SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________


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


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

_____________________________________


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

(Registrant’s telephone number, including area code)

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


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

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

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

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

There were ~~46,871,093~~47,074,611 shares of common stock, $.01 par value per share, outstanding as of ~~October 19, 2022.~~July 25, 2023.

TELEDYNE TECHNOLOGIES INCORPORATED

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

FOR THE ~~THIRD~~SECOND QUARTER AND ~~NINE~~SIX MONTHS ENDED ~~OCTOBER~~JULY 2, ~~2022~~2023 AND ~~OCTOBER~~JULY 3, ~~2021~~2022

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


		Third Quarter				Nine Months					Second Quarter				Six Months
		2022		2021		2022		2021			2023		2022		2023		2022
Net sales	Net sales	$	1,363.6	$	1,311.9	$	4,040.4	$	3,238.6	Net sales	$	1,424.7	$	1,355.8	$	2,808.0	$	2,676.8
Costs and expenses	Costs and expenses									Costs and expenses
Cost of sales	Cost of sales	785.8		787.7		2,327.0		1,943.3		Cost of sales	806.3		788.6		1,597.0		1,541.2
Selling, general and administrative expenses		283.7		279.3		861.4		768.2
Selling, general and administrative										Selling, general and administrative	313.0		286.4		613.4		577.7
Acquired intangible asset amortization	Acquired intangible asset amortization	48.9		55.3		153.8		97.9		Acquired intangible asset amortization	49.3		51.3		99.0		104.9
Total costs and expenses	Total costs and expenses	1,118.4		1,122.3		3,342.2		2,809.4		Total costs and expenses	1,168.6		1,126.3		2,309.4		2,223.8
Operating income		245.2		189.6		698.2		429.2
Interest and debt expense, net		(22.0)		(23.8)		(66.8)		(67.3)
Operating income (loss)										Operating income (loss)	256.1		229.5		498.6		453.0
Interest and debt income (expense), net										Interest and debt income (expense), net	(22.3)		(22.5)		(43.3)		(44.8)
Gain (loss) on debt extinguishment	Gain (loss) on debt extinguishment	—		—		10.6		(13.4)		Gain (loss) on debt extinguishment	1.6		10.6		1.6		10.6
Non-service retirement benefit income		2.9		2.8		8.6		8.4
Non-service retirement benefit income (expense), net										Non-service retirement benefit income (expense), net	2.9		2.9		6.2		5.7
Other income (expense), net	Other income (expense), net	5.2		(0.7)		5.2		4.4		Other income (expense), net	(3.4)		1.0		(4.5)		—
Income before income taxes		231.3		167.9		655.8		361.3
Provision for income taxes		53.1		33.8		93.7		77.8
Income (loss) before income taxes										Income (loss) before income taxes	234.9		221.5		458.6		424.5
Provision (benefit) for income taxes										Provision (benefit) for income taxes	49.4		50.2		94.3		40.6

Net income including noncontrolling interest		178.2		134.1		$	562.1	$	283.5
Net income (loss) including noncontrolling interest										Net income (loss) including noncontrolling interest	185.5		171.3		$	364.3	$	383.9
Less: Net income (loss) attributable to noncontrolling interest	Less: Net income (loss) attributable to noncontrolling interest	(0.1)		—		(0.1)		—		Less: Net income (loss) attributable to noncontrolling interest	0.2		—		0.3		—
Net income attributable to Teledyne		$	178.3	$	134.1	$	562.2	$	283.5
Net income (loss) attributable to Teledyne										Net income (loss) attributable to Teledyne	$	185.3	$	171.3	$	364.0	$	383.9

Basic earnings per common share	Basic earnings per common share	$	3.81	$	2.88	$	12.01	$	6.75	Basic earnings per common share	$	3.94	$	3.66	$	7.74	$	8.20
Weighted average common shares outstanding	Weighted average common shares outstanding	46.8		46.6		46.8		42.0		Weighted average common shares outstanding	47.0		46.8		47.0		46.8

Diluted earnings per common share	Diluted earnings per common share	$	3.74	$	2.81	$	11.79	$	6.58	Diluted earnings per common share	$	3.87	$	3.59	$	7.60	$	8.05
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	47.7		47.7		47.7		43.1		Weighted average diluted common shares outstanding	47.9		47.7		47.9		47.7

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

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE ~~THIRD~~SECOND QUARTER AND ~~NINE~~SIX MONTHS ENDED ~~OCTOBER~~JULY 2, ~~2022~~2023 AND ~~OCTOBER~~JULY 3, ~~2021~~2022

(Unaudited - Amounts in millions)


		Third Quarter				Nine Months					Second Quarter				Six Months
		2022		2021		2022		2021			2023		2022		2023		2022
Net income including noncontrolling interest		$	178.2	$	134.1	$	562.1	$	283.5
Net income (loss) including noncontrolling interest										Net 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 adjustment	Foreign exchange translation adjustment	(357.1)		(44.0)		(544.5)		(39.8)		Foreign exchange translation adjustment	12.3		(154.8)		8.0		(187.4)
Hedge activity, net of tax	Hedge activity, net of tax	(6.2)		(4.5)		(2.0)		(4.1)		Hedge activity, net of tax	1.6		(2.3)		4.1		4.2
Pension and postretirement benefit adjustments, net of tax	Pension and postretirement benefit adjustments, net of tax	4.1		4.4		12.3		13.2		Pension and postretirement benefit adjustments, net of tax	0.9		4.0		2.4		8.2
Other comprehensive income (loss)	Other comprehensive income (loss)	(359.2)		(44.1)		(534.2)		(30.7)		Other comprehensive income (loss)	14.8		(153.1)		14.5		(175.0)
Comprehensive income (loss) including noncontrolling interest	Comprehensive income (loss) including noncontrolling interest	(181.0)		90.0		27.9		252.8		Comprehensive income (loss) including noncontrolling interest	200.3		18.2		378.8		208.9
Comprehensive (income) loss attributable to noncontrolling interest		0.1		—		0.1		—
Less: comprehensive income (loss) attributable to noncontrolling interest										Less: comprehensive income (loss) attributable to noncontrolling interest	0.2		—		0.3		—

Comprehensive income (loss) attributable to Teledyne	Comprehensive income (loss) attributable to Teledyne	$	(180.9)	$	90.0	$	28.0	$	252.8	Comprehensive 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.

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - Amounts in millions, except share amounts)


		October 2, 2022		January 2, 2022			July 2, 2023		January 1, 2023
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	479.3	$	474.7	Cash and cash equivalents	$	364.2	$	638.1

Accounts receivable, net	Accounts receivable, net	770.4		767.7		Accounts receivable, net	859.4		883.7
Unbilled receivables, net	Unbilled receivables, net	309.5		316.1		Unbilled receivables, net	305.4		274.7
Inventories, net	Inventories, net	834.1		752.9		Inventories, net	970.6		890.7

Prepaid expenses and other current assets	Prepaid expenses and other current assets	126.1		118.0		Prepaid expenses and other current assets	141.1		130.7

Total current assets	Total current assets	2,519.4		2,429.4		Total current assets	2,640.7		2,817.9
Property, plant and equipment, net of accumulated depreciation and amortization of $830.6 at October 2, 2022 and $743.3 at January 2, 2022		742.9		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, 2023						Property, plant and equipment, net of accumulated depreciation and amortization of $905.1 at July 2, 2023 and $847.8 at January 1, 2023	766.0		769.8
Goodwill	Goodwill	7,718.2		7,986.7		Goodwill	7,943.8		7,873.0
Acquired intangibles, net	Acquired intangibles, net	2,421.8		2,741.6		Acquired intangibles, net	2,349.7		2,440.6
Prepaid pension assets	Prepaid pension assets	141.3		123.7		Prepaid pension assets	186.1		178.4
Operating lease right-of-use assets		143.9		144.5

Other assets, net	Other assets, net	138.9		176.9		Other assets, net	270.0		274.3
Total Assets	Total Assets	$	13,826.4	$	14,430.3	Total Assets	$	14,156.3	$	14,354.0
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity	Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity					Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable	Accounts payable	$	499.5	$	469.5	Accounts payable	$	459.4	$	505.7
Accrued liabilities	Accrued liabilities	619.0		1,028.9		Accrued liabilities	724.0		717.6
Current portion of long-term debt	Current portion of long-term debt	300.0		—		Current portion of long-term debt	450.1		300.1

Total current liabilities	Total current liabilities	1,418.5		1,498.4		Total current liabilities	1,633.5		1,523.4
Long-term debt, net of current portion	Long-term debt, net of current portion	3,618.4		4,099.4		Long-term debt, net of current portion	2,903.2		3,620.5
Long-term operating lease liabilities		134.8		138.0

Long-term deferred tax liabilities	Long-term deferred tax liabilities	548.7		625.5		Long-term deferred tax liabilities	462.3		490.0
Other long-term liabilities	Other long-term liabilities	414.4		447.0		Other long-term liabilities	574.4		547.2
Total Liabilities	Total Liabilities	6,134.8		6,808.3		Total Liabilities	5,573.4		6,181.1
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Redeemable Noncontrolling Interest	Redeemable Noncontrolling Interest	3.1		—		Redeemable Noncontrolling Interest	3.9		3.7
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Preferred stock, $0.01 par value; outstanding shares - none	Preferred 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 October 2, 2022 and 47,194,766 at January 2, 2022; outstanding shares: 46,868,187 at October 2, 2022 and 46,692,296 at January 2, 2022		0.5		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, 2023						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, 2023	0.5		0.5
Additional paid-in capital	Additional paid-in capital	4,340.6		4,317.1		Additional paid-in capital	4,371.2		4,353.4
Retained earnings	Retained earnings	4,335.4		3,773.2		Retained earnings	4,925.8		4,561.8
Treasury stock, 326,579 shares at October 2, 2022 and 502,470 shares at January 2, 2022		(23.8)		(38.8)
Accumulated other comprehensive loss		(964.2)		(430.0)
Treasury stock, 123,866 shares at July 2, 2023 and 282,131 shares at January 1, 2023						Treasury 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’ Equity	Total Stockholders’ Equity	7,688.5		7,622.0		Total Stockholders’ Equity	8,579.0		8,169.2

Total Liabilities, Redeemable Noncontrolling Interest and Equity		$	13,826.4	$	14,430.3
Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity						Total 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.

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In millions)
Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total
Balance, 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, 2022 0.5 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
Net income — — — 178.3 — 178.3
Other comprehensive loss, net of tax — — — — (359.2) (359.2)
Treasury stock issued — (0.5) 0.5 — — —
Stock-based compensation — 6.6 — — — 6.6
Exercise of stock options — 0.9 — — — 0.9
Balance, October 2, 2022 $ 0.5 $ 4,340.6 $ (23.8) $ 4,335.4 $ (964.2) $ 7,688.5


	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, January 1, 2023	$	0.5	$	4,353.4	$	(20.0)	$	4,561.8	$	(726.5)	$	8,169.2
Net income (loss)	—		—		—		178.7		—		178.7
Other comprehensive income (loss), net of tax	—		—		—		—		(0.3)		(0.3)
Treasury stock issued	—		(10.6)		10.6		—		—		—
Stock-based compensation	—		7.9		—		—		—		7.9
Exercise of stock options	—		10.2		—		—		—		10.2
Balance, April 2, 2023	0.5		4,360.9		(9.4)		4,740.5		(726.8)		8,365.7
Net income (loss)	—		—		—		185.3		—		185.3
Other comprehensive income (loss), net of tax	—		—		—		—		14.8		14.8
Treasury stock issued	—		(2.9)		2.9		—		—		—
Stock-based compensation	—		8.4		—		—		—		8.4
Exercise of stock options	—		4.8		—		—		—		4.8
Balance, July 3, 2023	$	0.5	$	4,371.2	$	(6.5)	$	4,925.8	$	(712.0)	$	8,579.0

Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated 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, 2021 0.4 398.4 (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 issued 0.1 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
Net income — — — 134.1 — 134.1
Other comprehensive income, net of tax — — — — (44.1) (44.1)
Treasury stock issued — (4.1) 4.1 — — —
Stock-based compensation — 8.7 — — — 8.7
Exercise of stock options — 5.5 — — — 5.5
Balance, October 3, 2021 $ 0.5 $ 4,307.5 $ (42.0) $ 3,611.4 $ (460.8) $ 7,416.6


	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated 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, 2022	0.5		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.

