.0 million of property leased under capital leases and $6.4 million of related accumulated depreciation. The 2016 property, plant and equipment accounts included $10.1 million of property leased under capital leases and $5.2 million of related accumulated depreciation.the weighted average discount rate is approximately 3.48% Rental expense under operating leases, including leases with a term of 12 months or less, net of immaterial sublease income, was $26.9$40.9 million in 2017, $28.12021, $29.4 million in 20162020 and $24.5$26.5 million in 2015. 2019. Cash paid for amounts included in the measurement of lease liabilities was $39.7 million for 2021 and $27.8 million for 2020.
Finance Leases and Subleases
Our finance leases and subleases are not material. Note 14. Commitments and Contingencies The Company is subject to federal, state and local environmental laws and regulations which require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including sites at which the Company has been identified as a potentially responsible party under the federal Superfund laws and comparable state laws. In accordance with the Company’s accounting policy disclosed in Note 2, environmental liabilities are recorded when the Company’s liability is probable and the costs are reasonably estimable. In many cases, however, investigations are not yet at a stage where the Company has been able to determine whether it is liable or, if liability is probable, to reasonably estimate the loss or range of loss, or certain components thereof. Estimates of the Company’s liability are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluations and estimates of appropriate cleanup technology, methodology and cost, the extent of corrective actions that may be required, and the number and financial condition of other potentially responsible parties, as well as the extent of their responsibility for the remediation. Accordingly, as investigation and remediation of these sites proceeds, it is likely that adjustments in the Company’s accruals will be necessary to reflect new information. The amounts of any such adjustments could have a material adverse effect on the Company’s results of operations in a given period, but the amounts, and the possible range of loss in excess of the amounts accrued, are not reasonably estimable. Based on currently available information, however, management does not believe that future environmental costs in excess of those accrued with respect to sites with which the Company has been identified are likely to have a material adverse effect on the Company’s financial condition or liquidity. At December 31, 2017,January 2, 2022, the Company’s reserves for environmental remediation obligations totaled $5.1$6.3 million, of which $1.0$1.7 million is included in current accrued liabilities with the remainder included in long-term accrued liabilities. The Company periodically evaluates whether it may be able to recover a portion of future costs for environmental liabilities from its insurance carriers and from third parties. The timing of expenditures depends on a number of factors that vary by site, including the nature and extent of contamination, the number of potentially responsible parties, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. The Company expects that it will expend present accruals over many years, and will complete remediation of all sites with which it has been identified in up to thirty yearsyears. On April 24, 2018, FLIR entered into a Consent Agreement with the United States Department of State’s Directorate of Defense Trade Controls to resolve allegations regarding the unauthorized export of technical data and defense services to dual and third country nationals in certain of FLIR’s facilities, the failure to properly use and manage export licenses and export authorizations, and failures to report certain payments under 22 CFR Part 130 in potential violation of International Traffic in Arms Regulations (“ITAR”). The Consent Agreement has a four-year term and provides for: (i) a civil penalty of $30.0 million with $15.0 million of this amount suspended on the condition that the funds have or will be used for Department-approved Consent Agreement remedial compliance measures, (ii) the appointment of an external Special Compliance Official to oversee compliance with the Consent Agreement and the ITAR; (iii) 2 external audits of our ITAR compliance program; and (iv) continued implementation of ongoing remedial compliance measures and additional remedial compliance measures related to automated systems and ITAR compliance policies, procedures, and training. While FLIR has enhanced its trade compliance program more broadly, implemented and continues to implement remedial measures and has undergone its first external audit and just concluded its second external audit of FLIR’s ITAR compliance program, additional adverse disclosures and findings could materially cause incurrence of additional expenses in connection with implementation of remedial measures and result in a substantial adjustment to our revenue and net income. As of January 2, 2022, under the Consent Agreement, $3.5 million remains to be paid by April 24, 2022. FLIR’s investments to date in remedial compliance measures have been more than sufficient to cover the $15.0 million suspension amount. In June 2017, the Bureau of Industry and Security (“BIS”) of the United States Department of Commerce informed FLIR of additional export licensing requirements that restricted the FLIR’s ability to sell certain thermal products without a license to customers in China not identified on a list maintained by the United States Department of Commerce. This action was precipitated by concerns of sale without a license or potential diversion of some of FLIR’s products to prohibited end users and to countries subject to economic and other sanctions implemented by the United States. BIS subsequently favorably modified these restrictions to reduce the applicability of the restrictions to sales of FLIR's Tau camera cores (as opposed to finished products containing Tau camera cores) to customers in China not identified on a list maintained by the United States Department of Commerce and persons in a country other than those in the Export Administration Regulations (“EAR”) Country Group A:5 (Supplement No. 1 to Part 740 of the EAR). FLIR has identified certain shipments that potentially violate these license requirements and voluntary disclosed this matter to BIS.
