tdy-20241229
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
For the fiscal year ended December 29, 2024
OR
For the transition period from to
Commission file number 1-15295
TELEDYNE TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
Thousand Oaks
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (805) 373-4545
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $.01 per share TDY New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2024, the aggregate market value of Common Stock (based upon closing price of the stock on the New York Stock Exchange) of the registrant held by non-affiliates was approximately $18.0 billion.
At February 12, 2025, there were 46,834,810 shares of the registrant’s Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement to be filed subsequently with the Securities and Exchange Commission pursuant to Regulation 14A for the 2025 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K. Except as expressly incorporated by reference, the registrant’s proxy statement shall not be deemed to be part of this report.
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INDEX
PAGE
PART I
Item 1. Business 1
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 21
Item 1C. Cybersecurity 21
Item 2. Properties 22
Item 3. Legal Proceedings 22
Item 4. Mine Safety Disclosures 22
PART II
Item 6. [Reserved] 23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38
Item 8. Financial Statements and Supplementary Data 38
Item 9A. Controls and Procedures 38
Item 9B. Other Information 39
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 39
Part III
Item 10. Directors, Executive Officers and Corporate Governance 40
Item 11. Executive Compensation 40
Item 14. Principal Accountant Fees and Services 40
PART IV
Item 15. Exhibits and Financial Statement Schedules 41
Index to Financial Statements and Related Information 42
Exhibit Index 85
Signatures 90
Explanatory Notes
In this Annual Report on Form 10-K, Teledyne Technologies Incorporated is referred to as the “Company”, “Teledyne”, “we”, “our” or “us”. For a discussion of risk factors and uncertainties associated with Teledyne and any forward-looking statements made by us, see the discussion beginning on page 7 of this Annual Report on Form 10-K. In this document, for any references to Note 1 through Note 18, refer to the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
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PART I
Item 1. Business
Who We Are
Teledyne Technologies Incorporated is a Delaware corporation that provides enabling technologies for industrial growth markets that require advanced technology and high reliability. These markets include aerospace and defense, factory automation, air and water quality environmental monitoring, electronics design and development, oceanographic research, deepwater oil and gas exploration and production, medical imaging and pharmaceutical research. Our products include digital imaging sensors, cameras and systems within the visible, infrared and X-ray spectra, monitoring and control instrumentation for marine and environmental applications, harsh environment interconnects, electronic test and measurement equipment, aircraft information management systems, and defense electronics and satellite communication subsystems. We also supply engineered systems for defense, space, environmental and energy applications. We believe our technological capabilities, innovation and ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we compete. We became an independent public company effective November 29, 1999.
The following description of our business should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within Item 7 of this Form 10-K.
Recent Developments
Consistent with our strategy, we completed two acquisitions each in 2024 and in 2023. The financial results of these acquisitions have been included since the respective date of each acquisition. Our 2024 and 2023 acquisitions were within the Digital Imaging and Instrumentation segments. See Note 3 for additional information about our 2024 and 2023 business acquisitions. Subsequent to the end of the year, we have completed two acquisitions. See Note 18 for additional information.
Our Business Segments
Our businesses are aligned in four segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems. Additional financial information about our business segments can be found in Note 4.
Percentage of Total Net Sales
Aerospace and Defense Electronics 14 % 13 % 12 %
Engineered Systems 8 % 8 % 8 %
Digital Imaging Segment
Our Digital Imaging segment includes high-performance sensors, cameras, and systems, within the visible, infrared, ultraviolet and X-ray spectra for use in industrial, scientific, government, space, defense, security, medical and other applications. We 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.
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 and acoustic-based gas leak detection, laboratory research and maritime thermal imaging. We develop high-resolution, low-dose X-ray sensors as well as high-power microwave and high-energy X-ray subsystems for medical, dental and industrial applications. We also provide instruments for the measurement of physical properties and maritime products for recreational and commercial customers globally.
We provide research and engineering capabilities primarily in the areas of electronics, materials, optical systems, and information science to military, aerospace and industrial customers, as well as to various businesses throughout Teledyne.
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For defense applications, we also develop and manufacture multi-spectrum electro-optic/infrared imaging systems and associated products such as lasers, optics, and radars, CBRNE (“Chemical, Biological, Radiological, Nuclear and Explosive detectors”) and unmanned air and ground systems. These sensors and instruments can be deployed as integrated solutions and with advanced target detection, identification and classification capabilities. We provide solutions for threat protection, military maneuver and force protection, border controls and homeland security, law enforcement, public safety, and commercial applications worldwide.
Instrumentation Segment
Our Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other applications, and electronic test and measurement equipment. We also provide power and communications connectivity devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments. Below is a description of the product lines that comprise the Instrumentation segment.
Marine Instrumentation
We offer a variety of products designed for use in harsh underwater environments, instruments that measure currents and other physical properties in the water column, systems that create acoustic images of objects beneath the water’s surface, including the bottom of a body of water, instruments for navigation and sensors that determine the geologic structure below the bottom. We also design and manufacture vehicles that utilize and transport these sensors over and beneath the water’s surface.
We provide a broad range of end-to-end undersea interconnect solutions to the offshore oil and gas, naval defense, oceanographic and telecom markets. We manufacture subsea, wet-mateable electrical and fiber-optic interconnect systems and subsea pressure vessel penetrators and connector systems with glass-to-metal seals. Our waterproof and splash-proof neoprene and glass reinforced epoxy connectors and cable assemblies are used in underwater equipment, submerged monitoring systems and other industrial and defense applications. Other marine products used by the U.S. Navy and commercial customers include acoustic modems for networked underwater communication and optical underwater cameras and LED lighting sources.
We manufacture complete autonomous-operated underwater vehicles systems, including underwater gliders. Glider applications range from oceanographic research to persistent surveillance systems for the U.S. Navy. We also design and manufacture remotely operated underwater vehicles used in maritime security, military, search and rescue, aquaculture, and scientific research applications.
Environmental Instrumentation
We offer a wide range of products used for environmental monitoring. Our instrumentation monitors trace levels of gases such as sulfur dioxide, carbon monoxide, oxides of nitrogen and ozone, as well as particulate pollution, in order to measure the quality of the air we breathe. We supply monitoring systems for the detection, measurement and automated reporting of air pollutants from industrial stack emissions, ozone generators and other process gas monitoring instruments. We also supply water monitoring systems for wastewater monitoring and detection of water-borne pathogens and contaminants of concern. Our instrumentation is used to detect a variety of water quality parameters and in applications found in petrochemical and refinery facilities.
We also manufacture and provide complementary laboratory instrumentation including through laboratory automation and sample introduction systems that automate the preparation and concentration of organic samples.
Our advanced elemental analysis products are used by environmental and quality control laboratories to detect trace levels of inorganic contaminants in water, foods, soils and other environmental and geological samples. We manufacture high-precision pumps utilized in a wide variety of analytical, research clinical, preparative and fluid-metering applications. In addition, we manufacture liquid chromatography instruments and accessories for the purification of organic compounds, which include highly sensitive evaporative light scanning detectors, primarily for pharmaceutical laboratories involved in drug discovery and development. We manufacture instruments that are used by pharmaceutical scientists to evaluate the release rate characteristics and physical properties of various dosage forms to ensure the safety and efficacy of medicines worldwide.
Finally, we manufacturefixed and portable industrial gas and flame detection instruments used in a variety of industries including petrochemical, power generation, oil and gas, food and beverage, mining and wastewater treatment.
Test and Measurement Instrumentation
Our test and measurement products provide capabilities that enable the designers of complex electronic systems in many industry sectors to bring their products to market reliably and quickly. Our customers use our equipment in the design, development, manufacture, installation, deployment and operation of electronics equipment in a broad range of industries, including aerospace and defense, internet infrastructure, automotive, industrial, computer and semiconductor, consumer electronics mobile and power electronics.
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We develop, manufacture, sell and license high-performance oscilloscopes, high-speed protocol analyzers, generators and emulators, 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.
Design and test engineers use our protocol analysis solutions, including traffic generators and emulators, to accurately and reliably monitor and test high data-rate communication interfaces and diagnose operational problems in a wide range of systems and devices to ensure that they comply with industry standards, including in the areas of cloud computing, data storage and networks. Our leadership in USB and video technologies provides a unique base to service the mobile, internet of things, automotive and consumer electronics test markets. We also produce protocol validation and test tools for high-performance solid-state storage devices used in both enterprise-grade data centers and in consumer computing applications. Our interposers and software options allow engineers to get a complete picture when testing the PCI Express interface standard by enabling a link between an oscilloscope and a protocol analyzer to show a synchronized view of both the physical and protocol layers.
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.
Aerospace and Defense Electronics Segment
Our Aerospace and Defense Electronics segment provides sophisticated electronic and optical 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 countermeasures, weapon systems, space, wireless and satellite communications and terminals and test equipment.
We provide onboard avionics systems and ground-based applications that allow civil and military aircraft operators to access, manage and utilize their data more efficiently. Our products include aircraft data and connectivity solutions, hardware systems, and software applications used by commercial airlines and the U.S. military, and we provide services related to our products.
Engineered Systems Segment
Our Engineered Systems segment provides innovative systems engineering, integration and advanced technology development, and complex manufacturing solutions for defense, space, environmental and energy applications. This segment also designs and manufactures electrochemical energy systems and manufactures specialty electronics for demanding military applications.
Our core business base includes National Aeronautics and Space Administration (“NASA”), the U.S. Department of Defense, the U.S. Department of Energy, foreign militaries and commercial customers.
Customers
We have a broad and diversified customer base in the various markets we serve. No commercial customer in 2024 or 2023 accounted for more than 10% of net sales for any of our segments or for the total Company.
Total sales to international customers were $2,731.1 million in 2024 and $2,740.1 million in 2023. Of these net sales to international customers, our businesses in the United States accounted for $950.0 million in 2024 and $900.5 million in 2023.
In both 2024 and 2023, we sold products to customers in over 100 foreign countries. Approximately 90% of our net sales to international customers during 2024 were made to customers in 30 foreign countries. In 2024, the top five countries for sales to international customers, ranked by net sales, were the United Kingdom, China, Germany, Japan and France and represented approximately 19% of our total net sales. There were no sales to individual countries outside of the United States in excess of 10% of our sales.
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Information on our net sales to the U.S. Government, including direct sales to agencies as a prime contractor and indirect sales as a subcontractor, was as follows (in millions):
Total U.S. Government sales as a percent of total net sales 24.3 % 24.5 % 24.9 %
Our principal U.S. Government customer is the U.S. Department of Defense, with total net sales of $1,062.7 million and $1,081.3 million in 2024 and 2023, respectively. With the exception of the Engineered Systems segment, no U.S Government program in 2024 or 2023 accounted for more than 10% of net sales for any of our segments or for the total Company. In 2024 and 2023, the largest program with the U.S. Government within the Engineered Systems segment was the Marshall Operations, Systems, Services, and Integration II (“MOSSI II”) contract with the NASA Marshall Space Flight Center, which represented approximately 16% and approximately 17% of Engineered Systems net sales, respectively.