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE~~SIX MONTHS ENDED ~~OCTOBER~~JULY 2, ~~2022~~2023 AND ~~OCTOBER~~JULY 3, ~~2021~~2022

(Unaudited - Amounts in millions)


		Nine Months					Six Months
		2022		2021			2023		2022
Operating Activities	Operating Activities					Operating Activities
Net income including noncontrolling interest		$	562.1	$	283.5
Net income (loss) including noncontrolling interest						Net income (loss) including noncontrolling interest	$	364.3	$	383.9

Adjustments to reconcile net income including noncontrolling interest to net cash provided by 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 amortization	Depreciation and amortization	250.4		237.8		Depreciation and amortization	162.1		169.6

Stock-based compensation	Stock-based compensation	22.1		25.0		Stock-based compensation	16.3		15.4
Bridge financing and debt extinguishment (income) expense		(10.6)		30.5
Debt extinguishment (income) expense						Debt 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 receivables	Accounts receivable and unbilled receivables	(40.2)		(103.0)		Accounts receivable and unbilled receivables	9.9		(67.5)
Inventories	Inventories	(135.1)		3.7		Inventories	(75.3)		(103.9)

Accounts payable	Accounts payable	58.9		59.8		Accounts payable	(49.7)		32.8

Deferred and income taxes receivable/payable, net	Deferred and income taxes receivable/payable, net	(32.8)		16.9		Deferred and income taxes receivable/payable, net	8.5		(60.2)
Prepaid expenses and other assets	Prepaid expenses and other assets	4.2		19.9		Prepaid expenses and other assets	(16.3)		16.2
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(403.0)		(65.4)		Accrued expenses and other liabilities	(18.6)		(405.1)

Other operating, net	Other operating, net	(26.9)		20.3		Other operating, net	(6.1)		9.6

Net cash provided by operating activities		249.1		529.0
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	393.5		(19.8)
Investing Activities	Investing Activities					Investing Activities
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(58.5)		(67.6)		Purchases of property, plant and equipment	(51.7)		(41.8)
Purchase of businesses, net of cash acquired		(11.9)		(3,723.3)
Purchase of business, net of cash acquired						Purchase of business, net of cash acquired	(53.5)		—
Proceeds from disposal of fixed assets	Proceeds from disposal of fixed assets	5.2		—		Proceeds from disposal of fixed assets	—		5.1
Other investing, net	Other investing, net	1.3		0.5		Other investing, net	0.7		1.3
Net cash used in investing activities		(63.9)		(3,790.4)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	(104.5)		(35.4)
Financing Activities	Financing Activities					Financing Activities

Net payments on fixed rate notes		—		(796.6)
Net proceeds from credit facility		—		3,975.8
Payments on fixed rate senior notes						Payments on fixed rate senior notes	(308.4)		(64.4)
Net borrowings from (repayments made to) credit facility						Net borrowings from (repayments made to) credit facility	(125.0)		—

Payments on other debt	Payments on other debt	(174.7)		—		Payments on other debt	(135.3)		(80.1)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	18.4		21.4		Proceeds from exercise of stock options	15.0		17.5
Liquidations of cross currency swap		43.1		—
Payments for bridge financing and debt extinguishment		—		(30.5)
Maturity of cross currency swap						Maturity of cross currency swap	(13.5)		—
Liquidation of cross currency swap						Liquidation of cross currency swap	—		18.3
Other financing, net	Other financing, net	(2.0)		(22.8)		Other financing, net	(0.6)		(1.9)
Net cash (used in) provided by financing activities		(115.2)		3,147.3
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(567.8)		(110.6)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(65.4)		(7.2)		Effect of exchange rate changes on cash	4.9		(30.1)
Change in cash and cash equivalents	Change in cash and cash equivalents	4.6		(121.3)		Change in cash and cash equivalents	(273.9)		(195.9)
Cash and cash equivalents—beginning of period	Cash and cash equivalents—beginning of period	474.7		673.1		Cash and cash equivalents—beginning of period	638.1		474.7
Cash and cash equivalents—end of period	Cash and cash equivalents—end of period	$	479.3	$	551.8	Cash and cash equivalents—end of period	$	364.2	$	278.8

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

TELEDYNE TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~October~~July 2, ~~2022~~2023

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 ~~October~~July 2, ~~2022~~2023 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the ~~third~~second quarter and ~~nine~~six months ended ~~October~~July 2, ~~2022.~~2023. The results of operations and cash flows for the periods ended ~~October~~July 2, ~~2022~~2023 and cash flows for the ~~nine~~six months ended ~~October~~July 2, ~~2022~~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 Financial 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 of the end of each period. The adoption of ASU 2022-04 did not have an impact on the Company's disclosures as the impact of supplier finance programs is not material to the Company's financial statements.

Note 2. Business Acquisitions

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

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.

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.

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


	2023
Acquisitions	Acquisition Date	Cash Paid (a)		Goodwill Acquired		Acquired Intangible Assets
ChartWorld	January 3, 2023	$	53.5	$	49.4	$	11.3

(a) Net of cash acquired
	2022
Acquisitions	Acquisition Date	Cash Paid (a)		Goodwill Acquired		Acquired Intangible Assets
ETM	October 28, 2022	$	87.7	$	33.2	$	20.9
NL Acoustics (acquisition of 80% interest)	July 15, 2022	11.9		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 for the 2022 and 2023 acquisitions included the acquired businesses’ market positions, growth opportunities in the markets in which they operate, their experienced work force and established operating infrastructures. The results of 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 segments.

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


	Second Quarter				%		Six Months				%
	2023		2022		Change		2023		2022		Change
Net sales (a):
Digital Imaging	$	793.3	$	775.8	2.3	%	$	1,565.8	$	1,526.3	2.6	%
Instrumentation	328.4		312.5		5.1	%	661.9		621.4		6.5	%

Aerospace and Defense Electronics	186.0		168.8		10.2	%	359.2		335.0		7.2	%
Engineered Systems	117.0		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	%
Instrumentation	81.4		73.6		10.6	%	162.1		145.2		11.6	%

Aerospace and Defense Electronics	53.2		44.1		20.6	%	100.2		87.0		15.2	%
Engineered Systems	11.5		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.


Identifiable assets:	July 2, 2023		January 1, 2023
Digital Imaging	$	11,341.3	$	11,432.3
Instrumentation	1,637.8		1,626.4

Aerospace and Defense Electronics	568.6		540.1
Engineered Systems	215.9		200.3
Corporate	392.7		554.9
Total identifiable assets	$	14,156.3	$	14,354.0

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 Quarter				Six Months
Instrumentation	2023		2022		2023		2022

Marine Instrumentation	$	127.4	$	115.3	$	255.6	$	227.2
Environmental Instrumentation	115.3		115.5		233.2		229.5

Test and Measurement Instrumentation	85.7		81.7		173.1		164.7
Total	$	328.4	$	312.5	$	661.9	$	621.4

Note 4. Revenue Recognition and Contract Balances

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


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

(a) U.S. Government sales include sales as a prime contractor or subcontractor.

(b) Primarily commercial sales


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

(a) U.S. Government sales include sales as a prime contractor or subcontractor.

(b) Primarily commercial sales


	Second Quarter Ended July 3, 2022						Second Quarter Ended July 3, 2022
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	165.6	$	610.2	$	775.8	$	348.3	$	183.3	$	163.7	$	80.5	$	775.8
Instrumentation	27.2		285.3		312.5		134.4		74.5		74.1		29.5		312.5
Aerospace and Defense Electronics	61.6		107.2		168.8		127.4		23.0		13.1		5.3		168.8
Engineered Systems	88.9		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


	Six Months Ended July 3, 2022						Six Months Ended July 3, 2022
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	307.1	$	1,219.2	$	1,526.3	$	685.5	$	367.1	$	313.3	$	160.4	$	1,526.3
Instrumentation	49.6		571.8		621.4		267.8		155.4		139.7		58.5		621.4
Aerospace and Defense Electronics	121.5		213.5		335.0		251.3		45.6		27.3		10.8		335.0
Engineered Systems	175.3		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

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, 2023		January 1, 2023
Accrued liabilities	$	216.7	$	187.6
Other long-term liabilities	20.9		20.2



Total contract liabilities	$	237.6	$	207.8

The Company recognized revenue of $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 ~~year, gain~~period earnings through a cumulative catch-up basis. This method recognizes, in the

current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly.

The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first six months of 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

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


	Digital Imaging		Instrumentation		Aerospace and Defense Electronics		Engineered Systems		Total


















Balance at January 1, 2023	$	6,780.4	$	913.2	$	161.8	$	17.6	$	7,873.0
Current year acquisitions	49.4		—		—		—		49.4
Foreign currency changes and other	13.4		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, 2023						January 1, 2023
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Proprietary technology	$	1,664.7	$	576.3	$	1,088.4	$	1,667.7	$	497.4	$	1,170.3
Customer list/relationships	605.4		198.6		406.8		596.1		177.0		419.1
Patents	0.6		0.6		—		0.6		0.6		—
Non-compete agreements	0.9		0.9		—		0.9		0.9		—
Trademarks	9.9		5.1		4.8		7.1		4.4		2.7
Backlog	16.4		16.2		0.2		16.1		15.8		0.3
Total intangibles subject to amortization	2,297.9		797.7		1,500.2		2,288.5		696.1		1,592.4
Intangibles not subject to amortization:
Trademarks	849.5		—		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 ~~debt extinguishment~~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 ~~presented as separate line item on~~required in 2023. The Company will perform its annual analysis during the ~~income statement.~~fourth quarter of 2023.

Note 6. Supplemental Balance Sheet Information

The Company had ~~$118.1~~$47.1 million and $167.1 million of cash equivalents at ~~October~~July 2, ~~2022~~2023 and ~~an immaterial amount of cash equivalents at~~ January ~~2, 2022.~~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

~~Note 2. Business Combinations, Goodwill~~Accounts receivable is presented net of an allowance for doubtful accounts of $9.6 million at July 2, 2023 and ~~Acquired Intangible Assets~~$11.7 million at January 1, 2023.

~~Acquisition~~Inventories, net

Inventories are stated at current cost, net of ~~FLIR Systems, Inc.~~

~~On May 14, 2021, Teledyne acquired the outstanding stock of FLIR Systems, Inc. ( “FLIR”)~~reserves for ~~approximately $8.1 billion, comprising of net cash payments of $3.7 billion, net Teledyne share issuances of $3.9 billion,~~excess, slow moving and the assumption of FLIR debt of $0.5 billion. FLIR stockholders received $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share, 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 is 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. FLIR is part of the Digital Imaging segment.

The significant factors that resulted in recognition of goodwill were: (a) the purchase price was based on cash flow and return on capital projections assuming integration with our businesses and (b) the calculation of the fair value of tangible and intangible assets acquired that qualified for recognition. Goodwill resulting from the FLIR acquisition will not be deductible for tax purposes.

~~The following table presents the final purchase price allocation for FLIR, as the measurement period closed in the second quarter of 2022. We accounted for the FLIR acquisition~~obsolete inventory. Inventories are primarily valued under the ~~acquisition~~FIFO method and measured 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 deemed reasonable by the Company.


~~Fair values allocated to the assets acquired and liabilities assumed - FLIR (in millions):~~
~~Cash and cash equivalents~~	$	~~287.7~~
~~Accounts receivables, net~~	~~241.3~~
~~Unbilled receivables, net~~	~~72.1~~
~~Inventories, net~~	~~519.4~~
~~Prepaid expenses and other current assets~~	~~54.8~~
~~Total current assets~~	~~1,175.3~~

~~Property, plant and equipment~~	~~354.1~~
~~Goodwill~~	~~5,939.7~~
~~Acquired intangible assets~~	~~2,490.0~~
~~Other long-term assets~~	~~141.9~~
~~Total assets acquired~~	$	~~10,101.0~~

~~Accounts payable~~	~~144.7~~
~~Accrued liabilities~~	~~612.1~~
~~Total current liabilities assumed~~	~~756.8~~

~~Long-term debt, net~~	~~496.8~~
~~Long-term deferred tax liabilities~~	~~603.3~~
~~Other long-term liabilities~~	~~335.5~~
~~Total liabilities assumed~~	~~2,192.4~~
~~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 acquisitionor average cost 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, and we received notification in the fourth quarter of 2022 that this appeal was denied.

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.

~~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 2021 (dollars in millions):~~

Intangibles subject to amortization: Intangible Assets Weighted average useful life in years
Proprietary technology $ 1,355.0 9.7
Customer list/relationships 450.0 14.4
Total intangibles subject to amortization 1,805.0 10.9
Intangibles not subject to amortization:
Trademarks 685.0
Total acquired intangible assets $ 2,490.0

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:~~

Third Quarter (a) Nine Months (a)
(unaudited - in millions, except per share amounts) 2021 2021
Net sales $ 1,311.9 $ 3,859.9
Net income $ 164.3 $ 356.8
Basic earnings per common share $ 3.53 $ 8.50
Diluted earnings per common share $ 3.44 $ 8.28
(a) The above unaudited proforma information is presented for the FLIR acquisition as it is considered a material acquisition.

~~Acquisition of 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 net cash during the period,~~ with an immaterial amount ~~payable next year. NL Acoustics, located in Helsinki, Finland, designs and manufactures acoustics imaging instruments and predictive maintenance solutions. NL Acoustics is part~~ of inventories valued under the ~~Digital Imaging segment.~~

The minority ownership interest in shares of NL Acoustics held by a third party is classified as a redeemable noncontrolling interest on the condensed consolidated balance sheet due to a put option under which the third party may require the Company to purchase the remaining ownership interest, with the put option exercisable beginning in the third quarter of 2025. The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value and its carrying amount adjusted for net income (loss) attributable to the noncontrolling interest. Adjustments to the carrying value of the redeemable noncontrolling interest are recorded through retained earnings. Changes in the redeemable noncontrolling interest balance during the period were not material.

