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What changed in Teledyne Technologies's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Teledyne Technologies's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+448 added−550 removedSource: 10-K (2024-02-23) vs 10-K (2022-02-25)

Top changes in Teledyne Technologies's 2023 10-K

448 paragraphs added · 550 removed · 187 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

56 edited+16 added−22 removed14 unchanged
Biggest changeOur 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.
Biggest changeOur 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. 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 waterproof and splash-proof neoprene and glass reinforced epoxy connectors and cable assemblies are used in underwater equipment, submerged monitoring systems and other industrial applications. Other marine products used by the U.S. Navy and commercial customers include acoustic modems for networked underwater communication and optical underwater cameras and LED lighting sources. We manufacture complete autonomous-operated underwater vehicles systems.
Our waterproof and splash-proof neoprene and glass reinforced epoxy connectors and cable assemblies are used in underwater equipment, submerged monitoring systems and other industrial and defense applications. Other marine products used by the U.S. Navy and commercial customers include acoustic modems for networked underwater communication and optical underwater cameras and LED lighting sources. We manufacture complete autonomous-operated underwater vehicles systems.
Marine Instrumentation We offer a variety of products designed for use in harsh underwater environments, instruments that measure currents and other physical properties in the water column, systems that create acoustic images of objects beneath the water’s surface, including the bottom of a body of water, and sensors that determine the geologic structure below the bottom.
Marine Instrumentation We offer a variety of products designed for use in harsh underwater environments, instruments that measure currents and other physical properties in the water column, systems that create acoustic images of objects beneath the water’s surface, including the bottom of a body of water, instruments for navigation and sensors that determine the geologic structure below the bottom.
Board Oversight Pursuant to the mandate in their respective charters, the Audit Committee of our Board of Directors (the “Board”) regularly reviews matters related to compliance with environmental laws and the health and safety of employees, and the Nominating and Governance Committee of our Board reviews and evaluates our policies and practices and monitors our efforts in areas of legal and social responsibility, diversity and sustainability, and other ESG matters.
Pursuant to the mandate in their respective charters, the Audit Committee of our Board of Directors (the “Board”) regularly reviews matters related to compliance with environmental laws and the health and safety of employees, and the Nominating and Governance Committee of our Board reviews and evaluates our policies and practices and monitors our efforts in areas of legal and social responsibility, diversity and sustainability, and other ESG matters.
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.
Finally, we manufacture instruments that are used by pharmaceutical scientists to evaluate the release rate characteristics and physical properties of various dosage forms to ensure the safety and efficacy of medicines worldwide.
We manufacture instruments that are used by pharmaceutical scientists to evaluate the release rate characteristics and physical properties of various dosage forms to ensure the safety and efficacy of medicines worldwide.
Securities and Exchange Commission (the “SEC”) at www.sec.gov . We will provide, free of charge, a paper copy of any report we file with the SEC (without exhibits) upon written request to Melanie S. Cibik, Senior Vice President, General Counsel, Chief Compliance Officer and Secretary, at Teledyne Technologies Incorporated, 1049 Camino Dos Rios, Thousand Oaks, California 91360-2362.
Securities and Exchange Commission (the “SEC”) at www.sec.gov . We will provide, free of charge, a paper copy of any report we file with the SEC (without exhibits) upon written request to Melanie S. Cibik, Executive Vice President, General Counsel, Chief Compliance Officer and Secretary, at Teledyne Technologies Incorporated, 1049 Camino Dos Rios, Thousand Oaks, California 91360-2362.
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.
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.
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.
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.
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 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.
We also produce and provide manufacturing services for micro electromechanical systems (“MEMS”) and high-performance, high-reliability semiconductors including analog-to-digital and digital-to-analog converters, as well as unmanned aerial and ground systems. This segment also includes our sponsored and centralized research laboratories.
We also produce and provide manufacturing services for micro electromechanical systems (“MEMS”) and high-performance, high-reliability semiconductors including analog-to-digital and digital-to-analog converters, as well as unmanned aerial and ground systems. This segment also includes our customer- and Company-sponsored applied research center.
Test and Measurement Instrumentation We believe our test and measurement products provide unique, world-class capabilities that enable the designers of complex electronic systems in many industry sectors to bring their products to market reliably and quickly.
Test and Measurement Instrumentation Our test and measurement products provide capabilities that enable the designers of complex electronic systems in many industry sectors to bring their products to market reliably and quickly.
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.
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 5 Table of Contents foundation of knowledge that can serve them throughout their career and that may allow them to progress to more responsible 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.
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.
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.
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.
Marketing Our sales and marketing approach varies by segment and by products within our segments. A shared fundamental tenet is the commitment to work closely with our customers to understand their needs, with an aim to secure preferred supplier and longer-term relationships.
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 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.
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% 48.4 10.0 62% 32% 6% Europe, the Middle East and Africa 28% 43.3 9.9 62% 25% 13% Asia-Pacific Region 3% 40.7 8.0 52% 23% 25% We have a stable and long-tenured workforce.
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. Customers We have a broad and diversified customer base in the various markets we serve.
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.
Government within the Engineered Systems segment was the Mission Operations and Integration contract with the NASA Marshall Space Flight Center, which represented approximately 11% of Engineered Systems net sales. As described in greater detail under Item 1A. Risk Factors, there are risks associated with doing business with the U.S. Government. In 2023, approximately 79% of our U.S.
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 2023, our voluntary employee turnover (excluding reductions in force) was approximately 10%. As of December 31, 2023, the average years of service of our employees was approximately 10 years. Employees are vital to the success of our growth strategy.
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.
Our instrumentation monitors trace levels of gases such as sulfur dioxide, carbon monoxide, oxides of nitrogen and ozone, as well as particulate pollution, in order to measure the quality of the air we breathe.
Our instrumentation monitors trace levels of gases such as sulfur dioxide, carbon monoxide, oxides of nitrogen and ozone, as well as particulate pollution, in order to measure the quality of the air we breathe. We supply monitoring systems for the detection, measurement and automated reporting of air pollutants from industrial stack emissions, ozone generators and other process gas monitoring instruments.
Talent Development We are committed to identifying and developing the talents of our next generation of leaders. On an annual basis, we conduct an organization and leadership review for all segment, business unit, and function leaders, focusing on our high performing and high potential talent, diversity and succession for our most critical roles.
On an annual basis, we conduct an organization and leadership review for all segment, business unit, and function leaders, focusing on our high performing and high potential talent, diversity and succession for our most critical roles. From this review, individualized development and retention programs are implemented or revised as needed.
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 differentiate ourselves from many of our direct competitors by having a customer- and Company-sponsored applied research center that augments our product development expertise. We believe our technological capabilities, innovation and 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.
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.
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.
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 net sales to international customers, our businesses in the United States accounted for $900.5 million in 2023 and $837.9 million in 2022. In both 2023 and 2022, we sold products to customers in over 100 foreign countries. Approximately 90% of our net sales to international customers during 2023 were made to customers in 30 foreign countries.
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.
When contracts are terminated for convenience, we can recover costs incurred or committed, settlement expenses and profit on work completed prior to termination. During 2023 and 2022, contracts terminated by the U.S. Government did not materially impact our results of operations.
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.
Our goal is to maintain a safe, hospitable and inclusive work environment in which every employee is encouraged to contribute to the success of the company. 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.
We also supply monitoring systems for the detection, measurement and automated reporting of air pollutants from industrial stack emissions, ozone generators and other process gas monitoring instruments. Our instrumentation is used to detect a variety of water quality parameters and in applications found in petrochemical and refinery facilities.
We also supply water monitoring systems for wastewater monitoring and detection of water-borne pathogens and contaminants of concern. Our instrumentation is used to detect a variety of water quality parameters and in applications found in petrochemical and refinery facilities.
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.
Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 17 . No material capital expenditures relating to environmental compliance are presently anticipated. See Note 17 for additional discussion of other government regulations. Sustainability Teledyne continues to focus on developing solutions to address sustainability and climate challenges facing humanity today.
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.
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 and distributors. Several Teledyne businesses, including across our segments, have been marketing and selling products collaboratively to similar customers.
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.
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 .
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.
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: 2023 2022 2021 Digital Imaging 56 % 57 % 52 % Instrumentation 23 % 23 % 25 % Aerospace and Defense Electronics 13 % 12 % 14 % Engineered Systems 8 % 8 % 9 % 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, medical and other applications.
We do not consider any single patent or trademark, or any group of them, essential either to Teledyne’s business as a whole or to any one of our reportable segments. The annual royalties received or paid under license agreements are not significant to any of our reportable segments or to Teledyne’s overall operations.
We license patents, technology and other intellectual property rights owned and controlled by others. Similarly, other companies license patents, technology and other intellectual property rights owned and controlled by us. We do not consider any single patent or trademark, or any group of them, essential either to Teledyne’s business as a whole or to any one of our reportable segments.
Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. We do not expect the expiration or termination of these patents, patent applications and license agreements to have a material adverse effect on our business, results of operations or financial condition.
The annual royalties received or paid under license agreements are not significant to any of our reportable segments or to our overall operations. Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise.
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.
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. 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.
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.
In 2023, the top five countries for sales to international customers, ranked by net sales, were the United Kingdom, China, Japan, Germany and Norway and represented approximately 21% of our total net sales. There were no sales to individual countries outside of the United States in excess of 10% of the Company’s sales.
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 4 Table of Contents 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. The prominence and importance of sustainability and Environmental, Social and Governance (“ESG”) initiatives have dramatically increased.
