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

FORM 10-Q
_____________________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 20222, 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)
_____________________________________
Delaware 25-1843385
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification Number)No.)
1049 Camino Dos Rios
Thousand OaksCalifornia91360-2362
(Address of principal executive offices) (Zip Code)
805 373-4545
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each 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  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): 
Yes  ☐    No  ☒
There were 46,864,64347,074,611 shares of common stock, $.01 par value per share, outstanding as of July 26, 2022.25, 2023.

Table of Contents
TELEDYNE TECHNOLOGIES INCORPORATED
TABLE OF CONTENTS
PAGE
2
2
Condensed Consolidated Statements of Income (Loss)
2
Condensed Consolidated Statements of Comprehensive Income (Loss)
23
Condensed Consolidated Balance Sheets
34
Condensed Consolidated Statements of Stockholders' Equity
45
Condensed Consolidated Statements of Cash Flows
56
Notes to Condensed Consolidated Financial Statements
67
2119
3127
3127
3127
3127
3127
Item 5. Other Information
27
3328
3429


1

Table of Contents
PART I FINANCIAL INFORMATION
 
Item 1.    Financial Statements
TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 2, 2023 AND JULY 3, 2022 AND JULY 4, 2021
(Unaudited - Amounts in millions, except per-share amounts)
Second QuarterSix MonthsSecond QuarterSix Months
2022202120222021 2023202220232022
Net salesNet sales$1,355.8 $1,121.0 $2,676.8 $1,926.7 Net sales$1,424.7 $1,355.8 $2,808.0 $2,676.8 
Costs and expensesCosts and expensesCosts and expenses
Cost of salesCost of sales788.6 663.1 1,541.2 1,155.6 Cost of sales806.3 788.6 1,597.0 1,541.2 
Selling, general and administrative expenses286.4 320.7 577.7 488.9 
Selling, general and administrativeSelling, general and administrative313.0 286.4 613.4 577.7 
Acquired intangible asset amortizationAcquired intangible asset amortization51.3 32.8 104.9 42.6 Acquired intangible asset amortization49.3 51.3 99.0 104.9 
Total costs and expensesTotal costs and expenses1,126.3 1,016.6 2,223.8 1,687.1 Total costs and expenses1,168.6 1,126.3 2,309.4 2,223.8 
Operating income229.5 104.4 453.0 239.6 
Interest and debt expense, net(22.5)(21.2)(44.8)(43.5)
Operating income (loss)Operating income (loss)256.1 229.5 498.6 453.0 
Interest and debt income (expense), netInterest and debt income (expense), net(22.3)(22.5)(43.3)(44.8)
Gain (loss) on debt extinguishmentGain (loss) on debt extinguishment10.6 — 10.6 (13.4)Gain (loss) on debt extinguishment1.6 10.6 1.6 10.6 
Non-service retirement benefit income2.9 2.8 5.7 5.6 
Other income, net1.0 6.1 — 5.1 
Income before income taxes221.5 92.1 424.5 193.4 
Provision for income taxes50.2 27.4 40.6 44.0 
Non-service retirement benefit income (expense), netNon-service retirement benefit income (expense), net2.9 2.9 6.2 5.7 
Other income (expense), netOther income (expense), net(3.4)1.0 (4.5)— 
Income (loss) before income taxesIncome (loss) before income taxes234.9 221.5 458.6 424.5 
Provision (benefit) for income taxesProvision (benefit) for income taxes49.4 50.2 94.3 40.6 
Net income$171.3 $64.7 $383.9 $149.4 
Net income (loss) including noncontrolling interestNet income (loss) including noncontrolling interest185.5 171.3 $364.3 $383.9 
Less: Net income (loss) attributable to noncontrolling interestLess: Net income (loss) attributable to noncontrolling interest0.2 — 0.3 — 
Net income (loss) attributable to TeledyneNet income (loss) attributable to Teledyne$185.3 $171.3 $364.0 $383.9 
Basic earnings per common shareBasic earnings per common share$3.66 $1.52 $8.20 $3.76 Basic earnings per common share$3.94 $3.66 $7.74 $8.20 
Weighted average common shares outstandingWeighted average common shares outstanding46.8 42.5 46.8 39.7 Weighted average common shares outstanding47.0 46.8 47.0 46.8 
Diluted earnings per common shareDiluted earnings per common share$3.59 $1.48 $8.05 $3.66 Diluted earnings per common share$3.87 $3.59 $7.60 $8.05 
Weighted average diluted common shares outstandingWeighted average diluted common shares outstanding47.7 43.6 47.7 40.8 Weighted average diluted common shares outstanding47.9 47.7 47.9 47.7 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 2, 2023 AND JULY 3, 2022 AND JULY 4, 2021
(Unaudited - Amounts in millions)
Second QuarterSix Months Second QuarterSix Months
2022202120222021 2023202220232022
Net income$171.3 $64.7 $383.9 $149.4 
Net income (loss) including noncontrolling interestNet income (loss) including noncontrolling interest$185.5 $171.3 $364.3 $383.9 
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Foreign exchange translation adjustmentForeign exchange translation adjustment(154.8)3.2 (187.4)4.2 Foreign exchange translation adjustment12.3 (154.8)8.0 (187.4)
Hedge activity, net of taxHedge activity, net of tax(2.3)0.5 4.2 0.4 Hedge activity, net of tax1.6 (2.3)4.1 4.2 
Pension and postretirement benefit adjustments, net of taxPension and postretirement benefit adjustments, net of tax4.0 4.5 8.2 8.8 Pension and postretirement benefit adjustments, net of tax0.9 4.0 2.4 8.2 
Other comprehensive income (loss)Other comprehensive income (loss)(153.1)8.2 (175.0)13.4 Other comprehensive income (loss)14.8 (153.1)14.5 (175.0)
Comprehensive income (loss) including noncontrolling interestComprehensive income (loss) including noncontrolling interest200.3 18.2 378.8 208.9 
Less: comprehensive income (loss) attributable to noncontrolling interestLess: comprehensive income (loss) attributable to noncontrolling interest0.2 — 0.3 — 
Comprehensive income$18.2 $72.9 $208.9 $162.8 
Comprehensive income (loss) attributable to TeledyneComprehensive income (loss) attributable to Teledyne$200.1 $18.2 $378.5 $208.9 
The accompanying notes are an integral part of these condensed consolidated financial statements.
23

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - Amounts in millions, except share amounts)
July 3, 2022January 2, 2022July 2, 2023January 1, 2023
AssetsAssetsAssets
Current AssetsCurrent AssetsCurrent Assets
Cash and cash equivalentsCash and cash equivalents$278.8 $474.7 Cash and cash equivalents$364.2 $638.1 
Accounts receivable, netAccounts receivable, net814.7 767.7 Accounts receivable, net859.4 883.7 
Unbilled receivables, netUnbilled receivables, net314.6 316.1 Unbilled receivables, net305.4 274.7 
Inventories, netInventories, net821.5 752.9 Inventories, net970.6 890.7 
Prepaid expenses and other current assetsPrepaid expenses and other current assets107.8 118.0 Prepaid expenses and other current assets141.1 130.7 
Total current assetsTotal current assets2,337.4 2,429.4 Total current assets2,640.7 2,817.9 
Property, plant and equipment, net of accumulated depreciation and amortization of $818.9 at July 3, 2022 and $743.3
at January 2, 2022
774.2 827.5 
Property, plant and equipment, net of accumulated depreciation and amortization of $905.1 at July 2, 2023 and $847.8 at January 1, 2023Property, plant and equipment, net of accumulated depreciation and amortization of $905.1 at July 2, 2023 and $847.8 at January 1, 2023766.0 769.8 
GoodwillGoodwill7,894.6 7,986.7 Goodwill7,943.8 7,873.0 
Acquired intangibles, netAcquired intangibles, net2,618.8 2,741.6 Acquired intangibles, net2,349.7 2,440.6 
Prepaid pension assetsPrepaid pension assets135.5 123.7 Prepaid pension assets186.1 178.4 
Operating lease right-of-use assets147.1 144.5 
Other assets, netOther assets, net139.9 176.9 Other assets, net270.0 274.3 
Total AssetsTotal Assets$14,047.5 $14,430.3 Total Assets$14,156.3 $14,354.0 
Liabilities and Stockholders’ Equity
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ EquityLiabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current LiabilitiesCurrent LiabilitiesCurrent Liabilities
Accounts payableAccounts payable$483.0 $469.5 Accounts payable$459.4 $505.7 
Accrued liabilitiesAccrued liabilities620.0 1,028.9 Accrued liabilities724.0 717.6 
Current portion of long-term debtCurrent portion of long-term debt300.0 — Current portion of long-term debt450.1 300.1 
Total current liabilitiesTotal current liabilities1,403.0 1,498.4 Total current liabilities1,633.5 1,523.4 
Long-term debt, net of current portionLong-term debt, net of current portion3,645.7 4,099.4 Long-term debt, net of current portion2,903.2 3,620.5 
Long-term operating lease liabilities139.3 138.0 
Long-term deferred tax liabilitiesLong-term deferred tax liabilities568.5 625.5 Long-term deferred tax liabilities462.3 490.0 
Other long-term liabilitiesOther long-term liabilities429.1 447.0 Other long-term liabilities574.4 547.2 
Total LiabilitiesTotal Liabilities6,185.6 6,808.3 Total Liabilities5,573.4 6,181.1 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies
Redeemable Noncontrolling InterestRedeemable Noncontrolling Interest3.9 3.7 
Stockholders’ EquityStockholders’ EquityStockholders’ Equity
Preferred stock, $0.01 par value; outstanding shares - nonePreferred stock, $0.01 par value; outstanding shares - none— — 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 July 3, 2022 and 47,194,766 at January 2, 2022; outstanding shares: 46,862,209 at July 3, 2022 and 46,692,296 at January 2, 20220.5 0.5 
Common stock, $0.01 par value; authorized 125,000,000 shares; issued shares: 47,194,766 at July 2, 2023 and 47,194,766 at January 1, 2023; outstanding shares: 47,070,900 at July 2, 2023 and 46,912,635 at January 1, 2023Common stock, $0.01 par value; authorized 125,000,000 shares; issued shares: 47,194,766 at July 2, 2023 and 47,194,766 at January 1, 2023; outstanding shares: 47,070,900 at July 2, 2023 and 46,912,635 at January 1, 20230.5 0.5 
Additional paid-in capitalAdditional paid-in capital4,333.6 4,317.1 Additional paid-in capital4,371.2 4,353.4 
Retained earningsRetained earnings4,157.1 3,773.2 Retained earnings4,925.8 4,561.8 
Treasury stock, 332,557 shares at July 3, 2022 and 502,470 shares at January 2, 2022(24.3)(38.8)
Accumulated other comprehensive loss(605.0)(430.0)
Treasury stock, 123,866 shares at July 2, 2023 and 282,131 shares at January 1, 2023Treasury stock, 123,866 shares at July 2, 2023 and 282,131 shares at January 1, 2023(6.5)(20.0)
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(712.0)(726.5)
Total Stockholders’ EquityTotal Stockholders’ Equity8,579.0 8,169.2 
Total Stockholders’ Equity7,861.9 7,622.0 
Total Liabilities and Stockholders’ Equity$14,047.5 $14,430.3 
Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' EquityTotal Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity$14,156.3 $14,354.0 
The accompanying notes are an integral part of these condensed consolidated financial statements.
34

Table of Contents
TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions)
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— — — 212.6 — 212.6 
Other comprehensive 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 
Net income— — — 171.3 — 171.3 
Other comprehensive loss, net of tax— — — — (153.1)(153.1)
Treasury stock issued— (2.9)2.9 — — — 
Stock-based compensation— 6.5 — — — 6.5 
Exercise of stock options— 4.8 — — — 4.8 
Balance, July 3, 2022$0.5 $4,333.6 $(24.3)$4,157.1 $(605.0)$7,861.9 
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 
Net income (loss)— — — 185.3 — 185.3 
Other comprehensive income (loss), net of tax— — — — 14.8 14.8 
Treasury stock issued— (2.9)2.9 — — — 
Stock-based compensation— 8.4 — — — 8.4 
Exercise of stock options— 4.8 — — — 4.8 
Balance, July 3, 2023$0.5 $4,371.2 $(6.5)$4,925.8 $(712.0)$8,579.0 
Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, January 3, 2021$0.4 $389.9 $(59.5)$3,327.9 $(430.1)$3,228.6 
Net income— — — 84.7 — 84.7 
Other comprehensive income, net of tax— — — — 5.2 5.2 
Treasury stock issued— (9.3)9.3 — — — 
Stock-based compensation— 7.0 — — — 7.0 
Exercise of stock options— 10.8 — — — 10.8 
Balance, April 4, 20210.4 398.4 (50.2)3,412.6 (424.9)3,336.3 
Net income— — — 64.7 — 64.7 
Other comprehensive income, net of tax— — — — 8.2 8.2 
Common stock issued0.1 3,889.6 — — — 3,889.7 
Treasury stock issued— (4.1)4.1 — — — 
Stock based compensation— 8.4 — — — 8.4 
Exercise of stock options— 5.1 — — — 5.1 
Balance, July 4, 2021$0.5 $4,297.4 $(46.1)$3,477.3 $(416.7)$7,312.4 
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 
Net income (loss)— — — 171.3 — 171.3 
Other comprehensive income (loss), net of tax— — — — (153.1)(153.1)
Treasury stock issued— (2.9)2.9 — — — 
Stock based compensation— 6.5 — — — 6.5 
Exercise of stock options— 4.8 — — — 4.8 
Balance, July 3, 2022$0.5 $4,333.6 $(24.3)$4,157.1 $(605.0)$7,861.9 
The accompanying notes are an integral part of these condensed consolidated financial statements.
45

Table of Contents
TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 3, 20222, 2023 AND JULY 4, 20213, 2022
(Unaudited - Amounts in millions)
Six Months Six Months
20222021 20232022
Operating ActivitiesOperating ActivitiesOperating Activities
Net income$383.9 $149.4 
Net income (loss) including noncontrolling interestNet income (loss) including noncontrolling interest$364.3 $383.9 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:
Depreciation and amortizationDepreciation and amortization169.6 112.4 Depreciation and amortization162.1 169.6 
Stock-based compensationStock-based compensation15.4 16.3 Stock-based compensation16.3 15.4 
Bridge financing and debt extinguishment (income) expense(10.6)30.5 
Debt extinguishment (income) expenseDebt extinguishment (income) expense(1.6)(10.6)
Changes in operating assets and liabilities excluding the effect of business acquired:Changes in operating assets and liabilities excluding the effect of business acquired:Changes in operating assets and liabilities excluding the effect of business acquired:
Accounts receivable and unbilled receivablesAccounts receivable and unbilled receivables(67.5)(28.0)Accounts receivable and unbilled receivables9.9 (67.5)
InventoriesInventories(103.9)20.5 Inventories(75.3)(103.9)
Accounts payableAccounts payable32.8 27.4 Accounts payable(49.7)32.8 
Deferred and income taxes receivable/payable, netDeferred and income taxes receivable/payable, net(60.2)(2.6)Deferred and income taxes receivable/payable, net8.5 (60.2)
Prepaid expenses and other assetsPrepaid expenses and other assets16.2 11.4 Prepaid expenses and other assets(16.3)16.2 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities(405.1)(15.5)Accrued expenses and other liabilities(18.6)(405.1)
Other operating, net Other operating, net9.6 14.4  Other operating, net(6.1)9.6 
Net cash (used in) provided by operating activities(19.8)336.2 
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities393.5 (19.8)
Investing ActivitiesInvesting ActivitiesInvesting Activities
Purchases of property, plant and equipmentPurchases of property, plant and equipment(41.8)(38.4)Purchases of property, plant and equipment(51.7)(41.8)
Purchase of businesses, net of cash acquired— (3,723.4)
Purchase of business, net of cash acquiredPurchase of business, net of cash acquired(53.5)— 
Proceeds from disposal of fixed assetsProceeds from disposal of fixed assets5.1 — Proceeds from disposal of fixed assets— 5.1 
Other investing, netOther investing, net1.3 — Other investing, net0.7 1.3 
Net cash used in investing activities(35.4)(3,761.8)
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities(104.5)(35.4)
Financing ActivitiesFinancing ActivitiesFinancing Activities
Net payments on fixed rate notes— (496.5)
Net proceeds from credit facility— 3,975.8 
Payments on fixed rate senior notesPayments on fixed rate senior notes(308.4)(64.4)
Net borrowings from (repayments made to) credit facilityNet borrowings from (repayments made to) credit facility(125.0)— 
Payments on other debtPayments on other debt(144.5)— Payments on other debt(135.3)(80.1)
Proceeds from exercise of stock optionsProceeds from exercise of stock options17.5 15.9 Proceeds from exercise of stock options15.0 17.5 
Maturity of cross currency swapMaturity of cross currency swap(13.5)— 
Liquidation of cross currency swapLiquidation of cross currency swap18.3 — Liquidation of cross currency swap— 18.3 
Payments for bridge financing and debt extinguishment— (30.5)
Other financing, netOther financing, net(1.9)(13.3)Other financing, net(0.6)(1.9)
Net cash (used in) provided by financing activities(110.6)3,451.4 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(567.8)(110.6)
Effect of exchange rate changes on cashEffect of exchange rate changes on cash(30.1)(3.8)Effect of exchange rate changes on cash4.9 (30.1)
Change in cash and cash equivalentsChange in cash and cash equivalents(195.9)22.0 Change in cash and cash equivalents(273.9)(195.9)
Cash and cash equivalents—beginning of periodCash and cash equivalents—beginning of period474.7 673.1 Cash and cash equivalents—beginning of period638.1 474.7 
Cash and cash equivalents—end of periodCash and cash equivalents—end of period$278.8 $695.1 Cash and cash equivalents—end of period$364.2 $278.8 
The accompanying notes are an integral part of these condensed consolidated financial statements.
56