As described in greater detail under Item 1A. Risk Factors, there are risks associated with doing business with the U.S. Government. In 2024, approximately 78% of our U.S. Government prime contracts and subcontracts were fixed-price type contracts, compared to 79% in 2023, with the remaining U.S. Government contracts related to cost-reimbursable contracts (“cost-type”) contracts. Under fixed-price type contracts, we bear the inherent risk that actual performance cost may exceed the fixed contract price. Such contracts are typically not subject to renegotiation of profits if we fail to anticipate technical problems, estimate costs accurately or control costs during performance. Additionally, U.S. Government contracts are subject to termination by the U.S. Government at its convenience, without identification of any default. When contracts are terminated for convenience, we can recover costs incurred or committed, settlement expenses and profit on work completed prior to termination. During 2024 and 2023, contracts terminated by the U.S. Government did not materially impact our results of operations.
Many of our U.S. Government contracts are awarded after a competitive bidding process in which we seek to emphasize our ability to provide superior products and technical solutions.
Raw Materials and Suppliers
Most raw materials used in our operations are readily available. 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. While some of our businesses provide services, for those businesses that sell products, a portion of the value that we provide is labor-oriented, such as design, engineering, assembly and test activities. In manufacturing our products, we use our own production capabilities and third-party suppliers and subcontractors, including international sources. 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.
Marketing
Our sales and marketing approach varies by segment and by products within our segments. A shared fundamental tenet is the commitment to work closely with our customers to understand their needs, with an aim to secure preferred supplier and longer-term relationships. Given the technical nature of our products, we conduct our marketing activities through a direct internal sales force as well as third-party sales representatives and distributors. Several Teledyne businesses, including across our segments, are marketing and selling products collaboratively to certain customers.
Competition
Because of the diversity of products sold and the number of markets we serve, we encounter a wide variety of competitors, none of which we believe offer the same product and service lines or serve all of the same markets as we do. Although we have certain advantages that we believe help us compete effectively in our markets, each of our markets is highly competitive. Our businesses compete on quality, product performance and reliability, technical expertise, price and service. Many of our competitors have, and potential competitors could have, greater name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution capabilities and greater financial, technological and personnel resources than we do.
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Intellectual Property
We own and control various intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and copyrights. We license patents, technology and other intellectual property rights owned and controlled by others. Similarly, other companies license patents, technology and other intellectual property rights owned and controlled by us. We do not consider any single patent or trademark, or any group of them, essential either to Teledyne’s business as a whole or to any one of our reportable segments. The annual royalties received or paid under license agreements are not significant to any of our reportable segments or to our overall operations.
Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. We do not expect the expiration or termination of these patents, patent applications and license agreements to have a material adverse effect on our business, results of operations or financial condition.
Environment and Other Government Regulations
Information with respect to environmental matters is set forth under “Other Matters – Environmental” of “Item 7. Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 17. No material capital expenditures relating to environmental compliance are presently anticipated. See Note 17 for additional discussion of other government regulations.
Sustainability
Teledyne continues to focus on developing solutions to address sustainability and climate challenges facing humanity today. Many of our products directly support sustainability and climate challenges. We provide a broad range of precision measurement technologies for environmental monitoring and climate research. Our sensors and instruments are deployed everywhere: in space, on aircraft and drones, on land, on the sea surface, in the water column, and on the seafloor. They operate around the clock, measuring greenhouse gases from space, precisely monitoring air and water quality throughout the world, and continuously profiling the Earth’s oceans. 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.
The prominence and importance of sustainability and Environmental, Social and Governance (“ESG”) initiatives have dramatically increased. In November 2022, we published our second Corporate Social Responsibility (“CSR”) report, in which we disclose and highlight some of our most recent efforts focused on sustainability and ESG. We published supplements to the CSR report in 2023 and 2024 to include updated financial information and other information in the report. The CSR report together with its supplements, which is not incorporated by reference in this document, is available at the Corporate Social Responsibility link on our website at www.teledyne.com under the tab “Who We Are”. The CSR Report and its supplements include data on Teledyne’s combined direct emissions (“Scope 1”) and indirect emissions from purchased energy (“Scope 2”), workplace safety, water usage, waste generation and recycling and workplace demographics.
In 2021, we compiled the first global inventory of our greenhouse gas (“GHG”) emissions (starting with fiscal year 2020) and have developed a GHG monitoring and management plan. We have set a goal to reduce our combined Scope 1 and Scope 2 in company operations, normalized for revenue, by 40% from 2020 levels by the end of 2040. Going forward, we will continue to evaluate our emission reduction goals, while at the same time providing the tools and technologies enabling environmental science and climatology across the globe. 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.
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, sustainability and other ESG matters.
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Human Capital
We consider our relations with our employees to be good. At December 29, 2024, our total workforce consisted of approximately 14,900 employees in 36 countries. Workforce demographics for various regions are provided below:
Gender (Self-Reported)
We have a stable and long-tenured workforce. In 2024, our voluntary employee turnover was approximately 8%. As of December 29, 2024, the average years of service of our employees was approximately 10 years.
Employees are vital to the success of our growth strategy. Our goal is to maintain a safe, hospitable and inclusive work environment in which every employee is encouraged to contribute to the success of the company. We are focused on attracting, developing, and retaining employees through competitive compensation and benefits, workforce and management development, succession planning, corporate culture and leadership quality, in compliance with applicable regulations. We strive to recruit the best possible candidate for each role.
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. The majority of our employees (including all full-time employees in the United States, Canada and the United Kingdom) have access to our employee assistance program which includes third-party counseling and mental health services at no cost to the employee when life events impact an employee.
We are committed to identifying and developing the talents of our next generation of leaders. On an annual basis, we conduct an organization and leadership review for segment, business unit, and function leaders, focusing on our high performing and high potential talent and succession for our most critical roles. From this review, individualized development and retention programs are implemented or revised as needed. We also provide additional opportunities for our existing employees to enhance their careers. We invest in employee skills development in various ways, including through educational expense reimbursement. 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. We provide courses, webinars, and certification programs and targeted training programs on management, technical competencies, soft skills development, and compliance. Select, high-potential employees also receive strategic and operational leadership skills development through our leadership development program.
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. Securities and Exchange Commission (the “SEC”) at www.sec.gov. We will provide, free of charge, a paper copy of any report we file with the SEC (without exhibits) upon written request to Melanie S. Cibik, Executive Vice President, General Counsel, Chief Compliance Officer and Secretary, at Teledyne Technologies Incorporated, 1049 Camino Dos Rios, Thousand Oaks, California 91360-2362. 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.
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Item 1A. Risk Factors
Risk Factors
The following discussion sets forth the material risk factors that could affect Teledyne’s financial condition and operations. You should not consider any descriptions of these factors to be a complete set of all potential risks that could affect Teledyne. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect our business, results of operations, financial condition, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.
Risks Related to our Business and Industry
A possible recession in the United States or globally may adversely affect us.
We sell products and services to customers in industries that are sensitive to the level of general economic activity and consumer spending habits. If another recession emerges, either globally or in the United States, 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.
Acquisitions and our ability to make acquisitions involve inherent risks that may adversely affect our operating results and financial condition.
Our growth strategy includes acquisitions. Acquisitions involve various inherent risks, such as:
•our ability to assess accurately the value, strengths, weaknesses, internal controls, contingent and other liabilities and potential profitability of acquisition candidates;
•difficulties in integrating acquired businesses, including the potential loss of key personnel from an acquired business, our potential inability to achieve identified financial, operating and other synergies anticipated to result from an acquisition, and integration issues associated with internal controls of acquired businesses;
•the diversion of management’s attention from our existing businesses;
•the potential impairment of assets;
•potential unknown liabilities associated with a business that we acquire or in which we invest, including environmental liabilities;
•new and proposed regulations limiting the enforcement of noncompetition and nonsolicitation agreements;
•production delays associated with consolidating acquired facilities and manufacturing operations;
•pre-existing vulnerabilities, undetected malware and access management issues at the acquired business and its supply chain;
•the incurrence of significant transaction costs, including for acquisitions which we may not complete; and
•the inadequacy of indemnification, insurance, escrows, holdbacks or other forms of protection for liabilities of the acquired company.
If we are unable to make acquisitions our future growth may be adversely impacted. Our ability to make acquisitions depends on a number of factors, including the availability of potential acquisition candidates at reasonable prices, competition from other bidders, the ability to obtain regulatory approvals, including under merger control and foreign direct investment laws, and the availability of debt and equity financing, among other factors. For additional discussion of business acquisition, see the discussion under “Item 7. Management’s Discussion and Analysis of Operations and Financial Condition” and Note 3.
Higher interest rates and other factors could cause our customers to reduce capital spending, which could adversely impact us.
Higher interest rates may reduce capital spending by our existing and potential customers, which could result in lower sales of our products.
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Increased prices for components and raw materials used in our products and higher labor and shipping costs could adversely impact our profitability.
In recent years, inflation and supply chain constraints resulted in sustained increases in the prices we pay for many of the components and raw materials used in our products. In addition, we have experienced higher labor costs due to increased competition for personnel in many regions in which we operate as well as general inflationary conditions, and higher shipping costs due to labor and rising energy prices. 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.
We have experienced component and raw material shortages in the past that impacted our ability to manufacture and ship all the product for which we have demand, and these constraints may continue in the future.
Our business in the recent past was impacted by interruptions in the supply chain, due in part to the COVID pandemic, a resumption of strong worldwide demand for electronic products and components across a number of end markets, and interruption in supplier operations. As a result, we experienced delivery delays and shortages of certain components and raw materials needed for many of the products we manufacture. Any such delays in the future 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.
We may not have sufficient resources to fund all future research and development and capital expenditures.
In order to remain competitive, we must make substantial investments in research and development of new or enhanced products and continuously upgrade our process technology and manufacturing capabilities. Our research and development efforts primarily involve engineering and design related to improving existing products and developing new products and technologies in the same or similar fields. We may be unable to fund all of our research and development and capital investment needs or possible strategic acquisitions of businesses or product lines. Our ability to raise additional capital will depend on a variety of factors, some of which will not be within our control, including the existence of bank and capital markets, investor perceptions of us, our businesses and the industries in which we operate, and general economic conditions. Failure to successfully raise needed capital or generate cash flow on a timely or cost-effective basis could have a material adverse effect on our business, results of operations and financial condition.
We may be unable to successfully introduce new and enhanced products in a timely and cost-effective manner or increase our participation in new markets, which could harm our profitability and prospects.
Our operating results depend in part on our ability to introduce new and enhanced products on a timely basis. Some of our businesses are engaged in major development activities. If we fail to execute on these development activities in a timely manner, our business could be negatively impacted. Some products, especially those sold by our Test and Measurement group, have short lifecycles that require frequent updating and new product innovation. We may not be able to develop and introduce new or enhanced products in a timely and cost-effective manner or develop and introduce products that satisfy customer requirements.
Increasing competition could reduce the demand for our products and services.
