TELEDYNE TECHNOLOGIES INC [TDY] Filings

10-Q 1 tdy-20240630.htm 10-Q - FORM 10Q Q2 2024 TDY tdy-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

FORM 10-Q

_____________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-15295

_____________________________________

TELEDYNE TECHNOLOGIES INCORPORATED

(Exact name of registrant as specified in its charter)

_____________________________________


Delaware		25-1843385
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1049 Camino Dos Rios
Thousand Oaks	California	91360-2362
(Address of principal executive offices)		(Zip Code)

805 373-4545

(Registrant’s telephone number, including area code)

____________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	TDY	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ☐ No ☒

There were 46,784,213 shares of common stock, $.01 par value per share, outstanding as of July 19, 2024.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

TABLE OF CONTENTS


		PAGE
Part I	Financial Information	2

	Item 1. Financial Statements	2

	Condensed Consolidated Statements of Income (Loss)	2

	Condensed Consolidated Statements of Comprehensive Income (Loss)	3

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Stockholders' Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	30

	Item 4. Controls and Procedures	30

Part II	Other Information	30

	Item 1. Legal Proceedings	30

	Item 1A. Risk Factors	30



	Item 5. Other Information	30

	Item 6. Exhibits	31

Signatures		32

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2024 AND JULY 2, 2023

(Unaudited - Amounts in millions, except per-share amounts)


	Second Quarter				Six Months
	2024		2023		2024		2023
Net sales	$	1,374.1	$	1,424.7	$	2,724.2	$	2,808.0
Costs and expenses
Cost of sales	781.5		806.3		1,551.7		1,597.0
Selling, general and administrative	296.5		313.0		592.7		613.4
Acquired intangible asset amortization	49.1		49.3		98.5		99.0
Total costs and expenses	1,127.1		1,168.6		2,242.9		2,309.4
Operating income (loss)	247.0		256.1		481.3		498.6
Interest and debt income (expense), net	(15.8)		(22.3)		(28.5)		(43.3)
Gain (loss) on debt extinguishment	—		1.6		—		1.6
Non-service retirement benefit income (expense), net	2.7		2.9		5.4		6.2
Other income (expense), net	(2.2)		(3.4)		(1.0)		(4.5)
Income (loss) before income taxes	231.7		234.9		457.2		458.6
Provision (benefit) for income taxes	51.4		49.4		97.8		94.3



Net income (loss) including noncontrolling interest	180.3		185.5		$	359.4	$	364.3
Less: Net income (loss) attributable to noncontrolling interest	0.1		0.2		0.7		0.3
Net income (loss) attributable to Teledyne	$	180.2	$	185.3	$	358.7	$	364.0













Basic earnings per common share	$	3.82	$	3.94	$	7.58	$	7.74
Weighted average common shares outstanding	47.2		47.0		47.3		47.0





Diluted earnings per common share	$	3.77	$	3.87	$	7.49	$	7.60
Weighted average diluted common shares outstanding	47.8		47.9		47.9		47.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2024 AND JULY 2, 2023

(Unaudited - Amounts in millions)


	Second Quarter				Six Months
	2024		2023		2024		2023
Net income (loss) including noncontrolling interest	$	180.3	$	185.5	$	359.4	$	364.3
Other comprehensive income (loss):
Foreign exchange translation adjustment	(5.8)		12.3		(94.6)		8.0
Hedge activity, net of tax	(2.3)		1.6		(6.5)		4.1
Pension and postretirement benefit adjustments, net of tax	2.1		0.9		4.2		2.4
Other comprehensive income (loss)	(6.0)		14.8		(96.9)		14.5
Comprehensive income (loss) including noncontrolling interest	174.3		200.3		262.5		378.8
Less: Comprehensive income (loss) attributable to noncontrolling interest	0.1		0.2		0.7		0.3


Comprehensive income (loss) attributable to Teledyne	$	174.2	$	200.1	$	261.8	$	378.5

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - Amounts in millions, except share amounts)


	June 30, 2024		December 31, 2023
Assets
Current Assets
Cash and cash equivalents	$	443.2	$	648.3

