Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

_____________________________________
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2017April 2, 2023
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file numberFile Number: 1-15295

TELEDYNE TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)

_____________________________________
Delaware25-1843385
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification Number)
No.)
1049 Camino Dos Rios
Thousand Oaks, California
91360-2362
Thousand OaksCalifornia91360-2362
(Address of principal executive offices)(Zip Code)
(805)805 373-4545
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueTDYNew 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  ý☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☒Accelerated filer☐
Large accelerated filerýAccelerated filer¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
☐		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  ý☒
There were 35,436,48747,045,579 shares of common stock, $.01 par value per share, outstanding as of October 31, 2017.April 19, 2023.



Table of Contents
TELEDYNE TECHNOLOGIES INCORPORATED
TABLE OF CONTENTS
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Condensed Consolidated Statements of Income
2

Condensed Consolidated Statements of Comprehensive Income (Loss)
23

Condensed Consolidated Balance Sheets
34

Condensed Consolidated Statements of Stockholders' Equity
5
Condensed Consolidated Statements of Cash Flows
46

Notes to Condensed Consolidated Financial Statements
57

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Item 5. Other Information
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PART I FINANCIAL INFORMATION
 
Item 1.    Financial Statements
TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRDFIRST QUARTER ENDED APRIL 2, 2023 AND NINE MONTHS ENDED OCTOBER 1, 2017 AND OCTOBER 2, 2016APRIL 3, 2022
(Unaudited - Amounts in millions, except per-share amounts)
 Third Quarter Nine Months
 2017 2016 2017 2016
Net sales$662.2
 $526.8
 $1,899.4
 $1,597.0
Costs and expenses       
Cost of sales405.8
 317.0
 1,178.3
 978.0
Selling, general and administrative expenses163.5
 141.0
 483.9
 435.7
Total costs and expenses569.3
 458.0
 1,662.2
 1,413.7
Operating income92.9
 68.8
 237.2
 183.3
Interest and debt expense, net(8.2) (5.6) (25.5) (17.2)
Other income/(expense), net(3.0) (0.8) (13.0) 15.1
Income before income taxes81.7
 62.4
 198.7
 181.2
Provision for income taxes12.7
 10.4
 39.1
 43.3
Net income$69.0
 $52.0
 $159.6
 $137.9
        
Basic earnings per common share$1.95
 $1.50
 $4.53
 $4.00
Weighted average common shares outstanding35.3
 34.7
 35.2
 34.5
        
Diluted earnings per common share$1.90
 $1.46
 $4.41
 $3.90
Weighted average diluted common shares outstanding36.4
 35.6
 36.2
 35.4
First Quarter
 20232022
Net sales$1,383.3 $1,321.0 
Costs and expenses
Cost of sales790.7 752.6 
Selling, general and administrative300.4 291.3 
Acquired intangible asset amortization49.7 53.6 
Total costs and expenses1,140.8 1,097.5 
Operating income (loss)242.5 223.5 
Interest and debt income (expense), net(21.0)(22.3)
Non-service retirement benefit income (expense), net3.3 2.8 
Other income (expense), net(1.1)(1.0)
Income (loss) before income taxes223.7 203.0 
Provision (benefit) for income taxes44.9 (9.6)
Net income (loss) including noncontrolling interest178.8 212.6 
Less: Net income (loss) attributable to noncontrolling interest0.1 — 
Net income (loss) attributable to Teledyne$178.7 $212.6 
Basic earnings per common share$3.81 $4.55 
Weighted average common shares outstanding46.9 46.7 
Diluted earnings per common share$3.73 $4.46 
Weighted average diluted common shares outstanding47.9 47.7 
The accompanying notes are an integral part of these condensed consolidated financial statements.


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TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THIRDFIRST QUARTER ENDED APRIL 2, 2023 AND NINE MONTHS ENDED OCTOBER 1, 2017 AND OCTOBER 2, 2016APRIL 3, 2022
(Unaudited - Amounts in millions)
 Third Quarter Nine Months
 2017 2016 2017 2016
Net income$69.0
 $52.0
 $159.6
 $137.9
Other comprehensive income (loss):       
Foreign exchange translation adjustment36.8
 (7.7) 91.6
 3.6
Hedge activity, net of tax1.9
 (0.9) 4.8
 4.6
Pension and postretirement benefit adjustments, net of tax3.2
 3.3
 10.0
 10.8
Other comprehensive income (loss)41.9
 (5.3) 106.4
 19.0
Comprehensive income, net of tax$110.9
 $46.7
 $266.0
 $156.9
 First Quarter
 20232022
Net income (loss) including noncontrolling interest$178.8 $212.6 
Other comprehensive income (loss):
Foreign exchange translation adjustment(4.3)(32.6)
Hedge activity, net of tax2.5 6.5 
Pension and postretirement benefit adjustments, net of tax1.5 4.2 
Other comprehensive income (loss)(0.3)(21.9)
Comprehensive income (loss) including noncontrolling interest178.5 190.7 
Comprehensive (income) loss attributable to noncontrolling interest0.1 — 
Comprehensive income (loss) attributable to Teledyne$178.4 $190.7 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - Amounts in millions, except share amounts)
 October 1, 2017 January 1, 2017
Assets   
Current Assets   
Cash$82.5
 $98.6
Accounts receivable, net466.0
 383.7
Inventories, net431.9
 314.2
Prepaid expenses and other current assets60.6
 49.7
Total current assets1,041.0
 846.2
Property, plant and equipment, net of accumulated depreciation and amortization of $519.4 at October 1, 2017 and $468.5 at January 1, 2017452.1
 340.8
Goodwill1,748.9
 1,193.5
Acquired intangibles, net408.2
 234.6
Prepaid pension assets109.8
 88.5
Other assets, net87.5
 70.8
Total Assets$3,847.5
 $2,774.4
Liabilities and Stockholders’ Equity   
Current Liabilities   
Accounts payable$186.0
 $138.8
Accrued liabilities336.6
 261.0
Current portion of long-term debt, capital leases and other debt2.5
 102.0
Total current liabilities525.1
 501.8
Long-term debt and capital leases1,193.2
 515.8
Other long-term liabilities275.8
 202.4
Total Liabilities1,994.1
 1,220.0
Commitments and contingencies
 
Stockholders’ Equity
 
Preferred stock, $0.01 par value; outstanding shares - none—
 —
Common stock, $0.01 par value; authorized 125,000,000 shares; issued shares: 37,697,865 at October 1, 2017 and January 1, 2017; outstanding shares: 35,436,187 at October 1, 2017 and 35,110,762 at January 1, 20170.4
 0.4
Additional paid-in capital337.1
 335.7
Retained earnings2,072.0
 1,912.4
Treasury stock, 2,261,678 at October 1, 2017 and 2,587,103 at January 1, 2017(211.3) (242.9)
Accumulated other comprehensive loss(344.8) (451.2)
Total Stockholders’ Equity1,853.4
 1,554.4
Total Liabilities and Stockholders’ Equity$3,847.5
 $2,774.4
April 2, 2023January 1, 2023
Assets
Current Assets
Cash and cash equivalents$665.2 $638.1 
Accounts receivable, net827.9 883.7 
Unbilled receivables, net292.2 274.7 
Inventories, net951.7 890.7 
Prepaid expenses and other current assets145.4 130.7 
Total current assets2,882.4 2,817.9 
Property, plant and equipment, net of accumulated depreciation and amortization of $876.2 at April 2, 2023 and $847.8 at January 1, 2023765.3 769.8 
Goodwill7,925.5 7,873.0 
Acquired intangibles, net2,405.4 2,440.6 
Prepaid pension assets182.4 178.4 
Other assets, net268.3 274.3 
Total Assets$14,429.3 $14,354.0 
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current Liabilities
Accounts payable$495.0 $505.7 
Accrued liabilities692.9 717.6 
Current portion of long-term debt300.1 300.1 
Total current liabilities1,488.0 1,523.4 
Long-term debt, net of current portion3,520.3 3,620.5 
Long-term deferred tax liabilities482.4 490.0 
Other long-term liabilities569.2 547.2 
Total Liabilities6,059.9 6,181.1 
Commitments and contingencies
Redeemable Noncontrolling Interest3.7 3.7 
Stockholders’ Equity
Preferred stock, $0.01 par value; outstanding shares - none— — 
Common stock, $0.01 par value; authorized 125,000,000 shares; issued shares: 47,194,766 at April 2, 2023 and 47,194,766 at January 1, 2023; outstanding shares: 47,037,465 at April 2, 2023 and 46,912,635 at January 1, 20230.5 0.5 
Additional paid-in capital4,360.9 4,353.4 
Retained earnings4,740.5 4,561.8 
Treasury stock, 157,301 shares at April 2, 2023 and 282,131 shares at January 1, 2023(9.4)(20.0)
Accumulated other comprehensive income (loss)(726.8)(726.5)
Total Stockholders’ Equity8,365.7 8,169.2 
Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity$14,429.3 $14,354.0 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 1, 2017 AND OCTOBER 2, 2016(In millions)
Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated 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— 10.2 — — — 10.2 
Balance, April 2, 20230.5 4,360.9 (9.4)4,740.5 (726.8)8,365.7 
(Unaudited - Amounts in millions)
 Nine Months
 2017 2016
Operating Activities   
Net income$159.6
 $137.9
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization87.4
 65.6
Deferred income taxes(1.3) 9.0
Stock-based compensation14.3
 12.2
Gain on sale of facility—
 (17.9)
Changes in operating assets and liabilities:   
Accounts receivable(7.7) 2.3
Inventories(36.9) (18.9)
Prepaid expenses and other assets(1.2) (1.4)
Accounts payable12.6
 6.9
Accrued liabilities11.4
 37.5
Income taxes receivable/payable, net11.9
 26.7
Long-term assets(12.5) 0.8
Other long-term liabilities16.1
 6.0
Pension and postretirement benefits(13.9) (12.3)
     Other operating, net8.5
 (3.7)
Net cash provided by operating activities248.3
 250.7
Investing Activities   
Purchases of property, plant and equipment(40.5) (44.9)
Purchase of businesses and other investments, net of cash acquired(773.8) (58.5)
Proceeds from the sale of assets1.1
 29.6
Sales proceeds transferred to escrow as restricted cash—
 (19.5)
Net cash used in investing activities(813.2) (93.3)
Financing Activities   
Net proceeds from (payments on) credit facility285.0
 (150.5)
Proceeds from senior notes268.0
 —
Proceeds from term loan100.0
 —
Payments on senior notes and other debt(131.7) (22.7)
Proceeds from other debt—
 6.1
Proceeds from exercise of stock options18.7
 26.7
Other financing, net(4.4) (1.1)
Net cash provided by (used in) financing activities535.6
 (141.5)
Effect of exchange rate changes on cash13.2
 (1.5)
Change in cash(16.1) 14.4
Cash—beginning of period98.6
 85.1
Cash—end of period$82.5
 $99.5
Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, January 2, 2022$0.5 $4,317.1 $(38.8)$3,773.2 $(430.0)$7,622.0 
Net income (loss)— — — 212.6 — 212.6 
Other comprehensive income (loss), net of tax— — — — (21.9)(21.9)
Treasury stock issued— (11.6)11.6 — — — 
Stock-based compensation— 7.0 — — — 7.0 
Exercise of stock options— 12.7 — — — 12.7 
Balance, April 3, 20220.5 4,325.2 (27.2)3,985.8 (451.9)7,832.4 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 2, 2023 AND APRIL 3, 2022
(Unaudited - Amounts in millions)
 Three Months
 20232022
Operating Activities
Net income (loss) including noncontrolling interest$178.8 $212.6 
Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:
Depreciation and amortization82.1 86.9 
Stock-based compensation7.9 9.0 
Changes in operating assets and liabilities excluding the effect of business acquired:
Accounts receivable and unbilled receivables50.0 (57.2)
Inventories(57.6)(56.6)
Accounts payable(10.8)33.1 
Deferred and income taxes receivable/payable, net7.2 5.6 
Prepaid expenses and other assets(11.3)(2.4)
Accrued expenses and other liabilities(34.6)(451.5)
  Other operating, net(8.7)3.8 
Net cash provided by (used in) operating activities203.0 (216.7)
Investing Activities
Purchases of property, plant and equipment(24.4)(21.0)
Purchase of businesses, net of cash acquired(52.5)— 
Other investing, net— 1.4 
Net cash provided by (used in) investing activities(76.9)(19.6)
Financing Activities
Net borrowings from (repayments made to) credit facility(100.0)32.0 
Payments on other debt(0.1)— 
Proceeds from exercise of stock options10.2 12.7 
Maturity of cross currency swap(13.5)— 
Other financing, net— (2.1)
Net cash provided by (used in) financing activities(103.4)42.6 
Effect of exchange rate changes on cash4.4 3.3 
Change in cash and cash equivalents27.1 (190.4)
Cash and cash equivalents—beginning of period638.1 474.7 
Cash and cash equivalents—end of period$665.2 $284.3 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
October 1, 2017April 2, 2023


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 generally accepted 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 January 1, 20172023 (“20162022 Form 10-K”).
In the opinion of Teledyne’s 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 October 1, 2017April 2, 2023 and the consolidated results of operations, and consolidated comprehensive income for the three(loss) and nine months then ended andconsolidated cash flows for the nine months then ended.first quarter ended April 2, 2023. The results of operations and cash flows for the periodperiods ended October 1, 2017April 2, 2023 and cash flows for the three months ended April 2, 2023 are not necessarily indicative of the results of operations or cash flows to be expected for any subsequent quarter or the full fiscal year. Certain prior year amounts have been reclassified to conform to the current period presentation.
Recent Accounting PronouncementsStandards
In January 2017,September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the computation2022-04, Liabilities-Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations. This standard requires annual disclosure of the implied fair valuekey terms of goodwill to measuresupplier finance programs, obligations outstanding with a goodwill impairment charge. Instead, entities will record a goodwill impairment charge based ondescription of where the excess of a reporting unit’s carrying amount over its fair value. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. We expect the adoption of this standard will reduce the complexity surrounding the evaluation of goodwill for impairment. The impact of this new standard for the Company will depend on the outcomes of future goodwill impairment tests.
In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU requires the service cost component of net benefit costs to be disaggregated from all other components and be reported in the same line item or items as other compensation costs and allow only the service cost component to be eligible for capitalization when applicable. The other components of net benefit costamounts are required to be presented in the income statement separately from the service cost componentfinancial statements, a rollforward of such amounts, and before income from operations. This ASU is effective for the Company for interim and annual periods beginning January 1, 2018. Upon adoption, the amendments in this update will be applied retrospectively for the presentationdisclosure of amounts outstanding as of the componentsend of net benefit cost, and prospectively for the capitalization of the service cost component of net benefit cost.each period. The adoption of this standard willASU 2022-04 did not have an impact pre-tax income or earnings per share reported foron the years ended December 31, 2017 and January 1, 2017 and is not expected to materially impact pre-tax income or earnings per share for the year ended December 30, 2018. The impacts to operating income from the re-classification of the other components of net benefit cost for the years ended December 31, 2017 and January 1, 2017 are immaterial. The impacts to operating income from the re-classification of the other components on net benefit cost for the year ended December 31, 2018 will be known when the Company measures its plan assets and benefit obligationsCompany's disclosures as of December 31, 2017.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The new standard, as subsequently amended, is effective for Teledyne for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2016. The new standard can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption.
Under the new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring control of a good or service to the customer, either at a point in time or over time. Under the new standard, Teledyne expects to recognize revenue over time on most of its contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of its performance obligations, which is similar to the percentage-of-completion (“POC”) cost-to-

cost method currently used on certain of these contracts.  Therefore, adoption of the ASU will primarily impact our contracts for which revenue is currently recognized using the POC units-of-delivery and milestone methods as we expect to recognize revenue for these contracts over time using the POC cost-to-cost method. These contracts represent approximately half of the revenue currently recognized under the POC method. The percentage of Teledyne revenue recognized using any POC method was 30.5% in 2016, 31.2% in 2015, and 28.7% in 2014. Also, to a lesser extent, we expect certain ship and bill contracts for custom products and products sold to the U.S. Government, as well as service and repair contracts will be recognized over time. Accordingly, revenue will be recognized earlier in the performance period as costs are incurred, as opposed to recognizing revenue when units are delivered, milestones achieved or services performed. This change will also impact our backlog and balance sheet presentation with an expected decrease in inventories, an increase in accounts receivable (i.e., unbilled receivables) and a net increase to retained earnings to primarily reflect the impact of converting certain ship and bill contracts and contracts currently applying the units-of-delivery and milestone methodssupplier finance programs is not material to the cost-to-cost method for recognizing revenue and profits.Company's financial statements.
The Company will adopt the standard as of January 1, 2018, using the modified retrospective transition method and is currently quantifying the impact of the adoption on its consolidated financial statements and related disclosures. Under the modified retrospective transition method, the Company will be required to calculate and record the cumulative-effect of adopting the new standard as of January 1, 2018, in the Company’s Quarterly Report on Form 10-Q for
Note 2. Business Acquisitions
2023 Acquisitions
ChartWorld
During the first quarter of 2018. The impact of adopting2023, the new standard to retained earnings is not known at this time, as it will be dependent on the affected contracts that have not been substantially completed as of December 31, 2017.
In August 2017, the FASB issued ASU No. 2017-12, “DerivativesCompany acquired ChartWorld International Limited and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities.” This ASU better aligns an entity’s risk management activities and financial reporting for hedging relationships. This ASU expands and refines hedge accounting for both nonfinancial and financial risk components, and this ASU simplifies and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This ASU is effective for fiscal years beginning after December 15, 2018 and for interim periods therein, with early adoption permitted. Teledyne is currently evaluating the impact this guidance will have on the consolidated financial statements and footnote disclosures.
Note 2. Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive income/(loss) (“AOCI”) by component, net of tax, for the third quarter and nine months ended October 1, 2017 and October 2, 2016 are as follows (in millions):
 Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of July 2, 2017$(144.0) $0.1
 $(242.8) $(386.7)
   Other comprehensive income before reclassifications36.8
 0.6
 —
 37.4
   Amounts reclassified from AOCI—
 1.3
 3.2
 4.5
Net other comprehensive income36.8
 1.9
 3.2
 41.9
Balance as of October 1, 2017$(107.2) $2.0
 $(239.6) $(344.8)
        
 Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of July 3, 2016$(162.9) $(1.2) $(224.8) $(388.9)
   Other comprehensive loss before reclassifications(7.7) (0.8) —
 (8.5)
   Amounts reclassified from AOCI—
 (0.1) 3.3
 3.2
Net other comprehensive income (loss)(7.7) (0.9) 3.3
 (5.3)
Balance as of October 2, 2016$(170.6) $(2.1) $(221.5) $(394.2)

 Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of January 1, 2017$(198.8) $(2.8) $(249.6) $(451.2)
   Other comprehensive income (loss) before reclassifications91.6
 (1.5) —
 90.1
   Amounts reclassified from AOCI—
 6.3
 10.0
 16.3
Net other comprehensive income91.6
 4.8
 10.0
 106.4
Balance as of October 1, 2017$(107.2) $2.0
 $(239.6) $(344.8)
        
 Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of January 3, 2016$(174.2) $(6.7) $(232.3) $(413.2)
   Other comprehensive income before reclassifications3.6
 2.5
 ���
 6.1
   Amounts reclassified from AOCI—
 2.1
 10.8
 12.9
Net other comprehensive income3.6
 4.6
 10.8
 19.0
Balance as of October 2, 2016$(170.6) $(2.1) $(221.5) $(394.2)
The reclassifications out of AOCI for the third quarter and nine months ended October 1, 2017 and October 2, 2016 are as follows (in millions):
 Amount Reclassified from AOCI Three Months Ended Amount Reclassified from AOCI Three Months EndedStatement of Income
 October 1, 2017 October 2, 2016Presentation
(Gain) loss on cash flow hedges:    
(Gain) loss recognized in income on derivatives$1.8
 $(0.1)Cost of sales
Income tax benefit(0.5) —
Income tax benefit
Total$1.3
 $(0.1) 
     
Amortization of defined benefit pension and postretirement plan items:    
Amortization of prior service cost$(1.5) $(1.5)Costs and expenses
Amortization of net actuarial loss6.7
 6.6
Costs and expenses
Total before tax5.2
 5.1
 
Income tax benefit(2.0) (1.8)Income tax benefit
Total$3.2
 $3.3
 
     
 Amount Reclassified from AOCI Nine Months Ended Amount Reclassified from AOCI Nine Months EndedStatement of Income
 October 1, 2017 October 2, 2016Presentation
Loss on cash flow hedges:    
Loss recognized in income on derivatives$8.5
 $2.9
Cost of sales
Income tax benefit(2.2) (0.8)Income tax benefit
Total$6.3
 $2.1
 
     
Amortization of defined benefit pension and postretirement plan items:    
Amortization of prior service cost$(4.5) $(4.5)Costs and expenses
Amortization of net actuarial loss20.8
 21.0
Costs and expenses
Total before tax16.3
 16.5
 
Income tax benefit(6.3) (5.7)Income tax benefit
Total$10.0
 $10.8
 


Note 3. 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 technologies plc (“e2v”affiliates ("ChartWorld") for $770.7 million, including stock options and assumed debt, net of $24.4 million of cash acquired. e2v provides high performance image sensors and custom camera solutions and application specific standard products for the machine vision market. In addition, e2v provides high performance space qualified imaging sensors and arrays for space science and astronomy. e2v also produces components and subsystems that deliver high reliability radio frequency power generation for healthcare, industrial and defense applications. Finally, the company provides high reliability semiconductors and board-level solutions for use in aerospace, space and communications applications. Teledyne funded the acquisition of e2v with borrowings under its credit facility and cash on hand as well as $100.0$52.5 million in a newly issued term loan.
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. Principally located in Chelmsford, United Kingdom and Grenoble, France, e2v had sales of approximately £236 million for its fiscal year ended March 31, 2016. e2v’s results have been included since the date of the acquisition and include $181.7 million in net sales and operating income of $19.1 million, which included $9.4 million in acquisition-related costs and $7.7 million in additional intangible asset amortization expense.
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 to hedge the e2v purchase price 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 2016 fiscal year and includes the effect of increased interest expense on net acquisition debt and the amortization of acquired intangible assets. The 2016 first nine months proforma amounts also include $14.9 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 $6.8 million in inventory fair value step-up amortization expense. These amounts totaling $36.0 million (which includes $2.9 million for the third quarter) 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 2016 fiscal year:
  Third Quarter (a) Nine Months (a)
(unaudited - in millions, except per share amounts) 2017 2016 2017 2016
Net sales $662.2
 $614.6
 $1,992.4
 $1,853.0
Net income $69.0
 $55.5
 $142.2
 $126.3
Basic earnings per common share $1.95
 $1.60
 $4.04
 $3.66
Diluted earnings per common share $1.90
 $1.56
 $3.93
 $3.57
a) The above unaudited proforma information is presented for the e2v acquisition as it is considered a material acquisition.
Fair values allocated to the assets acquired and liabilities assumed - e2v (in millions): (a)  
Current assets, excluding cash acquired $152.3
Property, plant and equipment 104.7
Goodwill 471.1
Acquired intangible assets 173.4
Other long-term assets 8.9
Total assets acquired 910.4
Current liabilities (78.7)
Long-term liabilities (89.3)
Total liabilities assumed (168.0)
Consideration transferred, net of cash acquired (b) $742.4
(a)The amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date of March 28, 2017 and the end of the period to finalize the analysis.
(b)Consideration transferred includes a $2.0 million liability for the payment to former e2v share option holders paid prior to the end of fiscal year 2017.

The following table is a summary at the acquisition date of the acquired intangible assets and weighted average useful life in years for the e2v acquisition made in 2017 (dollars in millions):
   
Intangibles subject to amortization:(a) Intangible Assets Weighted average useful life in years
Proprietary technology $97.5
 11.8
Customer list/relationships 26.3
 13.0
Backlog 2.8
 0.8
Total intangibles subject to amortization 126.6
 11.8
Intangibles not subject to amortization:(a)    
Trademarks 46.8
 
Total acquired intangible assets $173.4
 
(a)The amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis.
Other Acquisitions
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 manufactures precision components and specialized subassemblies used primarily in analytical and diagnostic instrumentation, such as High Performance Liquid Chromatography systems and specific medical devices and is part of the Instrumentation segment.
Teledyne spent $93.4 million on acquisitions and other investments in 2016. On December 6, 2016, Teledyne Instruments, Inc. acquired Hanson Research Corporation (“Hanson Research”) which specializes in analytical instrumentation for the pharmaceutical industry, for $25.0 million in cash. On November 2, 2016, Teledyne Instruments, Inc. acquired assets of IN USA, Inc. (“IN USA”) which manufactures a range of ozone generators, ozone analyzers and other gas monitoring instruments utilizing ultraviolet and infrared based technologies, for $10.2 million in cash. On May 3, 2016, Teledyne DALSA, Inc., a Canadian-based subsidiary, acquired the assets and business of CARIS, Inc. (“CARIS”) a leading developer of geospatial software designed for the hydrographic and marine community, for a cash, payment of $26.2 million, net of cash acquired. On April 15, 2016, Teledyne LeCroy, Inc., a U.S.-based subsidiary, acquired, assets of Quantum Data, Inc. (“Quantum Data”) which provides electronic test and measurement instrumentationsubject to certain adjustments. ChartWorld, headquartered in Cyprus, with additional locations in Germany, Singapore, Canada and Japan, is a market leader in video protocol analysis test tools for $17.3 million in cash. On April 6, 2016, Teledyne LeCroy, Inc. also acquired Frontline Test Equipment, Inc. (“Frontline”) which provides electronic testprovider of digital marine navigation hardware and measurement instrumentation and is a market leader in wireless protocol analysis test tools, for $13.7 million in cash. Each of the 2016 acquisitions are part of the Instrumentation segment except for CARIS whichsoftware 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.
2022 Acquisitions
ETM
During the fourth quarter of 2022, Teledyne fundedacquired ETM-Electromatic, Inc. ("ETM") for $87.7 million in cash, net of cash acquired, and subject to certain adjustments. ETM, headquartered in Newark, California, designs and manufactures high-power microwave and high-energy X-ray subsystems for cancer radiotherapy, defense and X-ray security applications. ETM is part of the SSIDigital Imaging segment. Goodwill resulting from the ETM acquisition will not be deductible for tax purposes.
NL Acoustics
During the third quarter of 2022, the Company acquired an approximate 80% majority interest in Noiseless Acoustics Oy ("NL Acoustics"), paying $11.9 million in cash, net of cash acquired, during the year, with an immaterial amount payable in 2023. NL Acoustics, located in Helsinki, Finland, designs and manufactures acoustics imaging instruments and predictive maintenance solutions. NL Acoustics is part of the Digital Imaging segment. Goodwill resulting from the NL Acoustics acquisition will not be deductible for tax purposes.
The minority ownership interest in shares of NL Acoustics held by certain former owners and employees is classified as a redeemable noncontrolling interest on the consolidated balance sheet due to a put option under which the third party may require the Company to purchase the remaining ownership interest, with the put option exercisable beginning in the third quarter of 2025. The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value and its carrying amount adjusted for net income (loss) attributable to the noncontrolling interest. Adjustments to the carrying value of the redeemable
7


noncontrolling interest are recorded through retained earnings. Changes in the redeemable noncontrolling interest balance during the period were not material.
The following tables show the purchase price (net of cash acquired), goodwill acquired, and acquired intangible assets for these acquisitions (in millions):
2023
AcquisitionsAcquisition DateCash Paid (a)Goodwill AcquiredAcquired Intangible Assets
ChartWorldJanuary 3, 2023$52.5 $48.4 $11.3 
(a) Net of cash acquired
2022
AcquisitionsAcquisition DateCash Paid (a)Goodwill AcquiredAcquired Intangible Assets
ETMOctober 28, 2022$87.7 $33.5 $20.9 
NL Acoustics (acquisition of 80% interest)July 15, 202211.9 11.6 3.8 
Total$99.6 $45.1 $24.7 
(a) Net of cash acquired; an immaterial portion of NL Acoustics will be paid in 2023.
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 2016estimated fair value of the assets and liabilities acquired was recorded as goodwill. The fair value of the acquired identifiable assets and liabilities for these acquisitions 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 borrowings under its credit facilitybook and cash on hand.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 2022 and 2023 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 all thethese acquisitions have been included in Teledyne’s results since the dates of thetheir 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 primary reasonsCompany 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 office expenses. Corporate expense primarily includes various 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):
First Quarter%
20232022Change
Net sales (a):
Digital Imaging$772.5 $750.5 2.9 %
Instrumentation333.5 308.9 8.0 %
Aerospace and Defense Electronics173.2 166.2 4.2 %
Engineered Systems104.1 95.4 9.1 %
Total net sales$1,383.3 $1,321.0 4.7 %
Operating income:
Digital Imaging$122.2 $115.7 5.6 %
Instrumentation80.7 71.6 12.7 %
Aerospace and Defense Electronics47.0 42.9 9.6 %
Engineered Systems10.0 9.4 6.4 %
Corporate expense(17.4)(16.1)8.1 %
Operating income$242.5 $223.5 8.5 %
(a) Net sales excludes inter-segment sales of $6.2 million and $5.5 million for the first quarter of 2023 and 2022, respectively.
8


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:April 2, 2023January 1, 2023
Digital Imaging$11,406.6 $11,432.3 
Instrumentation1,634.6 1,626.4 
Aerospace and Defense Electronics554.5 540.1 
Engineered Systems188.3 200.3 
Corporate645.3 554.9 
Total identifiable assets$14,429.3 $14,354.0 
Product Lines
The Instrumentation segment includes three product lines: Environmental Instrumentation, Marine 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 2017Instrumentation segment (in millions):
First Quarter
Instrumentation20232022
Marine Instrumentation$128.2 $111.9 
Environmental Instrumentation117.9 114.0 
Test and Measurement Instrumentation87.4 83.0 
Total$333.5 $308.9 

Note 4. Revenue Recognition and 2016 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 calculationContract Balances
Approximately 70% of the fair valueCompany's net sales are recognized at a point in time, with the remaining 30% of tangiblenet sales recognized over time. The Company disaggregates its revenue from contracts with customers by customer type and intangible assets acquired that qualifiedgeographic region for recognition.
For a further descriptioneach 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. With the exception of the Company’s acquisition activity for fiscal year 2016, please refer to Note 3 ofEngineered Systems segment, net sales in each segment is primarily derived from fixed price contracts. Net sales in the Notes to Consolidated Financial Statements includedEngineered Systems segment is typically between 45% and 55% fixed price contracts in our 2016 Form 10-K.
Goodwill and Acquired Intangible Assets
Teledyne’s goodwill was $1,748.9 million at October 1, 2017 and $1,193.5 million at January 1, 2017. The increase ina given reporting period, with the balance of goodwillnet sales derived from cost-reimbursable type contracts. For the three months ended April 2, 2023, approximately 51% of net sales in 2017 primarily included $471.1the Engineered Systems segment were derived from fixed price contracts.
First Quarter Ended
April 2, 2023
First Quarter Ended
April 2, 2023
Customer TypeGeographic Region (c)
(in millions)U.S. Govt. (a)Other (b)TotalUnited StatesEuropeAsiaAll otherTotal
Net sales:
Digital Imaging$130.4 $642.1 $772.5 $334.4 $197.3 $158.4 $82.4 $772.5 
Instrumentation23.0 310.5 333.5 138.0 97.2 67.5 30.8 333.5 
Aerospace and Defense Electronics64.7 108.5 173.2 120.1 29.5 17.0 6.6 173.2 
Engineered Systems93.4 10.7 104.1 103.3 — 0.2 0.6 104.1 
Total$311.5 $1,071.8 $1,383.3 $695.8 $324.0 $243.1 $120.4 $1,383.3 
(a) U.S. Government sale include sales as a prime contractor or subcontractor.
(b) Primarily commercial sales
(c) Geographic region by destination
9


First Quarter Ended
April 3, 2022
First Quarter Ended
April 3, 2022
Customer TypeGeographic Region (c)
(in millions)U.S. Govt. (a)Other (b)TotalUnited StatesEuropeAsiaAll otherTotal
Net sales:
Digital Imaging$141.5 $609.0 $750.5 $337.2 $183.8 $149.6 $79.9 $750.5 
Instrumentation22.4 286.5 308.9 133.4 80.9 65.6 29.0 308.9 
Aerospace and Defense Electronics59.9 106.3 166.2 123.9 22.6 14.2 5.5 166.2 
Engineered Systems86.4 9.0 95.4 95.0 — 0.2 0.2 95.4 
Total$310.2 $1,010.8 $1,321.0 $689.5 $287.3 $229.6 $114.6 $1,321.0 
(a) U.S. Government sale include sales as a prime contractor or subcontractor.
(b) Primarily commercial sales
(c) Geographic region by destination