~~Goodwill and Acquired Intangible Assets~~

Teledyne’s goodwill was $7,718.2 million at October 2, 2022 and $7,986.7 million at January 2, 2022, with the decrease primarily related to the impact of foreign currency translation. Teledyne’s net acquired intangible assets were $2,421.8 million at October 2, 2022 and $2,741.6 million at January 2, 2022. The decrease in the balance of net acquired intangible assets primarily reflected the impact of foreign currency translation as well amortization of acquired intangible assets.LIFO

~~Acquired intangible assets~~method. Inventory balances are summarized ~~as follows:~~
October 2, 2022 January 2, 2022
Acquired intangible assets (in millions):
Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount
Proprietary technology $ 1,610.4 $ 445.8 $ 1,164.6 $ 1,767.7 $ 358.2 $ 1,409.5
Customer list/relationships 577.2 163.3 413.9 616.2 141.8 474.4
Patents 0.6 0.6 — 0.6 0.6 —
Non-compete agreements 0.9 0.9 — 0.9 0.9 —
Trademarks 5.4 4.2 1.2 4.5 3.9 0.6
Backlog 15.4 15.4 — 16.3 16.3 —
Total intangibles subject to amortization 2,209.9 630.2 1,579.7 2,406.2 521.7 1,884.5
Intangibles not subject to amortization:
Trademarks 842.1 — 842.1 857.1 — 857.1
Total acquired intangible assets $ 3,052.0 $ 630.2 $ 2,421.8 $ 3,263.3 $ 521.7 $ 2,741.6

~~Note 3. Accumulated Other Comprehensive Income (Loss)~~

~~The changes in accumulated other comprehensive income (loss) ("AOCI") by component, net of tax, for the third quarter and nine months ended October 2, 2022 and October 3, 2021 are~~ as follows (in millions):
Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of July 3, 2022 $ (316.4) $ 0.8 $ (289.4) $ (605.0)
   Other comprehensive income (loss) before reclassifications (357.1) 7.7 — (349.4)
   Amounts reclassified from AOCI — (13.9) 4.1 (9.8)
Net other comprehensive income (loss) (357.1) (6.2) 4.1 (359.2)
Balance as of October 2, 2022 $ (673.5) $ (5.4) $ (285.3) $ (964.2)
Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of July 4, 2021 $ (80.4) $ 2.7 $ (339.0) $ (416.7)
   Other comprehensive income (loss) before reclassifications (44.0) 2.0 — (42.0)
   Amounts reclassified from AOCI — (6.5) 4.4 (2.1)
Net other comprehensive income (loss) (44.0) (4.5) 4.4 (44.1)
Balance as of October 3, 2021 $ (124.4) $ (1.8) $ (334.6) $ (460.8)


	Balance at
	July 2, 2023		January 1, 2023
Raw materials and supplies	$	600.2	$	563.7
Work in process	180.3		156.8
Finished goods	190.1		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):	2023		2022
Balance at beginning of year	$	50.3	$	49.5
Product warranty expense	8.2		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, 2023		January 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 2024	450.0		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 2026	450.0		450.0
Term loan due May 2026, variable rate of 6.45% at July 2, 2023 and 5.61% at January 1, 2023	110.0		245.0
2.25% Fixed Rate Senior Notes due April 2028	700.0		700.0
2.50% Fixed Rate Senior Notes due August 2030	485.0		485.0
2.75% Fixed Rate Senior Notes due April 2031	1,030.0		1,040.0











Other debt	2.0		2.1
Debt discount and debt issuance costs	(23.7)		(26.5)
Total debt, net	3,353.3		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.

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 of 2023 was 21.0% and 20.6%, respectively, compared with an effective income tax rate for the second quarter and first six months of 2022 of 22.7% and 9.6%, respectively. The second quarter and first six months of 2023 includes net discrete income tax benefits of $1.4 million and $8.0 million, respectively, compared with net discrete income tax benefits of $1.0 million and $57.5 million for the second quarter and first six months of 2022, respectively. The second quarter and first six months of 2023 net discrete tax benefits include $1.3 million and $7.2 million, respectively, related to stock-based accounting compared with $1.8 million and $8.5 million, of net discrete tax benefits related to stock-based accounting for the second quarter and first six months of 2022, respectively. The second quarter and first six months of 2023 also includes net discrete income tax expense of $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 $0.6 million 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 Quarter				Six Months
	2023		2022		2023		2022
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 loss	2.6		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 Company 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 $8.4 million and $16.3 million for the second quarter and first six months of 2023, respectively, and $6.4 million and $15.4 million for the second quarter and first six months of 2022, respectively.

Stock option activity for the second quarter and first six months of 2023 is as follows:



	Second Quarter			Six Months
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Beginning balance	1,622,944	$	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 balance	1,587,655	$	230.70	1,587,655	$	230.70
Exercisable at end of period	1,333,599	$	198.75	1,333,599	$	198.75

Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of January 2, 2022 $ (129.0) $ (3.4) $ (297.6) $ (430.0)
   Other comprehensive income (loss) before reclassifications (544.5) 28.4 — (516.1)
   Amounts reclassified from AOCI — (30.4) 12.3 (18.1)
Net other comprehensive income (loss) (544.5) (2.0) 12.3 (534.2)
Balance as of October 2, 2022 $ (673.5) $ (5.4) $ (285.3) $ (964.2)
Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of January 3, 2021 $ (84.6) $ 2.3 $ (347.8) $ (430.1)
   Other comprehensive income (loss) before reclassifications (39.8) 13.7 — (26.1)
   Amounts reclassified from AOCI — (17.8) 13.2 (4.6)
Net other comprehensive income (loss) (39.8) (4.1) 13.2 (30.7)
Balance as of October 3, 2021 $ (124.4) $ (1.8) $ (334.6) $ (460.8)

~~The reclassifications out of AOCI to net income~~Restricted stock activity for the ~~third quarter and nine~~first six months ~~ended October 2, 2022 and October 3, 2021 are~~of 2023 is as ~~follows (in millions):~~follows:
Amount Reclassified from AOCI for the Three Months Ended Amount Reclassified from AOCI for the Three Months Ended Statement of Income
October 2, 2022 October 3, 2021 Presentation
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives $ (18.5) $ (8.7) See Note 4
Income tax impact 4.6 2.2 Provision for income taxes
Total $ (13.9) $ (6.5)
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 loss 5.8 6.7 Costs and expenses
Total before tax 5.4 5.8
Income tax impact (1.3) (1.4) Provision for income taxes
Total $ 4.1 $ 4.4

Amount Reclassified from AOCI for the Nine Months Ended Amount Reclassified from AOCI for the Nine Months Ended Statement of Income
October 2, 2022 October 3, 2021 Presentation
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives $ (40.5) $ (23.8) See Note 4
Income tax impact 10.1 6.0 Provision for income taxes
Total $ (30.4) $ (17.8)
Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost (1.2) (2.7) Costs and expenses
Amortization of net actuarial loss 17.4 20.1 Costs and expenses
Total before tax 16.2 17.4
Income tax impact $ (3.9) $ (4.2) Provision for income taxes
Total $ 12.3 $ 13.2


	Shares	Weighted average fair value per share
Balance at January 1, 2023	166,395	$	368.62
Granted	19,763	$	370.82
Vested	(24,435)	$	394.33
Forfeited/Canceled	(5,313)	$	356.97
Balance at July 2, 2023	156,410	$	363.52

~~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, variable 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 nine months ended October 2, 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 $47.8 million, which was primarily 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 losses recorded in AOCI, net of tax, for the forward contracts that will mature in the next twelve months total $8.0 million. These losses are expected to be offset by anticipated gains in the value of the forecasted underlying hedged item. Amounts related to the cross currency swaps and interest rate swap expected to be reclassified from AOCI into income in the next twelve months total $1.1 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 October 2, 2022, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling $172.0 million. These foreign currency forward contracts have maturities ranging from December 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 $22.9 million. These foreign currency forward contracts have maturities ranging from December 2022 to February 2024. The cross currency swaps have notional amounts of €130.0 million and $125.0 million, and €156.0 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 October 2, 2022, Teledyne had no forward contracts designated as fair value hedges.

The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the third quarter and nine months ended October 2, 2022 and October 3, 2021 was as follows (in millions):
Third Quarter Nine Months
2022 2021 2022 2021
Net gain (loss) recognized in AOCI - Foreign Exchange Contracts (a) $ 10.2 $ (5.6) $ 36.0 $ 18.3
Net gain (loss) reclassified from AOCI into revenue - Foreign Exchange Contracts (a) $ (1.0) $ 1.8 $ (1.4) $ 7.8
Net gain (loss) recognized in AOCI - Interest Rate Contracts $ 0.3 $ (0.1) 2.3 $ (0.1)
Net gain (loss) reclassified from AOCI into other income and expense, net - Foreign Exchange Contracts (b) $ 17.8 $ 6.4 $ 38.9 $ 14.7
Net gain reclassified from AOCI into interest expense - Foreign Exchange Contracts $ 1.6 $ 0.9 $ 3.5 $ 2.6
Net gain (loss) reclassified from AOCI into interest expense - Interest Rate Contracts $ 0.3 $ (0.4) $ (0.3) $ (1.2)

~~(a) Effective portion, pre-tax~~

~~(b) Amount reclassified to offset earnings impact 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 associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. As of October 2, 2022, Teledyne had non-designated foreign currency contracts of this type, primarily in the following pairs (in millions):
Contracts to Buy Contracts to Sell
Currency Amount Currency Amount
Canadian Dollars $ 236.1 U.S. Dollars US$ 178.6
Great Britain Pounds £ 89.5 U.S. Dollars US$ 104.9
Euros € 237.4 U.S. Dollars US$ 237.2
Danish Krone DKR 74.6 U.S. Dollars US$ 10.0
Swedish Krona SEK 491.1 Euros € 46.0
U.S. Dollars US$ 15.6 Swedish Krona SEK 168.8
Norwegian Krone kr 214.7 Swedish Krona SEK 231.4

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 for the third quarter and nine months ended October 2, 2022 was expense of $40.5 million and $70.9 million, respectively. The effect of derivative instruments not designated as cash flow hedges in other income and expense for the third quarter and nine months ended October 3, 2021 was expense of $11.7 million and $16.5 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 Company has elected to use the income approach to value the derivatives, using observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability (specifically SOFR and EURIBOR cash and swap rates, foreign currency forward rates and cross currency basis spreads). Mid-market pricing is used as a practical expedient for fair value measurements. The fair value measurement of an asset or liability must reflect the nonperformance 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.

The fair values of the Company’s derivative financial instruments are presented below. All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy (in millions):
Asset/(Liability) Derivatives Balance sheet location October 2, 2022 January 2, 2022
Derivatives designated as hedging instruments:
Cash flow forward contracts Other current assets $ — $ 0.3
Cash flow forward contracts Accrued liabilities (12.7) (1.2)
Cash flow cross currency swap Other current assets 2.3 3.8
Cash flow cross currency swap Other non-current liabilities (2.5) (9.4)
Cash flow cross currency swap Other current assets (accrued interest) 0.1 0.1
Interest rate contracts Other long-term liabilities — (0.1)
Interest rate contracts Other current liabilities — (1.2)
Interest rate contracts Other current assets 1.3 —
Total derivatives designated as hedging instruments (11.5) (7.7)
Derivatives not designated as hedging instruments:
Non-designated forward contracts Other current assets 2.0 4.7
Non-designated forward contracts Accrued liabilities (19.0) (2.1)
Total derivatives not designated as hedging instruments (17.0) 2.6
Total derivatives, net $ (28.5) $ (5.1)

Note 5.11. Earnings Per Share

For the third quarter and first nine months of 2022, 397,854 and 262,894 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 third quarter and first nine 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):


		Third Quarter		Nine Months			Second Quarter		Six Months
		2022	2021	2022	2021		2023	2022	2023	2022

Weighted average basic common shares outstanding	Weighted average basic common shares outstanding	46.8	46.6	46.8	42.0	Weighted average basic common shares outstanding	47.0	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 outstanding	Weighted average diluted common shares outstanding	47.7	47.7	47.7	43.1	Weighted average diluted common shares outstanding	47.9	47.7	47.9	47.7

For the second quarter and first six months of 2023 and 2022, the Company excluded approximately 0.2 million of stock options in the computation of diluted earnings per share because the effect of their inclusion would have been anti-dilutive.

