ANNUAL
REPORT
Making a Measurable Impact...
GAAP EPS(a)
Sales
$12
$10
$8
$6
$4
$2
$0
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$
$ Per Share
$5.75 $5.44 $5.37
$6.26
$4.87
$4.33
$3.81
$3.25
$10.73
$9.01
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$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
$3,164
$2,902
$2,604
$2,394
$2,339
$2,298
$2,150
$ In Millions
$2,127
$1,942
$1,644
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
(a) Represents total GAAP earnings per diluted share for 2013 through 2019 and GAAP EPS from
continuing operations for 2010 through 2012.
Financial Highlights
Selected Consolidated Financial Data
(In millions, except per share data)
Summary Financial Information
2019
2018
2017
2016
2015
Sales
$3,163.6
$2,901.8
$2,603.8
$2,149.9
$2,298.1
Net income attributable
to Teledyne
Diluted earnings per
common share
Weighted average diluted
common shares outstanding
402.3
333.8
227.2
190.9
195.8
10.73
37.5
9.01
37.0
6.26
36.3
5.37
35.5
5.44
36.0
Summary Balance Sheet Data
2019
Cash and cash equivalents
Total assets
Long-term debt
Total equity
$199.5
4,579.8
750.0
2,714.7
2018
$142.5
3,809.3
610.1
2,229.7
2017
$70.9
3,846.4
1,063.9
1,947.3
2016
$98.6
2,774.4
509.7
1,554.4
2015
$85.1
2,717.1
754.1
1,344.1
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Notes to Consolidated
Financial Statements” in the 2019 Form 10-K for additional information regarding Teledyne Technologies Incorporated’s
financial data.
2
Teledyne Technologies 2019 Annual Report
2019 Sales by Segment
• Instrumentation
Test and measurement, monitoring and control instrumentation,
and power and communications connectivity devices for marine,
environmental, electronics and other applications
• Digital Imaging
High performance sensors, cameras and systems within the visible,
infrared, ultraviolet and X-ray spectra, used in industrial, government
and medical applications
• Aerospace and Defense Electronics
Sophisticated electronic components, subsystems and communications
products, including defense electronics, commercial avionics and harsh
environment interconnects
• Engineered Systems
Innovative systems engineering, manufacturing and specialized products
for government, space, energy and industrial customers
12%
22%
31%
Cumulative Total Stockholder Return
Instrumentation
35%
Digital Imaging
Aerospace &
Defense
Electronics
Engineered
Systems
Teledyne Technologies
Russell 2000
S&P 1500 Industrials
Russell 1000
S&P 500 Composite
The graph set forth below shows the cumulative total
12/28/14
stockholder return (i.e. price change plus reinvestment
118
of dividends) on our common stock for the five fiscal
115
years ending December 29, 2019, as compared to the
116
Standard & Poor’s 500 Composite Index, the Russell
112
1000 Index, the Russell 2000 Index and the Standard &
112
Poor’s 1500 Industrials Index.
85
95
96
100
100
100
100
100
100
100
01/03/16 01/01/17 12/31/17
The graph assumes $100 was invested on December 26,
2014.
173
132
140
136
136
In accordance with the rules of the SEC, this
presentation is not incorporated by reference into any
of our registration statements under the Securities Act
of 1933.
12/30/18 12/29/19
332
147
158
170
172
194
116
120
128
129
350
300
250
200
150
100
50
0
12/28/14
01/03/16
01/01/17
12/31/17
12/30/18
12/29/19
12/28/14
01/03/16
01/01/17
12/31/17
12/30/18
12/29/19
• Teledyne Technologies
• Russell 2000
• S&P 1500 Industrials
• Russell 1000
• S&P 500 Composite
100
100
100
100
100
85
95
96
100
100
118
115
116
112
112
173
132
140
136
136
194
116
120
128
129
332
147
158
170
172
3
Letter to Stockholders
Making a Measurable Impact—
2019 WAS ANOTHER RECORD YEAR FOR TELEDYNE:
full-year sales, earnings, operating margin and cash
flow were all-time records.
Total year sales for 2019 were $3,163.6 million,
compared with $2,901.8 million for 2018, an increase
of 9.0%. Net income was $402.3 million ($10.73 per
diluted share) for fiscal year 2019, compared with
$333.8 million ($9.01 per diluted share) for fiscal year
2018, an increase of 20.5%.
While we have increased our emphasis on margin
improvement, we continue our proven strategy of
disciplined capital deployment for compound growth
4
Teledyne Technologies 2019 Annual Report
in earnings and cash flow. In 2019, we deployed
$484.0 million on complementary acquisitions
within our Environmental Instrumentation and
Digital Imaging businesses. Furthermore, in early
2020, we acquired OakGate Technology, our third
bolt-on acquisition for Teledyne LeCroy.
While we remain committed to consistent financial
performance, our businesses also continue to focus
on developing solutions to address sustainability
and climate challenges facing humanity today.
Ethics and Social
Responsibility
Teledyne continuously operates within our Code
of Ethical Business Conduct. We firmly believe that
improvement is possible only if we measure our
performance and constantly raise our standards
through ethically-oriented practices, including our
contributions and commitment to having a positive
measurable impact on humanity.
2020 and Beyond
As we completed our 20th year as a public company,
we believe that we have the capability and
commitment to continue the path that we have set
out as we move into this new decade.
Teledyne continues to benefit from our balanced
portfolio of common technologies serving different,
complementary markets. We begin 2020 with the
largest backlog in the company’s history, and we
remain optimistic about Teledyne’s future.
We thank all of our employees, as well as our Board
of Directors, for their contributions to Teledyne’s
success. We also thank our stockholders for their
continued loyalty and support.
Kind regards,
Al Pichelli
President and Chief Executive Officer
Robert Mehrabian
Executive Chairman
February 24, 2020
5
Our broad range of precision measurement
technologies for environmental monitoring and
climate research is unique in the world. Our sensors
and instruments are deployed everywhere, from pole
to pole, in space, on aircraft and drones, on land,
on the sea surface, in the water column, and on the
seafloor. They operate around the clock, measuring
greenhouse gases from space, precisely monitoring
air and water quality throughout the world, and are
continuously profiling all of Earth’s oceans.
Applications of our instruments provide scientists
information that spans time from the origin of
the Universe to providing real-time data regarding
air pollution and dangerous storms, such as time-
critical warning of hurricanes and tsunamis.
In the following sections, we provide additional
information of our contributions to global
environmental and climate science.
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Teledyne Technologies 2019 Annual Report
Making a Measurable Impact
Helping Humanity
Environment
Space
Ninety percent of the world’s population is exposed
to air pollution above acceptable limits. Teledyne is
a global leader in breakthrough design, production
and distribution of sophisticated air quality instruments
that measure hazardous gases and particulate matter
in real-time.
• We provide sophisticated water samplers and
flowmeters to monitor wastewater, irrigation flow,
storm water, industrial discharge, construction
site run-off and municipal wastewater collection,
treatment and reuse.
• Every second of every day, our hazardous gas
detection monitors are making industrial workplaces
safer around the world.
Teledyne’s contributions to space exploration through
our visible and infrared sensors have advanced
our scientific understanding of the formation and
evolution of the Universe, solar system, planets and
moons and how humankind’s actions affect Earth’s
climate, atmosphere, oceans and land.
Business
• We operate within a Code of Ethical Business
Conduct with four key pillars: Integrity, Respect,
Responsibility and Citizenship. Teledyne has a zero
tolerance policy when it comes to violating the
Code.
• We build precision air quality instruments that
• Our Board of Directors and its committees regularly
measure common air pollutants and particulate
matter (NOx, SO2, ozone, PM10 and PM2.5) that are
considered hazardous to human health and the
environment. Our instruments enable government
agencies around the world to detect and monitor
the quality of the air we breathe in real-time to
assess their compliance with air quality regulations
and ultimately reduce air pollution.
Ocean
The ocean covers over 70% of the Earth’s surface,
holds 97% of its water, produces more than half the
world's oxygen, and stores 50 times more carbon
dioxide than Earth’s atmosphere. Changes in the
ocean affect weather patterns, climate, and food
security. Despite its vital importance, more than 80%
of our ocean is unmapped and unexplored.
• Our floats, gliders and instruments assist climate
research by providing access to accurate data,
including subsurface temperatures and velocities
of currents throughout the world’s oceans. On a
shorter timescale, scientists are employing our
instruments to provide essential inputs for
computer models of dangerous storms, providing
real-time information to help save lives.
• Teledyne works with maritime agencies around the
world, preserving free and safe navigation of the
world’s oceans.
review matters related to compliance with
environmental laws and the health and safety of
employees. We continually evaluate our policies
and practices and monitor our efforts in areas of
legal and social responsibility, diversity and
sustainability.
• We have made progress in our efforts to promote
diversity and inclusion. Today, approximately
one-third of our executive management team, as
well as our Board of Directors, are women.
Community
• We invest in projects to develop and secure
tomorrow’s long-term energy sources.
• Teledyne businesses around the world support
local charities and participate in volunteer
opportunities to help those in need.
• Teledyne’s products enhance the reliability and
safety of global transportation and protect the
security of our nation, our military and our allies.
• We partner with local universities to provide
mentor and internship programs, especially for
Science, Technology, Engineering and Math (STEM)
students.
7
Making a Measurable Impact
Across Time and Space
Space | Atmosphere | Land | Waterways | Ocean
Our understanding of Earth’s weather, environment
and climate advances continuously as scientists make
new discoveries and refine their predictive models.
These advances are only possible if scientists have access
to accurate, repeatable measurements of environmental
and climate data. We believe that our range of sensors
and instruments for these applications are the most
extensive in the world.
8
Teledyne Technologies 2019 Annual Report
Time
Space
Applications span time from researching the origin
of the Universe to providing immediate warnings of
air pollution and dangerous storms.
Our sensors and instruments span the globe from
pole to pole and from space to the seafloor.
On the longest timescale, astronomers use our
visible and infrared light sensors as a time machine
to study the origin of the Universe, the sun, our solar
system and our own planet.
Annual variations in ocean temperatures and currents
affect worldwide weather. Our instruments enable
scientists to more accurately forecast floods or
droughts thereby allowing farmers to better plan for
planting crops and providing irrigation.
The oceans are increasingly threatened by floating
plastics that are constantly moving. We support ocean
cleanup agencies with both airborne and space
based instruments that track and analyze the debris.
Our precision visible and infrared sensors enable
climate scientists to measure atmospheric
greenhouse gases from Earth observation satellites.
Over 70,000 of our instruments are used in over
100 countries to measure air quality. Our newest
instruments set the standard for measurement of
fine particles that pose the greatest risk to human
health.
Clean water is crucial for life, but drinking water is
often contaminated. We provide water samplers used
to collect and safely store water for transport to
laboratories. We also provide laboratory instruments
used for pollution analysis and instruments that
continually measure water flow rates.
Improving real-time forecasts for the trajectory and
intensity of developing hurricanes and typhoons is
extremely important. Scientists now position our
ocean gliders directly in the path of developing
hurricanes to monitor real-time current and
temperature conditions via satellite link allowing
them to continually update their forecasts.
Changing ocean temperatures have multiple impacts,
such as sea level rise and increases in extreme
weather events. Twenty-one countries rely on over
1,000 of our free-drifting profiling floats which
continuously monitor physical parameters, from the
surface to a depth of 2,000 meters in all the world’s
oceans.
The following section provides a more detailed
overview of our space-based sensors for Earth
observation and astronomy.
9
10
Teledyne Technologies 2019 Annual Report
Making a Measurable Impact
Exploring the Universe
Teledyne’s Space Technologies are
T eledyne’s heritage in space spans over
60 years from the development and
launch of the first successful U.S. satellite,
Explorer 1. Since that time, Teledyne has
made important contributions to every aspect of
space, including astronomy, planetary exploration,
manned spaceflight, Earth observation and satellite
communications.
Since the beginning of the space program, Teledyne’s
imaging sensors have been the enabling elements
of over 300 space missions and ground-based
observatories.
While each of the missions we support has unique
requirements, they all benefit humanity by:
• Advancing our scientific understanding of the
formation and evolution of the Universe.
• Searching for life beyond our planet.
• Learning more about our solar system including
planets and moons that may harbor life.
Understanding how humankind’s actions affect
Earth’s climate, atmosphere, oceans and land.
• Providing seasonal recommendations for
agriculture and fisheries and real-time forecasts of
the track and intensity of dangerous storms.
For all of these uses and more, we are proud to
provide the technology that enables scientists to
Explore the Universe and Understand
Our Impact.
11
Exploring the Universe—Remote Sensing of Light
ELECTROMAGNETIC RADIATION (light) is the
primary messenger of information in the Universe
and detection of light is critical to many areas of
scientific research. This is especially true in fields
where “remote sensing” of distant objects is the
only way to study those objects, such as astronomy
(from ground and space), planetary exploration,
heliophysics (physics of the Sun and its effects
on the solar system), and Earth observation from
airborne and space-based instrumentation.
Remote sensing depends on measurement of the
natural light emitted or reflected by the object under
study. It is not possible to illuminate faint distant
objects as can be done in a laboratory setting.
Therefore, the forefront of science requires the most
sensitive detectors of light. Since Teledyne produces
the world’s highest performance visible and infrared
detectors, most of the leading facilities and missions
rely on Teledyne’s products. Some missions would
not even be possible without Teledyne’s state-of-the-
art imaging technology. Examples are the James Webb
Space Telescope (JWST), the Wide Field Infrared
Survey Telescope (WFIRST), the PLAnetary Transits
and Oscillations of stars (PLATO) space telescope,
and the Kepler space telescope. All of these missions
are enabled by the large format, high performance
infrared and visible detectors made by Teledyne.
Teledyne is honored to partner with the passionate
scientists around the world who dedicate their
careers to exploration of the Universe.
This annual report presents two areas of space
science where Teledyne plays a vital role:
• Monitoring of greenhouse gases: Teledyne
supplies the visible and infrared imaging sensors
that enable NASA’s OCO and GeoCarb missions
that measure carbon dioxide and methane in the
Earth’s atmosphere.
• Study of asteroids, which are time capsules of
the material that formed the solar system: NASA’s
OSIRIS-REx asteroid rendezvous / sample mission
is presently orbiting and studying an asteroid with
visible imaging, visible-infrared spectroscopy, and
lidar ranging that depend on Teledyne’s imaging
technologies.
Examples of Facilities and Missions that rely on
Teledyne’s Visible and Infrared Detectors
James Webb
Space Telescope
2021 launch
Extremely Large Telescope
39-meter aperture
JUICE mission to Jupiter
and Galilean moons
FLEX mission to measure
Earth's photosynthesis
2024 first light
2022 launch
2022 launch
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Teledyne Technologies 2019 Annual Report
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G
Watching the Earth Breathe from
Space—Measuring CO2 from Orbiting
Carbon Observatories
Teledyne’s sensors enable spectrometers in NASA’s
Orbiting Carbon Observatories to make space-based
measurements of atmospheric carbon dioxide (CO2)
with the precision, resolution, and coverage needed
to characterize the distribution of CO2 around the
globe.
annual breathing cycle is dominated by the northern
hemisphere seasons.
While scientists understand how CO2 can affect
temperature, they do not fully understand the
geographic distribution of the sources and sinks of
CO2 and how the concentrations change over time.
Enhancing this understanding is the mission of NASA’s
two operational Orbiting Carbon Observatories: The
Orbiting Carbon Observatory-2 (OCO-2) satellite,
launched in 2014, operates in a polar orbit. Orbiting
Carbon Observatory-3 (OCO-3) was installed on
the International Space Station in May 2019 and is
collecting data to complement the OCO-2 data.
Carbon dioxide: This simple molecule vibrates at
frequencies corresponding to thermal radiation emitted
by the Earth’s surface. The thermal radiation is re-emitted,
with half returning to the Earth’s surface. CO2 is good for
the Earth’s radiation budget since some CO2 is needed to
keep the Earth warm. However, too much CO2 will cause
the Earth’s temperature to increase.
CO2 is the most significant of human-produced
greenhouse gases (gases that warm the Earth’s
atmosphere by absorbing thermal radiation emitted
from the Earth’s surface) and is the principal human-
produced driver of changes to Earth’s climate. The
content of CO2 in the Earth’s atmosphere has risen
dramatically since the start of the industrial revolution;
the Keeling curve (see figure) shows CO2 since 1958.
The annual oscillation of the CO2 concentration
(inset) shows the plants on Earth breathing. As plants
grow in the northern hemisphere summer, the plants
absorb CO2 and the CO2 concentration decreases,
reaching a minimum in September-October. In the
northern hemisphere winter, many plants die and
the atmospheric CO2 increases. Since 68% of the
Earth’s land area is in the northern hemisphere, the
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Above: This plot, called the “Keeling curve”, presents the
longest set of continuous measurements of CO2 in the
Earth’s atmosphere. The data is collected at the Mauna
Loa Observatory, at altitude of 3,397 meters (11,141 feet),
on the Big Island of Hawai’i. The curve is named for the
scientist Charles David Keeling who started the moni-
toring program in 1958 and supervised it until his death
in 2005. The Keeling curve is one of the most important
scientific works of the 20th century since it was the first
significant evidence of rapidly increasing CO2 levels in
the Earth’s atmosphere.
13
2.06 µm bands. Those measurements are calibrated
by measuring molecular oxygen (O2) at 0.76 µm. The
ratio of measured CO2 to O2 is used to determine the
concentration of atmospheric CO2 to a precision of
0.3 to 0.5% (1 to 2 parts per million).
The OCO spectrometer optics produce a
2-dimensional image of spectra on Teledyne’s 1024
x 1024 pixel H1RG focal plane array (FPA). The focal
plane array in the oxygen channel uses a silicon
light detecting material, while the CO2 channels use
mercury cadmium telluride (HgCdTe) light detecting
material with a 2.5 µm cutoff wavelength.
The Orbiting Carbon Observatories (OCO-2 and
OCO-3) operate in low Earth orbit (LEO) and while
these instruments get fairly good ground resolution
(1.3 by 2.3 km), they only can sense a 10.2 km wide
swath of the ground during each 99 minute orbit.
It takes 87 orbits of OCO-2, 16 days, to sample the
full Earth and there is a gap of 16 days between
measurements of any location. There is a need for
global sampling of CO2 on a daily basis, even if that
sampling has poorer ground resolution.
GeoCarb—Measuring Both Carbon
Dioxide and Methane
The GeoCarb instrument, being developed by the
University of Oklahoma, will be launched in 2022
and placed in geosynchronous orbit, giving it the
ability to image North and South America every day,
from the equator to 50° latitude (north and south),
at a resolution of 5 to 10 km (lower resolution at
higher latitudes). In addition to measuring the three
bands used by OCO-2 and OCO-3, GeoCarb will also
measure the carbon monoxide (CO) and methane
(CH4) bands near 2.323 µm.
Methane is up to 80 times more efficient than carbon
dioxide in trapping heat from the Earth and the
increasing amount of methane in the atmosphere is
of great interest to climate scientists.
GeoCarb is using the Teledyne’s H1RG visible-
infrared focal plane arrays (FPAs) in the mission’s
four spectrometers.
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Above: Artist rendition of the carbon dioxide column
measured by the Orbiting Carbon Observatories.
The Orbiting Carbon Observatories determine carbon
dioxide levels from space by measuring absorption
of reflected sunlight in the near-infrared spectrum
(see figure above). OCO-2’s science instrument
consists of three high-resolution spectrometers,
integrated into a common structure and illuminated
by a common telescope. The spectrometers make
simultaneous measurements of the amount of
reflected sunlight absorbed by CO2 in the 1.61 and
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Teledyne Technologies 2019 Annual Report
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Above: This global map of atmospheric carbon dioxide released by OCO-2 mission shows elevated carbon dioxide
concentrations across the southern hemisphere from springtime biomass burning.
Methane: Composed of a carbon atom and four hydrogen
atoms, methane (CH4) has more vibrational modes which
makes it much more efficient than CO2 at absorbing
thermal radiation. The amount of methane in the Earth’s
atmosphere is increasing, but the sources and sinks of
methane are not well understood.
Above: Artist concept of the GeoCarb instrument on
board an SES communication satellite at geosynchronous
orbit above the Americas. It is fortuitous that South
America is east of North America, enabling GeoCarb to
make a complete scan of South America before the Sun
illuminates North America.
15
Asteroids — Time Capsules of
the Solar System
4.6 billion years ago, the Solar System
formed from a large cloud of gas
and dust. Most of the material,
between 99.8% and 99.9%, was
gravitationally condensed into the Sun. Two-thirds
of the remaining mass coalesced into Jupiter. Most of
the remainder coalesced into the other planets with a
small amount left over that formed into asteroids and
comets. Asteroids are small rocky bodies whereas
comets are composed of dust, rocks, and ice; comets
are sometimes referred to as “dirty snowballs”.
Asteroids are defined as being at least 1 meter
diameter with smaller objects called meteoroids (see
nomenclature definitions on the next page). The
largest asteroid, Ceres, with mean diameter of 953 km,
is 28% of the diameter of the Moon.
Most asteroids reside in the main asteroid belt located
between the orbits of Mars and Jupiter, with some
asteroids trapped by Jupiter’s gravity in the same orbit
as Jupiter, in the vicinity of Lagrange points L4 and L5
that are 60 degrees ahead and behind Jupiter. These
asteroids are referred to as Jupiter’s Trojan asteroids.
Sometimes the orbit of an asteroid in the main belt
will get perturbed by the gravitational attraction of
other asteroids or by the planets which causes the
asteroid to fly in closer to the Sun becoming a Near
Earth Asteroid. Any asteroid that crosses the Earth’s
orbital path is referred to as an “Earth-crosser” and if
the asteroid gets within 0.05 AU*, it is referred to as a
Potentially Hazardous Asteroid (PHA).
*An AU (astronomical unit) is the Sun-Earth distance:
150 million km.
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Teledyne Technologies 2019 Annual Report
APPROXIMATE NUMBER OF ASTEROIDS (N) LARGER THAN A CERTAIN DIAMETER (D)
D
0.1 km
0.3 km
0.5 km
1 km
3 km
5 km
10 km
30 km
50 km 100 km 200 km 300 km 500 km 900 km
N 25,000,000
4,000,000 2,000,000
750,000
200,000 90,000
10,000
1,100
600
200
30
5
3
1
surface. Asteroids are time capsules of the materials
that formed the solar system 4.6 billion years ago.
The next section presents the OSIRIS-REx mission
that is presently orbiting an asteroid and will retrieve
a sample in Summer 2020 to return to Earth in 2023.
NOMENCLATURE
• Asteroid: a small rocky object that orbits the Sun
which is at least 1 meter in diameter. The three broad
composition classes of asteroids are C-, S-, and
M-types.
• C-type (carbonaceous) asteroids are the most
common variety, forming about 75% of known
asteroids. They have very low albedo (reflectivity)
of 3% to 10% — they are very dark because their
composition includes a large amount of carbon in
addition to rocks and minerals.
• S-type (“stony”) asteroids are made of silicate
materials and nickel-iron. Approximately 17% of
known asteroids are S-type.
• M-types asteroids are metallic (nickel-iron).
• Comet: objects made of dust, rocks, and ice that
orbit the Sun. Each comet has a small frozen nucleus,
often no larger than a few kilometers across. The
nucleus contains icy chunks, frozen gases with bits
of embedded dust. A comet warms up as it nears the
Sun and develops a coma which gets larger as the
comet nears the Sun. The coma may extend hundreds
of thousands of kilometers. The pressure of sunlight
and high-speed solar particles from the Sun (solar
wind) blow the coma dust and gas away from the Sun,
sometimes forming a long, bright tail. Comets actually
have two tails—a dust tail and an ion (gas) tail.
• Meteoroid: a small piece of an asteroid or comet that
has broken off after a collision of two asteroids or
dust evaporated from a comet, less than 1 meter
in diameter.
• Meteor: a meteoroid that enters the Earth’s atmosphere
and vaporizes, colloquially referred to as “shooting
stars”. What is seen is the air that is heated and
energized by the meteor.
• Meteorite: the portions of meteors that survive
passage through the Earth’s atmosphere and land on
the ground.
• Regolith: the layer of unconsolidated rocky material
covering bedrock.
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Above: Most asteroids reside in the main asteroid belt
with the Trojan asteroids in the orbit of Jupiter.
Credit: NASA
There are millions of asteroids in the Solar System
but as recently as 1989, only 10,000 asteroids had
been discovered. During the past three decades,
astronomers have used charge-coupled device or
CCD-based survey cameras on ground-based
telescopes to discover about 800,000 asteroids.
Scientists estimate that the asteroid belt contains
about 2 million asteroids larger than 500 meters in
diameter, and over 20 million smaller ones. Near-Earth
asteroids are being discovered on a daily basis—there
are now over 15,000 known, with about 1,000 that
are at least 1 km in diameter.
An estimate of the number of asteroids as a function
of size is given in the table above.
Asteroids and comets are too small to have evolved
since their formation. Asteroids do not have active
geology such as plate tectonics or volcanoes, and
the asteroid mass is too small to accumulate an
atmosphere with weather that would change the
OSIRIS-REx Asteroid Sample Return Mission
such as the 50 meter tall boulder shown in the
image below. The OLA lidar system was provided
by the Canadian Space Agency.
• OVIRS (OSIRIS-REx Visible and Infrared
Spectrometer): This instrument measures nearly
1,300 colors of visible and infrared light spanning
0.4 to 4.3 µm wavelengths using a Teledyne H1RG
detector that simultaneously detects visible and
infrared light. Since every chemical and mineral
has a unique spectral signature, OVIRS is providing
spectral maps that identify mineral and organic
material on the asteroid.
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Above: Visible light image of Bennu taken by a Teledyne
CCD detector on January 17, 2019, from a distance of
1.6 km (1 mile). The images have been cropped and the
contrast has been adjusted to better reveal surface
features. The large boulder is about 50 meters (164 feet)
across. Bennu is a very dark object with 4% albedo
(reflectivity), similar to fresh asphalt or dark wet soil.
NASA is conducting the OSIRIS-REx mission to
study an asteroid and return a sample to the Earth
for further study. OSIRIS-Rex (Origins, Spectral
Interpretation, Resource Identification, Security,
Regolith Explorer) launched from the Kennedy Space
Center (Florida) on September 8, 2016, and arrived
at the asteroid 101955 Bennu on December 3, 2018.
Bennu is a carbonaceous near-Earth asteroid that
is 592 meters wide and is a Potentially Hazardous
Asteroid (PHA), with a 1 in 2,700 chance of hitting
the Earth between 2175 and 2199.
During January 2019 — June 2020, OSIRIS-REx will
map and analyze Bennu’s surface to identify the best
area from which to retrieve a sample to bring back
to Earth. The first sampling attempt is planned for
August 2020. The mission has three opportunities
to retrieve a good sample, with minimum success
being 60 grams (2.1 ounces) of material but has the
capability to retrieve up to 2.2 kg. OSIRIS-REx will
depart Bennu in March 2021 and the sample capsule
will land on September 24, 2023, at the U.S. Air Force
Test and Training Range in Utah.
Teledyne has a major role in the instruments on
OSIRIS-REx, providing the sensors for three of four
science instruments:
• OCAMS (OSIRIS-REx Camera Suite): Teledyne’s
CCD detectors are used in these three visible light
cameras that are producing most of the images
that are shown of Bennu. OCAMS has mapped
the entire asteroid surface and provided detailed
imagery of the potential sample sites. One of the
cameras will record the entire sampling event
during the touch-and-go maneuver.
• OLA (OSIRIS-REx Laser Altimeter): Teledyne’s
scanning lidar (light detection and ranging) systems
emit laser pulses and measure the light reflected
from the surface. Precise measurement of the
time between sending the outgoing pulse and the
sensed return provides high resolution topography
of the asteroid surface as shown in the image on
page 20. The lidar measurements will enable the
mission team to program the spacecraft to adjust
its speed for the touch-and-go maneuver for
sampling and to avoid collision with large boulders
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Teledyne Technologies 2019 Annual Report
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An artist depiction of the OSIRIS-REx spacecraft
is shown. The spacecraft is 2.4 meters long, 3.1
meters tall, and 6.2 meters wide (which includes
the extended solar panels). OSIRIS-REx will not
land on the asteroid but will collect regolith using
the sample head that is on the articulated 3.35
meter long arm, shown extended to bottom left.
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Above: Three-dimensional view of Bennu created by the
OSIRIS-REx Laser Altimeter (OLA) that uses Teledyne’s
lidar system. OLA made over 10 million measurements
of the distance between the spacecraft and Bennu. This
image converts those measurements to surface height of
Bennu. The colors represent the distance from the center
of Bennu: dark blue areas lie approximately 60 meters
(197 feet) lower than peaks indicated in red.
The combination of information from OCAMS, OLA,
and OVIRS was used to select the site to sample the
asteroid. In December 2019, NASA announced that
the primary site for sampling Bennu will be a location
that has been named Nightingale.
The image below shows OSIRIS-REx primary sample
collection site on asteroid Bennu. The image is
overlaid with a graphic of the OSIRIS-REx spacecraft
to illustrate scale. The Nightingale site is a tight fit,
since the accessible portion of the crater is only about
20 meters wide, a bit more than three times the
width of the spacecraft (in the solar panel direction).
In addition, the large rock shown at lower right of
the image rises 10 meters above the crater floor.
Because Nightingale is located near the north pole
of the asteroid, temperatures in the region are lower
than elsewhere on the asteroid and the surface
material is well-preserved. Scientists estimate
that the Nightingale crater is relatively young, and
the regolith (rocky surface material) is "recently"
exposed which means that the sample collected will
be pristine, with minimal alteration by the solar wind
or space radiation.
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Above: Nightingale sample site on asteroid Bennu.
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Teledyne Technologies 2019 Annual Report
Board of Directors
Top Images Left to Right:
Lower Images Left to Right:
ROXANNE S. AUSTIN (2)(3)
President, Austin Investment Advisors
Former President and Chief Operating Officer of DIRECTV, Inc.
ROBERT MEHRABIAN
Executive Chairman,
Teledyne Technologies Incorporated
DENISE CADE (1)(2)
Senior Vice President, General Counsel and Corporate Secretary
of IDEX Corporation
CHARLES CROCKER (2)(3)
Chairman of the Board and Chief Executive Officer, Crocker Capital
Retired Chairman of the Board and Chief Executive Officer,
BEI Technologies, Inc.
KENNETH C. DAHLBERG (1)(3)
Retired Chairman of the Board and Chief Executive Officer,
Science Applications International Corporation (SAIC)
SIMON M. LORNE (1)(2)
Vice Chairman of the Board and Chief Legal Officer, Millennium
Management LLC
Former General Counsel, U.S. Securities and Exchange Commission
ROBERT A. MALONE (1)(3)
Executive Chairman of the Board, President and Chief Executive
Officer, First Sonora Bancshares, Inc.
Retired Chairman of the Board and President, BP America Inc.
PAUL D. MILLER (1)(2)
Retired Chairman of the Board and Chief Executive Officer,
Alliant Techsystems, Inc.
Commander-in-Chief, U.S. Atlantic Command and NATO Supreme
Allied Commander — Atlantic (Retired)
WESLEY W. VON SCHACK (2)(3)
Chairman of the Board, AEGIS Insurance Services
Former Chairman of the Board, President and Chief Executive
Officer, Energy East Corporation
JANE C. SHERBURNE (1)(3)
Principal of Sherburne PLLC
Former Senior Executive Vice President, General Counsel and
Corporate Secretary, The Bank of New York Mellon Corporation
MICHAEL T. SMITH (1)(2)(4)
Retired Chairman of the Board and Chief Executive Officer,
Hughes Electronics Corporation
(1) Audit Committee
(2) Nominating and Governance Committee
(3) Personnel and Compensation Committee
(4) Lead Director
21
Executive Management
STEPHEN F. BLACKWOOD*
Senior Vice President, Strategic Sourcing,
Tax and Treasurer
ROBERT MEHRABIAN*
Executive Chairman
GEORGE C. BOBB, III*
President, Aerospace and Defense
Electronics Segment, and Vice President,
Teledyne
MELANIE S. CIBIK*
Senior Vice President, General Counsel,
Chief Compliance Officer and Secretary
JASON W. CONNELL
Vice President, Human Resources and
Associate General Counsel
JANICE L. HESS
President, Engineered Systems Segment
SCOTT HUDSON
Vice President and Chief Information
Officer
SUSAN L. MAIN*
Senior Vice President and
Chief Financial Officer
SEAN O’CONNOR
Chief Operating Officer and Chief Financial
Officer, Environmental & Electronic
Measurement Instrumentation
KEVIN PRUSSO
Group Vice President and General
Manager, Test & Measurement
Instrumentation
MIKE R. READ
President, Teledyne Marine Group
EDWIN ROKS*
President, Teledyne Digital Imaging and
Vice President, Teledyne
GLENN SEEMANN
Vice President, Contracts
JASON VANWEES*
Executive Vice President
* Section 16 Officer
ALDO (AL) PICHELLI*
President and Chief Executive Officer
CARL ADAMS
Vice President, Business Risk Assurance
CYNTHIA Y. BELAK*
Vice President and Controller
VICKI BENNE
Group Vice President and General
Manager, Environmental Instrumentation
Stockholder Information
CORPORATE OFFICES
Teledyne Technologies Incorporated
1049 Camino Dos Rios
Thousand Oaks, CA 91360
Telephone: (805) 373-4545
Fax: (805) 373-4775
www.teledyne.com
TRANSFER AGENT AND REGISTRAR
Computershare
P.O. BOX 505000
Louisville, KY 40233-5000
Customer Service: 1-888-540-9867
computershare.com
STOCKHOLDER PUBLICATIONS —
FORM 10-K
Information on how to access Annual
Reports (including Form 10-K) and proxy
statements is mailed to all stockholders of
record. Copies of our SEC periodic reports,
corporate governance guidelines, code
of ethics and committee charters are also
available on our website at
www.teledyne.com. For additional
information, contact Investor Relations.
STOCK EXCHANGE LISTING
The common stock of Teledyne
Technologies Incorporated is traded
on the New York Stock Exchange
(symbol TDY).
ANNUAL MEETING
The Annual Meeting of Stockholders
will be held on Wednesday, April 22, 2020,
at 9:00 a.m. PDT, at Teledyne Technologies
Incorporated, 1049 Camino Dos Rios,
Thousand Oaks, CA 91360.
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Los Angeles, California
CURRENT NEWS AND
GENERAL INFORMATION
Information about Teledyne is available at
www.teledyne.com.
22
Teledyne Technologies 2019 Annual Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 29, 2019
OR
For the transition period from to
Commission file number 1-15295
TELEDYNE TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation of organization)
1049 Camino Dos Rios
Thousand Oaks
(Address of principal executive offices)
California
25-1843385
(I.R.S. Employer Identification Number)
91360-2362
(Zip Code)
Registrant’s telephone number, including area code: (805)-373-4545
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.01 per share
Trading Symbol(s)
TDY
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
Emerging growth company
☒
☐
☐
Accelerated file
Smaller reporting company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant section 13(a) of the Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 28, 2019, the aggregate market value of Common Stock (based upon closing price of the stock on the New York Stock Exchange) of the
registrant held by non-affiliates was approximately $9.7 billion.
At February 19, 2020, there were 36,630,917 shares of the registrant’s Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement to be filed subsequently with the Securities and Exchange Commission pursuant to Regulation 14A for the 2020
Annual Meeting of Shareholders are incorporated by reference in Part III of this Report on Form 10-K. Except as expressly incorporated by reference, the
registrant’s proxy statement shall not be deemed to be part of this report.
INDEX
Page Number
PART I
PART II
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Item 15. Exhibits and Financial Statement Schedules
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
Part III
PART IV
Item 16. Form 10-K Summary
EXHIBIT INDEX
SIGNATURES
1
14
27
28
28
28
29
29
30
51
51
51
51
52
52
52
53
53
53
54
55
98
99
103
Explanatory Notes
In this Annual Report on Form 10-K, Teledyne Technologies Incorporated is sometimes referred to as the “Company” or
“Teledyne”.
For a discussion of risk factors and uncertainties associated with Teledyne and any forward looking statements made by us, see
the discussion beginning on page 14 of this Annual Report on Form 10-K.
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Item 1. Business
Who We Are
PART I
Teledyne Technologies Incorporated provides enabling technologies for industrial growth markets that require advanced
technology and high reliability. These markets include 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. Our products include digital imaging sensors, cameras and systems
within the visible, infrared 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. We also supply engineered systems for defense,
space, environmental and energy applications. We differentiate ourselves from many of our direct competitors by having a
customer and company-sponsored applied research center that augments our product development expertise.
Our principal executive offices are located at 1049 Camino Dos Rios, Thousand Oaks, California 91360-2362. Our
telephone number is (805) 373-4545. Our website address is www.teledyne.com. We are a Delaware corporation that was
spun-off as an independent company on November 29, 1999.
Strategy
Our strategy continues to emphasize growth in our core markets of instrumentation, digital imaging, aerospace and
defense electronics and engineered systems. Our core markets are characterized by high barriers to entry and include
specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with
targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment
among capital expenditures, product development, acquisitions and share repurchases. We aggressively pursue operational
excellence to continually improve our margins and earnings by emphasizing cost containment and cost reductions in all aspects
of our business. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using
complementary technology across our businesses and internal research and development, we seek to create new products to
grow our company and expand our addressable markets. We continue to evaluate our businesses to ensure that they are aligned
with our strategy.