Contract Liabilities
Balance at
Contract Liabilities by Balance Sheet Location (in millions)April 2, 2023January 1, 2023
Accrued liabilities$221.5 $187.6 
Other long-term liabilities20.7 20.2 
Total contract liabilities$242.2 $207.8 
The Company recognized revenue of $67.9 million during the three months ended April 2, 2023 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 April 2, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,198.8 million. The Company expects approximately 82% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 18% recognized thereafter.
Changes in goodwill from e2v acquisition, as well asContract 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 exchange rate changes. Goodwill fromrevisions in cost and revenue estimates during the e2v acquisition will not be deductible for tax purposes. Teledyne’s net acquired intangible assets were $408.2 million at October 1, 2017 and $234.6 million at January 1, 2017. The increaseprogress of work may adjust the current period earnings through a cumulative catch-up basis. This method recognizes, in the balancecurrent period, the cumulative effect of acquired intangible assetsthe 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 2017 reflected $173.4 millionthe 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 intangible assets fromestimates on contracts accounted for under the e2v acquisition, partially offset by $29.2cost-to-cost method in the first three months of 2023 and 2022 was $2.9 million of amortization. The Company is in the process of specifically identifying the amount to be assigned to certain assets, including acquired intangible assets,favorable operating income and liabilities and the related impact on taxes and goodwill for the e2v acquisition, including the allocation by segment. The amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis. In addition, the Company is still in 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 SSI acquisition made in July 2017 and the IN USA and Hanson Research acquisitions made in the fourth quarter of 2016. The amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis.
Note 4. Derivative Instruments
Teledyne transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. The Company’s primary foreign currency risk management objective is to protect the United States dollar value of future cash flows and minimize the volatility of reported earnings. All derivatives are recorded on the balance sheet at fair value. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows$7.6 million favorable operating income, respectively, with both years primarily related to forecasted revenuesfavorable changes in estimates that impacted revenue, and, expenses denominated in Canadian dollars for our Canadian companies, including DALSA and in British pounds for our UK companies, including e2v. These contracts are designated and qualify as cash flow hedges. The Company has convertedto a US dollar denominated, variable rate debt obligation into a euro fixed rate obligation using a receive-float, pay fixed cross currency swap. This cross currency swap is designated as a cash flow hedge.
Cash Flow Hedging Activities
The effectivenesslesser degree, cost of sales. None of the forward contract cash flow hedge, which exclude time value, and the cross currency swap cash flow hedge is assessed prospectively and retrospectively on a monthly basis using regression analysis, as well as using other timing and probability criteria. To receive hedge accounting treatment, all hedging relationships are formally documented at the inceptioneffects of the hedges and must be highly effective in offsetting changes to future cash flows on hedged transactions. The effective portion of the cash flow hedge forward contracts’ gains or losses resulting from changes in estimates on any individual contract were material to the fair value of these hedges is initially reported, net of tax, as a component of AOCI in stockholders’ equity until the underlying hedged item is reflected in our consolidated statements of income at which time the effective amount in AOCI is reclassified to cost of sales in our consolidated statements of income. For the cross currency swap cash flow hedge, effective amounts are recorded in AOCI,for any period presented.
Note 5. Goodwill and reclassified into interest expense in the consolidated statements of income. In addition, for the cross currency swap an amount is reclassified from AOCI to other income and expense each reporting period, to offset the earnings impact of the remeasurement of the hedged liability. Net deferred gains recorded in AOCI, net of tax, for the forward contracts that will mature in the next twelve months total $3.8 million. These gains are expected to be offset by anticipated losses in theIntangible Assets
Goodwill
The carrying value of the forecasted underlying hedged item. Amounts related to the cross currency swap expected to be reclassified from AOCI into income in the coming twelve months total $1.9 million.
In the event that the gains or losses in AOCI are deemed to be ineffective, the ineffective portion of gains or losses resulting from changes in fair value, if any, is reclassified to other income and expense. In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or losses on the related cash flow hedges will be reclassified from AOCI to other income and expense. During the current reporting period, all forecasted transactions occurred and, therefore, there were no such gains or losses reclassified to other income and expense. As of October 1, 2017, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling $84.4 million. These foreign currency forward contracts have maturities ranging from December 2017 to February 2019. The cross currency swap has notional amounts of €93.0 million equivalent to $100.0 million, and matures in September 2019.
The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the third quarter and nine months ended October 1, 2017 and October 2, 2016goodwill by segment was as follows (in millions):

Digital Imaging InstrumentationAerospace and Defense ElectronicsEngineered SystemsTotal
Balance at January 1, 20236,780.4 913.2 161.8 17.6 7,873.0 
Current year acquisitions48.4 — — — 48.4 
Foreign currency changes and other(0.3)3.8 0.6 — 4.1 
Balance at April 2, 2023$6,828.5 $917.0 $162.4 $17.6 $7,925.5 
10


 Third Quarter Nine Months
 2017 2016 2017 2016
Net gain (loss) recognized in AOCI (a)$1.0
 $(1.0) $(1.9) $3.4
Net gain (loss) reclassified from AOCI into cost of sales (a)$(0.8) $(0.1) $—
 $2.9
Net gain reclassified from AOCI into interest expense (a)$0.4
 $—
 $0.9
 $—
Net loss reclassified from AOCI into other income and expense, net (b)$(3.0) $—
 $(9.3) $—
Net foreign exchange gain (loss) recognized in other income and expense, net (c)$0.8
 $0.1
 $(0.8) $(0.2)

a)    Effective portion, pre-tax
Acquired intangible assets
(in millions):
April 2, 2023January 1, 2023
Gross carrying amountAccumulated amortizationNet carrying amountGross carrying amountAccumulated amortizationNet carrying amount
Proprietary technology$1,673.8 $538.2 $1,135.6 $1,667.7 $497.4 $1,170.3 
Customer list/relationships604.4 187.7 416.7 596.1 177.0 419.1 
Patents0.6 0.6 — 0.6 0.6 — 
Non-compete agreements0.9 0.9 — 0.9 0.9 — 
Trademarks9.9 4.7 5.2 7.1 4.4 2.7 
Backlog16.2 16.0 0.2 16.1 15.8 0.3 
Total intangibles subject to amortization2,305.8 748.1 1,557.7 2,288.5 696.1 1,592.4 
Intangibles not subject to amortization:
Trademarks847.7 — 847.7 848.2 — 848.2 
Total acquired intangible assets$3,153.5 $748.1 $2,405.4 $3,136.7 $696.1 $2,440.6 
b)     Amount reclassified to offset earnings impact of liability hedged by cross currency swap
c)     Amount excluded from effectiveness testing

Non-Designated Hedging Activities
In addition, the Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign-currency-denominated monetary assets and liabilities, including intercompany receivables and payables. As of October 1, 2017, Teledyne had non-designated foreign currency contracts of this type in the following pairs (in millions):
Contracts to Buy Contracts to Sell
CurrencyAmount CurrencyAmount
Canadian DollarsC$155.4
 U.S. DollarsUS$124.1
Canadian DollarsC$4.0
 Euros€2.6
Euros€36.8
 Great Britain Pounds£33.8
Great Britain Pounds£1.7
 Australian DollarsA$2.7
Great Britain Pounds£54.8
 U.S. DollarsUS$71.8
Singapore DollarsS$1.9
 U.S. DollarsUS$1.4
Euros€14.2
 U.S. DollarsUS$17.1
Swiss FrancFr.1.2
 U.S. DollarsUS$1.3
U.S. DollarsUS$0.9
 Japanese Yen¥100.0
Danish KroneDKR31.2
 U.S. DollarsUS$5.0
Swedish Kronekr34.2
 Great Britain Pounds£3.3
The above table includes non-designated hedges derived from terms contained in triggered or previously designated cash flow hedges. The gains and losses on these derivatives which are not designated as hedging instruments are intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings. Teledyne does not use foreign currency forward contracts for speculative or trading purposes.
The effect of derivative instruments not designated as cash flow hedges recognized in other income and expense for the third quarter and nine months ended October 1, 2017 was income of $4.8 million and expense of $1.7 million, respectively. The effect of derivative instruments not designated as cash flow hedges in other income and expense for the third quarter and nine months ended October 2, 2016 was expense of $1.3 million and $0.9 million, respectively.
Fair Value of Derivative Financial Instruments
The Company has elected to use the income approach to value the derivatives, using observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR and EURIBOR) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR and EURIBOR cash and swap rates, foreign currency forward rates and cross currency basis spreads). Mid-market pricing is used as a practical expedient for fair value measurements. The fair value measurement of an asset or liability must reflect the nonperformance riskAn evaluation of the entitycarrying value of goodwill and the counterparty. Therefore, the impact of the counterparty’s creditworthiness when inindefinite-lived intangibles is required to be performed on an asset positionannual basis and the Company’s creditworthiness when in a liability position has also been factored into the fair value measurement of the derivative instruments and didon an interim basis if an event occurs or circumstances change that would more likely than not have a material impact onreduce the fair value of these derivative instruments. Botha reporting unit below its carrying value. There have been no events or changes in circumstances which indicate an interim impairment review is required in 2023. The Company will perform its annual analysis during the counterpartyfourth quarter of 2023.
Note 6. Supplemental Balance Sheet Information
Cash Equivalents
The Company had $326.1 million and $167.1 million of cash equivalents at April 2, 2023 and January 1, 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 $10.6 million at April 2, 2023 and $11.7 million at January 1, 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, with an immaterial amount of inventories valued under the LIFO method. Inventory balances are summarized as follows (in millions):
Balance at
April 2, 2023January 1, 2023
Raw materials and supplies$577.1 $563.7 
Work in process178.9 156.8 
Finished goods195.7 170.2 
Total inventories, net$951.7 $890.7 
Product Warranty Costs
Some of the Company’s products are subject to specified warranties, and the Company are expectedprovides 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 continue to perform under the contractualapplicable business or products, as well as the length and actual terms of the instruments.warranties. The warranty reserve is included in current accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.
 Three Months
Warranty Reserve (in millions):20232022
Balance at beginning of year$50.3 $49.5 
Product warranty expense4.3 0.6 
Deductions(4.2)(4.8)
Balance at end of period$50.4 $45.3 

11


Note 7. Long-Term Debt
Balance at
Long-Term Debt (in millions):April 2, 2023January 1, 2023
$1.15 billion credit facility due March 2026, weighted average variable rate of 5.76% at April 2, 2023 and 5.46% at January 1, 2023$25.0 $125.0 
0.65% Fixed Rate Senior Notes due April 2023300.0 300.0 
0.95% Fixed Rate Senior Notes due April 2024450.0 450.0 
Term loan due October 2024, variable rate of 6.11% at April 2, 2023 and 5.63% at January 1, 2023, swapped to a Euro fixed rate of 0.61%150.0 150.0 
1.60% Fixed Rate Senior Notes due April 2026450.0 450.0 
Term loan due May 2026, variable rate of 6.00% at April 2, 2023 and 5.61% at January 1, 2023245.0 245.0 
2.25% Fixed Rate Senior Notes due April 2028700.0 700.0 
2.50% Fixed Rate Senior Notes due August 2030485.0 485.0 
2.75% Fixed Rate Senior Notes due April 20311,040.0 1,040.0 
Other debt0.6 2.1 
Debt discount and debt issuance costs(25.2)(26.5)
Total debt, net3,820.4 3,920.6 
Less: current portion of long-term debt(300.1)(300.1)
Total long-term debt, net of current portion$3,520.3 $3,620.5 
During the first three months of 2023, the Company repaid $100.0 million of amounts outstanding on its credit facility.
At April 2, 2023, $1,103.9 million was available under the $1.15 billion credit facility, after reductions of $25.0 million in borrowings and $21.1 million in outstanding letters of credit. Our bank credit agreements require Teledyne to comply with various financial and operating covenants and at April 2, 2023, the Company was in compliance with these covenants.
Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The Company’s long-term debt is considered a level 2 input in the fair value hierarchy and is valued based on observable market data. As of April 2, 2023 and January 1, 2023, the aggregate fair values of our borrowings were $3,490.7 million and $3,492.7 million, respectively, and the carrying values were $3,845.6 million and $3,947.1 million, respectively.
Subsequent to the end of the first quarter, on April 3, 2023, the Company repaid the $300.0 million of fixed rate senior notes.
Note 8. Income Taxes
The income tax provision is calculated using an estimated annual effective tax rate, based upon estimates of annual income, permanent items, statutory tax rates and planned tax strategies in the various jurisdictions in which we operate except that certain loss jurisdictions and discrete items, such as the resolution of uncertain tax positions and stock-based accounting income tax benefits, are treated separately.
The Company’s derivative financial instruments are presented below. All fair valueseffective income tax rate for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy (in millions):first quarter of 2023 was a 20.1% compared with an effective income tax rate of negative 4.7% for the first quarter of 2022. The first quarter of 2023 includes net discrete income tax benefits of $6.6 million compared with net discrete income tax benefits of $56.5 million for the first quarter of 2022. The first quarter of 2023 net discrete tax benefits include $5.9 million related to stock-based accounting. The first quarter of 2022 net discrete income tax amounts include a non-cash income tax benefit of $50.0 million primarily related to the resolution of certain FLIR tax reserves and $6.7 million related to stock-based accounting. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.0% for the first quarter of 2023 and 23.1% for the first quarter of 2022.
Note 9. Pension Plans
 First Quarter
20232022
Service cost — benefits earned during the period (in millions)$1.5 $2.2 
Pension non-service cost (income) (in millions):
Interest cost on benefit obligation$8.4 $5.9 
Expected return on plan assets(13.6)(14.0)
Amortization of net prior service cost(0.5)(0.5)
Amortization of net actuarial loss2.4 5.8 
Pension non-service cost (income)$(3.3)$(2.8)
12

Asset/(Liability) DerivativesBalance sheet location October 1, 2017 January 1, 2017
Derivatives designated as hedging instruments:     
Cash flow forward contractsOther assets $5.3
 $—
Cash flow cross currency swapAccrued liabilities (10.0) —
Cash flow forward contractsAccrued liabilities —
 (1.0)
Cash flow forward contractsOther long-term liabilities —
 (0.1)
Total derivatives designated as hedging instruments  (4.7) (1.1)
Derivatives not designated as hedging instruments:     
Non-designated forward contractsOther current assets 4.7
 6.4
Non-designated forward contractsAccrued liabilities (4.1) (1.0)
Total derivatives not designated as hedging instruments  0.6
 5.4
Total (liability) asset derivatives  $(4.1) $4.3

Note 10. Stock-based Compensation
Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options and restricted stock. The Company also has non-employee Board of Director stock compensation plans, pursuant to which common stock, stock options and restricted stock have been issued to its directors. The Company issues shares of common stock upon the exercise of stock options.
Stock-based compensation expense was $7.9 million for the first quarter of 2023 and $9.0 million the first quarter of 2022.
Stock option activity for the first three months of 2023 is as follows:
 SharesWeighted Average Exercise Price
Balance at January 1, 20231,726,731$223.43 
Exercised(95,748)$106.51 
Canceled(8,039)$415.27 
Balance at April 2, 20231,622,944$229.38 
Exercisable at end of period1,366,491$197.58 
Restricted stock activity for the first three months of 2023 is as follows:
SharesWeighted average fair value per share
Balance at January 1, 2023166,395 $368.62 
Granted15,573 $361.64 
Vested(22,555)$389.60 
Forfeited/Canceled(5,313)$356.97 
Balance at April 2, 2023154,100 $357.28 
Note 5.11. Earnings Per Share
For the third quarter of 2017, no stock options were excluded in the computation of diluted earnings per share. For the first nine months of 2017, 600 stock options were excluded in the computation of diluted earnings per share because they had exercise prices that were greater than the weighted average market price of the Company’s common stock during the period.
For the third quarter of 2016, no stock options were excluded in the computation of diluted earnings per share. For the first nine months of 2016, 336,457 stock options were excluded in the computation of diluted earnings per share because they had exercise prices that were greater than the weighted average market price of the Company’s common stock during the period.
The weighted average number of common shares used in the calculation of basic and diluted earnings per share consisted of the following (in millions):
 First Quarter
20232022
Weighted average basic common shares outstanding46.9 46.7 
Effect of dilutive securities (primarily stock options)1.0 1.0 
Weighted average diluted common shares outstanding47.9 47.7 
 Third Quarter Nine Months
 2017 2016 2017 2016
Weighted average basic common shares outstanding35.3
 34.7
 35.2
 34.5
Effect of dilutive securities (primarily stock options)1.1
 0.9
 1.0
 0.9
Weighted average diluted common shares outstanding36.4
 35.6
 36.2
 35.4
Note 6. Stock-Based Compensation Plans
Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options, restricted stockFor the first quarter of 2023 and performance shares to certain employees. The Company also has non-employee Board of Director stock compensation plans, pursuant to which non-qualified stock options and common stock, and beginning in 2015 restricted stock units, have been issued to its directors. After 2014, non-employee directors no longer receive non-qualified stock options.
Stock Incentive Plan
The following disclosures are based on stock options granted to Teledyne’s employees and directors. Stock option compensation expense was $3.2 million and $11.0 million for the third quarter and first nine months of 2017, and was $2.5 million and $8.8 million for the third quarter and first nine months of 2016. Employee stock option grants are charged to expense evenly over the three year vesting period. For 2017,2022, the Company currently expectsexcluded approximately $14.40.2 million in stock option compensation expense based on stock options currently outstanding. This amount can be impacted by employee retirements and terminations or stock options granted during the remainder of the year. The Company issues shares of common stock upon the exercise of stock options.