In April 2021, FLIR resolved allegations of misrepresentations made to BIS, between November 2012 and December 2013, in a commodity jurisdiction request relating to newly developed Lepton uncooled focal plane arrays by an administrative settlement and fine of $0.3 million and agreeing to perform 2 internal audits of its EAR export compliance programs. The first internal audit has been completed and another voluntary disclosure has been filed to report potential violations. FLIR has made other voluntary disclosures to the U.S. Department of State and U.S. Department of Commerce, including to BIS with respect to the shipments of products from non-U.S. jurisdictions which were not licensed due to incorrect de minimis calculation methodology. If FLIR is found to have violated applicable rules and regulations with respect to customers and limitations on the export and end use of its products, FLIR could be subject to substantial fines and penalties, suspension of existing licenses or other authorizations and/or loss or suspension of export privileges. At this time, based on available information, we are unable to reasonably estimate the time it may take to resolve these matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with these matters. However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial position, results of operations or cash flows in and following the period in which such an outcome becomes estimable or known. Certain provisional adjustments have been made for the FLIR historical export compliance matters in Teledyne’s current preliminary estimates of its purchase price allocation. The final acquisition accounting adjustments for these matters may be materially different, as Teledyne obtains additional information on these matters and as additional information is made known during the post-acquisition measurement period. See Note 3 to these Notes to Consolidated Financial Statements for information regarding FLIR historical tax matters that existed at the date of the acquisition, including the Swedish Tax Authority's reassessment of tax for the year ending December 31, 2012 related to 1 of FLIR’s non-operating subsidiaries in Sweden. Various claims (whether based on U.S. Government or Company audits and investigations or otherwise) may be asserted against the Company related to its U.S. Government contract work, including claims based on business practices and cost classifications and actions under the False Claims Act. Although such claims are generally resolved by detailed fact-finding and negotiation, on those occasions when they are not so resolved, civil or criminal legal or administrative proceedings may ensue. Depending on the circumstances and the outcome, such proceedings could result in fines, penalties, compensatory and treble damages or the cancellation or suspension of payments under one or more U.S. Government contracts. Under government regulations, a company, or one or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. However, although the outcome of these matters cannot be predicted with certainty, management does not believe there is any audit, review or investigation currently pending against the Company of which management is aware that is likely to result in suspension or debarment of the Company, or that is otherwise likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s results of operations for that period. A number of other lawsuits, claims and proceedings have been or may be asserted against the Company, including those pertaining to product liability, acquisitions, patent infringement, commercial contracts, employment and employee benefits. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial condition.