Accounts receivable, net	860.2		899.7
Unbilled receivables, net	301.3		302.4
Inventories, net	965.7		917.7

Prepaid expenses and other current assets	174.3		213.3

Total current assets	2,744.7		2,981.4
Property, plant and equipment, net of accumulated depreciation and amortization of $984.8 at June 30, 2024 and $947.1 at December 31, 2023	755.6		777.0
Goodwill	8,040.2		8,002.8
Acquired intangibles, net	2,182.9		2,278.1
Prepaid pension assets	211.5		203.3

Other assets, net	286.2		285.3
Total Assets	$	14,221.1	$	14,527.9
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current Liabilities
Accounts payable	$	399.7	$	384.7
Accrued liabilities	836.8		781.3
Current portion of long-term debt	150.5		600.1

Total current liabilities	1,387.0		1,766.1
Long-term debt, net of current portion	2,646.9		2,644.8

Long-term deferred tax liabilities	407.1		415.4
Other long-term liabilities	455.2		475.8
Total Liabilities	4,896.2		5,302.1
Commitments and contingencies
Redeemable Noncontrolling Interest	5.2		4.6
Stockholders’ Equity
Preferred stock, $0.01 par value; outstanding shares - none	—		—
Common stock, $0.01 par value; issued shares: 47,432,939 at June 30, 2024 and 47,331,845 at December 31, 2023; outstanding shares: 46,943,484 at June 30, 2024 and 47,331,845 at December 31, 2023	0.5		0.5
Additional paid-in capital	4,435.9		4,407.3
Retained earnings	5,806.2		5,447.5
Treasury stock, 489,455 shares at June 30, 2024 and — at December 31, 2023	(191.9)		—
Accumulated other comprehensive income (loss)	(731.0)		(634.1)
Total Stockholders’ Equity	9,319.7		9,221.2


Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity	$	14,221.1	$	14,527.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In millions)


	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, December 31, 2023	$	0.5	$	4,407.3	$	—	$	5,447.5	$	(634.1)	$	9,221.2
Net income (loss)	—		—		—		178.5		—		178.5
Other comprehensive income (loss), net of tax	—		—		—		—		(90.9)		(90.9)

Stock-based compensation	—		12.0		—		—		—		12.0
Exercise of stock options and other	—		7.2		—		—		—		7.2
Balance, March 31, 2024	0.5		4,426.5		—		5,626.0		(725.0)		9,328.0
Net income (loss)	—		—		—		180.2		—		180.2
Other comprehensive income (loss), net of tax	—		—		—		—		(6.0)		(6.0)
Treasury stock issued	—		(1.9)		1.9		—		—		—
Treasury stock repurchased	—		—		(193.8)		—		—		(193.8)
Stock-based compensation	—		9.3		—		—		—		9.3
Exercise of stock options and other	—		2.0		—		—		—		2.0
Balance, June 30, 2024	$	0.5	$	4,435.9	$	(191.9)	$	5,806.2	$	(731.0)	$	9,319.7


	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, January 1, 2023	$	0.5	$	4,353.4	$	(20.0)	$	4,561.8	$	(726.5)	$	8,169.2
Net income (loss)	—		—		—		178.7		—		178.7
Other comprehensive income (loss), net of tax	—		—		—		—		(0.3)		(0.3)
Treasury stock issued	—		(10.6)		10.6		—		—		—
Stock-based compensation	—		7.9		—		—		—		7.9
Exercise of stock options and other	—		10.2		—		—		—		10.2
Balance, April 2, 2023	0.5		4,360.9		(9.4)		4,740.5		(726.8)		8,365.7

Net income (loss)	—		—		—		185.3		—		185.3
Other comprehensive income (loss), net of tax	—		—		—		—		14.8		14.8

Treasury stock issued	—		(2.9)		2.9		—		—		—
Stock based compensation	—		8.4		—		—		—		8.4
Exercise of stock options	—		4.8		—		—		—		4.8
Balance, July 2, 2023	$	0.5	$	4,371.2	$	(6.5)	$	4,925.8	$	(712.0)	$	8,579.0

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND JULY 2, 2023

(Unaudited - Amounts in millions)


