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Teledyne Technologies

Teledyne TechnologiesTDYEarnings & Financial Report

NYSE · Information Technology · Electronic Equipment & Instruments

Teledyne Technologies Incorporated is an American industrial conglomerate. It was founded in 1960, as Teledyne, Inc. by Henry Singleton and George Kozmetsky.

What changed in Teledyne Technologies's 10-K — 2021 vs 2022

Top changes in Teledyne Technologies's 2022 10-K

368 paragraphs added · 455 removed · 286 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

48 edited+8 added−16 removed28 unchanged
For defense applications, we also develop and manufacture multi-spectrum electro-optic/infrared imaging systems and associated products such as lasers, optics, and radars; Chemical, Biological, Radiological, Nuclear and Explosive detectors and unmanned air and ground systems. These sensors and instruments can be deployed as integrated solutions and with advanced target detection, identification and classification capabilities.
For defense applications, we also develop and manufacture multi-spectrum electro-optic/infrared imaging systems and associated products such as lasers, optics, and radars, CBRNE ("Chemical, Biological, Radiological, Nuclear and Explosive detectors") and unmanned air and ground systems. These sensors and instruments can be deployed as integrated solutions and with advanced target detection, identification and classification capabilities.
Our customers use our equipment in the design, development, manufacture, installation, deployment and operation of electronics equipment in broad range of industries, including aerospace and defense, internet infrastructure, automotive, industrial, computer and semiconductor, consumer electronics mobile and power electronics.
Our customers use our equipment in the design, development, manufacture, installation, deployment and operation of electronics equipment in a broad range of industries, including aerospace and defense, internet infrastructure, automotive, industrial, computer and semiconductor, consumer electronics mobile and power electronics.
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.
We believe our technological capabilities, 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.
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, storage and networks.
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 in the areas of cloud computing, storage and networks.
While the current supply chain constraints have not significantly affected our business, to reduce current and future supply disruptions, we have implemented short-term and long-term supplier actions to reduce disruptions and prioritize mitigation. Some raw materials are purchased from a limited set of suppliers, including international sources, due to technical capability, price, and other factors.
While the current supply chain constraints have not materially affected our business, we have implemented short-term and long-term supplier actions to reduce disruptions and prioritize mitigation. Some raw materials are purchased from a limited set of suppliers, including international sources, due to technical capability, price, and other factors.
We also manufacture and provide complementary laboratory instrumentation including through laboratory automation and sample introduction systems which automates the preparation and concentration of organic samples. 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.
We also manufacture and provide complementary laboratory instrumentation including through laboratory automation and sample introduction systems that automate the preparation and concentration of organic samples. 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.
From this review, individualized development and retention programs are implemented or revised as needed. We also provide additional opportunities for our existing employees to enhance their careers. We invest in employee skills development in various ways, including through educational expense reimbursement. These reimbursements help employees advance their education.
From this review, individualized development and retention programs are implemented or revised as needed. We also provide additional opportunities for our existing employees to enhance their careers. We invest in employee skills development in various ways, including through educational expense reimbursement.
In 2021, our voluntary employee turnover (excluding reductions in force) was approximately 10%. As of January 2, 2022, the average years of service of our employees was approximately 10 years. Equality, Diversity and Inclusion Employees are vital to the success of our innovation-driven growth strategy.
In 2022, our voluntary employee turnover (excluding reductions in force) was approximately 12%. As of January 1, 2023, the average years of service of our employees was approximately 10 years. Equality, Diversity and Inclusion Employees are vital to the success of our innovation-driven growth strategy.
We are focused on attracting, developing, and retaining employees through competitive compensation and benefits, workforce and management development, diversity and inclusion initiatives, succession planning, corporate culture and leadership quality. In 2020, we formed a committee to oversee our equality, diversity and inclusion efforts.
We are focused on attracting, developing, and retaining employees through competitive compensation and benefits, workforce and management development, diversity and inclusion initiatives, succession planning, corporate culture and leadership quality. Teledyne has a Corporate-led committee to oversee our equality, diversity and inclusion efforts.
The Audit Committee also oversees risk management, including the impact of climate change-related risks. Human Capital We consider our relations with our employees to be good. At January 2, 2022, our total workforce consisted of approximately 14,500 employees in more than 38 countries.
The Audit Committee also oversees risk management, including the impact of climate change-related risks. Human Capital We consider our relations with our employees to be good. At January 1, 2023, our total workforce consisted of approximately 14,700 employees in more than 37 countries.
We also provide power and communications connectivity devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments. Our Instrumentation segment represented approximately 25% of our net sales for 2021. Below is a description of the product lines that comprise the Instrumentation segment.
We also provide power and communications connectivity devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments. Below is a description of the product lines that comprise the Instrumentation segment.
Item 1. Business Who We Are Teledyne Technologies Incorporated (“Teledyne” or the “Company”), a Delaware company that became an independent public company effective November 29, 1999, provides enabling technologies for industrial growth markets that require advanced technology and high reliability.
Item 1. Business Who We Are Teledyne Technologies Incorporated is a Delaware corporation that became an independent public company effective November 29, 1999. We provide enabling technologies for industrial growth markets that require advanced technology and high reliability.
However, we believe our short-term and long-term supplier actions position us well to mitigate and reduce the impact these factors may have on our businesses. Marketing Our sales and marketing approach varies by segment and by products within our segments.
We expect inflationary and supply chain constraint trends to continue in 2023. However, we believe our short-term and long-term supplier actions position us well to mitigate and reduce the impact these factors may have on our businesses. Marketing Our sales and marketing approach varies by segment and by products within our segments.
Additionally, U.S. Government contracts are subject to termination by the U.S. Government at its convenience, without identification of any 3 Table of Contents default. When contracts are terminated for convenience, we can recover costs incurred or committed, settlement expenses and profit on work completed prior to termination. We had no U.S.
Government at its convenience, without identification of any default. When contracts are terminated for convenience, we can recover costs incurred or committed, settlement expenses and profit on work completed prior to termination. During 2022 and 2021, contracts terminated by the U.S.
Specialized training in a job related field gives employees new skills and a strong foundation of knowledge that can serve them throughout their career and that may allow them to progress to more responsible positions at Teledyne. In 2020, we launched Teledyne University, a learning platform for employees.
Specialized training in a job-related field gives employees new skills and a strong foundation of knowledge that can serve them throughout their career and that may allow them to progress to more responsible 5 Table of Contents positions at Teledyne. Our employees have access to Teledyne University, a learning platform.
Such applications include aircraft, radar, electronic countermeasures, weapon systems, space, wireless and satellite communications and terminals and test equipment. Our Aerospace and Defense Electronics segment represented approximately 14% of our net sales for 2021. We provide onboard avionics systems and ground-based applications that allow civil and military aircraft software operators to access, manage and utilize their data more efficiently.
Such applications include aircraft, radar, electronic countermeasures, weapon systems, space, wireless and satellite communications and terminals and test equipment. We provide onboard avionics systems and ground-based applications that allow civil and military aircraft software operators to access, manage and utilize their data more efficiently.
Workforce demographics for various regions are provided below: Gender Percent to Total Employees Average Age Average Years of Service Male Female Not Specified Americas 69% 48.8 10.2 63% 32% 5% Europe, the Middle East and Africa 28% 43.2 9.9 61% 24% 15% Asia-Pacific Region 3% 38.5 7.2 53% 24% 23% We have a stable and long-tenured workforce.
Workforce demographics for various regions are provided below: Gender (Self-Reported) Percent of Total Employees Average Age Average Years of Service Male Female Not Specified Americas 69% 48.8 9.9 62% 32% 6% Europe, the Middle East and Africa 28% 43.2 10.0 59% 24% 17% Asia-Pacific Region 3% 41.1 7.8 52% 23% 25% We have a stable and long-tenured workforce.
Government prime contracts and subcontracts were fixed-price type contracts, compared to 67% in 2020. 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.
Under fixed-price type 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.
This segment also designs and manufactures electrochemical energy systems and manufactures specialty electronics for demanding military applications. Our Engineered Systems segment represented approximately 9% of our net sales for 2021. Our core business base, includes National Aeronautics and Space Administration (“NASA”), the U.S. Department of Defense, the U.S. Department of Energy, foreign militaries and commercial customers.
This segment also designs and manufactures electrochemical energy systems and manufactures specialty electronics for demanding military applications. Our core business base includes National Aeronautics and Space Administration (“NASA”), the U.S. Department of Defense, the U.S. Department of Energy, foreign militaries and commercial customers. Teledyne exited the cruise missile turbine engine business in the first quarter of 2021.
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 also provide instruments for the measurement of physical properties and other maritime products for recreational and commercial customers globally. 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 leverage our existing supplier relationships and are not dependent on any one supplier for a material amount of our purchases. Prices of certain key raw materials and electronic components are expected to fluctuate in the future.
We leverage our existing supplier relationships and are not dependent on any one supplier for a material amount of our purchases. Prices of certain key raw materials and electronic components have fluctuated in the past and are expected to fluctuate in the future. We mitigate raw material cost increases primarily with long-term supply agreements and customer price increases.
Intellectual Property We own and control various intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and copyrights. We 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.
We 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.
More information about our carbon footprint and GHG emission reduction efforts and goals, and the contributions that Teledyne products make to carbon monitoring and environmental and climate science, can be found in our CSR report. Please note that information posted or accessible through websites referenced in this report is not incorporated by reference or otherwise included in this report.
More information about our carbon footprint and GHG emission reduction efforts and goals, and the contributions that Teledyne products make to carbon monitoring and environmental and climate science, can be found in our CSR report.
( “FLIR”), we further evolved into a global sensing and decision-support technology company: providing specialty sensors, cameras, instrumentation, algorithms and software across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land and air domains.
(“FLIR”), we further evolved into a global sensing and decision-support technology company, providing specialty sensors, cameras, instrumentation, algorithms and software across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land and air domains. 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.
Recently, the prominence and importance of sustainability and Environmental, Social and Governance (“ESG”) initiatives have dramatically increased. In February 2022, we published our inaugural Corporate Social Responsibility (“CSR”) report, in which we disclose and highlight some of Teledyne’s most recent efforts focused and sustainability and ESG.
In November 2022, we published our second Corporate Social Responsibility (“CSR”) report, in which we disclose and highlight some of Teledyne’s most recent efforts focused on sustainability and ESG.
Government contracts terminated for convenience or default in 2021 or 2020. 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.
Government have not materially impacted our results of operations. 3 Table of Contents 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 2021, the top five countries for sales to international customers, ranked by net sales, were China, the United Kingdom, Germany, Japan and France and represented approximately 20% of our total net sales. Approximately 26% of our total net sales for both 2021 and 2020 were derived from contracts with agencies of, and prime contractors to, the U.S. Government.