Table of Contents
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
July 3, 20222, 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 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 2, 1, 2023 (“2022 (“2021 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 July 3, 20222, 2023 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the second quarter and six months ended July 3, 2022.2, 2023. The results of operations and cash flows for the periods ended July 3, 20222, 2023 and cash flows for the six months ended July 3, 20222, 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 Standards
In September 2022, the current year, gain (loss) on debt extinguishment isFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations. This standard requires annual disclosure of the key terms of supplier finance programs, obligations outstanding with a description of where the amounts are presented in the financial statements, a rollforward of such amounts, and interim disclosure of amounts outstanding as separate line itemof the end of each period. The adoption of ASU 2022-04 did not have an impact on the income statement.
Teledyne had an immaterial amountCompany's disclosures as the impact of cash equivalents at July 3, 2022 and January 2, 2022.supplier finance programs is not material to the Company's financial statements.
Note 2. Business Combinations, GoodwillAcquisitions
2023 Acquisitions
ChartWorld
During the first quarter of 2023, the Company acquired ChartWorld International Limited and Acquired Intangible Assets
Acquisition of FLIR Systems, Inc.
On May 14, 2021, Teledyne acquired the outstanding stock of FLIR Systems, Inc. ( “FLIR”affiliates ("ChartWorld") for approximately $8.1 billion, comprising of net cash payments of $3.7 billion, net Teledyne share issuances of $3.9 billion, and the assumption of FLIR debt of $0.5 billion. FLIR stockholders received $28.00 per share$53.5 million in cash, net of cash acquired, and 0.0718 sharessubject to certain adjustments. ChartWorld, headquartered in Cyprus, with additional locations in Germany, Singapore, Canada and Japan, is a provider of Teledyne common stock for each FLIR share,digital marine navigation hardware and Teledyne issued approximately 9.5 million shares at $409.41 per share. See Note 3 to the Notes to Consolidated Financial Statements in Teledyne’s 2021 Form 10-K for additional information regarding the FLIR acquisition.
Founded in 1978, FLIR issoftware provided through an industrial technology company focused on intelligent sensing solutions for defense and industrial applications. FLIR technologies include thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and advanced threat-detection solutions. FLIRaffordable 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 acquired 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 Digital 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. For further information about the Company's redeemable noncontrolling interest, refer to the Company's 2022 Form 10-K.




7


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$53.5 $49.4 $11.3 
(a) Net of cash acquired
2022
AcquisitionsAcquisition DateCash Paid (a)Goodwill AcquiredAcquired Intangible Assets
ETMOctober 28, 2022$87.7 $33.2 $20.9 
NL Acoustics (acquisition of 80% interest)July 15, 202211.9 11.7 3.8 
Total$99.6 $44.9 $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 estimated 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 book and tax basis differences, if any. Pro forma results of operations, the revenue and net income subsequent to the acquisition date, and a more detailed breakout of the major classes of assets and liabilities acquired for these acquisitions have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to the Company's financial results. The significant factors that resulted in recognition of goodwill were: (a)for the purchase price was based on cash flow2022 and return on capital projections assuming integration with2023 acquisitions included the acquired businesses’ market positions, growth opportunities in the markets in which they operate, their experienced work force and established operating infrastructures. The results of these acquisitions have been included in Teledyne’s results since the dates of their respective acquisition.
Note 3. Business Segments
Teledyne is a leading provider of sophisticated digital imaging products and software, instrumentation, aerospace and defense electronics, and engineered systems. Our customers include government agencies, aerospace prime contractors, energy exploration and production companies, major industrial companies and airlines. The Company has four reportable segments: Digital Imaging; Instrumentation; Aerospace and Defense Electronics; and Engineered Systems.
Segment results include net sales and operating income by segment but excludes corporate office expenses. Corporate expense primarily includes various administrative expenses relating to the corporate office not allocated to our businesses and (b) the calculation of the fair value of tangible and intangible assets acquired that qualified for recognition. Goodwill resulting from the FLIR acquisition will not be deductible for tax purposes.segments.
The following table presents the final purchase price allocation for FLIR, as the measurement period closed in the second quarter of 2022. We are accounting for the FLIR acquisition under the acquisition methodnet sales and are required to measure identifiable assets acquired and liabilities assumed of the acquiree at the fair values on the closing date. The Company has completed the process of specifically identifying the amounts assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the FLIR acquisition. The fair values of acquired intangibles were determined based on estimates and assumptions that are deemed reasonableoperating income by the Company.
6

Fair values allocated to the assets acquired and liabilities assumed - FLIR (in millions):
Cash and cash equivalents$287.7
Accounts receivables, net241.3
Unbilled receivables, net72.1
Inventories, net519.4
Prepaid expenses and other current assets54.8
Total current assets1,175.3
Property, plant and equipment354.1
Goodwill5,939.7
Acquired intangible assets2,490.0
Other long-term assets141.9
Total assets acquired$10,101.0
Accounts payable144.7
Accrued liabilities612.1
Total current liabilities assumed756.8
Long-term debt, net496.8
Long-term deferred tax liabilities603.3
Other long-term liabilities335.5
Total liabilities assumed2,192.4
Consideration transferred$7,908.6
Consideration transferred, net of cash acquired (a)$7,620.9
(a)     The consideration transferred included approximately $3.9 billion of Teledyne shares issued to existing shareholders of the acquired company. This $3.9 billion of equity consideration is a non-cash transaction. An immaterial portion of the cash consideration for certain vested FLIR restricted stock awards was deferred at the election of the award holder and will be paid out in future periods.

During fiscal year 2018, the Swedish Tax Authority (“STA”) issued a reassessment of tax for the year ending December 31, 2012 to one of FLIR’s non-operating subsidiaries in Sweden. The total taxes, penalties and interest levied by the STA totaled SEK 3.1 billion ($364.7 million based on exchange rates as of the acquisition date). The reassessment concerned the use of tax credits applied against capital gains pursuant to European Union Council Directive 2009/133/EC, commonly referred to as the EU Merger Directive, and the reassessment levied significant taxes and penalties. In March 2020, FLIR received an adverse judgment from the First Instance Court of Sweden regarding the STA’s reassessment. FLIR appealed the decision to the Administrative Court of Appeal in Stockholm, Sweden. After completing an extensive analysis, including consultation with outside specialists, Teledyne recorded a liability for this uncertain tax position that reflected the most likely outcome for this tax matter under the acquisition method for business combinations in the third quarter of 2021, which was included within accrued liabilities on the consolidated balance sheet at January 2, 2022. On January 26, 2022, the Administrative Court of Appeal in Stockholm, Sweden generally affirmed the March 2020 ruling of the First Instance Court and determined an estimated tax liability in the amount of SEK 2.765 billion. We paid the tax on February 2, 2022 totaling $296.4 million. We have requested for permission to appeal this ruling to the Swedish Administrative Supreme Court. We have not yet received a response to our request.
During the second quarter of 2022, the Company finalized the measurement period including reviewing and identifying acquisition accounting adjustments for a number of acquired tax positions of FLIR that may meet the definition of an acquired uncertain tax position. In addition to the STA matter described above, the Company recorded $187.6 million of purchase accounting adjustments for the accrual of other uncertain tax positions of FLIR. These amounts are included within other long-term liabilities on the Condensed Consolidated Balance Sheet.

7

The following table is a summary at the acquisition date of the acquired intangible assets and weighted average useful life in years for the FLIR acquisition made in 2021segment (dollars in millions):
Second Quarter%Six Months%
20232022Change20232022Change
Net sales (a):
Digital Imaging$793.3 $775.8 2.3 %$1,565.8 $1,526.3 2.6 %
Instrumentation328.4 312.5 5.1 %661.9 621.4 6.5 %
Aerospace and Defense Electronics186.0 168.8 10.2 %359.2 335.0 7.2 %
Engineered Systems117.0 98.7 18.5 %221.1 194.1 13.9 %
Total net sales$1,424.7 $1,355.8 5.1 %$2,808.0 $2,676.8 4.9 %
Operating income:
Digital Imaging$124.6 $117.9 5.7 %$246.8 $233.6 5.7 %
Instrumentation81.4 73.6 10.6 %162.1 145.2 11.6 %
Aerospace and Defense Electronics53.2 44.1 20.6 %100.2 87.0 15.2 %
Engineered Systems11.5 8.6 33.7 %21.5 18.0 19.4 %
Corporate expense(14.6)(14.7)(0.7)%(32.0)(30.8)3.9 %
Operating income$256.1 $229.5 11.6 %$498.6 $453.0 10.1 %
(a) Net sales excludes inter-segment sales of $8.1 million and $14.3 million for the second quarter and first six months of 2023, respectively, and $5.1 million and $10.6 million for the second quarter and first six months of 2022, respectively.
Intangibles subject to amortization:Intangible AssetsWeighted average useful life in years
Proprietary technology$1,355.0 9.7
Customer list/relationships450.0 14.4
Total intangibles subject to amortization1,805.0 10.9
Intangibles not subject to amortization:
Trademarks685.0 
Total acquired intangible assets$2,490.0 
8

The unaudited proforma information below assumes that FLIR had been acquired at the beginning of the 2020 fiscal year and includes the effect of transaction accounting adjustments. These adjustments include financing and interest costs associated with debt to fund the acquisition, amortization of acquired intangible assets, depreciation of the fair value step-up of acquired property, plant and equipment, amortization of inventory fair value step-up (assumed to be fully amortized in 2020) and tax related effects as well as the issuance of Teledyne common stock in connection with the acquisition.
This unaudited proforma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the 2020 fiscal year.In addition, the unaudited proforma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.
The following table presents proforma net sales, net income and earnings per share data assuming FLIR was acquired at the beginning of the 2020 fiscal year:
Second Quarter (a)Six Months (a)
(unaudited - in millions, except per share amounts)20212021
Net sales$1,275.0 $2,548.0 
Net income$93.2 $192.3 
Basic earnings per common share$2.19 $4.84 
Diluted earnings per common share$2.14 $4.71 
(a) The above unaudited proforma information is presented for the FLIR acquisition as it is considered a material acquisition.
Goodwill and Acquired Intangible Assets
Teledyne’s goodwill was $7,894.6 million at July 3, 2022 and $7,986.7 million at January 2, 2022. Teledyne’s net acquired intangible assets were $2,618.8 million at July 3, 2022 and $2,741.6 million at January 2, 2022. The decrease in the balance of net acquired intangible assets primarily reflected amortization of acquired intangible assets.
8

Acquired intangibleIdentifiable assets are summarized as follows: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):
July 3, 2022January 2, 2022
Acquired intangible assets (in millions):
Gross carrying amountAccumulated amortizationNet carrying amountGross carrying amountAccumulated amortizationNet carrying amount
Proprietary technology$1,750.4 $432.7 $1,317.7 $1,767.7 $358.2 $1,409.5 
Customer list/relationships611.0 159.6 451.4 616.2 141.8 474.4 
Patents0.6 0.6 — 0.6 0.6 — 
Non-compete agreements0.9 0.9 — 0.9 0.9 — 
Trademarks5.3 4.1 1.2 4.5 3.9 0.6 
Backlog15.8 15.8 — 16.3 16.3 — 
Total intangibles subject to amortization2,384.0 613.7 1,770.3 2,406.2 521.7 1,884.5 
Intangibles not subject to amortization:
Trademarks848.5 — 848.5 857.1 — 857.1 
Total acquired intangible assets$3,232.5 $613.7 $2,618.8 $3,263.3 $521.7 $2,741.6 
Identifiable assets:July 2, 2023January 1, 2023
Digital Imaging$11,341.3 $11,432.3 
Instrumentation1,637.8 1,626.4 
Aerospace and Defense Electronics568.6 540.1 
Engineered Systems215.9 200.3 
Corporate392.7 554.9 
Total identifiable assets$14,156.3 $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 Instrumentation segment (in millions):
Second QuarterSix Months
Instrumentation2023202220232022
Marine Instrumentation$127.4 $115.3 $255.6 $227.2 
Environmental Instrumentation115.3 115.5 233.2 229.5 
Test and Measurement Instrumentation85.7 81.7 173.1 164.7 
Total$328.4 $312.5 $661.9 $621.4 

Note 3. Accumulated Other Comprehensive Income (Loss)4. Revenue Recognition and Contract Balances
Approximately 70% of the Company's net sales are recognized at a point in time, with the remaining 30% of net sales recognized over time. The changes in accumulated other comprehensive income (loss) ("AOCI")Company disaggregates its revenue from contracts with customers by component, netcustomer type and geographic region for each segment, as management believes it best depicts how the nature, amount, timing and uncertainty of tax, for the second quarterits revenue and six months ended July 3, 2022 and July 4, 2021cash flows are affected by economic factors.
Second Quarter Ended
July 2, 2023
Second Quarter Ended
July 2, 2023
Customer TypeGeographic Region (c)
(in millions)U.S. Govt. (a)Other (b)TotalUnited StatesEuropeAsiaAll otherTotal
Net sales:
Digital Imaging$131.3 $662.0 $793.3 $356.4 $207.3 $152.4 $77.2 $793.3 
Instrumentation21.3 307.1 328.4 139.4 95.2 64.6 29.2 328.4 
Aerospace and Defense Electronics61.0 125.0 186.0 126.0 36.2 15.5 8.3 186.0 
Engineered Systems103.2 13.8 117.0 114.4 — 0.4 2.2 117.0 
Total$316.8 $1,107.9 $1,424.7 $736.2 $338.7 $232.9 $116.9 $1,424.7 
(a) U.S. Government sales include sales as follows (in millions):
Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance as of April 3, 2022$(161.6)$3.1 $(293.4)$(451.9)
   Other comprehensive income (loss) before reclassifications(154.8)9.4 — (145.4)
   Amounts reclassified from AOCI— (11.7)4.0 (7.7)
Net other comprehensive income (loss)(154.8)(2.3)4.0 (153.1)
Balance as of July 3, 2022$(316.4)$0.8 $(289.4)$(605.0)
Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance as of April 4, 2021$(83.6)$2.2 $(343.5)$(424.9)
   Other comprehensive income before reclassifications3.2 2.2 — 5.4 
   Amounts reclassified from AOCI— (1.7)4.5 2.8 
Net other comprehensive income3.2 0.5 4.5 8.2 
Balance as of July 4, 2021$(80.4)$2.7 $(339.0)$(416.7)
a prime contractor or subcontractor.
(b) Primarily commercial sales
(c) Geographic region by destination
Six Months Ended
July 2, 2023
Six Months Ended
July 2, 2023
Customer TypeGeographic Region (c)
(in millions)U.S. Govt. (a)Other (b)TotalUnited StatesEuropeAsiaAll otherTotal
Net sales:
Digital Imaging$261.6 $1,304.2 $1,565.8 $690.8 $404.6 $310.8 $159.6 $1,565.8 
Instrumentation44.3 617.6 661.9 277.4 192.4 132.1 60.0 661.9 
Aerospace and Defense Electronics125.7 233.5 359.2 246.1 65.7 32.5 14.9 359.2 
Engineered Systems196.5 24.6 221.1 217.7 — 0.6 2.8 221.1 
Total$628.1 $2,179.9 $2,808.0 $1,432.0 $662.7 $476.0 $237.3 $2,808.0 
(a) U.S. Government sales include sales as a prime contractor or subcontractor.
(b) Primarily commercial sales
(c) Geographic region by destination
9

9

Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance as of January 2, 2022$(129.0)$(3.4)$(297.6)$(430.0)
   Other comprehensive income (loss) before reclassifications(187.4)20.7 — (166.7)
   Amounts reclassified from AOCI— (16.5)8.2 (8.3)
Net other comprehensive income (loss)(187.4)4.2 8.2 (175.0)
Balance as of July 3, 2022$(316.4)$0.8 $(289.4)$(605.0)
Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance as of January 3, 2021$(84.6)$2.3 $(347.8)$(430.1)
   Other comprehensive income before reclassifications4.2 11.7 — 15.9 
   Amounts reclassified from AOCI— (11.3)8.8 (2.5)
Net other comprehensive income4.2 0.4 8.8 13.4 
Balance as of July 4, 2021$(80.4)$2.7 $(339.0)$(416.7)
Second Quarter Ended
July 3, 2022
Second Quarter Ended
July 3, 2022
Customer TypeGeographic Region (c)
(in millions)U.S. Govt. (a)Other (b)TotalUnited StatesEuropeAsiaAll otherTotal
Net sales:
Digital Imaging$165.6 $610.2 $775.8 $348.3 $183.3 $163.7 $80.5 $775.8 
Instrumentation27.2 285.3 312.5 134.4 74.5 74.1 29.5 312.5 
Aerospace and Defense Electronics61.6 107.2 168.8 127.4 23.0 13.1 5.3 168.8 
Engineered Systems88.9 9.8 98.7 97.9 — 0.4 0.4 98.7 
Total$343.3 $1,012.5 $1,355.8 $708.0 $280.8 $251.3 $115.7 $1,355.8 
(a) U.S. Government sale include sales as a prime contractor or subcontractor.
(b) Primarily commercial sales
(c) Geographic region by destination

