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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-26 · 207 added, 181 removed, 322 unchanged (55% of the section changed)

Risk Factors;

Cautionary Statement as to Forward-Looking Statements

The following discussion sets forth the material risk factors that could affect Teledyne’s financial condition and

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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.

Risks related to the pending acquisition of FLIR

On January 4, 2021, we announced our proposed acquisition of FLIR in a cash and stock transaction valued at approximately $8.0 billion (including net debt), which would make the acquisition our largest to date.

Risks related to the 2021 acquisition of FLIR

FLIR is our largest acquisition to date and our business could be adversely affected if we do not manage the business effectively or if we fail to realize the anticipated benefits of the acquisition.

On May 14, 2021, we acquired FLIR in a cash and stock transaction valued at approximately $8.1 billion (including net debt), our largest to date.

FLIR designs, develops, manufactures, markets, and distributes technologies that enhance perception and awareness.

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FLIR offers a diversified portfolio that serves a number of applications in government and defense, industrial, and commercial markets.

FLIR, headquartered in Wilsonville, Oregon, will be part of the Digital Imaging segment.

While many of the products made and markets served by FLIR are complementary to Teledyne, the acquisition of FLIR would expand the size of our Digital Imaging segment relative to our other segments.

FLIR is part of the Digital Imaging segment.

While many of the products made and markets served by FLIR are complementary to Teledyne, the acquisition of FLIR expanded the size of our Digital Imaging segment relative to our other segments.

For the 2021 fiscal year, Teledyne’s Digital Imaging segment constituted 52% of our net sales, compared to 32% for the 2020 fiscal year.

Continued innovation and research and development efforts will be required to maintain FLIR’s leadership position in imaging products.

There are numerous risk and uncertainties associated with the acquisition, including:

• Completion of the acquisition is subject to a number of conditions, some of which are outside of our control, and if any of these conditions are not satisfied or waived, the acquisition will not be completed.

Among these conditions are the approval by FLIR’s stockholders of the acquisition, the approval by our stockholders of the issuance of Teledyne stock in the acquisition and the receipt of certain regulatory approvals, including the expiration or termination of any applicable waiting period (and any extension thereof) under the HSR Act and under the antitrust laws of certain non-U.S.

jurisdictions.

There are numerous risk and uncertainties associated with the acquisition and its integration, including:

• Teledyne’s and FLIR’s existing business relationships with third parties may be disrupted due to uncertainty associated with the acquisition, which could have an adverse effect on the results of operations, cash flows and financial position of the combined company.

• Failure to complete the acquisition could negatively impact our stock price and our future business and financial results.

• The merger agreement between Teledyne and FLIR subjects us to restrictions on our activities, such as certain equity issuances during the period while the acquisition is pending.

• After the acquisition, as a result of the issuance of Teledyne stock in the acquisition to the holders of FLIR stock, Teledyne stockholders will have lower ownership and voting interests in Teledyne than they currently have and will exercise less influence over management.

• Litigation challenging the acquisition may increase costs and prevent the acquisition from being completed within the expected timeframe, or from being completed at all.

• Both we and FLIR will incur significant transaction costs in connection with the acquisition.

• Unplanned future events and conditions could reduce or delay the accretion to earnings that is currently projected by us in connection with the acquisition.

• Pursuant to the merger agreement we may be required, under certain circumstances related to the termination of the merger agreement, to pay a termination fee to FLIR of $250.0 million, which, if paid, may materially and adversely affect our financial results.

• We intend to pay the cash portion of the consideration for the acquisition, refinance certain existing indebtedness of us and FLIR, and pay other fees and expenses required to be paid in connection with the acquisition from cash on hand and borrowings.

There can be no assurance that we will be able to secure the funds necessary to pay the cash portion of the merger consideration in connection with the acquisition and refinance certain existing indebtedness on acceptable terms, in a timely manner or at all.

• The COVID-19 pandemic may delay or prevent the completion of the acquisition.

• After completion of the acquisition, we may fail to realize the anticipated benefits and cost savings of the transaction, which could adversely affect the value of our common stock.

• The future results of the combined company may be adversely impacted if we do not effectively manage our expanded operations following completion of the acquisition.

• Both Teledyne and FLIR may have difficulty retaining, motivating, and attracting executives and other employees in light of the pending acquisition, including those experienced with post-acquisition integration, and failure to do so could seriously harm the combined company.

• The effects of the COVID-19 pandemic could adversely affect the business, results of operations and financial condition of Teledyne, FLIR and the combined company following the completion of the acquisition.

• We may fail to realize the anticipated benefits and cost savings of the transaction, which could adversely affect the value of our common stock.

• The future results of the combined company may be adversely impacted if we do not effectively manage the operations of FLIR, which includes jurisdictions in which Teledyne did not have operations.

• Both Teledyne and FLIR may have difficulty retaining, motivating, and attracting executives and other employees in light of the acquisition, including those experienced with post-acquisition integration, and failure to do so could seriously harm the combined company.

• The market price of our common stock may decline as a result of the acquisition if, among other things, the combined company does not achieve the perceived benefits of the acquisition as rapidly or to the extent anticipated by financial or industry analysts, or if the effect of the acquisition on the combined company’s financial results is not consistent with the expectations of financial or industry analysts.

Risks related to the indebtedness expected to be incurred in connection with the FLIR acquisition

The incurrence by us of substantial indebtedness in connection with the financing of the acquisition, along with the planned assumption of FLIR’s existing senior notes may have an adverse impact on our liquidity, limit our flexibility in responding to other business opportunities and increase our vulnerability to adverse economic and industry conditions.

Teledyne expects to incur a significant amount of indebtedness in connection with the financing of the FLIR acquisition, which we expect will be funded using borrowings along with cash on hand.

We may also incur additional indebtedness through the planned assumption of FLIR’s existing senior notes.