Note 12. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) ("AOCI") by component, net of tax, for the second quarter and six months ended July 2, 2023 and July 3, 2022 are as follows (in millions):


	Foreign Currency Translation		Cash Flow Hedges and Other		Pension and Postretirement Benefits		Total
Balance at April 2, 2023	$	(476.6)	$	3.8	$	(254.0)	$	(726.8)
Other comprehensive income (loss) before reclassifications	12.3		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 Translation		Cash Flow Hedges and Other		Pension and Postretirement Benefits		Total
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)


	Foreign Currency Translation		Cash Flow Hedges and Other		Pension and Postretirement Benefits		Total
Balance as of January 1, 2023	$	(472.3)	$	1.3	$	(255.5)	$	(726.5)
Other comprehensive income (loss) before reclassifications	8.0		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 Translation		Cash Flow Hedges and Other		Pension and Postretirement Benefits		Total
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 AOCI to net income for the second quarter and six months ended July 2, 2023 and July 3, 2022 are as follows (in millions):


	Amount Reclassified from AOCI for the Quarter Ended		Amount Reclassified from AOCI for the Quarter Ended		Statement of Income (Loss) Presentation
	July 2, 2023		July 3, 2022
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives	$	(1.8)	$	(15.6)	See Note 13
Income tax impact	0.4		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 loss	1.8		5.7		Costs and expenses
Total before tax	1.4		5.3
Income tax impact	(0.5)		(1.3)		Provision for income taxes
Total	$	0.9	$	4.0


	Amount Reclassified from AOCI for the Six Months Ended		Amount Reclassified from AOCI for the Six Months Ended		Statement of Income (Loss) Presentation
	July 2, 2023		July 3, 2022
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives	$	(11.6)	$	(22.0)	See Note 13
Income tax impact	2.9		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 loss	4.3		11.6		Costs and expenses
Total before tax	3.4		10.8
Income tax impact	$	(1.0)	$	(2.6)	Provision for income taxes
Total	$	2.4	$	8.2

Note ~~6. Stock-Based Compensation Plans~~13. Derivative Instruments and Hedging Activities

~~Teledyne has long-term incentive plans pursuant~~The Company's primary exposure to ~~which it has granted non-qualified stock options, restricted stock~~market risk relates to changes in foreign currency exchange rates and ~~performance shares~~interest rates. The Company’s primary foreign currency risk management objective is to ~~certain employees. Performance shares are not significant.~~protect the U.S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company ~~also has non-employee Board~~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 Approach

Quantitative 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 depends on the use of ~~Director stock compensation plans, pursuant~~the derivative instrument and whether it is designated 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 the condensed consolidated balance sheets in AOCI to the extent the derivative instrument is effective in mitigating the exposure related to the anticipated transaction. The amount recorded within AOCI is reclassified into earnings in the same period during which ~~common stock, stock options and restricted stock units have been issued to its directors.~~

~~Stock Incentive Plan~~

~~Stock option compensation expense was $3.7 million~~the underlying hedged transaction affects earnings. The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the ~~third~~second quarter and six months ended July 2, 2023 and July 3, 2022 was as follows (in millions):


	Second Quarter				Six Months
	2023		2022		2023		2022
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 and $5.8 million the third quarter of 2021. Stock option compensation expense was $11.6 million~~liability hedged by cross currency swap

Net deferred losses recorded in AOCI for the ~~first nine~~forward contracts that will mature in the next twelve months total $0.5 million, net of ~~2022 and $13.6 million for~~taxes. These losses are expected to be offset by anticipated gains in the ~~first nine months~~value of ~~2021. The Company issues shares of common stock upon~~ the ~~exercise of stock options.~~forecasted underlying hedged item.

~~Stock option transactions~~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 Buy			Contracts to Sell
Currency	Amount			Currency	Amount
Canadian Dollars	$	257.0		U.S. Dollars	US$	192.1

Canadian Dollars	$	7.7		Euros	€	5.3

Great Britain Pounds	£	29.7		U.S. Dollars	US$	37.1


Euros	€	56.7		U.S. Dollars	US$	61.4


Danish Krone	DKR	93.0		U.S. Dollars	US$	13.5
Swedish Krona	SEK	158.8		Euros	€	13.6

Norwegian Krone	kr	64.7		U.S. Dollars	US$	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 for the ~~third~~second quarter and ~~nine~~six months ended July 2, 2023 was income of $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 ~~summarized as follows:~~presented below. All fair values for these derivative instruments were measured using Level 2 inputs in the fair value hierarchy (in millions):
2022
Third Quarter Nine Months
Shares Weighted
Average
Exercise
Price Shares Weighted
Average
Exercise
Price
Beginning balance 1,649,885 $ 210.01 1,793,857 $ 206.08
Exercised (6,037) $ 143.86 (135,495) $ 135.89
Canceled (5,969) $ 419.50 (20,483) $ 397.60
Ending balance 1,637,879 $ 209.49 1,637,879 $ 209.49
Exercisable at end of period 1,437,305 $ 179.97 1,437,305 $ 179.97


Asset/(Liability) Derivative Instruments	Balance sheet location	July 2, 2023		January 1, 2023
Derivatives designated as hedging instruments:
Cash flow forward contracts	Other current assets	$	2.3	$	0.4
Cash flow forward contracts	Accrued liabilities	(1.8)		(6.8)
Interest rate contracts	Other current assets	—		0.7


Cash flow cross currency swap	Other current assets	3.1		2.7
Cash flow cross currency swap	Accrued liabilities	—		(14.0)
Cash flow cross currency swap	Other 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 contracts	Other current assets	5.0		3.5
Non-designated forward contracts	Accrued liabilities	(1.9)		(7.0)
Total derivatives not designated as hedging instruments		3.1		(3.5)
Total derivative instruments, net		$	(14.5)	$	(38.8)

Note 14. Commitments and Contingencies

Effective April 24, 2022, the ~~Company granted 135,751 stock options at an exercise price~~United States Department of ~~$360.39 per share~~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 ~~a weighted average fair value~~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 ~~$124.44 per share.~~

~~Restricted Stock~~

~~The following table shows~~ the ~~restricted stock activity for the first nine months of 2022:~~
Shares Weighted average fair value per share
Balance, January 2, 2022 (a) 87,180 $ 352.94
Granted 19,492 $ 384.76
Vested (33,739) $ 300.66
Forfeited/Canceled (3,578) $ 403.34
Balance, October 2, 2022 69,355 $ 384.72

~~(a) includes restricted stock units issued on May 14, 2021~~trade compliance program, adverse disclosures and findings could cause additional expenses in connection with ~~the FLIR acquisition.~~further remedial measures or potential penalties.

~~On October 25, 2022, the Company granted 89,472 restricted stock units with a weighted average fair value of $360.39 per share.~~

~~Note 7. Inventories~~

Inventories are stated at current cost, net of reserves for excess, slow moving and obsolete inventory. Inventories are primarily valued under the FIFO method or average cost method, with an immaterial amount of inventories valued under the LIFO method.
Balance at
Inventories (in millions): October 2, 2022 January 2, 2022
Raw materials and supplies $ 526.9 $ 479.8
Work in process 157.8 123.0
Finished goods 149.4 150.1
Total inventories, net $ 834.1 $ 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 nine months of 2022 was approximately $30.5 million of favorable operating income, primarily related to favorable changes in estimates that impacted revenue within the Digital Imaging and Aerospace and Defense Electronics segments. The net aggregate effects of changes in estimates on contracts accounted for under the cost-to-cost method in the first nine months of 2021 was approximately $16.9 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

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~~changes~~The Company has made other voluntary disclosures to the 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 ~~estimates~~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, ~~individual contract were~~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 ~~condensed consolidated statements~~Company’s financial position, results of ~~income for any period presented.~~

~~Contract Liabilities~~

~~We recognize a liability for interim~~operations or cash flows in 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 $155.5 million and $21.2 million as of October 2, 2022, and $186.0 million and $25.3 million as of January 2, 2022, respectively, with the decrease in contract liabilities from the beginning of the year due to timing and use of advance payments received on certain contracts within the Digital Imaging and Aerospace and Defense Electronic segments.

The Company recognized revenue of $129.6 million during the nine months ended October 2, 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~~following the period end date and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of October 2, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,188.5 million. The Company expects approximately 73% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 27% 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.
Nine Months
Warranty Reserve (in millions): 2022 2021
Balance at beginning of year $ 49.5 $ 22.4
Product warranty expense 4.5 9.1
Deductions (7.3) (6.8)
Acquisition 1.6 23.2
Balance at end of period $ 48.3 $ 47.9

~~Accounts Receivable, net~~

~~Accounts receivable is presented net of an allowance for doubtful accounts of $11.1 million at October 2, 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.~~outcome becomes estimable or known.

The Company’s effective income tax rate for the third quarter and first nine months of 2022 was 23.0% and 14.3%, respectively. The Company's effective income tax rate for the third quarter and first nine months of 2021 was 20.1% and 21.5%, respectively. The third quarter of 2022 includes net discrete income tax benefits of $0.3 million compared with net discrete income tax benefits of $6.3 million. The first nine months of 2022 includes net discrete income tax benefits of $57.8 million compared with net discrete income tax benefits of $8.5 million. The third quarter and first nine months of 2022 net discrete income tax amounts include $0.2 million and $8.7 million, respectively, related to share-based accounting. The third quarter and first nine months of 2022 also includes non-cash income tax benefits of $0.1 million and non-cash income tax benefits of $49.1 million, with the first nine months of 2022 primarily related to the resolution of certain FLIR tax reserves. The third quarter and first nine months of 2021 net discrete income tax amounts include $3.0 million and $9.9 million, respectively, related to share-based accounting. The third quarter and first nine months of 2021 net discrete income tax amounts also include income tax benefits of $4.9 million primarily related to research and development and foreign tax credits. The first nine 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 2021 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

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~~third quarter and first nine months of 2022, respectively, and 23.9% for the third quarter and first nine months of 2021, respectively.~~

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.

~~Note 10. Long-Term Debt and Letters of Credit~~
Balance at
Long-Term Debt (in millions): October 2, 2022 January 2, 2022
$1.15 billion credit facility due March 2026, weighted average variable rate of 4.15% at October 2, 2022 and 1.20% at January 2, 2022 $ 125.0 $ 125.0
Term loan due October 2024, variable rate of 4.37% at October 2, 2022 and 1.35% at January 2, 2022, swapped to a Euro fixed rate of 0.6120% 149.9 150.6
0.65% Fixed Rate Senior Notes due April 2023 300.0 300.0
0.95% Fixed Rate Senior Notes due April 2024 450.0 450.0
1.60% Fixed Rate Senior Notes due April 2026 450.0 450.0
2.25% Fixed Rate Senior Notes due April 2028 700.0 700.0
2.50% Fixed Rate Senior Notes due August 2030 485.0 500.0
2.75% Fixed Rate Senior Notes due April 2031 1,040.0 1,100.0
Term loan due May 2026, variable rate of 4.30% at October 2, 2022 and 1.35% at January 2, 2022 245.0 355.0
Other debt 1.4 0.7
Debt discount and debt issuance costs (27.9) (31.9)
Total debt, net 3,918.4 4,099.4
Less: current portion of long-term debt (300.0) —
Total long-term debt, net of current portion $ 3,618.4 $ 4,099.4

The Company repaid $185.0 million of debt during the first nine months of 2022. The Company made $110.0 million of floating rate debt payments which reduced its term loan due May 2026. The Company also 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.Environmental Remediation Obligations

At ~~October~~July 2, 2022, $1,004.0 million was available under the $1.15 billion credit facility, after reductions of $125.0 million in borrowings and $21.4 million in outstanding letters of credit. Our bank credit agreements require Teledyne to comply with various financial and operating covenants and at October 2, 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 debt is considered a level 2 fair value hierarchy and is valued based on observable market data. As of October 2, 2022 and January 2, 2022, the aggregate fair values of our borrowings were $3,414.0 million and $4,146.6 million, respectively, and the carrying values were $3,946.3 million and $4,130.0 million, respectively.

~~Note 11. Leases~~

Operating lease expense was $9.0 million and $28.0 million for the third quarter and first nine months of 2022. Operating lease expense was $10.0 million and $24.3 million for the third quarter and first nine months of 2021.

~~Note 12. Lawsuits, Claims, Commitments, Contingencies and Related Matters~~

For a further description of the Company’s commitments and contingencies, reference is made to Note 14 of the Company’s financial statements as of and for the fiscal year ended January 2, 2022, included in the 2021 Form 10-K.

~~At October 2, 2022,~~2023, the Company’s reserves for environmental remediation obligations totaled ~~$5.9~~$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 accruals~~pay the amounts recorded over many years and will complete remediation of all sites with which it has been identified in up to 30 years.

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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 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 two internal audits of its EAR export compliance programs. The first internal audit was completed and a voluntary disclosure was filed in October 2021 to report potential violations. The second internal audit was completed in 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.Legal Matters

A number of other lawsuits, claims and proceedings have been or may be asserted against the Company, including those pertaining to product liability, acquisitions, patent infringement, contracts, environmental, employment and employee benefits matters. While the outcome of ~~litigation~~such 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.

