What changed in this filing

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Item 1. Business

2022-02-25 compared with 2021-02-26 · 112 added, 64 removed, 120 unchanged (59% of the section changed)

Teledyne Technologies Incorporated (“Teledyne” or the “Company”), a Delaware company that spun off

from Allegheny Technologies Incorporated as an independent company in 1999, 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.

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.

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.

( “FLIR”), we further evolved into a global sensing and decision-support technology company:

providing specialty sensors, cameras, instrumentation, algorithms and software across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land and air domains.

We differentiate ourselves from many of our direct competitors by having a customer and Company-sponsored applied research center that augments our product development expertise.

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.

For discussion on our business and strategy for 2019 and 2018 see our Annual Report on Form 10-K for the fiscal year ended December 29, 2019;

for a discussion of our 2019 acquisitions, see Item 7.

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.

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

On January 4, 2021, we announced together with FLIR Systems, Inc.

(“FLIR”) that the companies have entered into a definitive merger agreement under which we will acquire FLIR in a cash and stock transaction valued at approximately $8.0 billion.

Under the terms of the merger agreement, FLIR stockholders will receive $28.00 per share in cash and 0.0718 shares of our common stock for each FLIR share, which implies a total purchase price of approximately $56.00 per FLIR share based on the 5-day volume weighted average price of our stock as of December 31, 2020.

The transaction is expected to close in the middle of 2021 subject to the receipt of required regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (the “HSR Act”) approvals of our stockholders and FLIR stockholders and other customary closing conditions.

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, Teledyne share issuances of $3.9 billion, and the assumption of FLIR debt of $0.5 billion.

FLIR stockholders received $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share, and Teledyne issued approximately 9.5 million shares at $409.41 per share.

See Note 10 to these Notes to Consolidated Financial Statements for information regarding financing activities undertaken in connection with the FLIR acquisition.

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.

FLIR is part of the Digital Imaging segment.

Our Business Segments

Our businesses are aligned in four segments:

Instrumentation, Digital Imaging, Aerospace and Defense Electronics and Engineered Systems.

Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems.

Financial information about our business segments can be found in Note 12 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for the fiscal year ended January 2, 2022 (this “Form 10-K”).

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.

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.

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.

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.

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.

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.

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.

We provide solutions for threat protection, military maneuver and force protection, border controls and homeland security, law enforcement, public safety, and commercial applications worldwide.

Instrumentation Segment

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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.

Our Instrumentation segment represented approximately 35% of our sales for 2020.

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.

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We believe our test and measurement products provide unique, world-class capabilities that enable the designers of complex electronic systems in many industry sectors to bring their products to market reliably and quickly.

Our customers use our equipment in the design, development, manufacture, installation, deployment and operation of electronics equipment in broad range of industry end markets, including aerospace and defense, internet infrastructure, automotive, industrial, computer and semiconductor, consumer electronics and power electronics.

We develop, manufacture, sell and license high-performance oscilloscopes, high-speed protocol analyzers, and related

test and measurement solutions for a wide range of industries.

Our oscilloscopes are used by designers and engineers to measure and analyze complex electronic signals to develop high-performance systems, validate electronic designs, and improve time to market.

We also make high-speed, high-resolution modular analog-to-digital conversion systems for applications including test and measurement, medical imaging, Light Detection and Ranging, and software defined radio.

Design and test engineers use our protocol analysis solutions to monitor accurately and reliably high data-rate communication interfaces and diagnose operational problems in a wide range of systems and devices to ensure that they comply with industry standards, including the area of cloud computing and networks.

Our product lines, along with our leadership in USB technology, provide a unique base to service the mobile, internet of things, automotive and consumer electronics test market.

Our most recent acquisition of OakGate Technology, Inc.

(“OakGate”) during 2020 provides protocol validation and test tools for disk drives, both spinning and solid state, and servers used for cloud-based storage.

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.

We develop, manufacture, sell and license high-performance oscilloscopes, high-speed protocol analyzers, and related test and measurement solutions for a wide range of industries.

Our oscilloscopes are used by designers and engineers to measure and analyze complex electronic signals to develop high-performance systems, validate high data-rate communication interfaces, qualify their electronic designs, and improve time to market.

We also make high-speed, high-resolution modular analog-to-digital conversion systems for applications including test and measurement, scientific instruments, medical imaging, and distributed sensing systems.

Our leadership in USB and video technologies provides a unique base to service the mobile, internet of things, automotive and consumer electronics test markets.