Six Months Ended
July 3, 2022
Six Months Ended
July 3, 2022
Customer TypeGeographic Region (c)
(in millions)U.S. Govt. (a)Other (b)TotalUnited StatesEuropeAsiaAll otherTotal
Net sales:
Digital Imaging$307.1 $1,219.2 $1,526.3 $685.5 $367.1 $313.3 $160.4 $1,526.3 
Instrumentation49.6 571.8 621.4 267.8 155.4 139.7 58.5 621.4 
Aerospace and Defense Electronics121.5 213.5 335.0 251.3 45.6 27.3 10.8 335.0 
Engineered Systems175.3 18.8 194.1 192.9 — 0.6 0.6 194.1 
Total$653.5 $2,023.3 $2,676.8 $1,397.5 $568.1 $480.9 $230.3 $2,676.8 
(a) U.S. Government sale include sales as a prime contractor or subcontractor.
(b) Primarily commercial sales
(c) Geographic region by destination

With the exception of the Engineered Systems segment, net sales in each segment is primarily derived from fixed price contracts. Net sales in the Engineered Systems segment is typically between 45% and 55% fixed price contracts in a given reporting period, with the balance of net sales derived from cost-reimbursable type contracts. For the six months ended July 2, 2023, approximately 53% of net sales in the Engineered Systems segment were derived from fixed price contracts.
Contract Liabilities
Balance at
Contract Liabilities by Balance Sheet Location (in millions)July 2, 2023January 1, 2023
Accrued liabilities$216.7 $187.6 
Other long-term liabilities20.9 20.2 
Total contract liabilities$237.6 $207.8 
The reclassifications outCompany recognized revenue of AOCI$114.0 million during the six months ended July 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 July 2, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,236.5 million. The Company expects approximately 83% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 17% recognized thereafter.
Changes in Contract Estimates at Completion
For over time contracts using the cost-to-cost method, the Company has an Estimate at Completion (“EAC”) process in which management reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue, determining reasonably dependable cost estimates, and making assumptions for schedule and technical issues. The majority of revenue recognized over time uses an EAC process. Since certain contracts extend over a long period of time, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings through a cumulative catch-up basis. This method recognizes, in the
10


current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly.
The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first six months of 2023 was $0.5 million of unfavorable operating income and in the first six months of 2022 was $17.4 million favorable operating income, with the first six months of 2022 primarily related to favorable changes in estimates that impacted revenue within our Digital Imaging operating segment. None of the effects of changes in estimates on any individual contract were material to the consolidated statements of income (loss) for any period presented.
Note 5. Goodwill and Intangible Assets
Goodwill
The carrying value of goodwill by segment was as follows (in millions):

Digital Imaging InstrumentationAerospace and Defense ElectronicsEngineered SystemsTotal
Balance at January 1, 2023$6,780.4 $913.2 $161.8 $17.6 $7,873.0 
Current year acquisitions49.4 — — — 49.4 
Foreign currency changes and other13.4 6.5 1.5 — 21.4 
Balance at July 2, 2023$6,843.2 $919.7 $163.3 $17.6 $7,943.8 
Acquired intangible assets
(in millions):
July 2, 2023January 1, 2023
Gross carrying amountAccumulated amortizationNet carrying amountGross carrying amountAccumulated amortizationNet carrying amount
Proprietary technology$1,664.7 $576.3 $1,088.4 $1,667.7 $497.4 $1,170.3 
Customer list/relationships605.4 198.6 406.8 596.1 177.0 419.1 
Patents0.6 0.6 — 0.6 0.6 — 
Non-compete agreements0.9 0.9 — 0.9 0.9 — 
Trademarks9.9 5.1 4.8 7.1 4.4 2.7 
Backlog16.4 16.2 0.2 16.1 15.8 0.3 
Total intangibles subject to amortization2,297.9 797.7 1,500.2 2,288.5 696.1 1,592.4 
Intangibles not subject to amortization:
Trademarks849.5 — 849.5 848.2 — 848.2 
Total acquired intangible assets$3,147.4 $797.7 $2,349.7 $3,136.7 $696.1 $2,440.6 
An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. 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 fourth quarter of 2023.
Note 6. Supplemental Balance Sheet Information
Cash Equivalents
The Company had $47.1 million and $167.1 million of cash equivalents at July 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 $9.6 million at July 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
11


method. Inventory balances are summarized as follows (in millions):
Balance at
July 2, 2023January 1, 2023
Raw materials and supplies$600.2 $563.7 
Work in process180.3 156.8 
Finished goods190.1 170.2 
Total inventories, net$970.6 $890.7 
Product Warranty Costs
Some of the Company’s products are subject to specified warranties, and the Company provides for the estimated cost of product warranties. The adequacy of the warranty reserve is assessed regularly, and the reserve is adjusted as necessary based on a review of historic warranty experience with respect to the applicable business or products, as well as the length and actual terms of the warranties. The warranty reserve is included in current accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.
 Six Months
Warranty Reserve (in millions):20232022
Balance at beginning of year$50.3 $49.5 
Product warranty expense8.2 4.0 
Deductions(7.5)(5.7)
Balance at end of period$51.0 $47.8 
Note 7. Long-Term Debt
Balance at
Long-Term Debt (in millions):July 2, 2023January 1, 2023
$1.15 billion credit facility due March 2026, weighted average variable rate of 5.76% at July 2, 2023 and 5.46% at January 1, 2023$— $125.0 
0.65% Fixed Rate Senior Notes due April 2023— 300.0 
0.95% Fixed Rate Senior Notes due April 2024450.0 450.0 
Term loan due October 2024, variable rate of 6.45% at July 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 6.45% at July 2, 2023 and 5.61% at January 1, 2023110.0 245.0 
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 20311,030.0 1,040.0 
Other debt2.0 2.1 
Debt discount and debt issuance costs(23.7)(26.5)
Total debt, net3,353.3 3,920.6 
Less: current portion of long-term debt(450.1)(300.1)
Total long-term debt, net of current portion$2,903.2 $3,620.5 
During the first six months of 2023, the Company repaid $125.0 million of amounts outstanding on its credit facility, the $300.0 million Fixed Rate Senior Notes due April 2023, and $135.0 million on its term loan due May 2026. The Company also repurchased and retired $10.0 million of its Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt. Subsequent to the end of the second quarter, the Company repaid $50.0 million on its term loan due May 2026, which reduced the remaining balance to $60.0 million.
At July 2, 2023, $1,131.1 million was available under the $1.15 billion credit facility, after a reduction of $18.9 million in outstanding letters of credit. Our bank credit agreements require Teledyne to comply with various financial and operating covenants and at July 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 July 2, 2023 and January 1, 2023, the aggregate fair values of our borrowings were $2,971.5 million and $3,492.7 million, respectively, and the carrying values were $3,377.0 million and $3,947.1 million, respectively.

12


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 effective income tax rate for the second quarter and first six months ended July 3, 2022of 2023 was 21.0% and July 4, 2021 are as follows (in millions):
Amount Reclassified from AOCI for the Three Months EndedAmount Reclassified from AOCI for the Three Months EndedStatement of Income
July 3, 2022July 4, 2021Presentation
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives$(15.6)$(2.2)See Note 4
Income tax impact3.9 0.5 Provision for income taxes
Total$(11.7)$(1.7)
Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost$(0.4)$(0.9)Costs and expenses
Amortization of net actuarial loss5.7 6.8 Costs and expenses
Total before tax5.3 5.9 
Income tax impact(1.3)(1.4)Provision for income taxes
Total$4.0 $4.5 

Amount Reclassified from AOCI for the Six Months EndedAmount Reclassified from AOCI for the Six EndedStatement of Income
July 3, 2022July 4, 2021Presentation
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives$(22.0)$(15.1)See Note 4
Income tax impact5.5 3.8 Provision for income taxes
Total$(16.5)$(11.3)
Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost(0.8)(1.8)Costs and expenses
Amortization of net actuarial loss11.6 13.4 Costs and expenses
Total before tax10.8 11.6 
Income tax impact$(2.6)$(2.8)Provision for income taxes
Total$8.2 $8.8 

10
Table of Contents
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 U.S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenues and expenses denominated in Canadian dollars for our Canadian companies, and in British pounds for our UK companies. These contracts are designated and qualify as cash flow hedges. The Company has also converted U.S. dollar denominated, variable20.6%, respectively, compared with an effective income tax rate and fixed rate obligations into euro fixed rate obligations using a receive float, pay fixed cross currency swap, and a receive fixed, pay fixed cross currency swap. These cross currency swaps are designated as cash flow hedges. In addition the Company has converted domestic U.S. variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap. The interest rate swap is also designated as a cash flow hedge. During the second quarter ended July 3, 2022, the Company liquidated its cross currency swap positions and replaced them with cross currency swaps reflecting current market terms. The liquidations resulted in a cash benefit of $18.3 million, which was recorded in cash flow from financing activities in the condensed consolidated statement of cash flows.
The effectiveness of the cash flow hedge forward contracts is assessed prospectively and retrospectively 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 inception of the hedges, and hedges 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 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 condensed consolidated statements of income, at which time the effective amount in AOCI is reclassified to revenue in our condensed consolidated statements of income. Net deferred gains recorded in AOCI, net of tax, for the forward contracts that will mature in the next twelve months total $1.6 million. These gains are expected to be offset by anticipated losses in the value of the forecasted underlying hedged item. Amounts related to the cross currency swaps and interest rate swap expected to be reclassified from AOCI into income in the next twelve months total $5.7 million.
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 or 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 July 3, 2022, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling $182.8 million. These foreign currency forward contracts have maturities ranging from September 2022 to February 2024. Teledyne had foreign currency forward contracts designated as cash flow hedges to buy British pounds and to sell U.S. dollars totaling $18.1 million. These foreign currency forward contracts have maturities ranging from September 2022 to August 2023. The cross currency swaps have notional amounts of €118.9 million and $125.0 million, and €142.6 million and $150.0 million, and mature in March 2023 and October 2024, respectively. The interest rate swap has a notional amount of $125.0 million and matures in March 2023.
In addition, Teledyne manages the risk of changes in the fair value of certain monetary liabilities attributable to changes in exchange rates. Teledyne manages these risks by using currency forward contracts formally designated and effective as fair value hedges. Hedge effectiveness is generally determined by evaluating the alignment of the hedging instrument's critical terms with the critical terms of the hedged item. The forward points attributable to the hedging instruments are excluded from the assessment of effectiveness and amortized to other income or expense, net using a systematic and rational methodology. Differences between the change in the fair value of the excluded component and amounts recognized under the systematic and rational method are recognized in other comprehensive income (loss). The change in fair value of the hedging instruments attributable to the hedged risk is reported in the other income or expense, net. The change in fair value of the hedged item attributable to the hedged risk is reported as an adjustment to its carrying value and also in other income or expense, net. At July 3, 2022 Teledyne had no forward contracts designated as fair value hedges.
11
Table of Contents
The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the second quarter and first six months ended July 3,of 2022 of 22.7% and July 4, 2021 was as follows (in millions):
 Second QuarterSix Months
 2022202120222021
Net gain recognized in AOCI - Foreign Exchange Contracts (a)$12.2 $0.2 $25.9 $12.7 
Net gain (loss) reclassified from AOCI into revenue - Foreign Exchange Contracts (a)$(0.2)$— $(0.4)$— 
Net gain (loss) reclassified from AOCI into COS - Foreign Exchange Contracts (a)$— $3.6 $— $6.0 
Net gain (loss) recognized in AOCI - Interest Rate Contracts$0.6 $(0.1)2.0 $— 
Net gain (loss) reclassified from AOCI into other income and expense, net - Foreign Exchange Contracts (b)$14.9 $(1.8)$21.1 $8.2 
Net gain reclassified from AOCI into interest expense - Foreign Exchange Contracts$1.1 $0.9 $1.9 $1.7 
Net gain (loss) reclassified from AOCI into interest expense - Interest Rate Contracts$(0.2)$(0.4)$(0.6)$(0.8)
(a)    Effective portion, pre-tax
(b)     Amount reclassified to offset earnings impact9.6%, respectively. The second quarter and first six months of liability hedged by cross currency swap
Non-Designated Hedging Activities
In addition, the Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated2023 includes net discrete income tax benefits of $1.4 million and $8.0 million, respectively, compared with foreign currency denominated monetary assetsnet discrete income tax benefits of $1.0 million and liabilities, including intercompany receivables and payables. As of July 3, 2022, Teledyne had non-designated foreign currency contracts of this type, primarily in the following pairs (in millions):
Contracts to BuyContracts to Sell
CurrencyAmountCurrencyAmount
Canadian Dollars$169.2 U.S. DollarsUS$134.3 
Great Britain Pounds£109.8 U.S. DollarsUS$137.8 
Euros€150.6 U.S. DollarsUS$162.3 
Danish KroneDKR441.7 U.S. DollarsUS$64.0 
Swedish KronaSEK511.7 Euros€48.7 
Norwegian Kronekr222.6 Swedish KronaSEK231.0 
The preceding 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$57.5 million for the second quarter and first six months ended July 3,of 2022, was expenserespectively. The second quarter and first six months of $25.62023 net discrete tax benefits include $1.3 million and $30.4$7.2 million, respectively. The effectrespectively, related to stock-based accounting compared with $1.8 million and $8.5 million, of derivative instruments not designated as cash flow hedges in other income and expensenet discrete tax benefits related to stock-based accounting for the second quarter and first six months ended July 4, 2021 wasof 2022, respectively. The second quarter and first six months of 2023 also includes net discrete income tax expense of $4.6$0.4 million and $0.7 million, respectively, primarily related to changes in acquisition-related tax reserves. The second quarter and first six months of 2022 also includes net discrete income tax expense of $4.8$0.6 million respectively.and net discrete income tax benefits of $49.4 million primarily related to the resolution of certain FLIR tax reserves. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 21.6% and 22.3% for the second quarter and first six months of 2023, respectively, and 23.1% for both the second quarter and first six months of 2022.
Note 9. Pension Plans
 Second QuarterSix Months
2023202220232022
Service cost — benefits earned during the period (in millions)$1.5 $2.1 $3.0 $4.3 
Pension non-service cost (income) (in millions):
Interest cost on benefit obligation$8.4 $5.9 $16.8 $11.8 
Expected return on plan assets(13.5)(14.1)(27.1)(28.1)
Amortization of net prior service cost(0.4)(0.4)(0.9)(0.9)
Amortization of net actuarial loss2.6 5.7 5.0 11.5 
Pension non-service cost (income)$(2.9)$(2.9)$(6.2)$(5.7)
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 income orCompany also has non-employee 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 largely offset by losses or gains in the value of the underlying hedged item excluding the impact of forward points.
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$8.4 million and standard valuation techniques to convert future amounts to a single present amount. Level 2 inputs$16.3 million for the valuations are limited to quoted prices for similar assets or liabilities in active marketssecond quarter and inputs other than quoted prices that are observablefirst six months of 2023, respectively, and $6.4 million and $15.4 million for the asset or liability (specifically SOFRsecond quarter and EURIBOR cashfirst six months of 2022, respectively.
Stock option activity for the second quarter and swap rates, foreign currency forward rates and cross currency basis spreads). Mid-market pricingfirst six months of 2023 is used as a practical expedient for fair value measurements. The fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s creditworthiness when in an asset position and the Company’s creditworthiness when in a liability position has also been factored into the fair value measurement of the derivative instruments and did not have a material impact on the fair value of these derivative instruments. Both the counterparty and the Company are expected to continue to perform under the contractual terms of the instruments.follows:
 Second QuarterSix Months
 SharesWeighted Average Exercise PriceSharesWeighted Average
Exercise Price
Beginning balance1,622,944$229.37 1,726,731$223.43 
Exercised(31,555)$152.28 (127,303)$117.85 
Canceled(3,734)$316.54 (11,773)$383.96 
Ending balance1,587,655$230.70 1,587,655$230.70 
Exercisable at end of period1,333,599$198.75 1,333,599 $198.75 
1213