	Six Months
	2024		2023
Operating Activities
Net income (loss) including noncontrolling interest	$	359.4	$	364.3


Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:
Depreciation and amortization	155.8		162.1

Stock-based compensation	21.3		16.3
Debt extinguishment (income) expense	—		(1.6)

Changes in operating assets and liabilities excluding the effect of business acquired:
Accounts receivable and unbilled receivables	39.1		9.9
Inventories	(43.2)		(75.3)

Accounts payable	13.3		(49.7)

Deferred taxes and income taxes receivable (payable), net	13.5		8.5
Prepaid expenses and other assets	7.4		(16.3)
Accrued expenses and other liabilities	33.6		(18.6)



Other operating, net	9.5		(6.1)


Net cash provided by (used in) operating activities	609.7		393.5
Investing Activities
Purchases of property, plant and equipment	(33.6)		(51.7)
Purchases of businesses, net of cash acquired	(123.6)		(53.5)

Other investing, net	0.1		0.7
Net cash provided by (used in) investing activities	(157.1)		(104.5)
Financing Activities




Proceeds from (payments on) fixed rate senior notes	(450.0)		(308.4)
Net borrowings from (repayments made to) credit facility	—		(125.0)

Proceeds from (payments on) other debt	(0.1)		(135.3)
Proceeds from exercise of stock options	11.5		15.0
Purchases of treasury stock	(193.8)		—
Liquidation (maturity) of cross currency swap	—		(13.5)
Other financing, net	(5.5)		(0.6)
Net cash provided by (used in) financing activities	(637.9)		(567.8)
Effects of exchange rate changes on cash	(19.8)		4.9
Change in cash and cash equivalents	(205.1)		(273.9)
Cash and cash equivalents—beginning of period	648.3		638.1
Cash and cash equivalents—end of period	$	443.2	$	364.2

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2024

Note 1. General

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Teledyne Technologies Incorporated (“Teledyne” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in notes to consolidated financial statements have been condensed or omitted pursuant to such rules and regulations, but resultant disclosures are in accordance with generally accepted accounting principles in the United States (“GAAP”) as they apply to interim reporting. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes in Teledyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“2023 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, Teledyne’s consolidated financial position as of June 30, 2024 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the second quarter and six months ended June 30, 2024. The results of operations and cash flows for the periods ended June 30, 2024 and cash flows for the six months ended June 30, 2024 are not necessarily indicative of the results of operations or cash flows to be expected for any subsequent quarter or the full fiscal year.

Recent Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard requires a public entity to disclose significant segment expenses and other segment items on an interim and annual basis. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”). The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction focuses on the rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements.

Note 2. Business Acquisitions

2024 Acquisitions

During the second quarter of 2024, the Company acquired Adimec Holding B.V. and its subsidiaries (“Adimec”) for $88.1 million in cash, net of cash acquired, and subject to certain adjustments. Adimec, founded in 1992 and headquartered in Eindhoven, Netherlands, develops customized high-performance industrial and scientific cameras. Adimec is part of the Digital Imaging segment. Goodwill resulting from the Adimec acquisition will not be deductible for tax purposes.

During the second quarter of 2024, the Company acquired Valeport Holdings 2019 Limited and its affiliates ("Valeport") for $35.5 million in cash, net of cash acquired, subject to certain adjustments. Approximately 10% of the purchase price is payable in fiscal year 2025. Valeport, founded in 1969 and headquartered in Totnes, United Kingdom, designs and manufactures underwater sensors for environmental, energy, construction and defense applications. Valeport is part of the Marine Instrumentation product line within the Instrumentation segment. Goodwill resulting from the Valeport acquisition will not be deductible for tax purposes.

2023 Acquisitions

Xena Networks

During the fourth quarter of 2023, the Company acquired Xena Networks ApS and affiliates (“Xena Networks”) for $24.2 million in cash, net of cash acquired, and subject to certain adjustments. Xena Networks, headquartered in Denmark, is a leading provider of high-speed terabit ethernet validation, quality assurance, and production test solutions. Xena Networks is part of the Test and Measurement Instrumentation product line within the Instrumentation segment. Goodwill resulting from the Xena Networks acquisition will not be deductible for tax purposes.