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 our most recent efforts focused on sustainability and ESG. We published a supplement to the CSR report in November 2023 to include updated financial information and other information in the report.
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.
Some raw materials are purchased from a limited set of suppliers, including international sources, due to technical capability, price, and other factors. We leverage our existing supplier relationships and are not dependent on any one supplier for a material amount of our purchases.
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.
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.
Human Capital We consider our relations with our employees to be good. At December 31, 2023, our total workforce consisted of approximately 14,900 employees in 36 countries.
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 compete on quality, product performance and reliability, technical expertise, price and service.
We also have vacation and sick leave policies that provide employees with flexibility to take time away from work for relaxation or to recover from illness. U.S. based employees have access to third-party counseling and mental health services at no cost to the employee when life events impact an employee.
These programs often include guest speakers on various topics, including mental health, heart disease, diabetes, and personal financial awareness. We also have vacation and sick leave policies that provide employees with flexibility to take time away from work for relaxation or to recover from illness.
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.
Government prime contracts and subcontracts were fixed-price type contracts, compared to 80% in 2022, with the remaining U.S. Government contracts related to cost-reimbursable contracts (“cost-type”) contracts. Under fixed-price type contracts, we bear the inherent risk that actual performance cost may exceed the fixed contract price.
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 together with its supplement, 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”.
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: 2023 2022 2021 Digital Imaging $ 570.7 $ 619.1 $ 515.9 Instrumentation 95.9 108.1 91.6 Aerospace and Defense Electronics 330.3 266.3 227.2 Engineered Systems 384.8 366.4 358.4 Total U.S. Government sales $ 1,381.7 $ 1,359.9 $ 1,193.1 Total U.S.
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.
Government sales as a percent of total net sales 24.5 % 24.9 % 25.9 % Our principal U.S. Government customer is the U.S. Department of Defense, with total net sales of $1,081.3 million and $1,065.1 million in 2023 and 2022, respectively.
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.
Item 1. Business Who We Are Teledyne Technologies Incorporated is a Delaware corporation that provides enabling technologies for industrial growth markets that require advanced technology and high reliability. These markets include aerospace and defense, factory automation, air and water quality environmental monitoring, electronics design and development, oceanographic research, deepwater oil and gas exploration and production, medical imaging and pharmaceutical research.
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.
We advertise vacancies and strive to recruit the best possible candidate for each role. We monitor diversity metrics on a global basis. The health and wellness of our employees is a critical component to the success of our business. Many of our larger facilities have on-site fitness centers and encourage healthy choices with various wellness challenge programs.
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, we have experienced supply chain challenges in recent years, including increased lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand.
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- 2 Table of Contents grade data centers and in consumer computing applications.
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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.
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Our products include digital imaging sensors, cameras and systems within the visible, infrared and X-ray spectra, monitoring and control instrumentation for marine and environmental applications, harsh environment interconnects, electronic test and measurement equipment, aircraft information management systems, and defense electronics and satellite communication subsystems. We also supply engineered systems for defense, space, environmental and energy applications.
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( “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.
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We became an independent public company effective November 29, 1999. The following description of our business should be read together 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 each in 2023 and in 2022.
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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 financial results of these acquisitions have been included since the respective date of each acquisition. Our 2023 acquisitions were within the Digital Imaging and Instrumentation segments, and both acquisitions in 2022 were part of the Digital Imaging segment. See Note 3 for additional information about our recent business acquisitions.
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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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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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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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Finally, we manufacture fixed and portable industrial gas and flame detection instruments used in a variety of industries including petrochemical, power generation, oil and gas, food and beverage, mining and wastewater treatment.
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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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No commercial customer in 2023 or 2022 accounted for more than 10% of net sales for any of our segments or for the total Company. Total sales to international customers were $2,740.1 million in 2023 and $2,586.0 million in 2022.
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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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Information on our net sales to the U.S. Government, including direct sales to agencies as a prime contractor and indirect sales as a subcontractor, was as follows (in millions): U.S.
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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”).
Added
With the exception of the Engineered Systems segment, no U.S Government program in 2023 or 2022 accounted for more than 10% of net sales for any of our segments or for the total Company. In 2023, the largest program with the U.S.
Removed
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.
Added
Government within the Engineered Systems segment was the Marshall Operations, Systems, Services, and Integration II (“MOSSI II”) contract with the NASA Marshall Space Flight Center, which represented approximately 17% of Engineered Systems net sales. In 2022, the largest program with the U.S.
Removed
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.
Added
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 3 Table of Contents to termination by the U.S. Government at its convenience, without identification of any default.
Removed
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.
Added
While some of our businesses provide services, for those businesses that sell products, a portion of the value that we provide is labor-oriented, such as design, engineering, assembly and test activities. In manufacturing our products, we use our own production capabilities and third-party suppliers and subcontractors, including international sources.
Removed
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.
Added
We do not expect the expiration or termination of these patents, patent applications and license agreements to have a material adverse effect on our business, results of operations or financial condition. Environment and Other Government Regulations Information with respect to environmental matters is set forth under “Other Matters – Environmental” of “ Item 7 .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

120 edited+57 added−53 removed89 unchanged
Biggest changeSome 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.
Biggest changeAny prolonged reduction in the overall level of offshore oil and gas exploration and development activities, whether resulting from changes in oil and gas prices or otherwise, could materially and adversely affect our financial condition and the results of our businesses within our Instrumentation segment. 11 Table of Contents 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; • conflict in the Middle East, including disruption of shipping lanes in the Red Sea; • 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.
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.
Our 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.
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.
These attempts, which might be related to industrial or foreign government espionage, crime, activism, or other motivations, include covertly introducing malware into our computers and computer networks, performing reconnaissance, impersonating authorized users, extortion, and stealing, corrupting or restricting our access to data, among other activities.
These attempts, which might be related to industrial or foreign government espionage, crime, activism, or other motivations, include covertly introducing malware into our computers and computer networks, performing reconnaissance, impersonating authorized users, extortion, fraud, and stealing, corrupting or restricting our access to data, among other activities.
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.
As a result, we expect to continue to devote additional resources to the security of our information technology systems, operating technology systems, products and services. More resources may be required in the defense arena to the extent the U.S. Government increases its cybersecurity mandates.
As a result, we expect to continue to devote resources to the security of our information technology systems, operating technology systems, products and services. More resources may be required in the defense arena to the extent the U.S. Government increases its cybersecurity mandates.
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.
While we conduct financial and other due diligence in connection with our acquisitions and generally seek some form of protection, such as indemnification from the seller, insurance coverage, and sometimes placing a portion of the purchase price in escrow to cover potential liabilities, such acquired companies may have weaknesses or liabilities that are not accurately assessed or brought to our attention at the time of the acquisition.
While we conduct financial and other due diligence in connection with our acquisitions and generally seek some form of protection, such as indemnification from the seller, insurance coverage, and sometimes placing a portion of the purchase price in escrow or a holdback arrangement to cover potential liabilities, such acquired companies may have weaknesses or liabilities that are not accurately assessed or brought to our attention at the time of the acquisition.
Security breaches also could result in a violation of applicable U.S. and international privacy and other laws, including GDPR, Health Insurance Portability and Accountability Act, Payment Card Industry Data Security Standard, and California Consumer Privacy Act and subject us to private consumer or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability.
Security breaches also could result in a violation of applicable U.S. and international privacy and other laws, including GDPR, Health Insurance Portability and Accountability Act, Payment Card Industry Data Security Standard, and California Consumer Privacy Act, or SEC regulations, and subject us to private consumer or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability.
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.
The U.S. government and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, supply chain, partners or customers.
Government and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, supply chain, partners or customers.
We develop and manufacture products for customers in the energy exploration and production markets, domestic and international commercial aerospace markets, the semiconductor industry, and the consumer electronics, telecommunications and automotive industries; each of which has been cyclical, exhibited rapid changes and suffered from fluctuating market demands. A cyclical downturn in these markets may materially affect future operating results.
We develop and manufacture products for customers in the energy exploration and production markets, commercial aerospace markets, the semiconductor industry, and the consumer electronics, telecommunications and automotive industries; each of which has been cyclical, exhibited rapid changes and suffered from fluctuating market demands. A cyclical downturn in these markets may materially affect future operating results.
We also may be required to record an earnings charge or incur unanticipated expenses if, as a result of a change in strategy or other reason, we were to determine the value of other assets had been impaired. For additional discussion of business investments, goodwill and other long-lived assets, see the discussion under “Item 7.
We also may be required to record an earnings charge or incur unanticipated expenses if, as a result of a change in strategy or other reason, we were to determine the value of other assets had been impaired. For additional discussion of business acquisitions, goodwill and other long-lived assets, see the discussion under “Item 7.
We anticipate that future sales to international customers will continue to account for a significant and increasing percentage of our revenues, particularly since business and growth plans for many Teledyne businesses focus on sales outside of the United States to China and emerging markets such as India, Brazil and West Africa.
We anticipate that future sales to international customers will continue to account for a significant and increasing percentage of our revenues, particularly since business and growth plans for many Teledyne businesses focus on sales outside of the United States including to emerging markets such as India, Brazil and West Africa.
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.
Disruption of these sources or supplier-imposed rationing of scarce components could cause delays or reductions in shipments of our products or increases in our costs, which could have an adverse effect on our financial condition or operations. International sources possess additional risks, some of which are similar to those described above regarding international sales.
Disruption of these sources or supplier-imposed rationing of scarce components could cause delays or reductions in shipments of our products or increases in our costs, which could have an adverse effect on our financial condition or operations. International sources pose additional risks, some of which are similar to those described above regarding international sales.