The fair valuesRestricted stock activity for the first six months of the Company’s derivative financial instruments are presented below. All fair values for these derivatives were measured using Level 2 information2023 is as defined by the accounting standard hierarchy (in millions):follows:
Asset/(Liability) DerivativesBalance sheet locationJuly 3, 2022January 2, 2022
Derivatives designated as hedging instruments:
Cash flow forward contractsOther current assets$— $0.3 
Cash flow forward contractsAccrued liabilities(2.7)(1.2)
Cash flow cross currency swapOther current assets4.4 3.8 
Cash flow cross currency swapOther non-current liabilities— (9.4)
Cash flow cross currency swapOther current assets (accrued interest)0.1 0.1 
Interest rate contractsOther long-term liabilities— (0.1)
Interest rate contractsOther current liabilities— (1.2)
Interest rate contractsOther current assets1.2 — 
Total derivatives designated as hedging instruments3.0 (7.7)
Derivatives not designated as hedging instruments:
Non-designated forward contractsOther current assets2.1 4.7 
Non-designated forward contractsAccrued liabilities(15.2)(2.1)
Total derivatives not designated as hedging instruments(13.1)2.6 
Total derivatives, net$(10.1)$(5.1)
SharesWeighted average fair value per share
Balance at January 1, 2023166,395 $368.62 
Granted19,763 $370.82 
Vested(24,435)$394.33 
Forfeited/Canceled(5,313)$356.97 
Balance at July 2, 2023156,410 $363.52 
Note 5.11. Earnings Per Share
For the second quarter and first six months of 2022, 198,260 and 195,415 stock options, respectively, were excluded in the computation of diluted earnings per share because the effect of their inclusion would have been anti-dilutive. For the second quarter of and first six months of 2021, no stock options were excluded in the computation of earnings per share. As part of the consideration transferred for the acquisition of FLIR, the Company issued approximately 9.5 million shares of common stock on May 14, 2021. The weighted average number of common shares used in the calculation of basic and diluted earnings per share consisted of the following (in millions):
Second QuarterSix Months Second QuarterSix Months
20222021202220212023202220232022
Weighted average basic common shares outstandingWeighted average basic common shares outstanding46.8 42.5 46.8 39.7 Weighted average basic common shares outstanding47.0 46.8 47.0 46.8 
Effect of dilutive securities (primarily stock options)Effect of dilutive securities (primarily stock options)0.9 1.1 0.9 1.1 Effect of dilutive securities (primarily stock options)0.9 0.9 0.9 0.9 
Weighted average diluted common shares outstandingWeighted average diluted common shares outstanding47.7 43.6 47.7 40.8 Weighted average diluted common shares outstanding47.9 47.7 47.9 47.7 


Note 6. Stock-Based Compensation Plans
Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options, restricted stock and performance shares to certain employees. Performance shares are not significant. The Company also has non-employee Board of Director stock compensation plans, pursuant to which common stock, stock options and restricted stock units have been issued to its directors.

13
Table of Contents
Stock Incentive Plan
Stock option compensation expense was $3.6 million for both the second quarter of 2022 and the second quarter of 2021. Stock option compensation expense was $7.9 million for first six months of 2022 and $7.8 million for the first six months of 2021. The Company issues shares of common stock upon the exercise of stock options.
Stock option transactions forFor the second quarter and first six months of 2023 and 2022, are summarized as follows:
 2022
 Second QuarterSix Months
 SharesWeighted
Average
Exercise
Price		SharesWeighted
Average
Exercise
Price
Beginning balance1,690,872$209.55 1,793,857$206.08 
Exercised(32,876)$148.62 (129,458)$135.52 
Canceled(8,111)$362.37 (14,514)$388.59 
Ending balance1,649,885$210.01 1,649,885$210.01 
Exercisable at end of period1,381,273$168.06 1,381,273 $168.06 
Restricted Stock
The following table shows the restrictedCompany excluded approximately 0.2 million of stock activity foroptions in the first six monthscomputation of 2022:
SharesWeighted average fair value per share
Balance, January 2, 2022 (a)87,180 $352.94 
Granted19,492 $384.76 
Vested(33,739)$300.66 
Forfeited/Canceled(2,897)$401.91 
Balance, July 3, 202270,036 $384.96 
(a) includes restricted stock units issued on May 14, 2021 in connection withdiluted earnings per share because the FLIR acquisition.

effect of their inclusion would have been anti-dilutive.
Note 7. Inventories12. Accumulated Other Comprehensive Income (Loss)
Inventories are stated at current cost,The changes in accumulated other comprehensive income (loss) ("AOCI") by component, 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.
Balance at
Inventories (in millions):July 3, 2022January 2, 2022
Raw materials and supplies$538.6 $479.8 
Work in process140.4 123.0 
Finished goods142.5 150.1 
Total inventories, net$821.5 $752.9 
Note 8. Customer Contracts
Estimate at Completion Process
For over time contracts using the cost-to-cost method, we have 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 and cost, and making assumptions for schedule and technical issues. Since certain contracts extend over multiple reporting periods, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings through a cumulative catch-up basis. This method recognizes, in the current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are reviewed and reassessed quarterly. The majority of revenue recognized over time uses an EAC process. The net aggregate effects of changes in estimates on contracts accounted for under the cost-to-cost method in the first six months of 2022 was approximately $17.4 million of favorable operating income, primarily related to favorable changes in estimates that impacted revenue within the Digital Imaging segment. The net aggregate effects of changes in estimates on contracts accounted for under the cost-to-cost method in the first six months of 2021 was approximately $11.4 million of favorable operating income, primarily related to favorable changes in estimates that impacted revenue within the Digital Imaging operating segment. 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.
14
Table of Contents
Contract Liabilities
We recognize a liability for interim and advance payments in excess of revenue recognized and present it as a contract liability which is included within accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet, which represented $171.3 million and $21.8 million as of July 3, 2022, and $186.0 million and $25.3 million as of January 2, 2022, respectively.
The Company recognized revenue of $91.8 million during the six months ended July 3, 2022 from contract liabilities that existed at the beginning of year. The Company recognizes the incremental costs of obtaining or fulfilling a contract as expense when incurred if the amortization period of the asset is one year or less. Incremental costs to obtain or fulfill contracts with an amortization period greater than one year were not material.
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 excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of July 3, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,075.7 million. The Company expects approximately 74% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 26% recognized thereafter.
Product Warranty Costs
Some of the Company’s products are subject to specified warranties, and the Company provides for the estimated cost of product warranties. The adequacy of the warranty reserve is assessed regularly, and the reserve is adjusted as necessary based on a review of historic warranty experience with respect to the applicable business or products, as well as the length and actual terms of the warranties. The warranty reserve is included in current and long-term accrued liabilities on the Condensed Consolidated Balance Sheet.
 Six Months
Warranty Reserve (in millions):20222021
Balance at beginning of year$49.5 $22.4 
Product warranty expense4.0 5.7 
Deductions(5.7)18.3 
Balance at end of period$47.8 $46.4 
Accounts Receivable, net
Accounts receivable is presented net of an allowance for doubtful accounts of $9.8 million at July 3, 2022 and $13.8 million at January 2, 2022.
Note 9. Income Taxes
The income tax, provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which the Company operates. However, losses in certain jurisdictions and discrete items, such as the resolution of uncertain tax positions, are treated separately.
The Company’s effective income tax rate for the second quarter and first six months ended July 2, 2023 and July 3, 2022 are as follows (in millions):
Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance at April 2, 2023$(476.6)$3.8 $(254.0)$(726.8)
   Other comprehensive income (loss) before reclassifications12.3 3.0 — 15.3 
   Amounts reclassified from AOCI— (1.4)0.9 (0.5)
Net other comprehensive income (loss)12.3 1.6 0.9 14.8 
Balance at July 2, 2023$(464.3)$5.4 $(253.1)$(712.0)
Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance at April 3, 2022$(161.6)$3.1 $(293.4)$(451.9)
   Other comprehensive income (loss) before reclassifications(154.8)9.4 — (145.4)
   Amounts reclassified from AOCI— (11.7)4.0 (7.7)
Net other comprehensive income (loss)(154.8)(2.3)4.0 (153.1)
Balance at July 3, 2022$(316.4)$0.8 $(289.4)$(605.0)

14


Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance as of January 1, 2023$(472.3)$1.3 $(255.5)$(726.5)
   Other comprehensive income (loss) before reclassifications8.0 12.8 — 20.8 
   Amounts reclassified from AOCI— (8.7)2.4 (6.3)
Net other comprehensive income (loss)8.0 4.1 2.4 14.5 
Balance as of July 2, 2023$(464.3)$5.4 $(253.1)$(712.0)
Foreign Currency TranslationCash Flow Hedges and OtherPension and Postretirement BenefitsTotal
Balance as of January 2, 2022$(129.0)$(3.4)$(297.6)$(430.0)
   Other comprehensive income (loss) before reclassifications(187.4)20.7 — (166.7)
   Amounts reclassified from AOCI— (16.5)8.2 (8.3)
Net other comprehensive income (loss)(187.4)4.2 8.2 (175.0)
Balance as of July 3, 2022$(316.4)$0.8 $(289.4)$(605.0)

The reclassifications out of 2022 was 22.7% and 9.6%, respectively. The Company's effectiveAOCI to net income tax rate for the second quarter and first six months of 2021 was 29.8%ended July 2, 2023 and 22.8%, respectively. The second quarter ofJuly 3, 2022 includes net discrete income tax benefits of $1.0 million compared with net discrete income tax expense of $4.1 million. The first six months of 2022 includes net discrete income tax benefits of $57.5 million compared with net discrete income tax benefits of $2.2 million. The second quarter and first six months of 2022 net discrete income tax amounts include $1.8 million and $8.5 million, respectively, related to share-based accounting. The second quarter and first six months of 2022 also includes non-cash income tax expense of $0.6 million and non-cash income tax benefits of $49.4 million primarily related to the resolution of certain FLIR tax reserves. The second quarter and first six months of 2021 net discrete income tax amounts include $2.1 million and $6.9 million, respectively, related to share-based accounting. The second quarter and six months of 2021 net discrete income tax amounts also include $11.5 million expense related to foreign tax rate changes and a $5.3 million income tax benefit related to the release of a valuation allowance. The foreign tax rate changes are a result of the United Kingdom Parliament enacting legislation to increase the corporate tax rate to 25% effective April 2023. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.1% for the second quarter of 2022 and 25.3% for the second quarter of 2021.as follows (in millions):
Amount Reclassified from AOCI for the Quarter EndedAmount Reclassified from AOCI for the Quarter EndedStatement of Income (Loss) Presentation
July 2, 2023July 3, 2022
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives$(1.8)$(15.6)See Note 13
Income tax impact0.4 3.9 Provision for income taxes
Total$(1.4)$(11.7)
Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost$(0.4)$(0.4)Costs and expenses
Amortization of net actuarial loss1.8 5.7 Costs and expenses
Total before tax1.4 5.3 
Income tax impact(0.5)(1.3)Provision for income taxes
Total$0.9 $4.0 
See Note 2 to these Notes to Condensed Consolidated Financial Statements for information regarding FLIR historical tax matters that existed at the date of the acquisition, including the STA’s reassessment of tax for the year ending December 31, 2012 related to one of FLIR’s non-operating subsidiaries in Sweden.
Amount Reclassified from AOCI for the Six Months EndedAmount Reclassified from AOCI for the Six Months EndedStatement of Income (Loss) Presentation
July 2, 2023July 3, 2022
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives$(11.6)$(22.0)See Note 13
Income tax impact2.9 5.5 Provision for income taxes
Total$(8.7)$(16.5)
Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost(0.9)(0.8)Costs and expenses
Amortization of net actuarial loss4.3 11.6 Costs and expenses
Total before tax3.4 10.8 
Income tax impact$(1.0)$(2.6)Provision for income taxes
Total$2.4 $8.2 
15

Table of Contents
Note 10. Long-Term Debt13. Derivative Instruments and Letters of Credit
Balance at
Long-Term Debt (in millions):July 3, 2022January 2, 2022
$1.15 billion credit facility due March 2026, weighted average variable rate of 2.71% at July 3, 2022 and 1.20% at January 2, 2022$125.0 $125.0 
Term loan due October 2024, variable rate of 2.92% at July 3, 2022 and 1.35% at January 2, 2022, swapped to a Euro fixed rate of 0.6120%149.3 150.6 
0.65% Fixed Rate Senior Notes due April 2023300.0 300.0 
0.95% Fixed Rate Senior Notes due April 2024450.0 450.0 
1.60% Fixed Rate Senior Notes due April 2026450.0 450.0 
2.25% Fixed Rate Senior Notes due April 2028700.0 700.0 
2.50% Fixed Rate Senior Notes due August 2030485.0 500.0 
2.75% Fixed Rate Senior Notes due April 20311,040.0 1,100.0 
Term loan due May 2026, variable rate of 2.86% at July 3, 2022 and 1.35% at January 2, 2022275.0 355.0 
Other debt0.7 0.7 
Debt discount and debt issuance costs(29.3)(31.9)
Total debt, net3,945.7 4,099.4 
Less: current portion of long-term debt(300.0)— 
Total long-term debt, net of current portion$3,645.7 $4,099.4 

Hedging Activities
The Company repaid $187.0 million of debt during the second quarter of 2022, including making $112.0 million of floating rate debt payments which reduced its term loan due May 2026 by $80.0 millionCompany's primary exposure to market risk relates to changes in foreign currency exchange rates and reduced its outstanding credit facility balance by $32.0 million. In addition, during the second quarter of 2022, Teledyne repurchased and retired $75.0 million of its Fixed Rate Senior Notes due August 2030 and April 2031, recording a $10.6 million non-cash gain on the extinguishment of this debt.
At July 3, 2022, $1,004.0 million was available under the $1.15 billion credit facility, after reductions of $125.0 million in borrowings and $21.0 million in outstanding letters of credit. Our credit agreements require Teledyne to comply with various financial and operating covenants and at July 3, 2022, 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 debtprimary foreign currency risk management objective is considered a levelto 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 July 2, 2023, the Company had foreign currency forward contracts to buy Canadian dollars and to sell U.S. dollars totaling $100.0 million. These foreign currency forward contracts have maturities ranging from September 2023 to February 2025. As of July 2, 2023, the Company had foreign currency forward contracts to buy British pounds and to sell U.S. dollars totaling $7.8 million. These foreign currency forward contracts have maturities ranging from September 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 July 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.
All derivative instruments are recorded on the condensed consolidated balance sheets at fair value. The accounting for gains and losses resulting from changes in fair value hierarchydepends on the use of the derivative instrument and whether it is valued baseddesignated and qualifies for hedge accounting.
Designated Hedging Activities
For a derivative instrument designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on observable market data. Asthe 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 July 3, 2022 and January 2, 2022,derivative instruments designated as cash flow hedges in the aggregate fair values of our borrowings were $3,577.0 million and $4,146.6 million, respectively, and the carrying values were $3,975.0 million and $4,130.0 million, respectively.
Note 11. Leases
Operating lease expense was $9.4 million and $19.0 millioncondensed consolidated financial statements for the second quarter and first six months ended July 2, 2023 and July 3, 2022 was as follows (in millions):
 Second QuarterSix Months
 2023202220232022
Net gain (loss) recognized in AOCI - Foreign Exchange Contracts (a)$3.1 $12.2 $16.8 $25.9 
Net gain (loss) reclassified from AOCI into revenue - Foreign Exchange Contracts (a)$(1.8)$(0.2)$(3.7)$(0.4)
Net gain (loss) recognized in AOCI - Interest Rate Contracts$— $0.6 — $2.0 
Net gain (loss) reclassified from AOCI into other income and expense, net - Foreign Exchange Contracts (b)$0.6 $14.9 $10.7 $21.1 
Net gain (loss) reclassified from AOCI into interest expense - Foreign Exchange Contracts$2.2 $1.1 $3.7 $1.9 
Net gain (loss) reclassified from AOCI into interest expense - Interest Rate Contracts$— $(0.2)$0.6 $(0.6)
(a)    Effective portion, pre-tax
(b)     Amount reclassified to offset earnings impact of 2022. Operating leaseliability hedged by cross currency swap
Net deferred losses recorded in AOCI for the forward contracts that will mature in the next twelve months total $0.5 million, net of taxes. These losses are expected to be offset by anticipated gains in the value of the forecasted underlying hedged item.
16