ChartWorld

During the first quarter of 2023, the Company acquired ChartWorld International Limited and affiliates ("ChartWorld") for $53.5 million in cash, net of cash acquired, and subject to certain adjustments. ChartWorld, headquartered in Cyprus, with additional locations in Germany, Singapore, Canada and Japan, is a provider of digital marine navigation hardware and software provided through an affordable subscription-based model. ChartWorld is part of the Digital Imaging segment. Goodwill resulting from the ChartWorld acquisition will not be deductible for tax purposes.

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


	2024
Acquisitions	Acquisition Date	Consideration Transferred (a)		Goodwill Acquired		Acquired Intangible Assets
Adimec	June 4, 2024	$	88.1	$	63.8	$	17.9
Valeport	April 10, 2024	35.5		23.3		7.8
		$	123.6	$	87.1	$	25.7
(a) Net of cash acquired; approximately 10% of the Valeport purchase price is payable in 2025 and included in the amount above
	2023
Acquisitions	Acquisition Date	Consideration Transferred (a)		Goodwill Acquired		Acquired Intangible Assets
Xena Networks	October 13, 2023	$	24.2	$	21.1	$	4.8
ChartWorld	January 3, 2023	53.5		55.5		11.3


Total		$	77.7	$	76.6	$	16.1
(a) Net of cash acquired

The Company’s cost to acquire these acquisitions was 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 was recorded as goodwill. The fair value of the acquired identifiable assets and liabilities for the Adimec, Valeport and Xena Networks 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. Pro forma results of operations, the revenue and net income subsequent to the acquisition date, and a more detailed breakout of the major classes of assets and liabilities acquired for these acquisitions have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to the Company's financial results. The significant factors that resulted in recognition of goodwill for the 2023 and 2024 acquisitions included the acquired businesses’ market positions, growth opportunities in the markets in which they operate, their experienced work force and established operating infrastructures. The results of these acquisitions have been included in Teledyne’s results since the dates of their respective acquisition.

Note 3. Business Segments

Teledyne is a leading provider of sophisticated digital imaging products and software, instrumentation, aerospace and defense electronics, and engineered systems. Our customers include government agencies, aerospace prime contractors, energy exploration and production companies, major industrial companies and airlines. The Company has four reportable segments: Digital Imaging; Instrumentation; Aerospace and Defense Electronics; and Engineered Systems.

Segment results include net sales and operating income by segment but excludes corporate expenses. Corporate expense primarily includes administrative expenses relating to the corporate office not allocated to our segments.

The following table presents net sales and operating income by segment (dollars in millions):


	Second Quarter				%		Six Months				%
	2024		2023		Change		2024		2023		Change
Net sales (a):
Digital Imaging	$	739.4	$	793.3	(6.8)	%	$	1,480.2	$	1,565.8	(5.5)	%
Instrumentation	333.5		328.4		1.6	%	663.9		661.9		0.3	%

Aerospace and Defense Electronics	194.4		186.0		4.5	%	380.1		359.2		5.8	%
Engineered Systems	106.8		117.0		(8.7)	%	200.0		221.1		(9.5)	%
Total net sales	$	1,374.1	$	1,424.7	(3.6)	%	$	2,724.2	$	2,808.0	(3.0)	%
Operating income:
Digital Imaging	$	113.5	$	124.6	(8.9)	%	$	227.3	$	246.8	(7.9)	%
Instrumentation	87.2		81.4		7.1	%	173.2		162.1		6.8	%

Aerospace and Defense Electronics	57.1		53.2		7.3	%	109.0		100.2		8.8	%
Engineered Systems	7.5		11.5		(34.8)	%	10.2		21.5		(52.6)	%
Corporate expense	(18.3)		(14.6)		25.3	%	(38.4)		(32.0)		20.0	%
Operating income	$	247.0	$	256.1	(3.6)	%	$	481.3	$	498.6	(3.5)	%
(a) Net sales exclude inter-segment sales of $8.5 million and $13.3 million for the second quarter and first six months of 2024, respectively, and $8.1 million and $14.3 million for the second quarter and first six months of 2023, respectively.