In 2021, Teledyne introduced the CrossSync™ PHY interposers and software options, enabling the first-ever link between an oscilloscope and a protocol analyzer to allow engineers to get a complete picture when testing the PCI Express interface standard.

Our 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 torque sensors are also used in other markets, including automotive and power tools.

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, defense and security and medical applications, among others.

This segment also includes our sponsored and centralized research laboratories.

Our Digital Imaging segment represented approximately 32% of our sales for 2020.

Through this segment, we design, develop and manufacture image sensors and digital cameras for use in industrial, scientific, academic research and medical applications and hardware and software for image processing and automatic data collection in industrial, academic research and medical applications.

We also develop high-resolution, low-dose X-Ray sensors for medical, dental and industrial applications.

We receive funding from the Defense Advanced Research Products Agency and various other U.S.

Department of Defense funding agencies, and we collaborate with researchers at universities and national laboratories to stay at the forefront of emerging technologies.

Through our 2019 acquisition of the scientific imaging businesses of Roper Technologies, Inc., we manufacture state-of-the-art cameras, spectrographs and optics for advanced research in physical sciences, life sciences research and spectroscopy imaging for applications and markets that include materials analysis, quantum technology and cell biology imaging using fluorescence and chemiluminescence.

Aerospace and Defense Electronics Segment

Our Aerospace and Defense Electronics segment provides sophisticated electronic components and subsystems, data acquisition and communications components and equipment, harsh environment interconnects, general aviation batteries and other components for a variety of commercial and defense applications that require high performance and high reliability.

Such applications include aircraft, radar, electronic warfare, weapon systems, space, wireless and satellite communications and terminals and test equipment.

Our Aerospace and Defense Electronics segment represented approximately 19% of our sales for 2020.

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.

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This segment also designs and manufactures electrochemical energy systems and manufactures specialty electronics for demanding military applications.

Our Engineered Systems segment represented approximately 14% of our sales for 2020.

Our core business base, includes NASA, the U.S.

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.

Teledyne exited the cruise missile turbine engine business in the first quarter of 2021.

We have a large number of customers in the various industries we serve.

No commercial customer in 2020 or 2019 accounted for more than 3.0% of total net sales or more than 10% of any segments net sales.

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.

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 sales to international customers during 2020 were made to customers in 22 foreign countries.

In 2020, the top five countries for sales to international customers, ranked by sales, volume were China, the United Kingdom, Germany, Japan and France and represented approximately 20% of our total net sales.

Approximately 26% and 24% of our total net sales for 2020 and 2019, respectively, were derived from contracts with agencies of, and prime contractors to, the U.S.

Approximately 90% of our net sales to international customers during 2021 were made to customers in 30 foreign countries.

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.

Information on our sales to the U.S.

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2021 2020 2019

Instrumentation $ 80.6 $ 80.4 $ 68.3

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

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In 2021 and 2020, our largest program with the U.S.

Government was the Mission Operations and Integration contract with the NASA Marshall Space Flight Center, which represented 1.5% and 1.4% of our total net sales, respectively.

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.

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Government contracts are subject to termination by the U.S.

Government at its convenience, without identification of any default.

When contracts are terminated for convenience, we recover costs incurred or committed, settlement expenses and profit on work completed prior to termination.

Government at its convenience, without identification of any

When contracts are terminated for convenience, we can recover costs incurred or committed, settlement expenses and profit on work completed prior to termination.

We had no U.S.

Government contracts terminated for convenience in 2020, compared with three in 2019.

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.

Our total backlog of confirmed and funded orders was approximately $1,700.2 million at January 3, 2021, compared with $1,699.3 million at December 29, 2019.

We expect to fulfill more than 77% of such backlog of confirmed orders during 2021.

Raw Materials and Suppliers

Generally, our businesses have experienced minimal fluctuations in the supply of raw materials, but not without some price volatility.

While some of our businesses provide services, for those businesses that sell hardware and product, a portion of the value that we provide is labor-oriented, such as design, engineering, assembly and test activities.

In manufacturing our products, we use our own production capabilities and third-party suppliers and subcontractors, including international sources.

Some of the items we use for the manufacture of our products, including certain components for particular marine navigation applications, certain magnets and helix wire for our traveling wave tubes, certain infrared detectors substrates and certain ceramics and molding compounds used in our sonar systems, as well as certain scintillator materials used in the production of our X-Ray detectors, are purchased from limited or single sources, including international sources, due to technical capability, price and other factors.

At times we have experienced difficulty in procuring raw materials, components, sub-assemblies and other supplies required in our manufacturing processes due to shortages and supplier-imposed allocation of components.

We did not experience significant difficulty in obtaining raw materials and/or other supplies during 2020.