The following assumptions were used in the valuation of stock options granted in 2017:the computation of diluted earnings per share because the effect of their inclusion would have been anti-dilutive.
Note 12. Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) ("AOCI") by component, net of tax, for the first quarter ended April 2, 2023 and April 3, 2022 are as follows (in millions):
Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance at January 1, 2023$(472.3)$1.3 $(255.5)$(726.5)
   Other comprehensive income (loss) before reclassifications(4.3)9.8 — 5.5 
   Amounts reclassified from AOCI— (7.3)1.5 (5.8)
Net other comprehensive income (loss)(4.3)2.5 1.5 (0.3)
Balance at April 2, 2023$(476.6)$3.8 $(254.0)$(726.8)
Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance at January 2, 2022$(129.0)$(3.4)$(297.6)$(430.0)
   Other comprehensive income (loss) before reclassifications(32.6)11.3 — (21.3)
   Amounts reclassified from AOCI— (4.8)4.2 (0.6)
Net other comprehensive income (loss)(32.6)6.5 4.2 (21.9)
Balance at April 3, 2022$(161.6)$3.1 $(293.4)$(451.9)
13



The reclassifications out of AOCI to net income for the first quarter ended April 2, 2023 and April 3, 2022 are as follows (in millions):
Amount Reclassified from AOCI for the Three Months EndedAmount Reclassified from AOCI for the Three Months EndedStatement of Income
April 2, 2023April 3, 2022Presentation
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives$(9.8)$(6.5)See Note 13
Income tax impact2.5 1.7 Provision for income taxes
Total$(7.3)$(4.8)
Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost$(0.4)$3.5 Costs and expenses
Amortization of net actuarial loss2.4 2.0 Costs and expenses
Total before tax2.0 5.5 
Income tax impact(0.5)(1.3)Provision for income taxes
Total$1.5 $4.2 
Note 13. Derivative Instruments and Hedging Activities
The Company's primary exposure to market risk relates to changes in foreign currency exchange rates and interest rates. The Company’s primary foreign currency risk management objective is to protect the U.S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company does not use foreign currency forward contracts for speculative or trading purposes. The Company mitigates exposure to foreign currency exchange rates and interest rates primarily through the following:
Mitigation ApproachQuantitative Information on Approach
The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars for our Canadian companies, and in British pounds for our U.K. companies. These contracts are designated and qualify as cash flow hedges.As of April 2, 2023, the Company had foreign currency forward contracts to buy Canadian dollars and to sell U.S. dollars totaling $134.9 million. These foreign currency forward contracts have maturities ranging from June 2023 to February 2025. As of April 2, 2023, The Company had foreign currency forward contracts to buy British pounds and to sell U.S. dollars totaling $12.3 million. These foreign currency forward contracts have maturities ranging from June 2023 to February 2024.
The Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. These foreign currency forward contracts are not designated as accounting hedges.See Non-Designated Hedging Activities section below.
The Company has converted a U.S. dollar denominated, variable rate debt obligation of a European subsidiary into euro fixed rate obligation using a receive float, pay fixed cross currency swap to reduce the variability of interest rates. This cross currency swap is designated as cash flow hedge.As of April 2, 2023, the Company has a cross currency swap outstanding with a notional amount of €156.0 million and $150.0 million that matures in October 2024.
2017
Expected volatility32.3%
Risk-free interest rate range1.0% to 2.5%
Expected life in years7.2
Expected dividend yield—
BasedAll derivative instruments are recorded on the assumptions usedcondensed consolidated balance sheets at fair value. The accounting for gains and losses resulting from changes in fair value depends on the use of the derivative instrument and whether it is designated and qualifies for hedge accounting.





14

Table of Contents
Designated Hedging Activities
For a derivative instrument designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the valuation of stock options, the grant date weighted average fair value is recorded on the condensed consolidated balance sheets in AOCI to the extent the derivative instrument is effective in mitigating the exposure related to the anticipated transaction. The amount recorded within AOCI is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings. The effect of stock options grantedderivative instruments designated as cash flow hedges in 2017 was $48.45 per share.

Stock option transactionsthe condensed consolidated financial statements for the third quarter and nine months ended October 1, 2017 are summarized as follows:
 2017
 Third Quarter Nine Months
 Shares 
Weighted
Average
Exercise
Price
 Shares 
Weighted
Average
Exercise
Price
Beginning balance2,515,100
 $82.26
 2,175,442
 $70.44
Granted—
 $—
 543,880
 $123.40
Exercised(104,496) $66.49
 (289,178) $64.84
Canceled(13,147) $104.92
 (32,687) $92.52
Ending balance2,397,457
 $82.83
 2,397,457
 $82.83
Options exercisable at end of period1,545,815
 $69.77
 1,545,815
 $69.77
Performance Share Plan and Restricted Stock Award Program
In the first quarter ended April 2, 2023 and April 3, 2022 was as follows (in millions):
 First Quarter
 20232022
Net gain (loss) recognized in AOCI - Foreign Exchange Contracts (a)$13.6 $13.7 
Net gain (loss) reclassified from AOCI into revenue - Foreign Exchange Contracts (a)$(1.9)$(0.2)
Net gain (loss) recognized in AOCI - Interest Rate Contracts$— $1.3 
Net gain (loss) reclassified from AOCI into other income and expense, net - Foreign Exchange Contracts (b)$10.1 $6.2 
Net gain (loss) reclassified from AOCI into interest expense - Foreign Exchange Contracts$1.5 $0.9 
Net gain (loss) reclassified from AOCI into interest expense - Interest Rate Contracts$0.6 $(0.4)
(a)    Effective portion, pre-tax
(b)     Amount reclassified to offset earnings impact of 2017,liability hedged by cross currency swap
Net deferred losses recorded in AOCI for the forward contracts that will mature in the next twelve months total $3.1 million, net of taxes. These losses are expected to be offset by anticipated gains in the value of the forecasted underlying hedged item. Amounts related to the cross currency swap expected to be reclassified from AOCI into income in the next twelve months total $7.0 million.
Non-Designated Hedging Activities
For a derivative instrument that has not been designated as an accounting hedge, the change in the fair value is recognized immediately in earnings. As of April 2, 2023, the Company issued 876 shareshad foreign currency forward contracts not designated as accounting hedges primarily in the following types and pairs (in millions):
Contracts to BuyContracts to Sell
CurrencyAmountCurrencyAmount
Canadian Dollars$185.6 U.S. DollarsUS$136.7 
Great Britain Pounds£50.3 U.S. DollarsUS$60.7 
Euros€50.5 U.S. DollarsUS$53.6 
Danish KroneDKR107.9 U.S. DollarsUS$15.5 
Swedish KronaSEK163.5 Euros€14.7 
U.S. DollarsUS$13.6 Chinese Yuan¥93.9 
The preceding table includes non-designated hedges derived from terms contained in previously designated cash flow hedges. The gains and losses on these derivatives instruments which are not designated as accounting hedges are intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings.
The effect of Teledyne common stockderivative instruments not designated as the thirdaccounting hedges recognized in other income and final payout under the 2012 to 2014 Performance Share Plan.
The following table shows the restricted stock activityexpense for the first nine monthsquarter ended April 2, 2023 was income of 2017:
Restricted stock:Shares Weighted average fair value per share
Balance, January 1, 201795,304
 $83.87
Granted23,002
 $114.42
Vested(30,704) $87.98
Forfeited/Canceled(1,068) $87.59
Balance, October 1, 201786,534
 $90.49

Note 7. Inventories
Inventories are stated at current cost net$7.8 million. The effect of reservesderivative instruments not designated as accounting hedges in other income and expense for excess, slow moving and obsolete inventory, less progress payments. Inventories are valued under the FIFO method, LIFO method and average cost method. Inventories at cost determined onfirst quarter ended April 3, 2022 was expense of $4.8 million. The income or expense was largely offset by losses or gains in the average cost or the FIFO methods were $372.2 million at October 1, 2017 and $268.4 million at January 1, 2017. The remaindervalue of the inventories usingunderlying hedged item excluding the LIFO method were $80.1 million at October 1, 2017 and $68.4 million at January 1, 2017. Interim LIFO calculations are based on the Company’s estimatesimpact of expected year-end inventory levels and costs since an actual valuationforward points.











15

Table of inventory under the LIFO method can be made only at the endContents
Fair Value of each year based on the inventory levels and costs at that time. Because these estimates are subject to many factors beyond the Company’s control, interim results areDerivative Financial Instruments

subject to the final year-end LIFO inventory valuation.
 Balance at
Inventories (in millions):October 1, 2017 January 1, 2017
Raw materials and supplies$201.2
 $146.0
Work in process193.4
 147.8
Finished goods57.7
 43.0
 452.3
 336.8
Progress payments(8.4) (9.1)
Reduction to LIFO cost basis(12.0) (13.5)
Total inventories, net$431.9
 $314.2
Note 8. Warranty Reserve
SomeThe fair values of the Company’s productsderivative instruments are subjectpresented below. All fair values for these derivative instruments were measured using Level 2 inputs in the fair value hierarchy (in millions):
Asset/(Liability) Derivative InstrumentsBalance sheet locationApril 2, 2023January 1, 2023
Derivatives designated as hedging instruments:
Cash flow forward contractsOther current assets$1.4 $0.4 
Cash flow forward contractsAccrued liabilities(4.5)(6.8)
Interest rate contractsOther current assets— 0.7 
Cash flow cross currency swapOther current assets2.3 2.7 
Cash flow cross currency swapOther current liabilities— (14.0)
Cash flow cross currency swapOther non-current liabilities(20.5)(18.3)
Total derivatives designated as hedging instruments(21.3)(35.3)
Derivatives not designated as hedging instruments:
Non-designated forward contractsOther current assets8.5 3.5 
Non-designated forward contractsAccrued liabilities(4.8)(7.0)
Total derivatives not designated as hedging instruments3.7 (3.5)
Total derivative instruments, net$(17.6)$(38.8)
Note 14. Commitments and Contingencies
Trade Compliance
Effective April 24, 2022, the United States Department of State’s Office of Defense Trade Controls Compliance (“DDTC”) closed the four-year Consent Agreement that had been entered into by FLIR Systems, Inc. ("FLIR"), to specified warranties,resolve various export allegations under the International Traffic in Arms Regulations (“ITAR”). In connection with this Consent Agreement and other export matters, while FLIR and its successor by mergers, Teledyne FLIR, have enhanced the trade compliance program more broadly, implemented remedial measures and have undergone external and internal audits of the trade compliance program, adverse disclosures and findings could cause additional expenses in connection with further remedial measures or potential penalties.
The Company has made other voluntary disclosures to the U.S. Department of State and the Company provides forU.S. Department of Commerce, including to the estimated costBureau of product warranties. The adequacy of the warranty reserve is assessed regularly,Industry and the reserve is adjusted as necessary based on a review of historic warranty experienceSecurity (“BIS”) with respect to the applicable business orTeledyne FLIR shipments of products as well as the length and actual terms of the warranties. The warranty reserve is included in current and long-term accrued liabilities on the balance sheet.
 Nine Months
Warranty Reserve (in millions):2017 2016
Balance at beginning of year$18.4
 $17.1
Accruals for product warranties charged to expense4.8
 7.0
Cost of product warranty claims(5.3) (4.7)
Acquisitions3.1
 0.3
Balance at end of period$21.0
 $19.7
Note 9. Income Taxes
The income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the variousfrom non-U.S. jurisdictions in which the Company operates. However, losses in certain jurisdictions and discrete items, such as the resolution of uncertain tax positions, are treated separately.
The Company’s effective income tax rate for the third quarter and first nine months of 2017 was 15.6% and 19.7%, respectively. The Company’s effective income tax rate for the third quarter and first nine months of 2016 was 16.7% and 23.9% respectively. The third quarter and first nine months of 2017 includes net discrete income tax benefits of $9.9 million and $15.9 million, respectively. Excluding net discrete income tax items in both 2017 periods, the effective tax rates would have been 27.7% for both the third quarter and first nine months of 2017. The 2017 first nine months net discrete tax benefits includes a $7.7 million income tax benefit as a result of the remeasurement of uncertain tax positionswere not licensed due to expiration of statute of limitation, of which $7.4 million was recorded in the third quarter of 2017. The first nine months of 2017 also includes an $8.5 million income tax benefit related to the release of valuation allowance for which the deferred tax assets are now determined more-likely-than-not to be realizable, of which $0.4 million was recorded in the third quarter. The first nine months of 2017 includes a $4.6 million income tax expense related to adjustments for uncertain tax positions. The 2017 third quarter and first nine months net discrete tax benefits also includes $2.3 million and $5.1 million, respectively, related to share-based accounting. The third quarter and first nine months of 2016 included net discrete income tax benefits of $6.6 million and $1.5 million, respectively. The first nine months of 2016 reflected $6.7 million in income tax expense related to the $17.9 million gain on the sale of a former operating facility. The 2016 third quarter and first nine months also included $4.0 million and $5.8 million, respectively, in net discrete tax benefits related to share-based accounting. Excluding net discrete income tax items in both 2016 periods, and the gain and related taxes on the facility sale in 2016, the effective tax rates would have been 27.2% for the third quarter and 27.4% for the first nine months of 2016.

Note 10. Long-Term Debt, Capital Lease and Letters of Credit
 Balance at
Long-Term Debt (in millions):October 1, 2017 January 1, 2017
$750.0 million credit facility due December 2020, weighted average rate of 2.41% at October 1, 2017$285.0
 $—
Term loans due through January 2022, weighted average rate of 2.61% at October 1, 2017 and 1.90% at January 1, 2017182.5
 182.5
4.74% Fixed Rate Senior Notes due and repaid September 2017—
 100.0
Term loan due October 2019, variable rate of 2.49% swapped to a Euro fixed rate of 0.7055% at October 1, 2017100.0
 —
2.61% Fixed Rate Senior Notes due December 201930.0
 30.0
5.30% Fixed Rate Senior Notes due September 202075.0
 75.0
2.81% Fixed Rate Senior Notes due November 202025.0
 25.0
3.09% Fixed Rate Senior Notes due December 202195.0
 95.0
3.28% Fixed Rate Senior Notes due November 2022100.0
 100.0
0.70% €50 Million Fixed Rate Senior Notes due April 2022
59.0
 —
0.92% €100 Million Fixed Rate Senior Notes due April 2023
118.2
 —
1.09% €100 Million Fixed Rate Senior Notes due April 2024
118.2
 —
Other debt at various rates due through 20183.0
 4.2
Total debt1,190.9
 611.7
Less: current portion of long-term debt and debt issuance costs (a)(3.4) (102.0)
Total long-term debt$1,187.5
 $509.7
(a) Includes debt issue costs associated with the term loans and senior notes of $2.2 million at October 1, 2017 and $1.4 million at January 1, 2017.
Available borrowing capacityincorrect de minimis calculation methodology under the $750.0 million credit facility, which is reduced by borrowings andExport Administration Regulations. The Company has also made voluntary disclosures to export authorities in jurisdictions outside the U.S. for certain outstanding letterspotential violations of credit, was $447.5 million at October 1, 2017. The credit agreements requirelocal export laws. At this time, based on available information, we are unable to reasonably estimate the Companytime it may take to comply with various financial and operating covenants and at October 1, 2017,resolve these matters or the Company was in compliance with these covenants. In March 2017, Teledyne entered into a $100.0 million term loan with a maturity dateamount or range of October 30, 2019. Subsequently, in March 2017, Teledyne entered into a cross currency swap to effectively convert the $100.0 million term loan to a €93.0 million denominated instrument with a fixed euro interest rate of 0.7055%. The proceeds from the term loan were usedpotential loss, penalty or other government action, if any, that may be incurred in connection with the acquisitionthese matters. However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of e2v.
On April 18, 2017, Teledyne entered into a note purchase agreement for a private placementexport privileges or of €250.0 million of senior unsecured notes due through April 2024. Teledyne used the proceeds of the private placement, among other things,particular authorizations that could be material to repay indebtedness and for general corporate purposes.
Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The Company’s long-term debt is considered a level 2 fair value hierarchy and is valued based on observable market data. The estimated fair value of Teledyne’s long-term debt at October 1, 2017 and January 1, 2017, approximated the carrying value.
At October 1, 2017, the Company had $7.0 million in capital leases, of which $1.3 million is current. At January 1, 2017, the Company had $7.4 million in capital leases, of which $1.3 million was current. At October 1, 2017, Teledyne had $20.9 million in outstanding letters of credit.