Note 15. Quarterly Financial Data (Unaudited)Subsequent Events On January 26, 2022, the Administrative Court of Appeal in Stockholm, Sweden generally affirmed the March 2020 ruling of the First Instance Court and determined a tax liability in the amount of SEK 2.765 billion. We paid the tax on February 2, 2022 totaling $296.4 million. We are evaluating the ruling. As a result of the payment, the Swedish Tax Authority cancelled the standby letter of credit of $244.6 million. | | | | | | | | | | | | | | | | | | Fiscal Year 2017 (a) (in millions, except per-share amounts) | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | Net Sales | | $ | 566.1 |
| | $ | 671.1 |
| | $ | 662.2 |
| | $ | 704.4 |
| Costs and expenses | | | | | | | | | Cost of sales (b) | | 354.2 |
| | 418.3 |
| | 405.8 |
| | 433.9 |
| Selling, general and administrative expenses (b) | | 153.8 |
| | 166.6 |
| | 163.5 |
| | 172.1 |
| Total costs and expenses | | 508.0 |
| | 584.9 |
| | 569.3 |
| | 606.0 |
| Operating income | | 58.1 |
| | 86.2 |
| | 92.9 |
| | 98.4 |
| Interest and debt expense, net (b) | | (8.2 | ) | | (9.1 | ) | | (8.2 | ) | | (7.6 | ) | Other income, net (b) | | (9.3 | ) | | (0.7 | ) | | (3.0 | ) | | (2.5 | ) | Income before income taxes | | 40.6 |
| | 76.4 |
| | 81.7 |
| | 88.3 |
| Provision for income taxes (c) | | 10.1 |
| | 16.3 |
| | 12.7 |
| | 20.7 |
| Net income attributable to Teledyne | | $ | 30.5 |
| | $ | 60.1 |
| | $ | 69.0 |
| | $ | 67.6 |
| | | | | | | | | | Basic earnings per common share | | $ | 0.87 |
| | $ | 1.71 |
| | $ | 1.95 |
| | $ | 1.91 |
| | | | | | | | | | Diluted earnings per common share | | $ | 0.84 |
| | $ | 1.66 |
| | $ | 1.90 |
| | $ | 1.84 |
|
| | | a) Fiscal year 2017 was a 52-week fiscal-year, each quarter contained 13 weeks. | | b) The first quarter of 2017 includes pretax charges of $21.2 million related to the acquisition of e2v, of which, $1.4 million was recorded to cost of sales, $11.5 million was recorded to selling, general and administrative expenses, $2.3 million was recorded to interest expense and $6.0 million was recorded as other expense. The second quarter of 2017 includes pretax charges of $4.0 million related to the acquisition of e2v, of which, $2.7 million was recorded to cost of sales and $1.3 million was recorded to selling, general and administrative expenses. The third quarter of 2017 includes pretax charges of $2.9 million related to the acquisition of e2v, of which, $2.7 million was recorded to cost of sales and $0.2 million was recorded to selling, general and administrative expenses. The fourth quarter of 2017 includes a $1.1 million reduction to estimated pretax charges recorded in 2017 related to the acquisition of e2v, which was recorded to cost of sales. | | c) Includes $1.4 million in net discrete income tax benefits in the first quarter, $4.6 million in net discrete income tax benefits in the second quarter, $9.9 million in net discrete income tax benefits the third quarter and $1.3 million in net discrete income tax benefits in the fourth quarter. The net discrete income tax benefits in the fourth quarter includes provisional charges of $4.7 million due to the estimated impact of the Tax Act. | |
| | | | | | | | | | | | | | | | | | Fiscal Year 2017 (in millions) | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | Net Sales: | | | | | | | | | Instrumentation | | $ | 232.8 |
| | $ | 233.8 |
| | $ | 232.5 |
| | $ | 254.8 |
| Digital Imaging | | 113.8 |
| | 188.5 |
| | 191.5 |
| | 199.7 |
| Aerospace and Defense Electronics | | 151.9 |
| | 172.8 |
| | 165.1 |
| | 180.4 |
| Engineered Systems | | 67.6 |