Our Recent Acquisitions
Consistent with our strategy, during 2019, 2018 and 2017, we made acquisitions and investments totaling $1,261.2
million, net of cash acquired. Our 2019 and 2017 acquisitions, as well as our most recent 2020 acquisition, include the
following:
2020 Acquisition
To extend our protocol test solution and products to the electronic storage industry and data centers:
OakGate Technology, Inc., based in Loomis, California, a provider of software and hardware designed to test electronic
data storage devices from development through manufacturing and end-use applications. We paid $28.0 million, net of cash
acquired.
2019 Acquisitions
To expand our range of digital imaging capabilities for life sciences, academic research and customized original
equipment manufacturer (“OEM”) industrial imaging solutions:
Scientific imaging businesses of Roper Technologies, Inc., principally located in the United States and Canada and
including Princeton Instruments, Photometrics and Lumenera. 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. We paid $224.8 million for these scientific camera businesses, net
of cash acquired.
To add complementary industrial gas and flame detection capabilities to our environmental instrumentation businesses:
Gas and flame detection businesses of 3M Company, primarily located in France, the United Kingdom and the United
States and including Oldham, Simtronics, Gas Measurement Instruments, Detcon and select Scott Safety products. The gas and
flame detection business 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. The rugged gas analyzers feature fast response time, intrinsically safe sensors and satisfy multiple international
certification standards. We paid $233.5 million for these gas and flame detection businesses, net of cash acquired.
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To expand our digital imaging foundry capacity and capabilities for biotech applications:
Micralyne Inc., (“Micralyne”) based in Edmonton, Alberta, Canada, a foundry providing micro electromechanical
systems (“MEMS”) devices. In particular, Micralyne possesses unique microfluidic technology for biotech applications, as
well as capabilities in non-silicon-based MEMS (e.g., gold, polymers) often required for human body compatibility. We paid
$25.7 million for Micralyne, net of cash acquired.
2017 Acquisitions:
To expand our digital imaging, space science, semiconductor and microwave solutions capabilities:
e2v technologies plc (“e2v”) principally located in Chelmsford, United Kingdom and Grenoble, France, which 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. We paid $740.6 million for e2v, net of cash acquired.
To expand our environmental and laboratory instrumentation capabilities:
Assets of Scientific Systems, Inc. (“SSI”), located in State College, PA, which manufactures precision components and
specialized subassemblies used primarily in analytical and diagnostic instrumentation, such as high performance liquid
chromatography systems and specific medical devices. We paid $31.3 million for SSI.
Our Business Segments
Our businesses are aligned in four segments: Instrumentation, Digital Imaging, Aerospace and Defense Electronics and
Engineered Systems. Financial information about our business segments can be found in Note 12 of the Notes to Consolidated
Financial Statements in this Annual Report on Form 10-K.
Instrumentation
Our Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other
applications, as well as electronic test and measurement equipment. We also provide power and communications connectivity
devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments.
Marine Instrumentation
We offer a variety of products designed for use in harsh underwater environments, instruments that measure currents and
other physical properties in the water column, systems that create acoustic images of objects beneath the water’s surface,
including the bottom of a body of water, and sensors that determine the geologic structure below the bottom. We also design
and manufacture vehicles that utilize and transport these sensors over and beneath the water’s surface.
We design and manufacture geophysical streamer cables, hydrophones, seismic energy sources and specialty products
used in offshore hydrocarbon exploration to locate oil and gas reserves beneath the ocean floor. Our Acoustic Doppler Current
Profilers (“ADCPs”) precisely measure currents at varying depths in oceans and rivers, and our Doppler Velocity Logs
(“DVLs”) are used for navigation by civilian and military surface ships, unmanned underwater vehicles and naval divers. We
design and manufacture inertial sensing and navigation products, as well as subsea pipe and cable detection systems for
offshore energy, oceanographic and military marine markets. We also design and manufacture remotely controlled and tethered
instrumentation deployment vehicles used for current measurement, seafloor mapping and measurement of physical parameters
such as salinity.
Additionally, we design and manufacture single and multibeam hydrographic survey instrumentation used in port surveys,
dredging, pre- and post-installation of offshore energy infrastructure and other challenging underwater applications. Our
multibeam sonar systems range from portable high-resolution systems used on tripods, autonomous and remotely operated
underwater vehicles (“AUVs” and “ROVs”) to full ocean depth vessel-mounted oceanographic systems as well as sub bottom
profilers that can survey structures beneath the seafloor. Our multibeam sonar systems can be used to create highly accurate
maps of underwater offshore constructions, wrecks or quay walls in harbors, and in particular, high-quality maps of the
seafloor. Our products are being utilized in both commercial and defense applications where we provide systems for detecting
mines in the water. We provide solutions that are ready-to-operate and fully installed, including a comprehensive software
package that ties together the variety of sensors that may be configured on an AUV or ROV platform.
We provide a broad range of end-to-end undersea interconnect solutions to the offshore oil and gas, naval defense,
oceanographic and telecom markets. We manufacture subsea, wet-mateable electrical and fiber-optic interconnect systems and
subsea pressure vessel penetrators and connector systems with glass-to-metal seals. Our waterproof and splash-proof neoprene
and glass reinforced epoxy connectors and cable assemblies are used in underwater equipment and submerged monitoring
systems. Our Teledyne Marine group and Teledyne Scientific Company continue to work collaboratively to improve the
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reliability of materials exposed to ultra-deep-sea conditions. We also manufacture rugged cable assemblies for land-based
energy and other industrial applications.
Other marine products used by the U.S. Navy and commercial customers include acoustic modems for networked
underwater communication and optical underwater cameras and LED lighting sources.
We manufacture complete AUV systems. Our marine gliders use a silent buoyancy engine for propulsion that takes
advantage of changes in buoyancy in conjunction with wings and tail steering to convert vertical motion to horizontal
displacement, thereby propelling the system on a programmed route with low power consumption. Glider applications range
from oceanographic research to persistent surveillance systems for the U.S. Navy. The modular design of our battery-powered,
man-portable Gavia™ AUV allows for rapid sensor bay reconfiguration and battery replacement capability. Our SeaRaptor™
AUV will permit deep water survey with operational depths of 6000 meters. Our Slocum® gliders, as well as our ADCPs, are
being used as part of the National Science Foundation’s Ocean Observatories Initiative to collect physical, chemical, geological
and biological data from the ocean and the seafloor on coastal, regional and global scales. We design and manufacture
Inspection Class ROVs used in maritime security, military, search and rescue, aquaculture, and scientific research applications.
Using our acoustic technology, we also provide quality control and package integrity systems under the Taptone® brand
to the food and beverage, personal care and pharmaceutical industries.
Environmental Instrumentation
We offer a wide range of products used for environmental monitoring, instruments that enable measurement and
monitoring of key air environmental parameters as well as gas purity and content for industrial and manufacturing applications,
sensors for the measurement and monitoring of the physical and chemical properties of untreated water, and laboratory systems
that improve sample acquisition, handling and preparation for analysis. We also provide instruments to measure toxic and
combustible gases for personnel and site safety.
Our instrumentation monitors trace levels of gases such as sulfur dioxide, carbon monoxide, oxides of nitrogen and
ozone, as well as particulate pollution, in order to measure the quality of the air we breathe. We also supply monitoring
systems for the detection, measurement and automated reporting of air pollutants from industrial stack emissions, ozone
generators and other process gas monitoring instruments. We serve the process control and monitoring needs of industrial plants
with instruments that include gas analyzers, and vacuum and flow measurement devices. We were a pioneer in the
development of precision trace oxygen analyzers, and we now manufacture a wide range of process gas and liquid analysis
products for the measurement of process contaminants, hydrocarbons, combustibles, oil-in-water, moisture, pH and many other
parameters. Our instrumentation is also used to detect a variety of water quality parameters. Our sampler products include
portable, refrigerated and specialty samplers used in hazardous location applications and water samplers that utilize both
peristatic and vacuum technologies. Flow meters include ultrasonic, submerged probe, bubbler and area velocity models.
Laser technology is now part of our flow capabilities. Our custom analyzer systems provide turn-key solutions to complex
process monitoring and/or control applications found in petrochemical and refinery facilities.
We provide laboratory instrumentation that complements our process or field environmental instrumentation. We
manufacture laboratory instrumentation that automates the preparation and concentration of organic samples for the analysis of
trace levels of volatile organic compounds by a gas chromatograph and mass spectrometer. We also provide laboratory
instrumentation for the detection of total organic carbon and total nitrogen in water and wastewater samples. In addition, we
provide inductively coupled plasma laboratory spectrometers, atomic absorption spectrometers, mercury analyzers and
calibration standards. We provide laboratory automation and sample introduction systems. Our advanced elemental analysis
products are used by environmental and quality control laboratories to detect trace levels of inorganic contaminants in water,
foods, soils and other environmental and geological samples. Our high-precision, high pressure syringe pumps measure process
extraction rates of fluids ranging from liquefied gases to viscous tars. We manufacture and sell positive-displacement piston
pumps utilized in a wide variety of analytical, clinical, preparative and fluid-metering applications. In addition, we manufacture
liquid chromatography instruments and accessories for the purification of organic compounds, which include highly sensitive
evaporative light scanning detectors. Our liquid chromatography customers include pharmaceutical laboratories involved in
drug discovery and development. Finally, we manufacture instruments that are used by pharmaceutical scientists to evaluate
the release rate characteristics and physical properties of various dosage forms to ensure the safety and efficacy of medicines
worldwide.
As a result of a 2019 acquisition, we manufacture a wide range of gas detection and measurement instruments, both
portable and fixed installation, to monitor toxic gases such as hydrogen sulfide and chlorine and to detect combustible gases.
These instruments are used at industrial sites such as paper mills and automobile factories as well as in the oil and gas sector at
refineries. In addition, utility companies for natural gas and water supply use portable instruments to ensure the safety of their
technicians.
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Test and Measurement Instrumentation
We develop, manufacture, sell and license high-performance oscilloscopes and high-speed protocol analyzers for various
communication links. We also provide related test and measurement equipment, probes, accessories and application solutions.
With these additional capabilities, we are able to configure our platforms to provide high-value-testing solutions for customers,
developing products in all industry sectors, that rely on increasingly complex electronic signals. To a lesser extent, we provide
extended warranty contracts, maintenance contracts and repairs and calibrations on our instruments after their warranties expire.
We believe our test and measurement products provide unique, world-class capabilities that enable the designers of
complex electronic systems in many industry sectors to bring their products to market reliably and quickly. Our customers use
our equipment in the design, development, manufacture, installation, deployment and operation of electronics equipment in
broad range of industry end markets, including aerospace and defense, internet infrastructure, automotive, industrial, computer
and semiconductor, consumer electronics and power electronics.
Our oscilloscopes are tools used by designers and engineers to measure and analyze complex electronic signals in order to
develop high-performance systems, validate electronic designs and improve time to market. We offer a broad range of real-
time oscilloscopes addressing different end user needs. Our five high-definition oscilloscope (“HD”) product families address
needs from the lower-bandwidth bench top sector to the mid-range general-purpose sector of the market. The HD families offer
superior signal fidelity for the ultimate in measurement accuracy and repeatability. Our LabMaster and WaveMaster product
families are industry leading high-end oscilloscopes with bandwidths extending to 65GHz. Our WaveProHD product family
covers the mid-to high-range performance and the WaveRunner product family covers the mid-range performance and general
purpose and bench-top sector. Our WaveSurfer product-line is designed for users in the lower bandwidth bench-top sector of
the market and value-oriented users in the economy sector. We also make high-speed, high-resolution modular analog-to-
digital conversion systems. These systems are used in many applications including test and measurement, medical imaging,
Light Detection and Ranging (“LIDAR”) and software defined radio. We recently introduced the WavePulser, using Teledyne
InP technology which enables hardware designers and test engineers to characterize and analyze interconnects and cables for
high-speed serial protocols such as PCI Express, HDMI, USB, SAS, SATA, Fibre Channel, InfiniBand, Gigabit Ethernet and
Automotive Ethernet.
Design and test engineers use our protocol analysis solutions to monitor accurately and reliably high data-rate
communication interfaces and diagnose operational problems in a wide range of systems and devices to ensure that they comply
with industry standards, including the area of Cloud computing and networks, where PCI Express and related standards are
required for high performance data centers. Our protocol test portfolio also covers wireless technologies, including Bluetooth
and 802.11 (Wi-Fi), and modern video technologies, such as HDMI and DisplayPort. Both product lines, along with our
leadership in USB technology, provide a unique base to service the mobile, internet of things, automotive and consumer
electronics test market. Our most recent acquisition of OakGate Technology, Inc. provides protocol validation and test tools for
disk drives, both spinning and solid state, and servers used for cloud-based storage.
We also manufacture torque sensors and automatic data acquisition systems that are used to test critical control valves in
nuclear power and industrial plants. Our torque sensors are also used in other markets, including automotive and power tools.
Digital Imaging
Our Digital Imaging segment includes high-performance sensors, cameras and systems, within the visible, infrared,
ultraviolet and X-ray spectra for use in industrial, government and medical applications, as well as MEMS and high-
performance, high-reliability semiconductors including analog-to-digital and digital-to-analog converters. In 2019, we acquired
a second MEMS foundry that specializes in BioMedical MEMS, Optical MEMS, industrial sensors and microfabrication. This
segment also includes our sponsored and centralized research laboratories benefiting government programs and businesses.
We design, develop and manufacture image capture products, primarily consisting of high-performance image sensors and
digital cameras for use in industrial, scientific, academic research and medical applications. We also design, develop and
manufacture image processing products, primarily consisting of hardware and software for image processing and automatic data
collection in industrial, academic research and medical applications. We develop high-resolution, low-dose X-ray sensors for
medical, dental and industrial applications. Our high-performance image sensors utilize both charge coupled device (“CCD”)
and complementary metal-oxide semiconductor (“CMOS”) technology. In particular, our CMOS image sensing technology is
used in our large flat panel detectors for X-ray imaging and in most of our sensors used for industrial machine vision
applications. Our image processing software allows OEMs and systems integrators to develop vision applications using our
image acquisition and processing hardware. Our smart camera products are user-friendly, cost-effective vision appliances for
task-specific factory floor applications such as gauging, high-precision alignment, inspection, assembly verification and
machine guidance. Our smart cameras are designed to be quickly deployed by technicians on the factory floor. We provide
lightweight X-ray sources for the inspection of materials and structures and for the analysis of suspicious objects. We design
and manufacture 3D time of flight sensors and modules for industrial robots, warehouse robots and ADAS (Advanced Driver
Assistance Systems) for automobiles. Through our 2019 acquisition of the scientific imaging businesses of Roper
Technologies, Inc., we manufacture state-of-the-art cameras, spectrographs and optics for advanced research in physical
sciences, life sciences research and spectroscopy imaging for applications and markets that include materials analysis, quantum
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technology and cell biology imaging using fluorescence and chemiluminescence. We also provide rugged USB-based
customized cameras for markets such as traffic management, as well as life sciences applications.
We produce and provide manufacturing services for MEMS. The majority of our semiconductor manufacturing capacity
is consumed by external customers with the remaining capacity applied towards supplying unique CCD and microbolometer
(for long-wave infrared detection) fabrication services for our internal image sensor requirements.
Additionally, we produce components and sub-systems that deliver high performance and high reliability radio frequency
power generation for healthcare, transportation and industrial applications. Such products include critical components used in
radiotherapy applications for cancer treatment, magnetrons and thyratrons for X-ray cargo scanning systems and microwave
sources for marine and airborne radar.
We also provide high performance semiconductors, sub-systems, and signal and data processing solutions. As a partner
of choice for high performance signal and data conditioning solutions for professional applications, we provide solutions that
meet the demanding specifications of our customers. Our design capability enables us to partner with customers and ascend the
value chain by providing multi-chip modules and boards. Our proprietary high-speed analog-to-digital and digital-to-analog
data converters provide market leading performance for space and radio frequency communications.
We provide space and quantum technology products and services, including space-qualified imaging and quantum
subsystems, radiation hardened imaging sensors for high radiation and space environments, cold atom quantum technology
devices and system development services. We also provide atomic clocks and gravity sensing and ground based astronomical
telescope sensors and subsystems.
In addition, our Digital Imaging segment provides LIDAR systems for airborne terrestrial mapping, mobile mapping,
bathymetry and laser-based 3D imaging applications through our Optech business. These imaging and mapping systems are
used by commercial and government customers serving energy, natural resources and infrastructure applications. We also
provide geospatial software designed for the hydrographic and marine community.
We provide research and engineering capabilities primarily in the areas of electronics, materials, optical systems, and
information science to military, aerospace and industrial customers, as well as to various businesses throughout Teledyne. We
receive funding from the Defense Advanced Research Products Agency (“DARPA”) and various other U.S. Department of
Defense funding agencies, and we collaborate with researchers at universities and national laboratories to stay at the forefront of
emerging technologies. We have developed high-speed electronics, precision timing and navigation devices, advanced
functional and structural materials, liquid-crystal based optical devices, and image processing algorithms.
We are a leader in the development and production of large format focal plane array sensors for astronomy, defense and
space science markets. Our advanced focal plane arrays, sensors, and subsystems cover a broad spectrum of frequencies from
X-ray wavelengths to 15 micron long-wave infrared wavelengths. We deliver advanced imaging solutions to the U.S.
Department of Defense, National Aeronautics and Space Administration (“NASA”), the European Space Agency (“ESA”),
prime system integrators, other foreign space agencies and commercial customers. Our sensor technologies are on many of
NASA’s major astronomy missions and can be found operating at nearly every major ground-based observatory telescope. Our
image sensors also play a critical role in defense applications in airborne and satellite systems. We have developed sensors,
subassemblies and cameras for air- and ground-based applications, including hyperspectral sensors for long-wave infrared and
for simultaneous visible-shortwave infrared applications. We also produce a wide variety of infrared photodiodes for the
commercial market. Our photodiodes are used in laboratory instrumentation and industrial equipment. In addition, we design
and manufacture advanced military laser eye protection spectacles and sensor protection filters.
Aerospace and Defense Electronics
Our 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.
We provide a range of microwave products to our customers ranging from components to highly integrated subsystems
and solutions. Our helix traveling wave tubes, commonly called TWTs, are used to provide broadband power amplification of
microwave signals. Military applications include radar, electronic warfare and satellite communication. We make TWTs for
commercial applications as well, such as electromagnetic compatibility test equipment and satellite communication terminals.
We also provide high-power solid-state TWT replacement amplifiers and complete amplifiers that incorporate a TWT and a
power supply.
We design and manufacture solid state radio frequency (“RF”) and microwave components and subassemblies used in a
wide variety of applications. As components which form the building blocks for electronic systems, we produce amplifiers,
voltage-controlled oscillators, YIGs, BAWs, low-noise amplifiers (“LNAs”), microwave mixers, and detectors using LDMOS,
GaAs, GaN, and SiC technologies. These components form the basis for our line of solid state power amplifiers, RF
converters, and modems which are used in systems that provide communications links between ground stations, mobile units,
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UAVs, and orbiting satellites. Such products are also used in TV broadcast and commercial data communications networks. In
addition, we also provide higher level microwave subsystems and systems for electronic warfare, UAV, radar and military
communication applications.
We supply a variety of connectors and cable assemblies, including specialized high voltage connectors and subassemblies
and coax microwave interconnects, for defense, aerospace and high-end industrial applications. Additionally, we produce pilot
helmet mounted display quick disconnect harnesses for the Joint Helmet Mounted Cueing System (“JHMCS”) used in the F-15,
F-16 and F-18 aircrafts. The JHMCS system is a multi-role system designed to enhance pilot situational awareness and
provides visual control of aircraft targeting systems and sensors. We manufacture microprocessor-controlled aircraft ejection
seat sequencers and related support elements to military aircraft programs. We also provide initiators and electronic safe and
arm devices for use in military applications.
We provide high performance, high reliability semiconductor solutions which address critical functions of the complete
signal chain and RF signal path, including design, assembly and test, packaging, qualification and long-term support for
customer’s program life cycle management.
We supply electromechanical relays, solid state power relays and coaxial switching devices to military, aerospace and
other industrial markets. Applications include microwave and wireless communication infrastructure, RF and general
broadband test equipment, test equipment used in semiconductor manufacturing, and industrial and commercial machinery and
control equipment. On commercial aircraft, our solid state and electromechanical relays are used in a variety of applications,
including jet engine fuel control, management of control surfaces and other on-board applications.
We are a supplier of digital flight data acquisition and analysis systems to the civil aviation and military aircraft markets.
These systems acquire data for use by the aircraft’s flight data recorder as well as record additional data for the airline’s
operation. We provide the means to transfer this data, using Teledyne’s wireless technology, from the aircraft to the airline
operation center. We also design and manufacture airborne networking products, including servers, wireless access points and
aircraft interface device software, as well as aircraft data loading equipment, flight data analysis software, and data distribution
software used by commercial airlines and the U.S. military, and we provide services related to our products. We also provide
lead acid aircraft batteries for general aviation, business and light jet, and U.S. military applications.
Engineered Systems
Our Engineered Systems segment provides innovative systems engineering and integration and advanced technology
development as well as complex manufacturing solutions for defense, space, environmental and energy applications. This
segment also designs and manufactures electrochemical energy systems and manufactures specialty electronics for demanding
military applications.
Teledyne Brown Engineering, Inc. is a well-recognized engineering and manufacturing company providing advanced
solutions across the whole lifecycle of systems in space, missile defense, maritime, environmental and energy markets.
We lead and support air and missile defense programs, including the Optical Signatures Code (“OSC”) and Optical
Signature In-Line Generator (“OPTISIG”) tools for modeling, simulation and analysis of next-generation hypersonic weapons.
In addition, our patent-pending test and evaluation solutions can enable ground test facilities to produce more effectively
simulated conditions a hypersonic vehicle, engine or subsystem may encounter to include; temperature and time of flight. We
are also the prime contractor for the Extended Air Defense Simulation (“EADSIM”) contract providing analysis, training, test,
and operational planning in a single integrated package for the U. S. Army Space and Missile Defense Command (“SMDC”).
Under the Naval Health Research contract, we provide medical modeling and simulation tools. We are the prime contractor for
SMDC’s Design, Development, and Integration (“D3I”) Domain 1 - Space/High Altitude and Missile Defense contract. Under
this contract we provide a suite of threat-realistic ballistic target missiles (“Zombie” targets) used for testing missile defense
systems. We recently joined with Raytheon to produce several large systems in direct support of the missile defense radar
systems.
We specialize in marine systems design, development, and manufacturing. For the U.S. Special Operations Command,
contracted through Naval Sea Systems Command (“NAVSEA”), we are the prime contractor for the design, development, test,
manufacture and sustainment of the Shallow Water Combat Submersible (“SWCS”) vehicle which will replace the current
SEAL Delivery Vehicle. With the design and development test phase of the SWCS engineering development model completed,
we began low-rate initial production in late 2016 with production scheduled through 2023. We are responsible for the
production, test and training of maintenance and operation crews for the Pluto Gigas remotely operated mine countermeasure
system sold to the Egyptian Navy through the NAVSEA Foreign Military Sales Office. We are producing the Littoral
Battlespace Sensing Glider (“LBS-G”) system for the U.S. Navy Program Executive Office - Command, Control,
Communications, Computers, and Intelligence. Teledyne Webb Research is the Glider developer and manufacturer on the
LBS-G program. For Northrop Grumman, we manufacture gun mounts and surface to surface mission modules for the Littoral
Combat Ship program. Under contract to Raytheon, we continue to manufacture advanced mine detection and neutralization
systems.
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We are active in U.S. space programs and continue to play a vital role in the science operations area of the International
Space Station (“ISS”). We provide 24-hour-per-day payload operations in the ISS Payload Operations and Integration Center,
located at NASA’s Marshall Space Flight Center (“MSFC”). Under contract with MSFC, we have designed and are
manufacturing the Launch Vehicle Stage Adapter, a critical element of NASA’s Space Launch System. Flight Unit 1 will be
delivered by June 2020 with Flight Unit 2 under contract and delivery scheduled for 2022. Flight Unit 3 is scheduled for
contract finalization in the first half of 2020 with anticipated delivery in 2024. We have developed a commercial platform that
hosts payloads for earth imaging and other scientific applications known as the Multi-User System for Earth Sensing
(“MUSES”). The first instrument affixed to MUSES was built in cooperation with the German Aerospace Center (“DLR”).
This DLR Earth Sensing Imaging Spectrometer (“DESIS”) was declared fully operational in September 2019, achieving
revolutionary spectral resolution of 2.55 nanometers and demonstrating the ability to detect ocean-borne plastics as well as
surface deposits of rare earth elements from space. DLR retains the scientific rights to the imagery while Teledyne has the
commercial rights. Hyperspectral imagery from the DESIS instrument will be sold to U.S. Government and industrial
customers for scientific research and commercial applications. We also design, develop, and manufacture components for
scientific payloads and human space flight vehicles.
We provide specialty electronic manufacturing services. We develop and manufacture custom microelectronic modules
that provide both high reliability and extremely dense packaging for military applications. We also develop custom tamper-
resistant microcircuits designed to provide enhanced security in military communication. We serve the market for high-mix,
low-volume manufacturing of sophisticated military electronics equipment.
We have delivered a prototype for a new method of processing enriched uranium at the U.S. Department of Energy Y-12
National Security Complex and have begun manufacture of production units with delivery through 2021. We also operate a
facility that supports test and development of nuclear technology.
We operate a full-service radiological analysis laboratory in Knoxville, Tennessee, which principally supports nuclear
power plants in the United States. We also manage and operate a separation, purification, and analysis of atmospheric samples
laboratory for the U.S. Government. Additionally, we provide engineering and manufacturing for customers in the commercial
nuclear market. Continuing our historic facilities and plant management services to the commercial chemical industry, we
currently lead on-site and off-site management and support of research services and facility management at several sites.
We manufacture high quality machined components that we integrate into complex products and systems for customers
across the spectrum of our core business base, including NASA, the U.S. Department of Defense, the U.S. Department of
Energy, foreign militaries and commercial customers.
We provide advanced thermoelectric material technology and generators for challenging applications. The NASA
Curiosity rover is powered by a thermoelectric generator designed and built by Teledyne Energy Systems, Inc., and we are
developing the next generation system based on advanced thermoelectric materials.
We provide leading edge battery and fuel cell energy technology solutions for use in U.S. Government programs and
underwater power applications. These are lightweight compact systems are for underwater vehicles, aircraft, launch vehicles,
spacecraft and umbilical replacements. Both technologies can be customized to meet challenging applications for extended
duration missions.
We manufacture hydrogen/oxygen gas generators used worldwide in electrical power plant generation plants,
semiconductor manufacturing and other industrial processes. Our sales of hydrogen generators have been primarily in
developing countries and domestic applications where delivered merchant gas is not practical.
We manufacture small gas turbine engines for military markets. Our engines power the Boeing/U.S. Navy Harpoon
Missile systems.
Customers
We have a large number of customers in the various industries we serve. No commercial customer accounted for more
than 10% of any segment net sales during 2019, 2018 or 2017. No commercial customer in 2019, 2018 or 2017 accounted for
more than 3.0% of total net sales.
Sales to international customers accounted for approximately 44% of total sales in 2019, compared with 47% in 2018 and
46% in 2017. In 2019, we sold products to customers in over 100 foreign countries. Approximately 90% of our sales to
foreign-based customers were made to customers in 25 foreign countries. In 2019, the top five countries for international sales
were China, the United Kingdom, Germany, Japan and South Korea and represented approximately 21% of our total sales.
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Approximately 24%, 23% and 24% of our total net sales for 2019, 2018 and 2017, respectively, were derived from
contracts with agencies of, and prime contractors to, the U.S. Government. Information on our sales to the U.S. Government,
including direct sales as a prime contractor and indirect sales as a subcontractor, is as follows (in millions):
U.S. Government sales by segment:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total U.S. Government sales
2019
$ 80.4
107.4
225.3
346.7
$ 759.8
2018
$ 68.3
90.5
177.2
319.3
$ 655.3
2017
$ 65.2
85.7
157.2
311.6
$ 619.7
Our principal U.S. Government customer is the U.S. Department of Defense, which totaled $545.5 million, $494.9 million
and $479.7 million of our total net sales for 2019, 2018 and 2017, respectively. In 2019 and 2017, our largest program with the
U.S. Government was the Mission Operations and Integration contract with the NASA Marshall Space Flight Center, which
represented 1.4% and 1.5% of our total net sales, respectively. In 2018, our largest program with the U.S. Government was the
Objective Sim Framework program with the Missile Defense Agency, which represented 1.6% of our total net sales.
As described under risk factors, there are risks associated with doing business with the U.S. Government. In 2019,
approximately 64% of our U.S. Government prime contracts and subcontracts were fixed-price type contracts, compared to
67% in 2018 and 58% in 2017. Under these types of contracts, we bear the inherent risk that actual performance cost may
exceed the fixed contract price. Such contracts are typically not subject to renegotiation of profits if we fail to anticipate
technical problems, estimate costs accurately or control costs during performance. Additionally, U.S. Government contracts are
subject to termination by the U.S. Government at its convenience, without identification of any default. When contracts are
terminated for convenience, we recover costs incurred or committed, settlement expenses and profit on work completed prior to
termination. We had three U.S. Government contracts terminated for convenience in 2019, compared with 15 in 2018 and nine
in 2017.
Our total backlog of confirmed and funded orders was approximately $1,699.3 million at December 29, 2019, compared
with $1,568.8 million at December 30, 2018, and $1,250.2 million at December 31, 2017. We expect to fulfill a majority of
such backlog of confirmed orders during 2020.
Seasonality
No material portion of our business is considered to be seasonal.
Raw Materials and Suppliers
Generally, our businesses have experienced minimal fluctuations in the supply of raw materials, but not without some
price volatility. While some of our businesses provide services, for those businesses that sell hardware and product, a portion
of the value that we provide is labor-oriented, such as design, engineering, assembly and test activities. In manufacturing our
products, we use our own production capabilities and third-party suppliers and subcontractors, including international sources.
Some of the items we use for the manufacture of our products, including certain gyro components for some marine navigation
applications, certain magnets and helix wire for our traveling wave tubes, certain infrared detectors substrates and certain
ceramics and molding compounds used in our sonar systems, as well as certain scintillator materials used in the production of
our X-ray detectors, are purchased from limited or single sources, including international sources, due to technical capability,
price and other factors. At times we have experienced difficulty in procuring raw materials, components, sub-assemblies and
other supplies required in our manufacturing processes due to shortages and supplier-imposed allocation of components.
Sales and Marketing
Our sales and marketing approach varies by segment and by products within our segments. A shared fundamental tenet is
the commitment to work closely with our customers to understand their needs, with an aim to secure preferred supplier and
longer-term relationships.
Our segments use a combination of internal sales forces, third-party distributors and third-party commissioned sales
representatives to market and sell our products and services. Our businesses have been working over the years to consolidate or
share internal sales and servicing efforts. Several Teledyne businesses have been marketing and selling products
collaboratively to similar customers to promote “one-stop” shopping under singular “brand” names, including Teledyne Marine,
Teledyne Oil & Gas, Teledyne Defense Electronics, Teledyne Microwave Solutions, Teledyne HiRel Electronics and Teledyne
Advanced Chemistry Systems.
Products are also advertised in trade journals and by means of various websites. To promote our products and other
capabilities, our personnel regularly participate in trade shows and professional associations.
Many of our government contracts are awarded after a competitive bidding process in which we seek to emphasize our
ability to provide superior products and technical solutions in addition to competitive pricing.
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Through Teledyne Technologies International Corp. and other subsidiaries, we have established offices in foreign
countries to facilitate international sales for various businesses. Locations include Brazil, China, France, Germany, India, Italy,
Japan, Malaysia, Singapore, South Korea and the United Arab Emirates.
Competition
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.
Although we have certain advantages that we believe help us compete effectively in our markets, each of our markets is highly
competitive. With regard to our defense businesses, it is common in the defense industry for work on programs to be shared
among several companies, including competitors. In any event, because of the diversity of products sold and the number of
markets we serve, we encounter a wide variety of competitors, none of which we believe offer the same product and service
lines or serve all of the same markets as we do. Our businesses vigorously compete on quality, product performance and
reliability, technical expertise, price and service. Many of our competitors have, and potential competitors could have, greater
name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution
capabilities and greater financial, technological and personnel resources than we do.
Intellectual Property
While we own and control various intellectual property rights, including patents, trade secrets, confidential information,
trademarks, trade names, and copyrights, which, in the aggregate, are of material importance to our business, we believe that
our business as a whole is not materially dependent upon any one intellectual property or related group of such properties. We
own several hundred active patents and are licensed to use certain patents, technology and other intellectual property rights
owned and controlled by others. Similarly, other companies are licensed to use certain patents, technology and other
intellectual property rights owned and controlled by us.
Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance
with their terms or otherwise. We do not expect the expiration or termination of these patents, patent applications and license
agreements to have a material adverse effect on our business, results of operations or financial condition.
Environment and Sustainability
Teledyne’s businesses continue to focus on developing solutions to address sustainability and climate challenges facing
humanity today. We provide a broad range of precision measurement technologies for environmental monitoring and climate
research. Our sensors and instruments are deployed everywhere, from pole to pole, in space, on aircraft and drones, on land,
on the sea surface, in the water column, and on the seafloor. They operate around the clock, measuring greenhouse gases from
space, precisely monitoring air and water quality throughout the world, and continuously profiling all of Earth’s oceans.
Applications of our instruments provide scientists information that spans time from the origin of the universe to providing real-
time data to quality of air pollution and dangerous storms, such as time-critical warning of hurricanes and tsunamis.
More specific examples of our contributions to global environmental and climate science include the following:
• We provide sophisticated water samplers and flowmeters to monitor wastewater, irrigation flow, storm water,
industrial discharge, construction site run-off and municipal wastewater collection, treatment and reuse.
•
Our hazardous gas detection monitors are making industrial workplaces safer around the world.
• We build precision air quality instruments that measure common air pollutants (NOX, SO2, CO, ozone, PM10 and
PM2.5) that are considered hazardous to human health and the environment. Our instruments enable government
agencies around the world to detect and monitor the quality of the air we breathe in real-time to assess their
compliance with air quality regulations and ultimately reduce air pollution. We provide the visible and infrared
imaging sensors that enable NASA’s Orbiting Carbon Observatory 2 and GeoCarb missions that measure carbon
dioxide and methane in the Earth’s atmosphere,
•
Our floats, gliders and instruments assist climate research by providing access to accurate data, including subsurface
temperatures and velocities of currents throughout the world’s oceans. On a shorter timescale, scientists are
employing our instruments and in particular our ocean gliders to provide essential inputs for computer models of
dangerous storms, providing real-time information to save lives. Our instruments enable scientists to forecast more
accurately floods or droughts thereby allowing farmers to better plan for planting crops and providing irrigation.
• We work with maritime agencies around the world, preserving free and safe navigation of the world’s oceans.
•
The oceans are increasingly threatened by floating plastics that are constantly moving. We support ocean cleanup
agencies with both airborne and space-based instruments that track and analyze the debris.
• We have products designed to improve the efficiency of motors, motor drives and industrial automation systems to
reduce energy consumption. Our line of motor drive analyzers measure performance dynamically. The high-
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resolution display and sensitive software tools enable engineers to look inside the motor and motor drive to optimize
performance and energy efficiency.
Pursuant to the mandate in their respective charters, the audit committee of our board regularly reviews matters related to
compliance with environmental laws and the health and safety of employees, and the nominating and governance committee of
our board reviews and evaluates our policies and practices and monitors our efforts in areas of legal and social responsibility,
diversity and sustainability.
Employees
We consider our relations with our employees to be good. At December 29, 2019, our total workforce consisted of
approximately 11,790 employees, of which approximately 7,150 employees were in the United States.
Information about our Executive Officers
Teledyne’s executive management includes:
Name and Title
Executive Officers:
Robert Mehrabian*
Executive Chairman; Director
Aldo Pichelli*
President and Chief Executive Officer
Jason VanWees*
Executive Vice President
Stephen F. Blackwood*
Senior Vice President, Strategic Sourcing,
Tax and Treasurer
Melanie S. Cibik*
Senior Vice President, General Counsel,
Chief Compliance Officer and Secretary
Susan L. Main*
Senior Vice President and Chief Financial
Officer
Cynthia Belak*
Vice President and Controller
George C. Bobb III*
Vice President of Teledyne and President -
Aerospace and Defense Electronics
Edwin Roks*
Vice President of Teledyne and Group
President - Teledyne Digital Imaging -
Teledyne DALSA and Teledyne e2v
Age
Principal Occupations Last 5 Years
78
68
48
57
60
61
63
45
55
Dr. Mehrabian has served as Executive Chairman since January 1, 2019.
Prior to January 1, 2019, he was Teledyne’s Chairman, President and Chief
Executive Officer for more than five years.
Mr. Pichelli has been the President and Chief Executive Officer since
January 1, 2019 and Chief Operating Officer of Teledyne since October
2015. Prior to his promotion to Chief Operating Officer, Mr. Pichelli had
been an Executive Vice President of Teledyne having responsibility for the
Instrumentation and Aerospace and Defense Electronics segments since July
2013.