Table of Contents
Amounts related to the cross currency swap expected to be reclassified from AOCI into income in the next twelve months total $7.8 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 July 2, 2023, the Company had 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$257.0 U.S. DollarsUS$192.1 
Canadian Dollars$7.7 Euros€5.3 
Great Britain Pounds£29.7 U.S. DollarsUS$37.1 
Euros€56.7 U.S. DollarsUS$61.4 
Danish KroneDKR93.0 U.S. DollarsUS$13.5 
Swedish KronaSEK158.8 Euros€13.6 
Norwegian Kronekr64.7 U.S. DollarsUS$6.0 
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 derivative instruments not designated as accounting hedges recognized in other income and expense was $7.9 million and $14.3 million for the second quarter and first six months ended July 2, 2023 was income of 2021.$2.0 million and $9.7 million, respectively. The effect of derivative instruments not designated as accounting hedges in other income and expense for the second quarter and six months ended July 3, 2022 was expense of $25.6 million and $30.4 million, respectively. The income or expense was largely offset by losses or gains in the value of the underlying hedged item excluding the impact of forward points.
Fair Value of Derivative Financial Instruments
The fair values of the Company’s derivative instruments are presented 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 locationJuly 2, 2023January 1, 2023
Derivatives designated as hedging instruments:
Cash flow forward contractsOther current assets$2.3 $0.4 
Cash flow forward contractsAccrued liabilities(1.8)(6.8)
Interest rate contractsOther current assets— 0.7 
Cash flow cross currency swapOther current assets3.1 2.7 
Cash flow cross currency swapAccrued liabilities— (14.0)
Cash flow cross currency swapOther long-term liabilities(21.2)(18.3)
Total derivatives designated as hedging instruments(17.6)(35.3)
Derivatives not designated as hedging instruments:
Non-designated forward contractsOther current assets5.0 3.5 
Non-designated forward contractsAccrued liabilities(1.9)(7.0)
Total derivatives not designated as hedging instruments3.1 (3.5)
Total derivative instruments, net$(14.5)$(38.8)
Note 12. Lawsuits, Claims,14. Commitments Contingencies and Related MattersContingencies
For a further descriptionTrade 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 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 Company’s commitmentstrade compliance program, adverse disclosures and contingencies, reference isfindings could cause additional expenses in connection with further remedial measures or potential penalties.
17

Table of Contents
The Company has made other voluntary disclosures to Note 14the U.S. Department of State and the U.S. Department of Commerce, including to the Bureau of Industry and Security (“BIS”) with respect to Teledyne FLIR shipments of products from non-U.S. jurisdictions which were not licensed due to incorrect de minimis calculation methodology under the Export Administration Regulations. The Company has also made voluntary disclosures to export authorities in jurisdictions outside the U.S. for certain potential violations of local export laws. At this time, based on available information, we are unable to reasonably estimate the time it may take to resolve these matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with these matters. However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial statements asposition, results of operations or cash flows in and forfollowing the fiscal year ended January 2, 2022, includedperiod in the 2021 Form 10-K.which such outcome becomes estimable or known.
Environmental Remediation Obligations
At July 3, 2022,2, 2023, the Company’s reserves for environmental remediation obligations totaled $6.1$5.6 million, of which $1.6$1.4 million is included in current accrued liabilities. At January 2, 2022,1, 2023, the Company’s reserves for environmental remediation obligations totaled $6.3$5.8 million. The Company 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.
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., on April 24, 2018, to resolve allegations regarding the unauthorized export of technical data and defense services to dual and third country nationals in certain of FLIR’s facilities, the failure to properly use and manage export licenses and export authorizations, and failures to report certain payments under 22 CFR Part 130 in potential violation of the International Traffic in Arms Regulations (“ITAR”). On April 13, 2022, Teledyne paid $3.5 million as the final installment of the civil penalty under the Consent
16
Table of Contents
Agreement. While FLIR and its successor by mergers, Teledyne FLIR, have enhanced the trade compliance program more broadly, implemented remedial measures and have undergone external audits of the ITAR compliance program, future adverse disclosures and findings could cause incurrence of additional expenses in connection with implementation of remedial measures.
In June 2017, the Bureau of Industry and Security (“BIS”) of the United States Department of Commerce informed FLIR of additional export licensing requirements that restricted the FLIR’s ability to sell certain thermal products without a license to customers in China not identified on a list maintained by the United States Department of Commerce. This action was precipitated by concerns of sale without a license or potential diversion of some of FLIR’s products to prohibited end users and to countries subject to economic and other sanctions implemented by the United States. BIS subsequently favorably modified these restrictions to reduce the applicability of the restrictions to sales of FLIR's Tau camera cores (as opposed to finished products containing Tau camera cores) to customers in China not identified on a list maintained by the United States Department of Commerce and persons in a country other than those in the Export Administration Regulations (“EAR”) Country Group A:5 (Supplement No. 1 to Part 740 of the EAR). FLIR has identified certain shipments that potentially violate these license requirements and voluntary disclosed this matter to BIS. On April 22, 2022, BIS closed this voluntary disclosure with the issuance of a Warning Letter to Teledyne FLIR, LLC.
In April 2021, FLIR resolved allegations of misrepresentations made to BIS, between November 2012 and December 2013, in a commodity jurisdiction request relating to newly developed Lepton uncooled focal plane arrays by an administrative settlement and fine of $0.3 million and agreeing to perform 2 internal audits of its EAR export compliance programs. The first internal audit has been completed and a voluntary disclosure was filed to report potential violations. The second internal audit is to be completed by October 2022.
FLIR and its successor by mergers, Teledyne FLIR, have made other voluntary disclosures to the U.S. Department of State and the U.S. Department of Commerce, including to BIS with respect to the shipments of products by FLIR from non-U.S. jurisdictions which were not licensed due to incorrect de minimis calculation methodology, as well as to other non-U.S. government agencies. If FLIR and now Teledyne FLIR, as its successor by mergers, is found to have violated applicable rules and regulations with respect to customers and limitations on the export and end use of its products or other trade compliance matters, Teledyne could be subject to substantial fines and penalties, suspension of existing licenses or other authorizations and/or loss or suspension of export privileges.
At this time, based on available information, we are unable to reasonably estimate the time it may take to resolve the above-described open matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with these matters. However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations.
Certain adjustments have been made for the FLIR historical export compliance matters in Teledyne’s final estimates of its purchase price allocation, based on the information that was made known during the post-acquisition measurement period.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 litigationsuch matters 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.
18
Note 13. Pension Plans
 Second QuarterSix Months
2022202120222021
Service cost — benefits earned during the period (in millions)$2.1 $2.7 $4.3 $5.4 
Pension non-service income (in millions):
Interest cost on benefit obligation$5.9 $5.6 $11.8 $11.2 
Expected return on plan assets(14.1)(14.2)(28.1)(28.5)
Amortization of net prior service cost(0.4)(0.9)(0.9)(1.7)
Amortization of net actuarial loss5.7 6.6 11.5 13.3 
Pension non-service income$(2.9)$(2.9)$(5.7)$(5.7)
17
Table of Contents
Note 14. Segment Information
Teledyne is a leading provider of sophisticated digital imaging products and software, instrumentation, aerospace and defense electronics, and engineered systems. Our customers include government agencies, aerospace prime contractors, energy exploration and production companies, major industrial companies and airlines. The Company has 4 reportable segments: Digital Imaging; Instrumentation; Aerospace and Defense Electronics; and Engineered Systems.
Segment results include net sales and operating income by segment but exclude non-service retirement benefit income, 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.
On May 14, 2021, the Company completed the acquisition of FLIR. The financial results of FLIR have been included since the date of the acquisition and are part of the Digital Imaging segment. See Note 2 to these Notes to Condensed Consolidated Financial Statements for information regarding the FLIR acquisition.
The following table presents Teledyne’s segment disclosures (dollars in millions):
Second Quarter%Six Months%
20222021Change20222021Change
Net sales(a):
Digital Imaging (b)$775.8 $579.5 33.9 %$1,526.3 $842.8 81.1 %
Instrumentation312.5 291.1 7.4 %621.4 577.6 7.6 %
Aerospace and Defense Electronics168.8 152.4 10.8 %335.0 303.6 10.3 %
Engineered Systems98.7 98.0 0.7 %194.1 202.7 (4.2)%
Total net sales$1,355.8 $1,121.0 20.9 %$2,676.8 $1,926.7 38.9 %
Operating income:
Digital Imaging (b)$117.9 $84.6 39.4 %$233.6 $136.6 71.0 %
Instrumentation73.6 64.6 13.9 %145.2 124.0 17.1 %
Aerospace and Defense Electronics44.1 28.4 55.3 %87.0 56.7 53.4 %
Engineered Systems8.6 11.0 (21.8)%18.0 25.9 (30.5)%
Corporate expense (c)(14.7)(84.2)(82.5)%(30.8)(103.6)(70.3)%
Operating income$229.5 $104.4 119.8 %$453.0 $239.6 89.1 %
(a) Net sales excludes inter-segment sales of $5.1 million and $10.6 million for the second quarter and first six months of 2022, respectively, and $5.1 million and $9.3 million for the second quarter and first six months of 2021, respectively.
(b) On May 14, 2021, the Company completed the acquisition of FLIR, and the financial results of FLIR have been included since the date of the acquisition. The second quarter and first six months of 2022 includes $167.6 million and $620.2 million in incremental net sales from FLIR, respectively.
(c) Corporate expense for the second quarter and first six months of 2021 includes $70.5 million and $76.4 million , respectively, in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition.
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:July 3, 2022January 2, 2022
Digital Imaging$11,308.9 $11,756.8 
Instrumentation1,609.7 1,640.3 
Aerospace and Defense Electronics530.1 536.3 
Engineered Systems190.6 179.2 
Corporate408.2 317.7 
Total identifiable assets$14,047.5 $14,430.3 


18
Table of Contents
Product Lines
The Instrumentation segment includes 3 product lines: Environmental Instrumentation, Marine Instrumentation and Test and Measurement Instrumentation. Teledyne’s other three segments each contain 1 product line.
The following table provides a summary of the net sales by product line for the Instrumentation segment (in millions):
Second QuarterSix Months
Instrumentation2022202120222021
Environmental Instrumentation$115.5 $112.8 $229.5 $227.6 
Marine Instrumentation115.3 104.9 227.2 206.9 
Test and Measurement Instrumentation81.7 73.4 164.7 143.1 
Total$312.5 $291.1 $621.4 $577.6 
We also disaggregate our revenue from contracts with customers by customer type and geographic region for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. With the exception of the Engineered Systems segment, net sales in our segments is primarily derived from fixed price contracts. Net sales in the Engineered Systems segment is typically between 45% and 55% fixed price contracts in a given reporting period, with the balance of net sales derived from cost type contracts. For the six months ended July 3, 2022, approximately 45% of net sales in the Engineered Systems segment were derived from fixed price contracts.
Second Quarter Ended July 3, 2022Six Months Ended July 3, 2022
Customer TypeCustomer Type
(in millions)United States Government (a)Other, Primarily CommercialTotalUnited States Government (a)Other, Primarily CommercialTotal
Net Sales:
Digital Imaging$165.6 $610.2 $775.8 $307.1 $1,219.2 $1,526.3 
Instrumentation27.2 285.3 312.5 49.6 571.8 621.4 
Aerospace and Defense Electronics61.6 107.2 168.8 121.5 213.5 335.0 
Engineered Systems88.9 9.8 98.7 175.3 18.8 194.1 
$343.3 $1,012.5 $1,355.8 $653.5 $2,023.3 $2,676.8 
(a) Includes sales as a prime contractor or subcontractor.

Second Quarter Ended July 3, 2022Six Months Ended July 3, 2022
Geographic Region (a)Geographic Region (a)
(in millions)United StatesEuropeAll otherTotalUnited StatesEuropeAll otherTotal
Net sales:
Digital Imaging$375.7 $204.9 $195.2 $775.8 $736.8 $405.3 $384.2 $1,526.3 
Instrumentation243.9 54.4 14.2 312.5 473.6 111.7 36.1 621.4 
Aerospace and Defense Electronics143.0 25.8 — 168.8 285.2 49.8 — 335.0 
Engineered Systems98.7 — — 98.7 194.1 — — 194.1 
$861.3 $285.1 $209.4 $1,355.8 $1,689.7 $566.8 $420.3 $2,676.8 
(a) Net sales by geographic region of origin.

19
Table of Contents
Second Quarter Ended July 4, 2021Six Months Ended July 4, 2021
Customer TypeCustomer Type
(in millions)United States Government (a)Other, Primarily CommercialTotalUnited States Government (a)Other, Primarily CommercialTotal
Net Sales:
Digital Imaging$112.8 $466.7 $579.5 $144.9 $697.9 842.8 
Instrumentation20.8 270.3 291.1 43.4 534.2 577.6 
Aerospace and Defense Electronics54.9 97.5 152.4 108.6 195.0 $303.6 
Engineered Systems88.4 9.6 98.0 187.6 15.1 202.7 
$276.9 $844.1 $1,121.0 $484.5 $1,442.2 $1,926.7 
(a) Includes sales as a prime contractor or subcontractor.


Second Quarter Ended July 4, 2021Six Months Ended July 4, 2021
Geographic Region (a)Geographic Region (a)
(in millions)United StatesEuropeAll otherTotalUnited StatesEuropeAll otherTotal
Net sales:
Digital Imaging$265.8 $163.1 $150.6 $579.5 $346.0 $235.3 $261.5 $842.8 
Instrumentation218.4 60.5 12.2 291.1 431.8 119.1 26.7 577.6 
Aerospace and Defense Electronics126.9 25.5 — 152.4 252.4 51.2 — 303.6 
Engineered Systems98.0 — — 98.0 202.7 — — 202.7 
$709.1 $249.1 $162.8 $1,121.0 $1,232.9 $405.6 $288.2 $1,926.7 
(a) Net sales by geographic region of origin.

Note 15. Subsequent Events
In July 2022, the Company was notified by the Canadian Revenue Agency ("CRA") that the CRA intends to challenge certain tax positions for the 2013-2017 tax years. The Company believes that the amount of the reassessment would be less than $20 million. The Company intends to appeal any such reassessment as it believes its tax positions are more-likely-than-not to be sustained upon final adjudication of the dispute.
In July 2022, the Company acquired a majority interest in Noiseless Acoustics Oy ("NL Acoustics") for an immaterial amount. NL Acoustics, located in Helsinki, Finland, designs and manufactures acoustics imaging instruments and predictive maintenance solutions. NL Acoustics will be part of the Digital Imaging segment.
20
Table of Contents


Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Teledyne Technologies Incorporated (“Teledyne” or the “Company”) provides enabling technologies for industrial growth markets that require advanced technology and high reliability. These markets include factory automation and condition monitoring, aerospace and defense, air and water quality environmental monitoring, electronics design and development, medical imaging and pharmaceutical research, oceanographic research, and deepwater energy exploration and production.Following the 2021 acquisition of FLIR Systems, Inc. ( “FLIR”), we further evolved into Teledyne is a global sensing and decision-support technology company: providing specialty sensors, cameras, instrumentation, algorithms and software across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land and air domains.We differentiate ourselves from many of our direct competitors by having a customercustomer- and Company-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 corefour business segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems. The markets of digital imaging, instrumentation, aerospace and defense electronics and engineered systems. Our core marketsin 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 product development. We aggressively pursue operational excellence to continually improve our margins and 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 Company and expand our addressable markets. We continue to evaluate our businesses to ensure that they are aligned with our strategy. As part of our continuing FLIR acquisition integration efforts, and as we accelerate the relocation of select Teledyne FLIR operations to existing sites, we expect to record $10.0 million to $12.0 million of pretax costs in the second half of 2023 related to facility consolidation costs, facility lease impairments and employee separation costs.
In connectionConsistent with thisour strategy, on May 14, 2021, Teledynewe completed one acquisition in the acquisitionfirst half of FLIR2023 and two acquisitions in a cash and stock transaction valued at approximately $8.1 billion. As a combined company, we uniquely provide a full spectrum of imaging technologies and products spanning X-ray through infrared and from components to complete imaging systems. We also provide a complete range of unmanned systems and imaging payload across2022, which were all domains ranging from deep sea to deep space. FLIR is part of the Digital Imaging segment. The financial results of the FLIR acquisitionthese acquisitions have been included in Teledyne’s results since the respective date of theeach acquisition. See Note 2 for additional information about our recent acquisitions.
At July 3, 2022, total debt was $3,945.7 million, compared with total debt of $4,099.4 million at January 2, 2022. During the first six months of 2022, we made $80.0 million of floating rate debt payments which reduced our term loan due May 2026. In addition, during the first six months of 2022, we repurchased and retired $75.0 million of our Fixed Rate Senior Notes, recording a $10.6 million non-cash gain on the extinguishment of this debt. At July 3, 2022, $1,004.0 million was available under the $1.150 billion credit facility, after reductions of $125.0 million in borrowings and $21.0 million in outstanding letters of credit. During the first six months of 2022, we reduced our outstanding letters of credit, primarily due to the Swedish Tax Authority cancelling its standby letter of credit of $244.6 million.Trends Affecting Our Consolidated Leverage Ratio, as defined in our $1.150 billion credit facility, was 3.7x at the end of the second quarter of 2021, shortly after the acquisition of FLIR. Our Consolidated Leverage Ratio has declined each quarter since the acquisition of FLIR and was 2.5x at the end of the second quarter of 2022.
COVID and Other Challenges
With regard to the COVID pandemic, our first priority remains the health and safety of our employees and their families. Although the COVID pandemic continued to impact our business operations and practices, we experienced limited disruptions in the first six months of 2022, mostly as a result of COVID-related lockdowns in China and localized and temporary labor shortages due to virus exposure. However, given the continuing dynamic nature of this situation, we may not fully estimate the impacts of COVID on our financial condition, results of operations or cash flows. Contingency plans remain in place in the event of significant impacts from COVID infection resurgences, and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, partners and suppliers.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 also delayed our ability to convert backlog to revenue and negatively impacted our profit margins. WeAlthough perhaps to a lesser extent compared to recent quarters, we expect inflationary and supply chain constraint trends to continue in the second half of 2022.2023.
The strengtheningCosts incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollar relativedollars using exchange rates effective during the respective period. As a result, we are exposed to other currencies adversely impacted our salesmovements in the second quarterexchange rates of various currencies against the U.S. dollar. See Note 13 for additional discussion around our derivative instruments and year-to-date periods, and may continue to do so in future periods. It may also increase the price and reduce the competitiveness of some of our products sold in markets outside the United States.
We do not have any material business, operations or assets in Russia, Belarus or Ukraine, and to date we have not been materially impacted by the actions of the Russian government. Our total net sales from these three countries in 2021and thehedging activities.
21
Table of Contents
first six months of 2022 constituted less than 1.0% of total net sales, respectively. However, the conflict between Russia and Ukraine has increased the disruption, instability and volatility in global markets and industries and could negatively impact our operations. The U.S. Government and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls, the full impact of which on us may still be unknown to us or evolving. If the ongoing conflict intensifies or expands, it could adversely affect our business, supply chain, partners or customers.19