Each of our markets is highly competitive. Many of our competitors have, and potential competitors could have, greater name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution capabilities and greater financial, technological and personnel resources. New or existing competitors may also develop new technologies that could adversely affect the demand for our products and services. We have been experiencing increased competition for some of our key products. Furthermore, some of our patents have expired or are expiring, which could open up further competition. Additionally, some of our customers have been developing competing products or electing to vertically integrate and replace our products with their own.
Low-cost competition from China and other developing countries could also result in decreased demand for our products. Increasing competition could reduce the volume of our sales or the prices we may charge, which would negatively impact our revenues. We are experiencing increasing competition in many of our businesses, especially our digital imaging and instrumentation businesses, from Chinese manufacturers that offer lower cost products with increasingly advanced technical capabilities.
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Risks Related to International Operations
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.
In 2024 and 2023, sales to customers outside the United States accounted for approximately 48% and 49% of total net sales, respectively. In both 2024 and 2023, we sold products to customers in over 100 foreign countries. In 2024, the top five countries for sales to international customers, ranked by net sales, were the United Kingdom, China, Germany, Japan and France and represented approximately 19% of our total net sales. We anticipate that future sales to international customers will continue to account for a significant and increasing percentage of our revenues.
Risks associated with international sales and operations include, but are not limited to:
•political and economic instability, including the war between Ukraine and Russia, the conflict in Israel and neighboring region and potential hostilities between China and Taiwan;
•additional deterioration in United States - China and United States - Russia relations;
•existing and intensifying global economic sanctions and export controls, including export controls related to China, sanctions related to Russia, and increasingly complex regulations related to exports of marine instruments, digital imaging and other products;
•our ability to obtain export licenses in a timely manner;
•unauthorized release of export-controlled or otherwise protected information;
•compliance with anti-corruption laws, including the U.S. Foreign Corrupt Practices Act and the UK Bribery Act;
•changes in tax laws and tariff rates;
•protection and enforcement of intellectual property rights;
•compliance with non-U.S. data protection laws, including the EU General Data Protection Regulation (“GDPR”) in the European Union and the Personal Information Protection Law in China;
•new and emerging non-U.S. regulations relating to ESG and CSR matters, which could be costly to comply with;
•international terrorism;
•transportation, including piracy in international waters;
•currency exchange rate fluctuations; and
•challenges relating to managing a global workforce with diverse cultures, backgrounds and labor laws.
The impact of these factors is difficult to predict, but one or more of them could have a material adverse effect on our financial position, results of operations, or cash flows.
Currency exchange rate fluctuations may increase the cost of our products to international customers and therefore reduce our competitive position. In addition to making our products manufactured in the United States more expensive, a stronger dollar impacts the value of our foreign profits when translated back into dollars. Since we report our financials in U.S. dollars, volatility in the strength of the U.S. dollar could have a material impact on our reported earnings.
Continued economic slowdown in China may adversely affect us.
Our net sales to China-based customers represented approximately 4% of total revenues in 2024 and 2023, respectively. Economic growth in China has slowed since the COVID pandemic. Continued growth in many of our businesses, including those in our Environmental Instrumentation group, could be negatively impacted if another economic downturn occurs in China.
Escalating global trade tensions and the adoption or expansion of tariffs and trade restrictions could negatively impact us.
In early 2025, the new U.S. Presidential administration announced significant new tariffs on foreign imports into the United States, specifically from Mexico and Canada, all of which were subsequently postponed prior to becoming effective, and China, and has proposed additional new tariffs that may be implemented in the future, including on member states of the European Union and on commodities like steel, aluminum and titanium. The administration has announced additional tariffs on steel and aluminum imports and has threatened to raise tariffs on semiconductors, pharmaceuticals and other products. High tariffs generally increase the cost of materials for our products, which could result in our products becoming less competitive or generating lower margins. The extent and duration of increased tariffs and the resulting impact on general economic conditions
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and on our business are uncertain and depend on various factors, such as negotiations between the United States and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected markets. Uncertainty around whether and the extent to which new tariffs will be imposed could also impact our supply chain and the cost of our products. We have significant operations in Canada and in member states of the European Union, which could be negatively impacted by a trade war with the United States. With high tariffs imposed on our products, we may also need to find new suppliers and components for our products, which could result in production delays. These countries could impose retaliatory tariffs on imports from the United States. To the extent our products are the subject of retaliatory tariffs, customers may begin to seek domestic or non-U.S. sources for products that we sell, or be pressured or incentivized by foreign governments not to purchase U.S.-origin goods, which could harm our future sales in these markets. Further escalation of the “trade war” between the United States and China, or new trade wars between the United States and other countries, could result in continued or increased tariffs.
New and expanding economic sanctions and export restrictions could impact our ability to sell our products.
Recent export restrictions have had a significant impact on business. A number of well-established customers and suppliers have become listed on government restricted party lists. In particular, U.S. export enforcement agencies have placed several Chinese companies and many of their international subsidiaries on such lists, prohibiting the export to them of most commercial and dual-use items subject to the Export Administration Regulations. Furthermore, the United States has imposed certain sectoral sanctions to limit Chinese development and manufacturing of semiconductor and supercomputer technology and have imposed comprehensive restrictions of both U.S.-origin items as well as non-U.S. items manufactured from U.S.-origin equipment. In response, China has unveiled restrictions on exports from China of certain materials and components, including gallium and germanium which are used in semiconductor manufacturing and which has impacted the production and pricing of some of our digital imaging products. Many key suppliers to our businesses, whether direct or indirect, are based in China. These and other tariffs, trade restrictions and retaliatory measures could result in revenue reduction, price increases on material used in our products or significant production delays, which could adversely affect our business, financial condition, operational results and cash flows.
Sanctions on Russia imposed by multiple countries and related Teledyne policies have led to a comprehensive ban on commercial activity with that market.
Global conflicts could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations.
Conflicts around the world could negatively impact our operations.
The continuing conflict between Russia and Ukraine has led to energy market disruptions and shortages which could result in the shutdown of or slowdowns at our manufacturing facilities, particularly those located in Europe, and may result in substantial increases in the cost of energy.
The conflict in Israel and neighboring region could have a material impact on our business, especially if it escalates into a wider regional conflict. The conflict has resulted in some supply delays resulting from disruptions in shipping routes using the Red Sea and Suez Canal and could lead to higher energy prices and disruptions for suppliers and customers located in the region. Pro-Palestinian activist groups have targeted the facilities of defense companies, including our sites. Actions taken by these groups have the potential to disrupt activity and temporarily halt production at the sites targeted.
A military conflict between China and Taiwan would likely have a material adverse impact on our ability to sell products to customers in these areas and on our supply chain.
In-country manufacturing could result in lower demand for our products.
Many countries, including China, India and Saudi Arabia, have bolstered laws or regulations requiring the use of local suppliers and in-country manufacturing, which has had a negative impact on Teledyne’s revenues of instrumentation, commercial aerospace, marine and digital imaging products, as we currently have limited manufacturing operations in these countries. Several of our competitors in countries like China may be subsidized by state actors and as a result may be able to offer competing products at much lower prices than we can.
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Risks Related to our Markets
We sell products in markets that are cyclical in nature and a downturn in one or more of these markets could materially impact our financial results.
We develop and manufacture products for customers in the energy exploration and production markets, commercial aerospace markets, the semiconductor industry, and the consumer electronics, telecommunications, automotive and healthcare industries; each of which has been cyclical, exhibited rapid changes and suffered from fluctuating market demands. A cyclical downturn in one or more of these markets may materially affect future operating results. The current cyclical downturn in the semiconductor market has impacted the results of our digital imaging and instrumentation businesses.
Our revenue from U.S. Government contracts depends on the continued availability of funding from the U.S. Government, and, accordingly, we have the risk that funding for our existing contracts may be canceled or diverted to other uses or delayed or that funding for new programs will not be available. Similarly, sales to the European defense market depends on continued funding from European governments.
We perform work on a number of contracts with the U.S. Department of Defense and other agencies and departments of the U.S. Government including subcontracts with government prime contractors. Sales under contracts with the U.S. Government, including sales under contracts with the U.S. Department of Defense, as prime contractor or subcontractor, represented 24.3% and 24.5% of our total net sales in 2024 and 2023, respectively. Performance under government contracts has inherent risks that could have a material effect on our business, results of operations, and financial condition.
Government contracts are conditioned upon the continuing availability of Congressional appropriations, and the failure of Congress to appropriate funds for programs in which we participate could negatively affect our results of operations. U.S. Government operation under a continuing resolution could impact the business by preventing new programs from starting as planned and by limiting funding on existing programs. U.S. Government shutdowns have resulted in delays in anticipated contract awards and delayed payments of invoices for several of our businesses, and any new shutdown or increase in shutdowns could have similar or worse effects. 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.
The new Presidential administration has announced plans to significantly cut federal spending and the size of the federal government and has taken steps to reduce and reorganize the federal workforce at many agencies. It is unclear how such cuts, if implemented, could impact our current and future business with the U.S. government. If cuts to government personnel lead to staff shortages or disorganization at certain federal agencies, we may experience delays in obtaining contract awards or payments, the loss of current or future contracts, or delays in obtaining necessary permits, licenses or registrations.
Rising inflation and other factors also may result in a shift in U.S. defense spending between various programs based on priorities, which may result in a reduction or loss of expected revenues on programs in which we participate.
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.
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. These delays by the U.S. Government could impact our revenues. 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.
Further, most of our U.S. Government contracts are subject to termination by the U.S. Government either at its convenience or upon the default of the contractor. Termination for convenience provisions provides only for the recovery of costs incurred or committed, settlement expenses, and profit on work completed prior to termination. Termination for default clauses imposes liability on the contractor for excess costs incurred by the U.S. Government in re-procuring undelivered items from another source. During 2024 and 2023, contracts terminated by the U.S. Government have not materially impacted our results of operations.
We are seeing increased sales into the European defense market as European defense budgets increase as a result of the conflict in Ukraine, threats from Russia and other geopolitical instability. If European government funding on defense programs declines, or if defense spending priorities of the North Atlantic Treaty Organization (“NATO”)-member countries change with respect to Ukraine, existing and potential future sales would be negatively impacted.
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Our U.S. Government contracting business is subject to government contracting regulations, including increasingly complex regulations on cybersecurity, and our failure to comply with such laws and regulations could harm our operating results and prospects.
Our U.S. Government contracting businesses, like other government contractors, are subject to various audits, reviews and investigations (including private party “whistleblower” lawsuits) relating to our compliance with applicable federal and state laws and regulations. More routinely, the U.S. Government may audit the costs we incur on our U.S. Government contracts, including allocated indirect costs. Such audits could result in adjustments to our contract costs. Any costs found to be improperly allocated to a specific contract will not be reimbursed, and such costs already reimbursed would need to be refunded. We have recorded contract revenues based upon costs we expect to realize after final audit. In a worst case scenario, should a business or division be charged with wrongdoing, or should the U.S. Government determine that the business or division is not a “presently responsible contractor,” that business or division, and conceivably our Company as a whole, could be temporarily suspended or, in the event of a conviction, could be debarred for up to three years from receiving new government contracts or government-approved subcontracts. In addition, we could expend substantial amounts defending against such charges and in damages, fines and penalties if such charges were proven or were to result in negotiated settlements. Routine audits by U.S. Government agencies of Teledyne’s various procurement and accounting systems have the potential to result in disapproval of the audited systems by the administrative contracting officer. Disapproval could significantly impact cash flow, as up to 10% may be withheld from payments, as well as significantly impact potential contract awards and increase audit oversight of individual contract proposals.