Mr. VanWees has been Executive Vice President since January 1, 2019.
Prior to his promotion he was Senior Vice President, Strategy and Mergers &
Acquisitions for more than five years.
Mr. Blackwood has been Senior Vice President, Strategic Sourcing, Tax and
Treasurer since January 1, 2019. Prior to his promotion, he was Vice
President and Treasurer of Teledyne for more than five years.
Miss Cibik has been Senior Vice President, General Counsel and Secretary
since September 2012 and Chief Compliance Officer since August 2016. In
August 2019, Miss Cibik became a director of OPUS Bank.
Ms. Main has been Senior Vice President and Chief Financial Officer of
Teledyne since November 2012. In July 2017, Ms. Main became a director
of Ashland Global Holdings, Inc., a specialty chemical company. In October
2018, Ms. Main became a director of Garrett Motion Inc., a technology
provider to vehicles.
Ms. Belak has been Vice President and Controller of Teledyne since May
2015. Prior to her promotion, Ms. Belak had been Vice President, Business
Risk Assurance of Teledyne since January 2012.
Mr. Bobb has been Vice President of Teledyne for more than five years.
Since July 29, 2019, he has been the President of the Aerospace and Defense
Electronics segment. Prior to that, he had been and President - Teledyne
Aerospace Electronics since August 2017. He has been President of Teledyne
Controls LLC since April 2018. From January 2017 until April 2018 he was
President of Teledyne Scientific & Imaging LLC. He was Vice President-
Contracts, Information Technology and Selected Operations and Deputy
General Counsel for Litigation of Teledyne from August 2016 to August
2017. Prior to that he was Chief Compliance Officer, Vice President-
Information Technology and Deputy General Counsel for Litigation of
Teledyne.
Dr. Roks has been a Vice President of Teledyne since January 2014 and
Group President - Teledyne Digital Imaging, Teledyne DALSA and
Teledyne e2v, since March 2017. Dr. Roks has been President of Teledyne
DALSA, Inc. since October 2015. From January 2014 to October 2015, Dr.
Roks had been the Chief Technology Officer of Teledyne. Prior to that since
April 2010, Dr. Roks served as Executive Vice President and General
Manager of the professional imaging division of Teledyne DALSA, Inc.
(formerly known as DALSA Corporation).
10
Name and Title
Other Executives:
Carl Adams
Vice President, Business Risk
Assurance
Vicki Benne
Vice President and General Manager of
Teledyne Environmental Instrumentation
Jason Connell
Vice President - Human Resources and
Associate General Counsel
Janice L. Hess
President, Engineered Systems Segment
Scott Hudson
Vice President - Chief Information
Officer
Sean O’Connor
Chief Operating Officer and Chief
Financial Officer of Teledyne
Environmental and Electronic
Measurement Instrumentation (“EEMI”)
Kevin Prusso
Vice President and General Manager of
Teledyne Test and Measurement
Instrumentation
Michael Read
President, Teledyne Marine Group
Glenn A. Seemann
Vice President, Contracts
Age
Principal Occupations Last 5 Years
50
58
44
60
58
55
56
61
62
Mr. Adams has been Vice President, Business Risk Assurance of Teledyne since
May 2015. Prior to that, upon joining Teledyne in April 2015, he was Senior
Director, Finance. Prior to that, he was the Chief Financial Officer and Vice
President of NeuroSigma, Inc. since March 2014.
Ms. Benne has been Vice President and General Manager of Teledyne
Environmental Instrumentation since September 2018. Prior to that she was Vice
President and General Manager, Teledyne ISCO since April 2014.
Mr. Connell has been Vice President - Human Resources since December 2016.
Prior to that he was and remains Associate General Counsel and General Counsel
of the Engineered Systems segment.
Ms. Hess has been the President of the Engineered Systems segment of Teledyne
since May 2014. Prior to her promotion, Ms. Hess was the Executive Vice
President and Chief Financial Officer for the Engineered Systems segment and
Teledyne Scientific and Imaging for more than five years.
Mr. Hudson has been Vice President and Chief Information Officer since August
2017 and Chief Information Officer since June 2014.
Mr. O’Connor has been Chief Operating Officer and Chief Financial Officer of
Teledyne Environmental and Electronic Measurement Instrumentation since
September 2018. Prior to that he was Vice President and Chief Financial Officer
of Teledyne Environmental and Electronic Measurement Instrumentation, which
included Teledyne LeCroy, Inc. for more than five years.
Mr. Prusso has been Vice President and General Manager of Teledyne Test and
Measurement Instrumentation since August 2018. Prior to that he was Vice
President of Sales and Marketing for Teledyne LeCroy, Inc. since April 2018 and
prior to that he was Vice President of Sales and Marketing for the Protocol
Solutions Group of Teledyne LeCroy, Inc.
Mr. Read has been President, Teledyne Marine Group since August 2016. Prior
to that since August 2009 he was President, Teledyne Oil & Gas.
Mr. Seemann has been Vice President - Contracts since August 2017. Prior to
that since April 2015 he was Associate Vice President, Corporate Contracts,
Procurement, and Property Management. Prior to that since July 2009 he was
Vice President, Contracts - Teledyne Instruments, Inc.
* Such officers are subject to the reporting and other requirements of Section 16 of the Securities Exchange Act of 1934, as amended.
Dr. Robert Mehrabian and Teledyne are parties to a Sixth Amended and Restated Employment Agreement dated as of
October 23, 2018 (the “Mehrabian Employment Agreement”). The Mehrabian Employment Agreement provides that effective
January 1, 2019, Dr. Mehrabian shall be employed by the Company as Executive Chairman. The Executive Chairman shall
have primary responsibility to manage the affairs of the Board and to manage and direct mergers and acquisition activities and
strategic planning and margin expansion initiatives of Teledyne. Its term continues through December 31, 2023.
The Mehrabian Employment Agreement also provides that Dr. Mehrabian’s base salary of $995,000 continued through
December 31, 2019, after which date his base salary was reduced to and remains $900,000. Such base salary may be increased
annually at the discretion of the Personnel and Compensation Committee.
The Mehrabian Employment Agreement further provides, among other things:
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Annual Incentive Plan (“AIP”): Dr. Mehrabian shall participate in the AIP with a target opportunity of 120% of base
salary.
Performance Share Plan (“PSP”): Through December 31, 2019, Dr. Mehrabian shall participate in the PSP at the target
opportunity of 150% of base salary. Effective January 1, 2020, Dr. Mehrabian shall participate in the PSP at a target
opportunity equal to 300% of base. The applicable percentage for Dr. Mehrabian’s current 2018-2020 PSP award is
prorated, with this increased percentage effective as of January 1, 2020.
Restricted Stock: Dr. Mehrabian shall participate in Teledyne’s restricted stock award program with annual grants of
restricted stock equal to at least 100% of Base Salary as of the date of the grant subject to meeting targets set forth in
the restricted stock award.
Stock Options: Dr. Mehrabian’s stock option grant in 2019 shall have a fair value equal to the amount he received in
2018 (which was $2,422,000), and future annual grants thereafter, as determined by the Committee, shall have a fair
value as of the grant date equal to $900,000. With respect to options granted to Dr. Mehrabian on or after the date of
the Mehrabian Employment Agreement, the Mehrabian Employment Agreement provides that in the event of Dr.
Mehrabian’s separation of service for any reason other than death, outstanding stock options shall continue to vest and
11
the right of Dr. Mehrabian to exercise vested stock options, when and as vested, shall continue, but in no event may
any such vested options be exercised after the expiration of any applicable option period. With respect to options
granted to Dr. Mehrabian on or after the date of the Mehrabian Employment Agreement, the Mehrabian Employment
Agreement provides that in the event of the death of Dr. Mehrabian, all outstanding options shall vest in full and the
right of Dr. Mehrabian’s beneficiary to exercise the stock options shall terminate upon the expiration of twelve months
from the date of Dr. Mehrabian’s death, but in no event may such stock options be exercised after the expiration of any
applicable option period.
Supplemental Pension Benefit: With respect to Dr. Mehrabian’s Non-Qualified Pension Benefit, which provides for
payments supplemental to any accrued pension under Teledyne’s qualified pension plan equal to 50% of his base
salary for ten years following Dr. Mehrabian’s retirement, the Mehrabian Employment Agreement provides that the
base salary rate to be used for calculating the payments shall be the rate in effect for 2018 (which was $995,000).
Post-Retirement Medical Coverage: Commencing on Dr. Mehrabian’s separation from service (for any reason) and
continuing for the longer to live of Dr. Mehrabian and his spouse, Dr. Mehrabian and his spouse shall be deemed
participants in Teledyne’s medical benefit plan offered to all employees of Teledyne and be deemed to be eligible to
receive the benefits under the medical plan. Dr. Mehrabian shall be charged for such deemed participation at a rate
equal to the monthly rate the medical plan charges former participants and spouses eligible for continuation coverage
under COBRA, plus the rate payable by the employer, as each such COBRA rate is adjusted from time to time.
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Mr. Pichelli and Teledyne are parties to an Employment Agreement dated October 23, 2018 (the “Pichelli Employment
Agreement”). The Pichelli Employment Agreement provides that Teledyne will employ Mr. Pichelli as President and Chief
Executive Officer and is effective from January 1, 2019, through December 31, 2021. The Pichelli Employment Agreement
provides that effective January 1, 2019, Mr. Pichelli’s annual base salary shall be $800,000. Such base salary may be increased
annually at the discretion of the Personnel and Compensation Committee.
The Pichelli Employment Agreement further provides, among other things, that effective January 1, 2019:
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AIP: Mr. Pichelli shall participate in the AIP at an opportunity of 110% of base salary if targets are reached at 100%,
or such greater percentage if provided in the AIP for any year.
PSP: Mr. Pichelli shall participate in the PSP at an opportunity equal to 300% of base salary if targets are reached at
100%. The applicable percentage for Mr. Pichelli’s current 2018-2020 PSP award will be prorated, with this increased
percentage effective as of January 1, 2019.
Restricted Stock: Mr. Pichelli shall participate in Teledyne’s restricted stock award program with annual grants of
restricted stock equal to at least 100% of Base Salary as of the date of the grant subject to meeting targets set forth in
the restricted stock award.
Stock Options: Mr. Pichelli will be eligible to receive future annual grants of options having a fair value of at least
$800,000 as of the grant date, or such other higher value as determined by the Committee. With respect to options
granted to Mr. Pichelli on or after the date of the Pichelli Employment Agreement, the Pichelli Employment
Agreement provides that in the event of Mr. Pichelli’s separation of service for any reason other than death,
outstanding stock options shall continue to vest and the right of Mr. Pichelli to exercise vested stock options, when and
as vested, shall continue, but in no event may any such vested options be exercised after the expiration of any
applicable option period. With respect to options granted to Mr. Pichelli on or after the date of the Pichelli
Employment Agreement, the Pichelli Employment Agreement provides that in the event of Mr. Pichelli’s death, all
outstanding options shall vest in full and the right of Mr. Pichelli’s beneficiary to exercise the stock options shall
terminate upon the expiration of twelve months from the date of Mr. Pichelli’ death, but in no event may such stock
options be exercised after the expiration of any applicable option period.
Benefits: Mr. Pichelli will continue to be eligible to participate in other employee benefit plans and programs available
to executive-level employees, including but not limited to an automobile allowance.
Ten current members of management have entered into change of control severance agreements. The agreements have a
three-year, automatically renewing term, except as noted below. The executive is entitled to severance benefits if (1) there is a
change in control of the Company and (2) within three months before or 24 months after the change in control, either we
terminate the executive’s employment for reasons other than cause or the executive terminates the employment for good reason.
“Severance benefits” currently consist of:
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A cash payment equal to three times in the case of Dr. Mehrabian or two times in the other cases the sum of (i) the
executive’s highest annual base salary within the year preceding the change in control and (ii) the Annual Incentive
Plan bonus target for the year in which the change in control occurs or the average actual bonus payout for the three
years immediately preceding the change in control, whichever is higher.
A cash payment for the current AIP bonus cycle based on the fraction of the year worked times the AIP target
objectives at 100%.
12
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Payment in cash for unpaid performance share program awards, assuming applicable goals are met, at 120% of
performance targets (100% of performance targets in some agreements).
Continued equivalent health and welfare (e.g., medical, dental, vision, life insurance and disability) benefits at our
expense for a period of up to 36 months (including Dr. Mehrabian) (24 months in some agreements, including Mr.
Pichelli) after termination (with the executive bearing any portion of the cost the executive bore prior to the change in
control); provided, however, such benefits would be discontinued to the extent the executive receives similar benefits
from a subsequent employer.
Removal of restrictions on restricted stock issued under our restricted stock award programs.
Full vesting under the Company’s pension plans (within legal parameters) such that the executive shall be entitled to
receive the full accrued benefit under all such plans in effect as of the date of the change in control, without any
actuarial reduction for early payment.
Up to $25,000 (including Dr. Mehrabian) ($15,000 in some agreements, including Mr. Pichelli) reimbursement for
actual professional outplacement services.
Immediate vesting of all stock options, with options being exercisable for the full remainder of the term.
There is no “gross up payment” to hold the executive harmless against the impact, if any, of federal excise taxes
imposed on executive as a result of “excess parachute” payments as defined in Section 280G of the Internal Revenue
Code. The executive will receive the better of, on an after-tax basis, (a) the unreduced excess parachute payment with
no tax gross up payment, or (b) a parachute payment reduced to a level below which an excise tax is imposed.
Certain payments are deferred for six months following a separation of service to assure compliance with
Section 409A of the Internal Revenue Code.
The Company has entered into individual Indemnification Agreements with directors and certain officers and executives
of Teledyne, including those members of Executive Management listed above. The Indemnification Agreements provide the
directors and executives who are parties to the agreements with a stand-alone contractual right to indemnification and expense
advancement to the greatest extent allowable under Delaware law. The Indemnification Agreements also provide:
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•
In a third-party proceeding, an indemnitee is entitled to indemnification if the indemnitee acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, if in a criminal
action or proceeding, if the indemnitee had no reason to believe that his or her conduct was unlawful. In a third-party
proceeding, the indemnification obligation covers reasonable expenses, judgment fines, and amounts paid in settlement
actually and reasonably incurred by the indemnity.
In proceedings by or in the name of the Company (e.g., derivative suits), an indemnitee is entitled to indemnification if
the indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best
interests of the Company. In derivative suits, the indemnification obligation covers reasonable expenses, but in
proceedings where the Company is alleging harm caused by the indemnitee, the indemnitee would generally not be
entitled to be indemnified for judgments, fines and amounts paid in settlement (otherwise the Company would
effectively not recover any damages), unless a Delaware or other court determines otherwise despite the finding of
liability.
The Company has an obligation to advance, on an unsecured and interest free basis, reasonable expenses incurred by
the indemnitee within 30 days of the indemnitee’s request. The indemnitee does not need to meet any standard of
conduct to be entitled to advancement of expenses and there is no determination requirement to be made by the Board
in connection with the advancements of expenses. An indemnity must repay any amounts advanced if it ultimately
determined that the indemnity is not entitled to indemnification.
Our indemnification obligations do not cover the following situations: (1) where indemnification payments have been
made under director’s and officer’s insurance or other indemnification provisions; (2) where the claim is based on disgorgement
of short-swing profits under Section 16(b) of the Exchange Act; (3) where the claim is based on reimbursement by the
indemnitee to the Company of a bonus or other incentive-based or equity-based compensation if required under the Exchange
Act (e.g., in connection with a restatement as a result of the Company’s noncompliance with the financial reporting
requirements required by Section 304 of the Sarbanes-Oxley Act); or (4) where the proceeding is initiated by the indemnitee
(other than proceedings that are consented to by the Board or that the indemnitee initiates against the Company to enforce the
Agreement).
Under the Indemnification Agreements, in the event of a change in control or we reduce or do not renew our
director’s and officer’s insurance coverage, we are required to purchase (or cause the acquirer or successor to the Company to
purchase or maintain) a six-year tail policy, subject to a 200% premium cap. The agreements continue until the later of
(i) 10 years after the indemnitee ceases to serve as a director or officer, and (ii) one year following the final termination of any
proceeding subject to the agreement.
13
Available Information
Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K, and any
amendments to these reports, are available free-of-charge on our website (www.teledyne.com) as soon as reasonably practicable
after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission (the “SEC”). The
SEC also maintains a website that contains these reports and other information we file, including our proxy statements, at
www.sec.gov. In addition, our Corporate Governance Guidelines, our Global Code of Ethical Business Conduct, our Codes of
Ethics for Financial Executives, Directors and Service Providers and the Charters of the standing committees of our Board of
Directors are available on our website. We intend to post any amendments to or waivers of these policies, guidelines and
charters on our website. Alternatively, if you would like a paper copy of any report we file with the SEC (without exhibits) or
other document, please write to Melanie S. Cibik, Senior Vice President, General Counsel, Chief Compliance Officer and
Secretary, at Teledyne Technologies Incorporated, 1049 Camino Dos Rios, Thousand Oaks, California 91360-2362, and a copy
of such requested document will be provided to you, free-of-charge.
Item 1A. Risk Factors
Risk Factors; Cautionary Statement as to Forward-Looking Statements
The following text highlights various risks and uncertainties associated with Teledyne. These factors could materially
affect “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that we may
make from time to time, including forward-looking statements contained in “Item 1. Business” and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K and in Teledyne’s 2019 Annual
Report to Stockholders. It is not possible for management to predict all such factors, and new factors may emerge or existing
factors may change. Additionally, management cannot assess the impact of each such factor on Teledyne or the extent to which
any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements.
Escalating global trade tensions and the adoption or expansion of tariffs and trade restrictions could negatively impact
us.
Starting in 2018, the U.S. Government imposed tariffs on a wide range of goods imported from China and a trade war
ensued between the two nations. Several countries affected by these tariffs imposed retaliatory tariffs. In January 2020, under
a U.S.-China trade agreement, China agreed to purchase $200 billion in additional goods and services from the United States
over the next two years, in exchange for the United States agreeing to reduce tariffs on $120 billion in Chinese products from
15% to 7.5%. It is not yet known what if any impact this deal may have on our businesses or what impact there may be if either
party fails to live up to the terms of the deal, more so with China given the Coronavirus health crisis threatening its already
slowing economic growth. In any event, high tariffs generally increase the cost of materials for our products, which could
result in our products becoming less competitive or generating lower margins. With high tariffs imposed on our products, we
may also need to find new suppliers and components for our products, which could result in production delays. To the extent
our products are the subject of retaliatory tariffs, customers in some countries or regions, such as China, may begin to seek
domestic or non-U.S. sources for products that we sell, or be pressured or incentivized by foreign governments not to purchase
U.S.-origin goods, which could harm our future sales in these markets. Additionally, if China were to enact laws or regulations
requiring the use of local suppliers, it could have a negative impact on Teledyne’s revenues.
Furthermore, as global tensions increase, more countries are enhancing their export regulations. For example, the U.K.
has recently limited the sale of certain defense equipment to Middle Eastern countries. We also have seen a recent increase in
denial of export licenses for sales into Russia, Turkey and the Middle East.
Additionally, a number of well-established customers and suppliers have become listed on Government restricted party
lists without much warning. In particular, U.S. export enforcement agencies have placed several Chinese and Russian
companies and many of their international subsidiaries on such lists, prohibiting the export of most commercial and dual-use
items subject to the Export Administration Regulations. Multiple Teledyne companies had large pending orders with some of
those companies that had to be either cancelled or for which Teledyne submitted export license applications that have a low
probability of approval. For example, Huawei Technologies, Co., Ltd. (“Huawei”), and its affiliates were added to the U.S.
Department of Commerce Bureau of Industry and Security Entity list on May 16, 2019. Huawei was a customer of our test and
measurement business, and pending license applications have not yet been approved. The U.S. Government has also made
efforts to increase restrictions on some of those listed entities, including proposals to expand U.S. export jurisdiction over
certain foreign made products containing U.S.-origin materials. For example, the U.S. Government had proposed modifying the
minimum amount of U.S. content permitted within products before they become subject to U.S. export restrictions from 25% to
10% for anything sold to Huawei. While we will continue to work to mitigate the impact of tariffs and trade restrictions, they
could result in reduction in our revenue, price increases on material used in our products or production delays, which could
adversely affect our business, financial condition, operational results and cash flows.
14
A material amount of our total revenues is derived from companies in the oil and gas industry, especially the offshore oil
and gas industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and
volatility of oil and gas prices.
A material amount of our total revenues is derived from customers in or connected to oil and gas exploration,
development and production, especially the offshore oil and gas industry. The oil and gas industry has historically been cyclical
and characterized by significant changes in the levels of exploration and development activities. Oil and gas prices, and market
expectations of potential changes in those prices, significantly affect the levels of those activities. Any prolonged reduction in
the overall level of offshore oil and gas exploration and development activities, whether resulting from changes in oil and gas
prices or otherwise, could materially and adversely affect our financial condition and the results of our businesses within our
Instrumentation segment.
Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our
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services and products include the following:
worldwide demand for oil and gas;
general economic and business conditions and industry trends;
the ability of the Organization of Petroleum Exporting Countries, or OPEC, to set and maintain production levels;
the level of production by non-OPEC countries;
the ability of oil and gas companies to generate or raise funds for capital expenditures;
domestic and foreign tax policy;
laws and governmental regulations that restrict exploration and development of oil and gas in various offshore
jurisdictions;
laws and governmental regulation that restrict the use of hydraulic fracturing;
technological changes;
the political environment of oil-producing regions;
the price and availability of alternative fuels; and
climate change regulations that provide incentives to conserve energy or use alternative energy sources.
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Teledyne manufactures seismic energy sources, interconnects and data acquisition products that are used in offshore
energy exploration. When crude oil and natural gas prices are low, the level of marine seismic exploration activity typically
decreases, potentially resulting in reduced demand for our products used in offshore energy exploration. In addition, a decline
in the level of capital spending by oil and natural gas companies may result in a reduced rate of development of new energy
reserves, which could adversely affect demand for our products related to energy production, and, in certain instances, result in
the cancellation, modification or rescheduling of existing orders and a reduction in customer-funded research and development
related to next generation products.
A new global recession or an economic downturn in China may adversely affect us.
If another global recession emerges, if economic uncertainty in Europe continues or worsens, or if economic growth in
China substantially slows, we may experience declines in revenues, profitability and cash flows from reduced orders, payment
delays, collection difficulties, increased price pressures for our products, increased risk of excess and obsolete inventories or
other factors caused by the economic problems of our customers. Our sales to China-based customers represented 6.6% of total
revenues in 2019, 6.7% of total revenue in 2018 and 6.3% of total revenue in 2017. Economic growth in China has moderated,
with a health crisis threatening already slowing economic growth. Continued growth in many of our businesses, including those
in our Environmental and Electronic Measurement Instrumentation group, could be negatively impacted if an economic
downturn persists in China. If negative conditions in the global credit markets prevent our customers from having access to
credit or render them insolvent, orders for our products may decrease, which would result in lower revenue. Likewise, if our
suppliers face challenges in obtaining credit, in selling their products, or otherwise in operating their businesses or remaining
solvent, they may become unable to offer the materials we use to manufacture our products. These events could adversely
impact our ability to manufacture affected products and could also result in reductions in our revenue, increased price
competition, and increased operating costs, which could adversely affect our business, financial condition, operational results,
and cash flows.
We develop and manufacture products for customers in the energy exploration and production markets, domestic and
international commercial aerospace markets, the semiconductor industry, and the consumer electronics, telecommunications
and automotive industries; each of which has been cyclical, exhibited rapid changes and suffered from fluctuating market
demands. A cyclical downturn in these markets may materially affect future operating results.
In addition, we sell products and services to customers in industries that are sensitive to the level of general economic
activity and consumer spending habits and to customers in more mature industries that are sensitive to capacity constraints.
Adverse economic conditions affecting these industries may reduce demand for our products and services, which may reduce
our revenues, profits or production levels. Some of our businesses serve industries such as power generation and petrochemical
15
refining, which may be negatively impacted in the event of future reductions in global capital expenditures and manufacturing
capacity.
Our indebtedness, and any failure to comply with our covenants that apply to our indebtedness, could materially and
adversely affect our business.
As of December 29, 2019, we had $851.8 million total outstanding indebtedness, including $295.0 million in senior
unsecured fixed rate notes, $279.8 million in Euro denominated fixed rate notes, $150.0 million in term loans and $125.0
million outstanding under our $750.0 million floating rate credit facility. Our indebtedness or a failure to comply with our
covenants that apply to our indebtedness could harm our business by, among other things, reducing the funds available to make
acquisitions, capital expenditures, stock repurchases, or reducing our flexibility in planning for or reacting to changes in our
business or market conditions. Our indebtedness exposes us to interest rate risk since a portion of our debt obligations are at
variable rates. Our indebtedness or a failure to comply with our covenants that apply to our indebtedness could also have a
material adverse effect on our business by increasing our vulnerability to general adverse economic and industry conditions or a
downturn in our business. General adverse economic and industry conditions or a downturn in our business could result in our
inability to repay this indebtedness in a timely manner.
Further, the Financial Conduct Authority (the authority that regulates LIBOR) has announced that it intends to stop
compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee
(“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the
alternative to USD-LIBOR for use in debt instruments, derivatives and other financial contracts that are currently indexed to
USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently
working on industry wide and company specific transition plans as it relates to derivatives, debt and cash markets exposed to
USD-LIBOR. It is unclear as to what the new method of calculating LIBOR that may evolve and this new method could
adversely affect the Company’s interest rates on the Company’s indebtedness. The Company is monitoring the ARRC transition
plan and is evaluating potential related risks. As of December 29, 2019, approximately 32.5% of the Company’s long-term
debt is variable and can be indexed to USD-LIBOR. A 2019 amendment to our $750.0 million credit facility includes a
procedure to switch to LIBOR alternative replacement rates in the future.
We are subject to the risks associated with international sales and international operations, which could harm our
business or results of operations.
During 2019, sales to international customers accounted for approximately 44% of our total revenues, compared with 47%
in 2018 and 46% in 2017. In 2019, we sold products to customers in over 100 countries. In 2019, the top five countries for
international sales were China, Germany, the United Kingdom, Japan and South Korea, constituting approximately 21% of our
total sales. We anticipate that future sales to international customers will continue to account for a significant and increasing
percentage of our revenues, particularly since business and growth plans for many Teledyne businesses focus on sales outside
of the United States, including to emerging markets such as China, India, Brazil and West Africa.
Risks associated with international sales and operations include, but are not limited to:
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political and economic instability;
international terrorism;
export controls, including U.S. export controls related to China, sanctions related to Russia, and increased scrutiny of
exports of marine instruments, digital imaging and other products;
failure to comply with anti-bribery legislation, including the U.S. Foreign Corrupt Practices Act;
changes in legal and regulatory requirements;
U.S. and foreign government policy changes affecting the markets for our products;
changes in tax laws and tariffs;
changes in U.S. - China and U.S. - Russia relations;
difficulties in protection and enforcement of intellectual property rights;
failure to comply with the foreign data protection laws, including the EU General Data Protection Regulation
(“GDPR”) in the European Union;
inadvertent transfers of export-controlled information due to increased cross-border technology transfers and the use of
offshore computer servers;
transportation, including piracy in international waters;
currency exchange rate fluctuations; and
challenges relating to managing a global workforce with diverse cultures and backgrounds.
Any of these factors could have a material adverse effect on our business, results of operations and financial condition.
Exchange rate fluctuations may increase the cost of our products to international customers and therefore reduce our
competitive position.
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In June 2016, the United Kingdom (“U.K.”) held a referendum in which voters approved an exit from the European Union
(“E.U.”), commonly referred to as “Brexit.” The U.K. formally left the E.U. on January 31, 2020 and has entered a transition
period until December 31, 2020. During the transition period, the U.K. and the E.U. will seek to negotiate a trade deal, and the
U.K. will remain in both the E.U. customs union and single market. The announcement of Brexit caused significant volatility
in global stock markets and currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against
foreign currencies in which we conduct business. The withdrawal of the U.K. from the E.U. may also create further global
economic uncertainty, which may adversely impact the economies of the U.K., the E.U. countries and other nations, may cause
our current and future customers to reduce their spending on our products and services, and may cause certain E.U.-based
customers to source products from businesses based outside of the U.K. For example, Brexit-related uncertainty could lead to a
reconsideration by Airbus as to future investment and spending in the U.K., which could reduce sales for our U.K.-based
businesses that supply Airbus. Potential Brexit-related risks for our U.K.-based businesses also include increased import
duties, loss of customers in the E.U., delays in the movement of goods between the U.K. and the E.U. and loss of access to the
E.U. labor pool. Given our several U.K.-based businesses, volatility in the value of the British pound relative to the U.S. dollar,
or other foreign currencies, could increase the cost of raw materials and components for our U.K.-based businesses and could
otherwise adversely affect the business, operations and the financial condition of our U.K.-based businesses.
Acquisitions involve inherent risks that may adversely affect our operating results and financial condition.
Our growth strategy includes acquisitions. Acquisitions involve various inherent risks, such as:
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our ability to assess accurately the value, strengths, weaknesses, internal controls, contingent and other liabilities and
potential profitability of acquisition candidates;
the potential loss of key personnel of an acquired business;
our ability to integrate acquired businesses and to achieve identified financial, operating and other synergies
anticipated to result from an acquisition;
our ability to assess, integrate and implement internal controls of acquired businesses in accordance with Section 404
of the Sarbanes-Oxley Act of 2002;
the distraction of management resulting from the need to integrate acquired businesses;
increased competition for acquisition targets, which may increase acquisition costs;
the potential impairment of assets;
potential unknown liabilities associated with a business that we acquire or in which we invest, including environmental
liabilities;
the risks associated with acquiring privately-held companies, which generally do not have the same formal or
comprehensive internal controls and compliance systems in place as public companies;
production delays associated with consolidating acquired facilities and manufacturing operations;
risks associated with owning and operating businesses internationally, including those arising from U.S. and foreign
government policy changes or actions and currency exchange rate fluctuations;
unanticipated changes in business or economic conditions affecting an acquired business; and
exposure to new and unfamiliar regulations in new jurisdictions.
While we conduct financial and other due diligence in connection with our acquisitions and generally seek some form of
protection, such as indemnification from the seller, insurance coverage, and sometimes placing a portion of the purchase price
in escrow to cover potential liabilities, such acquired companies may have weaknesses or liabilities that are not accurately
assessed or brought to our attention at the time of the acquisition. Further, indemnities, insurance or escrow arrangements may
not fully cover such matters.
In connection with our acquisitions, including those acquisitions that we do not complete, we may incur significant
transaction costs. We are required to expense, as incurred, such transaction costs, which may have a material adverse impact on
our financial results.
Changes in future business conditions could cause business investments, goodwill and other long-lived assets to become
impaired, resulting in significant losses and write-downs that would reduce our operating income.
On December 29, 2019, Teledyne’s goodwill was $2,050.5 million and net acquired intangible assets were $430.8 million.
Under current accounting guidance, we are required to test annually both acquired goodwill and other indefinite-lived intangible
assets for impairment based upon a fair value approach, rather than amortizing the value over time. We have chosen to perform
our annual impairment reviews of goodwill and other indefinite-lived intangible assets during the fourth quarter of each fiscal
year. We also are required to test goodwill 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. If
the fair market value is less than the carrying value, including goodwill, we could be required to record an impairment charge.
The valuation of reporting units requires judgment in estimating future cash flows, discount rates and estimated product life
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cycles. In making these judgments, we evaluate the financial health of the business, including such factors as industry
performance, changes in technology and operating cash flows. As we have grown through acquisitions, the amount of goodwill
and net acquired intangible assets is a significant portion of our total assets. As a result, the amount of any annual or interim
impairment could be significant and could have a material adverse effect on our reported financial results for the period in
which the charge is taken. We also may be required to record an earnings charge or incur unanticipated expenses if, as a result
of a change in strategy or other reason, we were to determine the value of other assets had been impaired.
For additional discussion of business investments, goodwill and other long-lived assets, see the discussion under “Item 7.
Management’s Discussion and Analysis of Operations and Financial Condition” and Note 3 of the Notes to Consolidated
Financial Statements.
United States and global responses to terrorism, increasing tension between the U.S., and Russia, China and Iran;
concerns regarding nuclear proliferation and the safety of nuclear energy; potential epidemics such as the Coronavirus;
continuing turmoil in Middle Eastern countries; and potential future financial issues impacting airlines and volatile
energy prices increase uncertainties with respect to many of our businesses and may adversely affect our business and
results of operations.
United States’ and global responses to terrorism, continuing turmoil in Middle Eastern countries and nuclear proliferation
concerns increase uncertainties with respect to U.S. and other business and financial markets and could adversely affect our
business and operations. Increasing tensions between the U.S. and Russia, and between the U.S. and China, as well as the U.S.
and Iran, could disrupt the economy.
Air travel declines have occurred after terrorist attacks and heightened security alerts, as well as after the high-profile
outbreaks of disease, including the recent outbreak and spread of the Wuhan, China-originated Coronavirus. Additional
declines in air travel resulting from these factors and other factors could adversely affect the financial condition of many of our
commercial airline and aircraft manufacturer customers and, in turn, could adversely affect our Aerospace and Defense
Electronics segment. In addition, a prolonged virus epidemic or pandemic, or the threat thereof, could result in worker
absences, lower productivity, voluntary closure of our offices and manufacturing facilities, disruptions in our supply chain,
travel restrictions on our employees, and other disruptions to our businesses. Moreover, health epidemics may force local
health and government authorities to mandate the temporary closure of our offices and manufacturing facilities.
With the outbreak of the Coronavirus, Chinese authorities quarantined many cities and restricted travel within the country.
We asked our approximately 140 employees based in China not to report to our facilities and restricted travel to China. Similar
actions have been taken by our China-based and other suppliers and customers. Many commercial airlines and countries have
canceled flights and restricted travel to and from China. If the virus spreads further and Chinese business continue to be
shutdown or delayed, it could adversely affect our business and results of operations.
Higher oil prices could adversely affect commercial airline-related customers of our Aerospace and Defense Electronics
segment. Conversely, lower oil prices have decreased oil exploration and petrochemical refining activities and have hindered
our Marine and other Instrumentation businesses. In addition, instability in the Middle East or other oil-producing regions
could adversely affect expansion plans of the oil and gas industry customers of our Instrumentation businesses.
Our revenue from government contracts subjects us to many risks:
Our revenue from U.S. government contracts depends on the continued availability of funding from the U.S.
Government, and, accordingly, we have the risk that funding for our existing contracts may be canceled or
diverted to other uses or delayed or that funding for new programs will not be available.
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 subcontracts with government prime contractors. Sales under contracts with the
U.S. Government, including sales under contracts with the U.S. Department of Defense, as prime contractor or subcontractor,
represented approximately 24% of our total revenue in 2019, compared with 23% in 2018 and 24% in 2017. Performance
under government contracts has inherent risks that could have a material effect on our business, results of operations, and
financial condition.
Government contracts are conditioned upon the continuing availability of Congressional appropriations and the failure of
Congress to appropriate funds for programs in which we participate could negatively affect our results of operations. U.S.
Government shutdowns have resulted in delays in anticipated contract awards and delayed payments of invoices for several of
our businesses and any new shutdown could have similar or worse effects. The failure by Congress to approve future budgets
on a timely basis could delay procurement of our products and services and cause us to lose future revenues. Any renewed
emphasis on Federal deficit and debt reduction could lead to a further decrease in overall defense spending. Budgetary
concerns could result in future contracts being awarded more on price than on other competitive factors, and smaller defense
budgets could result in government in-sourcing of programs and more intense competition on programs that are not in-sourced,
which could result in lower revenues and profits.
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Although the U.S. President has indicated his desire for increased defense spending, continued defense spending does not
necessarily correlate to continued business for us, because not all of the programs in which we participate or have current
capabilities may be provided with continued funding. Changes in policy and budget priorities by the President, his
Administration and the U.S. Congress for various defense and National Aeronautics and Space Administration (“NASA”)
programs could continue to impact our Engineered Systems, Aerospace and Defense Electronics and Digital Imaging segments.
Our Aerospace and Defense Electronics segment may be impacted by volume or price reductions in connection with the F-35
Joint Strike Fighter program, to the extent they are imposed. The timing of program cycles can affect our results of operations
for a quarter or year, and cancellations of significant programs such as the Space Launch System (“SLS”), Launch Vehicle
Stage Adapter (“LVSA”), International Space Station (“ISS”), Mission Operations and Integration (“MO&I”), or the Shallow
Water Combat Submersible (“SWCS”) would affect our results. It is also not uncommon for the U.S. Department of Defense to
delay the timing of awards for major programs for six to twelve months. Reductions and delays in research and development
funding by the U.S. Government could impact our revenues. Uncertainty over budgets or priorities with the existing or a
different U.S. Presidential Administration following the 2020 election could result in delays in funding and the timing of
awards, and changes in funded programs that could have a material impact on our revenues.
Our participation in government programs may decrease as those programs evolve over time.