~~Note 13. Pension Plans~~

Third Quarter Nine Months
2022 2021 2022 2021
Service cost — benefits earned during the period (in millions) $ 2.2 $ 2.6 $ 6.5 $ 8.0
Pension non-service income (in millions):
Interest cost on benefit obligation $ 6.0 $ 5.5 $ 17.8 $ 16.7
Expected return on plan assets (14.1) (14.2) (42.2) (42.7)
Amortization of net prior service cost (0.4) (0.8) (1.3) (2.5)
Amortization of net actuarial loss 5.6 6.7 17.1 20.0
Pension non-service income $ (2.9) $ (2.8) $ (8.6) $ (8.5)

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~~Note 14. Segment Information~~

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):~~
Third Quarter % Nine Months %
2022 2021 Change 2022 2021 Change
Net sales(a):
Digital Imaging (b) $ 777.9 $ 760.6 2.3 % $ 2,304.2 $ 1,603.4 43.7 %
Instrumentation 306.4 287.1 6.7 % 927.8 864.7 7.3 %
Aerospace and Defense Electronics 169.5 161.8 4.8 % 504.5 465.4 8.4 %
Engineered Systems 109.8 102.4 7.2 % 303.9 305.1 (0.4) %
Total net sales $ 1,363.6 $ 1,311.9 3.9 % $ 4,040.4 $ 3,238.6 24.8 %
Operating income:
Digital Imaging (b) $ 133.7 $ 94.9 40.9 % $ 367.3 $ 231.5 58.7 %
Instrumentation 71.1 63.0 12.9 % 216.3 187.0 15.7 %
Aerospace and Defense Electronics 44.3 35.9 23.4 % 131.3 92.6 41.8 %
Engineered Systems 11.9 11.5 3.5 % 29.9 37.4 (20.1) %
Corporate expense (c) (15.8) (15.7) 0.6 % (46.6) (119.3) (60.9) %
Operating income $ 245.2 $ 189.6 29.3 % $ 698.2 $ 429.2 62.7 %
(a) Net sales excludes inter-segment sales of $4.8 million and $15.4 million for the third quarter and first nine months of 2022, respectively, and $5.4 million and $14.7 million for the third quarter and first nine 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 first nine months of 2022 includes $620.2 million in incremental net sales from FLIR.
(c) Corporate expense for the third quarter and first nine months of 2021 includes $0.3 million and $76.7 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: October 2, 2022 January 2, 2022
Digital Imaging $ 10,973.1 $ 11,756.8
Instrumentation 1,579.3 1,640.3
Aerospace and Defense Electronics 528.5 536.3
Engineered Systems 195.7 179.2
Corporate 549.8 317.7
Total identifiable assets $ 13,826.4 $ 14,430.3

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~~Product Lines~~

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

~~The following table provides a summary of the net sales by product line for the Instrumentation segment (in millions):~~
Third Quarter Nine Months
Instrumentation 2022 2021 2022 2021
Environmental Instrumentation $ 114.8 $ 108.0 $ 344.3 $ 335.6
Marine Instrumentation 110.0 104.7 337.2 311.6
Test and Measurement Instrumentation 81.6 74.4 246.3 217.5
Total $ 306.4 $ 287.1 $ 927.8 $ 864.7

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 nine months ended October 2, 2022, approximately 47% of net sales in the Engineered Systems segment were derived from fixed price contracts.

Third Quarter Ended October 2, 2022 Nine Months Ended October 2. 2022
Customer Type Customer Type
(in millions) United States Government (a) Other, Primarily Commercial Total United States Government (a) Other, Primarily Commercial Total
Net Sales:
Digital Imaging $ 156.3 $ 621.6 $ 777.9 $ 463.4 $ 1,840.8 $ 2,304.2
Instrumentation 29.5 276.9 306.4 79.1 848.7 927.8
Aerospace and Defense Electronics 62.8 106.7 169.5 184.3 320.2 504.5
Engineered Systems 99.1 10.7 109.8 274.4 29.5 303.9
$ 347.7 $ 1,015.9 $ 1,363.6 $ 1,001.2 $ 3,039.2 $ 4,040.4
(a) Includes sales as a prime contractor or subcontractor.

Third Quarter Ended October 2, 2022 Nine Months Ended October 2, 2022
Geographic Region (a) Geographic Region (a)
(in millions) United States Europe All other Total United States Europe All other Total
Net sales:
Digital Imaging $ 365.6 $ 215.6 $ 196.7 $ 777.9 $ 1,102.4 $ 620.9 $ 580.9 $ 2,304.2
Instrumentation 234.5 55.6 16.3 306.4 708.1 167.3 52.4 927.8
Aerospace and Defense Electronics 145.1 24.4 — 169.5 430.3 74.2 — 504.5
Engineered Systems 109.8 — — 109.8 303.9 — — 303.9
$ 855.0 $ 295.6 $ 213.0 $ 1,363.6 $ 2,544.7 $ 862.4 $ 633.3 $ 4,040.4
(a) Net sales by geographic region of origin.

~~Table of Contents~~

Third Quarter Ended October 3, 2021 Nine Months Ended October 3, 2021
Customer Type Customer Type
(in millions) United States Government (a) Other, Primarily Commercial Total United States Government (a) Other, Primarily Commercial Total
Net Sales:
Digital Imaging $ 182.3 $ 578.3 $ 760.6 $ 327.2 $ 1,276.2 1,603.4
Instrumentation 22.8 264.3 287.1 66.2 798.5 864.7
Aerospace and Defense Electronics 60.4 101.4 161.8 169.0 296.4 $ 465.4
Engineered Systems 92.1 10.3 102.4 279.7 25.4 305.1
$ 357.6 $ 954.3 $ 1,311.9 $ 842.1 $ 2,396.5 $ 3,238.6
(a) Includes sales as a prime contractor or subcontractor.

Third Quarter Ended October 3, 2021 Nine Months Ended October 3, 2021
Geographic Region (a) Geographic Region (a)
(in millions) United States Europe All other Total United States Europe All other Total
Net sales:
Digital Imaging $ 383.0 $ 198.4 $ 179.2 $ 760.6 $ 729.0 $ 433.7 $ 440.7 $ 1,603.4
Instrumentation 213.5 58.1 15.5 287.1 645.3 177.2 42.2 864.7
Aerospace and Defense Electronics 134.7 27.1 — 161.8 387.1 78.3 — 465.4
Engineered Systems 102.4 — — 102.4 305.1 — — 305.1
$ 833.6 $ 283.6 $ 194.7 $ 1,311.9 $ 2,066.5 $ 689.2 $ 482.9 $ 3,238.6
(a) Net sales by geographic region of origin.

~~Note 15. Subsequent Events~~

On October 28, 2022, the Company acquired ETM-Electromatic, Inc. ("ETM"), including ETM's manufacturing facility from an affiliate of ETM and its owners, for approximately $85 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 will be part of the Digital Imaging segment.

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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 ~~customer~~customer- 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/Overview~~Strategy

Our strategy continues to emphasize growth in our ~~core~~four 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 markets~~in which we sell our enabling technologies are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment among capital expenditures, acquisitions and 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 ~~internal~~through 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 connection~~Consistent with ~~this~~our strategy, ~~on May 14, 2021, Teledyne~~we completed one acquisition in the ~~acquisition~~first half of ~~FLIR~~2023 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 acquisition~~these acquisitions have been included ~~in Teledyne’s results~~ since the respective date of ~~the~~each acquisition. See Note 2 for additional information about our recent acquisitions.

At October 2, 2022, total debt was $3,918.4 million, compared with total debt of $4,099.4 million at January 2, 2022. During the first nine months of 2022, we made $110.0 million of floating rate debt payments which reduced our term loan due May 2026. In addition, during the first nine 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 October 2, 2022, $1,004.0 million was available under the $1.150 billion credit facility, after reductions of $125.0 million in borrowings and $21.4 million in outstanding letters of credit. During the first nine 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.

~~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 has impacted our business operations and practices, we experienced limited disruptions in the first nine 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.Trends Affecting Our Business

We have experienced supply chain challenges, including increased lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand. This has 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 ~~remainder~~second half of ~~2022 and likely into~~ 2023.

Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. ~~The strengthening of the U.S. dollar relative to other currencies adversely impacted~~See Note 13 for additional discussion around our ~~sales in both the third quarter~~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 2021 and thehedging activities.

~~Table of Contents~~

first nine 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, particularly in regard to increased energy prices and reduced energy availability to our European 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.

~~Results of Operations~~

Third Quarter Nine Months
(in millions) 2022 2021 2022 2021
Net sales $ 1,363.6 $ 1,311.9 $ 4,040.4 $ 3,238.6
Costs and expenses
Cost of sales 785.8 787.7 2,327.0 1,943.3
Selling, general and administrative expenses 283.7 279.3 861.4 768.2
Acquired intangible asset amortization 48.9 55.3 153.8 97.9
Total costs and expenses 1,118.4 1,122.3 3,342.2 2,809.4
Operating income 245.2 189.6 698.2 429.2
Interest and debt expense, net (22.0) (23.8) (66.8) (67.3)
Gain (loss) on debt extinguishment — — 10.6 (13.4)
Non-service retirement benefit income 2.9 2.8 8.6 8.4
Other income (expense), net 5.2 (0.7) 5.2 4.4
Income before income taxes 231.3 167.9 655.8 361.3
Provision for income taxes 53.1 33.8 93.7 77.8
Net income including noncontrolling interest $ 178.2 $ 134.1 $ 562.1 $ 283.5
Less: net income (loss) attributable to noncontrolling interest (0.1) — (0.1) —
Net income attributable to Teledyne $ 178.3 $ 134.1 $ 562.2 $ 283.5

Third Quarter % Nine Months %
(dollars in millions) 2022 2021 Change 2022 2021 Change
Net sales (a):
Digital Imaging (b) $ 777.9 $ 760.6 2.3 % $ 2,304.2 $ 1,603.4 43.7 %
Instrumentation 306.4 287.1 6.7 % 927.8 864.7 7.3 %
Aerospace and Defense Electronics 169.5 161.8 4.8 % 504.5 465.4 8.4 %
Engineered Systems 109.8 102.4 7.2 % 303.9 305.1 (0.4) %
Total net sales $ 1,363.6 $ 1,311.9 3.9 % $ 4,040.4 $ 3,238.6 24.8 %
Operating income:
Digital Imaging (b) $ 133.7 $ 94.9 40.9 % $ 367.3 $ 231.5 58.7 %
Instrumentation 71.1 63.0 12.9 % 216.3 187.0 15.7 %
Aerospace and Defense Electronics 44.3 35.9 23.4 % 131.3 92.6 41.8 %
Engineered Systems 11.9 11.5 3.5 % 29.9 37.4 (20.1) %
Corporate expense (c) (15.8) (15.7) 0.6 % (46.6) (119.3) (60.9) %
Total operating income $ 245.2 $ 189.6 29.3 % $ 698.2 $ 429.2 62.7 %
(a) Net sales excludes inter-segment sales of $4.8 million and $15.4 million for the third quarter and nine months of 2022, respectively, and $5.4 million and $14.7 million for the third quarter and nine 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 first nine months of 2022 includes $620.2 million in incremental net sales from FLIR.
(c) Corporate expense for the third quarter and nine months of 2021 includes $0.3 million and $76.7 million, respectively, in acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition.

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~~The table below presents net sales and cost~~Results of ~~sales by segment and total company:~~Operations
Third Quarter Nine Months
(dollars in millions) 2022 2021 2022 2021
Digital Imaging
Net sales $ 777.9 $ 760.6 $ 2,304.2 $ 1,603.4
Cost of sales $ 430.1 $ 449.3 $ 1,269.6 $ 931.8
Cost of sales as a % of net sales 55.3 % 59.1 % 55.1 % 58.2 %
Instrumentation
Net sales $ 306.4 $ 287.1 $ 927.8 $ 864.7
Cost of sales $ 163.2 $ 150.7 $ 494.0 $ 460.0
Cost of sales as a % of net sales 53.3 % 52.5 % 53.2 % 53.2 %
Aerospace and Defense Electronics
Net sales $ 169.5 $ 161.8 $ 504.5 $ 465.4
Cost of sales $ 101.2 $ 103.1 $ 307.4 $ 302.6
Cost of sales as a % of net sales 59.7 % 63.7 % 60.9 % 65.0 %
Engineered Systems
Net sales $ 109.8 $ 102.4 $ 303.9 $ 305.1
Costs of sales $ 91.3 $ 84.6 $ 256.0 $ 248.9
Cost of sales as a % of net sales 83.2 % 82.6 % 84.2 % 81.6 %
Total Company
Net sales $ 1,363.6 $ 1,311.9 $ 4,040.4 $ 3,238.6
Costs of sales $ 785.8 $ 787.7 $ 2,327.0 $ 1,943.3
Cost of sales as a % of net sales 57.6 % 60.0 % 57.6 % 60.0 %


	Second Quarter				%		Six Months				%
(in millions)	2023		2022		Change		2023		2022		Change
Net sales	$	1,424.7	$	1,355.8	5.1	%	$	2,808.0	$	2,676.8	4.9	%
Costs and expenses
Cost of sales	806.3		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 amortization	49.3		51.3		(3.9)	%	99.0		104.9		(5.6)	%
Total costs and expenses	1,168.6		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 extinguishment	1.6		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 taxes	234.9		221.5		6.0	%	458.6		424.5		8.0	%
Provision (benefit) for income taxes	49.4		50.2		(1.6)	%	94.3		40.6		132.3	%



Net income (loss) including noncontrolling interest	185.5		171.3		8.3	%	364.3		383.9		(5.1)	%



Less: net income (loss) attributable to noncontrolling interest	0.2		—		*		0.3		—		*
Net income (loss) attributable to Teledyne	$	185.3	$	171.3	8.2	%	$	364.0	$	383.9	(5.2)	%

~~Third~~* not meaningful


	Second Quarter				%		Six Months				%
(dollars in millions)	2023		2022		Change		2023		2022		Change
Net sales (a):
Digital Imaging	$	793.3	$	775.8	2.3	%	$	1,565.8	$	1,526.3	2.6	%
Instrumentation	328.4		312.5		5.1	%	661.9		621.4		6.5	%
Aerospace and Defense Electronics	186.0		168.8		10.2	%	359.2		335.0		7.2	%
Engineered Systems	117.0		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	%
Instrumentation	81.4		73.6		10.6	%	162.1		145.2		11.6	%
Aerospace and Defense Electronics	53.2		44.1		20.6	%	100.2		87.0		15.2	%
Engineered Systems	11.5		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 ~~2022 third~~2023 second quarter results compared with the ~~third~~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.~~

~~Third~~Second quarter of ~~2022~~2023 compared with the ~~third~~second quarter of ~~2021~~2022

Our ~~third~~second quarter of ~~2022~~2023 net sales increased ~~3.9%~~5.1%. Net income for the ~~third~~second quarter of ~~2022~~2023 increased ~~33.0%.~~8.2%, primarily driven by higher net sales. Net income per diluted share was ~~$3.74~~$3.87 for the ~~third~~second quarter of ~~2022,~~2023, compared with net income per diluted share of ~~$2.81.~~$3.59.