The Department of Defense as well as other U.S. Government contracting agencies have adopted rules and regulations requiring contractors to implement a set of cybersecurity measures to attain the safeguarding of contractor systems that process, store, or transmit certain information. 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 also are required to procure certain materials and parts from supply sources approved by the U.S. Government. The inability of a supplier to meet our needs, the failure to obtain such approvals or the appearance of counterfeit parts in our products could have a material adverse effect on our financial position, results of operations or cash flows. Such failure or inclusion could result in claims under the False Claims Act, which could lead to civil and criminal penalties and disbarment of the applicable business unit from doing business with the U.S. Government, among other things.
Risks associated with counterfeit parts could be exacerbated as a result of supply chain shortages or due to parts becoming obsolete. The Company is working to resolve a civil investigation by the U.S. Department of Justice relating to an ejection seat sequencer program and deliveries to the U.S. Government between 2006 and 2018 in which the use of counterfeit parts is alleged.
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We generate revenue from companies in the oil and gas industry, especially the offshore oil and gas industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and gas prices, which has in the past impacted and can impact in the future our financial results.
Teledyne manufactures seismic energy sources, interconnects and data acquisition products that are used in offshore energy exploration. 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;
•the ability of the Organization of Petroleum Exporting Countries (“OPEC”), to set and maintain production levels;
•the level of production by non-OPEC countries;
•the war between Russia and Ukraine, including the implementation of price controls on Russian oil exports and restrictions on oil and gas exports imposed by Russia;
•conflict in the Middle East, including disruption of shipping lanes in the Red Sea;
•the ability of oil and gas companies to generate or raise funds for capital expenditures;
•domestic and foreign tax policy;
•laws and governmental regulations that restrict exploration and development of oil and gas in various offshore jurisdictions or the use of hydraulic fracturing;
•laws and governmental regulation that restrict the use of hydraulic fracturing;
•technological changes;
•the political environment of oil-producing regions;
•the price and availability of alternative fuels; and
•climate change regulations that provide incentives to conserve energy, use electric vehicles or use alternative energy sources, or that impose restrictions on the development and extraction of oil and gas.
The airline industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations could suffer.
Our commercial aerospace group produces products for use in commercial aviation. Governmental agencies throughout the world, including the Federal Aviation Administration (“FAA”), prescribe standards and qualification requirements for aircraft components, including virtually all commercial airline and general aviation products. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. If any material authorization or approval qualifying us to supply our products is revoked or suspended, then sale of the product would be prohibited by law, which would have an adverse effect on our business, financial condition and results of operations.
The FAA and equivalent regulatory agencies have increasingly focused on the need to assure that airline industry products are designed with sufficient cybersecurity controls to protect against unauthorized access or other unwanted compromise. A failure to meet these evolving expectations could negatively impact sales into the industry and expose us to legal or contractual liability.
Changes in production rates for major aircraft manufacturers, like Boeing and Airbus, impact our commercial aerospace businesses. Boeing and Airbus recently have struggled to meet delivery targets due to supply chain issues and other challenges. In January 2024, the FAA ordered the temporary grounding of Boeing 737-9 MAX aircraft as a result of an incident on a Boeing 737-9 MAX where it lost a “door plug.” The FAA capped the output of Boeing 737-MAX aircraft until quality control targets are reached. A strike by machinists at Boeing in 2024 lasted almost two months and resulted in a pause in aircraft production. These factors have negatively impacted our sales to Airbus and Boeing and any future pauses or reductions in manufacturing could negatively impact our business.
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A change in policy direction related to environmental regulations and green energy could negatively impact demand for our monitoring instruments and energy systems products.
Many of our products are used by industrial customers and municipalities to monitor ambient air quality, water quality and gas and particulate emissions in order comply with regulatory requirements issued by the U.S. Environmental Protection Agency and other federal agencies. The new Presidential Administration has signaled its intent to scale back many of these regulations, which could result in decreased demand for our products. The new Presidential Administration has also signaled its intent to roll back green energy initiatives, which could harm our energy systems business that manufactures hydrogen-based energy generation systems.
Risks related to Finance and Tax Matters
Our indebtedness, and any failure to comply with our covenants that apply to our indebtedness, could materially and adversely affect our business.
As of December 29, 2024, we had $2,665.0 million total outstanding indebtedness in senior notes. As of December 29, 2024, no borrowings were outstanding under our $1.20 billion credit facility. Teledyne incurred a significant amount of indebtedness in connection with the financing of the acquisition of FLIR in 2021. The agreements we entered into with respect to our indebtedness, including the agreements we entered into to finance the FLIR acquisition and in connection with the assumption of FLIR’s existing senior notes, contain negative covenants, that, subject to certain exceptions, include limitations on indebtedness related to our credit facility, 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 may also have the effect, among other things, of limiting our ability to obtain additional financing, if needed, reducing the funds available to make acquisitions or capital expenditures, reducing our flexibility in planning for or reacting to changes in our business or market conditions, and making us more vulnerable to economic downturns and adverse competitive and industry conditions. 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. Any future indebtedness incurred under our credit facility will expose us to interest rate risk.
We may not be able to service our debt obligations.
Our ability to meet our interest expense and debt service obligations will depend on our future performance, including the cash we generate from operating activities, which will be affected by financial, business, economic and other factors, including potential changes in laws or regulations, industry conditions, industry supply and demand, customer preferences, the success of our products and pressure from competitors. If we are unable to meet our debt service obligations or should we fail to comply with our financial and other negative covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities. 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.
The credit rating of Teledyne could be downgraded, which may increase borrowing costs.
The credit ratings of Teledyne’s debt could 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. A ratings downgrade could also limit our access to certain sources of debt financing.
Higher tax rates may harm our results of operations and cash flow.
Increases in the United States on the taxation of foreign income and expense may harm our results of operations and cash flow. The relative amount of income we earn in jurisdictions outside the United States could reduce our net income and increase our cash payments. Additionally, beginning in 2023, the United States has adopted a 15% corporate alternative minimum tax for certain large corporations. Teledyne does not expect to be subject to this tax in 2023 or 2024; however, Teledyne is closely monitoring the potential impact of the U.S. corporate minimum tax. Many other jurisdictions have also enacted corporate global 15% minimum tax rules, which applied to Teledyne beginning in 2024. Teledyne is monitoring the impact of these foreign minimum tax rules. Increased tax due to corporate minimum taxes in the United States or in other jurisdictions could reduce our net income and increase our cash payments.
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Changes in future business conditions could cause business investments, goodwill and other long-lived assets to become impaired, resulting in significant losses and write-downs that would reduce our operating income.
On December 29, 2024, Teledyne’s goodwill was $7,990.5 million and net acquired intangible assets were $2,012.9 million. We are required to test annually both acquired goodwill and other indefinite-lived intangible assets for impairment based upon a fair value approach, rather than amortizing the value over time. We have chosen to perform our annual impairment reviews of goodwill and other indefinite-lived intangible assets during the fourth quarter of each fiscal year. We are also required to test goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors. If the fair market value is less than the carrying value, including goodwill, we could be required to record a non-cash impairment charge. The valuation of reporting units requires judgment in estimating future cash flows, discount rates and estimated product life cycles. In making these judgments, we evaluate the financial health of the business, including such factors as industry performance, changes in technology and operating cash flows. As we have grown through acquisitions, the amount of goodwill and net acquired intangible assets is a significant portion of our total assets. As a result, the amount of any annual or interim impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken. Goodwill and acquired intangibles assets of recently acquired reporting units generally represent a higher inherent risk of impairment, which typically decreases as the businesses are integrated into the Company. We also may be required to record an earnings charge or incur unanticipated expenses if, as a result of a change in strategy or other reason, we were to determine the value of other assets had been impaired.
For additional discussion of business acquisitions, goodwill and other long-lived assets, see the discussion under “Item 7. Management’s Discussion and Analysis of Operations and Financial Condition” and Note 3.
Risks related to climate change
Climate change may disrupt or adversely impact 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, droughts and rising sea levels, 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. 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 GHG or other emissions, establish a carbon tax or increase fuel or energy taxes. We have also voluntarily announced goals to reduce our GHG emissions by a target date. These 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. Proposed rules under the Federal Acquisition Regulation and similar rules in other jurisdictions such as the United Kingdom require or will require major contractors to disclose enhanced information on GHG emissions and commit to GHG emission reduction targets. If we are unable to comply with these rules, we may be ineligible to receive future contract awards from the United States and other governments. The inconsistent international, regional and/or national requirements associated with climate change regulations also create economic and regulatory uncertainty.
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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.
Risks related to Legal and Compliance Matters
Adverse findings in matters related to export control practices, including FLIR’s historical practices, could materially impact us.
Effective April 24, 2022, the United States Department of State’s Office of Defense Trade Controls Compliance (“DDTC”) closed the four-year Consent Agreement that had been entered into by FLIR Systems, Inc., to resolve various export allegations under the International Traffic in Arms Regulations (“ITAR”). In connection with this Consent Agreement and other export matters, FLIR and its successor by mergers, Teledyne FLIR, has enhanced the trade compliance program more broadly, implemented remedial measures and have undergone external and internal audits of the trade compliance program. Nonetheless, adverse disclosures and findings could cause additional expenses in connection with further remedial measures or potential penalties.
We have made other voluntary disclosures to the U.S. Department of State and the U.S. Department of Commerce, including to the Bureau of Industry and Security (“BIS”) with respect to Teledyne FLIR shipments of products from non-U.S. jurisdictions which were not licensed due to incorrect de minimis calculation methodology under the Export Administration Regulations. We have made voluntary disclosures to export authorities in jurisdictions outside the United States for certain potential violations of local export laws.
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 our financial position, results of operations or cash flows in and following the period in which such outcome becomes estimable or known.
We may not be able to enforce or protect our intellectual property rights, or third parties may claim we infringe their intellectual rights, each which may harm our ability to compete and thus harm our business.
Our ability to enforce and protect our patents, copyrights, software licenses, trade secrets, know-how, and other intellectual property rights is subject to general litigation risks, as well as uncertainty as to the enforceability of our intellectual property rights in various countries. When we seek to enforce our rights, we have found that various claims may be asserted against us, including claims that our intellectual property right is invalid, is otherwise not enforceable or is licensed to the party against whom we are asserting a claim. In addition, we may be the target of aggressive and opportunistic enforcement of patents by third parties. If we are not ultimately successful in defending ourselves against these claims in litigation, we may not be able to sell a product or family of products due to an injunction, or we may have to pay damages that could, in turn, harm our results of operations. Our inability to enforce our intellectual property rights under these circumstances may harm our competitive position and our business.