Note 11. Lawsuits, Claims, Commitments, Contingencies and Related Matters
For a further description of the Company’s commitments and contingencies, reference is made to Note 14 of the Company’s financial statements asposition, results of operations or cash flows in and forfollowing the fiscal year ended January 1, 2017, includedperiod in the 2016 Form 10-K.which such outcome becomes estimable or known.
Environmental Remediation Obligations
At October 1, 2017,April 2, 2023, the Company’s reserves for environmental remediation obligations totaled $5.5$5.7 million, of which $1.7$1.5 million is included in current accrued liabilities. At January 1, 2017,2023, the Company’s reserves for environmental remediation obligations totaled $7.0$5.8 million. The Company periodically evaluates whether it may be able to recover a portion of future costs for environmental liabilities from its insurance carriers and from third parties. The timing of expenditures depends on a number of factors that vary by site, including the nature and extent of contamination, the number of potentially responsible parties, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. The Company expects that it will expend present accrualspay the amounts recorded over many years and will complete remediation of all sites with which it has been identified in up to 30 years.
Legal Matters
A number of other lawsuits, claims and proceedings have been or may be asserted against the Company, including those pertaining to product liability, acquisitions, patent infringement, contracts, environmental, employment and employee benefits matters. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial statements.
16
Note 12. Pension Plans and Postretirement Benefits
For the domestic pension plan, the discount rate decreased to 4.54% in 2017 compared with a 4.91% discount rate used in 2016. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $3.5 million and $10.4 million for the third quarter and first nine months of both 2017 and 2016, respectively. Pension expense determined under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government. Teledyne did not make any cash pension contributions to its domestic pension plan in 2017 or 2016. No cash pension contributions are planned for 2017 for the domestic pension plan.
 Third Quarter Nine Months
Net periodic pension benefit (income) expense (in millions):2017 2016 2017 2016
Service cost — benefits earned during the period$2.7
 $2.8
 $8.1
 $8.4
Interest cost on benefit obligation9.1
 10.2
 27.4
 30.4
Expected return on plan assets(18.3) (18.8) (54.9) (56.3)
Amortization of prior service cost(1.5) (1.5) (4.5) (4.5)
Amortization of net actuarial loss7.3
 6.8
 21.9
 20.4
Net periodic pension income$(0.7) $(0.5) $(2.0) $(1.6)
Teledyne sponsors several postretirement defined benefit plans that provide health care and life insurance benefits for certain eligible retirees.
Table of Contents
 Third Quarter Nine Months
Net periodic postretirement benefits expense (in millions):2017 2016 2017 2016
Interest cost on benefit obligation$0.1
 $0.1
 $0.3
 $0.4
Amortization of net actuarial gain(0.1) (0.1) (0.3) (0.3)
Net periodic postretirement expense$—
 $—
 $—
 $0.1


Note 13. Segment Information
Teledyne is a leading provider of sophisticated instrumentation, digital imaging products and software, 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: Instrumentation; Digital Imaging; Aerospace and Defense Electronics; and Engineered Systems.
Segment results include net sales and operating income by segment but excludes equity income or loss, unusual non-recurring legal matter settlements, interest income and expense, gains and losses on the disposition of assets, sublease rental income and non-revenue licensing and royalty income, domestic and foreign income taxes and corporate office expenses. Corporate expense includes various administrative expenses relating to the corporate office and certain non-operating expenses, including certain acquisition related transaction costs, not allocated to our segments.
As part of a continuing effort to reduce costs and improve operating performance, the Company has taken actions to consolidate and relocate certain facilities and reduce headcount across various businesses, reducing our exposure to weak end markets and high cost locations. Teledyne incurred $2.6 million and $6.1 million in expense related to these efforts for the third quarter and first nine months of 2017, respectively. Teledyne incurred $3.1 million and $15.3 million in expense related to these efforts for the third quarter and first nine months of 2016, respectively. At October 1, 2017, Teledyne had a liability of $0.9 million included in other current liabilities related to these charges.

The following table presents Teledyne’s segment disclosures (dollars in millions):
 Third Quarter % Nine Months %
 2017 2016 Change 2017 2016 Change
Net sales(a):           
Instrumentation$232.5
 $208.3
 11.6 % $699.1
 $652.1
 7.2%
Digital Imaging191.5
 98.5
 94.4 % 493.8
 287.8
 71.6%
Aerospace and Defense Electronics165.1
 153.5
 7.6 % 489.8
 464.1
 5.5%
Engineered Systems73.1
 66.5
 9.9 % 216.7
 193.0
 12.3%
Total net sales$662.2
 $526.8
 25.7 % $1,899.4
 $1,597.0
 18.9%
Operating income(b):           
Instrumentation$34.8
 $28.1
 23.8 % $96.0
 $79.6
 20.6%
Digital Imaging31.9
 11.7
 172.6 % 73.6
 30.6
 140.5%
Aerospace and Defense Electronics29.4
 31.5
 (6.7)% 88.0
 83.6
 5.3%
Engineered Systems10.0
 8.6
 16.3 % 28.0
 22.2
 26.1%
Corporate expense(13.2) (11.1) 18.9 % (48.4) (32.7) 48.0%
Operating income$92.9
 $68.8
 35.0 % $237.2
 $183.3
 29.4%
(a)Net sales excludes inter-segment sales of $6.4 million and $17.8 million for the third quarter and first nine months of 2017, respectively, and $4.2 million and $16.2 million for the third quarter and first nine months of 2016, respectively.
(b)The third quarter of 2017 includes pretax charges of $2.9 million related to the acquisition of e2v which was recorded in the Digital Imaging segment. The first nine months of 2017 includes pretax charges of $19.8 million related to the acquisition of e2v, of which $9.1 million was recorded in the Digital Imaging segment, $0.3 million was recorded in the Aerospace and Defense Electronics segment and $10.4 million was recorded in corporate expense.

Identifiable assets are those assets used in the operations of the segments. Corporate assets primarily consist of cash, deferred taxes, net pension assets/liabilities and other assets (in millions):
Identifiable assets: October 1, 2017 January 1, 2017
Instrumentation $1,428.1
 $1,361.0
Digital Imaging 1,501.6
 671.1
Aerospace and Defense Electronics 619.6
 449.4
Engineered Systems 104.6
 93.9
Corporate 193.6
 199.0
Total identifiable assets $3,847.5
 $2,774.4
Product Lines
The Instrumentation segment includes three product lines: Environmental Instrumentation, Marine Instrumentation and Test and Measurement Instrumentation. Teledyne’s other three segments each contain one product line.
The following tables provide a summary of the net sales by product line for the Instrumentation segment (in millions):
 Third Quarter Nine Months
Instrumentation2017 2016 2017 2016
Marine Instrumentation$101.8
 $97.6
 $318.3
 $314.3
Environmental Instrumentation77.7
 63.8
 230.2
 200.4
Test and Measurement Instrumentation53.0
 46.9
 150.6
 137.4
Total$232.5
 $208.3
 $699.1
 $652.1






Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Teledyne Technologies Incorporated provides enabling technologies for industrial growth markets. We have evolved from a company that was primarily focused on aerospace and defense to one that serves multiple markets that require advanced technology and high reliability. These markets include deepwater oilfactory automation and gas explorationcondition monitoring, aerospace and production, oceanographic research,defense, air and water quality environmental monitoring, factory automationelectronics design and development, medical imaging. Our products include monitoringimaging and pharmaceutical research, oceanographic research, and deepwater energy exploration and production. Teledyne is a global sensing and decision-support technology company: providing specialty sensors, cameras, instrumentation, for marinealgorithms and environmental applications, harsh environment interconnects, electronic testsoftware across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land and measurement equipment, digital imaging sensors and cameras, aircraft information management systems, and defense electronics and satellite communication subsystems. We also supply engineered systems for defense, space, environmental and energy applications.air domains. We differentiate ourselves from many of our direct competitors by having a customercustomer- and company sponsoredCompany-sponsored applied research center that augments our product development expertise. We believe that technological capabilities and innovation and the ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we compete.
Strategy/OverviewStrategy
Our strategy continues to emphasize growth in our core markets of instrumentation,four business segments: digital imaging, instrumentation, aerospace and defense electronics and engineered systems. Our coreThe markets in which we sell our enabling technologies are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment among capital expenditures, acquisitions and share repurchases.product development. We aggressively pursue operational excellence to continually improve our margins and earnings.earnings by emphasizing cost containment and cost reductions in all aspects of our business. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and internalthrough targeted research and development, we seek to create new products to grow our companyCompany and expand our addressable markets. We continue to evaluate our businesses to ensure that they are aligned with our strategy.
On March 28, 2017,Consistent with our strategy, we completed our largestone acquisition to date. We purchased all of the common stock of e2v technologies plc (“e2v”) for $770.7 million, including stock options and assumed debt, net of $24.4 million of cash acquired. 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. See the Recent Acquisitions section for more information on the acquisition.
In the thirdfirst quarter of 2016, Teledyne completed the disposition of the net assets of its Printed Circuit Technology (“PCT”) business for $9.3 million2023 and two acquisitions in cash.
Our Recent Acquisitions
Acquisition of e2v
e2v, with principal locations in Chelmsford, United Kingdom and Grenoble, France,2022, which was acquired on March 28, 2017, had sales of approximately £236 million for its fiscal year ended March 31, 2016. Teledyne funded the acquisition of e2v with borrowings under its credit facility and cash on hand as well as $100.0 million in newly issued term loans. In connection with the acquisition of e2v, Teledyne incurred $2.9 million and $28.1 million in acquisition related costs during the third quarter and first nine months of 2017, respectively.
e2v provides high performance image sensors and custom camera solutions and application specific standard products for the machine vision market. In addition, e2v provides high performance space qualified imaging sensors and arrays for space science and astronomy. e2v also produces components and subsystems that deliver high reliability radio frequency power generation for healthcare, industrial and defense applications. Finally, the company provides high reliability semiconductors and board-level solutions for use in aerospace, space and communications applications.
Other Acquisitions
On July 20, 2017 a subsidiary of Teledyne, completed the acquisition of assets of Scientific Systems, Inc. (“SSI”) for $31.0 million in cash. Headquartered in State College, Pa., SSI manufactures precision components and specialized subassemblies used primarily in analytical and diagnostic instrumentation, such as High Performance Liquid Chromatography (HPLC) systems and specific medical devices and is part of the Instrumentation segment. SSI is a world leader in the design and manufacture of high pressure positive-displacement piston pumps for a wide variety of analytical, clinical, sample prep and fluid-metering applications.
Teledyne spent $93.4 million on acquisitions and other investments in fiscal year 2016. On December 6, 2016, Teledyne Instruments, Inc. acquired Hanson Research Corporation (“Hanson Research”) which specializes in analytical instrumentation for the pharmaceutical industry, for $25.0 million in cash. On November 2, 2016, Teledyne Instruments, Inc. acquired assets of IN USA, Inc. (“IN USA”) which manufactures a range of ozone generators, ozone analyzers and other gas monitoring instruments utilizing ultraviolet and infrared based technologies, for $10.2 million in cash. On May 3, 2016, Teledyne DALSA, Inc., a Canada-based subsidiary, acquired the assets and business of CARIS, Inc. (“CARIS”) a leading developer of geospatial software designed for the hydrographic and marine community, for a cash payment of $26.2 million, net of cash acquired. On April 15, 2016, Teledyne

LeCroy, Inc., a U.S.-based subsidiary, acquired assets of Quantum Data, Inc. (“Quantum Data”) which provides electronic test and measurement instrumentation and is a market leader in video protocol analysis test tools for $17.3 million in cash. On April 6, 2016, Teledyne LeCroy, Inc. also acquired Frontline Test Equipment, Inc. (“Frontline”) which provides electronic test and measurement instrumentation and is a market leader in wireless protocol analysis test tools, for $13.7 million in cash. Each of the 2016 acquisitions are part of the Instrumentation segment except for CARIS which iswere all part of the Digital Imaging segment.
Teledyne funded the SSI acquisition and the 2016 acquisitions from borrowings under its credit facility and cash on hand. The financial results of thethese acquisitions have been included in Teledyne’s results since the datesrespective date of each respective acquisition. See Note 2 for additional information about our recent acquisitions.
ForTrends Affecting Our Business
We have experienced supply chain challenges, including increased lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand. This has delayed our ability to convert backlog to revenue and negatively impacted our profit margins. Although perhaps to a further descriptionlesser extent, we expect inflationary and supply chain constraint trends to continue in 2023.
Costs incurred and sales recorded by subsidiaries operating outside of the Company’s acquisition activity forUnited States are translated into U.S. dollars using exchange rates effective during the fiscal year 2016, please referrespective period. As a result, we are exposed to Note 3movements in the exchange rates of various currencies against the U.S. dollar. The strengthening of the NotesU.S. dollar relative to Consolidated Financial Statements includedother currencies adversely impacted our sales in 2022, the first quarter of 2023 and may continue to do so in future periods. The strengthening of the U.S. dollar may also increase the price and reduce the competitiveness of some of our 2016 Annual Report on Form 10-K (“2016 Form 10-K”).products sold in markets outside the United States.


17

Table of Contents
Results of Operations
  
First Quarter
(in millions)20232022% Change
Net sales$1,383.3 $1,321.0 4.7 %
Costs and expenses
Cost of sales790.7 752.6 5.1 %
Selling, general and administrative ("SG&A")300.4 291.3 3.1 %
Acquired intangible asset amortization49.7 53.6 (7.3)%
Total costs and expenses1,140.8 1,097.5 3.9 %
Operating income242.5 223.5 8.5 %
Interest and debt income (expense), net(21.0)(22.3)(5.8)%
Non-service retirement benefit income (expense)3.3 2.8 17.9 %
Other income (expense), net(1.1)(1.0)10.0 %
Income before income taxes223.7 203.0 10.2 %
Provision (benefit) for income taxes44.9 (9.6)*
Net income (loss) including noncontrolling interest$178.8 $212.6 (15.9)%
Less: net income (loss) attributable to noncontrolling interest0.1 — *
Net income (loss) attributable to Teledyne$178.7 $212.6 (15.9)%
  
Third Quarter Nine Months
(in millions)2017 2016 2017 2016
Net sales$662.2
 $526.8
 $1,899.4
 $1,597.0
Costs and expenses       
Cost of sales405.8
 317.0
 1,178.3
 978.0
Selling, general and administrative expenses163.5
 141.0
 483.9
 435.7
Total costs and expenses569.3
 458.0
 1,662.2
 1,413.7
Operating income92.9
 68.8
 237.2
 183.3
Interest expense, net(8.2) (5.6) (25.5) (17.2)
Other income/(expense), net(3.0) (0.8) (13.0) 15.1
Income before income taxes81.7
 62.4
 198.7
 181.2
Provision for income taxes12.7
 10.4
 39.1
 43.3
Net income$69.0
 $52.0
 $159.6
 $137.9
* not meaningful

First Quarter
(dollars in millions)20232022% Change
Net sales (a):
Digital Imaging$772.5 $750.5 2.9 %
Instrumentation333.5 308.9 8.0 %
Aerospace and Defense Electronics173.2 166.2 4.2 %
Engineered Systems104.1 95.4 9.1 %
Total net sales$1,383.3 $1,321.0 4.7 %
Operating income (loss):
Digital Imaging$122.2 $115.7 5.6 %
Instrumentation80.7 71.6 12.7 %
Aerospace and Defense Electronics47.0 42.9 9.6 %
Engineered Systems10.0 9.4 6.4 %
Corporate expense(17.4)(16.1)8.1 %
Total operating income (loss)$242.5 $223.5 8.5 %
(a) Net sales excludes inter-segment sales of $6.2 million and $5.5 million for the first quarter of 2023 and 2022, respectively.
First Quarter Results
 Third Quarter % Nine Months %
(dollars in millions)2017 2016 Change 2017 2016 Change
Net sales(a):           
Instrumentation$232.5
 $208.3
 11.6 % $699.1
 $652.1
 7.2%
Digital Imaging191.5
 98.5
 94.4 % 493.8
 287.8
 71.6%
Aerospace and Defense Electronics165.1
 153.5
 7.6 % 489.8
 464.1
 5.5%
Engineered Systems73.1
 66.5
 9.9 % 216.7
 193.0
 12.3%
Total net sales$662.2
 $526.8
 25.7 % $1,899.4
 $1,597.0
 18.9%
Operating income:           
Instrumentation$34.8
 $28.1
 23.8 % $96.0
 $79.6
 20.6%
Digital Imaging31.9
 11.7
 172.6 % 73.6
 30.6
 140.5%
Aerospace and Defense Electronics29.4
 31.5
 (6.7)% 88.0
 83.6
 5.3%
Engineered Systems10.0
 8.6
 16.3 % 28.0
 22.2
 26.1%
Corporate expense(13.2) (11.1) 18.9 % (48.4) (32.7) 48.0%
Total operating income$92.9
 $68.8
 35.0 % $237.2
 $183.3
 29.4%
(a)Net sales excludes inter-segment sales of $6.4 million and $17.8 million for the third quarter and first nine months of 2017, respectively, and $4.2 million and $16.2 million for the third quarter and first nine months of 2016, respectively.