| | 76.0 |
| | 73.1 |
| | 69.5 |
| Total net sales | | $ | 566.1 |
| | $ | 671.1 |
| | $ | 662.2 |
| | $ | 704.4 |
| | | | | | | | | | Operating income: | | | | | | | | | Instrumentation | | $ | 30.4 |
| | $ | 30.8 |
| | $ | 34.8 |
| | $ | 31.4 |
| Digital Imaging (a) | | 15.3 |
| | 26.4 |
| | 31.9 |
| | 34.8 |
| Aerospace and Defense Electronics (a) | | 26.2 |
| | 32.4 |
| | 29.4 |
| | 36.9 |
| Engineered Systems | | 8.9 |
| | 9.1 |
| | 10.0 |
| | 9.7 |
| Corporate expense (a) | | (22.7 | ) | | (12.5 | ) | | (13.2 | ) | | (14.4 | ) | Total operating income | | $ | 58.1 |
| | $ | 86.2 |
| | $ | 92.9 |
| | $ | 98.4 |
|
| | a) | The first quarter of 2017 includes pretax charges of $12.9 million related to the acquisition of e2v, of which, $10.4 million was recorded to corporate expense and $2.5 million was recorded in the Digital Imaging segment. The second quarter of 2017 includes pretax charges of $4.0 million related to the acquisition of e2v, of which, $3.7 million was recorded in the Digital Imaging segment and $0.3 million was recorded in the Aerospace and Defense Electronics segment. The third quarter of 2017 includes pretax charges of $2.9 million related to the acquisition of e2v which was recorded in the Digital Imaging segment. The fourth quarter of 2017 includes a $1.1 million reduction to estimated pretax charges recorded in 2017 related to the acquisition of e2v which was recorded in the Digital Imaging segment. |
| | | | | | | | | | | | | | | | | | Fiscal Year 2016 (a) (in millions, except per-share amounts) | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | Net Sales | | $ | 530.5 |
| | $ | 539.7 |
| | $ | 526.8 |
| | $ | 552.9 |
| Costs and expenses | | | | | | | | | Cost of sales | | 324.8 |
| | 336.2 |
| | 317.0 |
| | 340.0 |
| Selling, general and administrative expenses (b) | | 144.8 |
| | 149.9 |
| | 141.0 |
| | 142.4 |
| Total costs and expenses | | 469.6 |
| | 486.1 |
| | 458.0 |
| | 482.4 |
| Operating income | | 60.9 |
| | 53.6 |
| | 68.8 |
| | 70.5 |
| Interest and debt expense, net (b) | | (5.7 | ) | | (5.9 | ) | | (5.6 | ) | | (6.0 | ) | Other income/(expense), net (b) | | (1.3 | ) | | 17.2 |
| | (0.8 | ) | | (4.4 | ) | Income before income taxes | | 53.9 |
| | 64.9 |
| | 62.4 |
| | 60.1 |
| Provision for income taxes (c) | | 14.9 |
| | 18.0 |
| | 10.4 |
| | 7.1 |
| Net income attributable to Teledyne | | $ | 39.0 |
| | $ | 46.9 |
| | $ | 52.0 |
| | $ | 53.0 |
| | | | | | | | | | Basic earnings per common share | | $ | 1.13 |
| | $ | 1.36 |
| | $ | 1.50 |
| | $ | 1.52 |
| | | | | | | | | | Diluted earnings per common share | | $ | 1.11 |
| | $ | 1.33 |
| | $ | 1.46 |
| | $ | 1.48 |
|
| | | a) Fiscal year 2016 was a 52-week fiscal-year, each quarter contained 13 weeks.
| | b) The second quarter other income includes a $17.9 million pretax gain on the sale of a former operating facility. The fourth quarter and total year 2016 includes pretax charges of $7.9 million related to the acquisition of e2v, of which, $1.9 million was recorded to selling, general and administrative expenses, $0.5 million was recorded to interest expense and $5.5 million was recorded as other expense.
| | c) Includes $0.6 million in net discrete income tax benefits in the first quarter, $5.7 million in net discrete income tax expense in the second quarter, $6.6 million in net discrete income tax benefits the third quarter and $9.4 million in net discrete income tax benefits in the fourth quarter. The second quarter amount includes $6.7 million in tax expense related to the gain on the sale of the former operating facility.