Product liability claims, product recalls and field service actions could have a material adverse effect on our reputation, business, results of operations and financial condition and we may have difficulty obtaining product liability and other insurance coverage.
As a manufacturer and distributor of a wide variety of products, including monitoring instruments, gas and flame detection instruments, products used in offshore oil and gas production, products used in transportation and commercial aviation, products used in maritime navigation and products used in medical devices (including X-ray detectors), our results of operations are susceptible to adverse publicity regarding the quality or safety of our products. Product liability claims challenging the safety of our products may result in a decline in sales for a product, which could adversely affect our results of operations. This could be the case even if the claims themselves are proven to be untrue or settled for immaterial amounts.
While we have general liability and other insurance policies concerning product liabilities and errors and omissions, we have self-insured retentions or deductibles under such policies with respect to a portion of these liabilities. Awarded damages could be more than our accruals. We could incur losses above the aggregate annual policy limit as well. We cannot ensure that, for 2025 and in future years, insurance carriers will be willing to renew coverage or provide new coverage for product liability.
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Product recalls can be expensive and tarnish our reputation and have a material adverse effect on the sales of our products. We cannot assure that we will not have additional product liability claims or that we will not recall any products.
We have been joined, among a number of defendants (often over 100), in lawsuits alleging injury or death as a result of exposure to asbestos. In addition, because of the prominent “Teledyne” name, we may continue to be mistakenly joined in lawsuits involving a company or business that was not assumed by us as part of our 1999 spin-off. To date, we have not incurred material liabilities in connection with these lawsuits. However, our historical insurance coverage, including that of our predecessors, may not fully cover such claims and the defense of such matters. Coverage typically depends on the year of purported exposure and other factors. Nonetheless, we intend to vigorously defend our position against these claims.
Teledyne Brown Engineering, Inc. and other Teledyne companies manufacture components for customers in the nuclear power market, including utilities and certain governmental entities. Certain liabilities associated with such products are covered by the Price-Anderson Nuclear Industries Indemnity Act and other statutory and common law defenses, and we have received indemnities from some of our customers. However, there is no assurance we will not face product liability claims related to such products or that our exposure will not exceed the amounts for which we have liability coverage or protection.
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.
Our manufacturing operations, including former operations, could expose us to material environmental liabilities. Additionally, companies that we acquire may have environmental liabilities that might not be accurately assessed or brought to our attention at the time of the acquisition.
Our 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 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 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.
For additional discussion of environmental matters, see the discussion under the caption “Other Matters – Environmental” of “Item 7. Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 17.
Other risks we face
Natural and man-made disasters could adversely affect our business, results of operations and financial condition.
Several of our facilities, as a result of their locations, could be subject to a catastrophic loss caused by earthquakes, hurricanes, tornados, floods, ice storms, rising sea levels, droughts or other natural disasters. Many of our production facilities and our headquarters are located in California and thus are in areas with above average seismic activity and may also be at risk of damage due to wildfire or mudslides. In November 2018 and again in 2024, wildfires impacted areas near our headquarters and principal research and development center in Thousand Oaks, California, resulting in temporary disruptions and evacuations of employees who lived nearby. Local utilities may impose blackouts during high fire risk weather conditions, which could result in disruptions to our businesses located in California, including our headquarters.
In the event of a major earthquake, tornado, hurricane or catastrophic event such as fire, power loss, telecommunications failure, vandalism, cyber-attack, war, terrorist attack or health epidemic (including COVID), we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our production, breaches of data security and loss of critical data, all of which could harm our business, results of operations and financial condition and have a material adverse impact on us. Starting in December 2022, a series of direct-action protests by political extremists on several of our facilities in the United Kingdom have resulted in trespass and vandalism and in some cases caused damage to our facilities and interrupted some productions lines for a period of time. Teledyne FLIR’s components operation is a single source supplier of certain sensors used throughout the FLIR business, and a disruption in business due to a disaster could have a material adverse impact on the businesses of Teledyne FLIR. Teledyne’s facilities in Quebec, Canada have been impacted by loss of electrical power caused by severe ice storms. In addition, we have manufacturing facilities in the southeastern United States and Texas that have been threatened or struck by major hurricanes. Our businesses located in Houston, Texas and Daytona Beach, Florida have been impacted in the past by hurricanes. Our facilities in Alabama, Florida, Nebraska, Tennessee and Virginia have also been threatened by tornados. If any of our California facilities were to experience a catastrophic earthquake or wildfire loss, or if any of our Alabama, Florida, Nebraska,
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Tennessee or Texas facilities were to experience a catastrophic hurricane, storm, tornado or other natural disaster, or if Teledyne’s facilities in Quebec experience long-term loss of electrical power, such event could disrupt our operations, delay production, shipments and revenue, result in large expenses to repair or replace the facility or facilities and could have a material adverse effect on our business. 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. Our existing disaster recovery and business continuity plans (including those relating to our information technology systems) may not be fully responsive to, or minimize losses associated with, catastrophic events.
Disasters also have an indirect adverse impact on our business. For example, in 2018, a fire at a Netherlands-based facility of a key supplier of printed circuit boards resulted in delivery disruptions to the electronics industry, including to businesses in our Digital Imaging segment.
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, fraud, and stealing, corrupting or restricting our access to data, among other activities. 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. We continue to train our personnel and update our infrastructure, security tools and processes, including processes for integration of newly acquired businesses, to protect against security incidents, including both external and internal threats, and to reduce the likelihood of their occurrence. 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 to fully mitigate its 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, damage our reputation, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business. We are subject to U.S. Department of Defense, Department of Homeland Security, and Department of Energy regulations applicable to certain types of data residing on or transiting through our information systems, and these regulations have been and will continue to be incorporated into certain U.S. Government contracts that we hold. To the extent that any security breach results in inappropriate disclosure of confidential or controlled information of employees, third parties or the U.S. Government, or any of the deployed security controls are deemed insufficient, we may incur liability or the loss of contracts or security clearances. As a result, we expect to continue to devote resources to the security of our information technology systems, operating technology systems, products and services. More resources may be required in the defense arena to the extent the U.S. Government increases its cybersecurity mandates. 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, or SEC regulations, and subject us to private consumer or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability. The systemic cybersecurity risk environment is elevated, in part by geopolitical conflicts and tensions, including the war between Ukraine and Russia, the war in Israel and neighboring regions, and increased supply chain-related cyber-risks. New technologies, including generative artificial intelligence (“AI”), quantum computing, new uses of QR codes and other innovations in digital communications, introduce new attack vectors, and new potential compromise scenarios, which malicious adversaries can exploit.
Issues in the development and use of artificial intelligence may result in reputational harm or liability, and failure to introduce new and innovative products that have artificial intelligence capabilities could put us at a competitive disadvantage.
We currently incorporate machine learning and AI capabilities into certain of our products and solutions and may seek to expand the use of AI in our offerings in the future. As with many innovations, AI presents risks, challenges, and unintended consequences that could affect our business. AI algorithms and training methodologies may be flawed. These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm. Further, incorporating AI could give rise to litigation risk and risk of non-compliance and unknown cost of compliance, as AI is an emerging technology for which the legal and regulatory landscape is not fully developed (including potential liability for breaching intellectual property or privacy rights or laws). While new AI initiatives, laws, and regulations are emerging and evolving, what they ultimately will look like remains uncertain, and our obligation to comply with them could entail significant costs, negatively affect our business, or entirely limit our ability to incorporate certain AI capabilities into our offerings.
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Additionally, leveraging AI capabilities to potentially improve internal functions and operations presents further risks and challenges. The use of AI to support business operations carries inherent risks related to data privacy and security, such as intended, unintended, or inadvertent transmission of proprietary, sensitive or export-controlled information, as well as challenges related to implementing and maintaining AI tools. Additionally, our competitors might move faster than us to gain efficiencies by incorporating AI into their design and development processes, and our products and/or cost structure could become less competitive as a result.
The rapid evolution of AI will require the application of resources by us to develop, test and maintain our products, services and operations to help ensure that AI is implemented ethically in order to minimize unintended, harmful impact.
Our competitors may be faster or more successful than we are in incorporating AI and other disruptive technology into their offerings, which would impair our ability to compete successfully.
Our business may suffer if we are unable to attract and retain key personnel.
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 also have a mature workforce. Some of our businesses, including our businesses in engineered systems as well as in traveling wave tube and integrated microwave module design and development, draw from a pool of specialized engineering talent that is small and, in some cases, currently shrinking. 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.
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. Furthermore, sole source supply is more common among our businesses that are heavily involved in research and development because there can be few suppliers in the world capable of producing the products or providing the services with the right highly specialized technology. 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. International sources pose additional risks, some of which are similar to those described above regarding international sales. With any continuing disruption in the global economy and financial markets, some of our suppliers may also continue to face issues gaining access to sufficient credit and materials to maintain their businesses, which could reduce the availability of some components and, to the extent such suppliers are single source suppliers, could adversely affect our ability to continue to manufacture and sell our products. Some companies engage subcontractors to perform a portion of the services we provide to our customers. To provide these services, the subcontractor must be financially viable and compliant with applicable laws, regulations and contract terms. Non-performance by a subcontractor could result in misalignment between subcontractor performance and our contractual obligations to our customers.
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, sales representatives and value-added resellers. Use of third party sales channels expose Teledyne to risks, including concentration, credit risk and legal risk because under certain circumstances we may be held responsible for the actions of third party intermediaries. We may rely on one or more key third party intermediaries for selling a product, and the loss of these third party intermediaries could reduce our revenue. Third party intermediaries may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivables and financial results. Violations of anti-corruption laws, trade compliance regulations, procurement regulations and other laws and regulations by third party intermediaries could have a material impact on our business. Competitors could also block our access to such parties. Failing to manage risks related to our use of third party intermediaries may reduce sales, increase expenses, and weaken our competitive position, and result in sanctions against us.
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We may not be able to sell or reconfigure businesses, facilities or product lines that we determine no longer meet with our growth strategy or that should be consolidated.
Consistent with our strategy to emphasize growth in our core markets, we continually evaluate our businesses to ensure that they are aligned with our strategy and objectives. Over the years we have also consolidated some of our business units and facilities, in some cases to respond to downturns in the defense or oil and gas industries, among other reasons. We may not be able to realize efficiencies and cost savings from our consolidation activities. There is no assurance that our efforts will be successful. Our ability to dispose of, exit or reconfigure businesses that may no longer be aligned with our growth strategy will depend on many factors, including the terms and conditions of any asset purchase and sale agreement or lease agreement, as well as industry, business and economic conditions.
Risks related to Corporate Governance Matters
Provisions of our governing documents, applicable law, and our Change in Control Severance Agreements could make an acquisition of Teledyne more difficult.
