On May 14, 2021, Teledyne acquired the outstanding stock of FLIR for approximately $8.1 billion, comprising of net cash payments of $3.7 billion, Teledyne share issuances of $3.9 billion, and the assumption of FLIR debt of $0.5 billion. FLIR stockholders received $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share, and Teledyne issued approximately 9.5 million shares at $409.41 per share. See Note 9 to these Notes to Consolidated Financial Statements for information regarding financing activities undertaken in connection with the FLIR acquisition.

FLIR is an industrial technology company focused on intelligent sensing solutions for defense and industrial applications. FLIR offers a diversified portfolio that serves a number of applications in government and defense, industrial, and commercial markets. FLIR technologies include thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and advanced threat-detection solutions. FLIR is part of the Digital Imaging segment.

On January 5, 2020, we acquired OakGate Technology, Inc. (“OakGate”) for $28.5 million in cash, net of cash acquired. Based in Loomis, California, OakGate provides software and hardware designed to test electronic data storage devices from development through manufacturing and end-use applications. The acquired business is part of the Test and Measurement product line of the Instrumentation segment.

On February 5, 2019, we acquired the scientific imaging businesses of Roper Technologies, Inc. for $224.8 million in cash. The acquired businesses include Princeton Instruments, Photometrics and Lumenera. The acquired businesses provide a range of imaging solutions, primarily for life sciences, academic research and customized original equipment manufacturer industrial imaging solutions. Princeton Instruments and Photometrics manufacture state-of-the-art cameras, spectrographs and optics for advanced research in physical sciences, life sciences research and spectroscopy imaging. Applications and markets include materials analysis, quantum technology and cell biology imaging using fluorescence and chemiluminescence. Lumenera primarily provides rugged USB-based customized cameras for markets such as traffic management, as well as life sciences applications. Principally located in the United States and Canada, the acquired businesses are part of the Digital Imaging segment.

On August 1, 2019, we acquired the gas and flame detection businesses of 3M Company for $233.5 million in cash. The gas and flame detection businesses includes Oldham, Simtronics, Gas Measurement Instruments, Detcon and select Scott Safety products. The gas and flame detection businesses provides a portfolio of fixed 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 waste water treatment. Principally located in France, the United Kingdom and the United States, the acquired businesses are part of the Environmental Instrumentation product line of the Instrumentation segment.

On August 30, 2019, we acquired Micralyne Inc. (“Micralyne”) for $25.7 million in cash. Micralyne is a foundry providing MEMS devices. In particular, Micralyne possesses unique microfluidic technology for biotech applications, as well as capabilities in non-silicon-based MEMS (e.g. gold, polymers) often required for human body compatibility. Based in Edmonton, Alberta, Canada, the acquired business is part of the Digital Imaging segment.

The primary reasons for the FLIR acquisition were to achieve synergies in merging with a business that has the same core business model based on proprietary sensor technologies, but with different products and markets; the opportunity to add new and complementary products with FLIR’s products based on different semiconductor technologies for imaging across different wavelengths than Teledyne products, and the opportunity to serve different customers and applications, with minimal overlapping technologies and markets; the expectation of combining two businesses that both provide sensors, cameras and sensor systems to customers and both business portfolios being balanced among commercial and government markets and geographies, but in the case of thermal imaging, with Teledyne primarily producing extremely high-performance infrared detectors used for astronomy and space-based imaging applications compared to FLIR’s products ranging from air and ground imaging systems to commercial thermography instruments and automotive advanced driver assistance systems; and the opportunity to add FLIR’s suite of imaging sensor products based on different semiconductor technologies for different wavelengths to Teledyne’s offerings.

The primary reasons for the 2020 and 2019 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. Teledyne funded the 2020 and 2019 acquisitions primarily from borrowings under its credit facilities, issuance of senior notes and term loans and cash on hand.

Teledyne’s goodwill was $7,986.7 million at January 2, 2022, and $2,150 million at January 3, 2021. The increase in the balance of goodwill in 2021 primarily resulted from the FLIR acquisition. Teledyne’s net acquired intangible assets were $2,741.6 million at January 2, 2022, and $409.7 million at January 3, 2021. The increase in the balance of acquired intangible assets in 2021 resulted from the FLIR acquisition, partially offset by amortization of acquired intangible assets. The Company’s cost to acquire the 2021 and 2020 acquisitions 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 fair value of all the acquired identifiable assets and liabilities summarized below for the 2021 FLIR acquisition is provisional pending finalization of the Company’s acquisition accounting, including the measurement of tax basis in certain jurisdictions and the resulting deferred taxes that might arise from book and tax basis differences, if any.