The use of indebtedness to finance the acquisition will reduce our liquidity and could cause us to place more reliance on cash generated from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow for working capital and capital expenditure

needs or to pursue other potential strategic plans.

We expect that the agreements we will enter into with respect to the indebtedness we will incur to finance the acquisition or in connection with the planned assumption of FLIR’s existing senior notes will contain negative covenants, that, subject to certain exceptions, will include limitations on indebtedness, liens, dispositions, investments and mergers and other fundamental changes.

Adverse findings in matters related FLIR’s historical export control practices could materially impact us.

On April 24, 2018, FLIR entered into a Consent Agreement with the United States Department of State’s Directorate of Defense Trade Controls to resolve allegations regarding the unauthorized export of technical data and defense services to dual and third country nationals in certain of FLIR’s facilities, the failure to properly use and manage export licenses and export authorizations, and failures to report certain payments under 22 CFR Part 130 in potential violation of International Traffic in Arms Regulations (“ITAR”).

The Consent Agreement has a four-year term and provides for:

(i) a civil penalty of $30.0 million with $15.0 million of this amount suspended on the condition that the funds have or will be used for Department-approved Consent Agreement remedial compliance measures, (ii) the appointment of an external Special Compliance Official to oversee compliance with the Consent Agreement and the ITAR;

(iii) two external audits of our ITAR compliance program;

and (iv) continued implementation of ongoing remedial compliance measures and additional remedial compliance measures related to automated systems and ITAR compliance policies, procedures, and training.

While FLIR has enhanced its trade compliance program more broadly, implemented and continues to implement remedial measures and completed two external audits of FLIR’s ITAR compliance program, additional adverse disclosures and findings could materially cause incurrence of additional expenses in connection with implementation of remedial measures and result in a substantial adjustment to our revenue and net income.

As of January 2, 2022, under the Consent Agreement, $3.5 million remains to be paid by April 24, 2022.

FLIR’s investments to date in remedial compliance measures have been more than sufficient to cover the $15.0 million suspension amount.

In June 2017, the Bureau of Industry and Security (“BIS”) of the United States Department of Commerce informed FLIR of additional export licensing requirements that restricted FLIR’s ability to sell certain thermal products without a license to customers in China not identified on a list maintained by the United States Department of Commerce.

This action was precipitated by concerns of sale without a license or potential diversion of some of FLIR’s products to prohibited end users and to countries subject to economic and other sanctions implemented by the United States.

BIS subsequently favorably modified these restrictions to reduce the applicability of the restrictions to sales of FLIR's Tau camera cores (as opposed to finished products containing Tau camera cores) to customers in China not identified on a list maintained by the United States Department of Commerce and persons in a country other than those in the Export Administration Regulations (“EAR”) Country Group A:5 (Supplement No.

1 to Part 740 of the EAR).

FLIR has identified certain shipments that potentially violate these license requirements and voluntarily disclosed this matter to BIS.

In April 2021, FLIR resolved allegations of misrepresentations made to BIS, between November 2012 and December 2013, in a commodity jurisdiction request relating to its newly developed Lepton uncooled focal plane arrays by an administrative settlement and fine of $0.3 million and agreeing to perform two internal audits of its EAR export compliance programs.

The first internal audit has been completed and pursuant to FLIR’s findings, as a result of certain findings FLIR submitted one voluntary self-disclosure to report potential violations.

FLIR has made other voluntary disclosures to the U.S.

Department of Commerce, including to BIS with respect to the shipments of products from non-U.S.

jurisdictions which were not authorized due to a potentially incorrect de minimis calculation methodology under section 734.4 and Supplement No.

2 of the EAR.

At this time, based on available information, we are unable to reasonably estimate the time it may take to resolve these matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with these matters.

However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial position, results of operations or cash flows in and following the period in which such an outcome becomes estimable or known.

The final acquisition accounting adjustments for these matters may be materially different, as Teledyne obtains additional information on these matters and as additional information is made known during the post-acquisition measurement period.

Risks related to our indebtedness

Our indebtedness, and any failure to comply with our covenants that apply to our indebtedness, could materially and

adversely affect our business.

As of January 2, 2022, we had $3,500.0 million total outstanding indebtedness in senior notes, $505.6 million in term loans and $125.0 million outstanding under our $1,150.0 million floating rate credit facility.

Teledyne incurred a significant amount of indebtedness in connection with the financing of the FLIR acquisition.

We also incurred additional indebtedness through the planned assumption of FLIR’s existing senior notes.

The use of indebtedness to finance the acquisition reduced our liquidity and caused us to place more reliance on cash generated from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow for operating activities and capital expenditure needs or to pursue other potential strategic plans.

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.

Our ability to comply with these negative covenants can be affected by events beyond our control.

The indebtedness and these negative covenants will also have the effect, among other things, of limiting our ability to obtain additional financing, if needed, limiting our flexibility in the conduct of our business 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, 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.

In addition, a breach of the negative covenants could result in an event of default with respect to the indebtedness, which, if not cured or waived, could result in the indebtedness becoming immediately due and payable and could have a material adverse effect on our business, financial condition or operating results.

Following completion of the acquisition, the credit rating of the combined company could be downgraded and/or the combined company may fail to obtain an investment grade rating, which may increase borrowing costs or could trigger an obligation to make an offer to purchase FLIR’s $500 million senior notes.

By reason of the debt incurred to finance the cash portion of the consideration for the acquisition, the combined company will have a considerably higher level of indebtedness than we and FLIR currently have in the aggregate, and there can be no assurance that the credit ratings of the existing FLIR debt will not be subject to a downgrade below investment grade.

If a ratings downgrade were to occur or if the combined company fails to obtain an investment grade rating, the combined company could experience higher borrowing costs in the future and more restrictive debt covenants, which would reduce profitability and diminish operational flexibility.