Our Restated Certificate of Incorporation, our Fourth Amended and Restated Bylaws and the General Corporation Law of the State of Delaware contain several provisions, that could make the acquisition of control of Teledyne, in a transaction not approved by our Board, more difficult. We have also entered into Change in Control Severance Agreements with seven members of our current management, which could have an anti-takeover effect. These provisions may prevent or discourage attempts to acquire our Company.
Our Fourth Amended and Restated Bylaws (“Bylaws”) designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain lawsuits between us and our stockholders, which could limit our stockholders’ ability to obtain a judicial forum that it finds favorable for such lawsuits and make it more costly for our stockholders to bring such lawsuits, which may have the effect of discouraging such lawsuits.
Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf, (ii) action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, Restated Certificate of Incorporation or Bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. Our Bylaws further provide that the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act of 1933, as amended, including all causes of action asserted against any defendant to such complaint. Our Bylaws also provide that any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and consented to this forum selection provision.
However, this forum selection provision is not intended to apply to any actions brought under the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and accordingly, the forum selection provision in our Bylaws will not relieve us of our duties to comply with the Exchange Act and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
Nevertheless, this forum selection provision in our Bylaws may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers and other employees, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. In addition, stockholders who do bring a claim in the Court of Chancery in the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. While we believe the risk of a court declining to enforce the forum selection provision contained in our Bylaws is low, if a court were to find the provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Risks Related to Our Securities
An investment in Teledyne’s Common Stock and other securities involve risks, many of which are beyond our control.
Stock markets in general, including the New York Stock Exchange on which our Common Stock is listed, have experienced a high degree of price and volume fluctuations that are not necessarily related to operating performance of the listed companies. In addition to general economic, political and market conditions, such volatility may be related to: (i) changes from analysts’ expectations in revenues, earnings and other financial results; (ii) strategic actions by other competitors; (iii) changes to budgets or policies of the United States and other governments; and (iv) other risks described in this report. We cannot provide assurances as to our Common Stock price, which during fiscal 2024 ranged from a low of $355.41 to a high of $492.00.
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Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We face many cybersecurity threats including ransomware and more advanced and persistent threats from state-affiliated groups. We have experienced cyber-attacks in the past and may experience cybersecurity incidents going forward. Our customers and suppliers face similar cybersecurity threats. While prior incidents have not materially affected our business, results of operations or financial condition, there is no guarantee that a future cyber incident would not affect our business strategy, results of operations or financial condition. See Item 1A. Risk Factors for more information on our cybersecurity risks.
Risk Management and Strategy
Our cybersecurity strategy prioritizes risk identification, quantification, communication, and mitigation, and this strategy is aligned with our overall Enterprise Risk Management strategy. Our strategy focuses on the deterrence, early detection, interception, and interruption of potential cyber-attacks. We strive to continuously monitor, evaluate, prioritize and mitigate vulnerabilities and attacks. Our policies and processes are compliant with applicable control frameworks provided by the U.S. National Institute of Standards and Technology (“NIST”) and other applicable standards.
Our employees are required to take cybersecurity-related training which promotes awareness of how to detect and respond to cybersecurity threats. We utilize benchmarking against peers in the industry to validate our defense posture, and we conduct internal and external assessments to evaluate our controls around information technology, operating technology, and product and service information security. We work with government, customer, industry and/or supplier partners, such as the National Defense Cyber Alliance to gather and develop best practices and share information to address cyber threats, and we contribute to overall cyber-safety of the defense industrial base through contributions of threat intelligence to law enforcement agencies.
We deploy layered defenses and connect them to allow automated responses to urgent threats, which aims to provide continued protection for mobile computing systems when they are outside the company perimeter. We conduct active threat hunting and vulnerability scanning to anticipate and pro-actively mitigate risks. We utilize third-party risk scoring services to quantify cybersecurity risks associated with our supply chain and service providers. We also use cybersecurity vetting procedures to maintain lists of approved and disallowed applications and services.
We have incident response plans and procedures, the goal of which is to enable the company to respond effectively and compliantly should a cyber-incident arise. “Tabletop” exercises are held at both the technical and executive level to maintain readiness to respond and to identify any areas where improvements or updates are required. We engage third-party expertise and utilize threat intelligence feeds to supplement and enhance our internal team of cybersecurity professionals.
Governance
Pursuant to its charter, the Audit Committee of the Board is responsible for reviewing, discussing and making recommendations to the Board on cybersecurity matters. Our Vice President of Information Technology and Chief Information Officer (“CIO”) and our Chief Information Security Officer (“CISO”) provide presentations to the Audit Committee on cybersecurity status, outcomes, and risks at each quarterly meeting. These briefings include assessments of cyber risks and threats landscape, updates on incidents, and our investments and plans in cybersecurity risk mitigation and governance.
At the management level, our Enterprise Risk Management Committee identifies and drives mitigation of company-wide risks, including those related to cybersecurity. The committee consists of our Vice President, Associate General Counsel and Assistant Secretary (“Chair”), Executive Vice President and Chief Financial Officer, Executive Vice President, General Counsel, Chief Compliance Officer and Secretary, Associate General Counsel and Senior Vice President, Human Resources, Vice President and CIO, and individuals representing the business operations. The Chair of the Enterprise Risk Management Committee periodically reports to the Audit Committee and the Board of Directors on the progress and results of the actions taken by the committee.
Our management team, including our Enterprise Risk Management Committee, CIO and CISO, is responsible for assessing and managing our cybersecurity risks and threats. Our CISO, who has approximately 30 years in various information technology and security roles and reports to our CIO, is primarily responsible for our overall cybersecurity risk management program and supervises both internal and external resources to prevent, detect, mitigate, and remediate cybersecurity risks, threats, and incidents. As such, our CISO has extensive experience and expertise in developing, implementing, and operating security policies and procedures covering our protective defenses of our network and critical data. We have established processes by which the CISO routinely informs the management team and the Board of cybersecurity risks, threats and incidents that have been identified or are reasonably likely of occurring and how such matters are managed.
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Item 2. Properties
At December 29, 2024, we had 77 principal operating facilities in 20 states and 10 foreign countries. Our executive offices are located in Thousand Oaks, California. We maintain our facilities in good operating condition, and we believe they are suitable and adequate for the purposes for which they are intended and overall have sufficient capacity to conduct business as currently conducted. At December 29, 2024, our principal operating facilities by segment were located as follows (countries and states listed alphabetically):
•Digital Imaging - Belgium, Canada, Estonia, France, the Netherlands, Norway, Spain, Sweden, the United Kingdom and the United States
◦The United States includes principal operating facilities in California, Florida, Indiana, Maryland, Massachusetts, Montana, New Hampshire, New Jersey, Oklahoma, Oregon, and Pennsylvania
•Instrumentation - Denmark, France, United Kingdom and the United States
◦The United States includes principal operating facilities in California, Colorado, Florida, Massachusetts, Nebraska, New Hampshire, New York, Ohio, Pennsylvania, Texas and Virginia
•Aerospace and Defense Electronics - the United Kingdom and the United States
◦The United States includes principal operating facilities in California and Illinois
•Engineered Systems - the United States, including principal operating facilities in Alabama, Maryland and Tennessee
Subsequent to the end of fiscal year 2024, we have completed two acquisitions that are part of the Aerospace and Defense Electronics segment, with principal operating facilities in the United States (Texas and Ohio) as well as the United Kingdom. See Note 18 for additional information.
Item 3. Legal Proceedings
Information pertaining to legal proceedings can be found in Note 17 and is incorporated by reference herein.
Item 4. Mine Safety Disclosures
No information is required in response to this item.
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PART II
Common Stock
Our Common Stock is listed on the New York Stock Exchange and traded under the symbol “TDY”.
As of February 12, 2025, there were 2,073 holders of record of the Common Stock. Because many of our shares of common stock are held by brokers and institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our stock represented by these stockholders of record.
Dividends
We intend to use future earnings to fund the development and growth of our businesses. Therefore, we do not anticipate paying any cash dividends in the foreseeable future.
Share Repurchase Program
The following table sets forth the shares repurchased during each fiscal month during the fourth quarter of 2024:
November 4 - December 1 — $ — — $ 896.1
December 2 - December 29 — $ — — $ 896.1
(a) On April 23, 2024, the Company’s Board of Directors authorized a new stock repurchase program to repurchase up to $1.25 billion of the Company’s common stock. The authorized stock repurchase program does not have a stated expiration date.
Securities Authorized for Issuance Under Existing Equity Compensation Plans
Additional information required by this item is set forth in the 2025 Proxy Statement under the caption and “Securities Authorized for Issuance Under Equity Compensation Plans” and is incorporated herein by reference.
Item 6. [Reserved]
Teledyne provides enabling technologies for industrial growth markets that require advanced technology and high reliability. These markets include aerospace and defense, factory automation, air and water quality environmental monitoring, electronics design and development, oceanographic research, deepwater oil and gas exploration and production, medical imaging and pharmaceutical research. Our products include digital imaging sensors, cameras and systems within the visible, infrared and X-ray spectra, monitoring and control instrumentation for marine and environmental applications, harsh environment interconnects, electronic test and measurement equipment, aircraft information management systems, and defense electronics and satellite communication subsystems. We also supply engineered systems for defense, space, environmental and energy applications. We believe our technological capabilities, innovation and the ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we compete.
Information about results of operations and financial conditions for 2022 and 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
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Strategy/Overview
Our strategy continues to emphasize growth in our four business segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems. The markets in which we sell our enabling technologies are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our business with targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment among capital expenditures, acquisitions, stock repurchases and product development. We aggressively pursue operational excellence to continually improve our margins and earnings by emphasizing cost containment and evaluating cost reductions in all aspects of our business. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and through targeted research and development, we seek to create new products to grow our company and expand our addressable markets. We continually evaluate our businesses to ensure that they are aligned with our strategy.
Trends and Other Matters Affecting Our Business
Sales recorded and costs incurred by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. See Item 7A. Market Risk, Note 1 and Note 14 for additional discussion around our derivative instruments and hedging activities.
In February 2025, the U.S. Presidential administration proposed certain orders directing the United States to potentially impose new tariffs on foreign imports impacting multiple countries, commodities and industries. We are currently evaluating the potential impact of the proposed tariffs to our business and financial condition. See our risks factor disclosure in Item 1A. Risk Factors for further information.
Recent Acquisitions
Consistent with our strategy, we completed two acquisitions each in 2024 and in 2023. The financial results of these acquisitions have been included since the respective date of each acquisition. Our 2024 and 2023 acquisitions were within the Digital Imaging and Instrumentation segments. See Note 3 for additional information about our 2024 and 2023 business acquisitions. Subsequent to the end of fiscal year 2024, we have completed two acquisitions. See Note 18 for additional information.
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Selected Consolidated Operating Results
Our fiscal year is determined based on a 52- or 53-week convention ending on the Sunday nearest to December 31. Fiscal years 2024 and 2023 each contained 52 weeks. Certain prior year amounts have been reclassified to conform to the current period presentation. We now disclose research and development expense on a separate income statement line. Research and development expense was previously included in selling, general and administrative expenses. In addition, we historically included bid and proposal expense as part of its annual research and development expense disclosures. We have not reclassified bid and proposal expense, which remains withing selling, general and administrative expense. We also now disclose impairment of acquired intangible assets on a separate income statement line item. Impairment of acquired intangible assets was previously included within selling, general and administrative expense.