| |
| | | | | | | | | | | | | | | | | | Fiscal Year 2016 (in millions) | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | Net Sales: | | | | | | | | | Instrumentation | | $ | 223.7 |
| | $ | 220.1 |
| | $ | 208.3 |
| | $ | 224.6 |
| Digital Imaging | | 89.9 |
| | 99.4 |
| | 98.5 |
| | 110.9 |
| Aerospace and Defense Electronics | | 152.6 |
| | 158.0 |
| | 153.5 |
| | 151.8 |
| Engineered Systems | | 64.3 |
| | 62.2 |
| | 66.5 |
| | 65.6 |
| Total net sales | | $ | 530.5 |
| | $ | 539.7 |
| | $ | 526.8 |
| | $ | 552.9 |
| | | | | | | | | | Operating income: | | | | | | | | | Instrumentation | | $ | 31.4 |
| | $ | 20.1 |
| | $ | 28.1 |
| | $ | 30.2 |
| Digital Imaging | | 8.2 |
| | 10.7 |
| | 11.7 |
| | 15.3 |
| Aerospace and Defense Electronics | | 24.1 |
| | 28.0 |
| | 31.5 |
| | 28.5 |
| Engineered Systems | | 8.0 |
| | 5.6 |
| | 8.6 |
| | 9.9 |
| Corporate expense (a) | | (10.8 | ) | | (10.8 | ) | | (11.1 | ) | | (13.4 | ) | Total operating income | | $ | 60.9 |
| | $ | 53.6 |
| | $ | 68.8 |
| | $ | 70.5 |
|
| | a) | The fourth quarter of 2016 includes pretax charges of $1.9 million related to the acquisition of e2v, which was recorded to corporate expense. |
Schedule II VALUATION AND QUALIFYING ACCOUNTS Schedule II VALUATION AND QUALIFYING ACCOUNTS For the Fiscal Years Ended December 31, 2017, January 1, 2017 and2, 2022, January 3, 20162021 and December 29, 2019 (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Additions | | | Description | | Balance at beginning of period | | Charged to costs and expenses | | Acquisitions | | Deductions and other (a) | | Balance at end of period | Fiscal Year 2021 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 12.3 | | | 4.5 | | | — | | | (3.0) | | | $ | 13.8 | | Environmental reserves | | $ | 6.5 | | | 0.4 | | | — | | | (0.6) | | | $ | 6.3 | | | | | | | | | | | | | Fiscal Year 2020 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 10.2 | | | 4.1 | | | — | | | (2.0) | | | $ | 12.3 | | Environmental reserves | | $ | 6.0 | | | 1.1 | | | — | | | (0.6) | | | $ | 6.5 | | | | | | | | | | | | | Fiscal Year 2019 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 6.7 | | | 1.3 | | | 2.3 | | | (0.1) | | | $ | 10.2 | | Environmental reserves | | $ | 6.0 | | | 0.6 | | | — | | | (0.6) | | | $ | 6.0 | | | | | | | | | | | | | (a) Represents payments except the amounts for allowance for doubtful accounts primarily represents uncollectible accounts written-off, net of recoveries. |
Item 16. Form 10-K Summary
None | | | | | | | | | | | | | | | | | | | | | | | Additions | | | Description | | Balance at beginning of period | | Charged to costs and expenses | | Acquisitions | | Deductions and other (a) | | Balance at end of period | Fiscal 2017 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 5.2 |
| | 4.2 |
| | 1.6 |
| | (0.7 | ) | | $ | 10.3 |
| Environmental reserves | | $ | 7.0 |
| | 2.3 |
| | 0.3 |
| | (4.5 | ) | | $ | 5.1 |
| | | | | | | | | | | | Fiscal 2016 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 6.3 |
| | 0.7 |
| | 0.2 |
| | (2.0 | ) | | $ | 5.2 |
| Environmental reserves | | $ | 8.7 |
| | 0.5 |
| | — |
| | (2.2 | ) | | $ | 7.0 |
| | | | | | | | | | | | Fiscal 2015 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 7.8 |
| | 0.9 |
| | 0.3 |
| | (2.7 | ) | | $ | 6.3 |
| Environmental reserves | | $ | 9.7 |
| | 0.6 |
| | — |
| | (1.6 | ) | | $ | 8.7 |
| | | | | | | | | | | | (a) Represents payments except the amounts for allowance for doubtful accounts primarily represents uncollectible accounts written-off, net of recoveries. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of February 27, 2018.