Over time, and for a variety of reasons, programs can evolve and affect the extent of our participation. We have been a
significant participant in NASA programs, primarily through our Engineered Systems segment and through Teledyne Scientific
and Imaging, LLC. The prior U.S. Presidential Administration introduced significant changes to the national space policy,
including the cancellation of NASA’s Constellation Program which includes Ares launch vehicles. Delayed funding and
changes in support for NASA’s current space policy, including the Space Launch System (“SLS”), International Space Station
(“ISS”), or Artemis Mission to the Moon could negatively impact our business. Furthermore, while funding for national space
has been more positive under the current U.S. Presidential Administration, a different U.S. Presidential Administration
following the 2020 election could make changes to funding for national space that could be less favorable.
Furthermore, the U.S. Government continues to place emphasis on small business quotas and may continue to increase
small business contract set asides and minimum work percentages. In some cases, prime contractors are required to reduce
participation by large subcontractors like Teledyne in order to fill small business quotas and be responsive to proposals and
bids. As a result, our Engineered Systems segment could lose participation in some government programs.
Our contracts with the U.S. Government are subject to termination rights that could adversely affect us.
Most of our U.S. Government contracts are subject to termination by the U.S. Government either at its convenience or
upon the default of the contractor. Termination for convenience provisions provide only for the recovery of costs incurred or
committed, settlement expenses, and profit on work completed prior to termination. Termination for default clauses impose
liability on the contractor for excess costs incurred by the U.S. Government in re-procuring undelivered items from another
source. We had three U.S. Government contracts terminated for convenience in 2019, compared with 15 in 2018 and nine in
2017. No contracts were terminated for default during such three-year period.
We may lose money or generate less than expected profits on our fixed-price and other government contracts; and
if we fail to meet certain pre-specified targets in government contracts, we may lose money.
There is no guarantee that U.S. Government contracts will be profitable. A number of our U.S. Government prime
contracts and subcontracts are fixed-price type contracts (64% of our total revenue from U.S. Government contracts came from
fixed-price in 2019, 67% in 2018 and 58% in 2017). Under these types of contracts, we bear the financial risk that actual
performance cost may exceed the fixed contract price. Under such contracts, we must absorb cost overruns, notwithstanding
the difficulty of estimating all of the costs we will incur in performing these contracts. We cannot assure that our contract loss
provisions in our financial statements will be adequate to cover all actual future losses. As the technological complexity and
required performance levels for our products increase, which is occurring in many of our businesses, it becomes more
challenging to estimate costs. We may lose money or generate lower profits on some contracts if we fail to meet these
estimates. We may also lose money on non-fixed price, cost-reimbursement contracts that contain penalties related to cost,
schedule or performance. Furthermore, some of our research and development programs for the government may get canceled
or descoped should we fail to meet certain technical goals.
Additionally, as we continue to support legacy defense programs certain components become more difficult to source,
there is a risk that we may not be able to source critical components which could lead to cost overruns.
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Our U.S. Government contracting business is subject to government contracting regulations, including
increasingly complex regulations on cybersecurity, and our failure to comply with such laws and regulations could
harm our operating results and prospects.
Our U.S. Government contracting businesses, like other government contractors, are subject to various audits, reviews and
investigations (including private party “whistleblower” lawsuits) relating to our compliance with applicable federal and state
laws and regulations. More routinely, the U.S. Government may audit the costs we incur on our U.S. Government contracts,
including allocated indirect costs. Such audits could result in adjustments to our contract costs. Any costs found to be
improperly allocated to a specific contract will not be reimbursed, and such costs already reimbursed would need to be
refunded. We have recorded contract revenues based upon costs we expect to realize after final audit. In a worst case scenario,
should a business or division involved be charged with wrongdoing, or should the U.S. Government determine that the business
or division is not a “presently responsible contractor”, that business or division, and conceivably our Company as a whole,
could be temporarily suspended or, in the event of a conviction, could be debarred for up to three years from receiving new
government contracts or government-approved subcontracts. In addition, we could expend substantial amounts defending
against such charges and in damages, fines and penalties if such charges were proven or were to result in negotiated settlements.
The Department of Defense as well as other U.S. Government contracting agencies have adopted rules and regulations
requiring contractors to implement a set of cyber security measures to attain the safeguarding of contractor systems that process,
store, or transmit certain information. Implementation and compliance with these cyber security requirements is complex and
costly, and could result in unforeseen expenses, lower profitability and, in the case of non-compliance, penalties and damages,
all of which could have an adverse effect on our business.
Our pension expense and the value of our pension assets are affected by factors outside of our control, including the
performance of plan assets, the stock market, interest rates and actuarial experience.
Our domestic qualified defined benefit pension plans cover most of our U.S. employees hired prior to 2004 or
approximately 10% of our active employees. We also have several small domestic non-qualified and foreign-based pension
plans. As of December 29, 2019, the value of the combined pension assets is greater than our combined pension benefit
obligations. The accounting rules applicable to our pension plans require that amounts recognized in the financial statements be
determined on an actuarial basis, rather than as contributions are made to the plan. Two significant elements in determining our
pension income or pension expense are the expected return on plan assets and the discount rate used in projecting pension
benefit obligations. Declines in the stock market and lower rates of return could increase required contributions to our qualified
pension plan and/or result in a change to shareholders’ equity. Our investment strategy may not produce the expected returns if
the credit, financial or stock markets deteriorate. Any decreases or increases in market interest rates will affect the discount rate
assumption used in projecting pension benefit obligations. In addition, changes in other actuarial assumptions such as mortality
assumptions or change due to legislative or regulatory actions could impact our pension income or expense as well as funding
obligations. Each year, beginning in 2014, the Society of Actuaries has released revised mortality tables, which updated life
expectancy assumptions. In consideration of these tables, each year we review the mortality assumptions used in determining
our pension and post-retirement benefit obligations. The impact of these mortality assumptions could increase our pension
obligation and increase future pension expense. No contributions have been made to the domestic qualified pension plan since
2013. If, and to the extent, decreases in our pension assets are not offset by voluntary contributions, recovered through future
asset returns, mitigated by an increase in the rate at which the benefit obligation is discounted, or other actions, our required
cash contributions and pension expense could increase under the plans. In addition, we have sold approximately $63.9 million
in pension liability to third parties. To the extent any of these counterparties are unable to fulfill their obligations to retirees, we
may have residual liability, particularly to the extent state guarantee funds are inadequate. For additional discussion of pension
matters, see the discussion under “Item 7. Management’s Discussion and Analysis of Operations and Financial Condition” and
Notes 2, 11 and 15 of the Notes to Consolidated Financial Statements.
Our business and operations could suffer in the event of cyber security breaches.
Attempts by others to gain unauthorized access to our information technology systems have become more sophisticated
and are sometimes successful. These attempts, which might be related to industrial or foreign government espionage, crime,
activism, or other motivations, include covertly introducing malware into our computers and computer networks, performing
reconnaissance, impersonating authorized users, extortion, stealing, corrupting or restricting our access to data, among other
activities. We continue to train our personnel and update our infrastructure, security tools and processes to protect against
security incidents, including both external and internal threats, and to prevent their recurrence. Company personnel and third
parties have been tasked to detect, respond to, and investigate such incidents, but it is possible that we might not prevent or be
aware of or be able to react to an incident or its magnitude and effects. The theft, corruption, unauthorized use or publication of
our intellectual property or confidential business information could harm our competitive position, reduce the value of our
investment in research and development and other strategic initiatives or otherwise adversely affect our business. We are
subject to U.S. Department of Defense regulations applicable to certain types of data residing on or transiting through our
information systems, and these regulations have been and will continue to be incorporated into certain U.S. Department of
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Defense contracts that we hold. To the extent that any security breach results in inappropriate disclosure of confidential or
controlled information of employees, third parties or the U.S. Government, or any of the deployed security controls are deemed
insufficient, we may incur liability or the loss of contracts or security clearances. As a result, we expect to continue to devote
additional resources to the security of our information technology systems. More resources may be required in the defense
arena to the extent the U.S. Government increases its cyber security mandates. Unauthorized access to or control of our
products, devices or systems could impact the safety of our customers and other third parties which could result in legal claims
against us. Security breaches also could result in a violation of applicable U.S. and international privacy and other laws,
including the EU General Data Protection Regulation (“GDPR”), Health Insurance Portability and Accountability Act
(“HIPAA”), Payment Card Industry Data Security Standard (“PCI”) and California Consumer Privacy Act (“CCPA”) and
subject us to private consumer or securities litigation and governmental investigations and proceedings, any of which could
result in our exposure to material civil or criminal liability.
We may not have sufficient resources to fund all future research and development and capital expenditures or possible
acquisitions.
In order to remain competitive, we must make substantial investments in research and development of new or enhanced
products and continuously upgrade our process technology and manufacturing capabilities. Our research and development
efforts primarily involve engineering and design related to improving existing products and developing new products and
technologies in the same or similar fields. Our Teledyne Scientific Company subsidiary, which serves as our primary research
center, has been actively promoting and funding joint research and development projects with other Teledyne businesses,
including Teledyne Oil & Gas, Teledyne Defense Electronics, Teledyne Digital Imaging and our Test and Measurement
businesses. The business of e2v, for which the design and development of specialized technology for high performance
systems and equipment is integral, also requires substantial investments in research and development. Additionally, some of
our businesses have sought or are actively pursuing governmental support and funding for some of their research and
development initiatives, including funding in 2019 for DALSA’s semiconductor foundry in Bromont, Quebec. Nonetheless,
we may be unable to fund all of our research and development and capital investment needs or possible strategic acquisitions of
businesses or product lines. Our ability to raise additional capital will depend on a variety of factors, some of which will not be
within our control, including the existence of bank and capital markets, investor perceptions of us, our businesses and the
industries in which we operate, and general economic conditions. Failure to successfully raise needed capital or generate cash
flow on a timely or cost-effective basis could have a material adverse effect on our business, results of operations and financial
condition. In addition, if we fail to accurately predict future customer needs and preferences or fail to produce viable
technologies, we may invest heavily in research and development of products that do not lead to significant revenue, which
would adversely affect our profitability.
Limitations in customer funding for applied research and development and limitations in government support for research
and development expenditures may reduce our ability to apply our ongoing investments in some market areas.
We may be unable to successfully introduce new and enhanced products in a timely and cost-effective manner or
increase our participation in new markets, which could harm our profitability and prospects.
Our operating results depend in part on our ability to introduce new and enhanced products on a timely basis. We have
major development activities at some of our businesses, for which a failure to execute in a timely manner could negatively
impact those businesses. In order to improve our product development capabilities, we purchased the research center that is
now Teledyne Scientific Company in 2006 and in 2011 we purchased DALSA to gain access to a well-equipped MEMS
research and development center. In 2013, we opened a 52,000-square-foot technology development center in Daytona Beach,
Florida primarily to serve the offshore oil and gas production and exploration industries. We are currently upgrading
infrastructure at Teledyne e2v’s facility in Chelmsford, U.K. and have expanded Teledyne DALSA’s MEMS foundry in
Bromont, Quebec, as well as acquired a second MEMS foundry in Edmonton, Alberta as part of the Micralyne acquisition.
Successful product development and introduction depend on numerous factors, including our ability to anticipate customer and
market requirements, changes in technology and industry standards, our ability to differentiate our product offerings from the
product offerings of our competitors, and market acceptance. We may not be able to develop and introduce new or enhanced
products in a timely and cost-effective manner or to develop and introduce products that satisfy customer requirements.
Our new products also may not achieve market acceptance or correctly address new industry standards and technological
changes. We may also lose any technological advantage to competitors if we fail to develop new products in a timely manner.
Additionally, new products may trigger increased warranty costs as information on such products is augmented by actual
usage. Accelerated entry of new products to meet heightened market demand and competitive pressures may cause additional
warranty costs as development and testing time periods might be accelerated or condensed.
We intend to both adapt our existing technologies and develop new products to expand into new market segments. We
may be unsuccessful in accessing these and other new markets if our products do not meet our customers’ requirements, as a
result of changes in either technology and industry standards or because of actions taken by our competitors.
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Technological change and evolving industry and regulatory standards could cause some of our products or services to
become obsolete or non-competitive.
The markets for some of our products and services are characterized by rapid technological development, evolving
industry standards, changes in customer requirements and new product introductions and enhancements. A faster than
anticipated change in one or more of the technologies related to our products or services, or in market demand for products or
services based on a particular technology, could result in faster than anticipated obsolescence of certain of our products or
services and could lead to reduced sales of those products, which could have a material adverse effect on our business, results
of operations and financial condition. Currently accepted industry and regulatory standards are also subject to change, which
may contribute to the obsolescence of our products or services. The political agenda of the U.S. Presidential Administration
may affect the level of environmental regulations and enforcement and government spending on scientific research, which
could adversely impact the sales of our products and services, including sales of pollution monitoring instruments and
instruments used to measure the Earth’s climate and climate change, such as undersea gliders and space-based imaging sensors.
A change in China’s economic policies promoting pollution reduction could result in lower sales or slower sales growth for our
pollution monitoring and laboratory instrumentation to China.
We may not be able to reduce the costs of our products to satisfy customers’ cost reduction mandates, which could harm
our sales or margins.
Cost conscious customers may seek price reductions of our products. While we continually work to reduce our
manufacturing and other costs of our products, without affecting product quality and reliability, there is no assurance that we
will be able to do so or to do so in a timely manner to satisfy the pricing pressures of our customers. Prices of raw materials
and other components used in our products may be beyond our control depending on market conditions. As a result, customers
may seek lower cost products from China or other developing countries where manufacturing costs are lower.
The airline industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations
could suffer.
The Federal Aviation Administration (“FAA”) and equivalent regulatory agencies have increasingly focused on the need
to assure that airline industry products are designed with sufficient cybersecurity controls to protect against unauthorized access
or other unwanted compromise. A failure to meet these evolving expectations could negatively impact sales into the industry
and expose us to legal or contractual liability.
Governmental agencies throughout the world, including the FAA, prescribe standards and qualification requirements for
aircraft components, including virtually all commercial airline and general aviation products. Specific regulations vary from
country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries.
If any material authorization or approval qualifying us to supply our products is revoked or suspended, then sale of the product
would be prohibited by law, which would have an adverse effect on our business, financial condition and results of operations.
From time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to
existing regulations, which often are more stringent than existing regulations. If such proposals are adopted and enacted, we
may incur significant additional costs to achieve compliance, which could have a material adverse effect on our business,
financial condition and results of operations. Recent trends by China’s aviation authority to relax restrictions on airspace may
be reversed, and anticipated new regulations loosening airspace restrictions may not materialize, which could impact sales
prospects in China for our commercial aerospace businesses.
The FAA and the U.S. Department of Justice’s Fraud Section, among other agencies and countries, are investigating two
Boeing 737 Max 8 aircraft crashes that occurred in October 2018 and March 2019, which resulted in the groundings of such
aircraft across the world. While the investigations continue, Boeing announced in December 2019 that it will temporarily
suspend production of the 737 Max starting in January 2020. While the impact of this decision has been factored into our
business plans, there is a risk that the decision will have further negative impact on our Teledyne Controls’ business,
particularly if the suspension lasts longer than expected.
Increasing competition could reduce the demand for our products and services.
Each of our markets is highly competitive. Many of our competitors have, and potential competitors could have, greater
name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution
capabilities and greater financial, technological and personnel resources. New or existing competitors may also develop new
technologies that could adversely affect the demand for our products and services. We have been experiencing increased
competition for some of our key products. Furthermore, some of our patents have or are expiring which could open up further
competition. For example, our U.S. patent related to our Wireless GroundLink product expired in 2018, allowing several
competitors to enter the market. Additionally, some of our customers have been developing competing products or electing to
vertically integrate and replace our products with their own. For example, Airbus has developed its own wireless product,
FOMAX, that now competes directly with Teledyne Controls hardware and services. Furthermore, Boeing has announced a
vertical integration program, which include avionics. Lastly, some of our products face increasing competition from alternative
technologies. For example, the lead acid batteries that Teledyne Battery Products sells face competition from lithium ion
batteries, among other competing technologies.
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Industry acquisition and consolidation trends, particularly among aerospace and defense contractors, have adversely
impacted demand for our aerospace and defense related engineering services as large prime contractors elect to in-source major
acquisition programs and expand small business participation to meet Government contracting goals. Such consolidations can
also cause delays in business as the newly consolidated organization undergoes integration.
Low-cost competition from China and other developing countries could also result in decreased demand for our products.
Increasing competition could reduce the volume of our sales or the prices we may charge, which would negatively impact our
revenues. Smaller defense budgets both in the United States and Europe could result in additional competition for new and
existing defense programs.
Product liability claims, product recalls and field service actions could have a material adverse effect on our
reputation, business, results of operations and financial condition and we may have difficulty obtaining product liability
and other insurance coverage.
As a manufacturer and distributor of a wide variety of products, including monitoring instruments, products used in
offshore oil and gas production, products used in transportation and commercial aviation and products used in medical devices
(including X-ray detectors), our results of operations are susceptible to adverse publicity regarding the quality or safety of our
products. In part, product liability claims challenging the safety of our products may result in a decline in sales for a product,
which could adversely affect our results of operations. This could be the case even if the claims themselves are proven to be
untrue or settled for immaterial amounts.
While we have general liability and other insurance policies concerning product liabilities and errors and omissions, we
have self-insured retentions or deductibles under such policies with respect to a portion of these liabilities. Awarded damages
could be more than our accruals. We could incur losses above the aggregate annual policy limit as well. We cannot assure that,
for 2020 and in future years, insurance carriers will be willing to renew coverage or provide new coverage for product liability.
Product recalls can be expensive and tarnish our reputation and have a material adverse effect on the sales of our products.
We cannot assure that we will not have additional product liability claims or that we will not recall any products.
We have been joined, among a number of defendants (often over 100), in lawsuits alleging injury or death as a result of
exposure to asbestos. In addition, because of the prominent “Teledyne” name, we may continue to be mistakenly joined in
lawsuits involving a company or business that was not assumed by us as part of our 1999 spin-off. To date, we have not
incurred material liabilities in connection with these lawsuits. However, our historic insurance coverage, including that of our
predecessors, may not fully cover such claims and the defense of such matters. Coverage typically depends on the year of
purported exposure and other factors. Nonetheless, we intend to vigorously defend our position against these claims.
Teledyne Brown Engineering, Inc. and other Teledyne companies manufacture components for customers in the nuclear
power market, including utilities and certain governmental entities. Certain liabilities associated with such products are covered
by the Price-Anderson Nuclear Industries Indemnity Act and other statutory and common law defenses, and we have received
indemnities from some of our customers. However, there is no assurance we will not face product liability claims related to
such products or that our exposure will not exceed the amounts for which we have liability coverage or protection.
Our business and financial results could be adversely affected by conditions and other factors associated with our
suppliers.
Some items we purchase for the manufacture of our products are purchased from limited or single sources of supply due
to technical capability, price and other factors. For example, Teledyne Digital Imaging has an internal single source of supply
for CCD semiconductor wafers used to assemble image sensors and an external single source of supply for CMOS
semiconductor wafers used to assemble X-ray panel products. Furthermore, sole source supply is more common among our
research and development businesses because there can be few suppliers in the world capable of producing the products or
providing the services with the right highly specialized technology. LeCroy continues to outsource a portion of its research and
development activities to third-party engineering firms in Malaysia and India where it may be more difficult for us to enforce
our intellectual property rights. We have also outsourced from time to time the manufacturing of certain parts, components,
subsystems and even finished products to single or limited sources, including international sources. Disruption of these sources
or supplier-imposed rationing of scarce components could cause delays or reductions in shipments of our products or increases
in our costs, which could have an adverse effect on our financial condition or operations. We could experience global supply
chain disruptions if the Coronavirus heath crisis continues and widens. International sources possess additional risks, some of
which are similar to those described above regarding international sales. With any continuing disruption in the global economy
and financial markets, some of our suppliers may also continue to face issues gaining access to sufficient credit and materials to
maintain their businesses, which could reduce the availability of some components and, to the extent such suppliers are single
source suppliers, could adversely affect our ability to continue to manufacture and sell our products.
23
We face risks related to sales through distributors and other third parties that we do not control, which could harm our
business.
We sell a portion of our products through third parties such as distributors, value-added resellers and OEMs (collectively
“distributors”). Using third parties for distribution exposes Teledyne to many risks, including concentration, credit risk and
legal risk because under certain circumstances we may be held responsible for the action of those third-party sales channels
even though we exercise less control over them than we do our directly employed sales personnel. We may rely on one or more
key distributors for a product, and the loss of these distributors could reduce our revenue. Distributors may face financial
difficulties, including bankruptcy, which could harm our collection of accounts receivables and financial results. Violations of
the Foreign Corrupt Practices Act (“FCPA”) or similar anti-bribery laws by distributors or other third-party intermediaries
could have a material impact on our business. Competitors could also block our access to key distributors. Failing to manage
risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position, and could
result in sanctions against us.
Compliance with increasing environmental and climate change regulations, as well as the effects of potential
environmental liabilities, could have a material adverse financial effect on us.
We, like other industry participants, are subject to various federal, state, local and international environmental laws and
regulations. We may be subject to increasingly stringent environmental standards in the future, particularly as greenhouse gas
emissions and climate change regulations and initiatives increase. Future developments, administrative actions or liabilities
relating to environmental and climate change matters could have a material adverse effect on our business, results of operations
or financial condition. Environmental regulations on hydraulic fracturing and the use of seismic energy sources for offshore
energy exploration could adversely affect some product lines of our Instrumentation segment.
Our manufacturing operations, including former operations, could expose us to material environmental liabilities.
Additionally, companies that we acquire may have environmental liabilities that might not be accurately assessed or brought to
our attention at the time of the acquisition.
The U.S. Environmental Protection Agency (“EPA”) has focused on greenhouse gases (“GHGs”), maintaining GHGs
threaten the public health and welfare of the American people. The EPA also maintains that GHG emissions from on-road
vehicles contribute to that threat. The EPA’s endangerment finding covers emissions of six greenhouse gases. The EPA’s
continuing efforts to limit GHG emissions could adversely affect our U.S. manufacturing operations, increase prices for energy,
fuel and transportation, require us to accommodate changes in parameters, such as the way parts are manufactured, and may, in
some cases, require us to redesign certain of our products. This, or other federal or state regulations, could lead to increased
costs, which we may not be able to recover from customers, delays in product shipments and loss of market share to
competitors. For example, Teledyne Battery Products unit makes lead acid batteries in California and is subject to a variety of
environmental regulations and inspections, which have increased over time. Also, some of our sites conduct electroplating,
metal finishing and other operations that utilize hazardous materials that are subject to similar regulations. Regulatory changes
or failure to meet applicable requirements could disrupt that business or force a closure or relocation of the business.
Our products are subject to various regulations that prohibit or restrict the use of certain hazardous substances. For
example, our products placed on the European market are subject to the Registration, Evaluation, Authorization and Restriction
of Chemicals (“REACH”) and the restriction of the use of certain hazardous substances in electrical and electronic equipment
(“ROHS”) Directives. Future hazardous substance restrictions or prohibitions may limit our ability to market some products in
certain countries.
For additional discussion of environmental matters, see the discussion under the caption “Other Matters – Environmental”
of “Item 7. Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 14 of the Notes
to Consolidated Financial Statements. For a discussion of our products that contribute to the environment, sustainability and
climate science, see “Item 1. Business – Environment and Sustainability”.
Our inability to attract and retain key personnel could have a material adverse effect on our future success.
Our future success depends to a significant extent upon the continued service of our executive officers and other key
management and technical personnel and on our ability to continue to attract, retain and motivate qualified personnel. We also
have a maturing workforce. Some of our businesses, including our businesses in traveling wave tube and integrated microwave
module design and development, draw from a pool of specialized engineering talent that is small and currently shrinking. Some
of our businesses have a need for employees with a certain level of security clearance, and competition for such employees has
increased. While we have engaged in succession planning, the loss of the services of one or more of our key employees or our
failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial
condition and results of operations. Low unemployment in the United States has made it more difficult for some of our
businesses to attract and retain direct labor in certain markets.
24
We may not be able to sell or reconfigure businesses, facilities or product lines that we determine no longer meet with
our growth strategy or that should be consolidated.
Consistent with our strategy to emphasize growth in our core markets, we continually evaluate our businesses to ensure
that they are aligned with our strategy and objectives. Over the years we have also consolidated some of our business units and
facilities, in some cases to respond to downturns in the defense and oil and gas industries, among other reasons. We are
currently in the process of closing our Teledyne Paradise Datacom facility in State College, Pennsylvania and moving its
operations to our Teledyne Microwave Solutions facility in Rancho Cordova, California. We may not be able to realize
efficiencies and cost savings from our consolidation activities. There is no assurance that our efforts will be successful. If we
do not successfully manage our current consolidation activities, or any other similar activities that we may undertake in the
future, expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted.
Our ability to dispose of, exit or reconfigure businesses that may no longer be aligned with our growth strategy will depend on
many factors, including the terms and conditions of any asset purchase and sale agreement or lease agreement, as well as
industry, business and economic conditions. We cannot provide any assurance that we will be able to sell non-strategic
businesses on terms that are acceptable to us, or at all. In addition, if the sale of any non-strategic business cannot be
consummated or is not practical, alternative courses of action, including relocation of product lines or closure, may not be
available to us or may be more costly than anticipated.
Natural and man-made disasters could adversely affect our business, results of operations and financial condition.
Several of our facilities, as a result of their locations, could be subject to a catastrophic loss caused by earthquakes,
hurricanes, tornados, floods, ice storms or other natural disasters. Many of our production facilities and our headquarters are
located in California and thus are in areas with above average seismic activity and may also be at risk of damage due to
wildfires. In November 2018, wildfires impacted areas near our headquarters and principal research and development center in
Thousand Oaks, California, resulting in temporary disruptions and evacuations of employees who lived nearby. Local utilities
may impose blackouts during high fire risk weather conditions, which could result in disruptions to our businesses located in
California, including our headquarters. Teledyne DALSA’s semiconductor facilities in Quebec, Canada have been impacted
by loss of electrical power caused by severe ice storms. In addition, we have manufacturing facilities in the southeastern United
States and Texas that have been threatened or struck by major hurricanes. In 2017, our businesses located in Houston, Texas
were impacted by Hurricane Harvey and our business in Florida was threatened by Hurricanes Irma and Matthew. Our
facilities in Alabama, Florida, Nebraska, Tennessee and Virginia have also been threatened by tornados. If any of our
California facilities, including our California headquarters, were to experience a catastrophic earthquake or wildfire loss or if
any of our Alabama, Florida, Nebraska, Tennessee or Texas facilities were to experience a catastrophic hurricane, storm,
tornado or other natural disaster, or if DALSA’s facilities in Quebec experience long-term loss of electrical power, such event
could disrupt our operations, delay production, shipments and revenue, and result in large expenses to repair or replace the
facility or facilities. While Teledyne has property insurance to partially reimburse it for losses caused by windstorm and earth
movement, such insurance would not cover all possible losses. In addition, our existing disaster recovery and business
continuity plans (including those relating to our information technology systems) may not be fully responsive to, or minimize
losses associated with, catastrophic events.
Disasters also have an indirect adverse impact on our business. For example, in 2018, a fire at a Netherlands-based
facility of a key supplier of printed circuit boards resulted in delivery disruptions to the electronics industry, including to
businesses in our Digital Imaging segment.
Teledyne Brown Engineering, Inc. has developed, built, and launched a multiuser system for earth sensing that is affixed
to the International Space Station (“ISS”). For the program to continue to be financially successful, the 20-year-old ISS must
continue to fly in a safe and human tended condition. While certain spaceflight risks, such as a high-velocity debris impact to
the station causing significant structural damage or necessitating the evacuation of the ISS, have been regarded as small, if such
event were to occur, the ISS program continuation could be threatened, jeopardizing our investment and potential revenue
generation from ISS-based Earth imaging.
We may not be able to enforce or protect our intellectual property rights, or third parties may claim we infringe their
intellectual rights, each which may harm our ability to compete and thus harm our business.
Our ability to enforce and protect our patents, copyrights, software licenses, trade secrets, know-how, and other
intellectual property rights is subject to general litigation risks, as well as uncertainty as to the enforceability of our intellectual
property rights in various countries. When we seek to enforce our rights, we have found that various claims may be asserted
against us, including claims that our intellectual property right is invalid, is otherwise not enforceable or is licensed to the party
against whom we are asserting a claim. In addition, we may be the target of aggressive and opportunistic enforcement of
patents by third parties. If we are not ultimately successful in defending ourselves against these claims in litigation, we may not
be able to sell a product or family of products due to an injunction, or we may have to pay damages that could, in turn, harm our
results of operations. Our inability to enforce our intellectual property rights under these circumstances may harm our
competitive position and our business.
25
Higher tax rates may harm our results of operations and cash flow.
Our effective tax rate for 2019 was 15.1%, compared with 15.3% for 2018 and 20.8% for 2017. While in December 2017,
the Tax Cuts and Jobs Act of 2017 was signed into law, which in general lowered corporate tax rates in the United States, a
number of factors may impact our effective tax rates, which could reduce our net income and increase our tax payments,
including:
•
•
•
•
•
•
•
•
the relative amount of income we earn in other jurisdictions;
changes in tax laws or their interpretation, including changes in the United States to the taxation of foreign income
and expenses, changes in tax laws in foreign jurisdictions, and changes in U.S. generally accepted accounting
principles and governing body pronouncements and interpretations;
the resolution of issues arising from tax audits;
changes in valuation of our deferred tax assets and liabilities, including deferred tax valuation allowances;
adjustments to income taxes upon finalization of tax returns;
increases in expense not deductible for tax purposes;
changes in available tax credits; and
any decision to repatriate non-U.S. earnings for which we have not made provision for U.S. taxes.
Our financial statements are based on estimates required by Generally Accepted Accounting Principles in the United
States (“GAAP”), and actual results may differ materially from those estimated under different assumptions or
conditions.
Our financial statements are prepared in conformity with GAAP. These principles require our management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. For example, estimates are used when accounting for
items such as revenue, asset valuations, allowances for doubtful accounts, allowance for excess and obsolete inventory,
depreciation and amortization, impairment assessments, employee benefits, taxes, recall and warranty costs, product and
general liability and contingencies. While we base our estimates on historical experience and on various assumptions that we
believe to be reasonable under the circumstances at the time made, actual results may differ materially from those estimated.
Our most critical accounting estimates are described in “Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations” in this Form 10-K under “Critical Accounting Estimates.”
There are inherent limitations in internal control systems, and misstatements resulting from error or fraud may occur
and may not be detected.
We continue to act to assure compliance with the internal controls, disclosure controls and other requirements of the
Sarbanes-Oxley Act of 2002. Our management, including our Chief Executive Officer and Chief Financial Officer, cannot
guarantee that our internal controls and disclosure controls will prevent all possible errors or all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the
benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of
controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by
collusion of two or more persons, or by management override of the controls. The design of any system of controls is also
based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because
of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of inherent
limitations in a cost-effective control system, misstatements resulting from error or fraud may occur and may not be detected.
Provisions of our governing documents, applicable law, and our Change in Control Severance Agreements could make
an acquisition of Teledyne more difficult.
Our Restated Certificate of Incorporation, our Amended and Restated Bylaws and the General Corporation Law of the
State of Delaware contain several provisions that could make the acquisition of control of Teledyne, in a transaction not
approved by our Board of Directors, more difficult. We have also entered into Change in Control Severance Agreements with
ten members of our current management, which could have an anti-takeover effect. These provisions may prevent or discourage
attempts to acquire our company.
26
The market price of our Common Stock has fluctuated significantly since we became a public company, and could
continue to do so.
The market price of our Common Stock has fluctuated substantially and fluctuations in our stock price could continue. In
2019, the price of our Common Stock ranged from $198.15 to $351.53. Subsequent to year-end 2019, our Common Stock hit a
high of $398.99 on January 22, 2020. On February 21, 2020, the closing price of our Common Stock was $385.66.
Among the factors that could affect our stock price are:
quarterly variations in our operating results;
strategic actions by us or our competitors;
acquisitions;
divestitures;
stock repurchases;
adverse business developments;
war in the Middle East or elsewhere;
terrorists' activities;
•
•
•
•
•
•
•
•
• military or homeland defense activities;
•
•
changes to the U.S. Federal budget or other government budgets;
changes in the energy exploration or production, semiconductor, digital imaging, telecommunications, commercial
aviation, and electronic manufacturing services markets;
general market conditions;
changes in tax laws;
general economic factors unrelated to our performance;
changes from analysts’ expectations in revenues, earnings or other financial results; and
one or more of the risk factors described in this report.
•
•
•
•
•
Stock markets in general, and the markets for high-technology companies in particular, have experienced a high degree of
volatility that is not necessarily related to the operating performance of these companies. We cannot provide assurances as to
our stock price. We have in the past repurchased shares of our stock pursuant to board-approved stock repurchase programs.
We cannot provide assurances that we will continue to repurchase shares under those programs, or that our board will authorize
new repurchase programs.
Item 1B. Unresolved Staff Comments
None.
27
Item 2.
Properties
The Company has 70 principal operating facilities in 17 states and six foreign countries. The Company’s executive
offices are located in Thousand Oaks, California. Its principal research and development center is also located in Thousand
Oaks, California. We maintain our facilities in good operating condition, and we believe they are suitable and adequate for the
purposes for which they are intended and overall have sufficient capacity to conduct business as currently conducted.
Information on the number, ownership and location of principal operating facilities by segment was as follows at
February 21, 2020:
Segment
Owned
Leased
States
Countries
Location of Facilities
Instrumentation
16
13 California, Colorado,
Florida, Massachusetts,
Nebraska, New Hampshire,
New York, Ohio,
Pennsylvania, Texas and
Virginia
Digital Imaging
13
7 California, Massachusetts,
New Jersey and
North Carolina
United States,
Canada, Denmark,
France and United
Kingdom
United States,
Belgium,
Canada,
France, The
Netherlands and
United Kingdom
Aerospace and Defense Electronics
Engineered Systems
Total
Item 3. Legal Proceedings
6
2
8 California, Illinois,
Pennsylvania and Texas
United States and
United Kingdom
5 Alabama, Maryland, Ohio
United States
and Tennessee
37
33
From time to time, we become involved in various lawsuits, claims and proceedings arising out of, or incident to, our
ordinary course of business including lawsuits, claims or proceedings pertaining to product liability, patent infringement,
commercial contracts, employment and employee benefits. While we cannot predict the outcome of any lawsuit, claim or
proceeding, our management does not believe that the disposition of any pending matters is likely to have a material adverse
effect on our business, financial condition or liquidity.
Item 4. Mine Safety Disclosures
No information is required in response to this item.
28
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Our Common Stock is listed on the New York Stock Exchange and traded under the symbol “TDY”. The following table
sets forth, for the periods indicated, the high and low sale prices for the Common Stock as reported by the New York Stock
Exchange.
As of February 18, 2020, there were 2,791 holders of record of the Common Stock. Because many of our shares of
common stock are held by brokers and institutions on behalf of stockholders, we are unable to estimate the total number of
beneficial owners of our stock represented by these stockholders of record.
We intend to use future earnings to fund the development and growth of our businesses, including through potential
acquisitions. We may also deploy cash to fund share repurchases. Therefore, we do not anticipate paying any cash dividends in
the foreseeable future.
We have stock repurchase programs authorized by our Board of Directors to repurchase up to approximately three million
shares. No repurchases were made since 2015. See Note 8 of the Notes to Consolidated Financial Statements for additional
information about our stock repurchase program.
Information relating to compensation plans under which our equity securities are outstanding for issuance is set forth in
Part III, Item 12 of this Annual Report on Form 10-K.
In each of December 2019, December 2018 and December 2017, we withheld shares upon the vesting of restricted stock
unit awards to satisfy tax withholding obligations in the amounts of 2,651 shares, 2,651 shares and 2,960 shares, respectively
Item 6.
Selected Financial Data
The following table presents our summary consolidated financial data. We derived the following historical selected
financial data from our audited consolidated financial statements. Our fiscal year is determined based on a 52- or 53-week
convention ending on the Sunday nearest to December 31. Each fiscal year presented below contained 52 weeks except for
fiscal year 2015 which contained 53 weeks. The five-year summary of selected financial data should be read in conjunction
with the discussion under “Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operation”
and the Notes to Consolidated Financial Statements.
Five-Year Summary of Selected Financial Data
2016
2017
2018
(In millions, except per-share amounts)
$ 2,603.8
227.2
$
227.2
$
6.45
$
6.26
$
36.3
$ 3,846.4
$ 1,063.9
$ 1,947.3
$ 2,149.9
190.9
$
190.9
$
5.52
$
5.37
$
35.5
$ 2,774.4
$
509.7
$ 1,554.4
$ 2,901.8
333.8
$
333.8
$
9.32
$
9.01
$
37.0
$ 3,809.3
$
610.1
$ 2,229.7
2015
$ 2,298.1
195.5
$
195.8
$
5.55
$
5.44
$
36.0
$ 2,717.1
$
754.1
$ 1,344.1
Net sales
Net income
Net income attributable to Teledyne
Basic earnings per common share
Diluted earnings per common share
Weighted average diluted common shares outstanding
Total assets
Long-term debt, less current portion
Total stockholders’ equity
2019
$ 3,163.6
402.3
$
402.3
$
11.08
$
10.73
$
37.5
$ 4,579.8
$
750.0
$ 2,714.7
29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Teledyne Technologies Incorporated provides enabling technologies for industrial growth markets that require advanced
technology and high reliability. These markets include aerospace and defense, factory automation, air and water quality
environmental monitoring, oceanographic research, deepwater oil and gas exploration and production, medical imaging and
pharmaceutical research. Our products include digital imaging sensors, cameras and systems within the visible, infrared and X-
ray spectra, monitoring 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. We also supply engineered systems for defense, space, environmental and energy applications.