Results of Operations
  
Second QuarterSix Months
(in millions)2022202120222021
Net sales$1,355.8 $1,121.0 $2,676.8 $1,926.7 
Costs and expenses
Cost of sales788.6 663.1 1,541.2 1,155.6 
Selling, general and administrative expenses286.4 320.7 577.7 488.9 
Acquired intangible asset amortization51.3 32.8 104.9 42.6 
Total costs and expenses1,126.3 1,016.6 2,223.8 1,687.1 
Operating income229.5 104.4 453.0 239.6 
Interest and debt expense, net(22.5)(21.2)(44.8)(43.5)
Gain (loss) on debt extinguishment10.6 — 10.6 (13.4)
Non-service retirement benefit income2.9 2.8 5.7 5.6 
Other income, net1.0 6.1 — 5.1 
Income before income taxes221.5 92.1 424.5 193.4 
Provision for income taxes50.2 27.4 40.6 44.0 
Net income$171.3 $64.7 $383.9 $149.4 

Second Quarter%Six Months%
(dollars in millions)20222021Change20222021Change
Net sales (a):
Digital Imaging (b)$775.8 $579.5 33.9 %$1,526.3 $842.8 81.1 %
Instrumentation312.5 291.1 7.4 %621.4 577.6 7.6 %
Aerospace and Defense Electronics168.8 152.4 10.8 %335.0 303.6 10.3 %
Engineered Systems98.7 98.0 0.7 %194.1 202.7 (4.2)%
Total net sales$1,355.8 $1,121.0 20.9 %$2,676.8 $1,926.7 38.9 %
Operating income:
Digital Imaging (b)$117.9 $84.6 39.4 %$233.6 $136.6 71.0 %
Instrumentation73.6 64.6 13.9 %145.2 124.0 17.1 %
Aerospace and Defense Electronics44.1 28.4 55.3 %87.0 56.7 53.4 %
Engineered Systems8.6 11.0 (21.8)%18.0 25.9 (30.5)%
Corporate expense (c)(14.7)(84.2)(82.5)%(30.8)(103.6)(70.3)%
Total operating income$229.5 $104.4 119.8 %$453.0 $239.6 89.1 %
(a) Net sales excludes inter-segment sales of $5.1 million and $10.6 million for the second quarter and six months of 2022, respectively, and $5.1 million and $9.3 million for the second quarter and six months of 2021, respectively.
(b) On May 14, 2021, the Company completed the acquisition of FLIR, and the financial results of FLIR have been included since the date of the acquisition. The second quarter and first six months of 2022 includes $167.6 million and $620.2 million in incremental net sales from FLIR, respectively.
(c) Corporate expense for the second quarter and six months of 2021 includes $70.5 million and $76.4 million, respectively, in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition.

22
Table of Contents
The table below presents net sales and costResults of sales by segment and total company:Operations
Second QuarterSix Months
(dollars in millions)2022202120222021
Digital Imaging
Net sales$775.8 $579.5 $1,526.3 $842.8 
Cost of sales$434.3 $328.7 $839.5 $482.5 
Cost of sales as a % of net sales56.0 %56.7 %55.0 %57.3 %
Instrumentation
Net sales$312.5 $291.1 $621.4 $577.6 
Cost of sales$166.9 $153.4 $330.8 $309.3 
Cost of sales as a % of net sales53.4 %52.7 %53.2 %53.5 %
Aerospace and Defense Electronics
Net sales$168.8 $152.4 $335.0 $303.6 
Cost of sales$103.2 $99.9 $206.2 $199.5 
Cost of sales as a % of net sales61.1 %65.6 %61.6 %65.7 %
Engineered Systems
Net sales$98.7 $98.0 $194.1 $202.7 
Costs of sales$84.2 $81.1 $164.7 $164.3 
Cost of sales as a % of net sales85.3 %82.8 %84.9 %81.1 %
Total Company
Net sales$1,355.8 $1,121.0 $2,676.8 $1,926.7 
Costs of sales$788.6 $663.1 $1,541.2 $1,155.6 
Cost of sales as a % of net sales58.2 %59.2 %57.6 %60.0 %
  
Second Quarter%Six Months%
(in millions)20232022Change20232022Change
Net sales$1,424.7 $1,355.8 5.1 %$2,808.0 $2,676.8 4.9 %
Costs and expenses
Cost of sales806.3 788.6 2.2 %1,597.0 1,541.2 3.6 %
Selling, general and administrative ("SG&A")313.0 286.4 9.3 %613.4 577.7 6.2 %
Acquired intangible asset amortization49.3 51.3 (3.9)%99.0 104.9 (5.6)%
Total costs and expenses1,168.6 1,126.3 3.8 %2,309.4 2,223.8 3.8 %
Operating income (loss)256.1 229.5 11.6 %498.6 453.0 10.1 %
Interest and debt income (expense), net(22.3)(22.5)(0.9)%(43.3)(44.8)(3.3)%
Gain (loss) on debt extinguishment1.6 10.6 (84.9)%1.6 10.6 (84.9)%
Non-service retirement benefit income (expense)2.9 2.9 — %6.2 5.7 8.8 %
Other income (expense), net(3.4)1.0 *(4.5)— *
Income before income taxes234.9 221.5 6.0 %458.6 424.5 8.0 %
Provision (benefit) for income taxes49.4 50.2 (1.6)%94.3 40.6 132.3 %
Net income (loss) including noncontrolling interest185.5 171.3 8.3 %364.3 383.9 (5.1)%
Less: net income (loss) attributable to noncontrolling interest0.2 — *0.3 — *
Net income (loss) attributable to Teledyne$185.3 $171.3 8.2 %$364.0 $383.9 (5.2)%
* not meaningful
Second Quarter%Six Months%
(dollars in millions)20232022Change20232022Change
Net sales (a):
Digital Imaging$793.3 $775.8 2.3 %$1,565.8 $1,526.3 2.6 %
Instrumentation328.4 312.5 5.1 %661.9 621.4 6.5 %
Aerospace and Defense Electronics186.0 168.8 10.2 %359.2 335.0 7.2 %
Engineered Systems117.0 98.7 18.5 %221.1 194.1 13.9 %
Total net sales$1,424.7 $1,355.8 5.1 %$2,808.0 $2,676.8 4.9 %
Operating income (loss):
Digital Imaging$124.6 $117.9 5.7 %$246.8 $233.6 5.7 %
Instrumentation81.4 73.6 10.6 %162.1 145.2 11.6 %
Aerospace and Defense Electronics53.2 44.1 20.6 %100.2 87.0 15.2 %
Engineered Systems11.5 8.6 33.7 %21.5 18.0 19.4 %
Corporate expense(14.6)(14.7)(0.7)%(32.0)(30.8)3.9 %
Total operating income (loss)$256.1 $229.5 11.6 %$498.6 $453.0 10.1 %
(a) Net sales excludes inter-segment sales of $8.1 million and $14.3 million for the second quarter and six months of 2023, respectively, and $5.1 million and $10.6 million for the second quarter and six months of 2022, respectively.
Second Quarter Results
The following is a discussion of our 20222023 second quarter results compared with the second quarter results of 2021.2022. Comparisons are with the corresponding reporting period of 2021,2022, unless noted otherwise. Prior period amounts have been reclassified to conform to the current presentation.
Second quarter of 20222023 compared with the second quarter of 20212022
Our second quarter of 20222023 net sales increased 20.9%5.1%. Net income for the second quarter of 20222023 increased 164.8%.8.2%, primarily driven by higher net sales. Net income per diluted share was $3.59$3.87 for the second quarter of 2022,2023, compared with net income per diluted share of $1.48.
The second quarter of 2022 net sales included $167.6 million in incremental net sales from the acquisition of FLIR, which was acquired in May 2021. In the second quarter of 2021, in connection with the FLIR acquisition, Teledyne incurred pretax expenses of $117.9 million, which included $42.3 million of transaction and integration-related costs, $52.2 million for the settlement of FLIR employee and director stock awards and $23.4 million in acquired inventory step-up expense. No comparable pretax expenses were incurred in the second quarter of 2022.$3.59.
Net Sales
The second quarter of 20222023 net sales, compared with the second quarter of 2021 net sales,2022, reflected higher net sales in each segment. The second quarter


20

Table of 2022 included $167.6 million in incremental net sales from the acquisition of FLIR in the Digital Imaging segment, as well as organic sales growth.Contents
Cost of Sales
Cost of sales increased $125.5$17.7 million in the second quarter of 2022 and primarily reflected the increase in net sales.2023. Cost of sales as a percentage of net sales decreased for the second quarter of 20222023 to 58.2%56.6% from 59.2%58.2%. The lower cost of sales percentage in 2022 reflects the impact of the FLIR acquisition, which carries a lower cost of sales percentage than the average of other Teledyne businesses.
Selling, General and Administrative Expenses
Selling, general and administrativeSG&A expenses, including research and development expense, decreased $34.3increased $26.6 million in the second quarter of 2022. Selling, general and administrative2023. SG&A expenses for the second quarter of 2022, as a percentage of net sales decreasedfor the second quarter of 2023 increased to 21.1%22.0% from 28.6%21.1%. Corporate expense, which is included in selling, general and administrativeSG&A expenses, was $14.7$14.6 million for the second quarter of 2022,2023, compared with $84.2$14.7 million. Corporate expense in 2021 included $70.5 million in acquisition-related transaction and purchase accounting expenses. Stock optionStock-based compensation expense was $3.6$8.4 million for both the second quarter of 2022 and 2021, respectively.
23
Table2023 compared with $6.4 million, with the increase due to timing of Contents
grants in previous years.
Acquired Intangible Asset Amortization
Acquired intangible asset amortization for the second quarter of 20222023 was $51.3$49.3 million compared with $32.8 million. The second$51.3 million, with the decrease from the previous year related primarily to foreign currency translation impacts as well as certain finite-lived intangibles within the test and measurement instrumentation product line becoming fully amortized in the third quarter of 2022 includes a full quarter of FLIR intangible asset amortization as compared to the second quarter of 2021 which includes a partial quarter of amortization of FLIR intangibles due to the timing of the acquisition in that period.2022.
Pension Service Expense
Pension service expense is included in both cost of sales and selling general and administrative expense. For the second quarter of 20222023, pension service expense was $2.1$1.5 million, compared with $2.7$2.1 million. For 2022,2023, the weighted-average discount rate used to determine the benefit obligation for the domestic qualified pension plans is 2.97%5.71% compared with 2.64%2.97% in 2021.2022.
Operating Income
Operating income for the second quarter of 20222023 increased 119.8%11.6%. The second quarter of 2022,2023, compared with the second quarter of 2021,2022, reflected higher operating income in each business segment, except the Engineered Systems segment. In the second quarter of 2021, in connection with the FLIR acquisition, Teledyne incurred pretax expenses of $117.9 million, which included $42.3 million of transaction and integration-related costs, $52.2 million for the settlement of FLIR employee and director stock awards and $23.4 million in acquired inventory step-up expense. The incremental operating income included in the results for the second quarter of 2022 from the FLIR acquisition was $21.8 million.
Interest and Debt Expense, Debt Extinguishment, Non-Service Retirement BenefitNon-operating Income and Other Income and ExpenseExpenses
Interest and debt expense, net of interest income, was $22.5$22.3 million for the second quarter of 2022,2023, compared with $21.2$22.5 million. During the second quarter of 2022, Teledyne repurchased and retired $75.0 million of its Fixed Rate Senior Notes due August 2030 and April 2031, recording a $10.6 million non-cash gain on the extinguishment of this debt. Non-service retirement benefit income was $2.9 million for both the second quarter of 2022 compared with $2.82023 and 2022. Other income and expense, net was expense of $3.4 million for the second quarter of 2021. Other income and expense was2023 compared with income of $1.0 million for the second quarter of 2022 compared with other income of $6.1 million for the second quarter of 2021 and reflected higher foreign currency transaction gains in 2021.2022.
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 second quarter of 20222023 was 22.7%,21.0% compared with 29.8%.an effective income tax rate of 22.7% for the second quarter of 2022. The second quarter of 2022 included2023 includes net discrete income tax benefits of $1.4 million compared with net discrete income tax benefits of $1.0 million, which included a $1.8 million income tax benefit related to share-based accounting.million. The second quarter of 2021 included2023 net discrete tax benefits include $1.3 million related to stock-based accounting compared with $1.8 million. Excluding the net discrete income tax items in both periods, the effective rate would have been 21.6% for the second quarter of 2023 and 23.1% for the second quarter of 2022.
First six months of 2023 compared with the six months of 2022
The first six months of 2023 net sales increased 4.9%. Net income for the first six months of 2023 decreased 5.2%, primarily driven by higher income tax expense in the first half of 2023, as discussed below. Net income per diluted share was $7.60 for the first six months of 2023, compared with net income per diluted share of $8.05.
Net Sales
The first six months of 2023 net sales, compared with the first six months of 2022 net sales, reflected higher net sales in each segment.
Cost of Sales
Cost of sales increased $55.8 million in the first six months of 2023. Cost of sales as a percentage of net sales decreased for the first six months of 2023 to 56.9% from 57.6%.
Selling, General and Administrative Expenses
SG&A expenses, including research and development expense, increased $35.7 million in the first six months of 2023. SG&A expenses as a percentage of net sales for the first six months of 2023 increased slightly to 21.8% from 21.6%. Corporate expense, which is included in SG&A expenses, was $32.0 million for the first six months of 2023, compared with $30.8 million, with the increase primarily related to higher professional fees during the period. Stock-based compensation expense was $16.3 million for the first six months of 2023 compared with $15.4 million.
Acquired Intangible Asset Amortization
Acquired intangible asset amortization for the first six months of 2023 was $99.0 million compared with $104.9 million, with the decrease from the previous year related primarily to foreign currency translation impacts, finalization of FLIR purchase accounting in the second quarter of 2022 and certain finite-lived intangibles within the test and measurement instrumentation product line becoming fully amortized in the third quarter of 2022.
21

Table of Contents

Pension Service Expense
Pension service expense is included in both cost of sales and selling general and administrative expense. For the first six months of 2023, pension service expense was $3.0 million compared with $4.3 million. For 2023, the weighted-average discount rate used to determine the benefit obligation for the domestic qualified pension plans is 5.71% compared with 2.97% in 2022.
Operating Income
Operating income for the first six months of 2023 increased 10.1%. The first six months of 2023, compared with the first six months of 2022, reflected higher operating income in each business segment.
Non-operating Income and Expenses
Interest and debt expense, net of interest income, was $43.3 million for the first six months of 2023, compared with $44.8 million. Non-service retirement benefit income was $6.2 million for the first six months of 2023 compared with $5.7 million for the first six months of 2022. Other income and expense, net was expense of $4.1$4.5 million which included $11.5for the first six months of 2023 compared with an immaterial amount for the first six months of 2022.
Income Taxes
The Company’s effective income tax rate for the first six months of 2023 was 20.6% compared with an effective income tax rate of 9.6% for the first six months of 2022. The first six months of 2023 includes net discrete income tax benefits of $8.0 million expensecompared with net discrete income tax benefits of $57.5 million. The first six months of 2023 net discrete tax benefits include $7.2 million related to foreignstock-based accounting. The first six months of 2022 net discrete income tax rate changes, partially offset byamounts include a $5.3 millionnon-cash income tax benefit of $49.4 million primarily related to the releaseresolution of a valuation allowancecertain FLIR tax reserves and a $2.1$8.5 million income tax benefit related to share-basedstock-based accounting. The foreign tax rate changes are a result of the United Kingdom Parliament enacting legislation to increase the corporate tax rate to 25% effective April 2023. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.1% for the second quarter of 2022 and 25.3% for the second quarter of 2021. The Company’s annual effective tax rate for fiscal year 2022 is expected to be 23.1% before discrete tax items.
First six months of 2022 compared with the first six months of 2021
The first six months of 2022 net sales increased 38.9% and included $620.2 million in incremental net sales from the acquisition FLIR. Net income22.3% for the first six months of 2022 increased 157.0%. Net income per diluted share was $8.052023 and 23.1% for the first six months of 2022 compared with net income per diluted share of $3.66. In the first six months of 2021 and in connection with the FLIR acquisition, Teledyne incurred pretax expenses of $154.4 million, which included $48.2 million of transaction and integration-related costs, $52.2 million for the settlement of FLIR employee and director stock awards, $23.4 million in acquired inventory step-up expense and $30.6 million in bridge loan and debt extinguishment fees. The first six months of 2022 included net discrete income tax benefits of $57.5 million, compared with $2.2 million.
Net Sales
The first six months of 2022 net sales, compared with the first six months of 2021 net sales, reflected higher net sales in each segment other than the Engineered Systems segment. The first six months of 2022 included $620.2 million in incremental net sales from the acquisition of FLIR in the Digital Imaging segment, as well as organic sales growth.
Cost of Sales
Cost of sales increased $385.6 million in the first six months of 2022 and primarily reflected the impact of higher net sales. Cost of sales as a percentage of net sales for the six months of 2022 decreased to 57.6%, compared with 60.0%. The lower cost of sales percentage in 2022 primarily reflects the impact of the FLIR acquisition, which carries a lower cost of sales percentage than the average of other Teledyne businesses.