EXHIBIT INDEX | | | | Teledyne Technologies Incorporated (Registrant) | | | By: | | /s/ Robert Mehrabian | | | Robert Mehrabian | | | Chairman, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | /s/ Robert Mehrabian | | Chairman, President and | | | Robert Mehrabian | | Chief Executive Officer
(Principal Executive Officer)
and Director
| | February 27, 2018 | | | | /s/ Susan L. Main | | Senior Vice President and | | | Susan L. Main | | Chief Financial Officer
(Principal Financial Officer)
| | February 27, 2018 | | | | /s/ Cynthia Belak | | Vice President and | | | Cynthia Belak
| | Controller
(Principal Accounting Officer)
| | February 27, 2018 | | | | *
| | Director | | February 27, 2018 | Roxanne S. Austin | | | | | | | | *
| | Director | | February 27, 2018 | Charles Crocker | | | | | | | | *
| | Director | | February 27, 2018 | Kenneth C. Dahlberg | | | | | | | | *
| | Director | | February 27, 2018 | Simon M. Lorne | | | | | | | | *
| | Director | | February 27, 2018 | Robert A. Malone | | | | | | | | *
| | Director | | February 27, 2018 | Paul D. Miller | | | | | | | | *
| | Director | | February 27, 2018 | Jane C. Sherburne | | | | | | | | *
| | Director | | February 27, 2018 | Michael T. Smith | | | | | | | | * | | Director | | February 27, 2018 | Wesley W. von Schack | | | | | | | | | | | | *By: | /s/ S. Paul Sassalos | | | | | | | S. Paul Sassalos
Pursuant to Power of Attorney
filed as Exhibit 24.1
| | | | |
EXHIBIT INDEX
| | | | Exhibit No.
| | Description | | | 2.1 | | | | | 2.2 | | Rule 2.7 Announcement,Agreement and Plan of Merger, dated December 12, 2016 as of January 4, 2021, by and among Teledyne Technologies Incorporated, Firework Merger Sub I, Inc., related to the recommend cash offer for e2v technologies plcFirework Merger Sub II, LLC and FLIR Systems, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated December 11, 2016 (FileJanuary 2, 2021 File No. 1-15295))
| | | | 3.1 | | | | | 3.2 | | | | | 10.14.1 | | | | | | 4.2 | | | | | | 4.3 | | | | | | 4.4 | | | | | | 4.5 | | | | | | 4.6 | | | | | | 4.7 | | | | | | 4.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 10.6 | | | 10.2 | | 10.7 | | | | | | 10.8 | | | | | | 10.9 | | | | | | 10.10 | | | | | |
| | | | | | | | | | | | 10.1210.4 | | | | | | 10.13 | | | | | | | | 10.1410.5 | | | | | | 10.15 | | | | | | | | 10.1610.6 | | | | | | | | 10.1710.7 | | | | | | | | 10.18 | |
| | | | | | 10.19 | | | | | | | | 10.2010.8 | | | | | | 10.21 | | | | | | | | 10.2210.9 | | | | | | | | 10.2310.10 | | | | | | | | 10.2410.11 | | | | | | 10.25 | | | | | | 10.26 | | |
| | | | | | | 10.2710.12 | | | | | | 10.28 | | | | | | 10.29 | | | | | | 10.30 | | | | | | 10.31 | | | | | | 10.32 | | | | | | | | 10.3310.13 | |
| | | | | | 10.3410.14 | |
| | | | | 10.3510.15 | |
| | | | | 10.3610.16 | |
| | | | | | 10.3710.17 | |
| | | | | 10.3810.18 | |
| | | | | |
| | | | | | | | | | | | 10.19 | |
| | | | | | 10.3910.20 | | | | | | | | 10.21 | |
| | | | | | 10.40 | | | | | | | | 10.22 | | | | | | | | 10.23 | | | | | | | | 10.24 | |
| | | | | | 10.4110.25 | |
| | | | | | 10.42 | | | | | | | | 10.26 | |
| | | |
| | | | | 10.4310.27 | |
| | | | | | 10.4410.28 | | | | | | | | 10.29 | | | | | | | | 10.4510.30 | | | | | | 10.46 | | | | | | | | 10.4710.31 | | | | | | | | 10.4810.32 | | | | | | | | 10.49 | |
| | | |
| | | | | | | | | 10.5210.34 | | First Amendment to Amended and Restated Credit Agreement, dated as of October 26, 2021, by and among Teledyne Technologies Incorporated, as a borrower and guarantor, the designated borrowers party thereto, the guarantor party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent, swing line lender and L/C issuer (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q dated October 3, 2021) (File No. 1-15295) | | | | 10.35 | | Joinder Agreement of Teledyne FLIR, LLC, dated as of May 14, 2021, to Amended and Restated Credit Agreement dated as of March 1, 2013,4, 2021, by and among Teledyne Technologies Incorporated, (Teledyne)as a borrower and guarantor, the designated borrowers party thereto, the lenders party thereto and Bank of America, N.A., certain subsidiariesas administrative agent, swing line lender and L/C issuer (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated May 14, 2021) (File No. 1-15295)