We differentiate ourselves from many of our direct competitors by having a customer- and company-sponsored applied research
center that augments our product development expertise.
Strategy/Overview
Our strategy continues to emphasize growth in our core markets of instrumentation, digital imaging, aerospace and
defense electronics and engineered systems. Our core markets are characterized by high barriers to entry and include
specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with
targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment
among capital expenditures, acquisitions, product development and share repurchases. We aggressively pursue operational
excellence to continually improve our margins and earnings by emphasizing cost containment and cost reductions in all aspects
of our business. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using
complementary technology across our businesses and internal research and development, we seek to create new products to
grow our company and expand our addressable markets. We continue to evaluate our businesses to ensure that they are aligned
with our strategy.
Consistent with this strategy, we made three acquisitions in 2019 and in March 2017, we made our largest acquisition to
date, e2v technologies plc (“e2v”). See the Recent Acquisitions section following this section.
In the third quarter of 2019, we realigned the segment reporting structure for certain business units, primarily related to
certain refinements of our management reporting structure. This change primarily related to moving certain electronic
manufacturing services products from the Aerospace and Defense Electronics segment to the Engineered Systems segment.
Total net sales for these products were $76.2 million for fiscal year 2018. Other immaterial changes included moving certain
United Kingdom (“U.K.”) microwave product lines (previously within the Digital Imaging segment) and certain U.K.
manufactured composite parts (previously within the Engineered Systems segment) into the Aerospace and Defense Electronics
segment. Total net sales for these U.K. product lines was less than $20.0 million for fiscal year 2018. The realignment had no
impact on the Instrumentation segment or the Consolidated Financial Statements. See Note 12 of the Notes to Consolidated
Financial Statements for additional information on the realignment. Previously reported segment data has been adjusted to
reflect these changes.
As part of a continuing effort to reduce costs and improve operating performance, we may take and have taken actions to
consolidate and relocate certain facilities and reduce headcount across various businesses, reducing our exposure to weak end
markets and high cost locations. We continue to seek cost reductions in our businesses. At December 29, 2019, $1.5 million
remains to be paid related to these actions.
The following pre-tax charges were incurred related to severance and facility consolidations (in millions):
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total
Severance
Facility consolidations (a)
Total
(a) 2019 includes the reversal of certain amounts recorded in 2018 no longer needed.
30
2019
2018
2017
$
$
1.5
1.1
0.5
0.1
3.2
$
$
5.6
0.7
1.3
0.2
7.8
$
$
2.1
—
2.1
—
4.2
2019
2018
2017
$
$
3.5
(0.3)
3.2
$
$
5.6
2.2
7.8
$
$
3.8
0.4
4.2
Cost of sales
Selling, general and administrative expenses
Total
Recent Acquisitions
2019
2018
2017
$
$
0.8
2.4
3.2
$
$
4.9
2.9
7.8
$
$
2.8
1.4
4.2
The Company spent $484.0 million, $3.1 million and $774.1 million on acquisitions and other investments, net of cash
acquired in 2019, 2018 and 2017, respectively.
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 OEM 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 provides micro
electromechanical systems (“MEMS”) devices. In particular, Micralyne possesses unique microfluidic technology for biotech
applications, as well as capabilities in non-silicon-based MEMS (e.g. gold, polymers) often required for human body
compatibility. Based in Edmonton, Alberta, Canada, the acquired business is part of the Digital Imaging segment.
2017 Acquisitions
On March 28, 2017, we completed the acquisition of all of the outstanding common stock of e2v for $770.7 million,
including stock options and assumed debt, net of $24.4 million of cash acquired. 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’s results have been included
since the date of the acquisition and include $273.7 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 for fiscal year
2017.
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, $6.0
million related to a foreign currency option contract expense to hedge the e2v purchase price recorded as other expense and
$2.3 million in bank bridge facility commitment expense recorded to interest expense. Of these amounts, $8.3 million impacted
segment operating income.
On July 20, 2017, Teledyne Instruments, Inc. completed the acquisition of assets of Scientific Systems, Inc. (“SSI”) for
$31.0 million in cash. Headquartered in State College, Pa., SSI is a manufacturer of precision components and specialized
subassemblies used primarily in analytical and diagnostic instrumentation, such as high performance liquid chromatography
systems and specific medical devices. SSI designs and manufactures high pressure positive-displacement piston pumps for a
wide variety of analytical, clinical, sample prep and fluid-metering applications and is part of the Environmental
Instrumentation product line of the Instrumentation segment.
See Note 3 of the Notes to Consolidated Financial Statements for additional information about our recent acquisitions.
31
Consolidated Operating Results
Our fiscal year is determined based on a 52- or 53-week convention ending on the Sunday nearest to December 31. Fiscal
years 2019, 2018 and 2017 each contained 52 weeks. The following are selected financial highlights for 2019, 2018 and 2017
(in millions, except per-share amounts):
Net sales
Costs and expenses
Cost of sales
Selling, general and administrative expenses
Total costs and expenses
Operating income
Interest and debt expense, net
Non-service retirement benefit income
Other expense, net
Income before income taxes
Provision for income taxes
Net income
Basic earnings per common share
Diluted earnings per common share
2019
$ 3,163.6
2018
$ 2,901.8
2017
$ 2,603.8
1,920.3
751.6
2,671.9
1,791.0
694.2
2,485.2
1,624.0
658.1
2,282.1
491.7
(21.0)
8.0
(5.0)
473.7
71.4
402.3
11.08
10.73
$
$
$
416.6
(25.5)
13.5
(10.7)
393.9
60.1
333.8
9.32
9.01
$
$
$
321.7
(33.1)
13.9
(15.5)
287.0
59.8
227.2
6.45
6.26
$
$
$
Our businesses are aligned in four business segments: Instrumentation, Digital Imaging, Aerospace and Defense
Electronics and Engineered Systems. Our four business segments and their respective percentage contributions to our total
sales in 2019, 2018 and 2017 are summarized in the following table:
Segment contribution to total net sales:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Percentage of Total Net Sales
2017
2018
2019
35 %
31 %
22 %
12 %
100 %
35 %
30 %
22 %
13 %
100 %
37 %
27 %
23 %
13 %
100 %
32
Results of Operations
2019 compared with 2018
Net sales (dollars in millions)
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total net sales
Results of operations (dollars in millions)
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate expense
Operating income
Interest and debt expense, net
Non-service retirement benefit income
Other expense, net
Income before income taxes
Provision for income taxes
Net income
Sales and cost of sales by segment and total company (dollars in millions):
Instrumentation
Net sales
Cost of sales
Cost of sales % of net sales
Digital Imaging
Net sales
Cost of sales
Cost of sales % of net sales
Aerospace and Defense Electronics
Net sales
Cost of sales
Cost of sales % of net sales
Engineered Systems
Net sales
Cost of sales
Cost of sales % of net sales
Total Company
Net sales
Cost of sales
Cost of sales % of net sales
33
2019
2018
%
Change
$ 1,105.1
992.9
690.1
375.5
$ 3,163.6
$ 1,021.2
875.3
640.2
365.1
$ 2,901.8
8.2 %
13.4 %
7.8 %
2.8 %
9.0 %
2019
2018
%
Change
$
$
200.4
176.5
143.4
36.5
(65.1)
491.7
(21.0)
8.0
(5.0)
473.7
71.4
402.3
$ 147.4
155.5
131.8
37.9
(56.0)
416.6
(25.5)
13.5
(10.7)
393.9
60.1
$ 333.8
36.0 %
13.5 %
8.8 %
(3.7)%
16.3 %
18.0 %
(17.6)%
(40.7)%
(53.3)%
20.3 %
18.8 %
20.5 %
2019
2018
Change
$
$
$
$
$
$
$
$
$
$
1,105.1
612.8
55.5 %
992.9
580.6
58.5 %
690.1
414.7
60.1 %
375.5
312.2
83.1 %
3,163.6
1,920.3
60.7 %
$
$
$
$
$
$
$
$
$
$
1,021.2
575.2
56.3 %
875.3
529.4
60.5 %
640.2
385.9
60.3 %
365.1
300.5
82.3 %
2,901.8
1,791.0
61.7 %
$
$
$
$
$
$
$
$
$
$
83.9
37.6
117.6
51.2
49.9
28.8
10.4
11.7
261.8
129.3
We reported net sales of $3,163.6 million in 2019, compared with net sales of $2,901.8 million for 2018, an increase of
9.0%. Net income was $402.3 million ($10.73 per diluted share) in 2019, compared with net income of $333.8 million ($9.01
per diluted share) in 2018, an increase of 20.5%.
Total year 2019 and 2018 reflected pretax charges totaling $3.2 million and $7.8 million, respectively, for severance and
facility consolidation charges. Net income for 2019 and 2018 also included net discrete tax benefits of $26.1 million and $23.8
million, respectively.
Net sales
The increase in net sales in 2019, compared with 2018, reflected higher net sales in each segment. Net sales in 2019
included revenue growth of $128.7 million plus $133.1 million in incremental net sales from recent acquisitions.
Sales under contracts with the U.S. Government were approximately 24% of net sales in 2019 and 23% of net sales in
2018. Sales to international customers represented approximately 44% of net sales in 2019 and 47% of net sales in 2018.
Cost of Sales
Total cost of sales increased by $129.3 million in 2019, compared with 2018, which primarily reflected the impact of
higher net sales. The total company cost of sales as a percentage of net sales for 2019 was 60.7%, compared with 61.7% for
2018.
Selling, general and administrative expenses
Selling, general and administrative expenses, including research and development and bid and proposal expense, were
higher in 2019, compared with 2018. The increase primarily reflected the impact of higher sales and higher research and
development and bid and proposal expense. Corporate administrative expense in 2019 was $65.1 million, compared with $56.0
million in 2018. The higher 2019 amount reflected higher compensation expense including higher stock option expense. For
2019, we recorded a total of $26.1 million in stock option expense, of which $9.7 million was recorded within corporate
expense and $16.4 million was recorded in the operating segment results. For 2018, we recorded a total of $19.8 million in
stock option expense, of which $6.3 million was recorded within corporate expense and $13.5 million was recorded in the
operating segment results. Selling, general and administrative expenses as a percentage of sales was 23.8% for 2019, compared
with 23.9% for 2018.
Pension Service Expense
Pension service expense is included in both cost of sales and selling, general and administrative expense. Pension service
expense in 2019 was $9.4 million compared with $10.8 million in 2018.
Operating Income
Operating income for 2019 was $491.7 million, compared with $416.6 million for 2018, an increase of 18.0%. The
increase in operating income primarily reflected higher operating income in each segment, except the Engineered Systems
segment. Operating income in 2019 and 2018 reflected $3.2 million and $7.8 million in severance and facility consolidation
costs, respectively. The incremental operating income included in the results for 2019 from recent acquisitions was $16.2
million.
Interest Expense, Interest Income, Non-Service Retirement Benefit Income and Other Expense
Total interest expense, including credit facility fees and other bank charges, was $22.0 million in 2019 compared with
$29.2 million in 2018 and reflected the impact of lower average debt levels in 2019. Interest income was $1.0 million in 2019
and $3.7 million in 2018. Non-service retirement benefit income was $8.0 million in 2019, compared with $13.5 million in
2018. Other expense was $5.0 million for 2019, compared with expense of $10.7 million and reflected lower foreign currency
expense in 2019.
Income Taxes
The Company’s effective tax rate for 2019 was 15.1%, compared with 15.3% for 2018. For 2019 net discrete income tax
benefits were $26.1 million, which included a $15.4 million income tax benefit related to share-based accounting, $13.1 million
in income tax benefit as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitations, a
favorable tax settlement and a tax benefit related to U.S. export sales. For 2018 net discrete income tax benefits were $23.8
million, which included a $12.9 million income tax benefit related to share-based accounting, $5.1 million in income tax benefit
as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitations and a $4.8 million income
tax benefit related to the release of a valuation allowance for which the deferred tax assets are now determined more-likely-
than-not to be realizable. Excluding the net discrete income tax benefits in both years, the effective tax rates would have been
20.6% for 2019 and 21.3% for 2018.
34
2018 compared with 2017
Sales (dollars in millions)
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total sales
Results of operations (dollars in millions)
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate expense
Operating income
Interest and debt expense, net
Non-service retirement benefit income
Other expense, net
Income before income taxes
Provision for income taxes
Net income
Sales and cost of sales by segment and total company (dollars in millions):
Instrumentation
Net sales
Cost of sales
Cost of sales % of net sales
Digital Imaging
Net sales
Cost of sales
Cost of sales % of net sales
Aerospace and Defense Electronics
Net sales
Cost of sales
Cost of sales % of net sales
Engineered Systems
Net sales
Cost of sales
Cost of sales % of net sales
Total Company
Net sales
Cost of sales
Cost of sales % of net sales
35
2018
2017
%
Change
$ 1,021.2
875.3
640.2
365.1
$ 2,901.8
$
953.9
710.4
591.2
348.3
$ 2,603.8
7.1 %
23.2 %
8.3 %
4.8 %
11.4 %
2018
2017
%
Change
$
$
147.4
155.5
131.8
37.9
(56.0)
416.6
(25.5)
13.5
(10.7)
393.9
60.1
333.8
$
$
126.0
110.2
113.0
35.5
(63.0)
321.7
(33.1)
13.9
(15.5)
287.0
59.8
227.2
17.0 %
41.1 %
16.6 %
6.8 %
(11.1)%
29.5 %
(23.0)%
(2.9)%
(31.0)%
37.2 %
0.5 %
46.9 %
2018
2017
Change
$
$
$
$
$
$
$
$
$
$
1,021.2
575.2
56.3 %
875.3
529.4
60.5 %
640.2
385.9
60.3 %
365.1
300.5
82.3 %
2,901.8
1,791.0
61.7 %
$
$
$
$
$
$
$
$
$
$
953.9
547.2
57.4 %
710.4
442.8
62.3 %
591.2
348.9
59.0 %
348.3
285.1
81.9 %
2,603.8
1,624.0
62.4 %
$
$
$
$
$
$
$
$
$
$
67.3
28.0
164.9
86.6
49.0
37.0
16.8
15.4
298.0
167.0
We reported net sales of $2,901.8 million in 2018, compared with net sales of $2,603.8 million for 2017, an increase of
11.4%. Net income was $333.8 million ($9.01 per diluted share) in 2018, compared with net income of $227.2 million ($6.26
per diluted share) in 2017, an increase of 46.9%.
Total year 2018 and 2017 reflected pretax charges totaling $7.8 million and $4.2 million, respectively, for severance and
facility consolidation charges. Net income for 2018 and 2017 also included net discrete tax benefits of $23.8 million and $17.2
million, respectively. The total year 2017 amount included provisional charges of $4.7 million for the estimated impact of the
Tax Cuts and Jobs Act (“Tax Act”). Net income for 2017 included pretax charges totaling $27.0 million related to e2v
acquisition related expenses, of which, $5.7 million was recorded to cost of sales, $13.0 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
amount recorded to cost of sales related to the inventory fair value step-up amortization expense. The amount recorded to
selling, general and administrative expenses related to transaction costs, including stamp duty, advisory, legal and other
consulting fees and other costs. The amount recorded to interest expense related to funds-certain bank bridge facility
commitment expense. The amount recorded to other expense related to a foreign currency option contract.
Net sales
The increase in net sales in 2018, compared with 2017, reflected higher net sales in each segment. Net sales in 2018
included revenue growth of $182.9 million plus $115.1 million in incremental net sales from recent acquisitions, primarily e2v.
The incremental net sales from the March 2017 e2v acquisition in 2018 was $103.0 million.
Sales under contracts with the U.S. Government were approximately 23% of net sales in 2018 and 24% of net sales in
2017. Sales to international customers represented approximately 47% of net sales in 2018 and 46% of net sales in 2017.
Cost of Sales
Total company cost of sales increased by $167.0 million in 2018, compared with 2017, which primarily reflected the
impact of higher net sales. The total company cost of sales as a percentage of sales for 2018 was 61.7%, compared with 62.4%
for 2017.
Selling, general and administrative expenses
Selling, general and administrative expenses, including Company-funded research and development and bid and proposal
expense, were higher in 2018, compared with 2017. The increase primarily reflected the impact of higher sales and higher
research and development and bid and proposal expense. The 2017 amount included $13.0 million in acquisition related
expenses for the e2v acquisition. Corporate administrative expense in 2018 was $56.0 million, compared with $63.0 million in
2017. The 2017 amount included $10.4 million in acquisition related expenses for the e2v acquisition. For 2018, we recorded
a total of $19.8 million in stock option expense, of which $6.3 million was recorded within corporate expense and $13.5 million
was recorded in the operating segment results. For 2017, we recorded a total of $14.2 million in stock option expense, of which
$4.5 million was recorded within corporate expense and $9.7 million was recorded in the operating segment results. Selling,
general and administrative expenses as a percentage of sales was 23.9% for 2018, compared with 25.3% for 2017. The higher
percentage in 2017 reflected the impact of acquisition related expenses for the e2v acquisition.
Pension Service Expense
Pension service expense is included in both cost of sales and selling, general and administrative expense. Pension service
expense in 2018 was $10.8 million compared with pension service expense of $11.2 million in 2017.
Operating Income
Operating income for 2018 was $416.6 million, compared with $321.7 million for 2017, an increase of 29.5%. The
increase in operating income primarily reflected higher operating income in each segment, as well as lower corporate expense.
Operating income in 2018 and 2017 reflected $7.8 million and $4.2 million in severance and facility consolidation costs,
respectively. The incremental operating income included in the results for 2018 from recent acquisitions was $43.3 million.
Interest Expense, Interest Income, Non-Service Retirement Benefit Income and Other Expense
Total interest expense, including credit facility fees and other bank charges, was $29.2 million in 2018 compared with
$35.5 million in 2017 and reflected the impact of lower debt levels in 2018. Interest expense in 2017 included $2.3 million in
fees related to the terminated bridge facility in connection with the acquisition of e2v. Interest income was $3.7 million in 2018
and $2.4 million in 2017. Non-service retirement benefit income was $13.5 million in 2018, compared with $13.9 million in
2017. Other expense was $10.7 million for 2018, compared with expense of $15.5 million. Other expense in 2017 included
$6.0 million of expense for a foreign currency option contract related to the e2v acquisition.
36
Income Taxes
On December 22, 2017, the Tax Act was enacted, which 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. 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, for a net provisional charge of $4.7 million
recorded in the fourth quarter of 2017. The Company finalized its assessment of the Tax Act during the fourth quarter of 2018,
resulting in a decrease of $0.8 million to the provisional charge and the repatriation tax.
The Company’s effective tax rate for 2018 was 15.3%, compared with 20.8% for 2017. For 2018 net discrete income tax
benefits were $23.8 million, which included a $12.9 million income tax benefit related to share-based accounting, $5.1 million
in income tax benefit as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitations and a
$4.8 million income tax benefit related to the release of a valuation allowance for which the deferred tax assets are now
determined to be more-likely-than-not realizable. For 2017, net discrete income tax benefits were $17.2 million, which included
an $8.5 million income tax benefit related to the release of valuation allowance for which the deferred tax assets are now
determined more-likely-than-not to be realizable, $8.5 million income tax benefit as a result of the remeasurement of uncertain
tax positions due to expiration of statute of limitation, and $8.8 million in net discrete tax benefits related to share-based
accounting, partially offset by $4.6 million related to adjustments for uncertain tax positions and the $4.7 million provisional
charge, related to the Tax Act.
Excluding the net discrete income tax benefits in both years, the effective tax rates would have been 21.3% for 2018 and
26.8% for 2017. The decrease in the effective tax rate in 2018, primarily reflects the lower corporate income tax rates as part of
the Tax Act.
Segments
The following discussion of our four segments should be read in conjunction with Note 12 of the Notes to Consolidated
Financial Statements.
Instrumentation
(Dollars in millions)
Net sales
Cost of sales
Selling, general and administrative expenses
Operating income
Cost of sales % of net sales
Selling, general and administrative expenses % of net sales
Operating income % of net sales
International sales % of net sales
U.S. Government sales % of net sales
2019
$ 1,105.1
612.8
$
291.9
$
200.4
$
55.5 %
26.4 %
18.1 %
54.8 %
7.3 %
2018
$ 1,021.2
575.2
$
298.6
$
147.4
$
56.3 %
29.3 %
14.4 %
51.0 %
6.7 %
$
$
$
$
2017
953.9
547.2
280.7
126.0
57.4 %
29.4 %
13.2 %
53.7 %
6.8 %
Our Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other
applications, as well as electronic test and measurement equipment. We also provide power and communications connectivity
devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments.
2019 compared with 2018
Our Instrumentation segment net sales for 2019 increased 8.2%, compared with 2018. Operating income for 2019
increased 36.0%, compared with 2018.
The 2019 net sales increase primarily resulted from higher sales of environmental instrumentation, marine instrumentation
and test and measurement instrumentation, as well as the contribution from the gas and flame detection business acquisition.
Sales of environmental instrumentation increased $51.8 million and included $45.3 million in incremental sales from the gas
and flame detection business acquisition. Sales of marine instrumentation increased by $17.2 million. Sales of test and
measurement instrumentation increased $14.9 million. The increase in operating income reflected the impact of higher sales
and higher margins across most product lines. The incremental operating income included in the results for 2019 from the gas
and flame detection business acquisition was $4.1 million. Operating income in 2019 included $1.5 million in severance and
facility consolidation costs compared with $5.6 million in severance and facility consolidation costs for 2018.
37
Cost of sales increased by $37.6 million in 2019, compared with 2018, and primarily reflected the impact of higher net
sales. The cost of sales percentage decreased slightly to 55.5% in 2019 from 56.3% in 2018. Selling, general and
administrative expenses, including research and development and bid and proposal expense, in 2019, decreased by $6.7 million,
compared with 2018, and reflected the impact of cost control efforts, lower severance and facility consolidation costs and lower
research and development and bid and proposal expense of $3.2 million. Selling, general and administrative expenses for 2019,
as a percentage of sales, decreased to 26.4%, compared with 29.3% for 2018, and reflected the impact of cost control efforts,
lower severance and facility consolidation costs and lower research and development and bid and proposal expense.
2018 compared with 2017
Our Instrumentation segment net sales for 2018 increased 7.1%, compared with 2017. Operating income increased 17.0%,
compared with 2017.
The 2018 net sales increase primarily resulted from higher sales of test and measurement instrumentation, environmental
instrumentation and marine instrumentation, as well as the contribution from the SSI acquisition. Sales of test and measurement
instrumentation increased $39.7 million. Sales of environmental instrumentation increased $25.3 million and included $12.1
million in incremental sales from the SSI acquisition. Sales of marine instrumentation increased by $2.3 million. The increase in
operating income was primarily due to higher sales and improved margins for test and measurement instrumentation. Operating
income in 2017 included a $2.6 million reversal of a previously reserved receivable that was collected during 2017. The
incremental operating income included in the results for 2018 from recent acquisitions was $3.5 million.
Cost of sales increased by $28.0 million in 2018, compared with 2017, and primarily reflected the impact of higher net
sales. The cost of sales percentage decreased to 56.3% in 2018 from 57.4% in 2017. Selling, general and administrative
expenses, including research and development and bid and proposal expense, in 2018, increased by $17.9 million, compared
with 2017, and primarily reflected the impact of higher net sales. Selling, general and administrative expenses for 2018, as a
percentage of net sales, decreased slightly to 29.3%, compared with 29.4% for 2017.
Digital Imaging
(Dollars in millions)
Net sales
Cost of sales
Selling, general and administrative expenses
Operating income
Cost of sales % of net sales
Selling, general and administrative expenses % of net sales
Operating income % of net sales
International sales % of net sales
U.S. Government sales % of net sales
$
$
$
$
2019
992.9
580.6
235.8
176.5
58.5 %
23.7 %
17.8 %
59.7 %
10.8 %
2018 (a)
875.3
$
529.4
$
190.4
$
155.5
$
60.5 %
21.7 %
17.8 %
66.0 %
10.3 %
2017 (a)
710.4
$
442.8
$
157.4
$
110.2
$
62.3 %
22.2 %
15.5 %
61.2 %
12.1 %
(a) Previously reported segment data for 2018 and 2017 has been adjusted to reflect the third quarter 2019 segment realignment.
Our 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 MEMS and high-performance, high-reliability
semiconductors including analog-to-digital and digital-to-analog converters. It also includes our sponsored and centralized
research laboratories which benefit government programs and commercial businesses.
2019 compared with 2018
Our Digital Imaging segment net sales for 2019 increased 13.4%, compared with 2018. Operating income for 2019
increased 13.5%, compared with 2018.
Total year 2019 net sales primarily reflected higher sales of X-ray detectors for life sciences applications and aerospace,
defense and MEMS products, as well as $87.8 million in sales from recent acquisitions, partially offset by lower sales of
industrial machine vision products. The increase in operating income for 2019 reflected the impact of higher sales and
incremental operating profit from recent acquisitions. The incremental operating income reflected in the results for 2019 from
recent acquisitions was $12.1 million which included $4.7 million in additional intangible asset amortization expense.
38
Cost of sales for 2019 increased by $51.2 million, compared with 2018, and reflected the impact of higher net sales. The
cost of sales percentage in 2019 decreased to 58.5% compared with 60.5% in 2018 and reflected product mix differences.
Selling, general and administrative expenses for 2019 increased to $235.8 million, compared with $190.4 million in 2018 and
reflected the impact of higher net sales, higher research and development and bid and proposal expense and intangible
amortization expense from recent acquisitions. The selling, general and administrative expense percentage increased to 23.7%
in 2019 from 21.7% in 2018 and reflected the impact of higher research and development and bid and proposal expense and
intangible amortization expense from recent acquisitions.
2018 compared with 2017
Our Digital Imaging segment net sales for 2018 increased 23.2%, compared with 2017. Operating income for 2018
increased 41.1%, compared with 2017.
The 2018 net sales included organic growth of $77.4 million and $87.5 million in incremental net sales from the e2v
acquisition. Total year 2018 also reflected higher sales of X-ray detectors for life sciences applications, machine vision cameras
for industrial applications, infrared detectors, geospatial hardware and software and MEMS products. The increase in operating
income for 2018 reflected the impact of higher sales, favorable product mix and incremental operating profit from e2v.
Operating income in 2017 reflected $8.0 million in acquisition-related costs related to the e2v acquisition. The incremental
operating income reflected in the results for 2018 from the e2v acquisition was $31.3 million which included $1.1 million in
additional intangible asset amortization expense.
Cost of sales for 2018 increased by $86.6 million, compared with 2017, and reflected the impact of higher net sales. The
cost of sales percentage in 2018 decreased to 60.5% compared with 62.3% in 2017 and reflected product mix differences, as
well as the inclusion in 2017 of $5.4 million of inventory fair value step-up amortization expense related to the e2v acquisition.
Selling, general and administrative expenses for 2018 increased to $190.4 million, compared with $157.4 million in 2017 and
reflected the impact of higher net sales. The selling, general and administrative expense percentage decreased slightly to 21.7%
in 2018 from 22.2% in 2017.
Aerospace and Defense Electronics
(Dollars in millions)
Net sales
Cost of sales
Selling, general and administrative expenses
Operating income
Cost of sales % of net sales
Selling, general and administrative expenses % of net sales
Operating income % of net sales
International sales % of net sales
U.S. Government sales % of net sales
$
$
$
$
2019
690.1
414.7
132.0
143.4
60.1 %
19.1 %
20.8 %
27.4 %
32.6 %
2018 (a)
640.2
$
385.9
$
122.5
$
131.8
$
60.3 %
19.1 %
20.6 %
34.1 %
27.7 %
2017 (a)
591.2
$
348.9
$
129.3
$
113.0
$
59.0 %
21.9 %
19.1 %
40.8 %
26.6 %
(a) Previously reported segment data for 2018 and 2017 has been adjusted to reflect the third quarter 2019 segment realignment.
Our 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.
2019 compared with 2018
Our Aerospace and Defense Electronics segment net sales for 2019 increased 7.8%, compared with 2018. Operating
income for 2019 increased 8.8%, compared with 2018.
The 2019 net sales increase reflected $57.9 million of higher sales of defense electronics, partially offset by $8.0 million
of lower sales of aerospace electronics. The higher sales of defense electronics reflected greater sales in most product
categories. Operating income in 2019 reflected the impact of higher net sales.
Cost of sales for 2019 increased by $28.8 million, compared with 2018, and reflected the impact of higher net sales. Cost
of sales as a percentage of net sales for 2019 decreased slightly to 60.1% from 60.3% in 2018. Selling, general and
administrative expenses, including research and development and bid and proposal expense, increased to $132.0 million in
2019, from $122.5 million in 2018 and reflected higher research and development and bid and proposal expense of $10.5
million. The selling, general and administrative expense percentage was 19.1% for both 2019 and 2018.
39
2018 compared with 2017
Our Aerospace and Defense Electronics segment net sales for 2018 increased 8.3%, compared with 2017. Operating
income for 2018 increased 16.6%, compared with 2017.
The 2018 net sales increase reflected $59.5 million of higher sales of defense electronics, partially offset by $10.5 million
of lower sales of aerospace electronics. The higher sales of defense electronics reflected higher sales in most product categories
and included $14.9 million in incremental sales from the e2v acquisition. Operating income in 2018 reflected the impact of
higher net sales, overall improved margins and favorable product mix. The incremental operating income included in the
results for 2018 from the e2v acquisition was $8.5 million.
Cost of sales for 2018 increased by $37.0 million, compared with 2017, and reflected the impact of higher net sales. Cost
of sales as a percentage of net sales for 2018 increased to 60.3% from 59.0% in 2017. Selling, general and administrative
expenses, including research and development and bid and proposal expense, decreased to $122.5 million in 2018, from $129.3
million in 2017 and reflected lower research and development and bid and proposal expense of $9.8 million. The selling,
general and administrative expense percentage in 2018 decreased to 19.1% from 21.9% for 2017 and reflected the impact of
lower research and development and bid and proposal expense.
Engineered Systems
(Dollars in millions)
Net sales
Cost of sales
Selling, general and administrative expenses
Operating income
Cost of sales % of net sales
Selling, general and administrative expenses % of net sales
Operating income % of net sales
International sales % of net sales
U.S. Government sales % of net sales
$
$
$
$
2019
375.5
312.2
26.8
36.5
83.1 %
7.2 %
9.7 %
1.1 %
92.3 %
2018 (a)
365.1
$
300.5
$
26.7
$
37.9
$
82.3 %
7.3 %
10.4 %
2.9 %
87.5 %
2017 (a)
348.3
$
285.1
$
27.7
$
35.5
$
81.9 %
7.9 %
10.2 %
2.8 %
89.5 %
(a) Previously reported segment data for 2018 and 2017 has been adjusted to reflect the third quarter 2019 segment realignment.
Our Engineered Systems segment provides innovative systems engineering and integration, advanced technology
development, and manufacturing solutions for defense, space, environmental and energy applications. This segment also
designs and manufactures electrochemical energy systems and small turbine engines.
2019 compared with 2018
Our Engineered Systems segment net sales for 2019 increased 2.8%, compared with 2018. Operating income for 2019
decreased 3.7%, compared with 2018.
The 2019 sales increase of $10.4 million reflected higher sales of $14.3 million of engineered products and services,
partially offset by lower sales of $2.6 million of energy systems products and $1.3 million of turbine engines. The higher sales
of engineered products and services primarily reflected increased sales for nuclear manufacturing and space programs.
Operating income in 2019 decreased due to product mix differences.
Cost of sales for 2019 increased by $11.7 million, compared with 2018, and primarily reflected the impact of higher net
sales. Cost of sales as a percentage of net sales for 2019 increased slightly 83.1%, compared with 82.3% in 2018. Selling,
general and administrative expenses, including research and development and bid and proposal expense, increased slightly to
$26.8 million in 2019, compared with $26.7 million in 2018. The selling, general and administrative expense percentage
decreased slightly to 7.2% for 2019, compared with 7.3% in 2018.
2018 compared with 2017
Our Engineered Systems segment net sales for 2018 increased 4.8%, compared with 2017. Operating income for 2018
increased 6.8%, compared with 2017.
The 2018 sales increase of $16.8 million reflected higher sales of $28.8 million of engineered products and services,
partially offset by lower sales of $12.0 million of turbine engines. The higher sales of engineered products and services,
primarily reflected increased nuclear and aviation manufacturing programs and increased sales related to missile defense. Sales
of turbine engines reflected lower sales of cruise missile engines. Operating income in 2018 increased due to higher sales of
engineered products and services, partially offset by lower sales of turbine engines.
40
Cost of sales for 2018 increased by $15.4 million, compared with 2017, and reflected the impact of higher net sales. Cost
of sales as a percentage of net sales for 2018 increased slightly to 82.3%, compared with 81.9% in 2017. Selling, general and
administrative expenses, including research and development and bid and proposal expense, decreased to $26.7 million in 2018,
compared with $27.7 million in 2017, and reflected the impact of lower research and development and bid and proposal
expense of $1.8 million. The selling, general and administrative expense percentage decreased to 7.3% for 2018, compared with
7.9% in 2017, and reflected the impact of lower research and development and bid and proposal expense.
Financial Condition, Liquidity and Capital Resources
Principal Cash and Capital Requirements
Our principal cash and capital requirements are to fund working capital needs, capital expenditures, income tax payments
and debt service requirements, as well as acquisitions. We may deploy cash for stock repurchases. It is anticipated that
operating cash flow, together with available borrowings under the credit facility described below, will be sufficient to meet
these requirements and could be used to fund acquisitions in 2020. To support acquisitions, we may need to raise additional
capital. Our liquidity is not dependent upon the use of off-balance sheet financial arrangements. We have no off-balance sheet
financing arrangements that incorporate the use of special purpose or unconsolidated entities.
Credit Facility, Senior Notes and Term Loans
Long-term debt (in millions):
$750.0 million credit facility, due March 2024, weighted average rate of
2.80% at December 29, 2019 and 5.50% at December 30, 2018
Term loan repaid October 2019, variable rate of 3.63% at December 30,
2018, swapped to a Euro fixed rate of 0.7055%
Term loan due October 2024, variable rate of 2.702% at December 29,
2019, swapped to a Euro fixed rate of 0.612%
2.61% Fixed Rate Senior Notes repaid December 2019
5.30% Fixed Rate Senior Notes due September 2020
2.81% Fixed Rate Senior Notes due November 2020
3.09% Fixed Rate Senior Notes due December 2021
3.28% Fixed Rate Senior Notes due November 2022
0.70% €50 Million Fixed Rate Senior Notes due April 2022
0.92% €100 Million Fixed Rate Senior Notes due April 2023
1.09% €100 Million Fixed Rate Senior Notes due April 2024
Other debt
Debt issuance costs
Total long-term debt
Current portion of long-term debt
Total long-term debt, net of current portion
December 29, 2019
December 30, 2018
$
125.0
$
—
150.0
—
75.0
25.0
95.0
100.0
56.0
111.9
111.9
2.0
(1.2)
850.6
(100.6)
750.0
$
$
29.0
100.0
—
30.0
75.0
25.0
95.0
100.0
57.2
114.4
114.4
8.8
(1.3)
747.5
(137.4)
610.1
At December 29, 2019, we had $29.2 million in outstanding letters of credit.
On March 15, 2019, Teledyne amended its $750.0 million credit agreement to extend the maturity date from December
2020 to March 2024. While the borrowing capacity remains at $750.0 million, the amendment permits Teledyne to increase the
aggregate amount of the borrowing capacity by up to $250.0 million subject to certain conditions. Excluding interest and fees,
no payments are due under the $750.0 million unsecured credit facility (“credit facility”) until it matures. Borrowings under
our credit facility and term loans are at variable rates which are, at our option, tied to a Eurocurrency rate equal to LIBOR
(London Interbank Offered Rate) plus an applicable rate or a base rate 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 facility also provides for facility fees that vary between 0.12% and 0.25% of the credit line,
depending on our consolidated leverage ratio.
In October 2019, Teledyne and its subsidiary, Teledyne Netherlands B.V., as borrowers, entered into an Amended and
Restated Term Loan Credit Agreement (the “Amended Term Loan Credit Agreement”) that amends and restates the Term Loan
Credit Agreement dated as of March 17, 2017. Pursuant to the Amended Term Loan Credit Agreement, the lenders thereunder
made unsecured term loans in an aggregate principal amount of $150.0 million, denominated in US dollars, $100.0 million of
which was used to repay outstanding loans, which had a maturity date of October 30, 2019. Also, on October 30, 2019,
41
Teledyne entered into a cross currency swap to effectively convert the $150.0 million term loan to a €135.2 million
denominated instrument with a fixed euro interest rate of 0.612%.