Net Sales

The ~~third~~second quarter of ~~2022~~2023 net sales, compared with the ~~third~~second quarter of ~~2021 net sales,~~2022, reflected higher net sales in each ~~segment, primarily driven by organic growth.~~segment.

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Cost of Sales

Cost of sales ~~decreased $1.9~~increased $17.7 million in the ~~third~~second quarter of 2022. Non-cash inventory step-up expense related to FLIR was $35.2 million for the third quarter of 2021, and there was no comparable amount recorded in the third quarter of 2022. The decrease in non-cash inventory step-up expense was primarily offset by higher net sales in the period.2023. Cost of sales as a percentage of net sales decreased for the ~~third~~second quarter of ~~2022~~2023 to ~~57.6%~~56.6% from ~~60.0%, primarily due to the decrease in inventory step-up expense related to FLIR in 2021.~~58.2%.

Selling, General and Administrative Expenses

~~Selling, general and administrative~~SG&A expenses, including research and development expense, increased ~~$4.4~~$26.6 million in the ~~third~~second quarter of ~~2022. Selling, general and administrative~~2023. SG&A expenses as a percentage of net sales for the ~~third~~second quarter of ~~2022, decreased~~2023 increased to ~~20.8%~~22.0% from ~~21.3%~~21.1%. Corporate expense, which is included in ~~selling, general and administrative~~SG&A expenses, was ~~$15.8~~$14.6 million for the ~~third~~second quarter of ~~2022,~~2023, compared with ~~$15.7~~$14.7 million. ~~Stock option~~Stock-based compensation expense was ~~$3.7~~$8.4 million for the ~~third~~second quarter of ~~2022~~2023 compared with ~~$5.8 million.~~$6.4 million, with the increase due to timing of grants in previous years.

Acquired Intangible Asset Amortization

Acquired intangible asset amortization for the ~~third~~second quarter of ~~2022~~2023 was ~~$48.9~~$49.3 million compared with ~~$55.3~~$51.3 million, with the decrease from the previous year related primarily to foreign currency translation ~~impacts.~~

~~Table~~impacts as well as certain finite-lived intangibles within the test and measurement instrumentation product line becoming fully amortized in the third quarter of ~~Contents~~

2022.

Pension Service Expense

Pension service expense is included in both cost of sales and selling general and administrative expense. For the ~~third~~second quarter of ~~2022~~2023, pension service expense was ~~$2.2~~$1.5 million, compared with ~~$2.6~~$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 ~~third~~second quarter of ~~2022~~2023 increased ~~29.3%~~11.6%. The ~~third~~second quarter of ~~2022,~~2023, compared with the ~~third~~second quarter of ~~2021,~~2022, reflected higher operating income in each business segment. ~~Non-cash inventory step-up expense related to FLIR was $35.2 million for the third quarter of 2021, and there was no comparable amount recorded in the third quarter of 2022.~~

~~Interest and Debt Expense, Non-Service Retirement Benefit~~Non-operating Income and ~~Other Income and Expense~~Expenses

Interest and debt expense, net of interest income, was ~~$22.0~~$22.3 million for the ~~third~~second quarter of ~~2022,~~2023, compared with ~~$23.8~~$22.5 million. Non-service retirement benefit income was $2.9 million for both the ~~third~~second quarter of ~~2022 compared with $2.8 million for the third quarter of 2021.~~2023 and 2022. Other income and expense, net was ~~income~~expense of ~~$5.2~~$3.4 million for the ~~third~~second quarter of ~~2022,~~2023 compared with ~~other expense~~income of ~~$0.7~~$1.0 million for the ~~third quarter of 2021, and primarily reflected higher income from deferred compensation plan activity in the third~~second quarter of 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 ~~third~~second quarter of ~~2022~~2023 was ~~23.0%,~~21.0% compared with ~~20.1%. The third~~an effective income tax rate of 22.7% for the second quarter of ~~2022 included~~2022. The second quarter of 2023 includes net discrete income tax benefits of ~~$0.3~~$1.4 million compared with net discrete income tax benefits of $1.0 million. The second quarter of 2023 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 ~~2021~~2022.

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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 $4.5 million for 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 compared with net discrete income tax benefits of $57.5 million. The first six months of 2023 net discrete tax ~~benefit~~benefits include $7.2 million related to stock-based accounting. The first six months of ~~$6.3 million, which included $3.0 million~~2022 net discrete income tax ~~benefit related to share-based accounting and an~~amounts include a non-cash income tax benefit of ~~$4.9~~$49.4 million primarily related to ~~research~~the resolution of certain FLIR tax reserves and ~~development and foreign tax credits.~~$8.5 million related to stock-based accounting. Excluding the net discrete income tax items in both periods, the effective tax rates would have been ~~23.1% for the third quarter of 2022 and 23.9% for the third 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 nine months of 2022 compared with the first nine months of 2021~~

~~The first nine months of 2022 net sales increased 24.8% and included $620.2 million in incremental net sales from the acquisition FLIR. Net income~~22.3% for the first ~~nine~~six months of ~~2022 increased 98.3%. Net income per diluted share was $11.79 for the first nine months of 2022 compared with net income per diluted share of $6.58. In the first nine months of 2021~~2023 and in connection with the FLIR acquisition, Teledyne incurred pretax expenses of $191.4 million, which included $51.2 million of transaction and integration-related costs, $51.0 million for the settlement of FLIR employee and director stock awards, $58.6 million in acquired inventory step-up expense and $30.6 million in bridge loan and debt extinguishment fees. The first nine months of 2022 included net discrete income tax benefits of $57.8 million, compared with $8.5 million.

~~Net Sales~~

The first nine months of 2022 net sales, compared with the first nine months of 2021 net sales, reflected higher net sales in each segment other than the Engineered Systems segment. The first nine 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 $383.7 million in the first nine months of 2022 and primarily reflected the impact of higher net sales. Cost of sales as a percentage of net sales for the nine 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, with non-cash inventory step-up expense related to FLIR of $58.6 million for the first nine months of 2021, and no comparable amount recorded in the first nine months of 2022.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses, including research and development, increased by $93.2 million in the first nine months of 2022 and primarily reflected the impact of higher net sales, partially offset by $101.9 million in 2021 for acquisition-related transaction and purchase accounting expenses related to the FLIR acquisition. Selling, general and administrative expenses for the first nine months of 2022, as a percentage of net sales, decreased to 21.3% compared with 23.7%. In the first nine months of 2022 and 2021, we recorded a total of $11.6 million and $13.6 million, respectively, in stock option compensation expense.

~~Acquired Intangible Asset Amortization~~

Acquired intangible asset amortization for the first nine months of 2022 was $153.8 million, compared with $97.9 million. The first nine months of 2022 includes $127.4 million in acquired intangible asset amortization from the FLIR acquisition compared with $68.4 million in the first nine months of 2021 due to the timing of the FLIR acquisition midway through the second quarter of 2021.

~~Table of Contents~~

~~Pension Service Expense~~

~~Pension service expense for the first nine months of 2022 was $6.5 million compared with $8.0 million.~~

~~Operating Income~~

Operating income for the first nine months of 2022 increased 62.7%. The first nine months of 2022 compared with the first nine months of 2021, reflected higher operating income in each segment other than the Engineered Systems segment. Corporate expense was $46.6 million in the first nine months of 2022 compared with $119.3 million, and the 2021 amount included $76.7 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 nine months of 2022 from the FLIR acquisition was $67.7 million.

~~Interest Expense, Debt Extinguishment, Non-Service Retirement Benefit Income and Other Income/Expense~~

Interest expense, net of interest income, was $66.8 million for the first nine months of 2022, compared with $67.3 million. During the first nine 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 nine 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 income of $5.2 million for the first nine months of 2022 compared with income of $4.4 million.

~~Income Taxes~~

The Company’s effective income tax rate for the first nine months of 2022 was 14.3% compared with 21.5%. The first nine months of 2022 reflected $57.8 million in net discrete income tax benefits, which included $49.1 million of net discrete income tax benefits primarily related to the resolution of certain FLIR tax reserves and an $8.7 million income benefit related to share-based accounting. The first nine months of 2021 reflected $8.5 million in net discrete income tax benefits, which included a $9.9 million income benefit related to share-based accounting, a $5.3 million income tax benefit related to the release of a valuation allowance and an income tax benefit of $4.9 million primarily related to research and development and foreign tax credits, partially offset by $11.5 million expense related to foreign tax rate changes. 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 first ~~nine~~six months of ~~2022 and 23.9% for the first nine months 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~~(a)~~


		Third Quarter						Nine Months							Second Quarter						Change				Six Months						Change
(dollars in millions)	(dollars in millions)	2022			2021 (a)			2022			2021 (a)			(dollars in millions)	2023			2022			$		%		2023			2022			$		%
Net sales	Net sales	$	777.9		$	760.6		$	2,304.2		$	1,603.4		Net sales	$	793.3		$	775.8		$	17.5	2.3	%	$	1,565.8		$	1,526.3		$	39.5	2.6	%
Cost of sales	Cost of sales	$	430.1		$	449.3		$	1,269.6		$	931.8		Cost of sales	$	427.2		$	434.3		$	(7.1)	(1.6)	%	$	846.5		$	839.5		$	7.0	0.8	%
Selling, general and administrative expenses		$	169.4		$	166.3		$	527.7		$	358.0
SG&A expense														SG&A expense	$	195.9		$	177.2		$	18.7	10.6	%	$	381.1		$	358.3		$	22.8	6.4	%
Acquired intangible asset amortization	Acquired intangible asset amortization	$	44.7		$	50.1		$	139.6		$	82.1		Acquired intangible asset amortization	$	45.6		$	46.4		$	(0.8)	(1.7)	%	$	91.4		$	94.9		$	(3.5)	(3.7)	%
Operating income	Operating income	$	133.7		$	94.9		$	367.3		$	231.5		Operating income	$	124.6		$	117.9		$	6.7	5.7	%	$	246.8		$	233.6		$	13.2	5.7	%
Cost of sales as a % of net sales		55.3		%	59.1		%	55.1		%	58.2		%
Selling, general and administrative expenses as a % of net sales		21.8		%	21.9		%	22.9		%	22.3		%
Acquired intangible asset amortization as a % of net sales		5.7		%	6.5		%	6.1		%	5.1		%
Operating income as a % of net sales		17.2		%	12.5		%	15.9		%	14.4		%
As a percentage of net sales:														As a percentage of net sales:
Cost of sales														Cost of sales	53.9		%	56.0		%					54.1		%	55.0		%
SG&A expense														SG&A expense	24.7		%	22.8		%					24.3		%	23.5		%
Acquired intangible asset amortization														Acquired intangible asset amortization	5.7		%	6.0		%					5.8		%	6.2		%
Operating income														Operating income	15.7		%	15.2		%					15.8		%	15.3		%

~~(a) 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.~~

~~Third~~Second quarter of ~~2022~~2023 compared with the ~~third~~second quarter of ~~2021~~2022

~~The Digital Imaging segment’s third quarter of 2022 net~~Net sales increased ~~2.3%. Operating income for the third quarter~~primarily due to $28.8 million of ~~2022 increased 40.9%.~~

~~The third quarter of 2022 net~~incremental sales ~~increase primarily resulted~~ from acquisitions as well as greater sales of x-ray products, commercial infrared imaging components and solutions, and industrial and scientific ~~sensors and~~ cameras ~~X-ray products, and commercial infrared imaging solutions,~~sales, partially offset by lower sales of ~~surveillance~~unmanned ground systems for defense applications. ~~The third quarter~~

Cost of ~~2021 included $35.2~~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 ~~in FLIR inventory step-up expense.~~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.