The table below presents net sales and costfollowing is a discussion of sales by segment and total company:
  Third Quarter Nine Months
(dollars in millions) 2017 2016 2017 2016
Instrumentation        
Net sales $232.5
 $208.3
 $699.1
 $652.1
Cost of sales $129.3
 $116.1
 $398.1
 $364.3
Cost of sales as a % of net sales 55.6% 55.7% 57.0% 55.9%
Digital Imaging        
Net sales $191.5
 $98.5
 $493.8
 $287.8
Cost of sales $116.8
 $57.5
 $308.6
 $174.0
Cost of sales as a % of net sales 61.0% 58.4% 62.5% 60.5%
Aerospace and Defense Electronics        
Net sales $165.1
 $153.5
 $489.8
 $464.1
Cost of sales $103.0
 $90.6
 $299.6
 $284.2
Cost of sales as a % of net sales 62.4% 59.0% 61.2% 61.2%
Engineered Systems        
Net sales $73.1
 $66.5
 $216.7
 $193.0
Costs of sales $56.7
 $52.8
 $172.0
 $155.5
Cost of sales as a % of net sales 77.6% 79.4% 79.4% 80.6%
Total Company        
Net sales $662.2
 $526.8
 $1,899.4
 $1,597.0
Costs of sales $405.8
 $317.0
 $1,178.3
 $978.0
Cost of sales as a % of net sales 61.3% 60.2% 62.0% 61.2%
Thirdour 2023 first quarter of 2017results compared with the thirdfirst quarter results of 2022. Comparisons are with the corresponding reporting period of 2022, unless noted otherwise.
First quarter of 20162023 compared with the first quarter of 2022
Our thirdfirst quarter of 20172023 net sales were $662.2 million, compared with net sales of $526.8 millionincreased 4.7%. Net income for the thirdfirst quarter of 2016, an increase of 25.7%. The increase2023 decreased 15.9%, primarily driven by higher income tax expense in net sales, resulted from organic growth and from acquisitions, primarily e2v. Net income was $69.0 million for the thirdfirst quarter of 2017, compared with $52.0 million for the third quarter of 2016, an increase of 32.7%.2023, as discussed below. Net income per diluted share was $1.90$3.73 for the thirdfirst quarter of 2017,2023, compared with net income per diluted share of $1.46 for the third$4.46.
Net Sales
The first quarter of 2016. The third quarter of 2017 includes pretax charges of $2.9 million related to the acquisition of e2v.
Net sales
The third quarter of 20172023 net sales, compared with the thirdfirst quarter of 20162022 net sales, reflected higher net sales in each segment. The third quarter of 2017 included organic growth of $45.3 million and $90.1 million in incremental net sales from recent acquisitions, primarily e2v.
Cost of Sales
Cost of sales increased $88.8$38.1 million in the thirdfirst quarter of 2017, compared with the third quarter of 2016, which primarily reflected the impact of higher sales.2023. Cost of sales as a percentage of net sales increased slightly for the thirdfirst quarter of 2017 increased2023 to 61.3%, compared with 60.2% for the third quarter57.2% from 57.0%.


18

Table of 2016, which reflects the impact of the e2v acquisition which carries a higher cost of sales percentage than the overall Teledyne cost of sales percentage.Contents
Certain contracts are accounted for under the percentage of completion (“POC”) method and related contract cost and revenue estimates for significant contracts are reviewed and reassessed quarterly. The net aggregate effects of these changes in estimates on contracts accounted for under the POC accounting method, in the third quarters of 2017 and 2016, were $2.7 million and $0.9 million of unfavorable operating income, respectively. None of the effects of changes in estimates on any individual contract were material to the condensed consolidated statements of income for any period presented.
Selling, General and Administrative Expenses
Selling, general and administrativeSG&A expenses, including research and development and bid and proposal expense, increased $22.5$9.1 million in the thirdfirst quarter of 2017, compared with the third quarter of 2016, which primarily reflected the impact of higher sales. Selling, general and administrative2023. SG&A expenses for the third quarter of 2017, as a percentage of net sales decreased to 24.7% compared with 26.7% for the thirdfirst quarter of 2016 and reflected the impact of the e2v acquisition which carries a lower selling, general and administrative expense percentage than the overall Teledyne selling, general and administrative

expense percentage.2023 decreased slightly to 21.7% from 22.1%. Corporate expense, which is included in selling, general and administrativeSG&A expenses, was $13.2$17.4 million for the thirdfirst quarter of 2017,2023, compared with $11.1$16.1 million, with the increase primarily related to higher professional fees during the period. Stock-based compensation expense was $7.9 million for the thirdfirst quarter of 2016 and reflected higher compensation expense. In2023 compared with $9.0 million, with the thirddecrease related primarily due to timing of grants in previous years.
Acquired Intangible Asset Amortization
Acquired intangible asset amortization for the first quarter of 2017 and 2016, we recorded a total2023 was $49.7 million compared with $53.6 million, with the decrease from the previous year related primarily to foreign currency translation impacts as well as finalization of $3.2 million and $2.5 million, respectively,FLIR purchase accounting in stock option compensation expense.the second quarter of 2022.
Pension Income/Service Expense
Pension income orservice expense is included in both cost of sales and selling general and administrative expense. The thirdFor the first quarter of 2017 included2023, pension income of $0.7service expense was $1.5 million, compared with pension income of $0.5 million for$2.2 million. For 2023, the third quarter of 2016. For 2017, theweighted-average discount rate used to determine the benefit obligation for the domestic plan was 4.54 percentqualified pension plans is 5.71% compared with 4.91 percent2.97% in 2016. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $3.5 million for both the third quarter of 2017 and the third quarter of 2016. Pension expense determined allowable under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government.2022.
Operating Income
Operating income was $92.9 million for the thirdfirst quarter of 2017, compared with $68.8 million for the third2023 increased 8.5%. The first quarter of 2016, an increase of 35.0%. The third quarter of 2017,2023, compared with the thirdfirst quarter of 2016,2022, reflected higher operating income in each segment, except the Aerospacebusiness segment.
Non-operating Income and Defense Electronics segment. The incremental operating income included in the results for the third quarter of 2017 from recent acquisitions was $11.1 million which included $3.9 million in additional intangible asset amortization expense.Expenses
Interest Expense and Other Income/Expense
Interestdebt expense, net of interest income, was $8.2$21.0 million for the thirdfirst quarter of 2017,2023, compared with $5.6$22.3 million. Non-service retirement benefit income was $3.3 million for the thirdfirst quarter of 2016 and reflected2023 compared with $2.8 million for the impactfirst quarter of higher debt levels, primarily to fund the acquisition of e2v.2022. Other income and expense, net was expense of $3.0 million for the third quarter of 2017, compared with expense of $0.8 million for the third quarter of 2016.
Income Taxes
The income tax provision is calculated using an estimated annual effective tax rate, based upon estimates of annual income, permanent items, statutory tax rates and planned tax strategies in the various jurisdictions in which we operate except that certain loss jurisdictions and discrete items, such as the resolution of uncertain tax positions and share-based accounting income tax benefits, are treated separately. The Company’s effective income tax rate for the third quarter of 2017 was 15.6%, compared with 16.7% for the third quarter of 2016.
The third quarter of 2017 reflected $9.9 million in net discrete income tax benefits, which included a $7.4 million income tax benefit as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitation and a $2.3 million income tax benefit related to share-based accounting. The third quarter of 2016 included net discrete income tax benefits of $6.6 million, of which $4.0 million related to share-based accounting. Excluding the net discrete income tax items in 2017, the effective tax rate would have been 27.7% for the third quarter of 2017. Excluding net discrete income tax items in 2016, the effective tax rate would have been 27.2% for the third quarter of 2016. The Company’s effective tax rate for fiscal year 2017 is expected to be 27.7%, based on the projected mix of earnings before tax by jurisdiction, excluding the impact of any matters that would be treated as discrete.
First nine months of 2017 compared with the first nine months of 2016
Our first nine months of 2017 net sales were $1,899.4 million, compared with net sales of $1,597.0$1.1 million for the first nine monthsquarter of 2016, an increase2023 compared with other expense of 18.9%. The increase in net sales resulted from organic growth and from acquisitions, primarily e2v. Net income was $159.6$1.0 million for the first nine monthsquarter of 2017, compared with $137.9 million for the first nine months of 2016, an increase of 15.7%. Net income per diluted share was $4.41 for the first nine months of 2017, compared with net income per diluted share of $3.90 for the first nine months of 2016. The first nine months of 2017 includes pretax charges of $28.1 million related to the acquisition of e2v, of which, $6.8 million was recorded to cost of sales, $13.0 million was recorded to selling, general and administrative expenses, $2.3 million was recorded to interest expense and $6.0 million was recorded as other expense. The amount recorded to cost of sales related to the inventory fair value step-up amortization expense. The amount recorded to selling, general and administrative expenses related to transaction costs, including stamp duty, advisory, legal and other consulting fees and other costs. The amount recorded to interest expense related to funds-certain bank bridge facility commitment expense for the £625.0 million bridge credit facility entered into in December 2016 to fund the acquisition and related transaction costs in order to meet the requirement under the U.K. City Code on Takeovers and Mergers that we have sufficient and certain resources available to fund the consideration for the acquisition. The amount recorded to other expense related to a foreign currency option contract expense to hedge the e2v purchase price.

Net sales
The first nine months of 2017 net sales, compared with the first nine months of 2016 net sales, reflected higher net sales in each segment. The first nine months of 2017 included organic growth of $96.6 million and $205.8 million in incremental net sales from recent acquisitions, primarily e2v.

Cost of Sales
Cost of sales increased $200.3 million in the first nine months of 2017, compared with the first nine months of 2016, which primarily reflected the impact of higher sales. Cost of sales as a percentage of net sales for the nine months of 2017 increased to 62.0%, compared with 61.2% for the first nine months of 2016. The net aggregate effects of changes in estimates on contracts accounted for under the POC accounting method in the first nine months of 2017 and 2016 were $9.2 million and $1.7 million of unfavorable operating income, respectively.

Selling, general and administrative expenses
Selling, general and administrative expenses, including research and development and bid and proposal expense, increased by
$48.2 million in the first nine months of 2017, compared with the first nine months of 2016, and primarily reflected the impact of higher sales and $13.0 million in acquisition transaction expense related to the e2v acquisition. Selling, general and administrative expenses for the first nine months of 2017, as a percentage of net sales, decreased to 25.5% compared with 27.3% for the first nine months of 2016 despite the impact of $13.0 million in expense related to the e2v acquisition. Corporate expense, which is included in selling, general and administrative expenses, was $48.4 million for the first nine months of 2017, compared with $32.7 million for the first nine months of 2016 and reflected $10.4 million in expense related to the e2v acquisition. In the first nine months of 2017 and 2016, we recorded a total of $11.0 million and $8.8 million, respectively, in stock option compensation expense.

Pension Income/Expense
The first nine months of 2017 included pension income of $2.0 million, compared with pension income of $1.6 million in the first nine months of 2016. Pension expense allocated to contracts pursuant to CAS was $10.4 million in both the first nine months of 2017 and 2016.

Operating Income
Operating income was $237.2 million for the first nine months of 2017, compared with $183.3 million for the first nine months of 2016, an increase of 29.4%. The first nine months of 2017, compared with the first nine months of 2016, reflected higher operating income in each segment, partially offset by higher corporate expense. The incremental operating income included in the results for the first nine months of 2017 from recent acquisitions was $21.1 million which included $9.0 million in additional intangible asset amortization expense.
Interest Expense and Other Income/Expense
Interest expense, net of interest income, was $25.5 million for the first nine months of 2017, compared with $17.2 million for the first nine months of 2016 and reflected the impact of higher debt levels, as well as $2.3 million in fees related to the terminated bridge facility in connection with the acquisition of e2v. Other income and expense was expense of $13.0 million for the first nine months of 2017, compared with income of $15.1 million for the first nine months of 2016. Other expense in the first nine months of 2017 reflected $6.0 million of expense for a foreign currency option contract related to the e2v acquisition as well as higher foreign currency expense. Other income for the nine months of 2016 included a gain of $17.9 million on the sale of a former operating facility.

2022.
Income Taxes
The Company’s effective income tax rate for the first nine monthsquarter of 20172023 was 19.7%a 20.1% compared with 23.9%an effective income tax rate of negative 4.7% for the first nine monthsquarter of 2016.2022. The first nine monthsquarter of 2017 reflected $15.9 million in2023 includes net discrete income tax benefits which included an $8.5of $6.6 million compared with net discrete income tax benefit related to the releasebenefits of valuation allowance for which the deferred tax assets are now determined more-likely-than-not to be realizable and a $7.7 million income tax benefit as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitation, partially offset by $4.6 million related to adjustments for uncertain tax positions.$56.5 million. The first nine monthsquarter of 2017 also includes $5.1 in2023 net discrete tax benefits include $5.9 million related to share-basedstock-based accounting. The first nine monthsquarter of 20162022 net discrete income tax benefitsamounts include a non-cash income tax benefit of $1.5$50.0 million which includes $5.8 in net discrete tax benefitsprimarily related to share-based accountingthe resolution of certain FLIR tax reserves and $6.7 million in income tax expense related to the $17.9 million gain on the sale of the operating facility.stock-based accounting. Excluding the net discrete income tax items in both periods, and the gain and related taxes on the facility sale in 2016, the effective tax rates would have been 27.7%23.0% for the first nine monthsquarter of 20172023 and 27.4%23.1% for the first nine monthsquarter of 2016.2022.



Segment Results
Segment results include net sales and operating income by segment but excludes equity income or loss, unusual non-recurring legal matter settlements, interest income and expense, gains and losses on the disposition of assets, sublease rental income and non-revenue licensing and royalty income, domestic and foreign income taxes andexclude corporate office expenses. Corporate expense primarily includes various administrative expenses relating to the corporate office and certain nonoperating expenses, including certain acquisition related transaction costs, not allocated to our segments. See Note 133 to these condensed consolidated financial statements for additional segment information.
Instrumentation

 Third Quarter Nine Months
(dollars in millions)2017 2016 2017 2016
Net sales$232.5
 $208.3
 $699.1
 $652.1
Cost of sales$129.3
 $116.1
 $398.1
 $364.3
Selling, general and administrative expenses$68.4
 $64.1
 $205.0
 $208.2
Operating income$34.8
 $28.1
 $96.0
 $79.6
Cost of sales as a % of net sales55.6% 55.7% 57.0% 55.9%
Selling, general and administrative expenses % of sales29.4% 30.8% 29.3% 31.9%
Operating income as a % of net sales15.0% 13.5% 13.7% 12.2%
Digital Imaging
First Quarter
(dollars in millions)20232022$ Change% Change
Net sales$772.5 $750.5 $22.0 2.9 %
Cost of sales$419.3 $405.2 $14.1 3.5 %
SG&A expense$185.2 $181.1 $4.1 2.3 %
Acquired intangible asset amortization$45.8 $48.5 $(2.7)(5.6)%
Operating income$122.2 $115.7 $6.5 5.6 %
Cost of sales as a % of net sales54.3 %54.0 %
SG&A expense as a % of net sales24.0 %24.1 %
Acquired intangible asset amortization as a % of net sales5.9 %6.5 %
Operating income as a % of net sales15.8 %15.4 %
ThirdFirst quarter of 2017 compared with the third quarter of 2016
The Instrumentation segment’s third quarter of 2017 net sales were $232.5 million, compared with $208.3 million in the third quarter of 2016, an increase of 11.6%. Operating income for the third quarter of 2017 was $34.8 million, compared with operating income of $28.1 million in the third quarter of 2016, an increase of 23.8%.
The third quarter of 2017 net sales increase resulted from higher sales of environmental instrumentation, marine instrumentation and test and measurement instrumentation, as well as the contribution from recent acquisitions. Sales of environmental instrumentation increased $13.9 million and primarily reflected higher sales of air monitoring instruments and $6.9 million in incremental sales from recent acquisitions, including SSI. Sales of marine instrumentation increased $4.2 million and primarily reflected higher sales of interconnect systems. Sales of test and measurement instrumentation increased $6.1 million and included $1.4 million in incremental sales from recent acquisitions. The increase in operating income reflected the impact of greater sales and the $2.6 million collection of a previously reserved receivable.
The third quarter of 2017 cost of sales increased $13.2 million, compared with the third quarter of 2016, and reflected the impact of higher sales. The cost of sales percentage for the third quarter of 2017 decreased slightly to 55.6% compared with 55.7% for the third quarter of 2016. Third quarter 2017 selling, general and administrative expenses, including research and development expense, increased $4.3 million, compared with the third quarter of 2016 and reflected the impact of higher sales. The selling, general and administrative expense percentage decreased to 29.4% in the third quarter of 2017 from 30.8% in the third quarter of 2016 and reflected the $2.6 million collection of a previously reserved receivable.
First nine months of 20172023 compared with the first nine monthsquarter of 20162022

The Instrumentation segment’s first nine monthsNet sales increased primarily due to $25.0 million of 2017 netincremental sales were $699.1 million, compared with $652.1 million in the first nine months of 2016, an increase of 7.2%. Operating income for the first nine months of 2017 was $96.0 million, compared with operating income of $79.6 million in the first nine months of 2016, an increase of 20.6%.
The first nine months of 2017 net sales increase resulted from higher sales of environmental instrumentation, marine instrumentation and test and measurement instrumentation,acquisitions as well as the contribution from recent acquisitions. Sales of environmental instrumentation increased $29.8 million and primarily reflected highergreater sales of air monitoring instrumentsindustrial and $15.9 million in incremental sales from recent acquisitions. Sales of testscientific cameras and measurement instrumentation increased $13.2 million and included $6.0 million in incremental sales from recent acquisitions. Sales of marine instrumentation increased by $4.0 million. The increase in operating income was primarily due to greater sales and improved margins for environmental and test and measurement instrumentation and lower severance, facility consolidation and asset impairment expenses with marine instrumentation. The first nine months of 2016 included $7.9 million in higher severance, facility consolidation and asset impairment costs.
The first nine months of 2017 cost of sales increased by $33.8 million, compared with the first nine months of 2016, and primarily reflected the impact of higher sales,x-ray detectors, partially offset by lower severancesales of unmanned ground systems for defense applications.
Cost of sales increased primarily due to increased net sales, and facility consolidation expenses. Thethe cost of sales percentage increased to 57.0% from 55.9%. The first nine months of 2017 selling, general and administrative

expenses, including research and development expense, decreased by $3.2 million, compared withslightly during the first nine months of 2016 and reflected the impact of lower research and development expense and lower severance and facility consolidation costs and asset impairment expenses, partially offset the impact of higher sales. The selling, general and administrative expense percentage decreasedperiod. SG&A increased primarily due to 29.3% in the first nine months of 2017 from 31.9% in the first nine months of 2016 and reflected the impact of lower severance and facility consolidation expenses and asset impairment expense.