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 2024 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.
Some companies engage subcontractors to perform a portion of the services we provide to our customers. To provide these services, the subcontractor must be financially viable, company with applicable laws, regulations and contract terms. Non-performance by a subcontractor could result in misalignment between subcontractor performance and our contractual obligations to our customers.
Some companies engage subcontractors to perform a portion of the services we provide to our customers. To provide these services, the subcontractor must be financially viable and compliant with applicable laws, regulations and contract terms. Non-performance by a subcontractor could result in misalignment between subcontractor performance and our contractual obligations to our customers.
However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial position, results of operations or cash flows in and following the period in which such an outcome becomes estimable or known.
However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to our financial position, results of operations or cash flows in and following the period in which such outcome becomes estimable or known.
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.
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 seven 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.
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, escrow or holdback arrangements may not fully cover such matters. Acquisitions of public companies, such as our acquisition of FLIR in 2021, 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.
If the fair market value is less than the carrying value, including goodwill, we could be required to record an impairment charge. The valuation of reporting units requires judgment in estimating future cash flows, discount rates and estimated product life cycles.
If the fair market value is less than the carrying value, including goodwill, we could be required to record a non-cash impairment charge. The valuation of reporting units requires judgment in estimating future cash flows, discount rates and estimated product life cycles.
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.
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 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.
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.
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.
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, rising sea levels, droughts or other natural disasters.
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.
Successful product development and introduction depend on numerous factors, including our ability to anticipate customer and market requirements, changes in technology and industry standards, our ability to differentiate our product offerings from the product offerings of our competitors, and market acceptance.
Successful 12 Table of Contents product development and introduction depend on numerous factors, including our ability to anticipate customer and market requirements, changes in technology and industry standards, our ability to differentiate our product offerings from the product offerings of our competitors, and market acceptance.
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.
Department of Defense regulations applicable to certain types of data residing on or transiting through our information systems, and these regulations have been and will continue to be incorporated into certain U.S. Department of Defense contracts that we hold.
Department of Defense, Department of Homeland Security, and Department of Energy regulations applicable to certain types of data residing on or transiting through our information systems, and these regulations have been and will continue to be incorporated into certain U.S. Government contracts that we hold.
In the medium- to long-term, the withdrawal of the U.K. from the E.U. may create further global economic uncertainty, which may adversely impact the economies of the U.K., the E.U. countries and other nations, may cause our current and future customers to reduce their spending on our products and services, and may cause certain E.U.-based customers to source products from businesses based outside of the U.K.
Over time, the withdrawal of the U.K. from the E.U. may create further global economic uncertainty, which may adversely impact the economies of the U.K., the E.U. countries and other nations, may cause our current and future customers to reduce their spending on our products and services, and may cause certain E.U.-based customers to source products from businesses based outside of the U.K.
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.
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 in the recent past was 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.
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.
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, including complex trade compliance regulations; • 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; • new and emerging non-U.S. regulations relating to ESG and CSR matters, which could be costly to comply with; • 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.
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 15 Table of Contents 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.
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.
Inflation and recent supply chain constraints have resulted in sustained increases in the prices we pay for many of the components and raw materials used in our products.
We may be unable to adjust our product pricing to reflect such higher costs. If we are unable to increase our product prices enough to offset these increased costs, our gross margins and profitability could decrease, perhaps significantly over a sustained period of time.
If we are unable to increase our product prices enough to offset these increased costs, our gross margins and profitability could decrease, perhaps significantly over a sustained period of time.
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, many countries, including China, India and Saudi Arabia, have bolstered laws or regulations requiring the use of local suppliers and in-country manufacturing, which has had a negative impact on Teledyne’s revenues of instrumentation, commercial aerospace, marine and digital imaging products, as we currently have limited manufacturing operations in these countries.
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; 6 Table of Contents • 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; • pre-existing vulnerabilities, undetected malware and access management issues at the acquired business and supply chain.
For additional discussion of environmental matters, see the discussion under the caption “Other Matters – Environmental” of “Item 7. Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 14 of the Notes to Consolidated Financial Statements.
For additional discussion of environmental matters, see the discussion under the caption “Other Matters – Environmental” of “Item 7. Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 17.
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, the conflict in Israel and neighboring regions and potential hostilities between China and Taiwan; • international terrorism; • global economic sanctions and 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.
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.
Government, and, accordingly, we have the risk that funding for our existing contracts may be canceled or diverted to other uses or delayed or that funding for new programs will not be available. We perform work on a number of contracts with the U.S. Department of Defense and other agencies and departments of the U.S.
Government, and, accordingly, we have the risk that funding for our existing contracts may be canceled or diverted to other uses or delayed or that funding for new programs will not be available. Similarly, sales to the European defense market depends on continued funding from European governments. We perform work on a number of contracts with the U.S.
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 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.
In addition, if the sale of any non-strategic business cannot be consummated or is not practical, alternative courses of action, including relocation of product lines or closure, may not be available to us or may be more costly than anticipated. Risks related to climate change Climate change may have a long-term impact on our business .
In addition, if the sale of any non-strategic business cannot be consummated or is not practical, alternative courses of action, including relocation of product lines or closure, may not be available to us or may be more costly than anticipated.
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 rising energy prices. We expect inflationary pressures to persist in 2024, albeit at a lower rate than in 2023.
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.
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.
Apart from the current shortages we are experiencing due to global supply chain constraints, as discussed above, some items we purchase for the manufacture of our products are purchased from limited or single sources of supply due to technical capability, price and other factors.
Some items we purchase for the manufacture of our products are purchased from limited or single sources of supply due to technical capability, price and other factors.
Additionally, members of the investment community may screen companies such as ours for sustainability performance before investing in our stock.
We may face increasing pressure regarding our sustainability disclosures and practices. Additionally, members of the investment community may screen companies such as ours for sustainability performance before investing in our stock.
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 2023 ranged from a low of $364.98 to a high of $448.71. Item 1B. Unresolved Staff Comments None.
We may be unsuccessful in accessing these and other new markets if our products do not meet our customers’ requirements, as a result of changes in either technology and industry standards or because of actions taken by our competitors.
We may be unsuccessful in accessing these and other new markets if our products do not meet our customers’ requirements, as a result of changes in either technology and industry standards or because of actions taken by our competitors. The airline industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations could suffer.
Low-cost competition from China and other developing countries could also result in decreased demand for our products. Increasing competition could reduce the volume of our sales or the prices we may charge, which would negatively impact our revenues.
Such consolidations can also cause delays in business as the newly consolidated organization undergoes integration. Low-cost competition from China and other developing countries could also result in decreased demand for our products. Increasing competition could reduce the volume of our sales or the prices we may charge, which would negatively impact our 13 Table of Contents revenues.
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.
Distributors may face financial difficulties, including bankruptcy, which could harm our collection of 14 Table of Contents accounts receivables and financial results. 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.
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 export control practices, including FLIR ’ s historical 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.
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.
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.
Department of Defense and other agencies and departments of the U.S. Government including subcontracts with government prime contractors. Sales under contracts with the U.S. Government, including sales under contracts with the U.S. Department of Defense, as prime contractor or subcontractor, represented 24.5% and 24.9% of our total net sales in 2023 and 2022, respectively.
We are also required to test goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value.
We have chosen to perform our annual impairment reviews of goodwill and other indefinite-lived intangible assets during the fourth quarter of each fiscal year. We are also required to test goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value.
Industry acquisition and consolidation trends, particularly among aerospace and defense contractors, have adversely impacted demand for our aerospace and defense related engineering services as large prime contractors elect to in-source major acquisition programs and expand small business participation to meet U.S. Government contracting goals. Such consolidations can also cause delays in business as the newly consolidated organization undergoes integration.
Lastly, some of our products face increasing competition from alternative technologies. Industry acquisition and consolidation trends, particularly among aerospace and defense contractors, have adversely impacted demand for our aerospace and defense related engineering services as large prime contractors elect to in-source major acquisition programs and expand small business participation to meet U.S. Government contracting goals.
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.
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.
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.
The business of Teledyne e2v, for which the design and development of specialized technology for high performance systems and equipment is integral, also requires substantial investments in research and development.
The business of Teledyne e2v, for which the design and development of specialized technology for high performance systems and equipment is integral, also requires substantial investments in research and development. Additionally, some of our businesses have sought or are actively pursuing governmental support and funding for some of their research and development initiatives.
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.
Our sales to China-based customers represented approximately 5.6% and 6.0% of total revenues in 2021 and 2020, respectively. Economic growth in China had slowed due to the COVID pandemic. Continued growth in many of our businesses, including those in our Environmental Instrumentation group, could be negatively impacted if another economic downturn occurs in China.
Economic growth in China had slowed since the COVID pandemic. Continued growth in many of our businesses, including those in our Environmental Instrumentation group, could be negatively impacted if another economic downturn occurs in China.
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, 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. We also have a mature workforce.
Some of our businesses, including our businesses in traveling wave tube and integrated microwave module design and development, draw from a pool of specialized engineering talent that is small and currently shrinking. Some of our businesses have a need for employees with a certain level of security clearance, and competition for such employees has increased.
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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 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.
Biggest changeItem 2. Properties The Company has 76 principal operating facilities in 20 states and 10 foreign countries. The Company’s executive offices are located in Thousand Oaks, California.
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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.
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At December 31, 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, Spain, Sweden, 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, 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAlthough 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.