| | | | 10.36 | | Amended and Restated Term Loan Credit Agreement, dated October 30, 2019, by an among Teledyne Technologies Incorporated and Teledyne Netherlands BV, as borrowers, the several banks and other financial institutions form time to time parties thereto as lenders, Bank of America, N.A., as administrative agent, and B of A Securities, Inc., as sole book manager and sole lead arranger (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated October 30, 2019). | | | | 10.37 | | | | | | 10.38 | |
| | | | 10.39 | | | | | | 10.40 | | Joinder Agreement of Teledyne FLIR, LLC, dated as of May 14, 2021, to Amended and Restated Term Loan Credit Agreement dated as of October 30, 2019, by and among Teledyne Technologies Incorporated and Teledyne Netherlands BV, as borrowers, the lenders party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated May 14, 2021) (File No. 1-15295) | | | | 10.41 | |
| | | | 10.5310.42 | | First Amendment to Amended and Restated Credit Facility,Joinder Agreement of Teledyne FLIR, LLC, dated as of DecemberMay 14, 2021, to Term Loan Credit Agreement dated as of March 4, 2015,2021, by and among Teledyne certain subsidiaries of Teledyne,Technologies Incorporated, as borrower, the lender partieslenders party thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lenderadministrative agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated May 14, 2021) (File No. 1-15295) | | | | 10.43 | |
| | | | 10.54 | | Second Amendment, dated as of January 17, 2017, to Amended and Restated Credit Agreement, dated as of March 1, 2013, as supplemented by the First Amendment dated as of December 4, 2015, by and among Teledyne, certain subsidiaries of Teledyne, the lender parties thereto and Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 17, 2017 (File No. 1-15295))
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10.55 | | | | | | | | | 10.44 | | Third Amendment,Second Supplemental Indenture, dated as of March 17, 2017, to Amended and Restated Credit Agreement dated as of March 1, 2013, by and amongMay 14, 2021 between Teledyne Technologies Incorporated, certain subsidiaries of Teledyne as Designated Borrowers, certain subsidiaries of Teledyne as Guarantors, the Lender parties thereto and Bank of America, N.A. as Administrative Agent, Swing-Line Lender and L/C Issuer, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of December 4, 2015 and that certain Second Amendment to Amended and Restated Credit Agreement dated as of January 17, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 17, 2017) | | | | 10.56 | | Loan Agreement, dated October 22, 2012, among Teledyne Technologies Incorporated, as borrower, certain of its subsidiaries, as guarantors,FLIR, LLC and U.S. Bank National Association.,Association, as lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 22, 2012 (File No. 1-15295)) | | | 10.57 | | | | | | 10.58 | | | | | | 10.59 | | | | | | 10.60 | | | | | | 10.6110.45 | | | 10.62 | |
| | | | 10.63 | | | | | | 10.64 | |
| | | | 10.65 | | Term Loan Credit Agreement, dated as of March 17, 2017, by and among Teledyne Technologies Incorporated and Teledyne Netherlands B.V., as borrowers, the several banks and other financial institutions from time to time parties thereto as lenders, Bank of America, N.A., as administrative agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, sole lead arranger and sole book manager (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 17, 2017). | | | | 10.66 | | | | | | 10.6710.46 | | | | | | 10.68 | |