24
Table of Contents
Selling, General and Administrative Expenses
Selling, general and administrative expenses, including research and development, increased by $88.8 million in the first six months of 2022 and primarily reflected the impact of higher net sales, partially offset by $100.1 million in 2021 for acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition. Selling, general and administrative expenses for the first six months of 2022, as a percentage of net sales, decreased to 21.6% compared with 25.4%. In the first six months of 2022 and 2021, we recorded a total of $7.9 million and $7.8 million, respectively, in stock option compensation expense.
Acquired Intangible Asset Amortization
Acquired intangible asset amortization for the first six months of 2022 was $104.9 million, compared with $42.6 million. The first six months of 2022 includes $86.5 million in acquired intangible asset amortization from the FLIR acquisition compared with $22.8 million in the first six months of 2021 due to the timing of the FLIR acquisition midway through the second quarter of 2021.
Pension Service Expense
Pension service expense for the first six months of 2022 was $4.3 million compared with $5.4 million.
Operating Income
Operating income for the first six months of 2022 increased 89.1%. The first six months of 2022 compared with the first six months of 2021, reflected higher operating income in each segment other than the Engineered Systems segment. Corporate expense was $30.8 million in the first six months of 2022 compared with $103.6 million, and the 2021 amount included $76.4 million in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition. The incremental operating income included in the results for the first six months of 2022 from the FLIR acquisition was $67.7 million.
Interest Expense, Non-Service Retirement Benefit Income and Other Income/Expense
Interest expense, net of interest income, was $44.8 million for the first six months of 2022, compared with $43.5 million. During the first six months of 2022, Teledyne repurchased and retired $75.0 million of its Fixed Rate Senior Notes due August 2030 and April 2031, recording a $10.6 million non-cash gain on the extinguishment of this debt. During the first six months of 2021 and in connection with acquisition of FLIR, Teledyne called $493.3 million of existing fixed rate senior notes and incurred debt extinguishment expenses of $13.4 million. Other income and expense was immaterial for the first six months of 2022 compared with income of $5.1 million and reflected higher foreign currency transaction gains in 2021.
Income Taxes
The Company’s effective income tax rate for the first six months of 2022 was 9.6% compared with 22.8%. The first six months of 2022 reflected $57.5 million in net discrete income tax benefits, which included $49.4 million of net discrete income tax benefits primarily related to the resolution of certain FLIR tax reserves and an $8.5 million income benefit related to share-based accounting. The first six months of 2021 reflected $2.2 million in net discrete income tax benefits, which included a $6.9 million income benefit related to share-based accounting and a $5.3 million income tax benefit related to the release of a valuation allowance partially offset by $11.5 million expense related to foreign tax rate changes. The foreign tax rate changes were a result of the United Kingdom Parliament enacting legislation to increase the corporate tax rate to 25% effective April 2023. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.1% for both the first six months and second quarter of 2022, 23.9% for the first six months of 2021, and 25.3% for the second quarter of 2021.
2022.
Segment Results
Segment results include net sales and operating income by segment but excludes non-service retirement benefit income, 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 143 to these condensed consolidated financial statements for additional segment information.

Digital Imaging
Second QuarterChangeSix MonthsChange
(dollars in millions)20232022$%20232022$%
Net sales$793.3 $775.8 $17.5 2.3 %$1,565.8 $1,526.3 $39.5 2.6 %
Cost of sales$427.2 $434.3 $(7.1)(1.6)%$846.5 $839.5 $7.0 0.8 %
SG&A expense$195.9 $177.2 $18.7 10.6 %$381.1 $358.3 $22.8 6.4 %
Acquired intangible asset amortization$45.6 $46.4 $(0.8)(1.7)%$91.4 $94.9 $(3.5)(3.7)%
Operating income$124.6 $117.9 $6.7 5.7 %$246.8 $233.6 $13.2 5.7 %
As a percentage of net sales:
Cost of sales53.9 %56.0 %54.1 %55.0 %
SG&A expense24.7 %22.8 %24.3 %23.5 %
Acquired intangible asset amortization5.7 %6.0 %5.8 %6.2 %
Operating income15.7 %15.2 %15.8 %15.3 %
Second quarter of 2023 compared with the second quarter of 2022
Net sales increased primarily due to $28.8 million of incremental sales from acquisitions as well as greater sales of x-ray products, commercial infrared imaging components and solutions, and industrial and scientific cameras sales, partially offset by lower sales of unmanned ground systems for defense applications.
Cost of sales decreased primarily due to product mix partially offset by the increase in net sales. As a result, the cost of sales percentage decreased during the period. SG&A and SG&A as a percentage of net sales increased primarily due to the impact of higher net sales and higher employee compensation costs and travel costs. Research and development expense also increased $4.9 million compared to the previous period. Acquired intangible asset amortization expense decreased slightly primarily due to foreign currency translation impacts.
Operating income increased primarily due to increased net sales during the period, and operating income as a percentage of net sales increased slightly during the period.
25
22

Table of Contents
Digital Imaging

First six months of 2023 compared with the six months of 2022
Net sales increased primarily due to $53.9 million of (a)increme
Second QuarterSix Months
(dollars in millions)20222021 (a)20222021 (a)
Net sales$775.8 $579.5 $1,526.3 $842.8 
Cost of sales$434.3 $328.7 $839.5 $482.5 
Selling, general and administrative expenses$177.2 $138.8 $358.3 $191.7 
Acquired intangible asset amortization$46.4 $27.4 $94.9 $32.0 
Operating income$117.9 $84.6 $233.6 $136.6 
Cost of sales as a % of net sales56.0 %56.7 %55.0 %57.3 %
Selling, general and administrative expenses as a % of net sales22.8 %24.0 %23.5 %22.7 %
Acquired intangible asset amortization as a % of net sales6.0 %4.7 %6.2 %3.8 %
Operating income as a % of net sales15.2 %14.6 %15.3 %16.2 %
ntal sales from acquisitions as well as greater sales of x-ray products, commercial infrared imaging components and solutions, and industrial and scientific cameras sales, partially offset by lower sales of unmanned ground systems for defense applications.
(a)    On May 14, 2021,Cost of sales increased primarily due to increased net sales, and the Company completedcost of sales percentage decreased slightly during the acquisitionperiod. SG&A and SG&A as a percentage of net sales increased primarily due to the impact of higher net sales as well as increased research and development expense of $13.2 million. Acquired intangible asset amortization expense decreased primarily due to foreign currency translation impacts as well as finalization of FLIR purchase accounting in the second quarter of 2022.
Operating income increased primarily due to increased net sales and lower acquired intangible asset amortization expense during the financial resultsperiod, and operating income as a percentage of FLIR have been included sincenet sales increased slightly during the date of the acquisition.period.
Instrumentation
Second QuarterChangeSix MonthsChange
(dollars in millions)20232022$%20232022$%
Net sales$328.4 $312.5 $15.9 5.1 %$661.9 $621.4 $40.5 6.5 %
Cost of sales$172.5 $166.9 $5.6 3.4 %$352.9 $330.8 $22.1 6.7 %
SG&A expense$71.0 $67.3 $3.7 5.5 %$139.7 $135.8 $3.9 2.9 %
Acquired intangible asset amortization$3.5 $4.7 $(1.2)(25.5)%$7.2 $9.6 $(2.4)(25.0)%
Operating income$81.4 $73.6 $7.8 10.6 %$162.1 $145.2 $16.9 11.6 %
As a percentage of net sales:
Cost of sales52.5 %53.4 %53.3 %53.2 %
SG&A expense21.6 %21.5 %21.1 %21.9 %
Acquired intangible asset amortization1.1 %1.5 %1.1 %1.5 %
Operating income24.8 %23.6 %24.5 %23.4 %
Second quarter of 20222023 compared with the second quarter of 20212022
The Digital Imaging segment’s second quarter of 2022 netNet sales increased 33.9%. Operating income for the second quarterdue to higher sales at our marine instrumentation and our test and measurement instrumentation product lines. Sales of 2022marine instrumentation increased 39.4%.
The second quarter$12.1 million and sales of 2022 net sales increase included $167.6test and measurement instrumentation increased $4.0 million, respectively. Sales of incremental net sales from the FLIR acquisition as well as strong organic sales growth from industrial and scientific sensors and cameras and X-ray products. The increase in operating income in the second quarter of 2022 reflected the contribution from the FLIR acquisition as well as the impact of organic sales growth during the period. The incremental operating income included in the results for the second quarter of 2022 from the FLIR acquisition was $21.8environmental instrumentation decreased $0.2 million.
The second quarter of 2022 costCost of sales increased $105.6 million and primarily reflected the impact ofdue to higher net sales. The cost of sales percentage decreased due to 56.0%product mix. SG&A expense increased due to higher net sales, and SG&A expense as a percentage of net sales increased slightly in the second quarter of 2022 from 56.7%. Second quarter 2022 selling, general and administrative expenses increased to $177.2 million and primarily reflected the impact of higher net sales. The selling, general and administrative expense percentage decreased to 22.8% in the second quarter of 2022 from 24.0%.period. Acquired intangible asset amortization expense fordecreased primarily due to certain finite-lived intangibles within the secondtest and measurement instrumentation line becoming fully amortized in the third quarter of 2022 was $46.4 million, compared with $27.4 million.2022.
First six months of 2022 compared with the first six months of 2021
The Digital Imaging segment’s first six months of 2022 net sales increased 81.1%. Operating income for the first six months of 2022 increased 71.0%.
The first six months of 2022 net sales included $620.2 million incremental net sales from the FLIR acquisition as well as organic sales growth from industrial and scientific sensors and cameras and X-Ray products. The first six months of 2021 included $70.2 million of acquisition-related transaction and purchase accounting expenses related to FLIR which included $24.0 million of integration-related costs, $22.8 million in acquired intangible asset amortization expense and $23.4 million in inventory step-up expense. The increase in operating income also reflected the impact of organic sales growth. The incremental operating income included in the results for the first six months of 2022 from the FLIR acquisition was $67.7 million.
The first six months of 2022 cost of sales increased $357.0 million and reflected the impact of higher sales. The cost of sales percentage in 2022 decreased to 55.0%, compared with 57.3%. The 2021 cost of sales amount included $23.4 million in inventory step-up expense related to the acquisition of FLIR, and no comparable amount occured in 2022. Selling, general and administrative expenses increased $166.6 million in the first six months of 2022 and reflected the impact of higher net sales, partially offset by acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition in 2021. The selling, general and administrative expense percentage increased to 23.5% in the first six months of 2022 from 22.7% and reflects the impact of higher research and development expense for FLIR as a percentage of net sales.sales increased primarily due to increased net sales and lower acquired intangible asset amortization.

26
TableFor six months of Contents
Instrumentation
Second QuarterSix Months
(dollars in millions)2022202120222021
Net sales$312.5 $291.1 $621.4 $577.6 
Cost of sales$166.9 $153.4 $330.8 $309.3 
Selling, general and administrative expenses$67.3 $67.9 $135.8 $134.1 
Acquired intangible asset amortization$4.7 $5.2 $9.6 $10.2 
Operating income$73.6 $64.6 $145.2 $124.0 
Cost of sales as a % of net sales53.4 %52.7 %53.2 %53.5 %
Selling, general and administrative expenses as a % of net sales21.5 %23.3 %21.9 %23.2 %
Acquired intangible asset amortization as a % of net sales1.5 %1.8 %1.5 %1.8 %
Operating income as a % of net sales23.6 %22.2 %23.4 %21.5 %
Second quarter of 20222023 compared with the second quartersix months of 20212022
The Instrumentation segment’s second quarter of 2022 netNet sales increased 7.4%. Operating income for the second quarter of 2022 increased 13.9%.
The second quarter of 2022 net sales increase resulted fromdue to higher sales across all product lines. Sales of marine instrumentation increased $10.4$28.4 million, sales of test and measurement instrumentation increased $8.3$8.4 million and sales of environmental instrumentation increased $2.7 million. The increase in operating income primarily reflected the impact of higher sales and favorable product mix.$3.7 million, respectively.
The second quarter of 2022 costCost of sales increased $13.5 million. Theprimarily due to higher net sales, and the cost of sales percentage increased slightly. SG&A expense increased slightly due to 53.4%higher net sales. SG&A expense as a percentage of net sales decreased slightly in the period. Acquired intangible asset amortization expense decreased primarily due to certain finite-lived intangibles within the test and measurement instrumentation line becoming fully amortized in the third quarter of 2022.
Operating income and operating income as a percentage of net sales increased primarily due to increased net sales and lower acquired intangible asset amortization.
23

Table of Contents
Aerospace and Defense Electronics
Second QuarterChangeSix MonthsChange
(dollars in millions)20232022$%20232022$%
Net sales$186.0 $168.8 $17.2 10.2 %$359.2 $335.0 $24.2 7.2 %
Cost of sales$107.3 $103.2 $4.1 4.0 %$211.0 $206.2 $4.8 2.3 %
SG&A expense$25.3 $21.3 $4.0 18.8 %$47.6 $41.4 $6.2 15.0 %
Acquired intangible asset amortization$0.2 $0.2 $— — %$0.4 $0.4 $— — %
Operating income$53.2 $44.1 $9.1 20.6 %$100.2 $87.0 $13.2 15.2 %
As a percentage of net sales:
Cost of sales57.7 %61.1 %58.7 %61.6 %
SG&A expense13.6 %12.7 %13.3 %12.3 %
Acquired intangible asset amortization0.1 %0.1 %0.1 %0.1 %
Operating income28.6 %26.1 %27.9 %26.0 %
Second quarter of 2023 compared with the second quarter of 2022 from 52.7%.
Net sales increased due to a $9.6 million increase for defense electronics and a $7.6 million increase for aerospace electronics.
Cost of sales increased primarily due to higher net sales partially offset by the impact of improved product margins across certain defense electronics product categories, and the cost of sales percentage decreased due to these improved product margins. SG&A expense as well as the SG&A expense percentage increased primarily due to higher compensation costs as well as increased research and development expense.
Operating income and operating income as a percent of net sales increased primarily due to increased net sales and higher product margins during the period.
First six months of 2023 compared with the six months of 2022
Net sales increased due to a $13.6 million increase for defense electronics and a $10.6 million increase for aerospace electronics.
Cost of sales increased primarily due to higher net sales partially offset by the impact of improved product margins across certain defense electronics product categories, and the cost of sales percentage decreased due to these improved product margins. SG&A expense as well as the SG&A expense percentage increased primarily due higher compensation costs as well as increased research and development expense.
Operating income and operating income as a percent of net sales increased primarily due to increased net sales and higher product margins during the period.
Engineered Systems
Second QuarterChangeSix MonthsChange
(dollars in millions)20232022$%20232022$%
Net sales$117.0 $98.7 $18.3 18.5 %$221.1 $194.1 $27.0 13.9 %
Cost of sales$99.3 $84.2 $15.1 17.9 %$186.6 $164.7 $21.9 13.3 %
SG&A expense$6.2 $5.9 $0.3 5.1 %$13.0 $11.4 $1.6 14.0 %
Operating income$11.5 $8.6 $2.9 33.7 %$21.5 $18.0 $3.5 19.4 %
As percentage of net sales:
Cost of sales84.9 %85.3 %84.4 %84.9 %
SG&A expense5.3 %6.0 %5.9 %5.8 %
Operating income9.8 %8.7 %9.7 %9.3 %
Second quarter 2022 selling, general and administrative expenses decreased $0.6 million. The selling, general and administrative expense percentage decreased to 21.5% inof 2023 compared with the second quarter of 2022 from 23.3%.
First six months of 2022 compared with the first six months of 2021
The Instrumentation segment’s first six months 2022 netNet sales increased 7.6%. Operating income for the first six months of 2022 increased of 17.1%. The first six months of 2022 net sales increase resulted fromdue to higher sales across all product lines. Sales of marine instrumentation increased $20.3$14.8 million for engineered products and higher sales of test and measurement instrumentation increased $21.6$3.5 million and sales of environmental instrumentation increased $1.9 million. The increase in operating income the first six months of 2022 reflected the impact of higher sales and favorable product mix.for energy systems.
The first six months of 2022 costCost of sales increased by $21.5 million and primarily reflected the impact ofdue to higher net sales. The cost of sales percentage decreased slightly. SG&A expense increased slightly primarily due to 53.2% from 53.5%. The first six monthshigher net sales, and SG&A expense as a percentage of 2022 selling, general and administrative expenses increased by $1.7 million. The selling, general and administrative expense percentagenet sales decreased due primarily to 21.9% in the first six months of 2022 from 23.2%.
24