Biggest changeAlthough we have no current plans to repurchase stock, up to approximately three million shares may be repurchased under the stock repurchase program. See Note 2 for additional information about our stock repurchase program.
Because many of our shares of common stock are held by brokers and institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our stock represented by these stockholders of record. We intend to use future earnings to fund the development and growth of our businesses, including through potential acquisitions.
Because many of our shares of common stock are held by brokers and institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our stock represented by these stockholders of record. We intend to use future earnings to fund the development and growth of our businesses.
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 16, 2024, there were 2,256 holders of record of the Common Stock.
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Additional information required by this item is set forth in the 2024 Proxy Statement under the caption and “Securities Authorized for Issuance Under Equity Compensation Plans” and is incorporated herein by reference. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

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

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Biggest changeHowever, given the continuing dynamic nature of this situation, we may not fully estimate the impacts of COVID on our financial condition, results of operations or cash flows. We have 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.
Biggest changeTrends and Other Matters Affecting Our Business We have experienced supply chain challenges, including long lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand. These supply chain challenges have also delayed our ability to timely convert backlog to revenue.
We aggressively pursue operational excellence to continually improve our margins and earnings by emphasizing cost containment and cost reductions in all aspects of our business. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire.
We aggressively pursue operational excellence to continually improve our margins and earnings by emphasizing cost containment and evaluating cost reductions in all aspects of our business. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire.
Using complementary technology across our businesses and internal research and development, we seek to create new products to grow our company and expand our addressable markets. We continue to evaluate our businesses to ensure that they are aligned with our strategy.
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 continually evaluate our businesses to ensure that they are aligned with our strategy.
Our core markets are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment among capital expenditures, acquisitions and product development.
The markets in which we sell our enabling technologies are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our business with targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment among capital expenditures, acquisitions and product development.
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.
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. 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.
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. These markets include aerospace and defense, factory automation, air and water quality environmental monitoring, electronics design and development, oceanographic research, deepwater oil and gas exploration and production, medical imaging and pharmaceutical research.
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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.
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Our products include digital imaging sensors, cameras and systems within the visible, infrared and X-ray spectra, monitoring and control instrumentation for marine and environmental applications, harsh environment interconnects, electronic test and measurement equipment, aircraft information management systems, and defense electronics and satellite communication subsystems. We also supply engineered systems for defense, space, environmental and energy applications.
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( “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.
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Information about results of operations and financial conditions for 2021 and 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in the Company’s Annual Report on Form 10-K for the year ended January 1, 2023. 21 Table of Contents Strategy/Overview Our strategy continues to emphasize growth in our four business segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems.
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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.
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Although perhaps to a lesser extent compared to recent years, we expect cost inflation impacts and supply chain constraints to continue into 2024. Sales recorded and costs incurred by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period.
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In connection with this strategy, on May 14, 2021, Teledyne completed the acquisition of FLIR, our largest acquisition to date. In addition to the acquisition of FLIR, we made one acquisition in 2020 and three acquisitions in 2019. See the Recent Acquisitions section for additional information.
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As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. See
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COVID and Other Matters With regard to the COVID pandemic, our first priority remains the health and safety of our employees and their families. Our manufacturing sites are deemed essential businesses and remain operational. Since the beginning of the COVID pandemic, we have practiced social distancing, enhanced cleaning protocols, increased usage of personal protective equipment and other preventative measures.
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Although the COVID pandemic continued to impact our business operations and practices, we experienced limited disruptions in 2021. We expect to continue to take robust actions to help protect the health, safety and well-being of our employees, to support continued performance, to support our suppliers and partners and to continue to serve our customers.
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Our goals have been, and continue to be to lessen the potential adverse impacts, both health and economic, and to continue to position the company for long-term success.
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Like the communities in which we operate, our actions have varied depending on the severity of the COVID pandemic and applicable government requirements, the needs of our employees, the needs of our customers and the needs of our business.
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Contingency plans remain in place in the event of significant impacts from COVID infection resurgences, and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, partners and suppliers.
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While no company is immune to global economic challenges, Teledyne's business portfolio is well-balanced across end markets and geographies, and includes a high degree of businesses serving critical infrastructure sectors such as the defense industrial base, water and wastewater, and healthcare and public health.
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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.
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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.
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At January 2, 2022, an immaterial amount remains to be paid related to these actions. 21 Table of Contents The following pre-tax charges were incurred related to severance and facility consolidations (in millions): 2021 2020 2019 Digital Imaging $ 23.9 $ 2.9 $ 1.1 Instrumentation 1.3 5.9 1.5 Aerospace and Defense Electronics 0.7 11.1 0.5 Engineered Systems 0.4 0.5 0.1 Corporate 0.1 0.4 — Total $ 26.4 $ 20.8 $ 3.2 2021 2020 2019 Severance $ 14.5 $ 16.0 $ 3.5 Facility consolidations (a) 11.9 4.8 (0.3) Total $ 26.4 $ 20.8 $ 3.2 (a) 2019 includes the reversal of certain amounts recorded in 2018 no longer needed. 2021 2020 2019 Cost of sales $ 2.4 $ 10.3 $ 0.8 Selling, general and administrative expenses 24.0 10.5 2.4 Total $ 26.4 $ 20.8 $ 3.2 Recent Acquisitions See Note 3 of the Notes to Consolidated Financial Statements for additional information about our recent acquisitions.
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Acquisition of FLIR Systems, Inc. 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, $3.9 billion of Teledyne common stock, and the assumption of FLIR debt of $0.5 billion.
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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 of common stock at $409.41 per share. See Note 9 to these Notes to Consolidated Financial Statements for information regarding financing activities undertaken in connection with the FLIR acquisition.
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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 develops technologies that enhance perception and awareness.
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FLIR designs, develops, markets, and distributes solutions that detect people, objects and substances that may not be perceived by human senses and improve the way people interact with the world around them. FLIR technologies include thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and advanced threat-detection solutions. FLIR is part of the Digital Imaging segment.
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The significant factors that resulted in recognition of goodwill include the acquired businesses market presence and leading positions, growth opportunities in the markets in which they operate, their experienced work force and established operating infrastructures. Goodwill resulting from the FLIR acquisition will not be deductible for tax purposes.
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We are accounting for the FLIR acquisition under the acquisition method and are required to measure identifiable assets acquired and liabilities assumed of the acquiree at the fair values on the closing date.
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The Company made an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities.
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As of January 2, 2022, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the FLIR acquisition are subject to adjustment until the end of the respective measurement period.
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The Company is in the process of specifically identifying the amounts assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the FLIR acquisition. The Company is in the process of reviewing a third-party valuation of certain intangible assets and tangible assets of FLIR.
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The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. The amounts recorded as of January 2, 2022 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis. 2020 Acquisition On January 5, 2020, we acquired OakGate Technology, Inc.
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(“OakGate”) for $28.5 million in cash, net of cash acquired. Based in Loomis, California, OakGate provides software and hardware designed to test electronic data storage devices from development through manufacturing and end-use applications.
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The acquired business is part of the Test and Measurement product line within the Instrumentation segment. 22 Table of Contents 2019 Acquisitions On February 5, 2019, we acquired the scientific imaging businesses of Roper Technologies, Inc. for $224.8 million in cash. The acquired businesses include Princeton Instruments, Photometrics and Lumenera.
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The acquired businesses provide a range of imaging solutions, primarily for life sciences, academic research and customized OEM industrial imaging solutions. Princeton Instruments and Photometrics manufacture state-of-the-art cameras, spectrographs and optics for advanced research in physical sciences, life sciences research and spectroscopy imaging. Applications and markets include materials analysis, quantum technology and cell biology imaging using fluorescence and chemiluminescence.
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Lumenera primarily provides rugged USB-based customized cameras for markets such as traffic management, as well as life sciences applications. Principally located in the United States and Canada, the acquired businesses are part of the Digital Imaging segment. On August 1, 2019, we acquired the gas and flame detection businesses of 3M Company for $233.5 million in cash.
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The gas and flame detection businesses includes Oldham, Simtronics, Gas Measurement Instruments, Detcon and select Scott Safety products. The gas and flame detection businesses provides a portfolio of fixed and portable industrial gas and flame detection instruments used in a variety of industries including petrochemical, power generation, oil and gas, food and beverage, mining and waste water treatment.
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Principally located in France, the United Kingdom and the United States, the acquired businesses are part of the Environmental Instrumentation product line of the Instrumentation segment. On August 30, 2019, we acquired Micralyne Inc. (“Micralyne”) for $25.7 million in cash. Micralyne provides micro electromechanical systems (“MEMS”) devices.
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In particular, Micralyne possesses unique microfluidic technology for biotech applications, as well as capabilities in non-silicon-based MEMS (e.g. gold, polymers) often required for human body compatibility. Based in Edmonton, Alberta, Canada, the acquired business is part of the Digital Imaging segment.
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Consolidated Operating Results Our fiscal year is determined based on a 52- or 53-week convention ending on the Sunday nearest to December 31. Fiscal years 2021 and 2019 contained 52 weeks while fiscal year 2020 contained 53 weeks. Certain prior year amounts have been reclassified to conform to the current period presentation.
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The Company now discloses acquired intangible asset amortization on a separate income statement line. Acquired intangible asset amortization was previously included in selling, general and administrative expenses. In addition, the Company now discloses the balance of long-term deferred tax liabilities on the face of the balance sheet. Long-term deferred tax liabilities was previously included in other long-term liabilities.