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.

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.

We leverage our existing supplier relationships and are not dependent on any one supplier for a material amount of our purchases.

Prices of certain key raw materials and electronic components are expected to fluctuate in the future.

We mitigate raw material cost increases with long-term supply agreements, customer price increases, and isolating the market driven raw material component of the products we buy.

We anticipate that supply chain constraints for some raw materials will continue in 2022.

However, we believe our short-term and long-term supplier actions position us well to mitigate and reduce the impact these factors may have on our businesses.

Our sales and marketing approach varies by segment and by products within our segments.

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We provide a broad range of precision measurement technologies for environmental monitoring and climate research.

Our sensors and instruments are deployed everywhere, from pole to pole, in space, on aircraft and drones, on land, on the sea surface, in the water column, and on the seafloor.

Our sensors and instruments are deployed everywhere, in space, on aircraft and drones, on land, on the sea surface, in the water column, and on the seafloor.

They operate around the clock, measuring greenhouse gases from space, precisely monitoring air and water quality throughout the world, and continuously profiling 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.

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.

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.

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.

Going forward, we will continue to evaluate our emission reduction goals, while at the same time providing the tools and technologies enabling environmental science and climatology across the globe.

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.

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.

The Audit Committee also oversees risk management, including the impact of climate change-related risks.

Human Capital

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Asia-Pacific Region 3% 38.5 7.2 53% 24% 23%

Employees are vital to the success of our innovation-driven growth strategy.

We are focused on effective attraction, development, and retention of employees through competitive compensation and benefits, workforce and management development, diversity and inclusion initiatives, succession planning, corporate culture and leadership quality.

We have a stable and long-tenured workforce.

In 2020, our average voluntary employee turnover (excluding reductions in force) was approximately 9%.

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.

We are focused on attracting, developing, and retaining employees through competitive compensation and benefits, workforce and management development, diversity and inclusion initiatives, succession planning, corporate culture and leadership quality.

In 2020, we formed a committee to oversee our equality, diversity and inclusion efforts.

We are committed to building a more diverse and inclusive workplace, and we actively monitor diversity metrics on a global basis.

We are piloting an anonymized review/resume redaction process and we expanded our recruitment sources to attract more diverse candidates.

We work with many outreach programs, including the National Society of Black Engineers and the Society of Women Engineers.

We also began working with INROADS, a non-profit organization that creates pathways to careers for ethnically diverse high school and college students across the country, to improve our access to diverse candidates.

We regularly review our policies, processes and practices to ensure that they promote inclusivity for all applicants and employees.

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.

Employee Well-Being

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.

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.

based employees have access to third-party counseling and mental health services at no cost to the employee when life events impact an employee.

Talent Acquisition

We appreciate the benefits of diversity and support programs increasing the inclusion of underrepresented and minority groups, including the enablement of persons with disabilities, and the advancement of women in professional fields, particularly in science, technology, engineering and math (“STEM”).

We work with various organizations to increase diversity in our pool of available candidates to fill our STEM-based and other hard-to-fill positions.

As part of our outreach and development efforts for women in the science, technology, and engineering fields, we have participated in the Women in Science and Engineering Conference for Girls in various locations in the U.S.

We have also been a consistent sponsor of the Young Woman Engineer of the Year Awards in the United Kingdom (“U.K.”).

This event helps young students, school leavers and degree students understand more about engineering by learning about day-to-day jobs and personal experiences.

It is also designed to encourage young talent to pursue a career in STEM.

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 with our Executive Chairman and President and Chief Executive Officer 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.

With the oversight of our Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary and our Vice President of Human Resources, our Equality, Diversity and Inclusion Committee has piloted an anonymized resume review process to evaluate the potential for name bias when reviewing potential candidates, expanded recruitment sources, and enhanced diversity training and awareness.

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.

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.

The database of courses, webinars, and certification programs has hundreds of targeted training programs on management, technical competencies, soft skills development, and compliance.

Available Information

Teledyne’s website is www.teledyne.com.

We make available on our website, free of charge, annual

reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file or furnish such material to the U.S.

We make available on our website, free of charge, annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file or furnish such material to the U.S.

Securities and Exchange Commission (the “SEC”) at www.sec.gov .

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Cibik, Senior Vice President, General Counsel, Chief Compliance Officer and Secretary, at Teledyne Technologies Incorporated, 1049 Camino Dos Rios, Thousand Oaks, California 91360-2362.

We have included our website addresses throughout this report as inactive textual references only.

The information contained on the websites referenced herein is not incorporated into this Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business