Our credit facility, senior notes and term loans agreements require the Company to comply with various financial and
operating covenants, including maintaining certain consolidated leverage and interest coverage ratios, as well as minimum net
worth levels and limits on acquired debt. At December 29, 2019, the Company was in compliance with these covenants and we
had a significant amount of margin between required financial covenant ratios and our actual ratios. Currently, we do not
believe our ability to undertake additional debt financing, if needed, is reasonably likely to be materially impacted by debt
restrictions under our credit agreements subject to our complying with required financial covenants listed in the table below.
Financial covenant ratios and the actual ratios at December 29, 2019:
$750.0 million Credit Facility expires March 2024 and $150.0 million term loan due October 2024 (issued October
2019)
Financial Covenant
Consolidated Leverage Ratio (Net Debt/EBITDA) (a)
Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)
Requirement
No more than 3.25 to 1
No less than 3.0 to 1
Actual Measure
1.4 to 1
22.6 to 1
$574.8 million Private Placement Senior Notes due from 2020 to 2024
Financial Covenant
Consolidated Leverage Ratio (Net Debt/EBITDA) (a)
Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)
Requirement
No more than 3.25 to 1
No less than 3.0 to 1
Actual Measure
1.4 to 1
22.6 to 1
(a)
(b)
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.
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 credit agreements permit us, at our option, to exceed the Consolidated Leverage Ratio
of 3.25 to 1 for up to four quarters following the fiscal quarter in which the acquisition event occurs, provided that the
Consolidated Leverage Ratio does not exceed 3.5 to 1.
Available borrowing capacity under the $750.0 million credit facility, which is reduced by borrowings and outstanding
letters of credit, was $598.3 million at December 29, 2019.
Contractual Obligations
The following table summarizes our expected cash outflows resulting from financial contracts and commitments at
December 29, 2019:
Contractual obligations (in millions):
Debt obligations
Interest expense(a)
Operating lease obligations (b)
Purchase obligations (c)
Total
2020
$100.6
20.1
24.5
184.5
$329.7
2021
$ 95.4
17.0
23.0
22.6
$ 158.0
2022
$ 156.0
13.6
19.7
18.4
$ 207.7
2023
$111.9
10.0
16.9
8.3
$147.1
2024
$ 386.9
4.7
15.1
0.6
$ 407.3
After
2024
$
$
1.0
—
70.1
0.7
71.8
Total
851.8
65.4
169.3
235.1
1,321.6
$
$
(a)
(b)
(c)
Interest expense related to the credit facility, including facility fees, is assumed to accrue at the rates in effect at year-end 2019 and is assumed to be
paid at the end of each quarter with the final payment in March 2024 when the credit facility expires.
Includes imputed interest and the short-term portion of lease obligations.
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 $24.5 million are not included in the table above because $10.6 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 29, 2019, we were not required, and accordingly are not planning, to make any cash contributions to the
domestic qualified pension plan for 2020. Our minimum funding requirements after 2020 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 2020 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
42
through the pricing of products and services to the U.S. government under certain government contracts, therefore, future 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 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 2019, net cash provided by operating activities was $482.1 million, compared with $446.9 million in 2018 and $374.7
million in 2017. The higher cash provided by operating activities in 2019, compared with 2018, was driven by higher operating
income, cash flow from recent acquisitions, partially offset by $45.4 million of higher income tax payments. The higher cash
provided by operating activities in 2018, compared with 2017, was driven by higher operating income, partially offset by $28.0
million of higher income tax payments.
Free cash flow (cash provided by operating activities less capital expenditures) was $393.7 million in 2019, compared
with $360.1 million in 2018 and $316.2 million in 2017.
Free Cash Flow(a)
(in millions, brackets indicate use of funds)
Cash provided by operating activities
Capital expenditures for property, plant and equipment
Free cash flow
2019
$ 482.1
(88.4)
$ 393.7
2018
$ 446.9
(86.8)
$ 360.1
2017
$ 374.7
(58.5)
$ 316.2
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. 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 $571.9 million, $88.6 million and $831.2 million for 2019, 2018 and 2017,
respectively. Cash flows relating to investing activities consists primarily of cash used for acquisitions and other investments
and capital expenditures.
Capital expenditures (in millions):
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate
2019
$ 18.9
45.2
19.0
3.6
1.7
$ 88.4
2018
$ 14.8
35.8
18.7
13.6
3.9
$ 86.8
2017
$ 13.7
23.4
9.3
7.4
4.7
$ 58.5
During 2020, we plan to invest approximately $100.0 million in capital expenditures, principally to upgrade facilities and
manufacturing equipment to reduce costs and introduce new products. The increase in capital spending in 2018 compared with
2017, primarily reflects facility upgrades and expansions.
Acquisitions
Investing activities used cash for acquisitions and other investments of $484.0 million, $3.1 million and $774.1 million, in
2019, 2018 and 2017, respectively (see “Recent Acquisitions”). Teledyne funded the acquisitions primarily from borrowings
under its credit facilities, issuance of senior notes and term loans and cash on hand. On January 3, 2020, we acquired OakGate
Technology, Inc. for $28.0 million in cash.
For all acquisitions, the results of operations and cash flows are included in our consolidated financial statements from the
date of each respective acquisition.
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 2019 and 2017 (in millions):
Acquisition
Scientific imaging businesses
Gas and flame detection business
Micralyne Inc.
Total
(a) Net of any cash acquired and any purchase price adjustments.
Acquisition date
February 5, 2019
August 1, 2019
August 30, 2019
43
2019
Cash Paid (a)
224.8
$
233.5
25.7
484.0
$
Goodwill
Acquired
149.9
$
147.7
7.3
304.9
$
Acquired
Intangible
Assets
$
$
52.4
69.0
0.9
122.3
The majority of the goodwill resulting from the acquisition of the scientific imaging businesses will be deductible for tax
purposes. Goodwill resulting from the acquisition of the gas and flame detection business and Micralyne will not be deductible
for tax purposes.
Acquisition
e2v
SSI
Other investments
Total
(a) Net of any cash acquired and any purchase price adjustments.
Acquisition date
March 28, 2017
July 20, 2017
Various
2017
Cash Paid (a)
740.6
$
31.3
2.2
774.1
$
Goodwill
Acquired
494.3
$
18.6
0.6
513.5
$
Acquired
Intangible
Assets
$
$
172.3
4.8
0.4
177.5
Goodwill resulting from the e2v acquisition is not deductible for tax purposes. Goodwill resulting from the SSI
acquisition is deductible for tax purposes.
Financing Activities
Financing activities for 2019 reflected net proceeds from debt of $108.8 million, compared with net payments on debt of
$306.5 million in 2018 and net proceeds from debt of $393.7 million for 2017. Fiscal years 2019, 2018 and 2017 reflect
proceeds from the exercise of stock options of $34.6 million, $37.2 million and $24.9 million, respectively.
Other Matters
Pension Plans
Teledyne has a domestic qualified defined benefit pension plan covering substantially all U.S. employees hired before
January 1, 2004, or approximately 10% of Teledyne’s active employees as of December 29, 2019. As of January 1, 2004, new
U.S. hires participate in a domestic defined contribution plan. In 2019, 2018 and 2017, Teledyne’s domestic pension plan was
over 100% funded, thus no cash contributions were made. For the Company’s qualified defined benefit pension plans, the
discount rate for 2020 will decrease to an average of 3.41% from 4.59% in 2019. The company also has several small 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.
We intend to reinvest indefinitely the earnings of our material foreign subsidiaries in our operations outside of the United
States. The cash that the Company’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. At December 29, 2019, the amount of undistributed foreign earnings was $309.5 million,
for which we have not recorded a deferred tax liability of approximately $1.4 million for 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.
44
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 2015, United Kingdom
income tax matters for all years through 2017, France income tax matters for all years through 2016 and Canadian income tax
matters for all years through 2011.
Costs and Pricing
Inflationary trends in recent years have been moderate. Current inventory costs, the increasing costs of 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’s primary objective is to protect the United States
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, and in British pounds for our U.K. companies. These contracts are designated
and qualify as cash flow hedges. The Company has converted U.S. dollar denominated, variable rate and fixed rate debt
obligations of a European subsidiary, into euro fixed rate obligations using a receive float, pay fixed cross currency swap, and a
received fixed pay, fixed cross currency swap. These 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, 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”) 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 revenue 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 gains recorded in AOCI, net of tax, for forward contracts that will mature in the next 12 months total $0.8 million.
These gains are expected to be offset by anticipated losses 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 $5.9 million.
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, due to missed forecasts.
As of December 29, 2019, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy
Canadian dollars and to sell U.S. dollars totaling $75.7 million. These foreign currency forward contracts have maturities
ranging from March 2020 to February 2021. Teledyne had foreign currency forward contracts designated as cash flow hedges
to buy British pounds and to sell U.S. dollars totaling $17.1 million. These foreign currency forward contracts have maturities
ranging from March 2020 to February 2021. Together these contracts had a negative fair value of $1.1 million.
The cross currency swaps have notional amounts of €113.0 million and $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 March 2023.
45
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 29, 2019, Teledyne primarily had foreign currency contracts of this type in the following currency pairs (in millions):
Contracts to Buy
Contracts to Sell
Currency
Canadian Dollars
Euros
Great Britain Pounds
Canadian Dollars
Danish Krone
Great Britain Pounds
Amount
$
€
£
$
Kr.
£
7.9
35.8
44.9
11.9
66.2
9.1
Currency
U.S. Dollars
U.S. Dollars
U.S. Dollars
Euros
U.S. Dollars
Euros
Amount
US$
US$
US$
€
US$
€
6.2
39.2
55.5
8.2
9.7
10.3
These contracts had a negative fair value of $0.3 million at December 29, 2019. 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 29, 2019, 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 $7.6 million. A hypothetical 10 percent price change in the U.S. dollar from its value at
December 29, 2019 would result in a decrease or increase 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 $1.7 million. A hypothetical 10 percent
price change in the U.S. dollar from its value at December 29, 2019 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 December 29, 2019 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 $3.7 million, while a 100 basis point decrease would result
in a decrease in its fair value of $3.5 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 29, 2019, we had
$125.0 million outstanding under our $750.0 million credit facility. Any borrowings under the Company’s credit facility 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.
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 $6.0 million at both December 29, 2019 and December 30, 2018. 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 24 and Notes 2
and 14 of the Notes to Consolidated Financial Statements.
46
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 24% of total net sales in
2019, 23% of total net sales in 2018 and 24% of total sales in 2017. For a summary of sales to the U.S. Government by
segment, see Note 12 of the Notes to Consolidated Financial Statements. Sales to the U.S. Department of Defense represented
approximately 17%, 17% and 18% of total net sales for 2019, 2018 and 2017, 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 occurs 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.
For information on accounts receivable from the U.S. Government, see Note 5 of 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.
The following table reflects significant reserves and valuation accounts, which are estimates and based on judgments as
described above, at December 29, 2019, and December 30, 2018:
Reserves and Valuation Accounts (in millions): (a)
Allowance for doubtful accounts
Reduction to LIFO cost basis
Workers’ compensation and general liability reserves (b)
Environmental reserves (b)
Other accrued liability reserves (b)
2019
$ 10.2
7.8
$
6.5
$
$
6.0
$ 16.0
2018
6.8
$
9.4
$
8.9
$
$
6.0
$ 26.5
(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 historic 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):
Balance at beginning of year
Product warranty expense
Deductions
Acquisitions
Balance at year-end
2019
$ 21.0
13.1
(14.2)
4.9
$ 24.8
2018
$ 21.1
10.0
(10.1)
—
$ 21.0
2017
$ 18.4
6.0
(6.4)
3.1
$ 21.1
47
Critical Accounting Policies
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 acquired intangible assets; and
accounting for income taxes. For additional discussion of the application of these and other accounting policies, see Note 2 of
the Notes to Consolidated Financial Statements.
Revenue Recognition
Approximately 40% of our revenue is recognized over time with the remaining 60% of our revenue recognized at a point
in time.
Revenue recognized over time relates primarily to contracts to design, develop and/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 other 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
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 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. As control transfers continuously over time on these contracts, revenue is recognized based on the extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion
requires judgment and is based on the nature of the products or services to be provided. We 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 cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs
incurred to date to the total estimated costs at completion of the performance obligation.
For over time contracts using cost-to-cost, we have an Estimate at Completion (“EAC”) process in which management
reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative
to assessing risks, estimating contract revenue, determining reasonably dependable cost estimates, and making assumptions for
schedule and technical issues. Since certain contracts extend over a longer period of time, the impact of revisions in cost and
revenue estimates during the progress of work may adjust the current period earnings through 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.
We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract
estimates for 2019, 2018 or 2017 was material to the consolidated statements of income for such annual periods.
Revenue recognized at a point in time relates primarily to the sale of standard or minimally customized products, with
control transferring to the customer generally upon the transfer of title. See Note 2 of the Notes to Consolidated Financial
Statements for additional revenue recognition disclosures.
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 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.
48
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 2019 pension expense (in millions):
Increase (decrease) to pension expense resulting from:
Change in discount rate
Change in long-term rate of return on plan assets
0.25 Percentage
Point Increase
0.25 Percentage
Point Decrease
$
$
(1.2) $
(2.1) $
1.3
2.1
See Note 11 of the Notes to Consolidated Financial Statements for additional pension 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, often 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 test. We perform a quantitative test for each reporting unit at least
once every three years.
For goodwill impairment testing using the quantitative approach, the Company estimates the fair value of the selected
reporting units primarily through the 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 has 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.
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 applied a hypothetical
10% decrease to the fair values of each reporting unit subject to a quantitative impairment test and compared 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 December 29, 2019, the Company had nine reporting units for goodwill impairment testing. The carrying value of
goodwill included in the Company’s individual reporting units ranged from $1.2 million to $870.2 million. The Company’s
analysis in 2019 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 as a percentage of carrying value of the respective reporting unit) for the Company’s reporting units subject to a
quantitative test as of the fourth quarter of 2019, the annual testing date, exceeded at least 77%.
49
Income Taxes
Income tax expense and deferred tax assets and liabilities reflect management’s assessment of actual future taxes to be
paid on items reflected in the financial statements. Significant judgment is required in evaluating our tax positions and
determining our provision for income taxes. 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. Deferred tax assets and liabilities
arise due to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and tax carryforwards. Although we believe our income tax expense and deferred tax assets and liabilities
are 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. 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. The provision
for income taxes includes the impact of uncertain tax benefits that are considered appropriate, as well as the related net interest.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing
the need for a valuation allowance, we consider all available 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.
An increase of 100 basis points in our nominal tax rate would have resulted in additional income tax provision for the
fiscal year ended December 29, 2019, of $4.7 million. For a description of the Company’s tax accounting policies, refer to Note
2 and Note 10 of the Notes to Consolidated Financial Statements.
Recent Accounting Standards
For a discussion of recent accounting standards see Note 2 of the 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 Operation 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, environmental remediation cost,
stock repurchases, taxes, exchange rate fluctuations and strategic plans. All statements made in this Management’s Discussion
and Analysis of Financial Condition and Results of Operation 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: disruptions in the global economy; 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; cuts to
defense spending resulting from existing and future deficit reduction measures; impacts from the United Kingdom’s pending
exit from the European Union; uncertainties related to the policies of the U.S. Presidential administration; the imposition and
expansion of, and responses to, trade sanctions and tariffs; and threats to the security of our confidential and proprietary
information, including cyber security threats. 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 respect to hydraulic
fracturing could further negatively affect our businesses that supply the oil and gas industry. Disruptions from the production
delay of Boeing’s 737 Max aircraft and increasing fuel costs will negatively affect the markets of our commercial aviation
businesses. If the Coronavirus outbreak continues and results in a prolonged period of travel, commercial and other similar
restrictions, we could experience lower demand for our products and global supply disruptions. In addition, financial market
fluctuations affect the value of our pension assets.
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 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.
50
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 14 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 45 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 55 through 98. See the “Index to Financial
Statements and Related Information” on page 55.
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 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 29, 2019, 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 29, 2019, are
effective.
Internal Controls
See Management Statement on page 56 for management’s annual report on internal control over financial reporting. See
Report of Independent Registered Public Accounting Firm on page 57 for Deloitte & Touche LLP’s attestation report on the
Report of Management on Teledyne Technologies Incorporated’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 29, 2019, 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.
51
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
Jason VanWees, Executive Vice President
Tyler D. Vernon, Senior Director, SEC/GAAP Compliance and External Reporting
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.
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, the information required by this item is set forth in the 2020 Proxy Statement under the captions “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 2020 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.
52
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Except for the table below, the information required by this item is set forth in the 2020 Proxy Statement under the
caption “Stock Ownership Information” 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 29, 2019:
Plan Category
Equity compensation plans approved by security holders:
Amended and Restated 2008 Incentive Award Plan(1)
Amended and Restated 2014 Incentive Award Plan(2)
Equity Compensation plans not approved by security holders:
Employee Stock Purchase Plan(6)
Total
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)]
390,192
$
1,598,384 (3) $
62.77
147.24 (4)
—
2,885,771 (5)
—
1,988,576
$
—
130.67
1,000,000
3,885,771
1) 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.
2) 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.
3) Does not include (i) 15,430 shares of stock reserved for issuance under the 2015-2017 cycle of our PSP, of which 7,673 shares were issued as part
of the final installment payment in February 2020; (ii) 13,551 shares subject to restricted stock unit awards issued to employees and directors; and
(iii) 51,123 shares reserved for issuance under the 2018-2020 cycle of our PSP.
4) Does not include the securities described in footnote (3) above, which do not have an exercise price
.
5) The number of shares available for future issuance (i) includes shares transferred from the 2008 Plan (see footnote (1) above); and (ii) assumes
the issuance of (a) 15,430 shares of stock reserved for issuance under the 2015-2017 cycle of our PSP, of which 7,673 shares were issued as part
of the final installment payment in February 2020;(b) 13,551 shares subject to restricted stock unit awards issued to employees and directors; and
(c) 51,123 shares reserved for issuance under the 2018-2020 cycle of our PSP.
6) 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 2020 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 2020 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.
53
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 55 of this Report, which is incorporated herein by
reference.
(2) Financial Statement Schedules
See Schedule II captioned “Valuation and Qualifying Accounts” on page 98 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.
54
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
Financial Statements and Related Information:
Management Statement
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
Page
56
57
58
60
60
61
62
63
64
98
55
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 29, 2019. 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. 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 for the
scientific imaging businesses of Roper Technologies, Inc., the gas and flame detection businesses of 3M Company or the
Micralyne acquisitions in 2019. These acquisitions, which are included in the 2019 consolidated financial statements of the
Company, constituted approximately 12% of total assets, 4% of total revenues and 3% of net income of the Company as of and
for the fiscal year ended December 29, 2019. We did not assess the effectiveness of internal control over financial reporting at
these newly acquired entities 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 29, 2019, 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 57 of this Annual Report.
Date: February 21, 2020
Date: February 21, 2020
/s/ ALDO PICHELLI
Aldo Pichelli
President and Chief Executive Officer
/s/ SUSAN L. MAIN
Susan L. Main
Senior Vice President and Chief Financial Officer
56
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the 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 29, 2019, 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 29, 2019, 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 as of and for the year ended December 29, 2019, of the Company and our
report dated February 21, 2020, expressed an unqualified opinion on those financial statements and financial statement
schedule.
As described in Report of Management on Teledyne Technologies Incorporated’s Internal Control over Financial Reporting,
management excluded from its assessment the internal control over financial reporting for the scientific imaging businesses of
Roper Technologies, Inc., the gas and flame detection businesses of 3M Company, and the Micralyne acquisition, which were
acquired on February 5, 2019, August 1, 2019 and August 30, 2019, respectively, and whose financial statements constitute
approximately 12% of total assets, 4% of total revenues, and 3% of net income of the consolidated financial statement amounts
as of and for the year ended December 29, 2019. Accordingly, our audit did not include the internal control over financial
reporting for the 2019 acquisitions.
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 over 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 21, 2020
57
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the 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 29, 2019 and December 30, 2018, the related consolidated statements of income, comprehensive
income, shareholders' equity, and cash flows, for each of the three years in the period ended December 29, 2019, 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 29, 2019 and
December 30, 2018, and the results of its operations and its cash flows for each of the three years in the period ended December
29, 2019, in conformity with 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 29, 2019, 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 21, 2020, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue
recognition, effective January 1, 2018, due to adoption of FASB ASC Topic 606, Revenue from Contracts with Customers.
Also as discussed in Note 2 to the consolidated financial statements, effective December 31, 2018, the Company adopted FASB
ASC Topic 842, Leases, using the modified retrospective approach.
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 Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
58
Acquisitions — The Scientific Imaging Businesses of Roper Technologies, Inc. and the Gas and Flame Detection
Businesses of 3M Company – Intangible Assets – Refer to Notes 2 and 3 to the financial statements
Critical Audit Matter Description
During 2019, the Company completed three acquisitions for net consideration of $484.0 million. The most significant of these
were (1) the acquisition of the scientific imaging businesses of Roper Technologies, Inc. for net consideration of $224.8 million
and (2) the acquisition of the gas and flame detection businesses of 3M Company for net consideration of $233.5 million.
Auditing the Company’s 2019 acquisitions involved a high degree of auditor judgment and complexity to test management’s
identification and preliminary valuation of acquired intangibles, specifically revenue projections used within the fair valuation
of certain intangible assets assumed.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to (1) the identification of acquired intangibles and (2) revenue projections used to estimate the fair
value of the intangible assets acquired included the following, among others:
• We tested the effectiveness of controls over the identification of acquired intangibles and management’s controls over
the revenue projections used to estimate the fair value of the intangible assets acquired.
• With the assistance of our fair value specialists, we read each of the purchase agreements and evaluated and challenged
management’s identification of the acquired intangible assets.
• We evaluated the reasonableness of the revenue projections by comparing them to (1) third-party historical financial
data, (2) current economic factors and analyst reports of the Company and companies in its peer group, (3) evidence
obtained in other areas of the audit, such as assumptions used by the Company in its budgeting process, and (4) the
Company’s similar historical acquisitions.
• We performed a sensitivity analysis by varying projected revenue assumptions.
• With the assistance of our fair value specialists, we performed an analysis comparing the projected revenues of
comparable companies within the acquired companies’ industries to management’s projected revenues used within the
valuation models.
• With the assistance of our fair value specialists, we tested the underlying source information and mathematical
accuracy of the calculations.
/s/ Deloitte & Touche LLP
Los Angeles, California
February 21, 2020
We have served as the Company's auditor since 2015.
59
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per-share amounts)
Net Sales
Costs and expenses
Cost of sales
Selling, general and administrative expenses
Total costs and expenses
Operating income
Interest and debt expense, net
Non-service retirement benefit income
Other expense, net
Income before income taxes
Provision for income taxes
Net income
Basic earnings per common share
Weighted average common shares outstanding
Diluted earnings per common share
Weighted average diluted common shares outstanding
The accompanying notes are an integral part of these financial statements.
For the Fiscal Year
2019
3,163.6
$
2018
2,901.8
2017
2,603.8
$
$
1,920.3
751.6
2,671.9
491.7
(21.0)
8.0
(5.0)
473.7
71.4
402.3
11.08
36.3
$
$
10.73
$
37.5
1,791.0
694.2
2,485.2
416.6
(25.5)
13.5
(10.7)
393.9
60.1
333.8
9.32
35.8
9.01
37.0
$
$
$
1,624.0
658.1
2,282.1
321.7
(33.1)
13.9
(15.5)
287.0
59.8
227.2
6.45
35.2
6.26
36.3
$
$
$
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Net income
Other comprehensive income (loss):
Foreign exchange translation adjustment
Hedge activity, net of tax
Pension and postretirement benefit adjustments, net of tax
Other comprehensive income (loss)(a)
Comprehensive income
$
$
For the Fiscal Year
2018
333.8
$
$
2019
402.3
31.1
2.6
(16.3)
17.4
419.7
(79.5)
(5.4)
(31.4)
(116.3)
217.5
$
$
2017
227.2
96.8
3.3
21.8
121.9
349.1
(a) Net of income tax benefit of $6.6 million in 2019, income tax benefit of $10.6 million for 2018 and income tax expense of $12.7 million for 2017.
The accompanying notes are an integral part of these financial statements.
60
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
For the Fiscal Years Ended December 29, 2019 and December 30, 2018
(In millions, except share amounts)
Assets
Current Assets
Cash
Accounts receivable, net
Unbilled receivables, net
Inventories, net
Prepaid expenses and other current assets
Total Current Assets
Property, plant and equipment, net
Goodwill
Acquired intangible assets, net
Prepaid pension assets
Operating lease right-of-use assets
Other assets, net
Total Assets
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable
Accrued liabilities
Current portion of long-term debt and other debt
Total Current Liabilities
Long-term debt
Long-term operating lease liabilities
Other long-term liabilities
Total Liabilities
Commitments and Contingencies
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: 37,697,865 at December 29, 2019, and December 30, 2018; outstanding shares:
36,547,966 at December 29, 2019, and 36,087,297 at December 30, 2018
Additional paid-in capital
Retained earnings
Treasury stock, 1,149,899 at December 29, 2019 and 1,610,568 at December 30, 2018
Accumulated other comprehensive loss
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
The accompanying notes are an integral part of these financial statements.
2019
2018
$
199.5
460.4
200.5
393.4
59.9
1,313.7
487.9
2,050.5
430.8
71.8
127.1
98.0
$ 4,579.8
$
142.5
416.5
145.3
364.3
45.8
1,114.4
442.6
1,735.2
344.3
88.2
—
84.6
$ 3,809.3
$
271.1
391.5
100.6
763.2
750.0
119.3
232.6
1,865.1
$
227.8
355.6
137.4
720.8
610.1
—
248.7
1,579.6
—
—
0.4
360.5
2,926.0
(96.4)
(475.8)
2,714.7
$ 4,579.8
0.4
343.7
2,523.7
(144.9)
(493.2)
2,229.7
$ 3,809.3
61
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
Balance, January 1, 2017
$
0.4
$ 335.7
$ (242.9) $ 1,912.4
$
(451.2) $
1,554.4
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Net income
Other comprehensive income, net of tax
Treasury stock issued
Stock-based compensation
Exercise of stock options
Balance, December 31, 2017
Net income
Other comprehensive loss, net of tax
Treasury stock issued
Stock-based compensation
Exercise of stock options and other
Cumulative effect of new accounting standards
Net income
Other comprehensive income, net of tax
Treasury stock issued
Stock-based compensation
Exercise of stock options
Balance, December 29, 2019
—
—
—
—
—
—
—
(42.2)
24.9
18.9
—
—
42.2
—
—
227.2
—
—
—
—
—
121.9
—
—
—
227.2
121.9
—
24.9
18.9
0.4
337.3
(200.7)
2,139.6
(329.3)
1,947.3
—
—
—
—
—
—
—
—
(55.8)
37.2
25.0
—
—
—
55.8
—
—
—
333.8
—
—
—
(0.6)
50.9
—
—
—
—
—
—
—
(48.5)
30.7
34.6
—
—
48.5
—
—
402.3
—
—
—
—
—
(116.3)
333.8
(116.3)
—
—
—
(47.6)
(493.2)
—
17.4
—
—
—
—
37.2
24.4
3.3
2,229.7
402.3
17.4
—
30.7
34.6
$
0.4
$ 360.5
$
(96.4) $ 2,926.0
$
(475.8) $
2,714.7
Balance, December 30, 2018
0.4
343.7
(144.9)
2,523.7
The accompanying notes are an integral part of these financial statements.
62
TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Changes in operating assets and liabilities, excluding the effect of businesses acquired:
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued liabilities
Deferred and income taxes payable, net
Long-term assets
Other long-term liabilities
Other, net
Net cash provided by operating activities
Investing Activities
Purchases of property, plant and equipment
Purchase of businesses and other investments, net of cash acquired
Other, net
Net cash used in investing activities
Financing Activities
Net proceeds (payments) on credit facility
Proceeds from other debt
Payments on other debt
Proceeds from issuance of term loans and senior notes
Proceeds from stock options exercised
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
Change in cash
Cash—beginning of period
Cash—end of period
The accompanying notes are an integral part of these financial statements.
For the Fiscal Year
2019
2018
2017
$
402.3
$
333.8
$
227.2
111.9
30.7
(58.8)
12.2
2.8
29.6
5.9
(53.8)
(8.1)
11.9
(4.5)
482.1
(88.4)
(484.0)
0.5
(571.9)
96.0
—
(137.2)
150.0
34.6
(1.7)
141.7
5.1
57.0
142.5
199.5
$
113.0
25.1
(66.7)
(1.7)
7.6
39.9
17.8
(26.4)
4.9
(13.7)
13.3
446.9
(86.8)
(3.1)
1.3
(88.6)
(136.0)
11.5
(182.0)
—
37.2
(2.0)
(271.3)
(15.4)
71.6
70.9
142.5
$
113.0
18.8
(19.6)
(7.4)
(3.6)
12.4
16.2
28.1
(13.8)
(2.2)
5.6
374.7
(58.5)
(774.1)
1.4
(831.2)
165.0
100.0
(139.3)
268.0
24.9
(4.5)
414.1
14.7
(27.7)
98.6
70.9
$
63
TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 29, 2019
Note 1. Description of Business
Teledyne Technologies Incorporated (“Teledyne” or the “Company”) became an independent, public company effective
November 29, 1999. Teledyne provides enabling technologies for industrial growth markets that require advanced technology
and high reliability. These markets include 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 imaging sensors, cameras and systems within the
visible, infrared 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 itself from many of its direct competitors by having a customer
and company-sponsored applied research center that augments our product development expertise.
Teledyne consists of the Instrumentation segment with principal operations in the United States, the United Kingdom and
Denmark; the Digital Imaging segment with principal operations in the United States, Canada, France, the Netherlands and the
United Kingdom: 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 States.
In the third quarter of 2019, we realigned the segment reporting structure for certain business units, primarily related to
certain refinements of our management reporting structure. This change primarily related to moving certain electronic
manufacturing services products from the Aerospace and Defense Electronics segment to the Engineered Systems segment.
The realignment had no impact on the Instrumentation Segment or the Consolidated Financial Statements. See Note 12 to these
Consolidated Financial Statements for additional information on the realignment. Previously reported segment data has been
adjusted to reflect these changes.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Teledyne and its majority-owned 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 2019 was a 52-week fiscal year and ended on December 29, 2019. Fiscal year 2018 was a 52-week fiscal year and ended
on December 30, 2018. Fiscal year 2017 was a 52-week fiscal year and ended on December 31, 2017. References to the years
2019, 2018 and 2017 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.
64
Accumulated Other Comprehensive Income/(Loss)
The following table summarizes the changes in accumulated balances of other comprehensive income/(loss) (“AOCI”)
for the fiscal years ended December 29, 2019, and December 30, 2018 (in millions):
Foreign
Currency
Translation
$
(102.0) $
Cash Flow
Hedges and
other
Pension and
Postretirement
Benefits
Total
Balance as of December 31, 2017
Other comprehensive income (loss) before reclassifications
Amounts reclassified from AOCI
Net other comprehensive loss
Reclassification of stranded income tax effects
Balance as of December 30, 2018
Other comprehensive income before reclassifications
Amounts reclassified from AOCI
Net other comprehensive income (loss)
Balance as of December 29, 2019
$
(79.5)
—
(79.5)
—
(181.5)
31.1
—
31.1
(150.4) $
0.5
$
1.0
(6.4)
(5.4)
—
(4.9)
7.6
(5.0)
2.6
(2.3) $
(227.8) $ (329.3)
(78.5)
—
(37.8)
(31.4)
(116.3)
(31.4)
(47.6)
(47.6)
(493.2)
(306.8)
38.7
—
(21.3)
(16.3)
17.4
(16.3)
(323.1) $ (475.8)
The reclassification out of AOCI for the fiscal years ended December 29, 2019, and December 30, 2018, are as follows (in
millions):
Gain on cash flow hedges:
Gain recognized in income on derivatives
Income tax impact
Total
December 29,
2019
Amount
reclassified
from AOCI
December 30,
2018
Amount
reclassified
from AOCI
Financial
Statement
Presentation
$
$
(6.9) $
(8.7) See Note 2
1.9
(5.0) $
2.3
(6.4)
Provision for
income taxes
Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost
Amortization of net actuarial loss
Pension adjustments
Total before tax
Income tax impact
Net of tax
$
$
(5.9) $
30.9
(47.1)
(22.1)
5.8
(16.3) $
(6.1) See Note 11
31.5 See Note 11
(66.6) See Note 11
(41.2)
9.8
(31.4)
Revenue Recognition
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 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.
Approximately 60% of our revenue is recognized at a point in time, with the remaining 40% 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 generally upon the transfer of title. This type of revenue arrangement is typical for our
commercial contracts within the Instrumentation, Digital Imaging, and Aerospace and Defense Electronics segments, and to a
lesser extent for certain commercial contracts within the Engineered Systems segment relating to the sale of standard hydrogen/
oxygen gas generators. In limited circumstances, customer specified acceptance criteria exist. If we cannot objectively
demonstrate that the product meets those specifications prior to the shipment, the 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
65
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 an alternative use.
As control transfers continuously over time on these contracts, revenue is recognized based on the extent of progress towards
completion of the performance obligation. The selection of the method to measure progress towards completion requires
judgment and is based on the nature of the products or services to be provided. We 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 cost-to-cost method, the extent of progress towards completion is measured based on the ratio 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
other 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 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 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 specifications 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 it 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 contracts using cost-to-cost, we have an Estimate at Completion (“EAC”) process in which management
reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative
to assessing risks, estimating contract revenue, determining reasonably dependable cost estimates, and making assumptions for
schedule and technical issues. Since certain contracts extend over a longer period of time, the impact of revisions in cost and
revenue estimates during the progress of work may adjust the current period earnings through 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 majority of
revenue recognized over time uses an EAC process. The net aggregate effects of these changes in estimates on contracts
accounted for under the cost-to-cost method in 2019 was approximately $20.2 million of favorable operating income, primarily
related to favorable changes in estimates that impacted revenue, and, to a lesser degree, cost of sales, within the Digital Imaging
operating segment. The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost
method in 2018 was approximately $4.4 million of favorable operating income, primarily related to changes in estimates that
favorably impacted revenue. None of the effects of changes in estimates on any individual contract were material to the
consolidated statements of income for 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 December 29, 2019, the aggregate amount of the transaction price allocated to
remaining performance obligations was $1,834.8 million. The Company expects approximately 75% of remaining performance
obligations to be recognized into revenue within the next twelve months, with the remaining 25% recognized thereafter.
66
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’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 historic
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 long-term liabilities on
the balance sheet.
Warranty Reserve (in millions):
Balance at beginning of year
Product warranty expense
Deductions
Acquisitions
Balance at end of year
2019
$ 21.0
13.1
(14.2)
4.9
$ 24.8
2018
$ 21.1
10.0
(10.1)
—
$ 21.0
2017
$ 18.4
6.0
(6.4)
3.1
$ 21.1
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 $209.6 million in 2019, $185.6 million in 2018 and $177.7 million in 2017.
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.
67
Net Income Per Common Share
Basic and diluted earnings per share were computed based on net 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 share.
The following table sets forth the computations of basic and diluted earnings per share (amounts in millions, except per
share data):
Net Income Per Common Share:
Net income
Basic earnings per common share:
Weighted average common shares outstanding
Basic earnings per common share
Diluted earnings per share:
Weighted average common shares outstanding
Effect of diluted securities (primarily stock options)
Weighted average diluted common shares outstanding
Diluted earnings per common share
2019
$ 402.3
2018
$ 333.8
2017
$ 227.2
36.3
35.8
35.2
$ 11.08
$
9.32
$
6.45
36.3
1.2
37.5
35.8
1.2
37.0
35.2
1.1
36.3
$ 10.73
$
9.01
$
6.26
For 2019, 1,620 stock options were excluded in the computation of diluted earnings per share because they had exercise
prices that were greater than the weighted average market price of the Company’s common stock during the year. For 2018,
2,580 stock options were excluded in the computation of diluted earnings per share because they had exercise prices that were
greater than the weighted average market price of the Company’s common stock during the year. For 2017, no stock options
were excluded in the computation of diluted earnings per share.
For 2019, 2018 and 2017, stock options to purchase 2.0 million, 2.1 million and 2.3 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.
No contingent shares under the restricted stock or performance share compensation plans were excluded from fully
diluted shares outstanding for 2019, 2018 or 2017.
Cash
Cash totaled $199.5 million at December 29, 2019, of which $139.7 million was held by foreign subsidiaries.
Accounts Receivable, Unbilled Receivables and Contract Liabilities
The 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 $126.8 million and $17.9 million as of
December 29, 2019 and $111.5 million and $15.3 million as of December 30, 2018, 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 $55.2 million, or 38.0%, primarily due to
work performed ahead of billings on certain over time revenue contracts primarily in our Aerospace and Defense Electronics.
Contract liabilities increased from the beginning of the year by $17.9 million, or 14.1%. The Company recognized revenue of
$75.7 million during the year ended December 29, 2019 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.
68
Accounts receivable is presented net of an allowance for doubtful accounts of $10.2 million at December 29, 2019, and
$6.8 million at December 30, 2018. Expense recorded for the allowance for doubtful accounts was $1.3 million, $0.6 million
and $4.2 million for 2019, 2018 and 2017, 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 is based upon
specific identification, collection history and creditworthiness of the debtor. Trade credit is extended based upon evaluations of
each customer’s ability to perform its obligations, which are updated periodically.