Digital Imaging
 Third Quarter Nine Months
(dollars in millions)2017 2016 2017 2016
Net sales$191.5
 $98.5
 $493.8
 $287.8
Cost of sales$116.8
 $57.5
 $308.6
 $174.0
Selling, general and administrative expenses$42.8
 $29.3
 $111.6
 $83.2
Operating income$31.9
 $11.7
 $73.6
 $30.6
Cost of sales as a % of net sales61.0% 58.4% 62.5% 60.5%
Selling, general and administrative expenses % of sales22.3% 29.7% 22.6% 28.9%
Operating income as a % of net sales16.7% 11.9% 14.9% 10.6%
Third quarter of 2017 compared with the third quarter of 2016
The Digital Imaging segment’s third quarter of 2017 net sales were $191.5 million, compared with $98.5 million in the third quarter of 2016, an increase of 94.4%. Operating income was $31.9 million for the third quarter of 2017, compared with operating income of $11.7 million in the third quarter of 2016, an increase of 172.6%.
The third quarter of 2017 net sales included $70.1 million in incremental sales from the acquisition of e2v. The third quarter 2017 sales also reflected higher sales of machine vision cameras for industrial applications and X-ray detectors for life sciences applications. The increase in operating income in the third quarter of 2017 reflected the impact of higher sales, favorable product mix and incremental operating profit from e2v, partially offset by acquisition-related charges of $2.9 million. The incremental operating profit included in the results for the third quarter of 2017 from recent acquisitions was $10.2 million, which included $2.9 million in additional intangible asset amortization expense.
The third quarter of 2017 cost of sales increased $59.3 million, compared with the third quarter of 2016 and primarily reflected the impact of higher sales. The cost of sales percentage for the third quarter of 2017 increased to 61.0%, compared with 58.4% for the third quarter of 2016, and reflects the impact of the e2v acquisition which carries a higher cost of sales percentage than the other digital imaging businesses. Selling, general and administrative expenses, including research and development and bid and proposal expense, increased to $42.8 million in the third quarter of 2017, from $29.3 million in 2016 and reflected the impact of higher net sales, and certain acquisition-related costs relatedSG&A as a percentage of net sales decreased slightly
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Table of Contents
during the period. Acquired intangible asset amortization expense decreased primarily due to the e2v acquisition. The selling, general and administrative expense percentage decreased to 22.3%foreign currency translation impacts as well as finalization of FLIR purchase accounting in the thirdsecond quarter of 2017 from 29.7% in2022.
Operating income increased primarily due to increased net sales and lower acquired intangible asset amortization expense during the thirdperiod, and operating income as a percentage of net sales increased slightly during the period.
Instrumentation
First Quarter
(dollars in millions)20232022$ Change% Change
Net sales$333.5 $308.9 $24.6 8.0 %
Cost of sales$180.4 $163.9 $16.5 10.1 %
SG&A expense$68.7 $68.5 $0.2 0.3 %
Acquired intangible asset amortization$3.7 $4.9 $(1.2)(24.5)%
Operating income$80.7 $71.6 $9.1 12.7 %
Cost of sales as a % of net sales54.1 %53.0 %
SG&A expense as a % of net sales20.6 %22.2 %
Acquired intangible asset amortization as a % of net sales1.1 %1.6 %
Operating income as a % of net sales24.2 %23.2 %
First quarter of 2016 and reflected the impact of the e2v acquisition which carries a lower selling, general and administrative expense percentage than the other digital imaging businesses.
First nine months of 20172023 compared with the first nine monthsquarter of 20162022
The Digital Imaging segment’s first nine months of 2017 netNet sales were $493.8 million, compared with $287.8 million in the first nine months of 2016, an increase of 71.6%. Operating income was $73.6 million for the first nine months of 2017, compared with operating income of $30.6 million in the first nine months of 2016, an increase of 140.5%.
The first nine months of 2017 net sales included $152.7 million in incremental sales from recent acquisitions, primarily e2v. The first nine months sales also reflectedincreased due to higher sales across all product lines. Sales of machine vision cameras for industrial applications, micro electro-mechanical systems (“MEMS”), geospatial hardwaremarine instrumentation increased $16.3 million, sales of test and softwaremeasurement instrumentation increased $4.4 million and X-ray detectors for life sciences applications. The increase in operating income in the first nine monthssales of 2017 reflected the impact of higher sales, favorable product mix and incremental operating profit from e2v, partially offset by acquisition-related charges of $9.1 million. The incremental operating profit included in the results for the first nine months of 2017 from recent acquisitions was $16.6environmental instrumentation increased $3.9 million, which included $6.4 million in additional intangible asset amortization expense.respectively.


The first nine months of 2017 costCost of sales increased primarily due to $308.6 million from $174.0 million for the first nine months of 2016 and reflected the impact of higher net sales. The cost of sales percentage increased due to change in 2017product mix. SG&A expense increased slightly due to 62.5%higher net sales partially offset by $0.6 million of lower research and development expense during the period. SG&A expense as a percentage of net sales decreased primarily due to increased net sales and lower research and development spending in the period.
Operating income and operating income as a percentage of net sales increased primarily due to increased net sales and decreased research and development expense during the period.
Aerospace and Defense Electronics
First Quarter
(dollars in millions)20232022$ Change% Change
Net sales$173.2 $166.2 $7.0 4.2 %
Cost of sales$103.7 $103.0 $0.7 0.7 %
SG&A expense$22.3 $20.1 $2.2 10.9 %
Acquired intangible asset amortization$0.2 $0.2 $— — %
Operating income$47.0 $42.9 $4.1 9.6 %
Cost of sales as a % of net sales59.9 %62.0 %
SG&A expense as a % of net sales12.9 %12.1 %
Acquired intangible asset amortization as a % of net sales0.1 %0.1 %
Operating income as a % of net sales27.1 %25.8 %
First quarter of 2023 compared with 60.5% in the first nine monthsquarter of 20162022
Net sales increased due to a $4.0 million increase for defense electronics and reflecteda $3.0 million increase for aerospace electronics.
Cost of sales increased slightly, primarily due to higher net sales partially offset by the impact of improved product margins across certain product categories, and the e2v acquisition which carries a higher cost of sales percentage thandecreased due to these improved product margins. SG&A expense as well as the other digital imaging businesses. Selling, general and administrative expenses, includingSG&A expense percentage increased primarily due higher personnel costs as well as increased research and development expenses.
Operating income and bid and proposal expense,operating income as a percent of net sales increased primarily due to $73.6 million for the first nine months of 2017, from $30.6 million in first nine months of 2016 and reflected the impact of higherincreased net sales and certain acquisition-related costs related tohigher product margins during the e2v acquisition. The selling, general and administrative expense percentage decreased to 22.6% in the first nine monthsperiod.
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Table of 2017 from 28.9% in the first nine months of 2016 and reflected the impact of the e2v acquisition which carries a lower selling, general and administrative expense percentage than the other digital imaging businesses.

Contents
Aerospace and Defense Electronics
 Third Quarter Nine Months
(dollars in millions)2017 2016 2017 2016
Net sales$165.1
 $153.5
 $489.8
 $464.1
Cost of sales$103.0
 $90.6
 $299.6
 $284.2
Selling, general and administrative expenses$32.7
 $31.4
 $102.2
 $96.3
Operating income$29.4
 $31.5
 $88.0
 $83.6
Cost of sales as a % of net sales62.4% 59.0% 61.2% 61.2%
Selling, general and administrative expenses % of sales19.8% 20.5% 20.8% 20.8%
Operating income as a % of net sales17.8% 20.5% 18.0% 18.0%
Engineered Systems
First Quarter
(dollars in millions)20232022$ Change% Change
Net sales$104.1 $95.4 $8.7 9.1 %
Cost of sales$87.3 $80.5 $6.8 8.4 %
SG&A expense$6.8 $5.5 $1.3 23.6 %
Operating income$10.0 $9.4 $0.6 6.4 %
Cost of sales as a % of net sales83.9 %84.4 %
SG&A expense as a % of net sales6.5 %5.7 %
Operating income as a % of net sales9.6 %9.9 %
ThirdFirst quarter of 20172023 compared with the thirdfirst quarter of 20162022
The Aerospace and Defense Electronics segment’s third quarter of 2017 netNet sales were $165.1 million, compared with $153.5 million in the third quarter of 2016, an increase of 7.6%. Operating income was $29.4 million for the third quarter of 2017, compared with operating income of $31.5 million in the third quarter of 2016, a decrease of 6.7%.
The third quarter of 2017 net sales reflected $11.5 million ofincreased due primarily to higher sales of microwave and interconnect systems$4.8 million for engineered products and higher sales of $1.9$3.9 million for electronic manufacturing services products, partially offset by $1.8 millionenergy systems.
Cost of lower sales of avionics products and electronic relays.increased primarily due to higher net sales. The higher sales of microwave and interconnect systems included $11.7 million in sales from e2v. Operating income in the third quarter of 2017 reflected the impact of higher sales, more than offset by unfavorable product mix. The incremental operating profit included in the results for the third quarter of 2017 from e2v was $1.1 million, which included $0.2 million in additional intangible asset amortization expense.
The third quarter of 2017 cost of sales increased $12.4 million, compared with the third quarter of 2016 and reflected the impact of higher sales. Cost of salespercentage decreased slightly. SG&A expense as well as SG&A expense as a percentage of net sales for the third quarter of 2017 increased primarily due to 62.4% from 59.0% in the third quarter of 2016 and reflected favorable product mix. Selling, general and administrative expenses, includinghigher research and development and bid and proposal expense increased to $32.7of $0.8 million induring the third quarter of 2017, compared with the $31.4 million in the third quarter of 2016 and reflected the impact of higher sales. The selling, general and administrative expense percentage decreased to 19.8% in the third quarter of 2017, compared with 20.5% in the third quarter of 2016.period.

First nine months of 2017 compared with the first nine months of 2016
The Aerospace and Defense Electronics segment’s first nine months of 2017 net sales were $489.8 million, compared with $464.1 million in the first nine months of 2016, an increase of 5.5%. Operating income was $88.0 million for the first nine months of 2017, compared with operating income of $83.6 million in the first nine months of 2016, an increase of 5.3%.
The first nine months of 2017increased primarily due to increased net sales reflected $29.4 million of higher sales of microwave and interconnect systems and higher sales of $8.2 million of avionics products and electronic relays, partially offset by $11.9 million of lower sales for electronic manufacturing services products. The higher sales of microwave and interconnect systems included $31.2 million in sales from e2v.sales. Operating income in the first nine months of 2017 reflected the impact of higher sales, overall improved margins and favorable product mix. The incremental operating profit included in the results for the first nine months of 2017 from e2v was $4.3 million, which included $1.0 million in additional intangible asset amortization expense.

The first nine months of 2017 cost of sales increased by $15.4 million, compared with the first nine months of 2016, and reflected the impact of higher sales. Cost of sales as a percentage of net sales for the first nine months of 2017 remained at 61.2% in the first nine months of 2017, compared with the first nine months of 2016. Selling, general and administrative expenses, includingdecreased slightly primarily due to higher research and development andexpense, including higher bid and proposal expense, increased to $102.2 million in the first nine months of 2017, compared with $96.3 million for the first nine months of 2016 and reflected the impact of higher sales. The selling, general and administrative expense percentage remained at 20.8% in the first nine months of 2017, compared with the first nine months of 2016.costs.


Engineered Systems
 Third Quarter Nine Months
(dollars in millions)2017 2016 2017 2016
Net sales$73.1
 $66.5
 $216.7
 $193.0
Cost of sales$56.7
 $52.8
 $172.0
 $155.5
Selling, general and administrative expenses$6.4
 $5.1
 $16.7
 $15.3
Operating income$10.0
 $8.6
 $28.0
 $22.2
Cost of sales as a % of net sales77.6% 79.4% 79.4% 80.6%
Selling, general and administrative expenses % of sales8.7% 7.7% 7.7% 7.9%
Operating income as a % of net sales13.7% 12.9% 12.9% 11.5%
Third quarter of 2017 compared with the third quarter of 2016
The Engineered Systems segment’s third quarter of 2017 net sales were $73.1 million, compared with $66.5 million in the third quarter of 2016, an increase of 9.9%. Operating income was $10.0 million for the third quarter of 2017, compared with operating income of $8.6 million in the third quarter of 2016, an increase of 16.3%.
The third quarter of 2017 net sales reflected higher sales of $5.3 million of engineered products and services and $4.7 million of turbine engines, partially offset by lower sales of $3.4 million of energy systems products. The higher sales of engineered products and services primarily reflected greater sales from marine manufacturing and missile defense programs. The higher sales of turbine engines reflected greater sales for the Joint Air-to-Surface Standoff Missile (“JASSM”) and Harpoon missile programs.
Operating income in the third quarter of 2017, compared to the third quarter of 2016 reflected the impact of higher sales and a greater proportion of higher margin manufacturing programs. The third quarter of 2017 cost of sales increased $3.9 million, compared with the third quarter of 2016 and reflected the impact of higher sales and product mix differences. Cost of sales as a percentage of sales for the third quarter of 2017 decreased to 77.6% from 79.4% in the third quarter of 2016 and reflected product mix differences. Selling, general and administrative expenses, including research and development and bid and proposal expense, increased to $6.4 million for the third quarter of 2017, compared with $5.1 million for the third quarter of 2016 and reflected the impact of higher sales. The selling, general and administrative expense percentage was 8.7% for the third quarter of 2017, compared with 7.7% for the third quarter of 2016.
First nine months of 2017 compared with the first nine months of 2016
The Engineered Systems segment’s first nine months of 2017 net sales were $216.7 million, compared with $193.0 million in the first nine months of 2016, an increase of 12.3%. Operating income was $28.0 million for the first nine months of 2017, compared with operating income of $22.2 million in the first nine months of 2016, an increase of 26.1%.
The first nine months of 2017 sales reflected higher sales of $15.9 million of engineered products and services and $10.0 million of turbine engines, partially offset by lower sales of $2.2 million of energy systems products. The higher sales of engineered products and services primarily reflected greater sales from missile defense, space and marine manufacturing programs. The higher sales of turbine engines reflected greater sales for the JASSM missile program. Operating income in the first nine months of 2017, compared to the first nine months of 2016 reflected the impact of higher sales and a greater proportion of higher margin manufacturing programs
The first nine months of 2017 cost of sales increased by $16.5 million, compared with the first nine months of 2016, and reflected the impact of higher sales. Cost of sales as a percentage of sales for the first nine months of 2017 decreased to 79.4% from 80.6% in the first nine months of 2016. Selling, general and administrative expenses, including research and development and bid and proposal expense, increased to $16.7 million for the first nine months of 2017, compared with $15.3 million for the first nine months of 2016. The selling, general and administrative expense percentage decreased slightly to 7.7% for the first nine months of 2017 compared with 7.9% for the first nine months of 2016.