Approximately 90% of our net sales to international customers during 2022 were made to customers in 30 foreign countries. In 2022, the top five countries for sales to international customers, ranked by net sales, were China, Germany, Japan, the United Kingdom and France and represented approximately 20% of our total net sales.
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.
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. Given the technical nature of our products, we conduct our marketing activities through a direct internal sales force as well as third-party sales representatives.
Digital Imaging Segment Our Digital Imaging segment includes high-performance sensors, cameras and systems, within the visible, infrared, ultraviolet and X-ray spectra for use in industrial, scientific, government, space, defense, security and medical applications, among others.
Percentage of Total Net Sales Segment contribution to total net sales: 2022 2021 2020 Digital Imaging 57 % 52 % 32 % Instrumentation 23 % 25 % 35 % Aerospace and Defense Electronics 12 % 14 % 19 % Engineered Systems 8 % 9 % 14 % 100 % 100 % 100 % Digital Imaging Segment Our Digital Imaging segment includes high-performance sensors, cameras, and systems, within the visible, infrared, ultraviolet and X-ray spectra for use in industrial, scientific, government, space, defense, security and medical applications, among others.
Government was the Mission Operations and Integration (“MO&I”) contract with the NASA Marshall Space Flight Center, which represented 1.0% and 1.5% of our total net sales, respectively. As described in greater detail under Item 1A. Risk Factors of this Form 10-K, there are risks associated with doing business with the U.S. Government. In 2021, approximately 76% of our U.S.
In 2022 and 2021, the largest program with the U.S. Government within the Engineered Systems segment was the Mission Operations and Integration (“MO&I”) contract with the NASA Marshall Space Flight Center, which represented approximately 11% of Engineered Systems net sales in both 2022 and 2021. As described in greater detail under Item 1A.
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: 2021 2020 2019 Digital Imaging $ 515.9 $ 120.9 $ 107.4 Instrumentation 91.6 80.6 80.4 Aerospace and Defense Electronics 227.2 229.9 225.3 Engineered Systems 358.4 386.8 346.7 Total U.S.
Government sales by segment: 2022 2021 2020 Digital Imaging $ 619.1 $ 515.9 $ 120.9 Instrumentation 108.1 91.6 80.6 Aerospace and Defense Electronics 266.3 227.2 229.9 Engineered Systems 366.4 358.4 386.8 Total U.S. Government sales $ 1,359.9 $ 1,193.1 $ 818.2 Our principal U.S. Government customer is the U.S.
Going forward, we will continue to evaluate our emission reduction goals, while at the same time providing the tools and technologies enabling environmental science and climatology across the globe.
We have set a goal to reduce our combined Scope 1 and Scope 2 in company operations, normalized for revenue, by 40% from 2020 levels by the end of 2040. Going forward, we will continue to evaluate our emission reduction goals, while at the same time providing the tools and technologies enabling environmental science and climatology across the globe.
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.
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 We own and control various intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and copyrights.
Environment and Other Government Regulations Information with respect to environmental matters is set forth under “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 in this Form 10-K.
Environment and Other Government Regulations Information with respect to environmental matters is set forth under “Other Matters – Environmental” of “ Item 7 . Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 1 7 . No material capital expenditures relating to environmental or other government regulatory compliance are presently anticipated.
FLIR is part of the Digital Imaging segment. Our Business Segments Our businesses are aligned in four segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems.
As discussed in Note 18 , we have completed one acquisition in early 2023, which is part of the Digital Imaging segment. Our Business Segments Our businesses are aligned in four segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems. Additional financial information about our business segments can be found in Note 4 .
Teledyne exited the cruise missile turbine engine business in the first quarter of 2021. Customers We have a large number of customers in the various industries we serve. No commercial customer in 2021 or 2020 accounted for more than 3% of total net sales or more than 10% of any segment’s net sales.
Customers We have a large number of customers in the various industries we serve. No commercial customer in 2022 or 2021 accounted for more than 10% of net sales for any of our segments or for the total Company. Total sales to international customers were $2,586.0 million in 2022 and $2,147.9 million in 2021.
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 regarding air pollution and dangerous storms, such as time-critical warning of hurricanes and tsunamis.
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. Recently, the prominence and importance of sustainability and Environmental, Social and Governance (“ESG”) initiatives have dramatically increased.
We continue to focus on several activities and initiatives to actively increase diverse representation and progression within our company. We advertise vacancies and strive to recruit the best possible candidate for the role. 5 Table of Contents Employee Well-Being The health and wellness of our employees is a critical component to the success of our business.
Various initiatives include developing relationships with universities with higher underrepresentation, creating diverse talent pools, and increasing networking and referrals with diverse professional organizations. We advertise vacancies and strive to recruit the best possible candidate for each role. Employee Well-Being The health and wellness of our employees is a critical component to the success of our business.
We provide a range of cooled and uncooled infrared or thermal products, including sensors, camera cores and camera systems based on long wave infrared, mid-wave infrared, and short wave infrared technologies. Products and applications include space-based imaging, factory condition monitoring, optical gas leak detection, laboratory research and maritime thermal imaging.
Through this segment, we provide visible spectrum sensors and digital cameras for industrial machine vision and automated quality control, as well as for medical, research and scientific applications. We provide a range of cooled and uncooled infrared or thermal products, including sensors, camera cores and camera systems based on long wave infrared, mid-wave infrared, and short wave infrared technologies.
Government sales $ 1,193.1 $ 818.2 $ 759.8 Our principal U.S. Government customer is the U.S. Department of Defense, which totaled approximately $876.6 million and $578.4 million of our total net sales for 2021 and 2020, respectively. In 2021 and 2020, our largest program with the U.S.
Department of Defense, which totaled $1,065.1 million and $876.6 million of our total net sales for 2022 and 2021, respectively. With the exception of the Engineered Systems segment, no U.S Government program in 2022 or 2021 accounted for more than 10% of net sales for any of our segments or for the total Company.
No material capital expenditures relating to environmental or other government regulatory compliance are presently anticipated. 4 Table of Contents Sustainability Teledyne continues to focus on developing solutions to address sustainability and climate challenges facing humanity today. Many of our products directly support sustainability and climate challenges.
Sustainability Teledyne continues to focus on developing solutions to address sustainability and climate challenges facing humanity today. Many of our products directly support sustainability and climate challenges. We provide a broad range of precision measurement technologies for environmental monitoring and climate research.
Our leadership in USB and video technologies provides a unique base to service the mobile, internet of things, automotive and consumer electronics test markets. 2 Table of Contents In 2021, Teledyne introduced the CrossSync™ PHY interposers and software options, enabling the first-ever link between an oscilloscope and a protocol analyzer to allow engineers to get a complete picture when testing the PCI Express interface standard.
Our recently introduced interposers and software options allow engineers to get a complete picture when testing the PCI Express interface standard by enabling a link between an oscilloscope and a protocol analyzer. 2 Table of Contents We also manufacture torque sensors and automatic data acquisition systems that are used to test critical control valves in nuclear power and industrial plants.
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.
Although we have certain advantages that we believe help us compete effectively in our markets, each of our markets is highly competitive. Our businesses vigorously compete on quality, product performance and reliability, technical expertise, price and service.
Raw Materials and Suppliers Generally, most raw materials used in our operations are readily available; however, during 2021, we experienced supply chain constraints and price volatility on some raw materials.
Raw Materials and Suppliers Most raw materials used in our operations are readily available; however, during 2022, we experienced supply chain challenges, including increased lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand.
The CSR report is available at the Corporate Social Responsibility link on our website at www.teledyne.com under the tab “Who We Are”. In 2021, we compiled the first global inventory of our greenhouse gas (“GHG”) emissions (starting with fiscal year 2020) and are developing a GHG monitoring and management plan.
The CSR report, 4 Table of Contents which is not incorporated by reference in this document, is available at the Corporate Social Responsibility link on our website at www.teledyne.com under the tab “Who We Are”.
Sales to international customers accounted for approximately 47% of total sales in 2021 compared with 45% in 2020. In both 2021 and 2020, we sold products to customers in over 100 foreign countries. Approximately 90% of our net sales to international customers during 2021 were made to customers in 30 foreign countries.
Of these sales to international customers, our businesses in the United States accounted for $837.9 million in 2022 and $723.9 million in 2021. There were no sales to individual countries outside of the United States in excess of 10% of the Company’s sales. In both 2022 and 2021, we sold products to customers in over 100 foreign countries.
We provide a broad range of precision measurement technologies for environmental monitoring and climate research. Our sensors and instruments are deployed everywhere, in space, on aircraft and drones, on land, on the sea surface, in the water column, and on the seafloor.
Our sensors and instruments are deployed everywhere: 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 the Earth’s oceans.
Our acquisition of OakGate Technology, Inc. (“OakGate”) in 2020 supplements our broad product offerings with protocol validation and test tools for high-performance solid-state storage devices used in both enterprise-grade data centers and in consumer computing applications. 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 leadership in USB and video technologies provides a unique base to service the mobile, internet of things, automotive and consumer electronics test markets. We also produce protocol validation and test tools for high-performance solid-state storage devices used in both enterprise-grade data centers and in consumer computing applications.
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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.
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The following description of our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within Item 7 of this Form 10-K. Recent Developments Consistent with our strategy, we completed two acquisitions in 2022 and one acquisition in 2021. Our May 2021 acquisition of FLIR was our largest acquisition to date.
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For discussion on our business and strategy for 2020 and 2019 see our Annual Report on Form 10-K for the fiscal year ended January 3, 2021; for a discussion of our 2020 acquisition, see Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition. Recent Developments Acquisition of FLIR Systems, Inc.
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The financial results of these acquisitions have been included since the respective date of each acquisition. All acquisitions in 2022 and 2021 were part of the Digital Imaging segment. See Note 3 for additional information about our recent acquisitions.
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On May 14, 2021, Teledyne acquired the outstanding stock of FLIR for approximately $8.1 billion, comprising of net cash payments of $3.7 billion, Teledyne share issuances of $3.9 billion, and the assumption of FLIR debt of $0.5 billion.
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Products and applications include space-based imaging, factory condition monitoring, optical and acoustic-based gas leak detection, laboratory research and maritime thermal imaging. We develop high-resolution, low-dose X-ray sensors as well as high-power microwave and high-energy X-ray subsystems for medical, dental and industrial applications.
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FLIR stockholders received $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share, and Teledyne issued approximately 9.5 million shares at $409.41 per share. See Note 10 to these Notes to Consolidated Financial Statements for information regarding financing activities undertaken in connection with the FLIR acquisition.