Aerospace and Defense Electronics
Second QuarterSix Months
(dollars in millions)2022202120222021
Net sales$168.8 $152.4 $335.0 $303.6 
Cost of sales$103.2 $99.9 $206.2 $199.5 
Selling, general and administrative expenses$21.3 $23.9 $41.4 $47.0 
Acquired intangible asset amortization$0.2 $0.2 $0.4 $0.4 
Operating income$44.1 $28.4 $87.0 $56.7 
Cost of sales as a % of net sales61.1 %65.6 %61.6 %65.7 %
Selling, general and administrative expenses as a % of net sales12.7 %15.7 %12.3 %15.5 %
Acquired intangible asset amortization as a % of net sales0.1 %0.1 %0.1 %0.1 %
Operating income as a % of net sales26.1 %18.6 %26.0 %18.7 %
Second quarter of 2022 compared with the second quarter of 2021
The Aerospace and Defense Electronics segment’s second quarter of 2022 net sales increased 10.8%. Operating income for the second quarter of 2022 increased 55.3%.
27
Table of Contents
The second quarter of 2022 net sales increase reflected $12.3growth in excess of general and administrative expenses, which these expenses were at similar levels in both periods.
Operating income and operating income as a percentage of net sales increased primarily due to increased net sales. Operating income as a percentage of net sales increased primarily due to higher net sales growth and lower SG&A expense as a percentage of net sales.
First six months of 2023 compared with the six months of 2022
Net sales increased due primarily to higher sales of $19.6 million for aerospace electronicsengineered products and $4.1higher sales of $7.4 million for defense electronics. Operating income in the second quarter of 2022 reflected the impact of higher sales and favorable product mix primarily driven by stronger sales of aerospace electronics.energy systems.
The second quarter of 2022 costCost of sales increased $3.3 million and reflected the impact ofprimarily due to higher net sales. The cost of sales percentage decreased slightly. SG&A expense as well as SG&A expense as a percentage of net sales increased primarily due to 61.1% for the second quarter of 2022, from 65.6% and reflected favorable product mix. Selling, general and administrative expenses, includinghigher net sales as well as higher research and development expense, decreasedincluding higher bid and proposal costs.
Operating income increased primarily due to $21.3 million in the second quarterincreased net sales. Operating income as a percentage of 2022 from $23.9 million and reflected $1.8 million of lower research and development expense. The selling, general and administrative expense percentage decreasednet sales increased slightly primarily due to 12.7% in the second quarter of 2022 from 15.7% and reflected the impact of lowerincreased net sales, partially offset by higher research and development expense, including higher bid and higher sales.
First six months of 2022 compared with the first six months of 2021
The Aerospace and Defense Electronics segment’s first six months of 2022 net sales increased 10.3%. Operating income for the first six months of 2022 increased 53.4%.
The first six months of 2022 net sales reflected $26.1 million of higher sales for aerospace electronics and $5.3 million of higher sales for defense electronics. The increase in operating income in the first six months of 2022 primarily reflected the impact of higher sales and favorable product mix, primarily driven by the stronger sales of aerospace electronics.
The first six months of 2022 cost of sales increased by $6.7 million and reflected the impact of higher sales. Cost of sales as a percentage of sales for the first six months of 2022 decreased to 61.6% from 65.7% and reflected favorable product mix. Selling, general and administrative expenses, including research and development expense, decreased to $41.4 million in the first six months of 2022, compared with $47.0 million for the first six months of 2021, primarily due to lower research and development expense. The selling, general and administrative expense percentage decreased to 12.3% in the first six months of 2022, compared with 15.5% and reflected the impact of lower research and development expense and higher sales.

Engineered Systems
Second QuarterSix Months
(dollars in millions)2022202120222021
Net sales$98.7 $98.0 $194.1 $202.7 
Cost of sales$84.2 $81.1 $164.7 $164.3 
Selling, general and administrative expenses$5.9 $5.9 $11.4 $12.5 
Operating income$8.6 $11.0 $18.0 $25.9 
Cost of sales as a % of net sales85.3 %82.8 %84.9 %81.1 %
Selling, general and administrative expenses as a % of net sales6.0 %6.0 %5.8 %6.1 %
Operating income as a % of net sales8.7 %11.2 %9.3 %12.8 %
Second quarter of 2022 compared with the second quarter of 2021
The Engineered Systems segment’s second quarter of 2022 net sales increased 0.7%. Operating income for the second quarter of 2022 decreased 21.8%.
The second quarter of 2022 net sales primarily reflected higher sales of $0.9 million for energy systems partially offset by lower sales of $0.2 million for engineered products. The lower sales for engineered products primarily reflected decreased sales from electronic manufacturing services products and space programs, partially offset by higher sales from marine and other manufacturing programs. Operating income in the second quarter of 2022 primarily reflected the impact of decreased sales and lower gross margins for electronic manufacturing services products.
The second quarter of 2022 cost of sales increased $3.1 million. The cost of sales percentage increased to 85.3% for the second quarter of 2022 from 82.8%. Selling, general and administrative expense was $5.9 million for both the second quarter of 2022 and 2021, respectively. The selling, general and administrative expense percentage for the second quarter of 2022 and 2021 was 6.0%, respectively.
First six months of 2022 compared with the first six months of 2021
The Engineered Systems segment’s first six months of 2022 net sales decreased 4.2%. Operating income for the first six months of 2022 decreased 30.5%.
The first six months of 2022 net sales reflected lower net sales of $5.2 million for turbine engines and $4.5 million of lower sales of engineered products, partially offset by higher sales of $1.1 million for energy systems. Teledyne exited the cruise missile turbine engine business in the first quarter of 2021. Operating income in the first six months of 2022 reflected the
28
Table of Contents
impact of lower sales, including no sales of higher margin turbine engines and lower margins for electronic manufacturing services products.
The first six months of 2022 cost of sales increased by $0.4 million and primarily reflected the impact of higher cost of sales for electronic manufacturing services. Cost of sales as a percentage of sales for the first six months of 2022 increased to 84.9% from 81.1%. Selling, general and administrative expenses, including research and development expense, decreased to $11.4 million for the first six months of 2022, compared with $12.5 million for the first six months of 2021. The selling, general and administrative expense percentage decreased to 5.8% for the first six months of 2022 compared with 6.1%.proposal costs.
Financial Condition, Liquidity and Capital Resources
Net cash used in operating activities was $19.8 million for the first six months of 2022, compared with net cash provided by operating activities of $336.2 million. The first six 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 in Sweden. The first six months of 2022 also reflected investments in inventories, semi-annual interest payments, increased incentive compensation payments and higher cash income tax payments compared to 2021, partially offset by higher net income in 2022.
Net cash used in investing activities was $35.4 million for the first six months of 2022, compared with $3,761.8 million, as the first six months of 2021 included the acquisition of FLIR. Capital expenditures for the first six months of 2022 and 2021 were $41.8 million and $38.4 million, respectively.
Net cash used in financing activities was $110.6 million for the first six months of 2022, compared with cash provided by financing activities of $3,451.4 million. During the first six months of 2022, the Company made $80.0 million of floating rate debt payments which reduced its term loan due May 2026. In addition, during the first six months of 2022, the Company repurchased and retired $75.0 million of its Fixed Rate Senior Notes due August 2030 and April 2031, recording a $10.6 million non-cash gain on the extinguishment of this debt. During the first six months of 2022, the Company terminated and re-designated certain cross-currency swaps, receiving $18.3 million of cash which is included in cash provided by financing activities. The first six months of 2021 included the proceeds of debt incurred to fund the cash portion of the then pending FLIR acquisition. Proceeds from the exercise of stock options were $17.5 million for the first six months of 2022 compared with $15.9 million for the first six months of 2021.
Total debt at July 3, 2022 was $3,945.7 million compared with $4,099.4 million at January 2, 2022. At July 3, 2022, $1,004.0 million was available under the $1.15 billion credit facility, after reductions of $125.0 million in borrowings and $21.0 million in outstanding letters of credit.
Our principal cash and capital requirements are to fund working capital needs, capital expenditures, income tax payments, and debt service requirements, 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, will be sufficient to meet these requirements. To support acquisitions, we may need to raise additional capital. We currently expect to spend approximately $100.0 million for capital expenditures in 2022, of which $41.8 million has been spent in the first six months of 2022. No cash pension contributions have been made since 2013 or are planned for the remainder of 20222023 for the domestic qualified pension plans.
Cash and Cash Equivalents
Cash and cash equivalents totaled $364.2 million at July 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 at July 2, 2023 was $3,353.3 million compared with $3,920.6 million at January 1, 2023.
At July 2, 2023, $1,131.1 million was available under the $1.15 billion credit facility, after reductions of $18.9 million in outstanding letters of credit.
Our bank credit agreements, which includes our $1.15 billion credit facility expiring March 2026, our $110.0 million term loan due May 2026 and our $150.0 million term loan due October 2024, require Teledyneus to comply with various financial and operating covenants and atcovenants. At July 3, 2022, the Company was2, 2023, we were in compliance with these covenants. As of July 3, 2022, the Company had an adequate amount of margin between required financial covenant ratios (as required by applicable credit agreements) and our actual ratios. At July 3, 2022, the required financial ratios and the actual ratios were as follows for our $1.15 billion Credit Facility expires March 2026, $275.0 million term loan due May 2026 and $150.0 million term loan due October 2024 (issued October 2019):
Financial CovenantsRequirementActual Measure
Consolidated Leverage Ratio (Net Debt/EBITDA) (a)No more than 4.5 to 12.5 to 1
Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)No less than 3.0 to 116.2 to 1
a)    The Consolidated Leverage Ratio is equal to Net Debt/EBITDA as defined in our $1.150 billion credit agreement. The requirement changes to 4.0 to 1 for the fourth quarter of 2022 and 3.5 to 1 thereafter.
b)    The Consolidated Interest Coverage Ratio is equal to EBITDA/Interest as defined in our $1.150 billion 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 $393.5 million for the first six months of 2023 compared with net cash used in operating activities of $19.8 million, driven primarily by the first six months of 2022 including 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. The Companyfirst six months of 2023 reflected higher accounts receivable collections, lower inventory purchases, lower income tax payments and higher accounts payable activity as compared with the first quarter of 2022. The IRS announcement related to the California floods (IR-2023-33) postponed approximately $102 million of our second quarter 2023 U.S. federal income tax payments until October 2023. We also expect to defer an additional federal tax payment of approximately $37 million in the third quarter of 2023. As a result, our cash paid for income taxes in the fourth quarter of fiscal 2023 will significantly increase because of these deferred federal tax payments.
Net cash used in investing activities was $104.5 million for the first six months of 2023 compared with $35.4 million. During the first six months of 2023, we spent $53.5 million on acquisition activity. Capital expenditures for the first six months of 2023 and 2022 were $51.7 million and $41.8 million, respectively. We currently plan to invest approximately $100 million for capital expenditures in 2023.
Net cash used in financing activities was $567.8 million for the first six months of 2023 compared with $110.6 million. During the first six months of 2023, we repaid $570.0 million of debt, including paying $300.0 million of debt that matured in April 2023 and making $260.0 million of floating rate debt payments which reduced our term loan due May 2026 by $135.0 million and reduced our outstanding credit facility balance by $125.0 million. In addition, during the second quarter of 2023, Teledyne repurchased and retired $75.0$10.0 million of its Fixed Rate Senior Notes duringdue April 2031, recording a $1.6 million non-cash gain on
25

Table of Contents
the extinguishment of this debt. Proceeds from the exercise of stock options were $15.0 million for the first six months of 2023 compared with $17.5 million for the first six months of 2022. Subsequent to the end of the second quarter of 2023, the Company repaid $50.0 million outstanding on its term loan due May 2026.
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
29
Table of Contents
the following: accounting for revenue recognition; accounting for business combinations, goodwill, and acquired intangible assets; accounting for income taxes; and accounting for pension plans.
For additional discussion of the application of the critical accounting policies and other accounting policies, see Note 1 to these Condensed Consolidatedcondensed consolidated Financial 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 20212022 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, including the acquisition of FLIR, product sales, capital expenditures, pension matters, stock-based compensation expense, the credit facility, interest expense, severance, relocation and facility consolidation costs, environmental remediation costs, taxes, exchange rate 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 anticipated results, includingincluding: ongoing challenges and uncertainties posed by the lingering 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; the inability to achieve operating synergies with respect to the FLIR acquisition;world; 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; operating results of FLIR being lower than anticipated; disruptions in the global economy; the ongoing conflict between Russia and Ukraine;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 or changes to U.S. and foreign government spending and budget priorities triggered by the COVID pandemic, inflation, rising interest costs, and economic conditions; impacts from the United Kingdom’s exit from the European Union; uncertainties related to the policies of the U.S. Presidential Administration; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s exporttrade compliance 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 cybersecurity threats; and 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 those implemented in response to climate change, could further negatively affect our businesses that supply the oil and gas industry. Weakness in the commercial aerospace industry negatively affects the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of the company’sCompany’s pension assets. Changes in the policies of U.S. and foreign governments, including economic sanctions, could result, over time, in reductions or 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 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 internationally, including those arising from U.S. and foreign government policy changes or actions and exchange rate fluctuations.
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.
26

Table of Contents
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 2021our 2022 Form 10-K and subsequent Quarterly Reports on Form 10-Q.
All forward-looking statements speak only as of the date they are made and are based on information available at that time. We assume no obligation to update forward-looking statements to 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 required by federal
30
Table of Contents
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 20212022 Form 10-K.
Market Risk
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 objective is to protect the United States dollar value of future cash flows and minimize the volatility of reported earnings. 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. The Company has converted U.S. dollar denominated, variable rate and fixed rate debt obligations of a European subsidiary, into euro fixed rate obligations using a receive float, pay fixed cross currency swap, and a receive fixed, pay fixed cross currency swap. These cross currency swaps are designated as cash flow hedges. In addition, the Company has converted domestic U.S. variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap. The interest rate swap is also designated as a cash flow hedge.
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 July 3, 2022 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 $18.3 million. A hypothetical 10 percent price change in the U.S. dollar from its value at July 3, 2022 would result in a decrease or increase in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy British Pounds and to sell U.S. dollars by approximately $1.8 million. For additional information, see Derivative Instruments discussed in Note 4 to these condensed consolidated financial statements.
Market Risk Disclosure
We are exposed to market risk through the interest rate on our borrowings under our $1.15 billion credit facility and our $275.0 million term loan. As of July 3, 2022, we had no outstanding borrowings under our floating rate credit facility not subject to existing interest rate swap agreements and $275.0 million outstanding under our floating rate term loan. A 100 basis point increase in interest rates would result in an increase in annual interest expense of approximately $2.8 million, assuming the $275.0 million in debt was outstanding for the full year. A hypothetical 10 percent price change in the U.S. dollar from its value at July 3, 2022 would result in a decrease or increase in the fair value of our Euro/U.S. Dollar cross currency swaps designated as cash flow hedges by approximately $27.6 million. A hypothetical 10 percent increase in the U.S. interest rates at July 3, 2022 would result in an increase in the fair value of our U.S. dollar interest rate swap designated as a cash flow hedge by approximately $0.7 million, while a 10 percent decrease would result in a decrease in its fair value of $0.7 million.

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 July 3, 2022,2, 2023, are effective at the reasonable assurance level.

PART II OTHER INFORMATION
Item 1. Legal Proceedings
See Item 1 of Part 1, “Financial Statements -- Note 1214 -- Lawsuits, Claims, Commitments Contingencies and Related Matters.Contingencies.”
Item 1A.Risk Factors
31
Table of Contents
There are no material changes to the risk factors previously disclosed in our 20212022 Form 10-K in response to Item 1A to Part 1 of Form 10-K. See also Part I Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding COVID riskssupply chain and Part I Item 3, Quantitative and Qualitative Disclosures About Market Risk, for updated disclosures about interest rate exposure andforeign currency exchange rate risks.
Item 5.Other Information
Director and Officer Trading Arrangements
None of the Company’s directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended July 2, 2023.
32
27

Table of Contents
Item 6.Exhibits
(a)Exhibits
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)

3328

Table of Contents


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: August 1, 2022July 31, 2023By: /s/ Susan L. Main
Susan L. Main, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and Authorized Officer)

3429

Table of Contents
Teledyne Technologies Incorporated
Index to Exhibits
Exhibit NumberDescription
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)

3530