Inventories
Inventories are stated at the lower of cost or net realizable value. The majority of inventory values are valued on an
average cost or first-in, first-out method, while the remainder 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. 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 was $74.5 million in 2019, $73.5 million in 2018 and $65.9 million in 2017.
Goodwill, Acquired Intangible Assets and Other Long-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 indefinite-lived intangible assets in the
fourth quarter of each year, or more often as circumstances require. The Company 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. The 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 test every year.
The two-step quantitative impairment test is used to first identify potential goodwill impairment and then measure the
amount of goodwill impairment loss, if any. When it is determined that an impairment has occurred, an appropriate charge to
operations is recorded. The results of our annual impairment tests of goodwill indicated that no impairment existed in 2019,
2018 or 2017.
The Company reviews intangible and other 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. Acquired 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. Recorded impairment charges to intangible or other long-lived assets were not material in 2019,
2018 or 2017.
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. As of December 29, 2019 and December 30, 2018, $63.0 million and $52.4 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 $65.6 million
and $56.1 million, as of December 29, 2019 and December 30, 2018, respectively, and are recorded in other non-current assets.
69
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’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’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 $6.0 million at both December 29,
2019 and December 30, 2018. 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’s foreign 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 AOCI.
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’s primary foreign currency risk objective is to
protect the U.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, and in British pounds for our U.K. companies. These contracts
are designated and qualify as cash flow hedges. The Company has also converted a U.S. dollar denominated, variable rate debt
obligation into a euro fixed rate obligation using a receive-float, pay fixed cross currency swap. These 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, 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’ 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 revenue in our consolidated statements of income. Net deferred gains recorded in
AOCI, net of tax, for forward contracts that will mature in the next 12 months total $0.8 million. These gains are expected to be
offset by anticipated losses 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 next 12 months total $5.9 million.
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, due to missed forecasts.
As of December 29, 2019, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy
Canadian dollars and to sell U.S. dollars totaling $75.7 million. These foreign currency forward contracts have maturities
ranging from March 2020 to February 2021. Teledyne had foreign currency forward contracts designated as cash flow hedges
to buy British pounds and to sell U.S. dollars totaling $17.1 million. These foreign currency forward contracts have maturities
ranging from March 2020 to February 2021. Together these contracts had a fair value of $1.1 million.
The cross currency swaps have notional amounts of €113.0 million and $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 March 2023.
70
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 29, 2019, Teledyne primarily had foreign
currency contracts of this type in the following pairs (in millions):
Contracts to Buy
Contracts to Sell
Currency
Canadian Dollars
Euros
Great Britain Pounds
Canadian Dollars
Danish Krone
Great Britain Pounds
Amount
$
€
£
$
Kr.
£
7.9
35.8
44.9
11.9
66.2
9.1
Currency
U.S. Dollars
U.S. Dollars
U.S. Dollars
Euros
U.S. Dollars
Euros
Amount
US$
US$
US$
€
US$
€
6.2
39.2
55.5
8.2
9.7
10.3
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 2019 and 2018 was as follows (in millions):
Net gain recognized in AOCI - foreign exchange contracts (a)
Net gain recognized in AOCI - interest rate contracts
Net gain (loss) reclassified from AOCI into revenue/cost of sales - foreign exchange contracts
Net gain reclassified from AOCI into interest expense - foreign exchange contracts
Net gain reclassified from AOCI into interest expense -interest rate contracts
Net gain reclassified from AOCI into other income and expense, net - foreign exchange contracts (b)
Net foreign exchange loss recognized in revenue, net - foreign exchange contracts (c)
(a) Effective portion
(b) Amount reclassified to offset earnings impact of liability hedged by cross currency swap
(c) Amount excluded from effectiveness testing (recorded in other income and expense in 2018)
2019
2018
$
$
$
$
$
$
$
9.3 $
1.2
0.8 $ —
(1.8) $
2.1
2.4 $
2.4
0.2 $ —
6.0 $
(0.5) $
4.2
(0.5)
The effect of derivative instruments not designated as cash flow hedges recognized in other income and expense for 2019
and 2018 was a gain of $4.9 million and a loss of $24.8 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.
71
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
Derivatives designated as hedging instruments:
Cash flow forward contracts
Interest rate contracts
Interest rate contracts
Cash flow forward contracts
Cash flow cross currency swaps
Cash flow cross currency swaps
Cash flow cross currency swaps
Total derivatives designated as hedging instruments
Derivatives not designated as hedging instruments:
Non-designated forward contracts
Non-designated forward contracts
Total derivatives not designated as hedging instruments
Total liability derivatives
Supplemental Cash Flow Information
Balance sheet location
December 29, 2019
December 30, 2018
Other assets
Other current assets
$
$
1.3
0.2
Other non-current
assets
Accrued liabilities
Other current assets
Other non-current
liabilities
Accrued liabilities
Other current assets
Accrued liabilities
$
0.3
(0.1)
5.4
(7.8)
0.3
(0.4)
0.1
(0.4)
(0.3)
(0.7) $
—
—
—
(4.2)
—
—
(6.3)
(10.5)
—
(0.6)
(0.6)
(11.1)
Cash payments for federal, foreign and state income taxes were $110.1 million for 2019, which are net of $7.1 million in
tax refunds. Cash payments for federal, foreign and state income taxes were $64.7 million for 2018, which are net of $7.6
million in tax refunds. Cash payments for federal, foreign and state income taxes were $36.7 million for 2017, which are net of
$8.5 million in tax refunds. Cash payments for interest and credit facility fees totaled $23.4 million, $28.1 million and $32.4
million for 2019, 2018 and 2017, respectively.
Fair Value Measurements
Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a
liability in the principal or most advantageous market in an 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, 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.
72
Related Party Transactions
For all periods presented, the Company had no material related party transactions that required disclosure.
Recent Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-02, Leases (Topic 842). The guidance requires lessees to recognize most 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. We adopted the guidance on
December 31, 2018, the beginning of our 2019 fiscal year, using the modified retrospective transition method. Prior period
comparative information was not adjusted. In addition, we elected the package of practical expedients permitted under the
transition guidance, which among other things, allowed us to carry forward the historical lease classification. The adoption of
this guidance did not have a material impact related to existing leases and as a result, a cumulative-effect adjustment was not
recorded. Also, the adoption of the guidance did not have a material impact on our results of operations or cash flows. Upon
adoption, on December 31, 2018, we recognized right-of-use assets of $128.4 million and a total lease liability of
$139.8 million for operating leases. For additional discussion of the application of this guidance, see Note 13 of the Notes to
Consolidated Financial Statements.
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 AOCI 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. In the third quarter of 2018, Teledyne elected to early adopt this ASU and elected to reclassify, in the
period of enactment, stranded tax effects totaling $47.6 million from AOCI to retained earnings in its consolidated balance
sheet. The reclassification amount primarily included income tax effects related to our pension and postretirement benefit plans.
Income tax effects remaining in AOCI will be released into earnings as the related pretax amounts are reclassified to earnings.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815) Targeted Improvements to
Accounting for Hedging Activities.” This guidance better aligns an entity’s risk management activities and financial reporting
for hedging relationships and expands and refines hedge accounting for both nonfinancial and financial risk components. This
guidance also simplifies and aligns the recognition and presentation of the effects of the hedging instrument and the hedged
item in the financial statements. We adopted the guidance as of December 31, 2018, the beginning of our 2019 fiscal year
using the modified retrospective approach, there was no cumulative adjustment to retained earnings related to hedge
ineffectiveness for the year ended December 31, 2018. Additionally, as a result of the adoption, we no longer disclose the
ineffective portion of the change in fair value of our derivative financial instruments. The entire change in the fair value of the
cash flow hedging instruments aside from components excluded from the assessment of hedge effectiveness will now be
recorded in other comprehensive income and subsequently reclassified to earnings in the period the hedged item impacts
earnings. The adoption of this guidance did not have a material impact on our consolidated financial statements.
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 June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The new guidance is
effective for reporting periods beginning after December 15, 2019. The standard replaces the incurred loss impairment
methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-
looking expected credit loss model for accounts receivables, loans, and other financial instruments. The standard requires a
modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first
reporting period in which the guidance is effective. We plan to adopt the new credit loss standard effective December 30, 2019,
the beginning of our 2020 fiscal year. We do not expect the new guidance to have a material effect on our financial position,
results of operations or cash flows.
73
In May 2014, the FASB issued ASU No. 2014-09 (Topic 606), Revenue from Contracts with Customers, which provides
a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and
superseded most current revenue recognition guidance under Topic 605, Revenue Recognition. The Company adopted the
requirements of Topic 606 as of January 1, 2018, using the modified retrospective transition method which required a
cumulative-effect adjustment as of the date of adoption. Comparative disclosures with periods prior to adoption (i.e., fiscal year
2017) are not required due to our use of the modified retrospective transition method.
Note 3. Business Acquisitions, Goodwill and Acquired Intangible Assets
The Company spent $484.0 million, $3.1 million and $774.1 million on acquisitions and other investments, net of cash
acquired, in 2019, 2018 and 2017, respectively.
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 foundry
providing MEMS devices. In particular, Micralyne possesses unique microfluidic technology for biotech applications, as well
as capabilities in non-silicon-based MEMS (e.g. gold, polymers) often required for human body compatibility. Based in
Edmonton, Alberta, Canada, the acquired business is part of the Digital Imaging segment.
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, e2v 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
for 2017.
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.
74
The following table presents proforma net sales, net income and earnings per share data assuming e2v was acquired at the
beginning of the 2017 fiscal year:
(Unaudited - in millions, except per share amounts)
Net sales
Net income
Basic earnings per common share
Diluted earnings per common share
(a) The above unaudited proforma information is presented for the e2v acquisition as it is considered a material acquisition.
Fiscal Year (a)
2017
$
$
$
$
2,696.8
209.8
5.96
5.78
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.
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 above 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. The significant factors that resulted in recognition of goodwill were: (a) the
purchase price was based on cash flow 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
acquisitions primarily from borrowings under its credit facilities, issuance of senior notes and term loans and cash on hand.
Teledyne’s goodwill was $2,050.5 million at December 29, 2019, and $1,735.2 million at December 30, 2018. The
increase in the balance of goodwill in 2019 resulted from recent acquisitions and the impact of exchange rate changes.
Teledyne’s net acquired intangible assets were $430.8 million at December 29, 2019, and $344.3 million at December 30, 2018.
The increase in the balance of acquired intangible assets in 2019 primarily resulted from recent acquisitions, partially offset by
the amortization of acquired intangible assets and the impact of exchange rate changes. The Company’s cost to acquire the
2019 and 2017 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 2019 acquisitions is provisional pending finalization of the
Company’s acquisition accounting, including the finalization of the valuation of the intangible assets acquired, identification
and measurement of certain inventory and property, plant and equipment balances, identification and measurement of certain
liabilities, including the potential for loss contingencies and uncertain tax positions, if any, as well as 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
Company believes that such preliminary allocations provide a reasonable basis for estimating the fair values of assets acquired
and liabilities assumed, but the Company is waiting for additional information necessary to finalize its fair value determination
of these acquired identifiable assets and liabilities.
The following tables show the purchase price (net of cash acquired), provisional goodwill acquired and provisional
intangible assets acquired for the acquisitions made in 2019 (in millions):
Acquisitions
Scientific imaging businesses
Gas and flame detection businesses
Micralyne Inc.
Total
(a) Net of cash acquired and any purchase price adjustments.
Acquisition Date
February 5, 2019
August 1, 2019
August 30, 2019
2019
Cash
Paid (a)
$ 224.8
233.5
25.7
$ 484.0
Goodwill
Acquired
$ 149.9
147.7
7.3
$ 304.9
Acquired
Intangible
Assets
$
$
52.4
69.0
0.9
122.3
The majority of the goodwill resulting from the acquisition of the scientific imaging businesses will be deductible for tax
purposes. Goodwill resulting from the acquisition of the gas and flame detection businesses and Micralyne will not be
deductible for tax purposes.
75
Provisional fair values allocated to the assets acquired and liabilities assumed (in millions):
2019
Current assets, excluding cash acquired
Property, plant and equipment
Goodwill
Acquired intangible assets
Other long-term assets
Total assets acquired
Current liabilities
Long-term liabilities
Total liabilities assumed
Cash paid, net of cash acquired
$
$
83.0
30.7
304.9
122.3
7.1
548.0
(33.4)
(30.6)
(64.0)
484.0
The following table is a summary at the acquisition date of the acquired intangible assets and weighted average useful life
in years for the acquisitions made in 2019 (dollars in millions; amounts considered provisional as discussed above):
Intangibles subject to amortization:
Proprietary technology
Customer list/relationships
Backlog
Total intangibles subject to amortization
Intangibles not subject to amortization:
Trademarks
Total acquired intangible assets
Goodwill
Goodwill (in millions):
Balance at December 31, 2017
Current year acquisitions
Foreign currency changes and other (a)
Balance at December 30, 2018
Current year acquisitions
Foreign currency changes and other (a)
Balance at December 29, 2019
Instrumentation
756.4
$
1.8
(3.5)
754.7
147.7
3.5
905.9
$
$
$
Digital
Imaging
815.6
—
(5.9)
809.7
157.2
(4.2)
962.7
Aerospace
and Defense
Electronics
182.0
$
—
(33.5)
148.5
—
15.8
164.3
$
2019
Weighted
average
useful life
in years
9.8
11.9
1.5
10.3
n/a
n/a
n/a
Total
$ 1,776.7
1.8
(43.3)
1,735.2
304.9
10.4
$ 2,050.5
Intangible
Assets
$
$
$
81.8
27.9
0.7
110.4
11.9
122.3
304.9
Engineered
Systems
$
$
22.7
—
(0.4)
22.3
—
(4.7)
17.6
(a) Certain prior period balances have been recast due to a business realignment affecting the Aerospace and Defense Electronics segment the Digital Imaging
segment and the Engineered Systems segment in 2019 and the Aerospace and Defense Electronics segment and the Digital Imaging segment Systems
segment in 2018. Please refer to Note 12 Business Segments of the Notes to Consolidated Financial Statements included in this Form 10-K for further
information.
76
2019
2018
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Acquired intangible assets (in millions):
Proprietary technology
Customer list/relationships
Patents
Non-compete agreements
Trademarks
Backlog
Acquired intangible assets subject to
amortization
Acquired intangible assets not subject to
amortization:
Trademarks
Total acquired intangible assets
$
$ 397.5
177.6
0.7
0.9
4.1
16.4
$
207.6
101.4
0.6
0.9
3.3
16.1
$
189.9
76.2
0.1
—
0.8
0.3
$
313.7
148.8
0.7
0.9
3.9
15.6
179.8
90.9
0.6
0.9
3.0
15.6
$ 133.9
57.9
0.1
—
0.9
—
597.2
329.9
267.3
483.6
290.8
192.8
163.5
$ 760.7
$
—
329.9
163.5
430.8
151.5
635.1
$
$
$
—
290.8
151.5
$ 344.3
Amortizable acquired intangible assets are amortized on a straight-line basis over their estimated useful lives ranging from
one to 15 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 $37.4 million, $39.5 million and $41.4 million in amortization expense in 2019, 2018 and 2017,
respectively, for acquired intangible assets. The expected future amortization expense, including provisional amounts for the
2019 acquisitions, for the next five years is as follows (in millions): 2020 - $38.5; 2021 - $37.1; 2022 - $34.3; 2023 - $30.5;
2024 - $28.7.
The estimated remaining useful lives by asset category as of December 29, 2019, are as follows:
Acquired intangibles subject to amortization
Proprietary technology
Customer list/relationships
Patents
Backlog
Trademarks
Total acquired intangibles subject to amortization
Note 4. Financial Instruments
Weighted average
remaining useful
life in years
6.7
7.0
2.9
1.0
3.3
6.7
The Company had no cash equivalents at December 29, 2019 or December 30, 2018. The fair value of the Company’s
forward currency contracts as of December 29, 2019 and December 30, 2018, are disclosed in Note 2, under “Derivative
Instruments and Hedging Activities,” of the Notes to Consolidated Financial Statements 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 29, 2019 and December 30, 2018. The fair value of the Company’s credit facility, term
loans and other debt, also described in Note 9, at December 29, 2019 and December 30, 2018, 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.
77
Note 5. Accounts Receivable and Unbilled Receivables
Accounts Receivable and Unbilled Receivables (in millions):
Commercial and other billed receivables
U.S. Government and prime contractors billed receivables
Allowance for doubtful accounts
Account receivable, net
Commercial and other unbilled receivables
U.S. Government and prime contractors unbilled receivables
Unbilled receivables, net
Note 6. Inventories
Inventories (in millions):
Raw materials and supplies
Work in process
Finished goods
Reduction to LIFO cost basis
Total inventories, net
Balance at year-end
2019
2018
$
$
$
$
440.1
30.5
470.6
(10.2)
460.4
143.9
56.5
200.4
$
$
$
$
381.9
41.3
423.2
(6.7)
416.5
96.4
48.9
145.3
Balance at year-end
2019
2018
$
$
231.2
108.3
61.7
401.2
(7.8)
393.4
$
$
205.6
117.5
50.5
373.6
(9.3)
364.3
Inventories at cost determined on the LIFO method were $40.0 million at December 29, 2019, and $42.3 million at
December 30, 2018. The remainder of the inventories using average cost or the FIFO methods, were $361.2 million at
December 29, 2019, and $331.3 million at December 30, 2018.
The Company recorded LIFO income of $1.6 million, $0.1 million and $2.9 million in 2019, 2018 and 2017, respectively.
Note 7. Supplemental Balance Sheet Information
Property, plant and equipment (in millions):
Land
Buildings
Equipment and software and other
Accumulated depreciation and amortization
Total property, plant and equipment, net
Balance at year-end
2019
68.1
280.6
763.1
1,111.8
(623.9)
487.9
$
$
2018
59.6
254.7
694.3
1,008.6
(566.0)
442.6
$
$
The following table presents selected balance sheet components (in millions):
Balance sheet items
Salaries and wage accruals
Customer related accruals, deposits and credits
Deferred tax liabilities
Balance sheet location
Accrued liabilities
Accrued liabilities
Other long-term liabilities
December 29, 2019
124.1
$
127.0
$
34.0
$
December 30, 2018
116.5
$
111.6
$
51.2
$
78
Note 8. Stockholders’ Equity
Common stock and treasury stock activity:
Balance, January 1, 2017
Issued
Balance, December 31, 2017
Issued
Balance, December 30, 2018
Issued
Balance, December 29, 2019
Common
Stock
37,697,865
—
37,697,865
37,697,865
Treasury
Stock
2,587,103
(429,471)
2,157,632
— (547,064)
1,610,568
— (460,669)
1,149,899
37,697,865
Shares issued include stock options exercised as well as shares issued under certain compensation plans.
Treasury Stock
In January 2016, the Company’s Board of Directors authorized a stock repurchase program authorizing the Company to
repurchase up to 3,000,000 shares of its common stock. The number of shares repurchased 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. 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 2019, 2018 or 2017. Up to
approximately three million 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 2019, 2018 or 2017.
Stock Incentive Plan
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.
Stock Options
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 President and Chief Executive Officer and Teledyne’s
Executive Chairman, which were expensed immediately. The Company recorded $26.1 million, $19.8 million, and $14.2
million for stock option expense, for 2019, 2018 and 2017, respectively. The Company issues shares of common stock upon
the exercise of stock options. On January 21, 2020, the Company granted 245,985 stock options to its employees at an exercise
price of $383.33 per share.
The total pretax intrinsic value of options exercised during 2019 and 2018 (which is the amount by which the stock price
exceeded the exercise price of the options on the date of exercise) was $82.5 million and $69.6 million, respectively. At
December 29, 2019, the intrinsic value of stock options outstanding was $431.5 million and the intrinsic value of stock options
exercisable was $315.2 million. During 2019 and 2018, the amount of cash received from the exercise of stock options was
$34.6 million and $37.2 million, respectively.
At December 29, 2019, there was $25.6 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 1.3 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. 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:
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected life in years
79
2019
2018
2017
—
26.7 %
—
32.3 %
2.47% to 2.70% 1.99% to 2.58% 1.0 % to 2.5%
7.2
—
31.0 %
6.8
6.6
Based on the assumptions used in the valuation of stock options, the grant date weighted average fair value of stock options
granted in 2019, 2018 and 2017 was $72.00, $71.89 and $48.45, respectively.
Stock option transactions for Teledyne’s stock option plans are summarized as follows:
2019
2018
2017
Beginning balance
Granted
Exercised
Canceled or expired
Ending balance
Options exercisable at end of period
Weighted
Average
Exercise
Price
104.66
217.58
80.31
181.62
130.67
94.04
Shares
$
2,064,740
$
390,789
(429,654) $
(37,299) $
$
$
1,988,576
1,242,205
Weighted
Average
Exercise
Price
83.73
192.28
71.95
129.85
104.66
78.26
Shares
$
2,285,703
376,065
$
(516,927) $
(80,101) $
$
$
2,064,740
1,257,766
Weighted
Average
Exercise
Price
Shares
2,175,442
543,880
(390,835) $
(42,784) $
$
$
2,285,703
1,443,241
$
70.44
$ 123.40
63.96
92.79
83.73
70.35
The following table provides certain information with respect to stock options outstanding and stock options exercisable
at December 29, 2019, under the stock option plans:
Range of Exercise Prices
$20.70-$49.99
$50.00-$99.99
$100.00-$149.99
$150.00-$199.99
$200.00-$237.01
Performance Shares
Stock Options Outstanding
Stock Options Exercisable
Weighted
Average
Exercise Price
44.70
$
80.73
$
123.40
$
192.00
$
217.69
$
130.67
$
Remaining
life in years
1.2
4.5
7.2
8.2
9.1
6.3
Shares
120,459
786,518
386,443
314,364
380,792
1,988,576
Weighted
Average
Exercise Price
44.70
$
80.73
$
123.39
$
191.97
$
228.84
$
94.04
$
Shares
120,459
786,518
239,913
94,214
1,101
1,242,205
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-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 three 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 PSP program can 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 in lieu of awarded shares is based on the then current market
value of Teledyne stock.
In February 2015, the performance cycle for the three-year period ending December 31, 2017, was set. Under the plan,
and based on actual performance, the Company issued 6,481 shares in 2018, 8,586 shares in 2019 and 7,673 shares in February
2020.
In February 2018, the performance cycle for the three-year period ending December 31, 2020, was set. Under the plan,
and based on actual performance, the maximum number of shares that could be issued in three equal installments in 2021, 2022
and 2023, is 59,427.
The estimated 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 market
comparison. The estimated expense for these shares was calculated using a lattice-based 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 the 2018 performance cycle, 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 $7.5 million, $5.1 million and $4.6 million in compensation expense related to the PSP program for
fiscal years 2019, 2018 and 2017, respectively.
80
Restricted Stock
Under Teledyne’s restricted stock award program key officers and 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 estimated expense for restricted stock awards to employees is based on a lattice-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 Russell 2000 Index (for awards granted after 2017 the comparator is the Russell 1000). No adjustment to the
estimated expense will be made regardless of actual performance. The Company recorded $3.0 million, $2.7 million and $2.7
million in compensation expense related to restricted stock awards to employees, for fiscal years 2019, 2018 and 2017,
respectively. At December 29, 2019, there was $3.3 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 1.5 years.
The following table shows restricted stock award activity for grants made to employees:
Restricted Stock:
Balance, January 1, 2017
Granted
Issued
Forfeited/Canceled
Balance, December 31, 2017
Granted
Issued
Forfeited/Canceled
Balance, December 30, 2018
Granted
Issued
Balance, December 29, 2019
Weighted
average
fair value
per share
Shares
83.68
$
97,044
114.74
24,232
$
87.98
(30,704) $
82.58
(2,136) $
90.72
$
88,436
176.64
16,733
$
92.74
(28,855) $
135.48
(2,094) $
108.05
$
74,220
200.00
17,522
$
72.91
(35,330) $
158.62
$
56,412
In December 2016, Teledyne granted 16,045 restricted stock units with a grant date fair value of $2.0 million to
Teledyne’s then 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 $0.6 million in 2019, $0.7 million in 2018 and $0.7 million in 2017. In both December 2019
and December 2018, we issued 2,697 shares under the plan and 2,651 shares were withheld to pay income taxes. In December
2017, we issued 2,389 shares under the plan and 2,960 shares were withheld to pay income taxes.
Non-employee directors each receive restricted stock units valued at $110,000 (or valued at $55,000 for a person who
becomes a director for the first time after the date of the Annual 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 director’s
restricted stock units was approximately $1.0 million for each of 2019, 2018 and 2017.
The following table shows restricted stock award activity for grants made to non-employee directors:
Directors Restricted Stock:
Balance, January 1, 2017
Granted
Issued
Balance, December 31, 2017
Granted
Issued
Balance, December 30, 2018
Granted
Issued
Balance, December 29, 2019
81
Weighted
average
fair value
Shares
per share
97.16
$
11,307
134.26
7,371
$
96.00
(10,305) $
131.25
8,373
$
193.39
$
5,112
134.26
(5,733) $
170.00
$
7,752
251.23
4,155
$
193.39
(2,840) $
199.90
$
9,067
Note 9. Long-Term Debt
Long-Term Debt (in millions):
$750.0 million credit facility, due March 2024, weighted average rate of
2.80% at December 29, 2019 and 5.50% at December 30, 2018
Term loan repaid October 2019, variable rate of 3.63% at December 30, 2018,
swapped to a Euro fixed rate of 0.7055%
Term loan due October 2024, variable rate of 2.702% at December 29, 2019,
swapped to a Euro fixed rate of 0.612%
2.61% Fixed Rate Senior Notes repaid December 2019
5.30% Fixed Rate Senior Notes due September 2020
2.81% Fixed Rate Senior Notes due November 2020
3.09% Fixed Rate Senior Notes due December 2021
3.28% Fixed Rate Senior Notes due November 2022
0.70% €50 Million Fixed Rate Senior Notes due April 2022
0.92% €100 Million Fixed Rate Senior Notes due April 2023
1.09% €100 Million Fixed Rate Senior Notes due April 2024
Other debt
Debt issuance costs
Total long-debt
Current portion of long-term debt and other debt
Total long-term debt, net of current portion
$
Maturities of long-term debt as of December 29, 2019 (dollars in millions):
Fiscal year
2020
2021
2022
2023
2024
Thereafter
Total principal payments
Debt issuance costs
Total debt
December 29, 2019
125.0
$
December 30, 2018
29.0
$
—
150.0
—
75.0
25.0
95.0
100.0
56.0
111.9
111.9
2.0
(1.2)
850.6
(100.6)
750.0
$
$
$
100.0
—
30.0
75.0
25.0
95.0
100.0
57.2
114.4
114.4
8.8
(1.3)
747.5
(137.4)
610.1
100.6
95.4
156.0
111.9
386.9
1.0
851.8
(1.2)
850.6
The Company has no sinking fund requirements.
On March 15, 2019, Teledyne amended its $750.0 million credit agreement to extend the maturity date from December
2020 to March 2024. While the borrowing capacity remains at $750.0 million, the amendment permits Teledyne to increase the
aggregate amount of the borrowing capacity by up to $250.0 million subject to certain conditions. Excluding interest and fees,
no payments are due under the $750.0 million unsecured credit facility (“credit facility”) until it matures. Borrowings under
our credit facility and term loans are at variable rates which are, at our option, tied to a Eurocurrency rate equal to LIBOR
(London Interbank Offered Rate) plus an applicable rate or a base rate 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 facility 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. Available borrowing capacity under the credit
facility, which is reduced by borrowings and certain outstanding letters of credit, was $598.3 million at December 29, 2019.
The credit agreement and term loans requires the Company to comply with various financial and operating covenants and at
December 29, 2019, the Company was in compliance with these covenants. At December 29, 2019, Teledyne had
$29.2 million in outstanding letters of credit.
82
In October 2019, Teledyne and its subsidiary, Teledyne Netherlands B.V., as borrowers, entered into an Amended and
Restated Term Loan Credit Agreement (the “Amended Term Loan Credit Agreement”) that amends and restates the Term Loan
Credit Agreement dated as of March 17, 2017. Pursuant to the Amended Term Loan Credit Agreement, the lenders thereunder
made unsecured term loans in an aggregate principal amount of $150.0 million, denominated in US dollars, $100.0 million of
which was used to repay outstanding loans, which had a maturity date of October 30, 2019. Also, on October 30, 2019,
Teledyne entered into a cross currency swap to effectively convert the $150.0 million term loan to a €135.2 million
denominated instrument with a fixed euro interest rate of 0.612%.
Total interest expense including credit facility fees and other bank charges was $22.0 million in 2019, $29.2 million in
2018 and $35.5 million in 2017.
Note 10. Income Taxes
On December 22, 2017, the Tax Act was enacted, which 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. 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, for a net provisional charge of $4.7 million
recorded in the fourth quarter of 2017. The Company finalized its assessment of the Tax Act during the fourth quarter of 2018,
resulting in a decrease of $0.8 million to the provisional charge and the repatriation tax. The $12.0 million balance of the
repatriation tax at outstanding at December 30, 2018 was paid in February 2019.
Income before income taxes included income from domestic operations of $295.9 million for 2019, $243.7 million for
2018 and $187.2 million for 2017. Income before taxes included income from foreign operations of $177.8 million for 2019,
$150.2 million for 2018 and $99.8 million for 2017.
Income tax provision/(benefit) - (in millions):
Current
Federal
State
Foreign
Total current
Deferred
Federal
State
Foreign
Total deferred
Provision for income taxes
2019
2018
2017
$ 66.0
10.6
28.4
105.0
$ 22.9
8.1
31.8
62.8
$ 54.0
6.4
22.8
83.2
(37.0)
(2.3)
5.7
(33.6)
$ 71.4
2.3
0.6
(5.6)
(2.7)
$ 60.1
(10.7)
(3.6)
(9.1)
(23.4)
$ 59.8
The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate:
Tax rate reconciliation:
U.S. federal statutory income tax rate
State and local taxes, net of federal benefit
Research and development tax credits
Investment tax credits
Qualified production activity deduction
Foreign rate differential
Net reversals for unrecognized tax benefits
Stock-based compensation
U.S. export sales
Provisional charges related to U.S. tax reform
Other
Effective income tax rate
2017
2019
2018
21.0 % 21.0 % 35.0 %
2.1
1.9
(2.1)
(2.3)
(1.1)
(1.2)
—
—
0.7
1.1
(0.6)
(0.3)
(3.3)
(3.3)
(2.4)
(1.3)
—
(0.2)
0.8
(0.1)
15.1 % 15.3 % 20.8 %
1.8
(3.2)
(1.5)
(1.3)
(4.2)
(0.8)
(3.1)
—
1.6
(3.5)
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.
83
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:
Long-term:
Accrued liabilities
Inventory valuation
Accrued vacation
Deferred compensation and other benefit plans
Postretirement benefits other than pensions
Operating lease liabilities
Capitalization of research and development
Tax credit and net operating loss carryforward
Valuation allowance
Total deferred income tax assets
Deferred income tax liabilities:
Long-term:
Property, plant and equipment differences
Intangible amortization
Operating lease right-of-use assets
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
2019
2018
$ 20.5
14.5
7.8
30.2
1.8
33.5
38.8
30.2
(6.1)
171.2
$ 20.3
11.9
7.8
20.0
2.5
—
—
43.8
(5.4)
100.9
16.0
133.5
33.5
5.5
188.5
$ 17.3
20.5
112.0
—
7.1
139.6
$ 38.7
We intend to reinvest indefinitely the earnings of our material foreign subsidiaries in our operations outside of the United
States. The cash that the Company’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. At December 29, 2019, the amount of undistributed foreign earnings was $309.5 million, for which
we have not recorded a deferred tax liability of approximately $1.4 million for 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 increased by $0.7 million in 2019, primarily related to the evidence for future
utilization of the remaining investment tax credits.
At December 29, 2019, the Company had approximately $43.6 million of net operating loss carryforward primarily from
the Company’s entity in Denmark, which has no expiration date. The Company had foreign capital loss carryforward in the
amount of $2.1 million which has no expiration date. Also the Company had aggregate Canadian federal and provincial
investment tax credits of $8.6 million, which have expiration dates of 2030 to 2040. In addition, the Company had domestic
federal and state net operating loss carryforward of $3.8 million and $105.6 million, respectively. Generally, federal net
operating loss carryforward amounts are limited in their use by earnings of certain acquired subsidiaries, and have expiration
dates ranging from 2030 to 2037 and the state net operating loss carryforward amounts have expiration dates ranging from 2020
to 2039. Finally, the Company had federal research and development credit carryforward in the amount of $0.9 million which
will expire between 2032 and 2035 and state tax credits of $10.6 million, of which $9.7 million have no expiration date and
$0.8 million have expiration dates ranging from 2023 to 2033.
84
Unrecognized tax benefits (in millions):
Beginning of year
Increase in prior year tax positions (a)
Increase for tax positions taken during the current period
Reduction related to settlements with taxing authorities
Reduction related to lapse of the statute of limitations
Impact of exchange rate changes
End of year
a) Includes the impact of acquisitions in all years.
2019
$ 25.0
4.2
4.3
(4.6)
(4.3)
(0.1)
$ 24.5
2018
$ 26.0
2.3
2.1
(0.1)
(5.2)
(0.1)
$ 25.0
2017
$ 24.5
0.5
9.8
—
(8.8)
—
$ 26.0
The Company anticipates the total unrecognized tax benefit for various federal, state and foreign tax items may be
reduced by $3.4 million due to the expiration of statutes of limitation for various federal, state and foreign tax issues in the next
12 months.
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 $0.3 million of benefit, $0.3 million of expense and $0.5 million
of benefit, for 2019, 2018 and 2017, respectively. Interest and penalties in the amount of $1.1 million, $1.7 million and $1.4
million were recognized in the 2019, 2018 and 2017 statement of financial position, respectively. Substantially all of the
unrecognized tax benefits as of December 29, 2019, if recognized, would affect our effective tax rate.
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 2015, United Kingdom
income tax matters for all years through 2017, France income tax matters for all years through 2016 and Canadian income tax
matters for all years through 2011.
Note 11. Pension Plans and Postretirement Benefits
Pension Plans
As of December 29, 2019, Teledyne has a defined benefit pension plan covering substantially all U.S. employees hired
before January 1, 2004, or approximately 10% of Teledyne’s active employees. As of January 1, 2004, new hires participate in
a defined contribution plan only. The Company also has several small domestic non-qualified and foreign-based defined
benefit pension plans.
In 2018 and 2017, the Company’s U.S. domestic qualified pension plan purchased group annuity contracts from insurance
companies and paid a total annuity premium of $17.8 million in 2018 and $19.0 million in 2017. These annuity contracts
transfer the obligation to the insurance companies to guarantee the full payment of all annuity payments to 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. These annuity contracts covered 321 and 412 existing retired
pension plan participants for 2018 and 2017, respectively, at the time of purchase. No annuity contracts were purchased in
2019.
The domestic qualified pension plan allows participants to elect a lump-sum payment at retirement. In 2019, 2018 and
2017, the Company made lump sum payments of $17.2 million, $18.6 million and $21.7 million, respectively, from the
domestic qualified pension plan assets to certain participants in the 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.
Service cost - benefits earned during the period (in millions)
Domestic
2018
9.8
$
2019
8.5
$
2017
$ 10.2
2019
$ 0.9
Foreign
2018
$ 0.9
2017
$ 1.0
Pension non-service income (in millions):
Interest cost on benefit obligation
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Curtailment
Pension non-service income
85
Domestic
2018
31.5
(70.0)
(6.0)
31.1
—
2019
32.4
(64.8)
(6.0)
30.6
—
2017
1.2
(2.1)
(0.1)
0.6
(0.4)
$ (7.8) $ (13.4) $ (13.1) $ (0.3) $ (0.2) $ (0.8)
2017
35.6
(71.3)
(6.0)
28.6
—
2019
1.2
(1.4)
0.1
0.3
(0.5)
Foreign
2018
1.3
(1.7)
(0.1)
0.4
(0.1)
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 for the domestic
qualified plan and the foreign plans:
Pension Plan Assumptions:
Domestic plan - 2019
Domestic plan - 2018
Domestic plan - 2017
Foreign plans - 2019
Foreign plans - 2018
Foreign plans - 2017
Weighted average
discount rate
Weighted average
increase in future
compensation levels
Expected weighted-
average long-term
rate of return
4.59%
4.02%
4.54%
2.75%
2.75%
2.75%
7.80%
8.00%
8.00%
0.90% - 2.60%
0.70% - 2.40%
0.60% - 2.50%
1.00% - 2.50%
1.00% - 2.50%
1.00% - 2.50%
1.00% - 3.80%
1.00% - 4.50%
1.00% - 5.90%
See Note 15 of the Notes to Consolidated Financial Statements for information on the projected long-term rate of return
on domestic plan assets for 2020. 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 3.80% in 2020.
