Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (loss) before income taxes included the following (in millions):

	2023		2022		2021
Domestic operations	$	532.4	$	490.3	$	108.0
Foreign operations	426.5		417.8		425.8
Total income (loss) before income taxes	$	958.9	$	908.1	$	533.8

The provision for income taxes included the following (in millions):

	2023		2022		2021
Current provision (benefit)
Federal	$	91.2	$	47.2	$	43.0
State	21.4		14.8		10.8
Foreign	57.1		47.8		57.5
Total current provision (benefit)	169.7		109.8		111.3
Deferred provision (benefit)
Federal	(78.8)		(39.0)		(39.7)
State	(4.6)		0.3		(0.1)
Foreign	(14.0)		48.1		17.0
Total deferred provision (benefit)	(97.4)		9.4		(22.8)
Provision (benefit) for income taxes	$	72.3	$	119.2	$	88.5

The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate:

	2023		2022		2021
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of federal benefit	1.8		1.7		1.8
Research and development tax credits	(2.4)		(1.8)		(3.4)
Investment tax credits	(0.5)		(0.5)		(1.1)
Foreign rate differential	1.8		1.5		1.4
Net accruals (reversals) for unrecognized tax benefits	(10.8)		(7.9)		(2.4)
Stock-based compensation	(2.1)		(1.1)		(2.5)
U.S. export sales	(2.2)		(2.0)		(1.3)
Acquisition-related costs	—		—		1.7
Other	0.9		2.2		1.4
Effective income tax rate	7.5%		13.1	%	16.6	%

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse.

The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense were as follows (in millions):

Deferred income tax assets:	2023		2022
Long-term:
Accrued liabilities	$	29.5	$	32.0
Inventory valuation	29.1		30.3
Accrued vacation	8.1		8.3
Deferred compensation and other benefit plans	13.8		12.7
Postretirement benefits other than pensions	0.7		1.0
Operating lease liabilities	27.9		29.9
Capitalization of research and development	141.1		70.8
Tax credit and net operating loss carryforward	39.3		44.6
Other	34.8		32.6
Valuation allowance	(18.2)		(16.1)
Total deferred income tax assets	306.1		246.1
Deferred income tax liabilities:
Long-term:
Intangible amortization	638.7		646.9
Property, plant and equipment differences	29.0		31.9
Operating lease right-of-use assets	25.3		26.7
Unremitted earnings of foreign subsidiaries	3.6		3.1
Other	12.4		12.9
Total deferred income tax liabilities	709.0		721.5
Net deferred income tax liabilities	$	402.9	$	475.4

The Company is not permanently reinvested with respect to unremitted earnings of most of its foreign subsidiaries. The Company is subject to U.S. income tax on substantially all of these foreign earnings, while any remaining foreign earnings are eligible for potential U.S. tax deductions. As of December 31, 2023, the incremental tax cost to repatriate these earnings was not material.

The Company continues to make an indefinite reinvestment assertion on the unrepatriated prior year earnings of its material subsidiaries in Canada. Those unremitted earnings were used to finance Canadian operations and investments. The Company estimates that future cash generation will be sufficient to meet future domestic cash requirements. Determination of the unrecognized deferred tax liability for historical unremitted Canadian earnings is not practicable due to the uncertainty and overall complexity of the potential calculations

In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including recent financial performance, scheduled reversals of temporary differences, projected future taxable income, availability of taxable income in carryback periods and tax planning strategies. Based on a review of such information, management believes that it is possible that some portion of deferred tax assets will not be realized as a future benefit and therefore has recorded a valuation allowance. The valuation allowance for deferred tax assets increased by $2.1 million in 2023.

At December 31, 2023, the Company had approximately $32.3 million of net operating loss carryforward primarily from the Company’s foreign entities including the United Kingdom, Denmark and France, of which $28.0 million have no expiration dates and $4.3 million have expiration dates ranging from 2024 to 2040. The Company had Canadian capital loss carryforward in the amount of $3.6 million which has no expiration date. Also, the Company had aggregate Canadian federal and provincial investment tax credits of $11.9 million, which have expiration dates ranging from 2030 to 2042. The Company had Spanish federal research and development credit carryforward in the amount of $0.3 million, which have expiration dates ranging from 2025 to 2028. In addition, the Company had domestic federal and state net operating loss carryforward of $19.2 million and $175.8 million, respectively. Generally, federal net operating loss carryforward amounts are limited in their use by earnings of certain acquired subsidiaries. Of the $19.2 million federal net operation loss carryforward, $15.3 million have no expiration dates and $3.9 million have expiration dates ranging from 2024 to 2037. The state net operating loss carryforward amounts have expiration dates ranging from 2024 to 2042. Finally, the Company had state tax credits of $15.4 million, of which $10.1 million have no expiration date and $5.3 million have expiration dates ranging from 2025 to 2047.

Unrecognized tax benefits (in millions):	2023		2022		2021
Beginning of year (a)	$	162.8	$	402.0	$	32.3
Increase due to business combinations	18.6		—		413.8
Increase for tax positions taken during the current period	3.4		2.7		6.3
Increase in prior year tax positions	3.0		0.2		2.5
Reduction related to settlements with taxing authorities	—		(223.3)		(1.6)
Reduction related to lapse of the statute of limitations	(96.3)		(26.4)		(20.7)
Impact of exchange rate changes	5.0		7.6		(30.6)
End of year (a)	$	96.5	$	162.8	$	402.0

(a) Beginning and end of year balances include amounts offset by deferred tax and amounts offset by potential refunds in other taxing jurisdictions.

In the next 12 months, the Company anticipates the total unrecognized tax benefit for various federal, state and foreign tax items may be reduced by $21.5 million due to the expiration of statutes of limitation for various federal, state and foreign tax issues.

Teledyne recognized net tax benefits and expense for interest and penalties related to unrecognized tax benefits within the provision for income taxes in our statements of income of $10.3 million of benefits, $12.2 million of benefits and $2.4 million of expense, for 2023, 2022 and 2021, respectively. Interest and penalties in the amount of $36.9 million, $45.6 million and $160.8 million were recognized in the 2023, 2022 and 2021 balance sheets, respectively. In 2021, interest and penalties of $157.0 million were accrued as a result of the acquisition of FLIR. Substantially all of the unrecognized tax benefits as of December 31, 2023, if recognized, would affect our effective tax rate.

Teledyne files income tax returns in the United States federal and state jurisdictions and in various foreign jurisdictions. The Company has substantially concluded income tax matters in the U.S. 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.

Cash payments for federal, state and foreign income taxes were $313.0 million for 2023, which are net of $14.7 million in tax refunds. Cash payments for federal, state and foreign income taxes were $212.4 million for 2022, which are net of $20.1 million in tax refunds. Cash payments for federal, state and foreign income taxes were $83.6 million for 2021, which are net of $22.4 million in tax refunds.