Identifiable assets are those assets used in the operations of the segments. Corporate assets primarily consist of cash and cash equivalents, deferred taxes, net pension assets/liabilities and other assets (in millions):


Identifiable assets:	June 30, 2024		December 31, 2023
Digital Imaging	$	11,236.1	$	11,382.2
Instrumentation	1,734.6		1,692.3

Aerospace and Defense Electronics	560.4		569.1
Engineered Systems	208.3		184.8
Corporate	481.7		699.5
Total identifiable assets	$	14,221.1	$	14,527.9

Product Lines

The Instrumentation segment includes three product lines: Marine Instrumentation, Environmental Instrumentation and Test and Measurement Instrumentation. The Company’s other three segments each contain one product line.

The following table provides a summary of the net sales by product line for the Instrumentation segment (in millions):


	Second Quarter				Six Months
Instrumentation	2024		2023		2024		2023

Marine Instrumentation	$	147.8	$	127.4	$	295.6	$	255.6
Environmental Instrumentation	113.5		115.3		224.6		233.2

Test and Measurement Instrumentation	72.2		85.7		143.7		173.1
Total	$	333.5	$	328.4	$	663.9	$	661.9

Note 4. Revenue Recognition and Contract Balances

Approximately 70% of the Company's net sales are recognized at a point in time, with the remaining 30% of net sales recognized over time. The Company disaggregates its revenue from contracts with customers by customer type and geographic region for each segment, as management believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.


	Second Quarter Ended June 30, 2024						Second Quarter Ended June 30, 2024
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	122.3	$	617.1	$	739.4	$	325.3	$	201.7	$	136.5	$	75.9	$	739.4
Instrumentation	29.3		304.2		333.5		153.4		82.6		61.9		35.6		333.5
Aerospace and Defense Electronics	60.8		133.6		194.4		132.9		33.4		20.1		8.0		194.4
Engineered Systems	95.7		11.1		106.8		106.0		—		0.3		0.5		106.8
Total	$	308.1	$	1,066.0	$	1,374.1	$	717.6	$	317.7	$	218.8	$	120.0	$	1,374.1
(a) U.S. Government sales include sales as a prime contractor or subcontractor. (b) Primarily commercial sales (c) Geographic region by destination



	Six Months Ended June 30, 2024						Six Months Ended June 30, 2024
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	253.0	$	1,227.2	$	1,480.2	$	659.0	$	402.0	$	270.7	$	148.5	$	1,480.2
Instrumentation	62.7		601.2		663.9		298.0		179.5		122.0		64.4		663.9
Aerospace and Defense Electronics	119.6		260.5		380.1		256.6		67.6		38.7		17.2		380.1
Engineered Systems	175.5		24.5		200.0		198.8		—		0.4		0.8		200.0
Total	$	610.8	$	2,113.4	$	2,724.2	$	1,412.4	$	649.1	$	431.8	$	230.9	$	2,724.2
(a) U.S. Government sales include sales as a prime contractor or subcontractor. (b) Primarily commercial sales (c) Geographic region by destination


	Second Quarter Ended July 2, 2023						Second Quarter Ended July 2, 2023
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	131.3	$	662.0	$	793.3	$	356.4	$	207.3	$	152.4	$	77.2	$	793.3
Instrumentation	21.3		307.1		328.4		139.4		95.2		64.6		29.2		328.4
Aerospace and Defense Electronics	61.0		125.0		186.0		126.0		36.2		15.5		8.3		186.0
Engineered Systems	103.2		13.8		117.0		114.4		—		0.4		2.2		117.0
Total	$	316.8	$	1,107.9	$	1,424.7	$	736.2	$	338.7	$	232.9	$	116.9	$	1,424.7
(a) U.S. Government sales include sales as a prime contractor or subcontractor. (b) Primarily commercial sales (c) Geographic region by destination