Specifically, in the event that FLIR’s existing senior notes are downgraded below investment grade as a result of the acquisition, the terms of these notes will require the combined company to commence a change of control offer after the closing of the acquisition.

Because of higher debt levels, we may not be able to service our debt obligations in accordance with the terms contained in the agreements.

Our ability to meet our expense and debt service obligations contained in the agreements we expect to enter into with respect to the indebtedness we will incur to finance the acquisition will depend on our available cash and its future performance, 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.

If we are unable to meet our debt service obligations after the acquisition 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.

Our indebtedness also exposes us to interest rate risk since a portion of our debt obligations are at variable rates.

We may not be able to service our debt obligations.

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.

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.

We may not be able to, at any given time, refinance our debt, sell assets, incur additional indebtedness or issue equity securities on terms acceptable to us, in amounts sufficient to meet our needs.

If we are able to raise additional funds through the issuance of equity securities, such issuance would also result in dilution to our stockholders.

Our inability to service our obligations or refinance our debt could have a material and adverse effect on our business, financial condition or operating results after the acquisition.

Our inability to service our obligations or refinance our debt could have a material and adverse effect on our business, financial condition or operating results.

In addition, our debt obligations may limit our ability to make required investments in capacity, technology or other areas of our business, which could have a material adverse effect on our business, financial condition or operating results.

The credit rating of Teledyne could be downgraded, which may increase borrowing costs.

There can be no assurance that the credit ratings of Teledyne’s debt will not be subject to a downgrade below investment grade.

If a ratings downgrade were to occur, we could experience higher borrowing costs in the future and more restrictive debt covenants, which would reduce profitability and diminish operational flexibility.

Risks Related to our Business and Industry

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Our growth strategy includes acquisitions.

In 2020 and 2019, we expended $29.0 million and $484.0 million in cash, respectively, relating to acquisitions and other investments.

In 2021 and 2020, we expended $8.1 billion in cash and stock and $29.0 million in cash, respectively, relating to acquisitions and other investments.

Acquisitions involve various inherent risks, such as:

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While we conduct financial and other due diligence in connection with our acquisitions and generally seek some form of protection, such as indemnification from the seller, insurance coverage, and sometimes placing a portion of the purchase price in escrow to cover potential liabilities, such acquired companies may have weaknesses or liabilities that are not accurately assessed or brought to our attention at the time of the acquisition.

Further, indemnities, insurance or escrow arrangements may not fully cover such matters.

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.

We are required to expense, as incurred, such transaction costs, which may have a material adverse impact on our financial results.

Our indebtedness, and any failure to comply with our covenants that apply to our indebtedness, could materially and adversely affect our business.

As of January 3, 2021, we had $778.5 million total outstanding indebtedness, including $195.0 million in senior unsecured fixed rate notes, $305.3 million in Euro denominated fixed rate notes, $150.0 million in term loans and $125.0 million outstanding under our $750.0 million floating rate credit facility.

Our indebtedness or a failure to comply with our covenants that apply to our indebtedness could harm our business by, among other things, reducing the funds available to make acquisitions, capital expenditures, or reducing our flexibility in planning for or reacting to changes in our business or market conditions.

Our indebtedness exposes us to interest rate risk since a portion of our debt obligations are at variable rates.

Our indebtedness or a failure to comply with our covenants that apply to our indebtedness could also have a material adverse effect on our business by increasing our vulnerability to general adverse economic and industry conditions or a downturn in our business.

General adverse economic and industry conditions or a downturn in our business could result in our inability to repay this indebtedness in a timely manner.

Further, the Financial Conduct Authority (the authority that regulates the London Interbank Offered Rate, or LIBOR) has announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in debt instruments, derivatives and other financial contracts that are currently indexed to USD-LIBOR.

ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives, debt and cash markets exposed to USD-LIBOR.

It is unclear as to what the new method of calculating LIBOR that may evolve and this new method could adversely affect the Company’s interest rates on the Company’s indebtedness.

The Company is monitoring the ARRC transition plan and is evaluating potential related risks.

As of January 3, 2021, approximately 35.3% of the Company’s long-term debt is variable and can be indexed to USD-LIBOR.

Our $750.0 million credit facility includes a procedure to switch to LIBOR alternative replacement rates in the future.

Escalating global trade tensions and the adoption or expansion of tariffs and trade restrictions could negatively impact us.

The Company has operations in China, which represented one of the top five countries for our international sales in 2020 and 2019.

We are experiencing component and raw material shortages due to worldwide supply chain constraints which impacts our ability to manufacture and ship all of the product for which we have demand.

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.

As a result, we are experiencing delays in delivery and shortages of certain components and raw materials needed for many of the products we manufacture, particularly certain types of semiconductors, silicon wafers, specialized raw materials and chemicals, adhesives, engineered plastics and electronic components.

These conditions are currently limiting our ability to manufacture and ship all of the product for which we have demand.

In some cases, we have had to commit to additional orders or longer-term contracts from suppliers to secure needed components and materials.

We expect these delays and shortages to continue in 2022 and that such shortages could result in delays in shipments to our customers during the period of such shortages.

Any such delays would reduce our revenue and margins for the periods affected and would also result in an increase in our inventory of other components, which would reduce our operating cash flow.

Increased prices for components and raw materials used in our products and higher labor and shipping costs could adversely impact our profitability.

Supply chain constraints and 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.

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.

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.

Our inability to attract and retain key personnel and labor shortages resulting from the COVID pandemic and improving economic conditions, could have a material adverse effect on our future success.

Our future success depends to a significant extent upon the continued service of our executive officers and other key management and technical personnel and on our ability to continue to attract, retain and motivate qualified personnel.

The lack of human capital due to very competitive labor market conditions in certain regions could impact our ability to deliver products and services.

The skilled manufacturing and specialized engineering labor market is currently very competitive.