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Approximately 25% and 26% of our total net sales in 2022 and 2021, 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.
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FLIR is an industrial technology company focused on intelligent sensing solutions for defense and industrial applications. FLIR offers a diversified portfolio that serves a number of applications in government and defense, industrial, and commercial markets. FLIR technologies include thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and advanced threat-detection solutions.
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Risk Factors, there are risks associated with doing business with the U.S. Government. In 2022, approximately 80% of our U.S. Government prime contracts and subcontracts were fixed-price type contracts, compared to 76% in 2021, with the remaining U.S. Government contracts related to cost-reimbursable contracts ("cost-type").
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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 for the fiscal year ended January 2, 2022 (this “Form 10-K”).
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Several Teledyne businesses, including across our segments, have been marketing and selling products collaboratively to similar customers.
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Our Digital Imaging segment represented approximately 52% of our net sales for 2021, and includes the net sales contribution from the May 14, 2021 acquisition of FLIR. Through this segment, we provide visible spectrum sensors and digital cameras for industrial machine vision and automated quality control, as well as for medical, research and scientific applications.
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The CSR Report includes data on Teledyne’s combined direct emissions (“Scope 1”) and indirect emissions from purchased energy (“Scope 2”), workplace safety, water usage, waste generation and recycling and workplace demographics. In 2021, we compiled the first global inventory of our greenhouse gas (“GHG”) emissions (starting with fiscal year 2020) and have developed a GHG monitoring and management plan.
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We develop high-resolution, low-dose X-Ray sensors for medical, dental and industrial applications. We also provide instruments for the measurement of physical properties and other maritime products for recreational and commercial customers globally.
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We are committed to building a more diverse and inclusive workplace, and we actively monitor diversity metrics on a global basis. We regularly review our policies, processes and practices to ensure that they promote inclusivity for all applicants and employees. We continue to focus on several activities and initiatives to actively increase diverse representation and progression within our company.
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We mitigate raw material cost increases with long-term supply agreements, customer price increases, and isolating the market driven raw material component of the products we buy. We anticipate that supply chain constraints for some raw materials will continue in 2022.
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Given the technical nature of our products, we conduct our domestic and international marketing activities through a direct internal sales force, as well as third-party sales representatives and distributors, both in the United States and in other countries.
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We have set a goal to reduce our combined direct emissions (“Scope 1”) and indirect emissions from purchased energy (“Scope 2”) in company operations, normalized for revenue, by 40% from 2020 levels by the end of 2040.
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We are committed to building a more diverse and inclusive workplace, and we actively monitor diversity metrics on a global basis. We are piloting an anonymized review/resume redaction process and we expanded our recruitment sources to attract more diverse candidates. We work with many outreach programs, including the National Society of Black Engineers and the Society of Women Engineers.
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We also began working with INROADS, a non-profit organization that creates pathways to careers for ethnically diverse high school and college students across the country, to improve our access to diverse candidates. We regularly review our policies, processes and practices to ensure that they promote inclusivity for all applicants and employees.
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Talent Acquisition We appreciate the benefits of diversity and support programs increasing the inclusion of underrepresented and minority groups, including the enablement of persons with disabilities, and the advancement of women in professional fields, particularly in science, technology, engineering and math (“STEM”).
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We work with various organizations to increase diversity in our pool of available candidates to fill our STEM-based and other hard-to-fill positions. As part of our outreach and development efforts for women in the science, technology, and engineering fields, we have participated in the Women in Science and Engineering Conference for Girls in various locations in the U.S.
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We have also been a consistent sponsor of the Young Woman Engineer of the Year Awards in the United Kingdom (“U.K.”). This event helps young students, school leavers and degree students understand more about engineering by learning about day-to-day jobs and personal experiences. It is also designed to encourage young talent to pursue a career in STEM.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

110 edited+32 added−35 removed117 unchanged
Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect our business, results of operations, financial condition, competitive position or reputation, including materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.
Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect our business, results of operations, financial condition, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.
The indebtedness and these negative covenants may also have the effect, among other things, of limiting our ability to obtain additional financing, if needed, reducing the funds available to make acquisitions, capital expenditures, or reducing our flexibility in planning for or reacting to changes in our business or market conditions, and making us more vulnerable to economic downturns and adverse competitive and industry conditions.
The indebtedness and these negative covenants may also have the effect, among other things, of limiting our ability to obtain additional financing, if needed, reducing the funds available to make acquisitions or capital expenditures, reducing our flexibility in planning for or reacting to changes in our business or market conditions, and making us more vulnerable to economic downturns and adverse competitive and industry conditions.
If we are unable to meet our debt service obligations or should we fail to comply with our financial and other negative covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell important strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities.
If we are unable to meet our debt service obligations or should we fail to comply with our financial and other negative covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities.
In June 2016, the 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 entered a transition period until December 31, 2020 during which the U.K. remained in both the E.U. customs union and single market.
In June 2016, the 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 entered a transition period lasting until December 31, 2020 during which the U.K. remained in both the E.U. customs union and single market.
Further, indemnities, insurance or escrow arrangements may not fully cover such matters and acquisition of public companies, such as our acquisition of FLIR, typically do include post closing indemnities or escrows. In connection with our acquisitions, including those acquisitions that we do not complete, we may incur significant transaction costs.
Further, indemnities, insurance or escrow arrangements may not fully cover such matters. Acquisitions of public companies, such as our acquisition of FLIR, typically do not include post-closing indemnities or escrows. In connection with our acquisitions, including those acquisitions that we do not complete, we may incur significant transaction costs.
For example, Airbus is providing a wireless product, FOMAX, which now competes directly with Teledyne Controls hardware and services. Furthermore, Boeing has announced a vertical integration program, which includes avionics. Lastly, some of our products face increasing competition from alternative technologies.
For example, Airbus is providing a wireless product, FOMAX, which competes directly with Teledyne Controls hardware and services. Furthermore, Boeing has announced a vertical integration program, which includes avionics. Lastly, some of our products face increasing competition from alternative technologies.
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.
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.
Our Restated Certificate of Incorporation, our Amended and Restated Bylaws and the General Corporation Law of the State of Delaware contain several provisions, such as our classified Board, that could make the acquisition of control of Teledyne, in a transaction not approved by our Board, more difficult.
Our Restated Certificate of Incorporation, our Fourth Amended and Restated Bylaws and the General Corporation Law of the State of Delaware contain several provisions, such as our classified Board, that could make the acquisition of control of Teledyne, in a transaction not approved by our Board, more difficult.
Our business is being impacted by interruptions in the supply chain, due in part to the COVID pandemic, a resumption of strong worldwide demand for electronic products and components across a number of end markets, and interruption in supplier and port operations.
Our business is being impacted by interruptions in the supply chain, due in part to the COVID pandemic, a resumption of strong worldwide demand for electronic products and components across a number of end markets, and interruption in supplier operations.
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 such parties.
Violations of the Foreign Corrupt Practices Act 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 such parties.
Some of our businesses serve industries such as power generation and petrochemical refining, which may be negatively impacted in the event of future reductions in global capital expenditures and manufacturing capacity, or as a result of global environmental sustainability efforts. 10 Table of Contents We are subject to the risks associated with international sales and international operations, and events in those countries could harm our business or results of operations.
Some of our businesses serve industries such as power generation and petrochemical refining, which may be negatively impacted in the event of future reductions in global capital expenditures and manufacturing capacity, or as a result of global environmental sustainability efforts. 8 Table of Contents We are subject to the risks associated with international sales and international operations, and events in those countries could harm our business or results of operations.
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 and the Personal Information Protection Law in China; • 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.
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; • additional deterioration 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 and the Personal Information Protection Law in China; • 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, backgrounds and labor laws.
Our ability to meet our expense and debt service obligations will depend on our future performance, including the cash we generate from operating activities, which will be affected by financial, business, economic and other factors, including potential changes in laws or regulations, industry conditions, industry supply and demand balance, customer preferences, the success of our products and pressure from competitors.
Our ability to meet our interest expense and debt service obligations will depend on our future performance, including the cash we generate from operating activities, which will be affected by financial, business, economic and other factors, including potential changes in laws or regulations, industry conditions, industry supply and demand, customer preferences, the success of our products and pressure from competitors.
Legislative and regulatory measures currently under consideration or being implemented by government authorities to address climate change could require reductions in our greenhouse gas or other emissions, establish a carbon tax or increase fuel or energy taxes. We have also voluntarily announced goals to reduce our GHG emissions by a target date.
Legislative and regulatory measures currently under consideration or being implemented by government authorities to address climate change could require reductions in our GHG or other emissions, establish a carbon tax or increase fuel or energy taxes. We have also voluntarily announced goals to reduce our GHG emissions by a target date.
These impacts to our labor force resulting from the COVID pandemic could materially affect our ability to manufacture, ship or deliver our products, and in certain instances may result in higher wage costs, which could adversely impact our revenue and our results of operations We also have a mature workforce.
These impacts to our labor force resulting from a COVID pandemic resurgence could materially affect our ability to manufacture, ship or deliver our products, and in certain instances may result in higher wage costs, which could adversely impact our revenue and our results of operations We also have a mature workforce.
We cannot ensure that, for 2022 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 ensure that, for 2023 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.
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.
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.
As a result, we are experiencing delays in delivery and shortages of certain components and raw materials needed for many of the products we manufacture, particularly certain types of semiconductors, silicon wafers, specialized raw materials and chemicals, adhesives, engineered plastics and electronic components.
As a result, we are experiencing delays in delivery and shortages of certain components and raw materials needed for many of the products we manufacture, particularly certain types of semiconductors, integrated circuits, silicon wafers, specialized raw materials and chemicals, adhesives, engineered plastics and electronic components.
In addition, we are experiencing higher labor costs due to increased competition for personnel in many regions in which we operate as well as general inflationary conditions, and higher shipping costs due to labor and vehicle shortages and rising energy prices. We expect inflationary pressures to persist in 2022.
In addition, we are experiencing higher labor costs due to increased competition for personnel in many regions in which we operate as well as general inflationary conditions, and higher shipping costs due to labor and vehicle shortages and rising energy prices. We expect inflationary pressures to persist in 2023.
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.
We have also entered into Change in Control Severance Agreements with eight members of our current management, which could have an anti-takeover effect. These provisions may prevent or discourage attempts to acquire our Company.
As discussed under the risk factor below headed “Natural and man-made disasters could adversely affect our business, results of operations and financial condition,” some of our manufacturing facilities are located in regions that may be impacted by severe weather events, like hurricanes or ice storms, or in areas prone to wildfires, the frequency and severity of which may increase as a result of climate change.