	Six Months Ended July 2, 2023						Six Months Ended July 2, 2023
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	261.6	$	1,304.2	$	1,565.8	$	690.8	$	404.6	$	310.8	$	159.6	$	1,565.8
Instrumentation	44.3		617.6		$	661.9	277.4		192.4		132.1		60.0		661.9
Aerospace and Defense Electronics	125.7		233.5		$	359.2	246.1		65.7		32.5		14.9		359.2
Engineered Systems	196.5		24.6		$	221.1	217.7		—		0.6		2.8		221.1
Total	$	628.1	$	2,179.9	$	2,808.0	$	1,432.0	$	662.7	$	476.0	$	237.3	$	2,808.0
(a) U.S. Government sales include sales as a prime contractor or subcontractor. (b) Primarily commercial sales (c) Geographic region by destination

With the exception of the Engineered Systems segment, net sales in each segment are primarily derived from fixed price contracts. Net sales in the Engineered Systems segment are typically between 45% and 55% fixed price contracts in a given reporting period, with the balance of net sales derived from cost-reimbursable type contracts. For the six months ended June 30, 2024, approximately 49% of net sales in the Engineered Systems segment were derived from fixed price contracts.

Contract Liabilities


	Balance at
Contract Liabilities by Balance Sheet Location (in millions)	June 30, 2024		December 31, 2023
Accrued liabilities	$	311.2	$	241.1
Other long-term liabilities	29.5		25.5



Total contract liabilities	$	340.7	$	266.6

The Company recognized revenue of $101.3 million during the six months ended June 30, 2024 from contract liabilities that existed at the beginning of year.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and exclude unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of June 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,419.3 million. The Company expects approximately 77% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 23% recognized thereafter.

Changes in Contract Estimates at Completion

For over time contracts using the cost-to-cost method, the Company has an Estimate at Completion (“EAC”) process in which management reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue, determining reasonably dependable cost estimates, and making assumptions for schedule and technical issues. The majority of revenue recognized over time uses an EAC process. Since certain contracts extend over a long period of time, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings through a cumulative catch-up basis. This method recognizes, in the current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly.

The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first six months of 2024 was $2.1 million of favorable operating income compared with $0.5 million of unfavorable operating income in the first six months of 2023. None of the effects of changes in estimates on any individual contract were material to the consolidated statements of income (loss) for any period presented.

Note 5. Goodwill and Acquired Intangible Assets

Goodwill

The carrying value of goodwill by segment was as follows (in millions):


	Digital Imaging		Instrumentation		Aerospace and Defense Electronics		Engineered Systems		Total


















Balance at December 31, 2023	$	6,877.0	$	944.8	$	163.4	$	17.6	$	8,002.8
Current year acquisitions	63.8		23.3		—		—		87.1
Foreign currency changes and other	(42.0)		(7.5)		(0.2)		—		(49.7)
Balance at June 30, 2024	$	6,898.8	$	960.6	$	163.2	$	17.6	$	8,040.2


Acquired intangible assets (in millions):	June 30, 2024						December 31, 2023
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Proprietary technology	$	1,686.9	$	730.0	$	956.9	$	1,696.6	$	663.0	$	1,033.6
Customer list/relationships	609.0		236.5		372.5		609.5		219.4		390.1
Patents	0.6		0.6		—		0.6		0.6		—
Non-compete agreements	0.9		0.9		—		0.9		0.9		—
Trademarks	12.2		6.6		5.6		10.2		5.8		4.4
Backlog	16.3		16.3		—		16.4		16.4		—
Total intangibles subject to amortization	2,325.9		990.9		1,335.0		2,334.2		906.1		1,428.1
Intangibles not subject to amortization:
Trademarks	847.9		—		847.9		850.0		—		850.0
Total acquired intangible assets	$	3,173.8	$	990.9	$	2,182.9	$	3,184.2	$	906.1	$	2,278.1

An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Based on the results of the Company’s annual assessment in the fourth quarter of 2023, all reporting units with the exception of the FLIR reporting unit had estimated fair values that exceeded their respective carrying value by more than 100%. At the assessment date in the fourth quarter of 2023, the estimated fair value of the FLIR reporting unit exceeded its carrying value by approximately $460 million or 6%, and the FLIR reporting unit had $5,832.4 million of goodwill at the prior year assessment date. As of June 30, 2024, the FLIR reporting unit had $5,850.8 million of goodwill, with the change in value from the prior year assessment date related to the impact of foreign currency translation.