Costs and expenses
Impairment of acquired intangible assets 52.5 — 52.5 *
Net income (loss) attributable to Teledyne $ 819.2 $ 885.7 $ (66.5) (7.5) %
Diluted earnings per common share $ 17.21 $ 18.49 $ (1.28) (6.9) %
* not meaningful
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Consolidated Results of Operations
Our businesses are aligned in four segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems. Additional financial information about our business segments can be found in Note 4.
2024 compared with 2023
Net sales (dollars in millions) 2024 2023 $ Change % Change
Results of operations (dollars in millions) 2024 2023 $ Change % Change
Non-service retirement benefit income 10.8 12.4 (1.6) (12.9) %
Gain (loss) on debt extinguishment — 1.6 (1.6) (100.0) %
Other income (expense), net (4.1) (12.2) 8.1 (66.4) %
Net income (loss) including noncontrolling interest 820.7 886.6 (65.9) (7.4) %
Net income (loss) attributable to Teledyne $ 819.2 $ 885.7 $ (66.5) (7.5) %
Net Sales:
Net sales increased across three of our four business segments. Total year 2024 net sales included $49.4 million in incremental net sales from current and prior year acquisitions. Refer to “Business Segment Operating Results” later in this section for additional discussion of changes in net sales. Sales to international customers represented approximately 48% of net sales in 2024 and 49% of net sales in 2023. Approximately 24% and 25% of our total net sales for 2024 and 2023, respectively, were derived from contracts with agencies of, or prime contractors to, the U.S. Government.
Cost of Sales
Cost of sales increased in 2024, primarily driven by the impact of higher net sales as well as higher engineering costs. Cost of sales as a percentage of net sales for 2024 was 57.1%, compared with 56.7% for 2023. Refer to “Business Segment Operating Results” later in this section for additional discussion of changes in cost of sales.
Selling, General and Administrative Expense
Selling, general and administrative expense increased in 2024, primarily driven by higher sales across most segments. Selling, general and administrative expense as a percentage of net sales was 15.9% for 2024, compared with 15.1% for 2023. Corporate expense in 2024 was $77.8 million, compared with $65.6 million in 2023, with the increase primarily related to higher compensation expense, including higher stock-based compensation as well as higher consulting and legal costs.
Research and Development Expense
Research and development expense decreased in 2024, primarily driven by a decrease within the Digital Imaging segment.
Acquired Intangible Asset Amortization
Acquired intangible asset amortization for 2024 was $198.0 million, compared with $196.7 million for 2023.
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Impairment of Acquired Intangible Assets
We recorded $52.5 million of pretax, non-cash trademark impairments in 2024 in the Digital Imaging and Instrumentation segments. No comparative amounts were recorded in 2023.
Operating Income
Operating income decreased in 2024 primarily driven by $52.5 million of pretax, non-cash trademark impairments recorded in 2024. No comparative amounts were recorded in 2023.
Non-operating Income and Expense
Interest expense, including credit facility fees and other bank charges and net of interest income, was $57.9 million in 2024, compared with $77.3 million in 2023. The decrease was due primarily to reduced outstanding borrowings with lower weighted average interest rates compared to 2023. In 2023, we repurchased and retired $10 million of its Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt. The other expense, net in other income and expense, net, in 2024 was driven primarily by lower foreign exchange losses compared to the 2023 other expense, net amount.
Income Taxes
The income tax provision considers income, permanent items, tax credits, and various statutory tax rates. The effective tax rate decreased in 2024 compared to 2023 primarily due to lower reversals of unrecognized tax benefits in 2024 as well as lower research and development tax credits in 2024. See Note 9 for further information regarding our income taxes.
Provision (benefit) for income taxes $ 117.2 $ 72.3
Income (loss) before income taxes $ 937.9 $ 958.9
Effective tax rate 12.5% 7.5%
Business Segment Operating Results
The following discussion of our four segments should be read in conjunction with Note 4.
Digital Imaging
(dollars in millions) 2024 2023 $ Change % Change
Selling, general and administrative expense $ 510.7 $ 489.6 $ 21.1 4.3%
Acquired intangible asset amortization $ 183.3 $ 181.7 $ 1.6 0.9%
Impairment of acquired intangible assets $ 49.5 $ — $ 49.5 *
Cost of sales % of net sales 55.6 % 54.4 % 1.2%
Selling, general and administrative expense % of net sales 16.6 % 15.6 % 1.0%
Research and development expense % of net sales 5.8 % 7.7 % (1.9)%
Acquired intangible asset amortization % of net sales 6.0 % 5.8 % 0.2%
Impairment of acquired intangible assets % of net sales 1.6 % — % *
Operating income % of net sales 14.4 % 16.5 % (2.1)%
International sales % of net sales 55.5 % 55.3 % 0.2%
U.S. Government sales % of net sales 18.1 % 18.2 % (0.1)%
* not meaningful
Our Digital Imaging segment includes high-performance sensors, cameras and systems, within the visible, infrared and X-ray spectra for use in industrial, government and medical applications, as well as MEMS and high-performance, high-reliability semiconductors including analog-to-digital and digital-to-analog converters.
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2024 compared with 2023
Our Digital Imaging segment net sales for 2024 decreased 2.3%, compared with 2023. Operating income for 2024, which included a $49.5 million impairment of acquired intangible assets, decreased 14.6%, compared with 2023.
Total year 2024 net sales included $27.1 million in incremental net sales from current and prior year acquisitions. Sales of industrial automation vision systems decreased $134.7 million, sales of X-ray products decreased $31.9 million, sales of unmanned ground systems decreased $17.8 million, sales of unmanned air systems increased $56.7 million, sales of commercial and defense infrared detectors and subsystems increased $7.5 million and sales of surveillance systems increased $27.4 million.
Cost of sales for 2024 decreased compared with 2023 and reflected the impact of lower net sales partially offset by unfavorable product mix and higher engineering costs. The cost of sales percentage in 2024 increased compared with 2023 and reflected the impact of product mix. Selling, general and administrative expense and the selling, general and administrative expense percentage for 2024 increased compared with 2023 and included incremental selling, general and administrative expense from current and prior year acquisitions, higher bad debt expense in 2024 compared to a bad debt recovery in 2023 on previously reserved amounts and higher third party sales commissions. Research and development expense and the research and development expense percentage for 2024 decreased 27.3% compared with 2023, with the decrease driven primarily by the completion of certain unmanned air systems product development activities in 2023 that moved to commercialization in early 2024, FLIR integration-related cost-reduction efforts implemented in the second half of 2023 and a larger percentage of labor focused on customer-funded research and development projects in 2024 as compared to 2023.
The decrease in operating income in 2024 reflected the impact of lower net sales, unfavorable product mix, higher engineering costs and $49.5 million impairment of acquired intangible assets, partially offset by lower research and development expense.
Instrumentation
(dollars in millions) 2024 2023 $ Change % Change
Selling, general and administrative expense $ 196.4 $ 188.2 $ 8.2 4.4%
Research and development expense $ 92.6 $ 92.9 $ (0.3) (0.3)%
Acquired intangible asset amortization expense $ 13.9 $ 14.2 $ (0.3) (2.1)%
Impairment of acquired intangible assets $ 3.0 $ — $ 3.0 *
Cost of sales % of net sales 51.1 % 52.2 % (1.1)%
Selling, general and administrative expense % of net sales 14.2 % 14.2 % —%
Research and development expense % of net sales 6.7 % 7.0 % (0.3)%
Acquired intangible asset amortization % of net sales 1.0 % 1.1 % (0.1)%
Impairment of acquired intangible assets % of net sales 0.2 % — % *
Operating income % of net sales 26.8 % 25.5 % 1.3%
International sales % of net sales 55.8 % 57.3 % (1.5)%
U.S. Government sales % of net sales 8.9 % 7.2 % 1.7%
* not meaningful
Our Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other applications, as well as electronic test and measurement applications. We also provide power and communications connectivity devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments.
2024 compared with 2023
Our Instrumentation segment net sales for 2024 increased 4.3%, compared with 2023. Operating income for 2024 increased 9.5%, compared with 2023.
Total year 2024 net sales included $22.3 million in incremental net sales from current and prior year acquisitions. In 2024 compared with 2023, net sales of marine instrumentation increased $101.8 million which included $13.3 million in incremental net sales from current and prior year acquisitions. Net sales of test and measurement instrumentation decreased $34.7 million, which included $9.0 million in incremental net sales from current and prior year acquisitions. Net sales of environmental instrumentation decreased $10.7 million.
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Cost of sales increased in 2024, compared with 2023, and primarily reflected the impact of higher net sales. The cost of sales percentage decreased in 2024 compared with 2023 primarily driven by favorable product mix and improved product margins. Selling, general and administrative expense increased in 2024 compared with 2023, primarily driven by higher net sales. Selling, general and administrative expenses for 2024, as a percentage of sales, decreased slightly from 2023. Research and development expense as well as research and development expense as a percentage of revenue decreased slightly compared with 2023. Acquisition intangible asset amortization expense decreased slightly, and we recorded a $3.0 million impairment of acquired intangible assets in 2024.
The increase in operating income in 2024 reflected the impact of higher net sales, favorable product mix and improved product margins.
Aerospace and Defense Electronics
(dollars in millions) 2024 2023 $ Change % Change
Selling, general and administrative expense $ 91.2 $ 83.7 $ 7.5 9.0%
Research and development expense $ 21.8 $ 17.8 $ 4.0 22.5%
Acquired intangible asset amortization $ 0.8 $ 0.8 $ — —%
Cost of sales % of net sales 56.8 % 58.4 % (1.6)%
Selling, general and administrative expenses % of net sales 11.8 % 11.5 % 0.3%
Research and development expense % of net sales 2.8 % 2.5 % 0.3%
Acquired intangible asset amortization % of net sales 0.1 % 0.1 % —%
Operating income % of net sales 28.5 % 27.5 % 1.0%
International sales % of net sales 32.3 % 32.3 % —%
U.S. Government sales % of net sales 39.6 % 45.5 % (5.9)%
Our Aerospace and Defense Electronics segment provides sophisticated electronic components and subsystems and communications products, including defense electronics, harsh environment interconnects, data acquisition and communications equipment for aircraft, components and subsystems for wireless and satellite communications and general aviation batteries.
2024 compared with 2023
Our Aerospace and Defense Electronics segment net sales for 2024 increased 6.9%, compared with 2023. Operating income for 2024 increased 11.1%, compared with 2023.
The 2024 net sales increase compared with 2023 reflected $34.7 million of higher sales for defense electronics and $15.6 million of higher sales for aerospace electronics.
