Business Combinations, Goodwill and Acquired Intangible Assets

Acquisition of e2v

On March 28, 2017, Teledyne completed the acquisition of all of the outstanding common stock of e2v for $770.7 million, including stock options and assumed debt, net of $24.4 million of cash acquired. Principally located in Chelmsford, United Kingdom and Grenoble, France, most of e2v’s operations are included in the Digital Imaging and Aerospace and Defense Electronics segments. The Instrumentation segment includes a small portion of e2v’s operations.

The first nine months of 2017 includes pretax charges of $28.1 million related to the acquisition of e2v, which included $13.0 million in transaction costs, including stamp duty, advisory, legal and other consulting fees and other costs recorded to selling, general and administrative expenses, $6.8 million in inventory fair value step-up amortization expense recorded to cost of sales, $2.3 million in bank bridge facility commitment expense recorded to interest expense and $6.0 million related to a foreign currency option contract expense recorded as other expense. Of these amounts, $9.4 million impacted segment operating income.

The unaudited proforma information below, as required by GAAP, assumes that e2v had been acquired at the beginning of the 2017 fiscal year and includes the effect of increased interest expense on net acquisition debt and the amortization of acquired intangible assets. The 2017 proforma amount also include $12.3 million in transaction costs, including legal and other consulting fees, $11.5 million in expense related to a foreign currency option contract to hedge the e2v purchase price, $2.8 million in bridge financing costs and $1.4 million in inventory fair value step-up amortization expense. These amounts totaling $28.0 million should be considered non-recurring costs that were necessary to complete the acquisition and are not indicative of the ongoing operations of the combined company.

This unaudited proforma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited proforma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.

The following table presents proforma net sales, net income and earnings per share data assuming e2v was acquired at the beginning of the 2017 fiscal year:



	Third Quarter (a)		Nine Months (a)
(unaudited - in millions, except per share amounts)	2017		2017
Net sales	$	662.2	$	1,992.4
Net income	$	69.0	$	142.2
Basic earnings per common share	$	1.95	$	4.04
Diluted earnings per common share	$	1.90	$	3.93

a) The above unaudited proforma information is presented for the e2v acquisition as it is considered a material acquisition.

SSI Acquisition

On July 20, 2017, a subsidiary of Teledyne acquired assets of Scientific Systems, Inc. (“SSI”) for $31.0 million in cash. Headquartered in State College, PA, SSI is part of the Instrumentation segment.

For a further description of the Company’s acquisition activity for fiscal year 2017, please refer to Note 3 of the Notes to Consolidated Financial Statements included in our 2017 Form 10-K.

Goodwill and Acquired Intangible Assets

Teledyne’s goodwill was $1,755.5 million at September 30, 2018 and $1,776.7 million at December 31, 2017. The decrease in the balance of goodwill in 2018 included the impact of exchange rate changes, partially offset by adjustments for the purchase accounting allocation for the e2v and SSI acquisitions. Teledyne’s net acquired intangible assets were $357.8 million at September 30, 2018 and $398.9 million at December 31, 2017. The decrease in the balance of net acquired intangible assets reflected amortization and the impact of exchange rate changes, partially offset by adjustments for the purchase accounting allocation for the SSI acquisition. The Company completed 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 e2v and SSI acquisitions, including the allocation by segment, resulting in an increase to goodwill of $3.9 million for e2v and $4.8 million for SSI in 2018.