A significant portion of our revenue depends on the availability of a highly skilled technical workforce.

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 have experienced and may continue to experience temporary labor shortages as a result of the COVID pandemic due to personnel contracting the virus or needing to quarantine at home as a result of exposure to the virus, as well as due to restrictive measures implemented by governments around the world to help control the spread of the virus, including shelter in place or stay at home orders, school closures, orders that reduced the availability of public transportation and other measures.

Government-imposed vaccine mandates could negatively affect the availability of personnel or could lead to the attrition of personnel.

These impacts to our labor force resulting from the COVID pandemic could materially affect our ability to manufacture, ship or deliver our products, and in certain instances may result in higher wage costs, which could adversely impact our revenue and our results of operations

We also have a mature workforce.

Some of our businesses, including our businesses in traveling wave tube and integrated microwave module design and development, draw from a pool of specialized engineering talent that is small and currently shrinking.

Some of our businesses have a need for employees with a certain level of security clearance, and competition for such employees has increased.

While we have engaged in succession planning, the loss of the services of one or more of our key employees or our failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

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.

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.

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sources for products that we sell, or be pressured or incentivized by foreign governments not to purchase U.S.-origin goods, which could harm our future sales in these markets.

Additionally, if China bolsters laws or regulations requiring the use of local China suppliers, it could have a negative impact on Teledyne’s revenues.

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, a number of well-established customers and suppliers have become listed on Government restricted party lists without much warning.

In particular, U.S.

export enforcement agencies have placed several Chinese and Russian companies and many of their international subsidiaries on such lists, prohibiting the export of most commercial and dual-use items subject to the Export Administration Regulations.

Multiple Teledyne companies had large pending orders with some of those companies that had to be either cancelled or for which Teledyne has submitted export license applications that have a low probability of approval.

For example, Huawei Technologies, Co., Ltd.

(“Huawei”), and its non-U.S.

affiliates have been added to the U.S.

Department of Commerce Bureau of Industry and Security Entity list.

Huawei was a customer of our test and measurement business, and pending export license applications have not yet been approved.

Government has also made efforts to increase restrictions on some of the listed entities, including proposals to expand U.S.

export jurisdiction over foreign made products containing certain U.S.-origin materials.

In 2020, the U.S.

Government applied restrictions to products sold to Huawei where there was no U.S.

content in the products, but certain equipment used to manufacture the products had U.S.

Additionally, we face the risk that Airbus, a customer to our commercial aerospace business, will demonstrate a preference for non-U.S.

sources due to the complications and uncertainties of trade compliance.

While we will continue to work to mitigate the impact of tariffs and trade restrictions, they could result in revenue reduction, price increases on material

used in our products or production delays, which could adversely affect our business, financial condition, operational results and cash flows.

A material amount of our total revenues is derived from companies in the oil and gas industry, especially the offshore oil and gas industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and gas prices.

A material amount of our total revenues is derived from companies in or connected to oil and gas exploration, development and production, especially the offshore oil and gas industry.

The oil and gas industry has historically been cyclical and characterized by significant changes in the levels of exploration and development activities.

Oil and gas prices, and market expectations of potential changes in those prices, significantly affect the levels of those activities.

Any prolonged reduction in the overall level of offshore oil and gas exploration and development activities, whether resulting from changes in oil and gas prices or otherwise, could materially and adversely affect our financial condition and the results of our businesses within our Instrumentation segment.

Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our 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;

• 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;

• climate change regulations that provide incentives to conserve energy or use alternative energy sources.

Teledyne manufactures seismic energy sources, interconnects and data acquisition products that are used in offshore energy exploration.

When crude oil and natural gas prices are low, the level of marine seismic exploration activity typically decreases, potentially resulting in reduced demand for our products used in offshore energy exploration.

In addition, a decline in the level of capital spending by oil and natural gas companies may result in a reduced rate of development of new energy reserves, which could adversely affect demand for our products related to energy production, and, in certain instances, result in the cancellation, modification or rescheduling of existing orders and a reduction in customer-funded research and development related to next generation products.

Recession, financial and credit market disruptions, or an economic downturn in China, may adversely affect us.

If another global recession emerges, if economic uncertainty in Europe continues or worsens, or if economic growth in China 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.

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.

Tariffs and trade restrictions could result in revenue reduction, price increases on material used in our products or production delays, which could adversely affect our business, financial condition, operational results and cash flows.

The conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations.

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.

Recession, financial and credit market disruptions, or an economic slowdown in China, may adversely affect us.

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.

Our sales to China-based customers represented approximately 5.6% and 6.0% of total revenues in 2021 and 2020, respectively.

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A cyclical downturn in these markets may materially affect future operating results.

Due to declines in air travel, we face risk that our addressable market for retrofit products will shrink further as airlines retire significant number of aircraft.

Due to declines in air travel since the start of the COVID pandemic, we face risk that our addressable market for retrofit products will shrink further as airlines retire a significant number of aircraft.

In addition, we sell products and services to customers in industries that are sensitive to the level of general economic activity and consumer spending habits and to customers in more mature industries that are sensitive to capacity constraints.

Adverse economic conditions affecting these industries may reduce demand for our products and services, which may reduce our revenues, profits or production levels.

Some of our businesses serve industries such as power generation and petrochemical

refining, which may be negatively impacted in the event of future reductions in global capital expenditures and manufacturing capacity.

We are subject to the risks associated with international sales and international operations, which could harm our business or results of operations.

During 2020, sales to international customers accounted for approximately 45% of our total revenues, compared with 44% in 2019.

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.

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.

During 2021, sales to customers outside the United States accounted for approximately 47% of our net sales, compared with 45% in 2020.

In 2021, we sold products to customers in over 100 countries.

In 2020, the top five countries for international sales were China, Germany, the United Kingdom, Japan and France, constituting approximately 20% of our total sales.