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The following are selected financial highlights for 2021, 2020 and 2019 (in millions, except per-share amounts): 2021 2020 2019 Net sales $ 4,614.3 $ 3,086.2 $ 3,163.6 Costs and expenses Cost of sales 2,772.9 1,905.3 1,920.3 Selling, general and administrative expenses (a) 1,067.8 662.0 715.1 Acquired intangible asset amortization (a) 149.3 38.8 36.5 Total costs and expenses 3,990.0 2,606.1 2,671.9 Operating income 624.3 480.1 491.7 Interest and debt expense, net (104.2) (15.3) (21.0) Non-service retirement benefit income 11.2 12.1 8.0 Other income (expense), net 2.5 (7.2) (5.0) Income before income taxes 533.8 469.7 473.7 Provision for income taxes 88.5 67.8 71.4 Net income $ 445.3 $ 401.9 $ 402.3 Basic earnings per common share $ 10.31 $ 10.95 $ 11.08 Diluted earnings per common share $ 10.05 $ 10.62 $ 10.73 (a) Acquired intangible asset amortization was previously included in selling, general and administrative expenses.
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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.
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Our four business segments and their respective percentage contributions to our total net sales in 2021, 2020 and 2019 are summarized in the following table: Percentage of Total Net Sales Segment contribution to total net sales: 2021 2020 2019 Digital Imaging 52 % 32 % 31 % Instrumentation 25 % 35 % 35 % Aerospace and Defense Electronics 14 % 19 % 22 % Engineered Systems 9 % 14 % 12 % 100 % 100 % 100 % Results of Operations 2021 compared with 2020 Net sales (dollars in millions) 2021 2020 % Change Digital Imaging $ 2,412.9 $ 986.0 144.7 % Instrumentation 1,166.9 1,094.5 6.6 % Aerospace and Defense Electronics 628.7 589.4 6.7 % Engineered Systems 405.8 416.3 (2.5) % Total net sales $ 4,614.3 $ 3,086.2 49.5 % Results of operations (dollars in millions) 2021 2020 % Change Digital Imaging $ 325.6 $ 192.8 68.9 % Instrumentation 253.7 213.2 19.0 % Aerospace and Defense Electronics 133.2 80.8 64.9 % Engineered Systems 48.6 50.1 (3.0) % Corporate expense (136.8) (56.8) 140.8 % Operating income 624.3 480.1 30.0 % Interest and debt expense, net (104.2) (15.3) 581.0 % Non-service retirement benefit income 11.2 12.1 (7.4) % Other income (expense), net 2.5 (7.2) * Income before income taxes 533.8 469.7 13.6 % Provision for income taxes 88.5 67.8 30.5 % Net income $ 445.3 $ 401.9 10.8 % * not meaningful 24 Table of Contents Net sales and cost of sales by segment and total company (dollars in millions): 2021 2020 Change Digital Imaging Net sales $ 2,412.9 $ 986.0 $ 1,426.9 Cost of sales $ 1,421.7 $ 569.2 $ 852.5 Cost of sales % of net sales 58.9 % 57.7 % Instrumentation Net sales $ 1,166.9 $ 1,094.5 $ 72.4 Cost of sales $ 617.8 $ 603.4 $ 14.4 Cost of sales % of net sales 53.0 % 55.1 % Aerospace and Defense Electronics Net sales $ 628.7 $ 589.4 $ 39.3 Cost of sales $ 400.9 $ 395.1 $ 5.8 Cost of sales % of net sales 63.8 % 67.0 % Engineered Systems Net sales $ 405.8 $ 416.3 $ (10.5) Cost of sales $ 332.5 $ 337.6 $ (5.1) Cost of sales % of net sales 81.9 % 81.1 % Total Company Net sales $ 4,614.3 $ 3,086.2 $ 1,528.1 Cost of sales $ 2,772.9 $ 1,905.3 $ 867.6 Cost of sales % of net sales 60.1 % 61.7 % We reported net sales of $4,614.3 million in 2021, compared with net sales of $3,086.2 million for 2020, an increase of 49.5%.
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Net income increased 10.8% to $445.3 million ($10.05 per diluted share) in 2021, compared with net income of $401.9 million ($10.62 per diluted share) in 2020. Total year 2021 net sales included $1,273.6 million in incremental net sales from the acquisition of FLIR.
Removed
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.
Removed
Total year 2021 also included $39.0 million of acquired intangible asset amortization expense for acquisitions completed in prior periods. Total year 2020 included pretax charges of $72.1 million which included $38.8 million in acquired intangible asset amortization expense and $33.3 million in severance, facility consolidation and other costs.
Removed
Net income for 2021 and 2020 also included net discrete tax benefits of $34.7 million and $34.6 million, respectively. Net sales The increase in net sales in 2021, compared with 2020, reflected higher net sales in each segment except the Engineered Systems segment.
Removed
Total year 2021 also included net sales from the acquisition of FLIR in the Digital Imaging segment, as well as organic sales growth. Sales under contracts with the U.S. Government were approximately 26% of net sales in both 2021 and in 2020.
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Sales to international customers represented approximately 47% of net sales in 2021 and 45% of net sales in 2020. Cost of Sales Cost of sales increased by $867.6 million in 2021, compared with 2020, which primarily reflected the impact of higher net sales and $106.4 million in acquired inventory step-up expense from the acquisition of FLIR.
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Cost of sales as a percentage of net sales for 2021 was 60.1%, compared with 61.7% for 2020.
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The lower cost of sales percentage in 2021, primarily reflects the impact of the FLIR acquisition which carries a lower cost of sales percentage than the other Teledyne businesses, partially offset by the impact of acquired inventory step-up expense from the acquisition of FLIR.
Removed
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.
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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.
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For 2021, we recorded a total of $20.0 million in stock option expense, of which $6.1 million was recorded within corporate 25 Table of Contents expense and $13.9 million was recorded in the operating segment results.
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For 2020, we recorded a total of $24.7 million in stock option expense, of which $7.2 million was recorded within corporate expense and $17.5 million was recorded in the operating segment results. Selling, general and administrative expenses as a percentage of net sales was 23.2% for 2021, compared with 21.5% for 2020.
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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.
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Pension Service Expense Pension service expense is included in both cost of sales and selling, general and administrative expense. Pension service expense in 2021 was $10.6 million compared with $10.4 million in 2020. Operating Income Operating income for 2021 was $624.3 million, compared with $480.1 million for 2020, an increase of 30.0%.
Removed
The increase in operating income primarily reflected higher operating income in each segment except the Engineered Systems segment. Corporate expense was $136.8 million in 2021 compared with $56.8 million and included $77.1 million in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition in 2021.
Removed
Operating income in 2021 and 2020 included charges of $26.4 million and $33.3 million, respectively, primarily related to severance, facility consolidation and other costs. Of these amounts, severance and facility consolidation expense totaled $26.4 million in 2021 and $20.8 million in 2020.
Removed
The incremental operating income included in the results for 2021 from the FLIR acquisitions was $80.4 million, which included $242.6 million of acquisition-related transaction and purchase accounting expenses. Interest Expense, Interest Income, Non-Service Retirement Benefit Income and Other Expense Interest expense, including credit facility fees and other bank charges, was $104.8 million in 2021, compared with $15.8 million in 2020.
Removed
The 2021 amount primarily reflected interest and debt expense on the debt incurred to fund the cash portion of the FLIR acquisition, which included $30.6 million in bridge loan and debt extinguishment fees. Interest income was less than $1.0 million in both 2021 and 2020. Non-service retirement benefit income was $11.2 million in 2021, compared with $12.1 million in 2020.
Removed
Other income and expense was income of $2.5 million for 2021, compared with expense of $7.2 million in 2020. The 2020 amount reflected higher foreign currency translation losses. Income Taxes The Company’s effective tax rate for 2021 was 16.6%, compared with 14.4% for 2020.
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For 2021, net discrete income tax benefits were $34.7 million, which included an income tax benefit of $18.2 million primarily related to the resolution of certain FLIR tax reserves and a $13.1 million income tax benefit related to share-based accounting.
Removed
For 2020, net discrete income tax benefits were $34.6 million, which included a $20.9 million income tax benefit related to share-based accounting, $9.8 million in income tax benefit related to U.S. export sales, U.S. research credits and other items.
Removed
Excluding the net discrete income tax benefits in both years, the effective tax rates would have been 23.1% for 2021 and 21.8% for 2020. 26 Table of Contents 2020 compared with 2019 Net sales (dollars in millions) 2020 2019 % Change Digital Imaging $ 986.0 $ 992.9 (0.7) % Instrumentation 1,094.5 1,105.1 (1.0) % Aerospace and Defense Electronics 589.4 690.1 (14.6) % Engineered Systems 416.3 375.5 10.9 % Total sales $ 3,086.2 $ 3,163.6 (2.4) % Results of operations (dollars in millions) 2020 2019 % Change Digital Imaging $ 192.8 $ 176.5 9.2 % Instrumentation 213.2 200.4 6.4 % Aerospace and Defense Electronics 80.8 143.4 (43.7) % Engineered Systems 50.1 36.5 37.3 % Corporate expense (56.8) (65.1) (12.7) % Operating income 480.1 491.7 (2.4) % Interest and debt expense, net (15.3) (21.0) (27.1) % Non-service retirement benefit income 12.1 8.0 51.3 % Other expense, net (7.2) (5.0) 44.0 % Income before income taxes 469.7 473.7 (0.8) % Provision for income taxes 67.8 71.4 (5.0) % Net income $ 401.9 $ 402.3 (0.1) % Net sales and cost of sales by segment and total company (dollars in millions): 2020 2019 Change Digital Imaging Net sales $ 986.0 $ 992.9 $ (6.9) Cost of sales $ 569.2 $ 580.6 $ (11.4) Cost of sales % of net sales 57.7 % 58.5 % Instrumentation Net sales $ 1,094.5 $ 1,105.1 $ (10.6) Cost of sales $ 603.4 $ 612.8 $ (9.4) Cost of sales % of net sales 55.1 % 55.5 % Aerospace and Defense Electronics Net sales $ 589.4 $ 690.1 $ (100.7) Cost of sales $ 395.1 $ 414.7 $ (19.6) Cost of sales % of net sales 67.0 % 60.1 % Engineered Systems Net sales $ 416.3 $ 375.5 $ 40.8 Cost of sales $ 337.6 $ 312.2 $ 25.4 Cost of sales % of net sales 81.1 % 83.1 % Total Company Net sales $ 3,086.2 $ 3,163.6 $ (77.4) Cost of sales $ 1,905.3 $ 1,920.3 $ (15.0) Cost of sales % of net sales 61.7 % 60.7 % 27 Table of Contents We reported net sales of $3,086.2 million in 2020, compared with net sales of $3,163.6 million for 2019, a decrease of 2.4%.