Although the assumptions used in the Company’s prior year discounted cash flow model and market approach are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results of the FLIR reporting unit. Changes in forecast estimates or the application of alternative assumptions could produce significantly different results. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure.

Although no impairment existed for the FLIR reporting unit as of the prior year assessment date, a non-cash impairment of goodwill could result from a number of circumstances, including different assumptions used in determining the fair value of the reporting unit, changes to customer spending priorities, or a sharp increase in interest rates without a corresponding increase in future net sales.

For all reporting units, including the FLIR reporting unit, there have been no events or changes in circumstances which indicate an interim impairment review is required in 2024. The Company will perform its annual analysis during the fourth quarter of 2024.

Based on the results of the Company’s annual assessment in the fourth quarter of 2023, the estimated fair value of all material indefinite-lived trademarks, with the exception of the FLIR indefinite-lived trademark, significantly exceeded their respective carrying value. Trademarks of recently acquired businesses generally represent a higher inherent risk of impairment, which

typically decreases as the businesses are integrated into the Company. At the prior year annual assessment date, the FLIR indefinite-lived trademark had a carrying value of $685.3 million and a fair value of $694.9 million. The most significant assumptions utilized in the determination of the fair value of the FLIR trademark are the net sales growth rates (including residual growth rates), discount rate and royalty rate. Although the FLIR sales forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results of the FLIR business. Changes in sales forecast estimates or the application of alternative assumptions could produce significantly different results. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. The royalty rate was driven by historical and estimated future profitability of the underlying FLIR business, and the royalty rate assumption was consistent with assumptions used by the Company as part of the purchase price allocation of FLIR in 2021. The royalty rate may be impacted by significant adverse changes in long-term operating margins. Although no impairment exists for the FLIR trademark, a non-cash impairment of the trademark could result from a number of circumstances, including different assumptions used in determining the fair value of the trademark, changes to customer spending priorities, or a sharp increase in interest rates without a corresponding increase in future net sales.

For all indefinite-lived trademarks, including the FLIR trademark, there have been no events or changes in circumstances which indicate an interim impairment review is required in 2024. The Company will perform its annual analysis during the fourth quarter of 2024.

Note 6. Supplemental Balance Sheet Information

Cash Equivalents

The Company had $48.8 million and $265.1 million of cash equivalents at June 30, 2024 and December 31, 2023, respectively. The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets.

Accounts Receivable, net

Accounts receivable is presented net of an allowance for doubtful accounts of $12.4 million at June 30, 2024 and $11.5 million at December 31, 2023.

Inventories, net

Inventories are stated at current cost, net of reserves for excess, slow moving and obsolete inventory. Inventories are primarily valued under the FIFO method or average cost method. Inventory balances are summarized as follows (in millions):


	Balance at
	June 30, 2024		December 31, 2023
Raw materials and supplies	$	581.3	$	560.6
Work in process	209.9		184.8
Finished goods	174.5		172.3
Total inventories, net	$	965.7	$	917.7

Product Warranty Costs

Some of the Company’s products are subject to specified warranties, and the Company provides for the estimated cost of product warranties. The adequacy of the warranty reserve is assessed regularly, and the reserve is adjusted as necessary based on a review of historic warranty experience with respect to the applicable business or products, as well as the length and actual terms of the warranties. The warranty reserve is included in current accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.


	Six Months
Warranty Reserve (in millions):	2024		2023
Balance at beginning of year	$	49.1	$	50.3
Product warranty expense	13.7		8.2
Deductions	(14.9)		(7.5)
Acquisition	0.4		—
Balance at end of period	$	48.3	$	51.0

Note 7. Long-Term Debt


	Balance at
Long-Term Debt (in millions):	June 30, 2024		December 31, 2023
$1.20 billion credit facility due June 2029	$	—	$	—




Term loan due October 2024, variable rate of 6.69% at June 30, 2024 and 6.71% at December 31, 2023, swapped to a Euro fixed rate of 0.61%