We anticipate that future sales to international customers will continue to account for a significant and increasing percentage of our revenues, particularly since business and growth plans for many Teledyne businesses focus on sales outside of the United States to emerging markets such as China, India, Brazil and West Africa.

In 2021, the top five countries for international sales were China, the United Kingdom, Germany, Japan and France, constituting approximately 20% of our total sales.

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.

Risks associated with international sales and operations include, but are not limited to:

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• 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;

• 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;

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Any of these factors could have a material adverse effect on our business, results of operations and financial condition.

Exchange rate fluctuations may increase the cost of our products to international customers and therefore reduce our competitive position.

In June 2016, the United Kingdom (“U.K.”) held a referendum in which voters approved an exit from the European Union (“E.U.”), commonly referred to as “Brexit.” The U.K.

Currency exchange rate fluctuations may increase the cost of our products to international customers and therefore reduce our competitive position.

In June 2016, the U.K.

held a referendum in which voters approved an exit from the European Union (“E.U.”), commonly referred to as “Brexit.” The U.K.

formally left the E.U.

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countries and other nations, may cause our current and future customers to reduce their spending on our products and services, and may cause certain E.U.-based customers to source products from businesses based outside of the U.K.

For example, Brexit-related uncertainty could lead to a reconsideration by Airbus as to future investment and spending in the U.K., which could reduce sales for our U.K.-based businesses that supply Airbus.

Potential Brexit-related risks for our U.K.-based businesses also include increased import duties, loss of customers in the E.U., delays in the movement of goods between the U.K.

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dollar, or other foreign currencies, could increase the cost of raw materials and components for our U.K.-based businesses and could otherwise adversely affect the business, operations and the financial condition of our U.K.-based businesses.

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.

The oil and gas industry has historically been cyclical and characterized by significant changes in the levels of exploration and development activities.

Oil and gas prices, and market expectations of potential changes in those prices, significantly affect the levels of those activities.

Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our products and services include the following:

• worldwide demand for oil and gas;

• general economic and business conditions and industry trends;

• the ability of the Organization of Petroleum Exporting Countries (“OPEC”), to set and maintain production levels;

• the level of production by non-OPEC countries;

• the ability of oil and gas companies to generate or raise funds for capital expenditures;

• domestic and foreign tax policy;

• 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;

• 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.

Teledyne manufactures seismic energy sources, interconnects and data acquisition products that are used in offshore energy exploration.

Higher tax rates may harm our results of operations and cash flow.

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The relative amount of income we earn in other jurisdictions could reduce our net income and increase our cash payments.

Additionally, the new U.S.

Presidential administration proposed a higher corporate tax rate of 28% compared to 21%.

Such increased tax rate in the U.S.

Additionally, the U.S.

Presidential administration proposed a higher U.S.

federal statutory corporate income tax rate of 28% compared to the current rate of 21%.

Such increased income tax rate in the U.S.

or in other jurisdictions could also reduce our net income and increase our cash payments.

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Government, including sales under contracts with the U.S.

Department of Defense, as prime contractor or subcontractor, represented approximately 26% of our total revenue in 2020, compared with 24% in 2019.

Department of Defense, as prime contractor or subcontractor, represented approximately 26% of our total net sales in both 2021 and 2020.

Performance under government contracts has inherent risks that could have a material effect on our business, results of operations, and financial condition.

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Any renewed emphasis on Federal deficit and debt reduction could lead to a further decrease in overall defense spending.

Budgetary concerns could result in future contracts being awarded more on price than on other competitive factors, and smaller defense budgets could result in government in-sourcing of programs and more intense competition on programs that are not in-sourced, which could result in lower revenues and profits.

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.

Also, defense spending does not necessarily correlate to continued business for us, because not all of the programs in which we participate or have current capabilities may be provided with continued funding.

Changes in policy and budget priorities by the new U.S.

Presidential Administration for various defense and National Aeronautics and Space Administration (“NASA”) programs could impact our Engineered Systems, Aerospace and Defense Electronics and Digital Imaging segments.

Changes in policy and budget priorities by the U.S.

Presidential Administration for various defense and NASA programs could impact our Engineered Systems, Aerospace and Defense Electronics and Digital Imaging segments.

Our Aerospace and Defense Electronics segment may be impacted by volume or price reductions in connection with the F-35 Joint Strike Fighter program, to the extent they are imposed.

The timing of program cycles can affect our results of operations for a quarter or year, and cancellations of significant programs such as the Space Launch System (“SLS”), Launch Vehicle Stage Adapter (“LVSA”), International Space Station (“ISS”), Mission Operations and Integration (“MO&I”), or the Shallow Water Combat Submersible (“SWCS”) would affect our results.

The timing of program cycles can affect our results of operations for a quarter or year, and cancellations of significant programs such as the International Space Station (“ISS”), MO&I, the Shallow Water Combat Submersible (“SWCS”) or U.S.

Navy Health and Research would affect our results.

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

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Subsequently, Teledyne Brown Engineering, Inc.

filed a protest challenging such award, which protest was sustained and which sustainment triggered the cancelation of the MOSSI request for proposal and requiring a new acquisition, free of involvement of individuals with a conflict of interest, to begin.

While the MO&I contract continues through September 2021, and NASA has several options to further extend it through March 2023, there is no guarantee it will be further extended.

NASA anticipates release of the new acquisition, the Marshall Operations, Systems, Services, and Integration II, draft solicitation in April 2021 with the award expected in late 2022.

There is no guarantee that Teledyne Brown Engineering will be awarded this new contract.

filed a protest challenging such award, which protest was sustained and which sustainment triggered the cancelation of the MOSSI request for proposal and requiring a new award solicitation to begin.

The MO&I contract continues through June 2022 with options to extend up through December 2022.

NASA released the new acquisition solicitation, the Marshall Operations, Systems, Services, and Integration II, in August 2021.