Removed
Net income was $401.9 million ($10.62 per diluted share) in 2020, compared with net income of $402.3 million ($10.73 per diluted share) in 2019, a decrease of 0.1%. Total year 2020 and 2019 reflected pretax charges totaling $33.3 million and $8.8 million, respectively, primarily in severance, facility consolidation, acquisition and certain changes in contract cost estimates.
Removed
Net income for 2020 and 2019 also included net discrete tax benefits of $34.6 million and $26.1 million, respectively. Net sales The decrease in net sales in 2020, compared with 2019, reflected lower net sales in each segment except the Engineered Systems segment. Net sales in 2020 included $68.9 million in incremental net sales from recent acquisitions.
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Sales under contracts with the U.S. Government were approximately 26% of net sales in 2020 and 24% of net sales in 2019. Sales to international customers represented approximately 45% of net sales in 2020 and 44% of net sales in 2019.
Removed
Cost of Sales Cost of sales decreased by $15.0 million in 2020, compared with 2019, which primarily reflected the impact of lower net sales, partially offset by higher severance and facility consolidation expense. Cost of sales as a percentage of net sales for 2020 was 61.7%, compared with 60.7% for 2019.
Removed
Selling, general and administrative expenses Selling, general and administrative expenses, including research and development expense, were lower in 2020, compared with 2019. The decrease primarily reflected the impact of lower net sales. Corporate administrative expense in 2020 was $56.8 million, compared with $65.1 million in 2019. The lower 2020 amount primarily reflected lower compensation expense.
Removed
For 2020, we recorded a total of $24.7 million in stock option expense, of which $7.2 million was recorded within corporate expense and $17.5 million was recorded in the operating segment results.
Removed
For 2019, we recorded a total of $26.1 million in stock option expense, of which $9.7 million was recorded within corporate expense and $16.4 million was recorded in the operating segment results. Selling, general and administrative expenses as a percentage of net sales was 21.5% for 2020, compared with 22.6% for 2019.
Removed
Acquired Intangible Asset Amortization Acquired intangible asset amortization for 2020 was $38.8 million, compared with $36.5 million for 2019. Pension Service Expense Pension service expense is included in both cost of sales and selling, general and administrative expense. Pension service expense in 2020 was $10.4 million compared with $9.4 million in 2019.
Removed
Operating Income Operating income for 2020 was $480.1 million, compared with $491.7 million for 2019, a decrease of 2.4%. The decrease in operating income primarily reflected lower operating income in the Aerospace and Defense Electronics segment, partially offset by higher operating income in our other three segments.
Removed
Operating income in 2020 and 2019 included charges of $33.3 million and $8.8 million, respectively, primarily related to severance, facility consolidation and acquisition expense and certain changes in contract cost estimates. Of these amounts, severance and facility consolidation expense totaled $20.8 million in 2020 and $3.2 million in 2019.
Removed
The incremental operating income included in the results for 2020 from acquisitions was $4.1 million. Interest Expense, Interest Income, Non-Service Retirement Benefit Income and Other Expense Interest expense, including credit facility fees and other bank charges, was $15.8 million in 2020 compared with $22.0 million in 2019 and reflected the impact of lower average debt levels in 2020.
Removed
Interest income was $0.5 million in 2020 and $1.0 million in 2019. Non-service retirement benefit income was $12.1 million in 2020, compared with $8.0 million in 2019. Other expense was $7.2 million for 2020, compared with expense of $5.0 million in 2019 and reflected higher foreign currency translation losses.
Removed
Income Taxes The Company’s effective tax rate for 2020 was 14.4%, compared with 15.1% for 2019. For 2020, net discrete income tax benefits were $34.6 million, which included a $20.9 million income tax benefit related to share-based accounting, $9.8 million primarily related to U.S. export sales, U.S. research credits and other items.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 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.”
Biggest changeWe assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or otherwise. 33 Table of Contents 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.
Added
Item 7a. Market Risk , Note 1 and Note 1 4 for additional discussion around our derivative instruments and hedging activities. To date, we have not been materially impacted by the conflict in Israel and its effect on neighboring regions. We do not have material assets in Israel.
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Our total sales from Israel in 2023 and 2022 was less than 1.0% of total net sales, respectively. See Item 1a. Risk Factors for additional discussion.
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As part of a continuing effort to reduce costs and improve operating performance, we may take and have taken actions to consolidate and relocate certain facilities and reduce headcount across various businesses, reducing our exposure to weaker end markets. We continue to seek cost reductions in our businesses.
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For 2023, 2022 and 2021, we recorded $12.0 million of costs, $0.5 million of benefits and $26.4 million of costs, respectively, related to these actions, with the majority of the costs included within selling, general and administrative expense within the Digital Imaging segment. At December 31, 2023, $2.9 million remains to be paid related to actions taken in 2023.
Added
In 2022, we, recorded a net benefit of $0.5 million, which related to $3.5 million of costs related to headcount or facility consolidation costs, partially offset by $4.0 million of income related to the favorable resolution of a facility consolidation charge within the Digital Imaging segment.
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Recent Acquisitions Consistent with our strategy, we completed two acquisitions each in 2023 and in 2022. The financial results of these acquisitions have been included since the respective date of each acquisition. Our 2023 acquisitions were within the Digital Imaging and Instrumentation segments, and both acquisitions in 2022 were part of the Digital Imaging segment.
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See Note 3 for additional information about our recent business acquisitions. Selected Consolidated Operating Results Our fiscal year is determined based on a 52- or 53-week convention ending on the Sunday nearest to December 31.
Added
Fiscal years 2023 and 2022 each contained 52 weeks. 2023 2022 $ Change % Change Net sales $ 5,635.5 $ 5,458.6 $ 176.9 3.2 % Costs and expenses Cost of sales 3,196.1 3,128.3 67.8 2.2 % Selling, general and administrative 1,208.3 1,156.6 51.7 4.5 % Acquired intangible asset amortization 196.7 201.7 (5.0) (2.5) % Total costs and expenses 4,601.1 4,486.6 114.5 2.6 % Operating income (loss) 1,034.4 972.0 62.4 6.4 % Net income (loss) attributable to Teledyne $ 885.7 $ 788.6 $ 97.1 12.3 % Diluted earnings per common share $ 18.49 $ 16.53 $ 1.96 11.9 % Total year 2023 net sales included $99.8 million in incremental net sales from current and prior year acquisitions. 22 Table of Contents Net income for 2023 and 2022 also included net discrete tax benefits of $137.5 million and $86.7 million, respectively.
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Consolidated Results of Operations Our businesses are aligned in four segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems.
Added
Additional financial information about our business segments can be found in Note 4 . 2023 compared with 2022 Net sales (dollars in millions) 2023 2022 $ Change % Change Digital Imaging $ 3,144.1 $ 3,110.9 $ 33.2 1.1 % Instrumentation 1,326.2 1,254.0 72.2 5.8 % Aerospace and Defense Electronics 726.5 682.4 44.1 6.5 % Engineered Systems 438.7 411.3 27.4 6.7 % Total net sales $ 5,635.5 $ 5,458.6 $ 176.9 3.2 % Results of operations (dollars in millions) 2023 2022 $ Change % Change Digital Imaging $ 517.4 $ 519.3 $ (1.9) (0.4) % Instrumentation 338.3 295.3 43.0 14.6 % Aerospace and Defense Electronics 199.6 184.1 15.5 8.4 % Engineered Systems 44.7 39.2 5.5 14.0 % Corporate expense (65.6) (65.9) 0.3 (0.5) % Operating income (loss) 1,034.4 972.0 62.4 6.4 % Interest and debt expense, net (77.3) (89.3) 12.0 (13.4) % Non-service retirement benefit income 12.4 11.4 1.0 8.8 % Gain (loss) on debt extinguishment 1.6 10.6 (9.0) (84.9) % Other income (expense), net (12.2) 3.4 (15.6) * Income (loss) before income taxes 958.9 908.1 50.8 5.6 % Provision (benefit) for income taxes 72.3 119.2 (46.9) (39.3) % Net income (loss) including noncontrolling interest 886.6 788.9 97.7 12.4 % Less: Net income (loss) attributable to noncontrolling interest 0.9 0.3 0.6 200.0 % Net income (loss) attributable to Teledyne $ 885.7 $ 788.6 $ 97.1 12.3 % * not meaningful Net Sales: Net sales increased across all business segments.