2622

Table of Contents

First six months of 2023 compared with the six months of 2022

Net sales increased primarily due to $53.9 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 increased primarily due to increased net sales, and the cost of sales percentage decreased slightly during the period. 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 ~~for~~decreased primarily due to foreign currency translation impacts as well as finalization of FLIR purchase accounting in the ~~third~~second quarter of ~~2022 was $44.7 million, compared with $50.1 million. Excluding these expenses,~~2022.

Operating income increased primarily due to increased net sales and lower acquired intangible asset amortization expense during the ~~remaining~~period, and operating income ~~impact declined~~as a percentage of net sales increased slightly during the ~~quarter.~~period.

~~The third~~

Instrumentation


	Second Quarter						Change				Six Months						Change
(dollars in millions)	2023			2022			$		%		2023			2022			$		%
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 sales	52.5		%	53.4		%					53.3		%	53.2		%
SG&A expense	21.6		%	21.5		%					21.1		%	21.9		%
Acquired intangible asset amortization	1.1		%	1.5		%					1.1		%	1.5		%
Operating income	24.8		%	23.6		%					24.5		%	23.4		%

Second quarter of 2023 compared with the second quarter of 2022 ~~cost~~

Net sales increased due to higher sales at our marine instrumentation and our test and measurement instrumentation product lines. Sales of marine instrumentation increased $12.1 million and sales of test and measurement instrumentation increased $4.0 million, respectively. Sales of environmental instrumentation decreased $0.2 million.

Cost of sales ~~decreased $19.2 million and~~increased primarily ~~reflected the decrease in FLIR inventory step-up expense partially offset by~~due to higher net sales. The cost of sales percentage decreased due to ~~55.3%~~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 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 from 59.1%. Third quarter 2022 selling, general and administrative expenses increased $3.1 million and primarily reflected the impact of higher net sales. The selling, general and administrative expense percentage was 21.8% in the third quarter of 2022 as compared to 21.9%.2022.

~~First nine months of 2022 compared with the first nine months of 2021~~

~~The Digital Imaging segment’s first nine months of 2022 net sales increased 43.7%.~~ Operating income ~~for the first nine months of 2022 increased 58.7%.~~

~~The first nine 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 nine months of 2021 included $84.1 million of acquisition-related transaction and purchase accounting expenses related to FLIR which included $25.5 million of integration-related costs and $58.6 million in inventory step-up expense. Acquired intangible asset amortization expense for the first nine months of 2022 increased to $139.6 million compared with $82.1 million due to the timing of the FLIR acquisition midway through the second quarter of 2021. The incremental operating income included in the results for the first nine months of 2022 from the FLIR acquisition was $67.7 million. The increase in operating income also reflected the impact of organic sales growth during the period.

The first nine months of 2022 cost of sales increased $337.8 million and primarily reflected the impact of higher sales. The cost of sales percentage in 2022 decreased to 55.1%, compared with 58.2%. The 2021 cost of sales amount included $58.6 million in inventory step-up expense related to the acquisition of FLIR, and no comparable amount occurred in 2022. Selling, general and administrative expenses increased $169.7 million in the first nine 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 22.9% in the first nine months of 2022 from 22.3% and primarily 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.

~~Instrumentation~~
Third Quarter Nine Months
(dollars in millions) 2022 2021 2022 2021
Net sales $ 306.4 $ 287.1 $ 927.8 $ 864.7
Cost of sales $ 163.2 $ 150.7 $ 494.0 $ 460.0
Selling, general and administrative expenses $ 68.1 $ 68.4 $ 203.9 $ 202.5
Acquired intangible asset amortization $ 4.0 $ 5.0 $ 13.6 $ 15.2
Operating income $ 71.1 $ 63.0 $ 216.3 $ 187.0
Cost of sales as a % of net sales 53.3 % 52.5 % 53.2 % 53.2 %
Selling, general and administrative expenses as a % of net sales 22.2 % 23.8 % 22.0 % 23.4 %
Acquired intangible asset amortization as a % of net sales 1.3 % 1.8 % 1.5 % 1.8 %
Operating income as a % of net sales 23.2 % 21.9 % 23.3 % 21.6 %

~~Third quarter~~For six months of ~~2022~~2023 compared with the ~~third quarter~~six months of ~~2021~~2022

~~The Instrumentation segment’s third quarter of 2022 net~~Net sales increased ~~6.7%. Operating income for the third quarter of 2022 increased 12.9%.~~

~~The third quarter of 2022 net sales increase resulted from~~due to higher sales across all product lines. Sales of ~~test and measurement instrumentation increased $7.2 million, sales of environmental instrumentation increased $6.8 million and sales of~~ marine instrumentation increased ~~$5.3~~$28.4 million, ~~respectively. The increase in operating income primarily reflected the impact of higher~~ sales ~~and favorable product mix.~~

The third quarter of 2022 cost of sales increased $12.5 million. The cost of sales percentage increased to 53.3% in the third quarter of 2022 from 52.5%. Third quarter 2022 selling, general and administrative expenses decreased $0.3 million. The selling, general and administrative expense percentage decreased to 22.2% in the third quarter of 2022 from 23.8%.

~~First nine months of 2022 compared with the first nine months of 2021~~

The Instrumentation segment’s first nine months of 2022 net sales increased 7.3%. Operating income for the first nine months of 2022 increased 15.7%. The first nine months of 2022 net sales increase resulted from higher sales across all product lines.

~~Table of Contents~~

~~Sales~~ of test and measurement instrumentation increased ~~$28.8 million, sales of marine instrumentation increased $25.6~~$8.4 million and sales of environmental instrumentation increased ~~$8.7 million. The increase in operating income the first nine months of 2022 reflected the impact of higher sales.~~$3.7 million, respectively.

~~The first nine months of 2022 cost~~Cost of sales increased ~~by $34.0 million~~primarily due to higher net sales, and ~~primarily reflected~~ the ~~impact of higher sales. The~~ cost of sales percentage ~~was 53.2% for both nine month periods. The first nine months~~increased slightly. SG&A expense increased slightly due to higher net sales. SG&A expense as a percentage of ~~2022 selling, general and administrative expenses increased by $1.4 million. The selling, general and administrative expense percentage~~net sales decreased ~~to 22.0%~~slightly in the ~~first nine months of 2022 from 23.4%.~~

~~Aerospace~~period. Acquired intangible asset amortization expense decreased primarily due to certain finite-lived intangibles within the test and ~~Defense Electronics~~
Third Quarter Nine Months
(dollars in millions) 2022 2021 2022 2021
Net sales $ 169.5 $ 161.8 $ 504.5 $ 465.4
Cost of sales $ 101.2 $ 103.1 $ 307.4 $ 302.6
Selling, general and administrative expenses $ 23.8 $ 22.6 $ 65.2 $ 69.6
Acquired intangible asset amortization $ 0.2 $ 0.2 $ 0.6 $ 0.6
Operating income $ 44.3 $ 35.9 $ 131.3 $ 92.6
Cost of sales as a % of net sales 59.7 % 63.7 % 60.9 % 65.0 %
Selling, general and administrative expenses as a % of net sales 14.0 % 14.0 % 12.9 % 15.0 %
Acquired intangible asset amortization as a % of net sales 0.1 % 0.1 % 0.1 % 0.1 %
Operating income as a % of net sales 26.2 % 22.2 % 26.1 % 19.9 %

~~Third quarter of 2022 compared with the third quarter of 2021~~

~~The Aerospace and Defense Electronics segment’s third quarter of 2022 net sales increased 4.8%. Operating income for the third quarter of 2022 increased 23.4%.~~

~~The third quarter of 2022 net sales increase reflected a $6.9 million increase for aerospace electronics and a $0.8 million increase for defense electronics. Operating income~~measurement instrumentation line becoming fully amortized in the third quarter of ~~2022 reflected the impact of higher sales of aerospace electronics and improved margins across most product categories.~~2022.

The third quarter of 2022 cost of sales decreased $1.9 million and reflected the impact of improved product margins across most product categories. The cost of sales percentage decreased to 59.7% for the third quarter of 2022 from 63.7%. Selling, general and administrative expenses, including research and development expense, increased to $23.8 million in the third quarter of 2022 from $22.6 million and reflected higher research and development expense. The selling, general and administrative expense percentage was 14.0% in both third quarter.

~~First nine months of 2022 compared with the first nine months of 2021~~

~~The Aerospace and Defense Electronics segment’s first nine months of 2022 net sales increased 8.4%.~~ Operating income ~~for the first nine months of 2022 increased 41.8%.~~

~~The first nine months of 2022 net sales reflected $33.0 million of higher sales for aerospace electronics~~ and ~~$6.1 million of higher sales for defense electronics. The increase in~~ operating income ~~in the first nine months of 2022 primarily reflected the impact of higher sales and favorable product mix, primarily driven by stronger sales of aerospace electronics.~~

~~The first nine months of 2022 cost of sales increased by $4.8 million and reflected the impact of higher sales. Cost of sales~~ as a percentage of net sales ~~for the first nine months of 2022 decreased~~increased primarily due to ~~60.9% from 65.0%~~increased net sales and reflected favorable product mix. Selling, general and administrative expenses, including research and development expense, decreased to $65.2 million in the first nine months of 2022, compared with $69.6 million for the first nine months of 2021, and reflected $4.3 million of lower research and development expense. The selling, general and administrative expense percentage decreased to 12.9% in the first nine months of 2022, compared with 15.0% and reflected the impact of lower research and development expense and higher sales.acquired intangible asset amortization.

Table of Contents

~~Engineered Systems~~Aerospace and Defense Electronics


		Third Quarter						Nine Months							Second Quarter						Change				Six Months						Change
(dollars in millions)	(dollars in millions)	2022			2021			2022			2021			(dollars in millions)	2023			2022			$		%		2023			2022			$		%
Net sales	Net sales	$	109.8		$	102.4		$	303.9		$	305.1		Net sales	$	186.0		$	168.8		$	17.2	10.2	%	$	359.2		$	335.0		$	24.2	7.2	%
Cost of sales	Cost of sales	$	91.3		$	84.6		$	256.0		$	248.9		Cost of sales	$	107.3		$	103.2		$	4.1	4.0	%	$	211.0		$	206.2		$	4.8	2.3	%
Selling, general and administrative expenses		$	6.6		$	6.3		$	18.0		$	18.8
SG&A expense														SG&A expense	$	25.3		$	21.3		$	4.0	18.8	%	$	47.6		$	41.4		$	6.2	15.0	%
Acquired intangible asset amortization														Acquired intangible asset amortization	$	0.2		$	0.2		$	—	—	%	$	0.4		$	0.4		$	—	—	%
Operating income	Operating income	$	11.9		$	11.5		$	29.9		$	37.4		Operating income	$	53.2		$	44.1		$	9.1	20.6	%	$	100.2		$	87.0		$	13.2	15.2	%
Cost of sales as a % of net sales		83.2		%	82.6		%	84.2		%	81.6		%
Selling, general and administrative expenses as a % of net sales		6.0		%	6.2		%	6.0		%	6.1		%
Operating income as a % of net sales		10.8		%	11.2		%	9.8		%	12.3		%
As a percentage of net sales:														As a percentage of net sales:
Cost of sales														Cost of sales	57.7		%	61.1		%					58.7		%	61.6		%
SG&A expense														SG&A expense	13.6		%	12.7		%					13.3		%	12.3		%
Acquired intangible asset amortization														Acquired intangible asset amortization	0.1		%	0.1		%					0.1		%	0.1		%
Operating income														Operating income	28.6		%	26.1		%					27.9		%	26.0		%

~~Third~~Second quarter of 2023 compared with the second quarter of 2022

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 ~~third quarter~~six months of ~~2021~~2022

~~The Engineered Systems segment’s third quarter~~Net sales increased due to a $13.6 million increase for defense electronics and a $10.6 million increase for aerospace electronics.

Cost of ~~2022~~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 ~~7.2%. Operating income for~~primarily due to increased net sales and higher product margins during the ~~third~~period.

Engineered Systems


	Second Quarter						Change				Six Months						Change
(dollars in millions)	2023			2022			$		%		2023			2022			$		%
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 sales	84.9		%	85.3		%					84.4		%	84.9		%
SG&A expense	5.3		%	6.0		%					5.9		%	5.8		%
Operating income	9.8		%	8.7		%					9.7		%	9.3		%

Second quarter of ~~2022 increased 3.5%.~~

~~The third~~2023 compared with the second quarter of 2022 ~~net~~

Net sales ~~primarily reflected~~increased due to higher sales of ~~$5.1~~$14.8 million for engineered products and higher sales of ~~$2.3~~$3.5 million for energy systems. The higher sales for engineered products primarily reflected increased sales from electronic manufacturing services products, partially offset by lower sales from marine, space, and other manufacturing programs. Operating income in the third quarter of 2022 primarily reflected the impact of increased sales.