As discussed under the risk factor below headed “Natural and man-made disasters could adversely affect our business, results of operations and financial condition,” some of our manufacturing facilities are located in regions that may be impacted by severe weather events, like hurricanes or ice storms, or in areas prone to wildfires, droughts and rising sea levels, the frequency and severity of which may increase as a result of climate change.
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 wildfire.
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 wildfire or mudslides.
We are required to expense, as incurred, such transaction costs, which may have a material adverse impact on our financial results. We are experiencing component and raw material shortages due to worldwide supply chain constraints which impacts our ability to manufacture and ship all of the product for which we have demand.
We are required to expense such transaction costs as incurred, which may have a material adverse impact on our financial results. We are experiencing component and raw material shortages due to worldwide supply chain constraints that impact our ability to manufacture and ship all the product for which we have demand.
Furthermore, sole source supply is more common among our businesses that are heavily involved in research and development because there can be few suppliers in the world capable of producing the products or providing the services with the right highly specialized technology.
Furthermore, sole source supply is more common among our businesses that are 14 Table of Contents heavily involved in research and development because there can be few suppliers in the world capable of producing the products or providing the services with the right highly specialized technology.
However, our historical insurance coverage, including that of our 15 Table of Contents 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.
However, our historical 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.
Budgetary concerns could result in future contracts being awarded more on price than on other competitive factors, and smaller defense 12 Table of Contents 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.
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.
If another global recession emerges, or if economic growth in China 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.
If another global recession emerges, or if economic growth in China continues to slow, 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 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.
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 Marine, Teledyne Defense Electronics, Teledyne Digital Imaging and our Test and Measurement businesses.
This, or other federal or state regulations, could lead to increased costs, which we may not be able to 16 Table of Contents recover from customers, delays in product shipments and loss of market share to competitors.
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.
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.
As a manufacturer and distributor of a wide variety of products, including monitoring instruments, gas and flame detection instruments, products used in offshore oil and gas production, products used in transportation and commercial aviation, products used in maritime navigation 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 the event of a major earthquake, tornado, hurricane or catastrophic event such as fire, power loss, telecommunications failure, vandalism, cyber-attack, war, terrorist attack or health epidemic (including COVID), we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our production, breaches of data security and loss of critical data, all of which could harm our business, results of operations and financial condition.
In the event of a major earthquake, tornado, hurricane or catastrophic event such as fire, power loss, telecommunications failure, vandalism, cyber-attack, war, terrorist attack or health epidemic (including COVID), we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our production, breaches of data security and loss of critical data, all of which could harm our business, results of operations and financial condition and have a material adverse impact on us.
Risks associated with international sales and operations include, but are not limited to: • 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.
Risks associated with international sales and operations include, but are not limited to: • political and economic instability, including the war between Ukraine and Russia and potential hostilities between China and Taiwan; • 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.
The agreements we entered into with respect to our indebtedness, including the agreements we entered into to finance the FLIR acquisition and in connection with the assumption of FLIR’s existing senior notes, contain negative covenants, that, subject to certain exceptions, include limitations on indebtedness, liens, dispositions, investments and mergers and other fundamental changes.
The agreements we entered into with respect to our indebtedness, including the agreements we entered into to finance the FLIR acquisition and in connection with the assumption of FLIR’s existing senior notes, contain negative covenants, that, subject to certain exceptions, include limitations on indebtedness related to our bank term loans and credit facility, liens, dispositions, investments and mergers and other fundamental changes.
Acquisitions involve various inherent risks, such as: • our ability to assess accurately the value, strengths, weaknesses, internal controls, contingent and other liabilities and potential profitability of acquisition candidates; • difficulties in integrating acquired businesses, including the potential loss of key personnel from an acquired business, our potential inability to achieve identified financial, operating and other synergies anticipated to result from an acquisition, and integration issues associated with internal controls of acquired businesses; • the diversion of management’s attention from our existing businesses; • the potential impairment of assets; 8 Table of Contents • potential unknown liabilities associated with a business that we acquire or in which we invest, including environmental liabilities; and • production delays associated with consolidating acquired facilities and manufacturing operations.
Acquisitions involve various inherent risks, such as: • our ability to assess accurately the value, strengths, weaknesses, internal controls, contingent and other liabilities and potential profitability of acquisition candidates; • difficulties in integrating acquired businesses, including the potential loss of key personnel from an acquired business, our potential inability to achieve identified financial, operating and other synergies anticipated to result from an acquisition, and integration issues associated with internal controls of acquired businesses; • the diversion of management’s attention from our existing businesses; • the potential impairment of assets; • potential unknown liabilities associated with a business that we acquire or in which we invest, including environmental liabilities; • new and proposed regulations limiting the enforcement of noncompetition and nonsolicitation agreements; and • production delays associated with consolidating acquired facilities and manufacturing operations.
Additionally, China has bolstered laws or regulations requiring the use of local China suppliers and in-country manufacturing, which has had a negative impact on Teledyne’s revenues of instrumentation, marine and digital imaging products, as we currently have limited manufacturing operations in China.
Additionally, China has bolstered laws or regulations requiring the use of local China suppliers and in-country manufacturing, which has had a negative impact on Teledyne’s revenues of instrumentation, marine and digital imaging products, as we currently have limited manufacturing operations in China. Additionally, recent export restrictions have had a significant impact on business as well.
Risks Related to our Business and Industry Acquisitions involve inherent risks that may adversely affect our operating results and financial condition. Our growth strategy includes acquisitions. In 2021 and 2020, we expended $8.1 billion in cash and stock and $29.0 million in cash, respectively, relating to acquisitions and other investments.
Risks Related to our Business and Industry Acquisitions involve inherent risks that may adversely affect our operating results and financial condition. Our growth strategy includes acquisitions. In 2022 and 2021, we expended $92.6 million in cash and $8.1 billion in cash and stock, respectively, relating to acquisitions and other investments.
Management’s Discussion and Analysis of Operations and Financial Condition” and Note 3 of the Notes to Consolidated Financial Statements. Our revenue from U.S. Government contracts depends on the continued availability of funding from the U.S.
Management’s Discussion and Analysis of Operations and Financial Condition” and Note 3. Our revenue from U.S. Government contracts depends on the continued availability of funding from 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 26% of our total net sales in both 2021 and 2020.
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 25% and 26% of our total net sales in 2022 and 2021, respectively.
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 to them of most commercial and dual-use items subject to the EAR.
A number of well-established customers and suppliers have become listed on government restricted party lists. In particular, U.S. export enforcement agencies have placed several Chinese companies and many of their international subsidiaries on such lists, prohibiting the export to them of most commercial and dual-use items subject to the Export Administration Regulations.
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 GHG emissions and climate change regulations and initiatives increase.
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 (“GHG”) emissions and climate change regulations and initiatives proliferate.
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 January 2, 2022, Teledyne’s goodwill was $7,986.7 million and net acquired intangible assets were $2,741.6 million.
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 January 1, 2023, Teledyne’s goodwill was $7,873.0 million and net acquired intangible assets were $2,440.6 million.
Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our products and services 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 (“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; 11 Table of Contents • 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, use electric vehicles or use alternative energy sources, or that impose restrictions on the development and extraction of oil and gas.
Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our products and services include the following: • worldwide demand for oil and gas; • the ability of the Organization of Petroleum Exporting Countries (“OPEC”), to set and maintain production levels; • the level of production by non-OPEC countries; • the war between Russia and Ukraine, including the implementation of price controls on Russian oil exports and restrictions on oil and gas exports imposed by Russia; • 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 or the use of hydraulic fracturing; • 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, use electric vehicles or use alternative energy sources, or that impose restrictions on the development and extraction of oil and gas.
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 have not materially impacted our results of operations. 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.
If any of our California facilities, including our California headquarters or Teledyne FLIR’s manufacturing facility in Goleta, California, 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.
If any of our California facilities 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 Teledyne’s facilities in Quebec experience long-term loss of electrical power, such event could disrupt our operations, delay production, shipments and revenue, result in large expenses to repair or replace the facility or facilities and could have a material adverse effect on our business.
While we believe the risk of a court declining to enforce the forum selection provision contained in our Bylaws is low, if a court were to find the provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. 19 Table of Contents Risks Related to Our Securities An investment in Teledyne’s Common Stock and other securities involve risks, many of which are beyond our control.
While we believe the risk of a court declining to enforce the forum selection provision contained in our Bylaws is low, if a court were to find the provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Our Bylaws also provide that any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and consented to this forum selection provision.
Our Bylaws also provide that any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and consented to this forum selection provision. However, this forum selection provision is not intended to apply to any actions brought under the Exchange Act.
In April 2021, FLIR resolved allegations of misrepresentations made to BIS, between November 2012 and December 2013, in a commodity jurisdiction request relating to its newly developed Lepton uncooled focal plane arrays by an administrative settlement and fine of $0.3 million and agreeing to perform two internal audits of its EAR export compliance programs.
Department of Commerce, Bureau of Industry and Security (“BIS”), between November 2012 and December 2013, in a commodity jurisdiction request relating to newly developed Lepton uncooled focal plane arrays by an administrative settlement and fine of $0.3 million and agreeing to perform two internal audits of its EAR export compliance programs.
We generate revenue 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.
We generate revenue 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, which has in the past impacted and can impact in the future our financial results.
China represented one of the top five countries for our international sales in 2021 and 2020. Any tariffs or other trade restrictions affecting the import of products from China or any retaliatory trade measures taken by China in response to existing or future tariffs could have a material adverse effect on our results of operations. Starting in 2018, the U.S.
Any tariffs or other trade restrictions affecting the import of products from China or any retaliatory trade 7 Table of Contents measures taken by China in response to existing or future tariffs could have a material adverse effect on our results of operations. Starting in 2018, the U.S.
We cannot provide assurances as to our Common Stock price, which during fiscal 2021 ranged from a low of $350.01 to a high of $465.40. Item 1B. Unresolved Staff Comments None.
We cannot provide assurances as to our Common Stock price, which during fiscal 2022 ranged from a low of $331.10 to a high of $488.63. Item 1B. Unresolved Staff Comments None.
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.
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. Increasing competition could reduce the demand for our products and services. Each of our markets is highly competitive.
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.
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. Adverse findings in matters related to FLIR’s historical export control practices could materially impact us.
Higher tax rates may harm our results of operations and cash flow. As Teledyne expands globally, increases in the United States of the taxation of foreign income and expenses may harm our results of operations and cash flow. The relative amount of income we earn in other jurisdictions could reduce our net income and increase our cash payments.
Increases in the United States on the taxation of foreign income and expense may harm our results of operations and cash flow. The relative amount of income we earn in jurisdictions outside the U.S. could reduce our net income and increase our cash payments.
Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf, (ii) action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, Restated Certificate of Incorporation or Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of the Restated Certificate of Incorporation or Bylaws or (v) action asserting a claim governed by the internal affairs doctrine.
Our Fourth Amended and Restated Bylaws (“Bylaws”) designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain lawsuits between us and our stockholders, which could limit our stockholders’ ability to obtain a judicial forum that it finds favorable for such lawsuits and make it more costly for our stockholders to bring such lawsuits, which may have the effect of discouraging such lawsuits. 18 Table of Contents Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf, (ii) action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, Restated Certificate of Incorporation or Bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine.
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.
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.
Government operation under a continuing resolution could impact the business by preventing new programs from starting as planned and by, limiting funding on existing programs. A significant shift in U.S. Government priorities related to programs and acquisition strategies could have a material impact to our financial results. Further, most of our U.S.
Presidential Administration could result in further delays in funding and the timing of awards, and changes in funded programs that could have a material impact on our revenues. U.S. Government operation under a continuing resolution could impact the business by preventing new programs from starting as planned and by limiting funding on existing programs. A significant shift in U.S.
Supply chain constraints and improving economic conditions have resulted in sustained increases in the prices we pay for many of the components and raw materials used in our products.
Increased prices for components and raw materials used in our products and higher labor and shipping costs could adversely impact our profitability. Supply chain constraints and inflation have resulted in sustained increases in the prices we pay for many of the components and raw materials used in our products.
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.
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. 13 Table of Contents 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.
We have in the past experienced cyber-attacks including some loss of confidentiality and some loss of availability, although these attacks have not had material impact on our business.
We have in the past experienced cyber-attacks including some loss of confidentiality and some loss of availability, although these attacks have not had material impact on our business. Our customers and suppliers have also experienced successful cyber-attacks, which in some cases resulted in payments by or to us being unlawfully diverted.
Other Risks We Face 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.
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, rising sea levels, droughts or other natural disasters.
If we are unable to meet the sustainability standards set by these investors, or if we are unable meet GHG reduction targets we communicate to the public, we may lose investors, our stock price may be negatively impacted and our reputation may be negatively affected.
If we are unable to meet the sustainability standards set by these investors, or if we are unable meet GHG reduction targets we communicate to the public, we may lose investors, our stock price may be negatively impacted, and our reputation may be negatively affected. 16 Table of Contents Other risks we face Natural and man-made disasters could adversely affect our business, results of operations and financial condition.
Accordingly, the forum selection provision in our Bylaws will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and accordingly, the forum selection provision in our Bylaws will not relieve us of our duties to comply with the Exchange Act and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
We are experiencing increased competition for our most talented employees which may erode our competitive advantage, impair our ability to meet certain customer requirements or increase labor costs.
It is critical that we retain, develop, 9 Table of Contents and grow our workforce to protect future revenue and improve our competitive advantage. We are experiencing increased competition for our most talented employees which may erode our competitive advantage, impair our ability to meet certain customer requirements or increase labor costs.
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.
Some of our businesses, including our businesses in engineered systems as well as in traveling wave tube and integrated microwave module design and development, draw from a pool of specialized engineering talent that is small and, in some cases, currently shrinking.
The inconsistent international, regional and/or national requirements associated with climate change regulations also create economic and regulatory uncertainty. 17 Table of Contents Investor sentiment towards climate change and sustainability could adversely affect our business and the market price for our common stock .
If these rules become effective and we are unable to comply, we may be ineligible to receive future federal contract awards. The inconsistent international, regional and/or national requirements associated with climate change regulations also create economic and regulatory uncertainty. Investor sentiment towards climate change and sustainability could adversely affect our business and the market price for our common stock.
Disapproval could significantly impact cash flow, as up to 10% may be withheld from payments. 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 cybersecurity measures to attain the safeguarding of contractor systems that process, store, or transmit certain information.
Government contracting agencies have adopted rules and regulations requiring contractors to implement a set of cybersecurity measures to attain the safeguarding of contractor systems that process, store, or transmit certain information.
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. 9 Table of Contents Escalating global trade tensions, and the conflict between Russia and Ukraine, and the adoption or expansion of tariffs and trade restrictions could negatively impact us.
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. Higher tax rates may harm our results of operations and cash flow.
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 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 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. The lack of human capital due to very competitive labor market conditions in certain regions could impact our ability to deliver products and services.
Our inability to attract and retain key personnel and labor shortages 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.
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.
We are experiencing increasing competition in our digital imaging businesses from Chinese manufacturers which offer lower cost products with increasingly advanced technical capabilities. 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.
There can be no assurance that the credit ratings of Teledyne’s debt will not be subject to a downgrade below investment grade. If a ratings downgrade were to occur, we could experience higher borrowing costs in the future and more restrictive debt covenants, which would reduce profitability and diminish operational flexibility.
If a ratings downgrade were to occur, we could experience higher borrowing costs in the future and more restrictive debt covenants, which would reduce profitability and diminish operational flexibility. A ratings downgrade could also limit our access to certain sources of debt financing.
Termination for default clauses imposes liability on the contractor for excess costs incurred by the U.S. Government in re-procuring undelivered items from another source. We had no U.S. Government contracts terminated for convenience or default in 2021 or in 2020. Our U.S.
Termination for convenience provisions provides only for the recovery of costs incurred or committed, settlement expenses, and profit on work completed prior to termination. Termination for default clauses imposes liability on the contractor for excess costs incurred by the U.S. Government in re-procuring undelivered items from another source. During 2022 and 2021, contracts terminated by the U.S.
The timing of program cycles can affect our results of operations for a quarter or year, and cancellations of significant programs such as the International Space Station (“ISS”), MO&I, the Shallow Water Combat Submersible (“SWCS”) or U.S. Navy Health and Research would affect our results. In 2021 and 2020, our largest contract with the U.S.
The timing of program cycles can affect our results of operations for a quarter or year, and cancellations of significant programs such as the International Space Station (“ISS”), Marshall Operations, Systems, Services, and Integration II ("MOSSI II"), the Shallow Water Combat Submersible (“SWCS”) or Advanced Aerodynamic and Instrumentation Features and Simulation ("A2IFS") would affect our results.
The systemic cybersecurity risk environment is elevated, in part by remote working driven by COVID pandemic concerns, particularly at our customer and supplier partner organizations. Provisions of our governing documents, applicable law, and our Change in Control Severance Agreements could make an acquisition of Teledyne more difficult.
The systemic cybersecurity risk environment is elevated, in part by geopolitical conflicts and tensions, including the war between Ukraine and Russia, the spread of remote working and increased supply chain-related cyber-risks. Provisions of our governing documents, applicable law, and our Change in Control Severance Agreements could make an acquisition of Teledyne more difficult.
Due to declines in air travel since the start of the COVID pandemic, we face risk that our addressable market for retrofit products will shrink further as airlines retire a significant number of aircraft.
We also face risk that our addressable market for retrofit products will shrink further as airlines retire a significant number of aircraft in order to replace them with newer, more fuel-efficient planes.
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.
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.
During 2021, sales to customers outside the United States accounted for approximately 47% of our net sales, compared with 45% in 2020. In 2021, we sold products to customers in over 100 countries. In 2021, the top five countries for international sales were China, the United Kingdom, Germany, Japan and France, constituting approximately 20% of our total sales.
In 2022, the top five countries for sales to international customers, ranked by net sales, were China, Germany, Japan, the United Kingdom and France and represented approximately 20% of our total net sales.
Prices of raw materials and other components used in our products may be beyond our control depending on market conditions.
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.
We also incurred additional indebtedness through the planned assumption of FLIR’s existing senior notes.
Teledyne incurred a significant amount of indebtedness in connection with the financing of the acquisition of FLIR. We also incurred additional indebtedness through the assumption of FLIR’s existing senior notes.
Adverse economic conditions affecting these industries may reduce demand for our products and services, which may reduce our revenues, profits or production levels.
Adverse economic conditions affecting these industries may reduce demand for our products and services, which may reduce our revenues, profits or production levels. Reduced demand for mobile phones and other consumer electronics will result in lower sales of our cameras and sensors products in our Digital Imaging segment.

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Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties The Company has 77 principal operating facilities in 20 states and 10 foreign countries. The Company’s executive offices are located in Thousand Oaks, California. Our principal research and development center is also located in Thousand Oaks, California.
Item 2. Properties The Company has 77 principal operating facilities in 20 states and 10 foreign countries. The Company’s executive offices are located in Thousand Oaks, California.
Removed
The Digital Imaging segment has principal operations in the United States, the United Kingdom, Canada, France, Sweden, the Netherlands, Belgium, Estonia and the United Arab Emirates, the Instrumentation segment has principal operations in the United States, the United Kingdom, Denmark and France, the Aerospace and Defense Electronics segment with principal operations in the United States and the United Kingdom and the Engineered Systems segment has principal operations in the United States.
Added
At January 1, 2023, our principal operating facilities by segment were located as follows (countries and states listed alphabetically): • Digital Imaging - Belgium, Canada, Estonia, France, the Netherlands, Norway, Sweden, the United Arab Emirates, the United Kingdom and the United States ◦ The United States includes principal operating facilities in California, Florida, Indiana, Maryland, Massachusetts, Montana, New Jersey, Oklahoma, Oregon, and Pennsylvania • Instrumentation - Denmark, France, the United Kingdom and the United States ◦ The United States includes principal operating facilities in California, Colorado, Florida, Massachusetts, Nebraska, New Hampshire, New York, Ohio, Pennsylvania, Texas and Virginia • A erospace and Defense Electronics - the United Kingdom and the United States ◦ The United States includes principal operating facilities in California and Illinois • Engineered Systems - the United States, including principal operating facilities in Alabama, Maryland and Tennessee

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
Item 3. Legal Proceedings 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, personal injury, patent infringement, commercial contracts, employment and employee benefits.
Added
Item 3. Legal Proceedings Information pertaining to legal proceedings can be found in Note 1 7 and is incorporated by reference herein. 19 Table of Contents Item 4. Mine Safety Disclosures No information is required in response to this item. PART II
Removed
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. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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”. As of February 23, 2022, there were 2,520 holders of record of the Common Stock.
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”. As of February 17, 2023, there were 2,423 holders of record of the Common Stock.
Although we have no current plans to repurchase stock, up to approximately three million shares may be repurchased under the stock repurchase program. See Note 8 of the Notes to Consolidated Financial Statements for additional information about our stock repurchase program.
Although we have no current plans to repurchase stock, up to approximately three million shares may be repurchased under the stock repurchase program. See Note 11 for additional information about our stock repurchase program. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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In connection with the 2021 FLIR acquisition, Teledyne incurred pretax expenses of $350.3 million, which included $110.3 million in acquired intangible asset amortization expense, $106.4 million in acquired inventory step-up expense, $103.0 million of transaction and integration-related costs and $30.6 million in bridge loan and debt extinguishment fees.