Changes in benefit obligation (in millions):
Benefit obligation - beginning of year
Service cost - benefits earned during the year
Interest cost on projected benefit obligation
Actuarial (gain) loss
Benefits paid
Plan amendments
Settlements/curtailments
Other - including foreign currency
Benefit obligation - end of year
Domestic
Foreign
2019
2018
2019
2018
$ 731.7
8.5
32.4
93.1
(60.0)
—
—
—
$ 805.7
$ 812.3
9.8
31.5
(41.2)
(80.7)
—
—
—
$ 731.7
$ 52.3
0.9
1.2
5.6
(2.0)
—
1.9
0.4
$ 60.3
$ 57.8
0.9
1.3
(1.7)
(1.9)
1.1
(2.4)
(2.8)
$ 52.3
Accumulated benefit obligation - end of year
$ 801.3
$ 728.5
$ 56.3
$ 53.7
The key assumptions used to measure the benefit obligation at each respective year-end were:
Key assumptions:
Discount rate
Salary growth rate
Changes in plan assets (in millions):
Fair value of net plan assets - beginning of year
Actual return on plan assets
Employer contribution - other benefit plan
Foreign currency changes
Benefits paid
Other
Fair value of net plan assets - end of year
Domestic Plan
2018
2019
2017
3.41 % 4.59 % 4.02 % 0.20% - 1.80%
2019
Foreign Plans
2018
2017
0.90% - 2.60% 0.70% - 2.40%
2.75 % 2.75 % 2.75 % 1.00% - 2.50%
1.00% - 2.50% 1.00% - 2.50%
Domestic
Foreign
2019
2018
2019
2018
$ 780.3
113.1
2.3
—
(60.0)
—
$ 835.7
$ 896.0
(37.0)
2.0
—
(80.7)
—
$ 780.3
$
$
43.4
5.4
0.7
0.6
(2.0)
(0.1)
48.0
$ 46.7
0.8
2.2
(2.5)
(1.9)
(1.9)
$ 43.4
The measurement date for the Company’s pension plans is December 31.
86
The following tables sets forth the funded status and amounts recognized in the consolidated balance sheets at year-end
2019 and 2018 for the domestic qualified and nonqualified pension plans and the foreign-based pension plans for benefits
provided to certain employees (in millions):
Funded status
Amounts recognized in the consolidated balance sheets:
Prepaid pension asset long-term
Accrued pension obligation long-term
Accrued pension obligation short-term
Other long-term liabilities
Net amount recognized
Amounts recognized in accumulated other comprehensive loss:
Net prior service cost (credit)
Net loss
Net amount recognized, before tax effect
Domestic
Foreign
2019
$ 30.0
2018
$ 48.6
2019
2018
$ (12.3) $
(8.9)
$ 71.8
(33.8)
(2.7)
(5.3)
$ 30.0
$ 88.2
(31.8)
(2.6)
(5.2)
$ 48.6
$ — $ —
(8.6)
(0.3)
—
(8.9)
(11.7)
(0.6)
—
$ (12.3) $
$ (30.6) $ (18.6) $
431.7
$ 401.1
417.6
$ 399.0
$
(0.4) $
7.8
7.4
$
0.8
6.4
7.2
Amounts for pension plans with accumulated benefit obligations in excess of fair value of plan assets are as follows (in
millions):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2019
2018
$
$
$
102.0 $
98.0 $
48.0 $
91.9
88.8
43.4
At year-end 2019 and 2018 the Company had an accumulated non-cash reduction to stockholders’ equity of $323.1
million and $306.8 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 $102.5 million at year
end 2019 and $96.9 million at year end 2018.
At December 29, 2019, the estimated amounts of the minimum liability adjustment that are expected to be recognized as
components of net periodic benefit cost during 2020 for the pension plans are: net loss $22.9 million and net prior service credit
$6.0 million.
Estimated future pension plan benefit payments (in millions):
2020
2021
2022
2023
2024
2025-2029
Total
Domestic
55.0
$
55.0
56.6
55.8
55.4
271.7
549.5
$
Foreign
2.5
$
2.1
2.1
2.4
2.5
12.6
24.2
$
The following table sets forth the percentage of year-end market value by asset class for the pension plans:
Market value by asset class:
Equity instruments
Fixed income instruments
Alternatives and other
Total
Domestic
Plan Assets
% to Total
Foreign
Plan Assets
% to Total
2019
2018
2019
2018
49 %
31
20
100 %
51 %
34
15
100 %
56 %
25
19
100 %
53 %
27
20
100 %
87
The Company has an active management policy for the pension assets in the qualified domestic pension plan. As of
December 29, 2019, the long term asset allocation target for the domestic plan consists of approximately 52% in equity
instruments, approximately 34% in fixed income instruments and approximately 14% in 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 29, 2019, by asset category are as follows (in millions):
Asset category:(a)
Cash and cash equivalents (b)
Equity securities
U.S. government securities and futures
Corporate bonds
Insurance contracts related to foreign plans
Fair value of net plan assets at the end of the year
Investments measured at net asset value:
Alternatives
Mutual funds (c)
Mortgage-backed securities
High yield bonds
Fair value of net plan assets at the end of the year
Level 2
Level 1
$ — $ 65.4
266.7
6.6
47.4
14.0
$ 400.1
52.5
128.3
—
—
$ 180.8
Total
Level 3
$ — $ 65.4
319.2
134.9
47.4
14.0
$ — $ 580.9
—
—
—
—
$ 195.3
29.7
49.2
28.7
$ 302.9
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) The mutual funds are 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 December 30, 2018, by asset category are as follows (in millions):
Level 1 Level 2 Level 3
$ — $ 53.0
233.6
—
34.3
12.0
$ 332.9
Total
$ — $ 53.0
289.9
99.3
34.3
12.0
$ — $ 488.5
56.3
99.3
—
—
$ 155.6
—
—
—
—
$ 204.1
63.0
0.2
42.8
25.2
$ 335.3
Asset category: (a)
Cash and cash equivalents (b)
Equity securities
U.S. government securities and futures
Corporate bonds
Insurance contracts related to foreign plans
Fair value of net plan assets at the end of the year
Investments measured at net asset value:
Alternatives
Mutual funds (c)
Senior secured loans
Mortgage-backed securities
High yield bonds
Fair value of net plan assets at the end of the year
(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) 53% of mutual funds invest in fixed income types of securities; 47% invest in equity securities.
88
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.
See Note 15 to these Consolidated Financial Statements for information on the changes to our domestic qualified benefit
plan effective January 1, 2020.
The Company’s contributions associated with its 401(k) plans were $13.4 million, $11.9 million and $9.8 million, for
2019, 2018 and 2017, 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. No service cost was incurred for these
plans in 2019, 2018 or 2017.
Postretirement benefits non-service expense (in millions):
Interest cost on benefit obligation
Amortization of actuarial gain
Postretirement benefits non-service expense
Changes in benefit obligation (in millions):
Benefit obligation - beginning of year
Interest cost on projected benefit obligation
Actuarial (gain) loss
Benefits paid
Other
Benefit obligation - end of year
The measurement date for the Company’s postretirement plans is December 31.
Future postretirement plan benefit payments (in millions):
2020
2021
2022
2023
2024
2025-2029
Total
2019
0.4
(0.3)
$ 0.1
2018
0.4
(0.3)
$ 0.1
2017
0.4
(0.4)
$ —
2019
2018
$
$
8.7
0.4
0.1
(1.2)
0.1
8.1
$
$
$
$
9.7
0.4
(0.1)
(1.3)
—
8.7
0.9
0.8
0.8
0.7
0.7
2.7
6.6
89
The following table sets forth the funded status and amounts recognized in Teledyne’s consolidated balance sheets for the
postretirement plans at year-end 2019 and 2018 (in millions):
Funded status:
Funded status
Unrecognized net gain
Accrued benefit cost
Amounts recognized in the consolidated balance sheets:
Accrued postretirement benefits (long-term)
Accrued postretirement benefits (short-term)
Accumulated other comprehensive income
Net amount recognized
2019
2018
$
$
$
$
(8.1) $
(2.2)
(10.3) $
(7.2) $
(0.9)
(2.2)
(10.3) $
(8.7)
(2.5)
(11.2)
(7.7)
(1.0)
(2.5)
(11.2)
At December 29, 2019, the amount in AOCI that has not yet been recognized as a component of net periodic benefit
income for the retiree medical plans is a net gain $2.2 million and no net prior service credit. At December 29, 2019, the
estimated amortization from AOCI expected to be recognized as components of net periodic benefit income during 2020 for the
retiree medical plans is a net gain of $0.2 million and no net prior service cost.
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 6.25% in 2020 and was assumed to decrease to 5.0% by the year 2027 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 million for 2019 and would result in an increase in the postretirement benefit obligation by $0.2
million at December 29, 2019. 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 2018 and would result in a decrease in the
postretirement benefit obligation by $0.2 million at December 29, 2019.
Note 12. Business Segments
The Company has four reportable segments: Instrumentation; Digital Imaging; 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-mechanical systems (“MEMS”) and high-performance, high-reliability semiconductors including analog-to-digital and
digital-to-analog converters. It also includes our sponsored and centralized research laboratories benefiting government
programs and businesses. 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. 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
small turbine engines.
In the third quarter of 2019, we realigned the segment reporting structure for certain business units, primarily related to
certain refinements of our management reporting structure. This change primarily related to moving certain electronic
manufacturing services products from the Aerospace and Defense Electronics segment to the Engineered Systems segment.
Total net sales for these products were $76.2 million for fiscal year 2018. Other immaterial changes included moving certain
United Kingdom (U.K.) microwave product lines (previously within the Digital Imaging segment) and certain U.K.
manufactured composite parts (previously within the Engineered Systems segment) into the Aerospace and Defense Electronics
segment. Total net sales for these U.K. product lines was less than $20.0 million for fiscal year 2018. The realignment had no
impact on the Instrumentation segment or the Consolidated Financial Statements. Previously reported segment data has been
adjusted to reflect these changes.
90
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, the Company may take and has taken
actions to consolidate and relocate certain facilities and reduce headcount across various businesses, reducing our exposure to
weak end markets and high cost locations. At December 29, 2019, $1.5 million remains to be paid related to these actions.
The following pre-tax charges were incurred related to severance and facility consolidations (in millions):
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total
Information on the Company’s business segments was as follows (in millions):
Net sales:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total net sales
Operating income:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate expense
Total operating income
Depreciation and amortization:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate
Total depreciation and amortization
Capital expenditures:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate
Total capital expenditures
2019
2018
2017
$
$
1.5
1.1
0.5
0.1
3.2
$
$
5.6
0.7
1.3
0.2
7.8
$
$
2.1
—
2.1
—
4.2
2019
2018
2017
$ 1,105.1
992.9
690.1
375.5
$ 3,163.6
$ 1,021.2
875.3
640.2
365.1
$ 2,901.8
$
953.9
710.4
591.2
348.3
$ 2,603.8
2019
2018
2017
$
$
$
$
$
$
200.4
176.5
143.4
36.5
(65.1)
491.7
2019
35.9
48.5
14.3
6.0
7.2
111.9
2019
18.9
45.2
19.0
3.6
1.7
88.4
$
$
$
$
$
$
147.4
155.5
131.8
37.9
(56.0)
416.6
2018
37.0
50.8
13.8
4.3
7.1
113.0
2018
14.8
35.8
18.7
13.6
3.9
86.8
$
$
$
$
$
$
126.0
110.2
113.0
35.5
(63.0)
321.7
2017
38.2
49.6
14.0
4.6
6.6
113.0
2017
13.7
23.4
9.3
7.4
4.7
58.5
91
Identifiable assets are those assets used in the operations of the segments. Corporate assets primarily consist of cash,
deferred taxes, pension assets and other assets.
Identifiable assets:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate
Total identifiable assets
2019
$ 1,680.2
1,874.6
618.3
143.4
263.3
$ 4,579.8
2018
$ 1,392.7
1,577.5
509.9
151.5
177.7
$ 3,809.3
2017
$ 1,413.6
1,582.2
491.2
135.5
223.9
$ 3,846.4
Information on the Company’s sales by country of origin and long-lived assets by major geographic area was as follows
(in millions):
Sales by country of origin:
United States
Canada
United Kingdom
The Netherlands
All other countries
Total sales
Long-lived assets:
United States
Canada
United Kingdom
France
All other countries
Total long-lived assets
2019
$ 2,179.6
301.0
251.7
134.2
297.1
$ 3,163.6
2019
$ 1,839.4
355.0
492.2
367.1
195.6
$ 3,249.3
2018
$ 2,044.9
294.8
178.8
105.3
278.0
$ 2,901.8
2018
$ 1,402.3
264.6
414.9
353.8
246.7
$ 2,682.3
2017
$ 1,849.4
266.1
197.5
68.0
222.8
$ 2,603.8
2017
$ 1,495.4
288.2
487.9
370.2
182.0
$2,823.7
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. The all other
countries category primarily consists of Teledyne’s operations in Europe.
Product Lines
The Instrumentation segment includes three product lines: Environmental Instrumentation, Marine Instrumentation and
Test and Measurement Instrumentation. All other segments each contain one product line.
The tables below provide a summary of the sales by product line for the Instrumentation segment (in millions):
Instrumentation:
Environmental Instrumentation
Marine Instrumentation
Test and Measurement Instrumentation
Total
2019
$ 391.4
450.2
263.5
$ 1,105.1
2018
$ 339.6
433.0
248.6
$ 1,021.2
2017
$ 314.3
430.7
208.9
$ 953.9
Sales to the U.S. Government included sales to the U.S. Department of Defense of $545.5 million in 2019, $494.9 million
in 2018, and $479.7 million in 2017. Total sales to international customers were $1,391.6 million in 2019, $1,353.7 million in
2018, and $1,208.5 million in 2017. Of these amounts, sales by operations in the United States to customers in other countries
were $638.0 million in 2019, $600.5 million in 2018, and $555.5 million in 2017. 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 $30.3 million, $23.4 million and $22.8 million for 2019, 2018 and 2017,
respectively.
We also disaggregate our revenue from contracts with customers by customer type, contract-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. As we adopted Topic 606 during fiscal year 2018 using the modified retrospective
transition method, prior period information was not adjusted for Topic 606 and comparative disclosures for disaggregated
revenue are not required for the year prior to adoption.
92
Twelve Months Ended
December 29, 2019
Customer Type
Twelve Months Ended
December 30, 2018
Customer Type
United
States
Government
(a)
Other,
Primarily
Commercial
United
States
Government
(a)
Other,
Primarily
Commercial
Total
Total
$
$
80.4
107.4
225.3
338.9
752.0
$
$
1,024.7
885.5
464.8
36.6
2,411.6
$1,105.1
992.9
690.1
375.5
$3,163.6
$
$
68.3
90.5
177.2
319.3
655.3
$
$
952.9
784.8
463.0
45.8
2,246.5
$1,021.2
875.3
640.2
365.1
$2,901.8
Twelve Months Ended
December 29, 2019
Contract Type
Twelve Months Ended
December 30, 2018
Contract Type
Fixed Price
Cost Type
Total
Fixed Price
Cost Type
Total
(in millions)
Net Sales:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total
a) Includes sales as a prime contractor or subcontractor.
(in millions)
Net Sales:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total
$
$
1,094.4
903.1
687.8
168.9
2,854.2
$
$
10.7
89.8
2.3
206.6
309.4
$ 1,105.1
992.9
690.1
375.5
$ 3,163.6
$
$
1,001.0
795.5
637.4
165.8
2,599.7
$
$
20.2
79.8
2.8
199.3
302.1
$ 1,021.2
875.3
640.2
365.1
$ 2,901.8
Twelve Months Ended
December 29, 2019
Twelve Months Ended
December 30, 2018
Geographic Region (a)
Geographic Region (a)
United
States
Europe
All
other
Total
United
States
Europe
All
other
Total
$ 899.7
316.1
588.3
375.5
$ 164.8
299.4
100.8
—
$2,179.6 $ 565.0
$ 40.6
377.4
1.0
—
$ 419.0
$1,105.1 $ 835.0
239.3
605.5
365.1
$ 134.6
270.2
32.5
—
$3,163.6 $2,044.9 $ 437.3
992.9
690.1
375.5
$ 51.6
365.8
2.2
—
$ 419.6
$1,021.2
875.3
640.2
365.1
$2,901.8
(in millions)
Net sales:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total
a) Net sales by geographic region of origin.
Note 13. Lease Commitments
Lease Commitments
We determine if an arrangement is a lease at inception. Effective December 31, 2018, 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 may include
options to extend the lease term. We include those options to extend the lease term in determining the present value of the
future lease payments when it is reasonably certain that we will exercise such option. Lease expense for lease payments is
recognized on a straight-line basis over the lease term.
93
Many lease agreements contain renewal options at either a fixed cost, fixed increase or market value adjustment. For
those leases with renewal options, we will include the renewal options that are reasonably certain to be exercised for purposes
of calculating the lease liability and corresponding right-of-use asset. 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.
Operating Leases
Teledyne has approximately 125 long-term operating lease agreements for manufacturing facilities and office space.
These agreements frequently include one 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 December 29, 2019, Teledyne has right-of-use assets of $127.1 million.
At December 29, 2019, future minimum lease payments for operating leases with non-cancelable terms of more than one
year were as follows (in millions):
Operating lease commitments:
2020
2021
2022
2023
2024
Thereafter
Total minimum lease payments
Less:
Imputed interest
Current portion (included in other current liabilities)
Present value of minimum lease payments, net of current portion
$
$
24.5
23.0
19.7
16.9
15.1
70.1
169.3
(30.4)
(19.6)
119.3
The weighted average remaining lease term for operating leases is approximately 9 years and the weighted average
discount rate is 4.05%. Rental expense under operating leases, including leases with a term of 12 months or less, net of
immaterial sublease income, was $26.5 million in 2019, $30.7 million in 2018 and $26.9 million in 2017.
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.
94
At December 29, 2019, the Company’s reserves for environmental remediation obligations totaled $6.0 million, of which
$1.6 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 years.
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. Subsequent Events
The Company continues to manage the risks related to its defined benefit pension plan liabilities. Effective January 1,
2020, Teledyne restructured its domestic qualified defined benefit pension plan. The restructuring involved dividing our
domestic qualified defined pension plan into two separate plans, one comprised primarily of inactive participants (the “inactive
plan”) and the other comprised primarily of active participants (the “active plan”). The reorganization was made to facilitate a
targeted investment strategy over time and to provide additional flexibility in evaluating opportunities to reduce risk and
volatility. As a result of the restructuring, the Company re-measured the assets and liabilities of the two plans, as required
under U.S. GAAP, based on assumptions and market conditions on the January 1, 2020 effective date. Actuarial gains and
losses associated with the active plan will continue to be amortized over the average remaining service period of the active
participants, while the actuarial gains and losses associated with the inactive plan will be amortized over the average remaining
life expectancy of the inactive participants which is currently approximately 17.7 years. Based on the new targeted investment
strategy, the company is projecting for 2020 a long term rate of return on plan assets for the inactive plan of 6.71% and 7.80%
for the active plan. As a primary result of these changes, the net pre-tax pension expense for all benefit plans is expected to
decrease in 2020 by approximately $3.9 million to $2.6 million in pension income for 2020 from $1.3 million in pension
expense in 2019.
On January 3, 2020, we acquired OakGate Technology, Inc. (“OakGate”) for $28.0 million in cash. Based in Loomis,
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.
95
Note 16. Quarterly Financial Data (Unaudited)
Fiscal Year 2019 (a) (in millions, except per-share amounts)
Net Sales
Costs and expenses
Cost of sales
Selling, general and administrative expenses
Total costs and expenses
Operating income
Interest and debt expense, net
Non-service retirement benefit income
Other expense, net
Income before income taxes
Provision for income taxes (b)
Net income
Basic earnings per common share
Diluted earnings per common share
1st Quarter
745.2
$
2nd Quarter
782.0
$
3rd Quarter
802.2
$
4th Quarter
834.2
$
463.9
184.0
647.9
97.3
(5.4)
2.2
(1.2)
92.9
17.6
75.3
2.09
2.02
$
$
$
463.6
186.5
650.1
131.9
(5.4)
2.0
(0.6)
127.9
23.3
104.6
2.89
2.80
$
$
$
487.7
185.8
673.5
128.7
(5.5)
1.9
(1.7)
123.4
16.7
106.7
2.93
2.84
$
$
$
505.1
195.3
700.4
133.8
(4.7)
1.9
(1.5)
129.5
13.8
115.7
3.17
3.06
$
$
$
a)
b)
Fiscal year 2019 was a 52-week fiscal-year, each quarter contained 13 weeks.
Includes $3.1 million in net discrete income tax benefits in the first quarter, $4.3 million in net discrete income tax benefits in the second quarter,
$10.4 million in net discrete income tax benefits the third quarter and $8.3 million in net discrete income tax benefits in the fourth quarter.
Fiscal Year 2019 (in millions)
Net Sales:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total net sales
Operating income:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate expense
Total operating income
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$
$
$
$
256.5
232.4
166.6
89.7
745.2
39.9
36.6
32.5
6.4
(18.1)
97.3
$
$
$
$
264.1
248.4
176.0
93.5
782.0
49.0
51.6
38.6
9.0
(16.3)
131.9
$
$
$
$
282.9
244.0
177.1
98.2
802.2
52.0
41.2
39.5
10.6
(14.6)
128.7
$
$
$
$
301.6
268.1
170.4
94.1
834.2
59.5
47.1
32.8
10.5
(16.1)
133.8
96
Fiscal Year 2018 (a) (in millions, except per-share amounts)
Net Sales
Costs and expenses
Cost of sales
Selling, general and administrative expenses
Total costs and expenses
Operating income
Interest and debt expense, net
Non-service retirement benefit income
Other expense, net
Income before income taxes
Provision for income taxes (b)
Net income
Basic earnings per common share
Diluted earnings per common share
1st Quarter
695.6
$
2nd Quarter
732.5
$
3rd Quarter
725.3
$
4th Quarter
748.4
$
438.2
169.0
607.2
88.4
(7.1)
3.4
(2.5)
82.2
15.7
66.5
1.87
1.81
$
$
$
447.0
174.0
621.0
111.5
(6.7)
3.3
(3.7)
104.4
18.5
85.9
2.40
2.32
$
$
$
446.2
173.6
619.8
105.5
(6.0)
3.4
(2.7)
100.2
9.9
90.3
2.52
2.43
$
$
$
459.6
177.6
637.2
111.2
(5.7)
3.4
(1.8)
107.1
16.0
91.1
2.53
2.45
$
$
$
a)
b)
Fiscal year 2018 was a 52-week fiscal-year, each quarter contained 13 weeks.
Includes $2.1 million in net discrete income tax benefits in the first quarter, $3.4 million in net discrete income tax benefits in the second quarter,
$11.4 million in net discrete income tax benefits the third quarter and $6.9 million in net discrete income tax benefits in the fourth quarter.
Fiscal Year 2018 (in millions)
Net Sales:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Total net sales
Operating income:
Instrumentation
Digital Imaging
Aerospace and Defense Electronics
Engineered Systems
Corporate expense
Total operating income
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$
$
$
$
239.0
208.3
156.4
91.9
695.6
27.8
33.8
30.8
8.9
(12.9)
88.4
$
$
$
$
262.6
223.0
157.5
89.4
732.5
40.9
43.1
32.6
8.7
(13.8)
111.5
$
$
$
$
256.2
220.7
160.3
88.1
725.3
35.7
42.3
33.0
9.6
(15.1)
105.5
$
$
$
$
263.4
223.3
166.0
95.7
748.4
43.0
36.3
35.4
10.7
(14.2)
111.2
(a)
The 2018 periods have been adjusted to reflect the realignment, in the third quarter of 2019, of the reporting structure for certain business units, primarily
related to certain refinements of our management reporting structure. This change primarily related to moving certain electronic manufacturing services
products from the Aerospace and Defense Electronics segment to the Engineered Systems segment. Other immaterial changes included moving certain
United Kingdom (U.K.) microwave product lines (previously within the Digital Imaging segment) and certain U.K. manufactured composite parts
(previously within the Engineered Systems segment) into the Aerospace and Defense Electronics segment.
97
Schedule II VALUATION AND QUALIFYING ACCOUNTS
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
For the Fiscal Years Ended December 29, 2019, December 30, 2018 and December 31, 2017
(In millions)
Description
Fiscal Year 2019
Allowance for doubtful accounts
Environmental reserves
Fiscal Year 2018
Allowance for doubtful accounts
Environmental reserves
Fiscal Year 2017
Allowance for doubtful accounts
Environmental reserves
Additions
Balance at
beginning of
period
Charged
to costs and
expenses
Acquisitions
Deductions and
other (a)
Balance at end
of period
$
$
$
$
$
$
6.7
6.0
10.3
5.1
5.2
7.0
1.3
0.6
0.6
1.6
4.2
2.3
2.3
—
—
—
1.6
0.3
(0.1) $
(0.6) $
(4.2) $
(0.7) $
(0.7) $
(4.5) $
10.2
6.0
6.7
6.0
10.3
5.1
(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
98
EXHIBIT INDEX
Description
Separation and Distribution Agreement dated as of November 29, 1999 by and among Allegheny Teledyne
Incorporated, TDY Holdings, LLC, Teledyne Industries, Inc. and Teledyne Technologies Incorporated
(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated as of November 29,
1999 (File No. 1-15295))
Restated Certificate of Incorporation of Teledyne Technologies Incorporated (including Certificate of Designation
of Series A Junior Participating Preferred Stock) (incorporated by reference to Exhibit 3.1 to the Company’s
Annual Report on Form 10-K for the year ended January 2, 2000 (File No. 1-15295))
Amended and Restated Bylaws of Teledyne Technologies Incorporated (incorporated by reference to Exhibit 3.1
to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2014 (File No. 1-15295))
Exhibit
No.
2.1
3.1
3.2
4.1
Description of the Registrant's Securities*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Employee Benefits Agreement between Allegheny Teledyne Incorporated and Teledyne Technologies
Incorporated (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K/A
(Amendment No. 1) dated as of November 29, 199 (File No. 1-15295))†
Teledyne Technologies Incorporated 2008 Incentive Award Plan (incorporated by reference to Annex A of the
Company’s Definitive Proxy Statement filed March 7, 2008 (File No. 1-15295))†
Teledyne Technologies Incorporated Administrative Rules of the 2008 Incentive Award Plan Related to Non-
Employee Director Stock Compensation (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended March 30, 2008 (File No. 1-15295))†
Form of Stock Option Agreement under the 2008 Incentive Award Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 19, 2010 (File No.1-15295))†
Teledyne Technologies Incorporated Amended and Restated 2008 Incentive Award Plan (incorporated by
reference to Annex A of the Company’s Definitive Proxy Statement filed March 8, 2012 (File No. 1-15295))†
Administrative Rules of the Teledyne Technologies Incorporated Amended and Restated 2008 Incentive Award
Plan Related to Non-Employee Director Stock Compensation (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2012 (File No. 1-15295))†
Form of Stock Option Agreement under the Teledyne Technologies Incorporated Amended and Restated 2008
Incentive Award Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on
Form 10-Q for the fiscal quarter ended April 1, 2012 (File No. 1-15295))†
Teledyne Technologies Incorporated 2014 Incentive Award Plan (incorporated by reference to Annex A of the
Company’s Definitive Proxy Statement filed March 5, 2014 (File No. 1-15295))†
Form of stock option agreement and conditions under the Teledyne Technologies Incorporated 2014 Incentive
Award Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated
April 23, 2014 File No. 1-15295))†
10.10 Administrative Rules of the Teledyne Technologies Incorporated 2014 Incentive Plan Related to Non-Employee
Director Stock Compensation (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on
Form 8-K dated April 23, 2014 (File No. 1-15295))†
99
10.11 Administrative Rules of the 2014 Incentive Award Plan Related to Non-Employee Director Restricted Stock
Unit Awards and Fees (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
dated December 31, 2014 (File No. 1-15295))†
10.12 Amended and Restated Teledyne Technologies Incorporated 2014 Incentive Award Plan (incorporated by
reference to Annex A of the Company’s Definitive Proxy Statement filed March 10, 2017)†
10.13
Standing resolutions of the Nominating and Governance Committee related to non-employee director
compensation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated
April 26, 2017).†
10.14 Administrative Rules of the Amended and Restated Teledyne Technologies Incorporated 2014 Incentive Award
Plan Related to Non-Employee Director Restricted Stock Unit Awards and Fees (incorporated by reference to
Exhibit 10.3 to the Company’s Current Report on Form 8-K dated April 26, 2017).†
10.15 Administrative Rules for the Restricted Stock Award Program under the Amended and Restated Teledyne
Technologies Incorporated 2014 Incentive Award Plan (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated January 23, 2018)†
10.16
Form of Restricted Stock Award Agreement under the Amended and Restated Teledyne Technologies
Incorporated 2014 Incentive Award Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K dated January 23, 2018)†
10.17
Form of Stock Option Award Agreement under the Amended and Restated Teledyne Technologies Incorporated
2014 Incentive Award Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on
Form 8-K dated January 23, 2018)†
10.18
Terms and Conditions of Stock Option Award Agreement under the Amended and Restated Teledyne
Technologies Incorporated 2014 Incentive Award Plan for grants made after 2018†*
10.19 Summary Plan Description for the Performance Share Plan 2018-2020 Cycle under the Amended and Restated
Teledyne Technologies Incorporated 2014 Incentive Award Plan (incorporated by reference to Exhibit 10.4 to
the Company's Current Report on Form 8-K dated January 23, 2018)†
10.20
10.21
Sixth Amended and Restated Employment Agreement, by and between Teledyne Technologies Incorporated and
Robert Mehrabian, dated as of October 23, 2018. (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on October 23, 2018) (File No. 1-15295)†
Employment Agreement, by and between Teledyne Technologies Incorporated and Aldo Pichelli, dated as of
October 23, 2018. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on October 23, 2018) (File No. 1-15295)†
10.22 Amended and Restated Change in Control Severance Agreement, dated as of January 31, 2011, by and between
Teledyne Technologies Incorporated and Robert Mehrabian (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated January 31, 2011 (File No. 1-15295))†
10.23 Amended and Restated Change in Control Severance Agreement, dated as of January 31, 2011, by and between
Teledyne Technologies Incorporated and Al Pichelli (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K dated January 31, 2011 (File No. 1-15295))†
10.24 Amended and Restated change in Control Severance Agreement dated January 31, 2011, by and between
Teledyne Technologies Incorporated and Susan L. Main (incorporated by reference to Exhibit 10.12 to
Company’s Annual Report on Form 10-K for the fiscal years ended December 29, 2013 (File No. 1-15295))†
10.25 Amended and Restated Change in Control Severance Agreement, dated as of January 31, 2011, by and between
Teledyne Technologies Incorporated and Melanie Cibik (incorporated by reference to Exhibit 10.13 to the
Company’s Annual Report on Form 10-K for the fiscal year end December 29, 2013 (File No. 1-15295))†
100
10.26
10.27
10.28
10.29
10.30
10.31
10.32
Amended and Restated Change in Control Severance Agreement, dated as of January 31, 2011, by and between
Teledyne Technologies Incorporated and Edwin Roks (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year end December 30, 2018 (File No. I-15295)†
Teledyne Technologies Incorporated Executive Deferred Compensation Plan, as originally effective as of
November 29, 1999, as amended and restated effective December 31, 2004 (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 31, 2008)(File No. 1-15295)†
Teledyne Technologies Incorporated Pension Equalization/Benefit Restoration Plan, as originally effective as of
November 29, 1999, as amended and restated effective December 31, 2004 (incorporated by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 31, 2008(File No. 1-15295))†
Teledyne Technologies Pension Equalization/Benefit Restoration Plan - Resolutions of the Plan Administration
Committee (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated
December 31, 2014 (File No. 1-15295))†
Note Purchase Agreement, dated May 12, 2010, by and among Teledyne Technologies Incorporated and the
Purchasers identified therein (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the fiscal quarter ended July 4, 2010 (File No. 1-15295))
Amendment to Note Purchase Agreement, dated as of April 18, 2017, between Teledyne Technologies
Incorporated and the noteholders under that certain Note Purchase Agreement dated as of May 12, 2010
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated April 18, 2017)
Amended and Restated Credit Agreement, dated as of March 1, 2013, by and among Teledyne Technologies
Incorporated (Teledyne), 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 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K dated March 1, 2013) (File No. 1-15295))
10.33
First Amendment to Amended and Restated Credit Agreement, dated as of December 4, 2015,(incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 4, 2018 (File No.
I-15295)
10.34
10.35
10.36
10.37
10.38
10.39
Second Amendment, dated as of January 17, 2017, to Amended and Restated Credit Agreement, (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)
Third Amendment, dated as of March 17, 2017, to Amended and Restated Credit Agreement (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 17, 2017)
Fourth Amendment, dated as of March 15, 2019, to Amended and Restated Credit Agreement (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 15, 2019)
Fifth Amendment, dated as of October 30, 2019, to Amended and Restated Credit Agreement (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated October 30, 2019)
Note Purchase Agreement, dated September 23, 2014, by and among Teledyne Technologies Incorporated and
the Purchasers identified therein (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on
Form 8-K filed on September 23, 2014 (File No. 1-15295))
Amendment to Note Purchase Agreement, dated as of April 18, 2017, between Teledyne Technologies
Incorporated and the noteholders under that certain Note Purchase Agreement dated as of August 27, 2015
(incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated April 18,
2017).
101
10.40
Note Purchase Agreement, dated August 27, 2015, by and among Teledyne Technologies Incorporated and the
Purchasers identified therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated August 27, 2015) (File No. 1-15295))
10.41
10.42
10.43
10.44
10.45
14.1
14.2
14.3
21
23.1
24.1
31.1
31.2
32.1
32.2
Amendment to Note Purchase Agreement, dated as of April 18, 2017, between Teledyne Technologies
Incorporated and the noteholders under that certain Note Purchase Agreement dated as of September 23, 2014
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated April 18,
2017).
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).
Note Purchase and Guaranty Agreement, dated as of April 18, 2017, by and among Teledyne Technologies
Incorporated, Teledyne Netherlands B.V. and the purchasers identified therein (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 18, 2017).
Guaranty Agreement to Note Purchase Agreement, dated as of April 18, 2017, made by the Subsidiary
Guarantors (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated
April 18, 2017).
Form of Indemnification Agreement executed by each of the Company’s directors and named executive officers
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 22, 2009
(File No. 1-15295))†
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.pdf
Code of Ethics for Financial Professionals - this code of ethics may be accessed via the Company’s website at
www.teledyne.com/aboutus/ethics.asp
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.asp
Subsidiaries of Teledyne Technologies Incorporated*
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm *
Power of Attorney - Directors*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS XBRL Instance Document**
101.SCH XBRL Taxonomy Extension Schema Document**
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB XBRL Taxonomy Extension Label Linkbase Document**
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document**
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 29, 2019: (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.
102
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 21, 2020.
SIGNATURES
Teledyne Technologies Incorporated (Registrant)
By:
/s/ Aldo Pichelli
Aldo Pichelli
President and Chief Executive Officer
103
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/ Aldo Pichelli
Aldo Pichelli
/s/ Susan L. Main
Susan L. Main
/s/ Cynthia Belak
Cynthia Belak
/s/ Robert Mehrabian
Robert Mehrabian
Roxanne S. Austin
Denise R. Cade
Charles Crocker
Kenneth C. Dahlberg
Simon M. Lorne
Robert A. Malone
Paul D. Miller
Jane C. Sherburne
Michael T. Smith
*
*
*
*
*
*
*
*
*
*
President and Chief Executive Officer
Chief Executive Officer (Principal
Executive Officer)
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Vice President and
Controller
(Principal Accounting Officer)
Executive Chairman and Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
Director
February 21, 2020
Wesley W. von Schack
*By:
/s/ Melanie S. Cibik
Melanie S. Cibik
Pursuant to Power of Attorney
filed as Exhibit 24.1
104
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Forward-looking Statements
Cautionary Notice
F rom time to time we make, and this Annual Report
and our Annual Report on Form 10-K may contain,
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, our credit facility, interest expense, severance
and relocation costs, environmental remediation cost,
stock repurchases, taxes, exchange rate fluctuations, and
strategic plans. All statements made in this Annual Report
and the Company’s Annual 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: disruptions in the global economy; the spread
of the Coronavirus resulting in lower demand for our
products and global supply disruptions; 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; cuts to defense spending
resulting from existing and future deficit reduction
measures; impacts from the United Kingdom’s exit from
the European Union; uncertainties related to the policies
of the U.S. Presidential Administration; the imposition
and expansion of, and responses to, trade sanctions and
tariffs; and threats to the security of our confidential and
proprietary information, including cyber security threats.
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 respect to hydraulic fracturing, could
further negatively affect our businesses that supply the oil
and gas industry. Disruptions from the production delay
of Boeing’s 737 Max aircraft and increasing fuel costs will
negatively affect the markets of our commercial aviation
businesses. In addition, financial market fluctuations affect
the value of the company's pension assets.
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 we
participate.
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 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 in Teledyne’s
periodic filings with the Securities and Exchange
Commission, including its 2019 Annual Report on Form 10-K.
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.
Copyright © 2020 Teledyne Technologies Incorporated. All Rights Reserved. Editor: Neil Humphrey | Design: Chris McCorkindale | Printed in the U.S.A.
1049 Camino Dos Rios, Thousand Oaks, CA 91360 | Telephone: (805) 373-4545 | Fax: (805) 373-4775
www.teledyne.com
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