Notification of award is expected in the second half of 2022.

There is no guarantee that Teledyne will be awarded this new contract.

It is also not uncommon for the U.S.

Department of Defense to delay the timing of awards or change orders for major programs for six to twelve months.

Reductions and delays in research and development funding by the U.S.

These delays by the U.S.

Government could impact our revenues.

Uncertainty over budgets or priorities with the new U.S.

Presidential Administration could result in delays in funding and the timing of awards, and changes in funded programs that could have a material impact on our revenues.

Delays in procurements, awards and modifications to contracts have negatively impacted revenue in 2021.

This trend is continuing in 2022 and may also impact future revenue.

Uncertainty over budgets or priorities with the 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.

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.

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We had no U.S.

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

No contracts were terminated for default during such two-year period.

Government contracts terminated for convenience or default in 2021 or in 2020.

Government contracting business is subject to government contracting regulations, including increasingly complex regulations on cybersecurity, and our failure to comply with such laws and regulations could harm our operating results and prospects.

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The Department of Defense as well as other U.S.

Government contracting agencies have adopted rules and regulations requiring contractors to implement a set of cyber security measures to attain the safeguarding of contractor systems that process, store, or transmit certain information.

Implementation and compliance with these cyber security requirements is complex and costly, and could result in unforeseen expenses, lower profitability and, in the case of non-compliance, penalties and damages, all of which could have an adverse effect on our business.

The cyber security requirements also impact our supply base which could impact cost, schedule and performance on programs if suppliers do not meet the requirements and therefore, do not qualify to support the programs.

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.

Implementation and compliance with these cybersecurity requirements is complex and costly, and could result in unforeseen expenses, lower profitability and, in the case of non-compliance, penalties and damages, all of which could have an adverse effect on our business.

The cybersecurity requirements also impact our supply base which could impact cost, schedule and performance on programs if suppliers do not meet the requirements and therefore, do not qualify to support the programs.

We may not have sufficient resources to fund all future research and development and capital expenditures or possible acquisitions.

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Recent trends by China’s aviation authority to relax restrictions on airspace may be reversed, and anticipated new regulations loosening airspace restrictions may not materialize, which could impact sales prospects in China for our commercial aerospace businesses.

The FAA and the U.S.

Department of Justice’s Fraud Section, among other agencies and countries, have been investigating two Boeing 737 Max 8 aircraft crashes that occurred in October 2018 and March 2019, which resulted in the groundings of such aircraft across the world.

Subsequently, Boeing announced in December 2019 that it was temporarily suspending production of the 737 Max starting in January 2020.

While Boeing has started to resume minimal production in May 2020 and governmental groundings have been lifted, production is not expected to reach historic levels for the immediate future.

While resumption of some production of the 737 Max has been factored into our business plans, there is a risk that airlines and air travelers may respond negatively to the 737 Max aircraft due to historic and continuing perceived safety concerns.

These factors may further negatively impact our Teledyne Controls’ business.

Increasing competition could reduce the demand for our products and services.

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Furthermore, some of our patents have or are expiring, which could open up further competition.

For example, our U.S.

patent related to our Wireless GroundLink product expired in 2018, allowing several competitors to enter the market.

Additionally, some of our customers have been developing competing products or electing to vertically integrate and replace our products with their own.

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Furthermore, Boeing has announced a vertical integration program, which includes avionics.

Specifically, Boeing has expressed its intention to replace certain Teledyne wireless products on both the 737 Max and 787 aircraft with its own wireless products.

Lastly, some of our products face increasing competition from alternative technologies.

For example, the lead acid batteries that Teledyne Battery Products sells face competition from lithium ion batteries, among other competing technologies.

The hydrogen generation systems that Teledyne Energy Systems sells also face increasing competition from new entrants to the on-site electrolysis of water market.

Industry acquisition and consolidation trends, particularly among aerospace and defense contractors, have adversely impacted demand for our aerospace and defense related engineering services as large prime contractors elect to in-source major acquisition programs and expand small business participation to meet Government contracting goals.

Government contracting goals.

Such consolidations can also cause delays in business as the newly consolidated organization undergoes integration.

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Increasing competition could reduce the volume of our sales or the prices we may charge, which would negatively impact our revenues.

We are experiencing increasing competition in our digital imaging businesses from Chinese manufacturers which offer lower cost products with increasingly advanced technical capabilities.

Smaller defense budgets both in the United States and Europe could result in additional competition for new and existing defense programs.

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To date, we have not incurred material liabilities in connection with these lawsuits.

However, our historic insurance coverage, including that of our predecessors, may not fully cover such claims and the defense of such matters.

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.

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Our business and financial results could be adversely affected by conditions and other factors associated with our suppliers, and subcontractors.

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.

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.

For example, Teledyne Digital Imaging has an internal single source of supply for CCD semiconductor wafers used to assemble image sensors and an external single source of supply for CMOS semiconductor wafers used to assemble X-ray panel products.

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Teledyne LeCroy continues to outsource a portion of its research and development activities to third-party engineering firms in Malaysia and India where it may be more difficult for us to enforce our intellectual property rights.

Teledyne LeCroy also uses an engineering firm located in Ukraine that may be adversely impacted by the conflict between Russian and Ukraine, which in turn may delay some product development efforts.

We have also outsourced from time to time the manufacturing of certain parts, components, subsystems and even finished products to single or limited sources, including international sources.

Disruption of these sources or supplier-imposed rationing of scarce components could cause delays or reductions in shipments of our products or increases in our costs, which could have an adverse effect on our financial condition or operations.

We could experience global supply chain disruptions if the COVID-19 pandemic health crisis continues and new strains of the virus emerge.

International sources possess additional risks, some of which are similar to those described above regarding international sales.

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We face risks related to sales through distributors and other third parties which could harm our business.

