Business Acquisitions, Goodwill and Acquired Intangible Assets

The Company spent $195.8 million, $128.2 million and $389.2 million on acquisitions and other investments in 2014, 2013 and 2012, respectively.

On November 18, 2014, Teledyne acquired all of the outstanding common shares of Bolt Technology Corporation (“Bolt”) for $22.00 per share payable in cash. The aggregate value for the transaction was $171.0 million, excluding transaction costs and taking into account Bolt’s stock options, other liabilities and net cash on hand. Bolt is a developer and manufacturer of marine seismic data acquisition equipment used for offshore oil and natural gas exploration. Bolt is also a developer and manufacturer of remotely operated robotic vehicles systems used for a variety of underwater tasks. Bolt had sales of $67.5 million for its fiscal year ended June 30, 2014.

On October 22, 2014, a subsidiary of Teledyne acquired the assets of The Oceanscience Group Ltd. (“Oceanscience”) for $14.7 million, net of cash acquired. Oceanscience designs and manufactures marine sensor platforms and unmanned surface vehicles. Oceanscience had sales of $6.8 million for its fiscal year ended December 31, 2013.

On August 18, 2014, a subsidiary of Teledyne acquired assets of Atlas Hydrographic GmbH (“Atlas”) for $5.2 million. On March 31, 2014, a subsidiary of Teledyne acquired Photon Machines, Inc. (“Photon”) for an initial payment of $3.3 million. Teledyne expects to pay an additional $0.7 million in equal installments over the next three years. On July 1, 2014, Teledyne entered into a strategic partnership with Ocean Aero, Inc. (“Ocean Aero”). Based in San Diego, California, Ocean Aero is designing an unmanned surface vehicle that will also have the ability to descend subsea. Teledyne owns a 29.7% interest in Ocean Aero and it is accounted for as an equity investment.

All of the 2014 acquisitions are part of the instrumentation segment. On October 22, 2013, a subsidiary of Teledyne acquired C.D. Limited for $21.8 million in cash, net of cash acquired. C.D. Limited (“CDL”), headquartered in Aberdeen, Scotland, is a leading supplier of subsea inertial navigation systems and motion sensors for a variety of marine applications. CDL had sales of £9.9 million for its fiscal year ended December 31, 2012, and is part of the Instrumentation segment.

On August 30, 2013, a subsidiary of Teledyne acquired the assets of SD Acquisition, Inc. d/b/a CETAC Technologies (“CETAC”) for $26.4 million. Teledyne paid a $0.4 million purchase price adjustment in the fourth quarter. CETAC, headquartered in Omaha, Nebraska is a designer and manufacturer of automated sample handling and sample introduction equipment for laboratory instrumentation. CETAC had sales of $24.0 million for its fiscal year ended December 31, 2012, and is part of the Instrumentation segment.

On July 8, 2013, a subsidiary of Teledyne purchased the remaining 49% interest in Nova Research, Inc. (“Nova Sensors”) that it did not already own for $4.9 million. Nova Sensors produces compact short-wave and mid-wave infrared cameras and operates within the Digital Imaging segment.

On May 8, 2013, a subsidiary of Teledyne acquired Axiom, for an initial payment of $4.0 million, net of cash acquired, with an additional $1.3 million expected to be paid in equal installments over three years. Axiom is located in the Netherlands and is a fabless semiconductor company that develops high-performance CMOS mixed-signal integrated circuits and is part of the Digital Imaging segment.

On March 1, 2013, a subsidiary of Teledyne acquired all the outstanding shares of RESON for $69.7 million, net of cash acquired. RESON, headquartered in Slangerup, Denmark, provides multibeam sonar systems and specialty acoustic sensors for hydrography, global marine infrastructure and offshore energy operations. RESON had sales of €50.8 million for its fiscal year ended December 31, 2012, and is part of the Instrumentation segment. Also in 2013, the Company spent $1.4 million on certain assets.

On August 3, 2012, Teledyne acquired LeCroy Corporation (“LeCroy”) for $301.3 million, net of cash acquired. LeCroy, headquartered in Chestnut Ridge, New York is a leading supplier of oscilloscopes, protocol analyzers and signal integrity test solutions. LeCroy had sales of $178.1 million for its fiscal year ended June 30, 2011, and is part of the Instrumentation segment.