The following tables show the purchase price (net of cash acquired), goodwill acquired for the FLIR, OakGate acquisition and other investments made in 2021 and 2020 (in millions):


	2021
Acquisition	Acquisition Date	Consideration Transferred(a)		Goodwill Acquired		Acquired Intangible Assets
FLIR	May 14, 2021	$	7,620.9	$	5,905.5	$	2,490.0



(a) Net of cash acquired. The consideration included approximately $3.9 billion of Teledyne shares issued to existing shareholders of the acquired company. This $3.9 billion of equity consideration is a non-cash transaction. An immaterial portion of the cash consideration for certain vested FLIR restricted stock awards was deferred at the election of the award holder and will be paid out in future periods.

The following table presents the preliminary purchase price allocation for FLIR. We are accounting for the FLIR acquisition under the acquisition method and are required to measure identifiable assets acquired and liabilities assumed of the acquiree at the fair values on the closing date. The Company made an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. As of January 2, 2022, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the FLIR acquisition are subject to adjustment until the end of the respective measurement period. The Company is in the process of specifically identifying the amounts assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the FLIR acquisition. The Company is in the process of reviewing a third-party

valuation of certain intangible assets and tangible assets of FLIR. The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. The amounts recorded as of January 2, 2022 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis. Goodwill resulting from the FLIR acquisition will not be deductible for tax purposes.


Provisional fair values allocated to the assets acquired and liabilities assumed - FLIR (in millions):	2021
Cash and cash equivalents	$	287.7
Accounts receivable, net	241.3
Unbilled receivables, net	72.2
Inventories, net	531.8
Prepaid expenses and other current assets	55.2
Total current assets	1,188.2

Property, plant and equipment	356.3
Goodwill	5,905.5
Acquired intangible assets	2,490.0
Other long-term assets	151.5
Total assets acquired	10,091.5

Accounts payable	144.8
Accrued liabilities	629.5
Total current liabilities acquired	774.3

Long-term debt, net	496.8
Long-term deferred tax liabilities	646.5
Other long-term liabilities	265.3
Total liabilities assumed	2,182.9
Consideration transferred	$	7,908.6

Consideration transferred, net of cash acquired (a)	$	7,620.9


(a)			The consideration included approximately $3.9 billion of Teledyne shares issued to existing shareholders of the acquired company. This $3.9 billion of equity consideration is a non-cash transaction. An immaterial portion of the cash consideration for certain vested FLIR restricted stock awards was deferred at the election of the award holder and will be paid out in future periods.

With significant operations in the United States, Europe and Canada, FLIR had sales of approximately $1,923.7 million for its fiscal year ended December 31, 2020. FLIR’s results have been included since the date of the acquisition and include $1,273.6 million in net sales and operating income of $80.4 million, which included $242.6 million in acquisition-related costs for 2021 in the Digital Imaging segment.

In connection with the FLIR acquisition, in 2021, Teledyne incurred pretax expenses of $350.3 million, consisting of $110.3 million in acquired intangible asset amortization expense, $106.7 million recorded to cost of sales, primarily in acquired inventory step-up expense, and $103.0 million of transaction and integration-related costs, recorded to selling, general and administrative expenses and $30.6 million was recorded to interest and debt expense. Of these amounts, $242.6 million impacted the Digital Imaging segment’s operating income and $77.1 million of transaction and integration-related costs impacted corporate expense.

The unaudited proforma information below, as required by GAAP, assumes that FLIR had been acquired at the beginning of the 2020 fiscal year and includes the effect of transaction accounting adjustments. These adjustments include the financing and interest costs associated with debt to fund the acquisition, amortization of acquired intangible assets, depreciation of the fair value step-up of acquired property, plant and equipment, amortization of inventory fair value step-up (assumed to be fully amortized in 2020), and tax related effects as well as the issuance of Teledyne common stock in connection with the acquisition.

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 2020 fiscal year. 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 FLIR was acquired at the beginning of the 2020 fiscal year:



(unaudited - in millions, except per share amounts)	2021 (a)		2020 (a)
Net sales	$	5,235.6	$	5,009.9
Net income	$	571.7	$	399.6
Basic earnings per common share	$	13.23	$	8.65
Diluted earnings per common share	$	12.91	$	8.43
(a) The above unaudited proforma information is presented for the FLIR acquisition as it is considered a material acquisition.