We sell a portion of our products through third parties such as distributors, value-added resellers and OEMs (collectively, “distributors”).

We sell a portion of our products through third parties such as distributors, sales representatives, value-added resellers and OEMs (collectively, “distributors”).

Using third parties for distribution exposes Teledyne to many risks, including concentration, credit risk and legal risk because under certain circumstances we may be held responsible for the actions of those third-party sales channels.

We may rely on one or more key distributors for a product, and the loss of these distributors could reduce our revenue.

We may rely on one or more key distributors for selling a product, and the loss of these distributors could reduce our revenue.

Distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivables and financial results.

Violations of the Foreign Corrupt Practices Act (“FCPA”) or similar anti-bribery laws by distributors or other third-party intermediaries could have a material impact on our business.

Competitors could also block our access to key distributors.

Failing to manage risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position, and could result in sanctions against us.

Compliance with increasing environmental and climate change regulations, as well as the effects of potential environmental liabilities, could have a material adverse financial effect on us.

Competitors could also block our access to such parties.

Failing to manage risks related to our use of third party sales channels may reduce sales, increase expenses, and weaken our competitive position, and could result in sanctions against us.

Failing to comply with increasing environmental regulations, as well as the effects of potential environmental liabilities, could have a material adverse financial effect on us.

We, like other industry participants, are subject to various federal, state, local and international environmental laws and regulations.

We may be subject to increasingly stringent environmental standards in the future, particularly as greenhouse gas emissions and climate change regulations and initiatives increase.

We may be subject to increasingly stringent environmental standards in the future, particularly as GHG emissions and climate change regulations and initiatives increase.

Future developments, administrative actions or liabilities relating to environmental and climate change matters could have a material adverse effect on our business, results of operations or financial condition.

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Additionally, companies that we acquire may have environmental liabilities that might not be accurately assessed or brought to our attention at the time of the acquisition.

Environmental Protection Agency (“EPA”) has focused on greenhouse gases (“GHGs”), maintaining GHGs threaten the public health and welfare of the American people.

Environmental Protection Agency (“EPA”) has focused on GHGs, maintaining GHGs threaten the public health and welfare of the American people.

The EPA also maintains that GHG emissions from on-road vehicles contribute to that threat.

The EPA’s endangerment finding covers emissions of six greenhouse gases.

The EPA’s endangerment finding covers emissions of six GHGs.

The EPA’s continuing efforts to limit GHG emissions could adversely affect our U.S.

manufacturing operations, increase prices for energy, fuel and transportation, require us to accommodate changes in parameters, such as the way parts are manufactured, and may, in some cases, require us to redesign certain of our products.

This, or other federal or state regulations, could lead to increased costs, which we may not be able to recover from customers, delays in product shipments and loss of market share to competitors.

This, or other federal or state regulations, could lead to increased costs, which we may not be able to

recover from customers, delays in product shipments and loss of market share to competitors.

For example, Teledyne Battery Products unit makes lead acid batteries in California and is subject to a variety of environmental regulations and inspections, which have increased over time.

Also, some of our sites conduct electroplating, metal finishing and other operations that utilize hazardous materials that are subject to similar regulations.

Regulatory changes or failure to meet applicable requirements could disrupt that business or force a closure or relocation of the business.

Regulatory changes or failure by a business to meet applicable requirements could disrupt that business or force a closure or relocation of the business.

Our products are subject to various regulations that prohibit or restrict the use of certain hazardous substances.

For example, our products placed on the European market are subject to the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) and the restriction of the use of certain hazardous substances in electrical and electronic equipment

(“ROHS”) Directives.

For example, our products placed on the European market are subject to the Registration, Evaluation, Authorization and Restriction of Chemicals and the restriction of the use of certain hazardous substances in electrical and electronic equipment Directives.

Future hazardous substance restrictions or prohibitions may limit our ability to market some products in certain countries.

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Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 14 of the Notes to Consolidated Financial Statements.

For a discussion of our products that contribute to the environment, sustainability and climate science, see “Item 1.

Business – Environment and Sustainability.”

Our inability to attract and retain key personnel could have a material adverse effect on our future success.

We also have a maturing workforce.

Some of our businesses have a need for employees with a certain level of security clearance, and competition for such employees has increased.

We may not be able to sell or reconfigure businesses, facilities or product lines that we determine no longer meet with our growth strategy or that should be consolidated.

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Over the years we have also consolidated some of our business units and facilities, in some cases to respond to downturns in the defense or oil and gas industries, among other reasons.

During 2020, we relocated our Teledyne Paradise Datacom operation in State College, Pennsylvania to our Teledyne Microwave Solutions facility in Rancho Cordova, California.

We may not be able to realize efficiencies and cost savings from our consolidation activities.

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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 .

Climate change may have an increasingly adverse impact on our business and those of our customers, partners and suppliers.

While we seek to mitigate the risks associated with climate change on our operations, there are inherent climate-related risks globally.

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.

These events could result in potential damage to our physical assets as well as disruptions in manufacturing activities.

Some of our manufacturing facilities are in areas that may be at risk due to rising sea levels.

Moreover, some of our manufacturing facilities are in areas that could experience decreased access to water and reliable energy due to climate issues.

Severe weather and wildfire events may impair the ability of our employees to work effectively.

Climate change, including the increasing frequency and intensity of extreme weather events, its impact on our supply chain and critical infrastructure worldwide and its potential to increase political instability in regions where we, our customers, partners and our suppliers do business, may disrupt our business and may cause us to experience higher employee attrition and higher costs to maintain or resume operations.

The effects of climate change also may impact our decisions to construct new facilities or maintain existing facilities in the areas most prone to physical risks, which could similarly increase our operating and material costs.

We could also face indirect financial risks passed through the supply chain that could result in higher prices for our products and the resources needed to produce them.

We sell products to customers directly engaged in oil and gas exploration and production.

