Business Acquisitions, Goodwill and Intangible Assets

12 Months Ended

Jan. 01, 2012

Business Acquisitions, Goodwill and Intangible Assets [Abstract]

Business Acquisitions, Goodwill and Intangible Assets

Note 3.     Business Acquisitions, Goodwill and Intangible Assets

The Company spent $366.7 million, $67.9 million and $27.1 million on acquisitions in 2011, 2010 and 2009, respectively. On February 12, 2011, the Company acquired the stock of DALSA Corporation (“DALSA”). DALSA designs and manufactures digital image capture products, primarily consisting of high performance sensors, cameras and software for use in industrial, scientific, medical and professional applications products, as well as specialty semiconductors and micro electro mechanical systems (“MEMS”). The Company acquired DALSA for an aggregate purchase price of $339.5 million in cash. Headquartered in Waterloo, Ontario, Canada, DALSA had annual revenues of CAD $212.3 million for its fiscal year ended December 2010. DALSA operates within the Digital Imaging segment.

In addition to the acquisition of DALSA in 2011, the Company completed the acquisition of a majority interest in Nova Sensors (“Nova”) for total consideration of $5.1 million in cash and a minority interest in Optech Incorporated (“Optech”) for $18.9 million. Nova produces compact short-wave and mid-wave infrared cameras and operates within the Digital Imaging segment. Optech is a laser-based survey and digital imaging company. We also bought the remaining minority interest in Energy Systems for $3.2 million in 2011.

In 2010, Teledyne acquired Intelek plc (“Intelek”) for $43.5 million. Intelek primarily designs and manufactures electronic systems for satellite and microwave communications and aerospace manufacturing. In 2010, Teledyne also acquired Optimum Optical Systems Inc. (“Optimum”) for $5.7 million, a designer and manufacturer of custom optics and optomechanical assemblies and Hafmynd ehf. (“Gavia”) for $10.8 million, a designer and manufacturer of the Gavia autonomous underwater vehicle. In 2009, the Company purchased all of the remaining 14.1% minority interest in Ocean Design, Inc., now known as Teledyne ODI (“ODI”) for $25.5 million. Also in 2009, the Company purchased the assets of a marine sensor product line for $1.4 million.

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.

DALSA’s results have been included since the date of the acquisition. The unaudited pro forma financial information below assumes that DALSA had been acquired at the beginning of the 2011 and 2010 fiscal years and includes the effect of estimated amortization of acquired identifiable intangible assets, increased interest expense on net acquisition debt, as well as the impact of purchase accounting adjustments for certain liabilities and inventory valuation adjustments. The unaudited pro forma 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 pro forma financial 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.

	Fiscal Year
(unaudited, in millions, except per share amounts)	2011		2010
Net sales	$	1,966.0	$	1,850.2
Net income from continuing operations	$	133.5	$	113.6
Net income attributable to Teledyne Technologies	$	246.6	$	114.2
Basic earnings per common share — continuing operations	$	3.65	$	3.14
Basic earnings per common share — attributable to Teledyne Technologies	$	6.74	$	3.15
Diluted earnings per common share — continuing operations	$	3.58	$	3.08
Diluted earnings per common share — attributable to Teledyne Technologies	$	6.61	$	3.09

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

Teledyne’s goodwill was $717.8 million at January 1, 2012, and $546.3 million at January 2, 2011. Teledyne’s acquired intangible assets were $181.4 million at January 1, 2012, and $113.9 million at January 2, 2011. The increase in goodwill reflected current year acquisitions. The increase in acquired intangible assets primarily reflected current year acquisitions, partially offset by amortization.

The following tables show the purchase price, goodwill acquired and intangible assets acquired for the acquisitions made in fiscal 2011 and 2010 (in millions):

	Fiscal year 2011
Acquisition Date	Name	Purchase Price(a)		Goodwill Acquired		Acquired Intangible Assets
February 11, 2011	DALSA	$	342.3	$	166.9	$	91.5
March 17, 2011	Nova Sensors		5.1		8.3		2.0
		$	347.4	$	175.2	$	93.5

	Fiscal year 2010
Acquisition Date	Name	Purchase Price(a)		Goodwill Acquired		Acquired Intangible Assets
June 7, 2010	Optimum Optical	$	5.7	$	4.3	$	1.9
July 26, 2010	Intelek		43.5		34.0		15.3
September 20, 2010	Gavia		10.8		8.1		2.3
		$	60.0	$	46.4	$	19.5

(a) Includes transaction costs that were expensed.