In addition to the acquisition of LeCroy in 2012, the Company completed the acquisition of four other businesses in 2012 for $87.9 million in cash, net of cash acquired. The additional businesses acquired expanded our portfolio of rugged interconnect solutions, increased our instrumentation content on AUVs and ROVs used in oil and gas and marine survey applications, added 3D imaging capability to our portfolio of visible, X-ray and ultraviolet sensors, cameras, added bathymetric LIDAR systems used for coastal mapping and shallow water profiling and expanded our line of harsh environmental marine connectors. The aggregate annual sales of the five businesses acquired at the time of their respective acquisitions, in each case based on the acquired company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $98.7 million.

On April 2, 2012, Teledyne acquired a majority interest in the parent company of Optech for $27.9 million, net of cash acquired. The purchase increased Teledyne’s ownership percentage to 51% from the original 19% interest purchased in the first quarter of 2011. With the April 2012 purchase, we now consolidate Optech’s financial results into Teledyne’s results with an appropriate adjustment for the minority ownership. At the time of the purchase, the value of Optech’s total equity was based on the same per share price as those shares purchased by Teledyne to obtain the majority interest in 2012 and the value of the non-controlling interest was 49% of Optech’s total equity and was equal to $49.8 million. The minority ownership of Optech was $47.3 million and $49.8 million at December 29, 2013, and December 30, 2012, respectively. Optech had sales of CAD $54.7 million for its fiscal year ended March 30, 2012, and is reported as part of the Digital Imaging segment.

The results of these acquisitions have been included in Teledyne’s results since the dates of their respective acquisition.

On February 2, 2015, a subsidiary of Teledyne acquired Bowtech Products Limited for $18.4 million in cash. Based in Aberdeen, Scotland, Bowtech designs and manufactures harsh underwater environment vision systems.

The primary reasons for the above acquisitions were to strengthen and expand our core businesses through adding complementary product and service offerings, allowing greater integrated products and services, enhancing our technical capabilities or increasing our addressable markets. The significant factors that resulted in recognition of goodwill were: (a) the purchase price was based on cash flow and return on capital projections assuming integration with our businesses and (b) the calculation of the fair value of tangible and intangible assets acquired that qualified for recognition. Teledyne funded the purchases primarily from borrowings under its credit facility and cash on hand.

Teledyne’s goodwill was $1,150.6 million at December 28, 2014, and $1,037.8 million at December 29, 2013. The increase in the balance of goodwill in 2014 resulted from current year acquisitions, partially offset by the impact of exchange rate changes. Teledyne’s net acquired intangible assets were $277.6 million at December 28, 2014, and $270.9 million at December 29, 2013. The increase in the balance of acquired intangible assets in 2014 resulted from current year acquisitions, partially offset by amortization and the impact of exchange rate changes. The Company’s cost to acquire Bolt, Oceanscience, Atlas and Photon has been allocated to the assets acquired and liabilities assumed based upon their respective fair values as of the date of the completion of the acquisition. The differences between the fair value of the consideration paid and the estimated fair value of the assets and liabilities acquired has been recorded as goodwill. The Company has completed the process of specifically identifying the amounts assigned to assets and liabilities and acquired intangible assets and the related impact on goodwill for the 2014 acquisitions, except for the Bolt and Atlas acquisitions. The Company is still in the process of specifically identifying the amount to be assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the Bolt and Atlas acquisitions. The Company made preliminary estimates as of December 28, 2014, since there was insufficient time between the acquisition date and the end of the period to finalize the analysis.

The following tables show the purchase price (net of cash acquired), goodwill acquired and intangible assets acquired for the acquisitions made in 2014 and 2013 (in millions):



	2014
Name	Acquisition Date	Purchase Price		Goodwill Acquired		Acquired Intangible Assets
Photon	March 30, 2014	$	2.9	$	1.4	$	1.5
Atlas	August 17, 2014	5.2		3.6		0.8
Bolt	November 18, 2014	171.0		128.8		41.5
Oceanscience	October 22, 2014	14.7		9.0		4.4
Other investments		2.0		—		—
		$	195.8	$	142.8	$	48.2



	2013
Name	Acquisition Date	Purchase Price		Goodwill Acquired		Acquired Intangible Assets
RESON	March 1, 2013	$	69.7	$	35.1	$	25.5
Axiom	May 8, 2013	4.0		3.4		0.3
CETAC	August 30, 2013	26.4		11.1		6.7
CDL	October 22, 2013	21.8		11.9		7.8
Purchase of remaining interest of Nova Sensors	July 8, 2013	4.9		—		—
Other investments		1.4		1.0		0.3
		$	128.2	$	62.5	$	40.6

The following is a summary at the acquisition date of the estimated fair values allocated to the assets acquired and liabilities assumed for the acquisitions made in 2014 and 2013 (in millions):



	2014			2013
Current assets, excluding cash acquired	$	34.0		$	40.1
Property, plant and equipment	8.7			8.3
Goodwill	142.8			62.5
Other acquired intangible assets	48.2			40.6
Other long-term assets	5.3			—
Total assets acquired	239.0			151.5
Current liabilities	(26.0		)	(21.4		)
Long-term liabilities	(17.2		)	(6.8		)
Total liabilities assumed	(43.2		)	(28.2		)
Noncontrolling interests (a)	—			4.9
Purchase price, net of cash acquired	$	195.8		$	128.2
(a) relates to the purchase of the remaining interest in Nova Sensors.