Changes to regulations, social practices and preferences, energy generation and transportation technologies that may occur or be implemented to mitigate climate change could result in reduced demand for hydrocarbon products, which could result in a reduction in sales to these customers.

Regulations associated with climate change could adversely affect our business.

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.

These legal requirements, in addition to emission reduction efforts that we voluntarily undertake, are expected to result in increased capital expenditures and compliance costs, and could result in higher costs required to operate and maintain our facilities, procure raw materials and energy, and may require us to acquire emission credits or carbon offsets.

These costs and restrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our operations and product design activities.

The inconsistent international, regional and/or national requirements associated with climate change regulations also create economic and regulatory uncertainty.

Investor sentiment towards climate change and sustainability could adversely affect our business and the market price for our common stock .

Increased investor focus and activism related to climate change and sustainability may hinder our access to capital, as investors may reconsider their capital investment as a result of their assessment of our sustainability practices.

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.

If we are unable to meet the sustainability standards set by these investors, or if we are unable meet GHG reduction targets we communicate to the public, we may lose investors, our stock price may be negatively impacted and our reputation may be negatively affected.

Other Risks We Face

Natural and man-made disasters could adversely affect our business, results of operations and financial condition.

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Local utilities may impose blackouts during high fire risk weather conditions, which could result in disruptions to our businesses located in California, including our headquarters.

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-19), we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our products, 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.

Teledyne FLIR’s Goleta facility which is a single source supplier of sensors used throughout the FLIR business, is located near a runway of the Santa Barbara Airport and could be severely damaged in the event of an airplane crash.

Teledyne DALSA’s semiconductor facilities in Quebec, Canada have been impacted by loss of electrical power caused by severe ice storms.

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Our facilities in Alabama, Florida, Nebraska, Tennessee and Virginia have also been threatened by tornados.

If any of our California facilities, including our California headquarters, were to experience a catastrophic earthquake or wildfire loss or if any of our Alabama, Florida, Nebraska, Tennessee or Texas facilities were to experience a catastrophic hurricane, storm, tornado or other natural disaster, or if DALSA’s facilities in Quebec experience long-term loss of electrical power, such event could disrupt our operations, delay production, shipments and revenue, and result in large expenses to repair or replace the facility or facilities.

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.

In addition, the insurance we maintain may be insufficient to cover our losses resulting from disasters, cyber-attacks or other business interruptions, and any incidents may result in loss of, or increased costs of, such insurance.

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For example, in 2018, a fire at a Netherlands-based facility of a key supplier of printed circuit boards resulted in delivery disruptions to the electronics industry, including to businesses in our Digital Imaging segment.

Teledyne Brown Engineering, Inc.

has developed, built, and launched a multiuser system for earth sensing that is affixed to the International Space Station (“ISS”).

For the program to continue to be financially successful, the 21-year-old ISS must continue to fly in a safe and human tended condition.

While certain spaceflight risks, such as a high-velocity debris impact to the station causing significant structural damage or necessitating the evacuation of the ISS, have been regarded as small, if such event were to occur, the ISS program continuation could be threatened, jeopardizing our investment and potential revenue generation from ISS-based Earth imaging.

We may not be able to enforce or protect our intellectual property rights, or third parties may claim we infringe their intellectual rights, each which may harm our ability to compete and thus harm our business.

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Our inability to enforce our intellectual property rights under these circumstances may harm our competitive position and our business.

Our business and operations could suffer in the event of cyber security breaches.

Attempts by others to gain unauthorized access to our information technology systems have become more sophisticated and are sometimes successful.

Our business and operations could suffer in the event of cybersecurity breaches.

Attempts by malicious actors to gain unauthorized access to our information technology systems have become more sophisticated and are sometimes successful.

These attempts, which might be related to industrial or foreign government espionage, crime, activism, or other motivations, include covertly introducing malware into our computers and computer networks, performing reconnaissance, impersonating authorized users, extortion, and stealing, corrupting or restricting our access to data, among other activities.

We continue to train our personnel and update our infrastructure, security tools and processes to protect against security incidents, including both external and internal threats, and to prevent their recurrence.

Company personnel and third parties have been tasked to detect, respond to, and investigate such incidents, but it is possible that we might not prevent or be aware of or be able to react to an incident or its magnitude and effects.

The theft, corruption, unauthorized use or publication of our intellectual property or confidential business information could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business.

We 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.

Company personnel and third parties have been tasked to prevent, deter, detect, respond to, and investigate such incidents, however it is possible that we might not prevent or be aware of or be able to react to an incident or its magnitude and effects.

The theft, corruption, unauthorized use or publication of our intellectual property or confidential business information due to a cyber-attack could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business.

We are subject to U.S.

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Government, or any of the deployed security controls are deemed insufficient, we may incur liability or the loss of contracts or security clearances.

As a result, we expect to continue to devote additional resources to the security of our information technology systems.

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 cyber security mandates.

Unauthorized access to or control of our products, devices or systems could impact the safety of our customers and other third parties which could result in legal claims against us.

Government increases its cybersecurity mandates.

Unauthorized access to or control of our products, data, devices or systems could impact the safety of our customers and other third parties which could result in legal claims against us.

Security breaches also could result in a violation of applicable U.S.

and international privacy and other laws, including 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.

Lastly, we are not immune from cyber security and privacy breaches of our customers and suppliers.

The systemic cybersecurity risk environment is elevated, in part by remote working driven by COVID pandemic concerns, particularly at our customer and supplier partner organizations.

Provisions of our governing documents, applicable law, and our Change in Control Severance Agreements could make an acquisition of Teledyne more difficult.

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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 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 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.

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and (iv) other risks described in this report.

We cannot provide assurances as to our Common Stock price, which during fiscal 2020 has ranged from a low of $195.34 to a high of $398.99.

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.

Unresolved Staff Comments

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 1A. Risk Factors