~~The third quarter of 2022 cost~~Cost of sales increased ~~$6.7 million.~~primarily due to higher net sales. The cost of sales percentage decreased slightly. SG&A expense increased slightly primarily due to 83.2% for the third quarter of 2022 from 82.6%. Selling, general and administrative expense was $6.6 million for the third quarter of 2022 compared with $6.3 million. The selling, general and administrative expense percentage for the third quarter of 2022 was 6.0% compared with 6.2%.

~~First nine months of 2022 compared with the first nine months of 2021~~

~~The Engineered Systems segment’s first nine months of 2022~~higher net sales, ~~decreased 0.4%. Operating income for the first nine months of 2022 decreased 20.1%.~~

~~The first nine months of 2022 net sales reflected lower net sales of $5.2 million for turbine engines, partially offset by higher sales of $3.4 million for energy systems~~ and $0.6 million of higher sales of engineered products. Teledyne exited the cruise missile turbine engine business in the first quarter of 2021. Operating income in the first nine months of 2022 reflected the impact of lower sales, including no sales of higher margin turbine engines and lower margins for electronic manufacturing services products.

~~The first nine months of 2022 cost of sales increased by $7.1 million and primarily reflected the impact of higher cost of sales for electronic manufacturing services. Cost of sales~~SG&A expense as a percentage of net sales ~~for the first nine months of 2022 increased~~decreased due primarily to 84.2% from 81.6%. Selling, general and administrative expenses, including research and development expense, decreased to $18.0 million for the first nine months of 2022, compared with $18.8 million for the first nine months of 2021. The selling, general and administrative expense percentage decreased to 6.0% for the first nine months of 2022 compared with 6.1%.

~~Financial Condition, Liquidity and Capital Resources~~

Net cash provided by operating activities was $249.1 million for the first nine months of 2022, compared with $529.0 million. The first nine 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 nine months of 2022 also reflected investments in inventories, semi-annual interest payments and higher cash income tax payments compared to 2021, partially offset by stronger trade receivable collections and higher net income in 2022.

Net cash used in investing activities was $63.9 million for the first nine months of 2022, compared with $3,790.4 million, as the first nine months of 2021 included the acquisition of FLIR. Capital expenditures for the first nine months of 2022 and 2021 were $58.5 million and $67.6 million, respectively.

Net cash used in financing activities was $115.2 million for the first nine months of 2022, compared with net cash provided by financing activities of $3,147.3 million. During the first nine months of 2022, the Company made $110.0 million of floating rate debt payments which reduced its term loan due May 2026. In addition, during the first nine 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 nine months of 2022, the Company terminated and re-designated certain cross-currency swaps, receiving $47.8 million of cash which is primarily included in cash provided by financing activities. The first nine 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 $18.4 million for the first nine months of 2022 compared with $21.4 million for the first nine months of 2021.

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~~Total debt~~net sales growth in excess of general and administrative expenses, which these expenses were at ~~October 2, 2022 was $3,918.4 million~~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 ~~$4,099.4~~the six months of 2022

Net sales increased due primarily to higher sales of $19.6 million ~~at January 2, 2022. At October 2, 2022, $1,004.0~~for engineered products and higher sales of $7.4 million ~~was available under the $1.15 billion credit facility, after reductions~~for energy systems.

Cost of ~~$125.0 million in borrowings~~sales increased primarily 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 higher net sales as well as higher research and ~~$21.4 million in outstanding letters~~development expense, including higher bid and proposal costs.

Operating income increased primarily due to increased net sales. Operating income as a percentage of ~~credit.~~net sales increased slightly primarily due to increased net sales, partially offset by higher research and development expense, including higher bid and proposal costs.

Financial Condition, Liquidity and Capital Resources

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 ~~the~~our $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 $90 million for capital expenditures in 2022, of which $58.5 million has been spent in the first nine months of 2022.~~ No cash pension contributions have been made since 2013 or are planned for the remainder of ~~2022~~2023 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~~credit facility expiring March 2026, our ~~$245.0~~$110.0 million term loan due May 2026 and our $150.0 million term loan due October 2024, require ~~Teledyne~~us to comply with various financial and operating covenants. At ~~October~~July 2, ~~2022, the Company was~~2023, we were in compliance with these covenants.

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 ~~Company~~first 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 ~~during~~due April 2031, recording a $1.6 million non-cash gain on

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the extinguishment of this debt. Proceeds from the exercise of stock options were $15.0 million for the first ~~nine~~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 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 Consolidated~~condensed 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 ~~2021~~2022 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, ~~including~~including: 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, 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, including recent Chinese export controls announced by the U.S. Commerce Department on advanced computing and semiconductor manufacturing items;~~tariffs; the continuing review and resolution of FLIR’s ~~export~~trade compliance and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and

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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’s~~Company’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 ~~company~~Company participates.

While ~~the Company’s~~our 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.

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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 2021~~our 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 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, there~~There were no material changes to the information provided under “Item 7A, Quantitative and Qualitative Disclosure About Market Risk” included in our ~~2021~~2022 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 October 2, 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 $17.2 million. A hypothetical 10 percent price change in the U.S. dollar from its value at October 2, 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 $2.3 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 $245.0 million term loan. As of October 2, 2022, we had no outstanding borrowings under our floating rate credit facility not subject

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to existing interest rate swap agreements and $245.0 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 $2.5 million, assuming the $245.0 million in debt was outstanding for the full year. A hypothetical 10 percent price change in the U.S. dollar from its value at October 2, 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 $28.4 million. A hypothetical 10 percent increase in the U.S. interest rates at October 2, 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 $0.4 million, while a 10 percent decrease would result in a decrease in its fair value of $0.4 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 ~~October~~July 2, ~~2022,~~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

There are no material changes to the risk factors previously disclosed in our ~~2021~~2022 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 risks~~supply chain and ~~Part I Item 3, Quantitative and Qualitative Disclosures About Market Risk, for updated disclosures about interest rate exposure and~~foreign 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.

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Item 6.			Exhibits


(a)	Exhibits

























	Exhibit 31.1	302 Certification – Robert Mehrabian

	Exhibit 31.2	302 Certification – Susan L. Main

	Exhibit 32.1	906 Certification – Robert Mehrabian

	Exhibit 32.2	906 Certification – Susan L. Main

	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 104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TELEDYNE TECHNOLOGIES INCORPORATED



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

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Teledyne Technologies Incorporated

Index to Exhibits


Exhibit Number			Description


























Exhibit 31.1			302 Certification – Robert Mehrabian

Exhibit 31.2			302 Certification – Susan L. Main

Exhibit 32.1			906 Certification – Robert Mehrabian

Exhibit 32.2			906 Certification – Susan L. Main

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 104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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		PAGE
Part I	Financial Information	2

	Item 1. Financial Statements	2

	Condensed Consolidated Statements of Income (Loss)	2

	Condensed Consolidated Statements of Comprehensive Income (Loss)	3

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Stockholders' Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2219

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	3127

	Item 4. Controls and Procedures	3227

Part II	Other Information	3227

	Item 1. Legal Proceedings	3227

	Item 1A. Risk Factors	3227



	Item 5. Other Information	27

	Item 6. Exhibits	3328

Signatures		3429


Intangibles subject to amortization:	Intangible Assets		Weighted average useful life in years
Proprietary technology	$	1,355.0	9.7
Customer list/relationships	450.0		14.4

Total intangibles subject to amortization	1,805.0		10.9
Intangibles not subject to amortization:
Trademarks	685.0
Total acquired intangible assets	$	2,490.0


	Third Quarter (a)		Nine Months (a)
(unaudited - in millions, except per share amounts)	2021			2021
Net sales	$	1,311.9		$	3,859.9
Net income	$	164.3		$	356.8
Basic earnings per common share	$	3.53		$	8.50
Diluted earnings per common share	$	3.44		$	8.28
(a) The above unaudited proforma information is presented for the FLIR acquisition as it is considered a material acquisition.


	October 2, 2022						January 2, 2022
Acquired intangible assets (in millions):	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Proprietary technology	$	1,610.4	$	445.8	$	1,164.6	$	1,767.7	$	358.2	$	1,409.5
Customer list/relationships	577.2		163.3		413.9		616.2		141.8		474.4
Patents	0.6		0.6		—		0.6		0.6		—
Non-compete agreements	0.9		0.9		—		0.9		0.9		—
Trademarks	5.4		4.2		1.2		4.5		3.9		0.6
Backlog	15.4		15.4		—		16.3		16.3		—
Total intangibles subject to amortization	2,209.9		630.2		1,579.7		2,406.2		521.7		1,884.5
Intangibles not subject to amortization:
Trademarks	842.1		—		842.1		857.1		—		857.1
Total acquired intangible assets	$	3,052.0	$	630.2	$	2,421.8	$	3,263.3	$	521.7	$	2,741.6


	Amount Reclassified from AOCI for the Three Months Ended		Amount Reclassified from AOCI for the Three Months Ended		Statement of Income
	October 2, 2022		October 3, 2021		Presentation
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives	$	(18.5)	$	(8.7)	See Note 4
Income tax impact	4.6		2.2		Provision for income taxes
Total	$	(13.9)	$	(6.5)

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 loss	5.8		6.7		Costs and expenses
Total before tax	5.4		5.8
Income tax impact	(1.3)		(1.4)		Provision for income taxes
Total	$	4.1	$	4.4


Asset/(Liability) Derivatives	Balance sheet location	October 2, 2022		January 2, 2022
Derivatives designated as hedging instruments:
Cash flow forward contracts	Other current assets	$	—	$	0.3
Cash flow forward contracts	Accrued liabilities	(12.7)		(1.2)



Cash flow cross currency swap	Other current assets	2.3		3.8

Cash flow cross currency swap	Other non-current liabilities	(2.5)		(9.4)
Cash flow cross currency swap	Other current assets (accrued interest)	0.1		0.1




Interest rate contracts	Other long-term liabilities	—		(0.1)
Interest rate contracts	Other current liabilities	—		(1.2)
Interest rate contracts	Other current assets	1.3		—

Total derivatives designated as hedging instruments		(11.5)		(7.7)
Derivatives not designated as hedging instruments:
Non-designated forward contracts	Other current assets	2.0		4.7
Non-designated forward contracts	Accrued liabilities	(19.0)		(2.1)
Total derivatives not designated as hedging instruments		(17.0)		2.6
Total derivatives, net		$	(28.5)	$	(5.1)


	Shares	Weighted average fair value per share
Balance, January 2, 2022 (a)	87,180	$	352.94
Granted	19,492	$	384.76
Vested	(33,739)	$	300.66
Forfeited/Canceled	(3,578)	$	403.34
Balance, October 2, 2022	69,355	$	384.72


	Balance at
Inventories (in millions):	October 2, 2022		January 2, 2022
Raw materials and supplies	$	526.9	$	479.8
Work in process	157.8		123.0
Finished goods	149.4		150.1



Total inventories, net	$	834.1	$	752.9


	Third Quarter Ended October 2, 2022						Nine Months Ended October 2. 2022
	Customer Type						Customer Type
(in millions)	United States Government (a)		Other, Primarily Commercial		Total		United States Government (a)		Other, Primarily Commercial		Total
Net Sales:
Digital Imaging	$	156.3	$	621.6	$	777.9	$	463.4	$	1,840.8	$	2,304.2
Instrumentation	29.5		276.9		306.4		79.1		848.7		927.8

Aerospace and Defense Electronics	62.8		106.7		169.5		184.3		320.2		504.5
Engineered Systems	99.1		10.7		109.8		274.4		29.5		303.9
	$	347.7	$	1,015.9	$	1,363.6	$	1,001.2	$	3,039.2	$	4,040.4
(a) Includes sales as a prime contractor or subcontractor.


	Third Quarter Ended October 2, 2022								Nine Months Ended October 2, 2022
	Geographic Region (a)								Geographic Region (a)
(in millions)	United States		Europe		All other		Total		United States		Europe		All other		Total
Net sales:
Digital Imaging	$	365.6	$	215.6	$	196.7	$	777.9	$	1,102.4	$	620.9	$	580.9	$	2,304.2
Instrumentation	234.5		55.6		16.3		306.4		708.1		167.3		52.4		927.8

Aerospace and Defense Electronics	145.1		24.4		—		169.5		430.3		74.2		—		504.5
Engineered Systems	109.8		—		—		109.8		303.9		—		—		303.9
	$	855.0	$	295.6	$	213.0	$	1,363.6	$	2,544.7	$	862.4	$	633.3	$	4,040.4
(a) Net sales by geographic region of origin.


	Third Quarter Ended October 3, 2021						Nine Months Ended October 3, 2021
	Customer Type						Customer Type
(in millions)	United States Government (a)		Other, Primarily Commercial		Total		United States Government (a)		Other, Primarily Commercial		Total
Net Sales:
Digital Imaging	$	182.3	$	578.3	$	760.6	$	327.2	$	1,276.2	1,603.4
Instrumentation	22.8		264.3		287.1		66.2		798.5		864.7
Aerospace and Defense Electronics	60.4		101.4		161.8		169.0		296.4		$	465.4
Engineered Systems	92.1		10.3		102.4		279.7		25.4		305.1
	$	357.6	$	954.3	$	1,311.9	$	842.1	$	2,396.5	$	3,238.6
(a) Includes sales as a prime contractor or subcontractor.