In connection with the FLIR acquisition, Teledyne incurred pretax expenses in 2021 of $350.3 million, which included $110.3 million in acquired intangible asset amortization expense, $106.4 million in acquired inventory step-up expense, $103.0 million of transaction and integration-related costs and $30.6 million in bridge loan and debt extinguishment fees.
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.
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 the cost-to-cost method, we have an Estimate at Completion (“EAC”) process in which management reviews the progress and execution of our performance obligations.
Significant assumptions used in determining the our pension income or expense are the expected long-term rate of return on plan assets, participant mortality estimates, expected rates of increase in future compensation levels, employee turnover, as well as the assumed discount rate on pension obligations.
Significant assumptions used in determining our pension income or expense are the expected long-term rate of return on plan assets, participant mortality estimates, expected rates of increase in future compensation levels, employee turnover, as well as the assumed discount rate on pension obligations.
It is anticipated that operating cash flow, together with available borrowings under the credit facility and the debt financing arrangement described below will be sufficient to meet these requirements. To support acquisitions, we may need to raise additional capital. Our liquidity is not dependent upon the use of off-balance sheet financial arrangements.
It is anticipated that operating cash flow, together with available borrowings under the credit facility and the debt financing arrangements described below, will be sufficient to meet these requirements. To support acquisitions, we may need to raise additional capital. Our liquidity is not dependent upon the use of off-balance sheet financial arrangements.
Revenue Recognition Prior to the acquisition of FLIR, approximately 40% of our revenue was recognized over time, with the remaining 60% of our revenue recognized at a point in time. The majority of FLIR revenue is recognized at a point in time.
Revenue Recognition Prior to the acquisition of FLIR, approximately 40% of our revenue was recognized over time, with the remaining 60% of our revenue recognized at a point in time. The majority of Teledyne FLIR revenue is recognized at a point in time.
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.
On an ongoing basis, we evaluate our estimates, including those related to product returns and replacements, allowance for doubtful accounts, inventory, 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.
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.
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 30 Table of Contents circumstances change that would more likely than not reduce our enterprise fair value below its book value.
Estimates beyond 2022 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.
Estimates beyond 2023 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.
Presidential Administration; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s export and tax matters; escalating economic and diplomatic tension between China and the United States; the ongoing conflict between Russia and Ukraine; threats to the security of our confidential and proprietary information, including cybersecurity threats; natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint.
Presidential Administration; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s export and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and proprietary information, including cybersecurity threats; natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint.
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.
In the event that we change 31 Table of Contents 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.
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 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.
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.
There are additional risks associated with acquiring, owning and operating businesses internationally, 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.
For our plan which covers mostly inactive participants, gains and losses subject to amortization are amortized over the average participants future life expectancy which is approximately 17 years. This plan represents the majority of the pension obligations.
Gains or losses outside of the corridor are subject to amortization. For our plan which covers mostly inactive participants, gains and losses subject to amortization are amortized over the average participants future life expectancy which is approximately 17 years. This plan represents the majority of the pension obligations.
The remaining unrecognized tax benefits and accrued interest and penalties are not included in the table above because $52.9 million is offset by deferred tax assets, and the remainder cannot be reasonably estimated to be settled in cash due to a lack of prior settlement history and offsetting credits.
The remaining unrecognized tax benefits and accrued interest and penalties are not included in the table above because $32.1 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.
The Company has substantially concluded on all U.S. federal income tax matters for all years through 2011, Canadian income tax matters for all years through 2012, Swedish income tax matters for all years through 2011, Norwegian income tax matters for all years through 2016, Belgian income tax matters for all years through 2018, French income tax matters for all years through 2018 and United Kingdom income tax matters for all years through 2019.
The Company has substantially concluded on all U.S. federal income tax matters for all years through 2011, Canadian income tax matters for all years through 2012, Swedish income tax matters for all years through 2016, Norwegian income tax matters for all years through 2017, Belgian income tax matters for all years through 2019, French income tax matters for all years through 2019 and United Kingdom income tax matters for all years through 2014.
The increase in operating income in the 2021 reflected the contribution from FLIR, partially offset by $242.6 million of FLIR acquisition-related transaction and purchase accounting expenses, which included $110.3 million in acquired intangible asset amortization expense, $106.4 million in inventory step-up expense and $25.9 million of integration-related costs.
The increase in operating income in 2022 reflected the contribution from FLIR, and 2021 included $242.6 million of FLIR acquisition-related transaction and purchase accounting expenses, which consisted of $110.3 million in acquired intangible asset amortization expense, $106.4 million in inventory step-up expense and $25.9 million of integration-related costs.
While Teledyne’s growth strategy includes possible acquisitions, we cannot provide any assurance as to when, if or on what terms any acquisitions will be made. Acquisitions involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain key management and customers and achieve identified financial and operating synergies.
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, including the recent acquisition of ChartWorld, involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain key management and customers and achieve identified financial and operating synergies.
Other Matters Pension Plans Teledyne has two domestic qualified defined benefit pension plans covering substantially all U.S. employees hired before January 1, 2004, or approximately 6% of Teledyne’s active employees as of January 2, 2022. As of January 1, 2004, new U.S. hires participate in a domestic defined contribution plan.
Other Matters Pension Plans Teledyne has two domestic qualified defined benefit pension plans covering substantially all U.S. employees hired before January 1, 2004, or approximately 5% of Teledyne’s active employees as of January 1, 2023. As of January 1, 2004, new U.S. hires participate in a domestic defined contribution plan.
Continued weakness in the commercial aerospace industry will negatively affect the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of the Company’s pension assets.
Weakness in the commercial aerospace industry negatively affects the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of the Company’s pension assets.
We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or otherwise. 42 Table of Contents
We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or otherwise.
A hypothetical 10 percent price change in the U.S. dollar from its value at January 2, 2022 would result in a decrease in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy British Pounds and to sell U.S. dollars by approximately $1.9 million.
A hypothetical 10% price change in the U.S. dollar from its value at January 1, 2023 would result in a decrease in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy British Pounds and to sell U.S. dollars by approximately $1.7 million.
In addition, uncertainty exists regarding tax positions taken in previously filed tax returns still under 40 Table of Contents examination and positions expected to be taken in the current year and future returns which may impact income tax expense.
In addition, uncertainty exists regarding tax positions taken in previously filed tax returns still under examination and positions expected to be taken in the current year and future returns which may impact income tax expense.
We regularly assess the adequacy of our pre-existing warranty liabilities and adjust amounts as necessary based on a review of historical 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.
We regularly assess the adequacy of our pre-existing warranty liabilities and adjust amounts as necessary based on a review of historical 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. See further discussion in Note 7 .
We have identified the following as critical accounting policies: revenue recognition; accounting for business combinations, goodwill and acquired intangible assets; accounting for income taxes; and accounting for pension plans. For additional discussion of the application of these and other accounting policies, see Note 2 of the Notes to Consolidated Financial Statements.
We have identified the following as critical accounting policies: revenue recognition; accounting for business combinations, goodwill and acquired intangible assets; accounting for income taxes; and accounting for pension plans. For additional discussion of the application of these and other accounting policies, see Note 2 .
An increase of 100 basis points in our nominal tax rate would have resulted in additional income tax provision for the fiscal year ended January 2, 2022, of $5.3 million. 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.
An increase of 100 basis points in our nominal tax rate would have resulted in additional income tax provision for the fiscal year ended January 1, 2023, of $9.1 million. 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.
Reserves for environmental investigation and remediation totaled $6.3 million and $6.5 million as of January 2, 2022 and January 3, 2021, respectively. As investigation and remediation of these sites proceed and new information is received, the Company will adjust accruals to reflect new information.
Reserves for environmental investigation and remediation totaled $5.8 million and $6.3 million as of January 1, 2023 and January 2, 2022, respectively. As investigation and remediation of these sites proceed and new information is received, the Company will adjust reserves to reflect new information.
The Company has converted U.S. dollar denominated, variable rate and fixed 36 Table of Contents rate debt obligations of a European subsidiary, into euro fixed rate obligations using a receive float, pay fixed cross currency swap, and a receive fixed, pay fixed cross currency swap. These cross currency swaps are designated as cash flow hedges.
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 receive fixed, pay fixed cross currency swap.
Income Taxes We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits and deductions, and in the calculation of certain tax assets and liabilities which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.
These estimates and judgments occur in the calculation of tax credits, benefits and deductions, and in the calculation of certain tax assets and liabilities which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.
Many factors could change the anticipated results, including: ongoing challenges and uncertainties posed by the COVID pandemic for businesses and governments around the world, including production, supply, contractual and other disruptions, facility closures, furloughs and travel restrictions; the inability to achieve operating synergies with respect to the FLIR acquisition; changes in relevant tax and other laws; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages, higher inflation, including wage competition and higher shipping costs, and labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S.
Many factors could change the anticipated results, including: ongoing challenges and uncertainties posed by the COVID pandemic for businesses and governments around the world, including production, supply, contractual and other disruptions, such as COVID-related lockdowns, facility closures, furloughs and travel restrictions; changes in relevant tax and other laws; foreign currency exchange risks; rising interest rates; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages, higher inflation, including wage competition and higher shipping costs; labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S.
( “FLIR”), we further evolved into a global sensing and decision-support technology company: providing specialty sensors, cameras, instrumentation, algorithms and software across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land and air domains.
Following the 2021 acquisition of FLIR, we further evolved into a global sensing and decision-support technology company: providing specialty sensors, cameras, instrumentation, algorithms and software across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land and air domains.
Additionally, if the 39 Table of Contents 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.
Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed at least quarterly.
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.
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 5 for additional revenue recognition disclosures.
At January 2, 2022, we were not required, and accordingly are not planning, to make any cash contributions to the domestic qualified pension plans for 2022.
At January 1, 2023, we were not required, and accordingly are not planning, to make any cash contributions to the domestic qualified pension plans for 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Teledyne Technologies Incorporated (“Teledyne” or the “Company”) provides enabling technologies for industrial growth markets that require advanced technology and high reliability.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Teledyne provides enabling technologies for industrial growth markets that require advanced technology and high reliability.
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.
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.
We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract estimates for 2021, 2020 or 2019 was material to the consolidated statements of income for such annual periods.
We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract estimates for 2022 and 2021 was material to the consolidated statement of income for such annual periods.
In future periods, we expect approximately 30% of revenue to be recognized over time, with the remaining 70% 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.