The following table is a summary at the acquisition date of the acquired intangible assets and weighted average useful life in years for the acquisitions made in 2014 and 2013 (dollars in millions):



	2014			2013
Intangibles subject to amortization:	Intangible Assets		Weighted average useful life in years	Intangible Assets		Weighted average useful life in years
Proprietary technology	$	18.4	11.0	$	17.5	10.0
Customer list/relationships	21.4		11.3	11.1		9.7
Backlog	0.8		0.3	0.7		0.6
Total intangibles subject to amortization	40.6		11.0	29.3		9.6

Intangibles not subject to amortization:
Trademarks	7.6		n/a	11.3		n/a
Total intangibles not subject to amortization	7.6		n/a	11.3		n/a
Total acquired intangible assets	$	48.2	n/a	$	40.6	n/a

Goodwill	$	142.8	n/a	$	62.5	n/a

Except for the CETAC, Atlas and Oceanscience acquisitions, goodwill resulting from the acquisitions made in fiscal 2014 and 2013 will not be deductible for tax purposes.

The following table summarizes the changes in the carrying value of goodwill (in millions):



	Instrumentation			Digital Imaging			Aerospace and Defense Electronics			Engineered Systems			Total
Balance at December 30, 2012	$	493.8		$	327.1		$	145.2		$	24.1		$	990.2
Current year acquisitions	58.1			4.4			—			—			62.5
Foreign currency changes and other	(2.4		)	(13.0		)	0.4			0.1			(14.9		)
Balance at December 29, 2013	549.5			318.5			145.6			24.2			1,037.8
Current year acquisitions	142.8			—			—			—			142.8
Foreign currency changes and other	(12.2		)	(16.3		)	(1.1		)	(0.4		)	(30.0		)
Balance at December 28, 2014	$	680.1		$	302.2		$	144.5		$	23.8		$	1,150.6

The following table summarizes the carrying value of other acquired intangible assets (in millions):



	2014						2013
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Other acquired intangible assets:
Proprietary technology	$	202.8	$	99.7	$	103.1	$	191.3	$	82.5	$	108.8
Customer list/relationships	117.6		51.0		66.6		100.5		42.7		57.8
Patents	0.7		0.6		0.1		0.7		0.6		0.1
Non-compete agreements	0.9		0.9		—		0.9		0.9		—
Trademarks	3.4		1.9		1.5		3.3		1.7		1.6
Backlog	13.2		12.7		0.5		12.9		12.8		0.1
Other acquired intangible assets subject to amortization	338.6		166.8		171.8		309.6		141.2		168.4
Other acquired intangible assets not subject to amortization
Trademarks	105.8		—		105.8		102.5		—		102.5
Total other acquired intangible assets:	$	444.4	$	166.8	$	277.6	$	412.1	$	141.2	$	270.9

Amortizable other intangible assets are amortized on a straight-line basis over their estimated useful lives ranging from one to 15 years. Consistent with Teledyne’s growth strategy, we seek to acquire companies in markets characterized by high barriers to entry and that include specialized products not likely to be commoditized. Given our markets and highly engineered nature of our products, the rates of new technology development and customer acquisition and/or attrition are often not volatile. As such, we believe the value of acquired intangible assets decline in a linear, as opposed to an accelerated fashion, and we believe amortization on a straight-line basis is appropriate.

The Company recorded $32.0 million, $31.5 million and $29.4 million in amortization expense in 2014, 2013 and 2012, respectively, for other acquired intangible assets. The expected future amortization expense for the next five years is as follows (in millions): 2015 - $30.9; 2016 - $27.7; 2017 - $26.1; 2018 - $23.1; 2019 - $15.2.

The estimated remaining useful lives by asset category as of December 28, 2014, are as follows:



Intangibles subject to amortization		Weighted average remaining useful life in years
Proprietary technology		5.2
Customer list/relationships		6.0
Patents		6.1
Backlog		0.3
Trademarks		6.8
Total intangibles subject to amortization		5.5