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| | | | | | | | | 14.1 | | | | | | | | | | | | | | | | | 14.1 | | Teledyne Technologies Incorporated Global Code of Ethical Conduct - this code of ethics may be accessed via the Company’s website at www.teledyne.com/aboutus/ethics.pdfwho-we-are/ethics | 14.2 | | 14.2 | | Code of Ethics for Financial Professionals - this code of ethics may be accessed via the Company’s website at www.teledyne.com/aboutus/ethics.aspwho-we-are/ethics | 14.3 | | 14.3 | | Directors, Code of Business Conduct and Ethics - this code of ethics may be accessed via the Company’s website at www.teledyne.com/aboutus/ethics.aspwho-we-are/ethics | 21 | | 21 | | | 23.1 | | | 23.1 | | | 24.1 | | 24.1 | | | 31.1 | | 31.1 | | | 31.2 | | | 31.2 | | | 32.1 | | 32.1 | | | 32.2 | | 32.2 | | | | | 101.INS | | XBRL Instance Document** | 101.SCH | | 101.SCH | | XBRL Taxonomy Extension Schema Document** | 101.CAL | | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document** | 101.DEF | | 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document** | 101.LAB | | 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document** | 101.PRE | | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document** | 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| | | | | | * | Submitted electronically herewith. |
| | | | | | ** | Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language) for the year ended December 31, 2017:January 2, 2022: (i) the Consolidated Statement of Income, (ii) the Consolidated Balance Sheet, (iii) the Consolidated Statement of Shareholders’ Equity, (iv) the Consolidated Statement of Comprehensive Income (Loss), (v) the Consolidated Statement of Cash Flows, (vi) Notes to Consolidated Financial Statements and (vii) Financial Schedule of Valuation and Qualifying Accounts. |
| | | | | | † | Denotes management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-K. |
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of February 25, 2022. | | | | | | | | | | | | Teledyne Technologies Incorporated (Registrant) | | | | | | By: | | /s/ Robert Mehrabian | | | Robert Mehrabian | | | Chairman, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | /s/ Robert Mehrabian | | Chairman, President and Chief | | | Robert Mehrabian | | Executive Officer (Principal Executive Officer) and Director
| | February 25, 2022 | | | | | | /s/ Susan L. Main | | Senior Vice President and | | | Susan L. Main | | Chief Financial Officer (Principal Financial Officer) | | February 25, 2022 | | | | /s/ Cynthia Belak | | Vice President and | | | Cynthia Belak
| | Controller (Principal Accounting Officer) | | February 25, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | * | | Director | | February 25, 2022 | Denise R. Cade | | | | | | | | | | * | | Director | | February 25, 2022 | Charles Crocker | | | | | | | | * | | Director | | February 25, 2022 | Kenneth C. Dahlberg | | | | | | | | * | | Director | | February 25, 2022 | Michelle A. Kumbier | | | | | | | | * | | Director | | February 25, 2022 | Simon M. Lorne | | | | | | | | * | | Director | | February 25, 2022 | Robert A. Malone | | | | | | | | * | | Director | | February 25, 2022 | Vincent J. Morales | | | | | | | | | | * | | Director | | February 25, 2022 | Wesley W. von Schack | | | | | | | | * | | Director | | February 25, 2022 | Jane C. Sherburne | | | | | | | | * | | Director | | February 25, 2022 | Michael T. Smith | | | | | | | | | | | | | | | | | | | *By: | /s/ Melanie S. Cibik | | | | | | | Melanie S. Cibik Pursuant to Power of Attorney filed as Exhibit 24.1 | | | | |
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