Added
Total year 2023 net sales included $99.8 million in incremental net sales from current and prior year acquisitions. Refer to the “Business Segment Operating Results” discussion later in this section for additional discussion of changes in net sales. Sales to international customers represented approximately 49% of net sales in 2023 and 47% of net sales in 2022.
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Approximately 25% and 25% of our total net sales 2023 and 2022, respectively, were derived from contracts with agencies of, or prime contractors to, the U.S. Government. Cost of Sales Cost of sales increased in 2023, primarily driven by the impact of higher net sales.
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Cost of sales as a percentage of net sales for 2023 was 56.7%, compared with 57.3% for 2022. Refer to the “Business Segment Operating Results” discussion later in this section for additional discussion of changes in cost of sales.
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Selling, General and Administrative Expenses Selling, general and administrative expenses, including research and development expense, were higher in 2023, primarily driven by higher net sales in 2023. Selling, general and administrative expenses as a percentage of net sales was 21.4% for 2023, compared with 21.2% for 2022. Corporate expense in 2023 was $65.6 million, compared with $65.9 million in 2022.
Added
Acquired Intangible Asset Amortization Acquired intangible asset amortization for 2023 was $196.7 million, compared with $201.7 million for 2022, primarily related to decreased expense within the Digital Imaging and Instrumentation segments. Operating Income Operating income increased in 2023 due to higher operating income in each segment except the Digital Imaging segment.
Added
Non-operating Income and Expenses Interest expense, including credit facility fees and other bank charges and net of interest income, was $77.3 million in 2023, compared with $89.3 million in 2022. The decrease was due primarily to reduced outstanding borrowings with lower weighted average interest rates compared to 2022.
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In 2023, the Company repurchased and retired $10.0 million of its Fixed 23 Table of Contents Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt.
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In 2022, the Company repurchased and retired $75.0 million of its Fixed Rate Senior Notes due August 2030 and April 2031, recording a $10.6 million non-cash gain on the extinguishment of this debt.
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The other expense, net in other income and expense, net, in 2023 was driven primarily by foreign exchange losses, net as well as higher expense from deferred compensation plan activity, compared to the 2022 other income, net amount, which included foreign exchange gains, net as well as higher income from deferred compensation plan activity.
Added
Income Taxes The income tax provision considers income, permanent items, tax credits, and various statutory tax rates. Both the current and prior year discrete impact includes the resolution of uncertain tax positions which are primarily acquisition related and tax benefits on stock-based compensation. See Note 9 for further information regarding our income taxes.
Added
(Dollars in millions) 2023 2022 Provision (benefit) for income taxes $ 72.3 $ 119.2 Discrete event expense (benefit) $ 137.5 $ 86.7 Provision (benefit) for income taxes without discrete event expense (benefit) $ 209.8 $ 205.9 Income (loss) before income taxes $ 958.9 $ 908.1 Effective tax rate 7.5% 13.1% Effective tax rate without discrete events 21.9% 22.7% Business Segment Operating Results The following discussion of our four segments should be read in conjunction with Note 4.
Added
Digital Imaging (Dollars in millions) 2023 2022 $ Change % Change Net sales $ 3,144.1 $ 3,110.9 $ 33.2 1.1% Cost of sales $ 1,711.4 $ 1,705.6 $ 5.8 0.3% Selling, general and administrative expenses $ 733.6 $ 702.3 $ 31.3 4.5% Acquired intangible asset amortization $ 181.7 $ 183.7 $ (2.0) (1.1)% Operating income $ 517.4 $ 519.3 $ (1.9) (0.4)% Cost of sales % of net sales 54.4 % 54.8 % (0.4)% Selling, general and administrative expenses % of net sales 23.3 % 22.6 % 0.7% Acquired intangible asset amortization % of net sales 5.8 % 5.9 % (0.1)% Operating income % of net sales 16.5 % 16.7 % (0.2)% International sales % of net sales 55.3 % 54.5 % 0.8% U.S.
Added
Government sales % of net sales 18.2 % 19.9 % (1.7)% 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.
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It also includes our customer- and Company-sponsored applied research center which benefits government programs and commercial businesses. 2023 compared with 2022 Our Digital Imaging segment net sales for 2023 increased 1.1%, compared with 2022. Operating income for 2023 decreased 0.4%, compared with 2022.
Added
Total year 2023 net sales included $97.3 million in incremental net sales from current and prior year acquisitions as well as organic sales growth from X-ray products, infrared imaging detectors and surveillance systems, offset by lower sales of unmanned air and ground systems for defense applications, MEMS, and commercial maritime and commercial infrared products.
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The decrease in operating income in 2023 reflected the impact of higher employee severance and facility consolidation costs, which included $9.4 million of expense in 2023 compared with $1.9 million of income in 2022. The 2022 severance and facility consolidation costs amount included $4.0 million of income related to the favorable resolution of a facility consolidation charge in 2022.
Added
Cost of sales for 2023 increased compared with 2022, and reflected the impact of higher net sales, partially offset by product mix, including lower sales of unmanned ground systems offset by sales of higher margin products. The cost of sales percentage in 2023 decreased compared with 2022 and reflected the impact of product mix.
Added
Selling, general and administrative expenses for 2023 increased 4.5% compared with 2022 and reflected the impact of higher net sales and higher severance and facility consolidation expense.
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The selling, general and administrative expense percentage increased in 2023 compared with 2022, driven by higher employee compensation costs as well as higher employee severance and facility consolidation costs. 24 Table of Contents Instrumentation (Dollars in millions) 2023 2022 $ Change % Change Net sales $ 1,326.2 $ 1,254.0 $ 72.2 5.8% Cost of sales $ 692.6 $ 668.7 $ 23.9 3.6% Selling, general and administrative expenses $ 281.1 $ 272.8 $ 8.3 3.0% Acquired intangible asset amortization $ 14.2 $ 17.2 $ (3.0) (17.4)% Operating income $ 338.3 $ 295.3 $ 43.0 14.6% Cost of sales % of net sales 52.2 % 53.3 % (1.1)% Selling, general and administrative expenses % of net sales 21.2 % 21.8 % (0.6)% Acquired intangible asset amortization % of net sales 1.1 % 1.4 % (0.3)% Operating income % of net sales 25.5 % 23.5 % 2.0% International sales % of net sales 57.3 % 55.8 % 1.5% U.S.
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Government sales % of net sales 7.2 % 8.6 % (1.4)% Our Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other applications, as well as electronic test and measurement applications.
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We also provide power and communications connectivity devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments. 2023 compared with 2022 Our Instrumentation segment net sales for 2023 increased 5.8%, compared with 2022. Operating income for 2023 increased 14.6%, compared with 2022.
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In 2023, net sales of marine instrumentation increased $69.0 million, and net sales of test and measurement instrumentation increased $10.1 million compared with 2022. Net sales of environmental instrumentation decreased $6.9 million compared with 2022. The increase in operating income in 2023 reflected the impact of higher net sales, improved product margins and lower acquired intangible asset amortization.
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Cost of sales increased in 2023, compared with 2022, and primarily reflected the impact of higher net sales. The cost of sales percentage decreased in 2023 compared with 2022 primarily driven by product mix and improved product margins. Selling, general and administrative expenses, including research and development expense increased in 2023 compared with 2022, primarily driven by higher net sales.
Added
Selling, general and administrative expenses for 2023, as a percentage of sales, decreased from 2022, primarily due to the impact of higher net sales while maintaining focus on cost control. Acquisition intangible asset amortization expense decreased primarily to lower intangible amortization for the test and measurement instrumentation product line, as certain historical acquisition intangibles became fully amortized in late 2022.
Added
Aerospace and Defense Electronics (Dollars in millions) 2023 2022 $ Change % Change Net sales $ 726.5 $ 682.4 $ 44.1 6.5% Cost of sales $ 424.6 $ 407.8 $ 16.8 4.1% Selling, general and administrative expenses $ 101.5 $ 89.7 $ 11.8 13.2% Acquired intangible asset amortization $ 0.8 $ 0.8 $ — —% Operating income $ 199.6 $ 184.1 $ 15.5 8.4% Cost of sales % of net sales 58.4 % 59.8 % (1.4)% Selling, general and administrative expenses % of net sales 14.0 % 13.1 % 0.9% Acquired intangible asset amortization % of net sales 0.1 % 0.1 % —% Operating income % of net sales 27.5 % 27.0 % 0.5% International sales % of net sales 32.3 % 27.5 % 4.8% U.S.
Added
Government sales % of net sales 45.5 % 39.0 % 6.5% 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, components and subsystems for wireless and satellite communications and general aviation batteries. 2023 compared with 2022 Our Aerospace and Defense Electronics segment net sales for 2023 increased 6.5%, compared with 2022.
Added
Operating income for 2023 increased 8.4%, compared with 2022. The 2023 net sales increase compared with 2022 reflected $25.2 million of higher sales for aerospace electronics and 25 Table of Contents $18.9 million of higher sales for defense electronics.
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The increase in operating income for 2023 primarily reflected the impact of higher net sales and favorable product mix, partially offset by higher research and development expense. Cost of sales for 2023 increased compared with 2022 and reflected the impact of higher net sales partially offset by favorable product mix.
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Cost of sales as a percentage of net sales for 2023 decreased compared with 2022 and primarily reflected product mix, including the increased sales of aerospace electronics which carry a higher margin than most defense electronics products.