Cost of sales for 2024 increased compared with 2023 and reflected the impact of higher net sales partially offset by favorable product mix. Cost of sales as a percentage of net sales for 2024 decreased compared with 2023 and primarily reflected product mix. Selling, general and administrative expense increased in 2024 compared with 2023, and primarily related to higher net sales. Research and development expense increased in 2024 compared with 2023 primarily due to higher aerospace electronics spending. The selling, general and administrative expense and research and development expense percentages in 2024 increased slightly compared with 2023.
The increase in operating income for 2024 primarily reflected the impact of higher net sales and favorable product mix.
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Engineered Systems
(dollars in millions) 2024 2023 $ Change % Change
Selling, general and administrative expense $ 26.5 $ 24.9 $ 1.6 6.4%
Research and development expense $ 0.9 $ 1.6 $ (0.7) (43.8)%
Cost of sales % of net sales 86.3 % 83.8 % 2.5 %
Selling, general and administrative expense % of net sales 6.0 % 5.7 % 0.3 %
Research and development expense % of net sales 0.2 % 0.3 % (0.1) %
Operating income % of net sales 7.5 % 10.2 % (2.7) %
International sales % of net sales 1.0 % 1.9 % (0.9) %
U.S. Government sales % of net sales 88.4 % 87.7 % 0.7 %
Our Engineered Systems segment provides innovative systems engineering and integration, advanced technology development, and manufacturing solutions for defense, space, environmental and energy applications, including the design and manufacture of electrochemical energy systems.
2024 compared with 2023
Our Engineered Systems segment net sales for 2024 increased 0.3%, compared with 2023. Operating income for 2024 decreased 26.4%, compared with 2023.
The 2024 net sales increase primarily reflected $2.4 million of higher sales for engineered products, partially offset by $1.3 million of lower sales for energy systems. Operating income in 2024 primarily reflected the impact of unfavorable contract estimate changes related to electronic manufacturing services products.
Cost of sales for 2024 increased compared with 2023, and primarily reflected the impact of unfavorable contract estimate changes related to electronic manufacturing services products. Cost of sales as a percentage of net sales for 2024 increased compared with 2023. Selling, general and administrative expense in 2024 increased slightly compared with 2023. The selling, general and administrative expense as a percentage of net sales increased slightly compared with 2023.
Operating income in 2024 primarily reflected the impact of unfavorable contract estimate changes related to electronic manufacturing services products.
Financial Condition, Liquidity and Capital Resources
Principal Cash and Capital Requirements
Our principal cash and capital requirements are to fund working capital needs, capital expenditures, income tax payments and debt service requirements, as well as acquisitions. We may deploy cash for the stock repurchase program. It is anticipated that operating cash flow, together with available borrowings under the credit facility and the debt financing arrangements described below, will be sufficient to meet these requirements. To support acquisitions, we may need to raise additional capital. Our liquidity is not dependent upon the use of off-balance sheet financial arrangements. We have no off-balance sheet financing arrangements that incorporate the use of special purpose or unconsolidated entities.
Cash and Cash Equivalents
Cash and cash equivalents totaled $649.8 million at December 29, 2024, of which $314.4 million was held by foreign subsidiaries. Cash equivalents consist of highly liquid money-market mutual funds with maturities of three months or less when purchased.
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Long-term Debt
Long-term debt, including unamortized debt issuance costs was $2,649.0 million at December 29, 2024 compared to $3,244.9 million at December 31, 2023. During 2024, we repaid $450.0 million Fixed Rate Senior Notes due April 2024 and $150.0 million for a term loan due October 2024.
At December 29, 2024, we had $52.9 million in outstanding letters of credit, including $29.3 million against our credit facility.
Our credit facility requires us to comply with various financial and operating covenants and at December 29, 2024, we were in compliance with these covenants and had a significant amount of margin between required financial covenant ratios and our actual ratios. Currently, we do not believe our ability to undertake additional debt financing, if needed, is reasonably likely to be materially impacted by debt restrictions under our credit agreements. Available borrowing capacity under the $1.20 billion credit facility, which is reduced by borrowings and $29.3 million in outstanding letters of credit, was $1,170.7 million at December 29, 2024.
See Note 8 for additional information regarding our credit facility and long-term debt.
Contractual Obligations
The following table summarizes our expected cash outflows resulting from financial contracts and commitments at December 29, 2024:
(a) Interest expense related to the credit facility, including facility fees, is assumed to accrue at the rates in effect at year-end 2023 and is assumed to be paid at the end of each quarter with the final payment in June 2029 when the credit facility expires.
(b) Includes imputed interest and the short-term portion of lease obligations.
(c) Purchase obligations generally include contractual obligations for the purchase of goods and services and capital commitments that are enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction.
Unrecognized tax benefits of $45.2 million and accrued interest and penalties on these tax matters of $8.5 million are not included in the table above. These unrecognized tax benefits, accrued interest and penalties are not included in the table above because $25.7 million is offset by deferred tax assets, and the remainder cannot be reasonably estimated to be settled in cash due to a lack of prior settlement history and offsetting credits.
At December 29, 2024, we were not required, and accordingly are not planning, to make any cash contributions to the domestic qualified pension plans for 2025. Our minimum funding requirements after 2024 as set forth by the Employee Retirement Income Security Act, are dependent on several factors. Estimates beyond 2025 have not been provided due to the significant uncertainty of these amounts, which are subject to change until the Company’s pension assumptions can be updated at the appropriate times. In addition, certain pension contributions are eligible for future recovery through the pricing of products and services to the U.S. Government under certain government contracts, therefore, future cash contributions are not necessarily indicative of the impact these contributions may have on our liquidity. We also have payments due under our other postretirement benefit plans. These plans are not required to be funded in advance but are pay as you go. See further discussion in Note 10. We monitor and manage our defined benefit pension plans obligation and may take additional actions to manage risk in the future.
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Operating Activities
Net cash provided by operating activities was $1,191.9 million and $836.1 million in 2024 and 2023, respectively. The higher cash provided by operating activities in 2024, compared with 2023 primarily resulted from lower income tax payments, a higher amount of customer advances received in 2024 as well as the of accounts payable payments.
Free cash flow (cash provided by operating activities less capital expenditures) was as follows (in millions):
Cash provided by (used in) operating activities $ 1,191.9 $ 836.1
Less: Capital expenditures for property, plant and equipment (83.7) (114.9)
(a) We define free cash flow as cash provided by operating activities (a measure prescribed by U.S. generally accepted accounting principles “GAAP”) less capital expenditures for property, plant and equipment. We believe that this supplemental non-GAAP information is useful to assist management and the investment community in analyzing the company’s ability to generate cash flow.
Investing Activities
Net cash used in investing activities was $207.2 million and $190.3 million for 2024 and 2023, respectively. Investing activities used cash for acquisitions and other investments of $123.7 million and $77.7 million in 2024 and 2023, respectively (see “Recent Acquisitions”). We funded the acquisitions from cash on hand.
Cash flows relating to investing activities for capital expenditures.
Capital expenditures (in millions): 2024 2023
Aerospace and Defense Electronics 7.2 10.9
Engineered Systems 2.4 3.4
During 2025, we plan to invest approximately $130 million in capital expenditures, principally to upgrade facilities and manufacturing equipment, and this amount includes estimated post-acquisition capital expenditures relates to 2025 acquisitions described in Note 18.
Financing Activities
Net cash used in financing activities reflected net payments from debt of $600.6 million, share repurchases of $354.0 million and net proceeds from the exercise of stock options of $37.9 million in 2024. Net cash used in financing activities reflected net payments from debt of $678.9 million and proceeds from the exercise of stock options of $45.4 million in 2023.
During 2024, we repaid $450.0 million Fixed Rate Senior Notes due April 2024 and $150.0 million for a term loan due October 2024.
During 2023, we repaid $125.0 million of amounts outstanding on our credit facility, the $300.0 million Fixed Rate Senior Notes due April 2023, and the remaining $245.0 million on our term loan due May 2026. We also repurchased and retired $10.0 million of our Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt.
Other Matters
Income Taxes
Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.
We continually evaluate our global cash needs and have historically asserted that most of our unremitted foreign earnings are permanently reinvested, and we did not generally record deferred taxes on such amounts. During 2022, we determined that we could no longer make the assertion foreign earnings are permanently reinvested, as cash from most foreign subsidiaries may be remitted without incurring additional U.S. federal income tax. As a result, we changed our indefinite reinvestment assertion of unremitted earnings and certain other aspects of outside basis differences on a majority of our foreign subsidiaries.
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We continue to make an indefinite reinvestment assertion on the historic excess of the financial reporting bases over tax bases in our material foreign subsidiaries in Canada. The unremitted earnings of our Canadian foreign subsidiaries held for indefinite reinvestment are used to finance Canadian operations and investments. We estimate that future cash generation from non-Canadian operations will be sufficient to meet future domestic cash requirements. Determination of the unrecognized deferred tax liability for unremitted Canadian earnings is not practicable due to uncertainty and overall complexity of the potential calculations. We continue to evaluate its cash needs and may update our assertion in future periods.
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amount in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. Based on the Company’s history of operating earnings, expectations of future operating earnings and potential tax planning strategies, management believes that it is possible that some portion of deferred taxes will not be realized as a future tax benefit and therefore has recorded a valuation allowance.
We file income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. We have substantially concluded income tax matters in the United States through 2016, in Canada through 2012, in Sweden through 2018, in Norway through 2018, in Belgium through 2019, in France through 2019 and in the United Kingdom through 2015.
Costs and Pricing
Inflation exists in certain markets in which we operate. Current inventory costs, the costs of labor, materials, equipment and other costs are considered in establishing sales pricing policies. In addition, we emphasize cost containment and cost reductions in all aspects of our business.
Market Risk Disclosures
Our primary exposure to market risk relates to changes in interest rates and foreign currency exchange rates. We periodically evaluate these risks and have taken measures to mitigate these risks. We own assets and operate facilities in countries that have been politically stable.
Interest Rate Risk
We are exposed to market risk through the interest rate on our borrowings under our $1.20 billion credit facility. As of December 29, 2024, no borrowings are outstanding under our credit facility. Future indebtedness incurred under our credit facility will expose us to interest rate risk.
Foreign Currency Exchange Rate Risk
Teledyne transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. Our primary foreign currency risk management objective is to protect the U.S. dollar value of future cash flows and minimize the volatility of reported earnings, primarily achieved through the following:
•We utilize foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars for our Canadian companies, and in British pounds for our U.K. companies. These contracts are designated and qualify as cash flow hedges.
•We utilize foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables.
All derivatives are recorded on the balance sheet at fair value. The accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. Teledyne does not use foreign currency forward contracts for speculative or trading purposes. Refer to Notes 2, 14 and 15 for further disclosures around our derivative instruments and hedging activities.
Notwithstanding our efforts to mitigate portions of our foreign currency exchange rate risks, there can be no assurance that our hedging activities will adequately protect us against the risks associated with foreign currency fluctuations. A hypothetical 10% price change of the U.S. dollar from its value on December 29, 2024, would result in a decrease or increase in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and sell U.S. dollars by approximately $8.7 million.
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