The following is a summary at the acquisition date of the estimated fair values of the assets acquired and liabilities assumed for the acquisitions made in 2011 and 2010 (in millions):

	2011		2010
Current assets, excluding cash acquired	$	98.7	$	18.4
Property, plant and equipment		53.3		16.5
Goodwill		175.2		46.4
Intangible assets		93.5		19.5
Total assets acquired		420.7		100.8
Current liabilities, including short-term debt		37.7		18.8
Other long-term liabilities		38.4		25.0
Total liabilities assumed		76.1		43.8
Purchase price, net of cash acquired	$	344.6	$	57.0

The following table summarizes the intangible assets acquired as part of the acquisitions made in 2011 and 2010 (dollars in millions);

	2011				2010
	Intangible Assets		Weighted average useful life in years		Intangible Assets		Weighted average useful life in years
Intangibles assets not subject to amortization:
Goodwill	$	175.2		n/a	$	46.4		n/a
Trademarks	$	19.5		n/a	$	3.2		n/a
Intangibles assets subject to amortization:
Proprietary Technology	$	46.0		9.0	$	9.2		6.4
Customer List/Relationships		24.6		10.0		6.3		7.2
Backlog		3.4		1.6		0.8		0.8
	$	74.0		9.5	$	16.3		7.3

Goodwill resulting from the acquisitions made in fiscal 2011 and 2010 will be deductible for tax purposes, except for the DALSA and Optimum Optical acquisitions.

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 January 3, 2010	$	264.8		$	85.6		$	135.3		$	15.8	$	501.5
Current year acquisitions		8.1			4.3			26.1			7.9		46.4
Impact of foreign currency changes		(1.2	)		—			(0.3	)		—		(1.5	)
Adjustment to prior year acquisitions(a)		(0.1	)		—			—			—		(0.1	)
Balance at January 2, 2011		271.6			89.9			161.1			23.7		546.3
Current year acquisitions		—			175.2			—			—		175.2
Impact of foreign currency changes		(0.1	)		(3.9	)		0.3			—		(3.7	)
Balance at January 1, 2012	$	271.5		$	261.2		$	161.4		$	23.7	$	717.8

(a) The adjustments to prior year acquisitions primarily related to final estimates of fair value for assets acquired and liabilities assumed in connection with business acquisitions completed prior to 2010.

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

	2011						2010
	Gross carrying amount		Accumulated amortization		Net Carrying Amount		Gross carrying amount		Accumulated amortization		Net Carrying Amount
Other acquired intangible assets:
Proprietary Technology	$	124.2	$	47.0	$	77.2	$	79.5	$	33.4	$	46.1
Customer List/Relationships		68.5		25.3		43.2		44.5		17.6		26.9
Patents		0.7		0.5		0.2		0.7		0.5		0.2
Non-compete agreements		0.9		0.9		—		1.0		0.9		0.1
Trademarks		11.1		9.6		1.5		3.2		1.0		2.2
Backlog		3.2		1.2		2.0		7.7		7.5		0.2
Oher acquired intangible assets subject to amortization	$	208.6	$	84.5	$	124.1	$	136.6	$	60.9	$	75.7
Oher acquired intangible assets not subject to amortization
Trademarks		57.3		—		57.3		38.2		—		38.2
Total other acquired intangible assets:	$	265.9	$	84.5	$	181.4	$	174.8	$	60.9	$	113.9

Amortizable other intangible assets are amortized on a straight-line basis over their estimated useful lives ranging from one to 20 years. The Company recorded $24.6 million and $14.1 million in amortization expense in 2011 and 2010, respectively, for other acquired intangible assets. The expected future amortization expense for the next five years is as follows (in millions): 2012 — $23.4; 2013 — $19.7; 2014 — $19.6; 2015 — $18.1; 2016 — $15.4.

The estimated remaining useful lives by asset category as of January 1, 2012, are as follows:

Intangibles subject to amortization	Weighted average remaining useful life in years
Proprietary Technology		5.4
Customer List/Relationships		5.9
Patents		6.3
Backlog		1.0
Trademarks		9.7
Total intangibles subject to amortization		5.3