Added
Selling, general and administrative expenses, including research and development expense, increased in 2023 compared with 2022 and included $3.2 million of higher research and development expense in 2023. The higher research and development expense primarily reflected higher spending for aerospace electronics.
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The selling, general and administrative expense percentage in 2023 increased compared with 2022 and reflected the higher research and development expense.
Added
Engineered Systems (Dollars in millions) 2023 2022 $ Change % Change Net sales $ 438.7 $ 411.3 $ 27.4 6.7% Cost of sales $ 367.5 $ 346.2 $ 21.3 6.2% Selling, general and administrative expenses $ 26.5 $ 25.9 $ 0.6 2.3% Operating income $ 44.7 $ 39.2 $ 5.5 14.0 Cost of sales % of net sales 83.8 % 84.2 % (0.4) % Selling, general and administrative expenses % of net sales 6.0 % 6.3 % (0.3) % Operating income % of net sales 10.2 % 9.5 % 0.7 % International sales % of net sales 1.9 % 1.1 % 0.8 % U.S.
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Government sales % of net sales 87.7 % 89.1 % (1.4) % 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. 2023 compared with 2022 Our Engineered Systems segment net sales for 2023 increased 6.7%, compared with 2022.
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Operating income for 2023 increased 14.0%, compared with 2022. The 2023 net sales increase primarily reflected $17.9 million of higher sales for engineered products and $9.5 million of higher sales for energy systems.
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The higher net sales for engineered products primarily reflected increased sales from space and electronic manufacturing services programs products, partially offset by decreased sales in missile defense, maritime, and other manufacturing programs. Operating income in 2023 primarily reflected the impact of favorable product mix, primarily driven by higher electronic manufacturing services products.
Added
Cost of sales for 2023 increased compared with 2022, and primarily reflected the impact of higher net sales. Cost of sales as a percentage of net sales for 2023 decreased compared with 2022. Selling, general and administrative expenses in 2023, including research and development and bid and proposal expense, increased slightly compared with 2022.
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The selling, general and administrative expense as a percentage of net sales decreased slightly compared with 2022. 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.
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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.
Added
We have no off-balance sheet financing arrangements that incorporate the use of special purpose or unconsolidated entities. Cash and Cash Equivalents Cash and cash equivalents totaled $648.3 million at December 31, 2023, of which $369.1 million was held by foreign subsidiaries. Cash equivalents consist of highly liquid money-market mutual funds with maturities of three months or less when purchased.
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Long-term Debt Long-term debt, including unamortized debt issuance costs was $3,244.9 million at December 31, 2023 compared to $3,920.6 million at January 1, 2023. During 2023, we repaid $125.0 million of amount on its credit facility, the $300.0 million Fixed Rate Senior Notes due April 2023, and the remaining $245.0 million on our term loan due May 2026.
Added
We also 26 Table of Contents repurchased and retired $10.0 million of our Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt. At December 31, 2023, we had $41.9 million in outstanding letters of credit.
Added
The credit agreement and term loans require us to comply with various financial and operating covenants and at December 31, 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.
Added
Currently, we do not believe our ability to undertake additional debt financing, if needed, is reasonably likely to be materially impacted by debt restrictions under our credit agreements. Available borrowing capacity under the $1.15 billion credit facility, which is reduced by borrowings and $20.9 million in outstanding letters of credit, was $1,129.1 million at December 31, 2023.
Added
See Note 8 for additional information regarding our credit facility and long-term debt.
Added
Contractual Obligations The following table summarizes our expected cash outflows resulting from financial contracts and commitments at December 31, 2023: Contractual obligations (in millions): 2024 2025 2026 2027 2028 After 2029 Total Debt obligations $ 600.1 $ 0.2 $ 450.2 $ 0.2 $ 700.1 $ 1,515.2 $ 3,266.0 Interest expense (a) 73.1 65.1 59.7 57.9 44.8 105.2 405.8 Operating lease obligations (b) 36.4 33.2 27.3 22.3 15.9 39.4 174.5 Purchase obligations (c) 269.5 28.9 2.2 0.8 0.8 1.8 304.0 Total $ 979.1 $ 127.4 $ 539.4 $ 81.2 $ 761.6 $ 1,661.6 $ 4,150.3 (a) Interest expense related to the credit facility, including facility fees, is assumed to accrue at the rates in effect at year-end 2023 and is assumed to be paid at the end of each quarter with the final payment in March 2026 when the credit facility expires.
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(b) Includes imputed interest and the short-term portion of lease obligations.
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(c) Purchase obligations generally include contractual obligations for the purchase of goods and services and capital commitments that are enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction.
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Unrecognized tax benefits of $96.5 million and accrued interest and penalties on these tax matters of $36.9 million are not included in the table above.
Added
The remaining unrecognized tax benefits and accrued interest and penalties are not included in the table above because $28.9 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.
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At December 31, 2023, we were not required, and accordingly are not planning, to make any cash contributions to the domestic qualified pension plans for 2024. Our minimum funding requirements after 2023 as set forth by the Employee Retirement Income Security Act, are dependent on several factors.
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Estimates beyond 2024 have not been provided due to the significant uncertainty of these amounts, which are subject to change until the Company’s pension assumptions can be updated at the appropriate times. In addition, certain pension contributions are eligible for future recovery through the pricing of products and services to the U.S.
Added
Government under certain government contracts, therefore, future cash contributions are not necessarily indicative of the impact these contributions may have on our liquidity. We also have payments due under our other postretirement benefit plans. These plans are not required to be funded in advance but are pay as you go. See further discussion in Note 10 .
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We monitor and manage our defined benefit pension plans obligation and may take additional actions to manage risk in the future. Operating Activities Net cash provided by operating activities was $836.1 million and $486.8 million in 2023 and 2022, respectively.
Added
The higher cash provided by operating activities in 2023, compared with 2022 primarily resulted from a payment of $296.4 million to the Swedish Tax Authority in the first quarter of 2022, related to a disputed pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary in Sweden as well as lower inventory purchases and stronger accounts receivable collections in 2023 compared with 2022.
Added
These changes were partially offset by higher accounts payable and income tax payments in 2023 as compared with 2022.
Added
Free cash flow (cash provided by operating activities less capital expenditures) and adjusted free cash flow (both non-GAAP measures) were as follows (in millions): Free Cash Flow(a) 2023 2022 Cash provided by (used in) operating activities $ 836.1 $ 486.8 Less: Capital expenditures for property, plant and equipment (114.9) (92.6) Free cash flow 721.2 394.2 Add back: Payment for acquisition-related tax matter — 296.4 Adjusted free cash flow $ 721.2 $ 690.6 27 Table of Contents (a) We define free cash flow as cash provided by operating activities (a measure prescribed by GAAP) less capital expenditures for property, plant and equipment.
Added
Adjusted free cash flow eliminates the impact of cash paid for transaction related expenses for the FLIR acquisition on a net of tax basis as well as the payment of a pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary in Sweden.
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We believe that this supplemental non-GAAP information is useful to assist management and the investment community in analyzing the company’s ability to generate cash flow. Investing Activities Net cash used in investing activities was $190.3 million and $175.4 million for 2023 and 2022, respectively.
Added
Investing activities used cash for acquisitions and other investments of $77.7 million and $99.6 million in 2023 and 2022, respectively (see “Recent Acquisitions”). We funded the acquisitions from borrowings under our credit facilities and cash on hand. Cash flows relating to investing activities for capital expenditures.
Added
Capital expenditures (in millions): 2023 2022 Digital Imaging $ 78.2 $ 63.9 Instrumentation 14.0 9.3 Aerospace and Defense Electronics 10.9 8.0 Engineered Systems 3.4 5.3 Corporate 8.4 6.1 $ 114.9 $ 92.6 During 2024, we plan to invest approximately $105 million in capital expenditures, principally to upgrade facilities and manufacturing equipment.
Added
Financing Activities Financing activities reflected net payments from debt of $678.9 million in 2023 and $174.8 million in 2022. Fiscal years 2023 and 2022 reflect proceeds from the exercise of stock options of $45.4 million and $23.6 million, respectively.
Added
During 2023, we repaid $125.0 million of amounts outstanding on its credit facility, the $300.0 million Fixed Rate Senior Notes due April 2023, and the remaining $245.0 million on its term loan due May 2026.
Added
We also repurchased and retired $10.0 million of its Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt. During 2022, we repaid $185.0 million of debt. We made $110.0 million of floating rate debt payments on its term loan due May 2026.
Added
We also repurchased and retired $75.0 million of its Fixed Rate Senior Notes due August 2030 and April 2031, recording a $10.6 million non-cash gain on the extinguishment of this debt.
Added
Other Matters Income Taxes Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.
Added
The Company continually evaluates its global cash needs and has historically asserted that most of its unremitted foreign earnings are permanently reinvested and did not generally record deferred taxes on such amounts.
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During 2022, the Company determined that it could no longer make the assertion foreign earnings are permanently reinvested, as cash from most foreign subsidiaries may be remitted without incurring additional U.S. federal income tax.
Added
As a result, the Company changed its indefinite reinvestment assertion of unremitted earnings and certain other aspects of outside basis differences on a majority of its foreign subsidiaries. The Company continues to make an indefinite reinvestment assertion on the historic excess of the financial reporting bases over tax bases in its material foreign subsidiaries in Canada.
Added
The unremitted earnings of the Company’s Canadian foreign subsidiaries held for indefinite reinvestment are used to finance Canadian operations and investments. The Company estimate that future cash generation from non-Canadian operations will be sufficient to meet future domestic cash requirements.

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