In 2022, approximately 30% of revenue was recognized over time, with the remaining 70% 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.
Our minimum funding requirements after 2021 as set forth by ERISA, are dependent on several factors as discussed under “Accounting for Pension Plans” in the Critical Accounting Policies section of this Management’s Discussion and Analysis of Financial Condition and Results of Operation.
Our minimum funding requirements after 2022 as set forth by the Employee Retirement Income Security Act, are dependent on several factors as discussed under “Accounting for Pension Plans” in the Critical Accounting Policies and Estimates section of this Management’s Discussion and Analysis of Financial Condition and Results of Operation.
A hypothetical 10 percent price change in the U.S. dollar from its value at January 2, 2022 would result in a decrease or increase in the fair value of our Euro/U.S. Dollar cross currency swaps designated as cash flow hedges by approximately $28.7 million.
A hypothetical 10% price change in the U.S. dollar from its value at January 1, 2023 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 $30.8 million.
A 37 Table of Contents hypothetical 10 percent price change of the U.S. dollar from its value at January 2, 2022, would result in a decrease or increase in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars by approximately $14.8 million.
A hypothetical 10% price change of the U.S. dollar from its value at January 1, 2023, 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 $12.6 million.
These markets include factory automation and condition monitoring, aerospace and defense, air and water quality environmental monitoring, electronics design and development, medical imaging and pharmaceutical research, oceanographic research, and deepwater energy exploration and production. Following the 2021 acquisition of FLIR Systems, Inc.
These markets include factory automation and condition monitoring, aerospace and defense, air and water quality environmental monitoring, electronics design and development, medical imaging and pharmaceutical research, oceanographic research, and deepwater energy exploration and production.
Capital expenditures (in millions): 2021 2020 2019 Digital Imaging $ 64.2 $ 33.4 $ 45.2 Instrumentation 13.3 18.0 18.9 Aerospace and Defense Electronics 8.4 10.4 19.0 Engineered Systems 12.9 7.5 3.6 Corporate 2.8 2.1 1.7 $ 101.6 $ 71.4 $ 88.4 During 2022, we plan to invest approximately $100.0 million in capital expenditures, principally to upgrade facilities and manufacturing equipment.
Capital expenditures (in millions): 2022 2021 Digital Imaging $ 63.9 $ 64.2 Instrumentation 9.3 13.3 Aerospace and Defense Electronics 8.0 8.4 Engineered Systems 5.3 12.9 Corporate 6.1 2.8 $ 92.6 $ 101.6 During 2023, we plan to invest approximately $100 million in capital expenditures, principally to upgrade facilities and manufacturing equipment.
Operating income for 2021 decreased 3.0%, compared with 2020. The 2021 net sales decrease primarily reflected lower sales of $19.1 million for turbine engines, partially offset by higher sales of $8.3 million for engineered products $0.3 million for energy systems.
Operating income for 2022 decreased 19.3%, compared with 2021. The 2022 net sales increase primarily reflected $8.2 million of higher sales for energy systems and $2.5 million of higher sales for engineered products, partially offset by lower sales of $5.2 million for turbine engines.
Government sales % of net sales 88.3 % 92.9 % 92.3 % Our Engineered Systems segment provides innovative systems engineering and integration, advanced technology development, and manufacturing solutions for defense, space, environmental and energy applications, including the design and manufacture of electrochemical energy systems. 2021 compared with 2020 Our Engineered Systems segment net sales for 2021 decreased 2.5%, compared with 2020.
Government sales % of net sales 89.1 % 88.3 % Our Engineered Systems segment provides innovative systems engineering and integration, advanced technology development, and manufacturing solutions for defense, space, environmental and energy applications, including the design and manufacture of electrochemical energy systems. 2022 compared with 2021 Our Engineered Systems segment net sales for 2022 increased 1.4%, compared with 2021.
GAAP and related standards; operating results of FLIR being lower than anticipated; disruptions in the global economy; customer and supplier bankruptcies; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction measures or changes to U.S. and foreign government spending and budget priorities triggered by the COVID pandemic; impacts from the United Kingdom’s exit from the European Union; uncertainties related to the policies of the U.S.
GAAP and related standards; 32 Table of Contents disruptions in the global economy; the ongoing conflict between Russia and Ukraine, including the impact to energy prices and availability, especially in Europe; customer and supplier bankruptcies; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction measures or changes to U.S. and foreign government spending and budget priorities triggered by the COVID pandemic; impacts from the United Kingdom’s exit from the European Union; uncertainties related to the policies of the U.S.
Corporate administrative expense in 2021 was $136.8 million, compared with $56.8 million in 2020. The higher 2021 amount included $77.1 million in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition.
Corporate expense for 2022 was $65.9 million compared with $136.8 million, and the 2021 amount included $77.1 million in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition.
Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our recorded goodwill, differences in assumptions may have a material effect on the results of our impairment analysis. As of January 2, 2022, the Company had eleven reporting units for goodwill impairment testing.
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.
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. 2021 compared with 2020 Our Aerospace and Defense Electronics segment net sales for 2021 increased 6.7%, compared with 2020.
Government sales % of net sales 39.0 % 36.2 % 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. 2022 compared with 2021 Our Aerospace and Defense Electronics segment net sales for 2022 increased 8.5%, compared with 2021.
Acquisitions Investing activities used cash for acquisitions and other investments of $3,723.3 million, $29.0 million and $484.0 million, in 2021, 2020 and 2019, respectively (see “Recent Acquisitions”). Teledyne funded the acquisitions from borrowings under its credit facilities, issuance of senior notes and term loans, the issuance of Teledyne common stock and cash on hand.
Investing activities used cash for acquisitions and other investments of $99.6 million and $3,723.3 million in 2022 and 2021, respectively (see “Recent Acquisitions”). Teledyne funded the acquisitions from borrowings under its credit facilities, issuance of senior notes and term loans, the issuance of Teledyne common stock and cash on hand. Cash flows relating to investing activities for capital expenditures.
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.
These plans are not required to be funded in advance but are pay as you go. See further discussion in Note 10. Teledyne monitors and manages its defined benefit pension plans obligation and may take additional actions to manage risk in the future.
Differences in the discount rate and expected long-term rate of return on assets within the indicated range would have had the following impact on 2021 pension expense (in millions): 0.25 Percentage Point Increase 0.25 Percentage Point Decrease Increase (decrease) to pension expense resulting from: Change in discount rate $ (0.2) $ 0.2 Change in long-term rate of return on plan assets $ (2.1) $ 2.1 See Note 11 of the Notes to Consolidated Financial Statements for additional pension disclosures. 41 Table of Contents Recent Accounting Standards For a discussion of recent accounting standards see Note 2 of the Notes to Consolidated Financial Statements.
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 2022 pension expense (in millions): 0.25 Percentage Point Increase 0.25 Percentage Point Decrease Increase (decrease) to pension expense resulting from: Change in discount rate $ (0.1) $ 0.1 Change in long-term rate of return on plan assets $ (2.1) $ 2.1 See Note 10 for additional pension disclosures.
Unrecognized tax benefits, including accrued penalties and interest, increased $529.3 million from the prior year, primarily related to the FLIR acquisition on May 14, 2021. During the first quarter of 2022, we paid approximately $296.4 million related to an acquired uncertain tax position, refer to Note 3 of the Notes to Consolidated Financial Statements for additional detail.
Unrecognized tax benefits, including accrued penalties and interest, increased in 2021 due to the acquisition of FLIR. During the first quarter of 2022, we paid approximately $296.4 million related to an acquired uncertain tax position; refer to Note 3 for additional detail.
The higher percentage in 2021 primarily reflected the impact of acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition. Acquired Intangible Asset Amortization Acquired intangible asset amortization for 2021 was $149.3 million, compared with $38.8 million for 2020. The 2021 includes $110.3 million in acquired intangible asset amortization from the FLIR acquisition.
The higher percentage in 2021 primarily reflected the impact of acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition. Acquired Intangible Asset Amortization Acquired intangible asset amortization for 2022 was $201.7 million, compared with $149.3 million for 2021, with the increase primarily related to a full year of acquired intangible asset amortization in 2022 from the FLIR acquisition.
In 2021, 2020 and 2019, Teledyne was not required, and did not make any cash contributions to the domestic pension plans. For the Company’s domestic qualified defined benefit pension plans, the discount rate for 2022 will increase to an average of 2.97% from 2.64% in 2021. The Company also has several small non-qualified domestic and foreign-based defined benefit pension plans.
In 2022 and 2021, Teledyne was not required, and did not make any cash contributions to the domestic pension plans. For the Company’s domestic qualified defined benefit pension plans, the discount rate for 2023 will increase to an average of 5.71% from 2.97% in 2022.
We also provide power and communications connectivity devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments. 2021 compared with 2020 Our Instrumentation segment net sales for 2021 increased 6.6%, compared with 2020. Operating income for 2021 increased 19.0%, compared with 2020.
We also provide power and communications connectivity devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments. 2022 compared with 2021 Our Instrumentation segment net sales for 2022 increased 7.5%, compared with 2021. Operating income for 2022 increased 16.4%, compared with 2021. The 2022 net sales increased in all product lines.
Selling, general and administrative expenses Selling, general and administrative expenses, including research and development expense, were higher in 2021, compared with 2020, and primarily reflected the impact of higher net sales, as well as $102.7 million in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition and higher research and development expense.
Selling, General and Administrative Expenses Selling, general and administrative expenses, including research and development expense, were higher in 2022, primarily driven by higher net sales in 2022. Selling, general and administrative expenses in 2021 included $102.7 million in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition.
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.
At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and through targeted 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.
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.
Refer to Notes 2 , 14 and 1 5 for further disclosures around our derivative instruments and hedging activities 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.
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.
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% of the greater of the market related value of assets or benefit obligations.
We expect inflationary and supply chain constraint trends to continue in 2022. As part of a continuing effort to reduce costs and improve operating performance, as well as to respond to the impact of the COVID pandemic, beginning in 2020 we took actions to reduce headcount across various businesses, reducing our exposure to weak end markets, such as commercial aerospace.
As part of a continuing effort to reduce costs and improve operating performance, as well as to respond to the impact of the COVID pandemic, beginning in 2020 we commenced actions to reduce headcount across various businesses, reducing our exposure to weak end markets, such as commercial aerospace. We also exited certain facilities no longer needed.