Financial Condition, Liquidity and Capital Resources
Our net cash provided by operating activities was $248.3 million for the first nine months of 2017, compared with net cash provided by operating activities of $250.7 million for the first nine months of 2016. The lower cash provided by operating activities in the first nine months of 2017 reflected the impact of transaction related payments for the e2v acquisition and higher income tax payments, partially offset by the impact of higher operating income and cash flow from e2v.
Our net cash used in investing activities was $813.2 million for the first nine months of 2017, compared with net cash used by investing activities of $93.3 million for the first nine months of 2016. The 2017 amount includes $742.4 million for the acquisition of e2v. 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 manufactures precision components and specialized subassemblies used primarily in analytical and diagnostic instrumentation, such as High Performance Liquid Chromatography systems and specific medical devices and is part of the Instrumentation segment. The 2016 amount includes $58.5 million for acquisitions and other investments. See “Our Recent Acquisitions” section of this Management’s Discussion and Analysis for additional information on the e2v acquisition and acquisitions made in 2017 and in 2016. Capital expenditures for the first nine months of 2017 and 2016 were $40.5 million and $44.9 million, respectively.
Our goodwill was $1,748.9 million at October 1, 2017 and $1,193.5 million at January 1, 2017. The increase in the balance of goodwill in 2017 included $471.1 million in goodwill from the e2v acquisition, as well as the impact of exchange rate changes. Goodwill from the e2v acquisition will not be deductible for tax purposes. Teledyne’s net acquired intangible assets were $408.2 million at October 1, 2017 and $234.6 million at January 1, 2017. The increase in the balance of acquired intangible assets in 2017 reflected $173.4 million in acquired intangible assets from the e2v acquisition, partially offset by $29.2 million of amortization. The Company is in 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 acquisition. The amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis. In addition, the Company is still in 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 SSI acquisition made in July 2017 and the IN USA and Hanson Research acquisitions made in the fourth quarter of 2016. The amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis.
Financing activities provided cash of $535.6 million for the first nine months of 2017, compared with cash used by financing activities of $141.5 million for the first nine months of 2016. Financing activities for the first nine months of 2017 reflected net borrowings from the $750.0 million credit facility of $285.0 million and the proceeds from a $100.0 million term loan and the proceeds from the private placement of €250.0 million of senior unsecured notes. The first nine months of 2016 included net payments on debt of $167.1 million, which included net payments on the credit facility of $150.5 million. Proceeds from the exercise of stock options were $18.7 million and $26.7 million for the first nine months of 2017 and 2016, respectively. In March 2017, Teledyne entered into a $100.0 million term loan with a maturity date of October 30, 2019. Subsequently, in March 2017, Teledyne entered into a cross currency swap to effectively convert the $100.0 million term loan to a 93.0 million Euro denominated instrument with a fixed euro interest rate of 0.7055%. The proceeds from the term loan were used in connection with the acquisition of e2v. On April 18, 2017, Teledyne entered into a note purchase agreement for a private placement of €250.0 million of senior unsecured notes due through 2024. Teledyne used the proceeds of the private placement to, among other things, repay indebtedness incurred in connection with the acquisition of e2v and for general corporate purposes.
Our principal cash and capital requirements are to fund working capital needs, capital expenditures, income tax payments, pension contributions,and debt service requirements, and the stock repurchase program, as well as acquisitions. It is anticipated that cash on hand, operating cash flow, together with available borrowings under theour $1.15 billion credit facility, described below, will be sufficient to meet these requirements over the next twelve months. We may raise other forms of debt capital, depending on financial, market and economic conditions. Werequirements. To support acquisitions, we may need to raise additional capital to support acquisitions. We currently expect to spend up to $70.0 million for capital expenditures in 2017, of which $40.5 million has been spent in the first nine months of 2017.capital. No cash pension contributions have been made in 2017since 2013 or are planned for the remainder of 20172023 for the domestic qualified pension plan.plans.
Cash and Cash Equivalents
Cash and cash equivalents totaled $665.2 million at April 2, 2023 compared with $638.1 million at January 1, 2023. Cash equivalents consist of highly liquid money-market mutual funds and bank deposits with maturities of three months or less when purchased.
Long-term Debt
Total debt including capital lease obligations, at OctoberApril 2, 2023 was $3,820.4 million compared with $3,920.6 million at January 1, 2017 was $1,195.7 million. 2023. Subsequent to the end of the first quarter, on April 3, 2023, the Company repaid $300.0 million of its senior fixed rate notes.
At October 1, 2017, $285.0April 2, 2023, $1,103.9 million was outstandingavailable under the $750.0$1.15 billion credit facility, after reductions of $25.0 million credit facility. At October 1, 2017, Teledyne had $20.9in borrowings and $21.1 million in outstanding letters of credit. Available borrowing capacity under the $750.0 million credit facility, which is reduced by borrowings and certain outstanding letters of credit, was $447.5 million at October 1, 2017. The
Our bank credit agreements, which includes our $1.15 billion Credit Facility expiring March 2026, our $245.0 million term loan due May 2026 and our $150.0 million term loan due October 2024, require the Companyus to comply with various financial and operating covenants and at October 1, 2017, the Company wascovenants. At April 2, 2023, we were in compliance with these covenants.

As of October 1, 2017, the Company had an adequate amount of margin between required financial covenant ratios (as required by applicable credit agreements) and our actual ratios. At October 1, 2017, the required financial ratios and the actual ratios were as follows:
$750.0 million Credit Facility expires December 2020 and $182.5 million term loans due through January 2022 (issued in October 2012) and $100.0 million term loan due October 2019 (issued in March 2017)
Financial CovenantsRequirementActual Measure
Consolidated Leverage Ratio (Net Debt/EBITDA) (a)No more than 3.25 to 12.6 to 1
Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)No less than 3.0 to 110.9 to 1
$620.4 million Private Placement Senior Notes due from 2019 to 2024
Financial CovenantsRequirementActual Measure
Consolidated Leverage Ratio (Net Debt/EBITDA) (a)No more than 3.25 to 12.6 to 1
Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)No less than 3.0 to 110.9 to 1
a)The Consolidated Leverage Ratio is equal to Net Debt/EBITDA as defined in our private placement note purchase agreement and our $750.0 million credit agreement.
b)The Consolidated Interest Coverage Ratio is equal to EBITDA/Interest as defined in our private placement note purchase agreement and our $750.0 million credit agreement.
Our liquidity is not dependent upon the use of off-balance sheet financial arrangements. We have no off-balance sheet financing arrangements that incorporate the use of special purpose entities or unconsolidated entities.
We may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Cash Flows:
Net cash provided by operating activities was $203.0 million for the first three months of 2023 compared with net cash used in operating activities of $216.7 million. The first three months of 2023 reflected higher accounts receivable collections compared with the first quarter of 2022. The first three months of 2022 included a payment of $296.4 million to the Swedish Tax Authority related to a disputed pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary.
Net cash used in investing activities was $76.9 million for the first three months of 2023 compared with $19.6 million. During the first three months of 2023, we spent $52.5 million on acquisitions. Capital expenditures for the first three months of 2023 and 2022 were $24.4 million and $21.0 million, respectively. We currently plan to invest approximately $100 million for capital expenditures in 2023.
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Net cash used in financing activities was $103.4 million for the first three months of 2023 compared with net cash provided by financing activities of $42.6 million. During the first three months of 2023, we made $100.0 million of floating rate debt payments which reduced borrowings outstanding on our credit facility. Proceeds from the exercise of stock options were $10.2 million for the first three months of 2023 compared with $12.7 million for the first three months of 2022.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are those that are reflective of significant judgments and uncertainties and may potentially result in materially different results under different assumptions and conditions. Our critical accounting policies are the following: revenue recognition; accounting for pension plans;revenue recognition; accounting for business combinations, goodwill, and acquired intangible assets and other long-lived assets; accounting for income taxes; and accounting for income taxes.pension plans.
For additional discussion of the application of the critical accounting policies and other accounting policies, see Note 1 to these condensed consolidated financial statementsFinancial Statements and also Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Note 2 of the Notes to Consolidated Financial Statements included in Teledyne’s 20162022 Form 10-K.
Safe Harbor Cautionary Statement Regarding Forward-Looking Information
From time to time we make, and this report contains, forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995, directly or indirectly relating to sales, earnings, operating margin, growth opportunities, acquisitions, and divestitures,including the acquisition of FLIR, product sales, capital expenditures, pension matters, stock optionstock-based compensation expense, the credit facility, interest expense, severance, and relocation and facility consolidation costs, environmental remediation costs, stock repurchases, taxes, exchange ratesrate fluctuations and strategic plans. Forward-looking statements are generally accompanied by words such as “estimate”, “project”, “predict”, “believes”“believe” or “expect”, that convey the uncertainty of future events or outcomes. All statements made in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other sections of this Form 10-Q that are not historical in nature should be considered forward-looking.
Actual results could differ materially from these forward-looking statements.
Many factors could change the anticipated results, including: ongoing challenges and uncertainties posed by the COVID pandemic for businesses and governments around the world, including production, supply, contractual and other disruptions, such as COVID-related lockdowns, facility closures, furloughs and travel restrictions; changes in relevant tax and other laws; foreign currency exchange risks; rising interest rates; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages, higher inflation, including wage competition and higher shipping costs; labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards; disruptions in the global economy; the ongoing conflict between Russia and Ukraine, including the impact to energy prices and availability, especially in Europe; customer and supplier bankruptcies; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction measures; risks associated with our acquisition of e2v, including failuremeasures or changes to successfully integrateU.S. and foreign government spending and budget priorities triggered by the business;COVID pandemic; impacts from the United Kingdom’s decision to exit from the European Union; uncertainties related to the policies of the new U.S. Presidential Administration; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s export and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and proprietary information, including cyber security threats.cybersecurity threats; natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint. Lower oil and natural gas prices, as well as instability in the Middle East or other oil producing regions, and new regulations or restrictions relating to energy production, including with respectthose implemented in response to hydraulic fracturing,climate change, could further negatively affect the Company’sour businesses that supply the oil and gas industry. Increasing fuel costs couldWeakness in the commercial aerospace industry negatively affectaffects the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of the Company’s pension assets. Changes in the policies of U.S. and foreign governments, including economic sanctions, could result, over time, in reductions andor realignment in defense or other government spending and further changes in programs in which the companyCompany participates.

While the company’sour growth strategy includes possible acquisitions, we cannot provide any assurance as to when, if or on what terms any acquisitions will be made. Acquisitions, including the recent acquisition of ChartWorld, involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain key management and customers and achieve identified financial and operating synergies. There are additional risks associated with acquiring, owning and operating businesses outside of the United States,internationally, including those arising from U.S. and foreign government policy changes or actions and exchange rate fluctuations.
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We continue to take action to assure compliance with the internal controls, disclosure controls and other requirements of the Sarbanes-Oxley Act of 2002. While we believe our internal and disclosure control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and may not be detected.
Readers are urged to read our periodic reports filed with the Securities and Exchange Commission for a more complete description of our Company,company, its businesses, its strategies and the various risks that we face. Various risks are identified in Teledyne’s 2016our 2022 Form 10-K10-K.
All forward-looking statements speak only as of the date they are made and this Form 10-Q.
are based on information available at that time. We assume no dutyobligation to publicly update or revise any forward-looking statements whetherto reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as a result of new information or otherwise.required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
Item 3.     Quantitative and Qualitative Disclosures About Market Risk
Except as set forth below, thereThere were no material changes to the information provided under “Item 7A, Quantitative and Qualitative Disclosure About Market Risk” included in our 20162022 Form 10-K.
Market Risk
We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Foreign currency forward contracts are used primarily to hedge anticipated exposures. We do not enter into derivatives or other financial instruments for trading or speculative purposes.
Foreign Currency Exchange Rate Risk
Notwithstanding our efforts to mitigate portions of our foreign currency exchange rate risks, there can be no assurance that our hedging activities will adequately protect us against the risks associated with foreign currency fluctuations. A hypothetical 10 percent price change in the U.S. dollar from its value at October 1, 2017 would result in a decrease or increase in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars by approximately $8.4 million. A hypothetical 10 percent price change in the U.S. dollar from its value at October 1, 2017 would result in a decrease or increase in the fair value of our foreign currency forward contracts designated as a cash flow hedges to buy British Pounds and to sell U.S. dollars by approximately $0.1 million. A hypothetical 10 percent price change in the U.S. dollar from its value at October 1, 2017 would result in a decrease or increase in the fair value of our Euro/U.S. Dollar cross currency swap designated as a cash flow hedge by approximately $10.2 million. For additional information please see Derivative Instruments discussed in Note 4 to these condensed consolidated financial statements.
Interest Rate Exposure
We are exposed to market risk through the interest rate on our borrowings under our $750.0 million credit facility and our $282.5 million in term loans. Borrowings under our credit facility and our term loans are at variable rates which are, at our option, tied to a Eurocurrency rate equal to LIBOR (London Interbank Offered Rate) plus an applicable rate or a base rate as defined in our credit agreements. Eurocurrency rate loans may be denominated in U.S. dollars or an alternative currency as defined in the credit agreements. Eurocurrency or LIBOR based loans under the credit facility typically have terms of one, two, three or nine months and the interest rate for each such loan is subject to change if the loan is continued or converted following the applicable maturity date. The Company has not drawn any loans with a term longer than three months under the credit facility. Base rate loans have interest rates that primarily fluctuate with changes in the prime rate. Interest rates are also subject to change based on our consolidated leverage ratio as defined in the credit agreements. As of October 1, 2017, we had $567.5 million in outstanding indebtedness under our credit facility and term loans. A 100 basis point increase in interest rates would result in an increase in annual interest expense of approximately $5.7 million, assuming the $567.5 million in debt was outstanding for the full year.


Item 4.
Item 4. Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934, are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to provide reasonable assurance that information required to be disclosed by us in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our Chairman, President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, with the participation and assistance of other members of management, have reviewed the effectiveness of our disclosure controls and procedures and have concluded that the disclosure controls and procedures, as of October 1, 2017,April 2, 2023, are effective at the reasonable assurance level.
In connection with our evaluation during the quarterly period ended October 1, 2017, we have made no changes in our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II OTHER INFORMATION
Item 1.
Item 1. Legal Proceedings

See Item 1 of Part 1, “Financial Statements -- Note 1114 -- Lawsuits, Claims, Commitments Contingencies and Related Matters.Contingencies.”
Item 1A.Risk Factors
There are no material changes to the risk factors previously disclosed in our 20162022 Form 10-K in response to Item 1A to Part 1 of Form 10-K. See also Part I Item 3, Quantitative2, Management's Discussion and Qualitative Disclosures About Market Risk,Analysis of Financial Condition and Results of Operations for updated disclosures aboutadditional information regarding supply chain and foreign currency exchange rate risks.
Item 5.Other Information
Effective April 26, 2023, the Company entered into the following:

a.Second Amendment to Amended and Restated Credit Agreement dated as of March 4, 2021 (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “Credit Agreement”);
b.Fourth Amendment to Amended and Restated Term Loan Credit Agreement dated as of October 30, 2019 (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “2019 Term Loan Credit Agreement”); and
c.First Amendment to the Term Loan Credit Agreement dated as of March 4, 2021 (as amended, modified, extended, restated, replaced, or supplemented from time to time, “2021 Term Loan Credit Agreement,” and together with the Credit Agreement and 2019 Term Loan Credit Agreement, the “Credit Agreements”).

Capitalized terms used herein without definition have the meanings provided in the amendments to the Credit Agreements. Each Credit Agreement was amended as follows:

a.to replace the interest rate exposurefor Dollar denominated Loans thereunder that was previously determined as the sum of the London interbank offered rate (LIBOR) for an applicable interest period plus an Applicable Margin (determined by reference to the Company’s long-term, unsecured, senior, non-credit enhanced indebtedness ratings), with a successor rate determined by reference to the secured overnight financing rate administered by the Federal Reserve Bank of New York (SOFR) for interest periods of one, three or six months (or other period as may be agreed up to twelve months), but not less than a floor of zero, plus 0.10%, plus such Applicable Margin;
b.to modify the required leverage ratio that previously required the Company as of the end of each fiscal quarter not to permit the ratio of its Consolidated Funded Indebtedness net of unencumbered cash and exchange rate risks.


Cash Equivalents of the Company and its Domestic Subsidiaries in excess of $50 million to Consolidated EBITDA for the period of four
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quarters then ended to exceed 3.50:1, (i) to provide that such Consolidated Funded Indebtedness may be net of all cash and Cash Equivalents of the Company and its Domestic Subsidiaries; and (ii) to permit such ratio to increase to not more than 4.00:1 for each of the four quarter ends following an Acquisition by the Company and its Subsidiaries involving consideration in an aggregate amount exceeding $100 million (compared to $50 million in the prior Credit Agreement) (and thereafter such ratio shall again revert to not greater than 3.50:1 for each quarter end following such fourth quarter end); and
c.to further modify the confirmation of the parties to the Credit Agreement that the Amendment and other Loan Documents to be executed and delivered thereunder may be executed by each such party by an electronic signature.

The amendments to the Credit Agreements are being filed as exhibits to this Quarterly Report on Form 10-Q and the summary above is qualified in all respects by the full language of the amendments as set forth in the exhibits.


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Item 6.Exhibits
(a)Exhibits
(a)Exhibits
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101 (INS)XBRL Instance Document
Exhibit 101 (SCH)XBRL Schema Document
Exhibit 101 (CAL)XBRL Calculation Linkbase Document
Exhibit 101 (LAB)XBRL Label Linkbase Document XBRL Schema Document
Exhibit 101 (PRE)XBRL Presentation Linkbase Document XBRL Schema Document
Exhibit 101 (DEF)XBRL Definition Linkbase Document XBRL Schema Document
Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†Denotes management contract or compensatory plan or arrangement required to be filed with this report.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TELEDYNE TECHNOLOGIES INCORPORATED
DATE: November 6, 2017April 28, 2023By:/s/ Susan L. Main
Susan L. Main, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and Authorized Officer)


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Teledyne Technologies Incorporated
Index to Exhibits
Exhibit NumberDescription
Exhibit NumberDescription
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101 (INS)XBRL Instance Document
Exhibit 101 (SCH)XBRL Schema Document
Exhibit 101 (CAL)XBRL Calculation Linkbase Document
Exhibit 101 (DEF)XBRL Definition Linkbase Document XBRL Schema Document
Exhibit 101 (LAB)XBRL Label Linkbase Document XBRL Schema Document
Exhibit 101 (PRE)XBRL Presentation Linkbase Document XBRL Schema Document
Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†Denotes management contract or compensatory plan or arrangement required to be filed with this report.



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