During fiscal year 2018, the Swedish Tax Authority (“STA”) issued a reassessment of tax for the year ending December 31, 2012 to one of FLIR’s non-operating subsidiaries in Sweden. The total taxes, penalties and interest levied by the STA totals SEK 3.1 billion ($364.7 million based on exchange rates as of the acquisition date). The reassessment concerns the use of tax credits applied against capital gains pursuant to European Union Council Directive 2009/133/EC, commonly referred to as the EU Merger Directive, and the reassessment levied significant taxes and penalties. In March 2020, FLIR received an adverse judgment from the First Instance Court of Sweden regarding the STA’s reassessment. FLIR appealed the decision to the Administrative Court of Appeal in Stockholm, Sweden (the “ Appellate Court”). After completing an extensive analysis, including consultation with outside specialists, Teledyne recorded a liability for this uncertain tax position that reflects the most likely outcome for this tax matter under the acquisition method for business combinations in the third quarter of 2021, which is included within accrued liabilities on the consolidated balance sheet. Subsequently, the Appellate Court hearing was held on September 15, 2021 and in the subsequent weeks ending on October 22, 2021, the STA and Teledyne submitted additional arguments in writing, including closing arguments. On January 26, 2022, the Administrative Court of Appeal in Stockholm, Sweden generally affirmed the March 2020 ruling of the First Instance Court and determined an estimated tax liability in the amount of SEK 2.765 billion. We paid the tax on February 2, 2022 totaling $296.4 million. We are evaluating the ruling.

The Company is in the process of reviewing and identifying acquisition accounting adjustments for a number of acquired tax positions of FLIR that may meet the definition of an acquired uncertain tax position. In addition to the STA matter described above, the Company has preliminarily recorded $177.5 million of provisional purchase accounting adjustments for the accrual of other uncertain tax positions of FLIR. These amounts are included primarily within other long-term liabilities on the consolidated balance sheet. These preliminary estimates are subject to change as the Company obtains additional information on these matters and as additional information is made known during the post-acquisition measurement period. The final acquisition accounting adjustments for these tax matter may be materially different, as Teledyne obtains additional information on this matter and as additional information is made known during the post-acquisition measurement period.

The following table is a summary at the acquisition date of the acquired intangible assets and weighted average useful life in years for the FLIR acquisition made in 2021 (dollars in millions; amounts considered provisional as discussed above):


	2021
Intangibles subject to amortization:	Intangible Assets		Weighted average useful life in years
Proprietary technology	$	1,355.0	9.7
Customer list/relationships	450.0		14.4


Total acquired intangibles subject to amortization	1,805.0		10.9






Intangibles not subject to amortization:(a)
Trademarks	685.0		n/a
Total acquired intangible assets	$	2,490.0

Goodwill	$	5,905.5	n/a


Goodwill (in millions):	Digital Imaging		Instrumentation		Aerospace and Defense Electronics		Engineered Systems		Total















Balance at December 29, 2019	$	962.7	$	905.9	$	164.3	$	17.6	$	2,050.5
Current year acquisitions	—		16.9		—		—		16.9
Foreign currency changes and other	35.1		46.0		1.5		—		82.6
Balance at January 3, 2021	997.8		968.8		165.8		17.6		2,150.0
Current year acquisition	5,905.5		—		—		—		5,905.5
Foreign currency changes and other	(35.8)		(32.9)		(0.1)		—		(68.8)
Balance at January 3, 2022	$	6,867.5	$	935.9	$	165.7	$	17.6	$	7,986.7


	2021						2020
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Acquired intangible assets (in millions):
Proprietary technology	$	1,767.7	$	358.2	$	1,409.5	$	420.3	$	242.7	$	177.6
Customer list/relationships	616.2		141.8		474.4		168.3		112.8		55.5
Patents	0.6		0.6		—		0.7		0.7		—
Non-compete agreements	0.9		0.9		—		0.9		0.9		—
Trademarks	4.5		3.9		0.6		4.5		3.6		0.9
Backlog	16.3		16.3		—		16.5		16.5		—
Acquired intangible assets subject to amortization	2,406.2		521.7		1,884.5		611.2		377.2		234.0
Acquired intangible assets not subject to amortization:
Trademarks	857.1		—		857.1		175.7		—		175.7
Total acquired intangible assets	$	3,263.3	$	521.7	$	2,741.6	$	786.9	$	377.2	$	409.7

Amortizable acquired 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 expected future amortization expense for the next five years is as follows (in millions): 2022 - $211.6; 2023 - $207.7; 2024 - $205.9; 2025 - $200.3; 2026 - $198.1.