Instrumentation (Dollars in millions) 2021 2020 2019 Net sales $ 1,166.9 $ 1,094.5 $ 1,105.1 Cost of sales $ 617.8 $ 603.4 $ 612.8 Selling, general and administrative expenses (a) $ 275.3 $ 258.1 $ 274.9 Acquired intangible asset amortization (a) $ 20.1 $ 19.8 $ 17.0 Operating income $ 253.7 $ 213.2 $ 200.4 Cost of sales % of net sales 53.0 % 55.1 % 55.5 % Selling, general and administrative expenses % of net sales 23.6 % 23.6 % 24.9 % Acquired intangible asset amortization % of net sales 1.7 % 1.8 % 1.5 % Operating income % of net sales 21.7 % 19.5 % 18.1 % International sales % of net sales 56.1 % 57.0 % 54.8 % U.S.
Instrumentation (Dollars in millions) 2022 2021 Net sales $ 1,254.0 $ 1,166.9 Cost of sales $ 668.7 $ 617.8 Selling, general and administrative expenses $ 272.8 $ 275.3 Acquired intangible asset amortization $ 17.2 $ 20.1 Operating income $ 295.3 $ 253.7 Cost of sales % of net sales 53.3 % 53.0 % Selling, general and administrative expenses % of net sales 21.8 % 23.6 % Acquired intangible asset amortization % of net sales 1.4 % 1.7 % Operating income % of net sales 23.5 % 21.7 % International sales % of net sales 55.8 % 56.1 % U.S.
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 16 and Notes 2 and 14 of the Notes to Consolidated Financial Statements.
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 in Item 1A. Risk Factors as well as additional discussion in Notes 2 and 1 7.
The selling, general and administrative expense percentage decreased slightly to 6.9% for 2020, compared with 7.2% in 2019. 32 Table of Contents 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.
The selling, general and administrative expense percentage increased to 6.3% for 2022 compared to 6.1% in 2021. 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 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. Strategy/Overview Our strategy continues to emphasize growth in our core markets of digital imaging, instrumentation, aerospace and defense electronics and engineered systems.
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.
The higher net sales for engineered products primarily reflected increased sales from missile defense, medical modeling and analysis, and marine and other manufacturing programs. Teledyne exited the cruise missile turbine engine business in the first quarter of 2021. Operating income in 2021 primarily reflected the impact of lower sales.
The higher net sales for engineered products primarily reflected increased sales from marine and electronic manufacturing services programs products, partially offset by decreased sales in missile defense and space programs. Teledyne exited the cruise missile turbine engine business in the first quarter of 2021.
In addition, on March 17, 2021 Teledyne called $493.3 million of existing fixed rate senior notes and incurred debt extinguishment expenses of $13.4 million, which is included in interest and debt expense, net. On March 22, 2021, Teledyne completed all permanent financing for the acquisition of FLIR and terminated the $4.5 billion stand-by bridge facility.
The terms of the $1.0 billion Term Loan Credit Agreement allow for prepayments, at the Company’s option, at any time or from time to time, in whole or in part without premium or penalty. • On March 17, 2021, the Company called $493.3 million of existing fixed rate senior notes and incurred debt extinguishment expenses of $13.4 million, which is included in interest and debt expense, net. • On March 22, 2021, the Company completed all permanent financing for the acquisition of FLIR and terminated the $4.5 billion stand-by bridge facility.
At January 2, 2022, 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.
The credit agreement and term loans require the Company to comply with various financial and operating covenants and at January 1, 2023, the Company was in compliance with these covenants and had a significant amount of margin between required financial covenant ratios and our actual ratios.
Total year 2021 net sales included $1,273.6 million of incremental net sales from the FLIR acquisition as well as organic sales growth from industrial and scientific sensors and cameras, x-ray products, micro-electro-mechanical systems (“MEMS”) and detectors for space imaging applications, partially offset by lower sales for geospatial imaging systems.
Total year 2022 net sales included $593.7 million in incremental net sales from current and prior year acquisitions as well as organic sales growth from industrial and scientific sensors and cameras, X-ray products and MEMS, partially offset by lower sales of detectors for space imaging applications and lower sales for geospatial imaging systems.
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.
Market Risk Disclosures 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.
Government sales % of net sales 7.9 % 7.4 % 7.3 % (a) Acquired intangible asset amortization was previously included in selling, general and administrative expenses. Our Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other applications, as well as electronic test and measurement equipment.
Government sales % of net sales 8.6 % 7.9 % Our Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other applications, as well as electronic test and measurement equipment.
Cost of sales for 2021 increased by $852.5 million, compared with 2020, and reflected the impact of higher net sales and $106.4 million in acquired inventory step-up expense relating to the acquisition of FLIR. The cost of sales percentage in 2021 increased to 58.9% compared with 57.7% in 2020 and reflected the impact of acquired inventory step-up expense.
The increase in operating income also reflected the impact of organic sales growth. Cost of sales for 2022 increased by $283.9 million, compared with 2021, and reflected the impact of higher net sales, partially offset by the 2021 amount including $106.4 million in acquired inventory step-up expense relating to the acquisition of FLIR.
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. Teledyne acquired FLIR in May 2021.
Government sales % of net sales 19.9 % 21.4 % 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.
We also exited certain facilities no longer needed. In 2021, we took actions to integrate FLIR into our businesses resulting in higher severance and facility closure costs in the Digital Imaging segment.
In 2021, we took actions to integrate FLIR into our businesses resulting in higher severance and facility closure costs in the Digital Imaging segment. In 2021, we incurred $26.4 million of severance and facility consolidation costs, primarily related to our Digital Imaging Segment.
Digital Imaging (Dollars in millions) 2021 (a) 2020 2019 Net sales $ 2,412.9 $ 986.0 $ 992.9 Cost of sales $ 1,421.7 $ 569.2 $ 580.6 Selling, general and administrative expenses (b) $ 537.2 $ 205.9 $ 217.2 Acquired intangible asset amortization (b) $ 128.4 $ 18.1 $ 18.6 Operating income $ 325.6 $ 192.8 $ 176.5 Cost of sales % of net sales 58.9 % 57.7 % 58.5 % Selling, general and administrative expenses % of net sales 22.3 % 20.9 % 21.9 % Acquired intangible asset amortization % of net sales 5.3 % 1.8 % 1.8 % Operating income % of net sales 13.5 % 19.6 % 17.8 % International sales % of net sales 55.1 % 60.8 % 59.7 % U.S.
Digital Imaging (Dollars in millions) 2022 2021 Net sales $ 3,110.9 $ 2,412.9 Cost of sales $ 1,705.6 $ 1,421.7 Selling, general and administrative expenses $ 702.3 $ 537.2 Acquired intangible asset amortization $ 183.7 $ 128.4 Operating income $ 519.3 $ 325.6 Cost of sales % of net sales 54.8 % 58.9 % Selling, general and administrative expenses % of net sales 22.6 % 22.3 % Acquired intangible asset amortization % of net sales 5.9 % 5.3 % Operating income % of net sales 16.7 % 13.5 % International sales % of net sales 54.5 % 55.1 % U.S.
Department of Defense, were approximately 26% of total net sales in both 2021 and 2020 and 24% of total net sales in 2019. 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, were approximately 25% and 26% of our total net sales in 2022 and 2021, respectively. For a summary of sales to the U.S. Government by segment, see Note 4. Sales to the U.S. Department of Defense represented approximately 20% and 19% of total net sales for 2022 and 2021, respectively.
Operating income for 2021 increased 64.9%, compared with 2020. The 2021 net sales increase reflected $32.4 million of higher sales for defense and space electronics and $6.9 million for aerospace electronics.
Operating income for 2022 increased 38.2%, compared with 2021. The 2022 net sales increase reflected $35.7 million of higher sales for aerospace electronics and $18.0 million of higher sales for defense electronics.
Prior period amounts have been reclassified to conform to the current presentation. 23 Table of Contents Our businesses are aligned in four business segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems.
Certain prior year amounts have been reclassified to conform to the current period presentation. In the current year, gain (loss) on debt extinguishment is presented as separate line item on the income statement. Our businesses are aligned in four segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems.
Financing Activities Financing activities for 2021 reflected net proceeds from debt of $2,834.2 million, compared with net payments on debt of $98.1 million in 2020 and net proceeds from debt of $108.8 million for 2019. Fiscal years 2021, 2020 and 2019 reflect proceeds from the exercise of stock options of $25.4 million, $36.3 million and $34.6 million, respectively.
Financing Activities Financing activities reflected net payments from debt of $174.8 million in 2022 and net proceeds from debt of $2,834.2 million in 2021. Fiscal years 2022 and 2021 reflect proceeds from the exercise of stock options of $23.6 million and $25.4 million, respectively. During 2022, the Company repaid $185.0 million of debt.
The selling, general and administrative expense percentage was 19.1% in 2020 compared to 19.0% in 2019. 31 Table of Contents Engineered Systems (Dollars in millions) 2021 2020 2019 Net sales $ 405.8 $ 416.3 $ 375.5 Cost of sales $ 332.5 $ 337.6 $ 312.2 Selling, general and administrative expenses $ 24.7 $ 28.6 $ 26.8 Operating income $ 48.6 $ 50.1 $ 36.5 Cost of sales % of net sales 81.9 % 81.1 % 83.1 % Selling, general and administrative expenses % of net sales 6.1 % 6.9 % 7.2 % Operating income % of net sales 12.0 % 12.0 % 9.7 % International sales % of net sales 0.9 % 0.7 % 1.1 % U.S.
Engineered Systems (Dollars in millions) 2022 2021 Net sales $ 411.3 $ 405.8 Cost of sales $ 346.2 $ 332.5 Selling, general and administrative expenses $ 25.9 $ 24.7 Operating income $ 39.2 $ 48.6 Cost of sales % of net sales 84.2 % 81.9 % Selling, general and administrative expenses % of net sales 6.3 % 6.1 % Operating income % of net sales 9.5 % 12.0 % International sales % of net sales 1.1 % 0.9 % U.S.
Teledyne may redeem the $450.0 million of 0.95% Notes due 2024 at any time or from time to time, in whole or in part, at the Company’s option, from and after April 1, 2022, at a redemption price equal to 100% of the principal amount of the Notes redeemed.
Teledyne may redeem the $450.0 million of 0.95% Notes due 2024 at any time or from time to time, in whole or in part, at the Company’s option, from and after April 1, 2022, at a redemption price equal to 100% of the principal amount of the Notes redeemed. • As part of the acquisition of FLIR, the Company assumed and guaranteed FLIR’s $500.0 million, 2.50% Fixed Rate Senior Notes due August 2030. • In the second half of 2021, the Company made $645.0 million of floating rate debt payments on its term loan due May 2026.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk The information required by this item is included in this Report on page 36 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 7A. Quantitative and Qualitative Disclosures About Market Risk The information required by this item is included in this Report under the caption “Other Matters - Market Risk Disclosures” of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

Other TDY 10-K year-over-year comparisons