What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-25 · 186 added, 185 removed, 344 unchanged (52% of the section changed)

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You should not consider any descriptions of these factors to be a complete set of all potential risks that could affect

Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect our business, results of operations, financial condition, competitive position or reputation, including materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.

Risks related to the 2021 acquisition of FLIR

FLIR is our largest acquisition to date and our business could be adversely affected if we do not manage the business effectively or if we fail to realize the anticipated benefits of the acquisition.

On May 14, 2021, we acquired FLIR in a cash and stock transaction valued at approximately $8.1 billion (including net debt), our largest to date.

FLIR designs, develops, manufactures, markets, and distributes technologies that enhance perception and awareness.

FLIR provides innovative sensing solutions through thermal imaging, visible-light imaging, video analytics, measurement and diagnostic, and advanced threat detection systems.

FLIR offers a diversified portfolio that serves a number of applications in government and defense, industrial, and commercial markets.

FLIR is part of the Digital Imaging segment.

While many of the products made and markets served by FLIR are complementary to Teledyne, the acquisition of FLIR expanded the size of our Digital Imaging segment relative to our other segments.

For the 2021 fiscal year, Teledyne’s Digital Imaging segment constituted 52% of our net sales, compared to 32% for the 2020 fiscal year.

Continued innovation and research and development efforts will be required to maintain FLIR’s leadership position in imaging products.

There are numerous risk and uncertainties associated with the acquisition and its integration, including:

• Teledyne’s and FLIR’s existing business relationships with third parties may be disrupted due to uncertainty associated with the acquisition, which could have an adverse effect on the results of operations, cash flows and financial position of the combined company.

• Unplanned future events and conditions could reduce or delay the accretion to earnings that is currently projected by us in connection with the acquisition.

• We may fail to realize the anticipated benefits and cost savings of the transaction, which could adversely affect the value of our common stock.

• The future results of the combined company may be adversely impacted if we do not effectively manage the operations of FLIR, which includes jurisdictions in which Teledyne did not have operations.

• Both Teledyne and FLIR may have difficulty retaining, motivating, and attracting executives and other employees in light of the acquisition, including those experienced with post-acquisition integration, and failure to do so could seriously harm the combined company.

• The market price of our common stock may decline as a result of the acquisition if, among other things, the combined company does not achieve the perceived benefits of the acquisition as rapidly or to the extent anticipated by financial or industry analysts, or if the effect of the acquisition on the combined company’s financial results is not consistent with the expectations of financial or industry analysts.

Adverse findings in matters related FLIR’s historical export control practices could materially impact us.

On April 24, 2018, FLIR entered into a Consent Agreement with the United States Department of State’s Directorate of Defense Trade Controls 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 International Traffic in Arms Regulations (“ITAR”).

The Consent Agreement has a four-year term and provides for:

(i) a civil penalty of $30.0 million with $15.0 million of this amount suspended on the condition that the funds have or will be used for Department-approved Consent Agreement remedial compliance measures, (ii) the appointment of an external Special Compliance Official to oversee compliance with the Consent Agreement and the ITAR;

(iii) two external audits of our ITAR compliance program;

and (iv) continued implementation of ongoing remedial compliance measures and additional remedial compliance measures related to automated systems and ITAR compliance policies, procedures, and training.

While FLIR has enhanced its trade compliance program more broadly, implemented and continues to implement remedial measures and completed two external audits of FLIR’s ITAR compliance program, additional adverse disclosures and findings could materially cause incurrence of additional expenses in connection with implementation of remedial measures and result in a substantial adjustment to our revenue and net income.

As of January 2, 2022, under the Consent Agreement, $3.5 million remains to be paid by April 24, 2022.

FLIR’s investments to date in remedial compliance measures have been more than sufficient to cover the $15.0 million suspension amount.

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 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 voluntarily disclosed this matter to BIS.

In April 2021, FLIR resolved allegations of misrepresentations made to BIS, between November 2012 and December 2013, in a commodity jurisdiction request relating to its 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 has been completed and pursuant to FLIR’s findings, as a result of certain findings FLIR submitted one voluntary self-disclosure to report potential violations.

FLIR has made other voluntary disclosures to the U.S.

Department of Commerce, including to BIS with respect to the shipments of products from non-U.S.

jurisdictions which were not authorized due to a potentially incorrect de minimis calculation methodology under section 734.4 and Supplement No.

2 of the EAR.

At this time, based on available information, we are unable to reasonably estimate the time it may take to resolve these matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with these matters.

However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial position, results of operations or cash flows in and following the period in which such an outcome becomes estimable or known.

The final acquisition accounting adjustments for these matters may be materially different, as Teledyne obtains additional information on these matters and as additional information is made known during the post-acquisition measurement period.

Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect our business, results of operations, financial condition, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.

Risks related to our indebtedness

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As of January 1, 2023, we had $3,425.0 million total outstanding indebtedness in senior notes, $395.0 million in term loans and $125.0 million outstanding under our $1,150.0 million floating rate credit facility.

Teledyne incurred a significant amount of indebtedness in connection with the financing of the FLIR acquisition.

We also incurred additional indebtedness through the planned assumption of FLIR’s existing senior notes.

Teledyne incurred a significant amount of indebtedness in connection with the financing of the acquisition of FLIR.

We also incurred additional indebtedness through the assumption of FLIR’s existing senior notes.

The use of indebtedness to finance the acquisition reduced our liquidity and caused us to place more reliance on cash generated from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow for operating activities and capital expenditure needs or to pursue other potential strategic plans.

The agreements we entered into with respect to our indebtedness, including the agreements we entered into to finance the FLIR acquisition and in connection with the assumption of FLIR’s existing senior notes, contain negative covenants, that, subject to certain exceptions, include limitations on indebtedness, liens, dispositions, investments and mergers and other fundamental changes.

The agreements we entered into with respect to our indebtedness, including the agreements we entered into to finance the FLIR acquisition and in connection with the assumption of FLIR’s existing senior notes, contain negative covenants, that, subject to certain exceptions, include limitations on indebtedness related to our bank term loans and credit facility, liens, dispositions, investments and mergers and other fundamental changes.

Our ability to comply with these negative covenants can be affected by events beyond our control.

The indebtedness and these negative covenants may also have the effect, among other things, of limiting our ability to obtain additional financing, if needed, reducing the funds available to make acquisitions, capital expenditures, or reducing our flexibility in planning for or reacting to changes in our business or market conditions, and making us more vulnerable to economic downturns and adverse competitive and industry conditions.

The indebtedness and these negative covenants may also have the effect, among other things, of limiting our ability to obtain additional financing, if needed, reducing the funds available to make acquisitions or capital expenditures, reducing our flexibility in planning for or reacting to changes in our business or market conditions, and making us more vulnerable to economic downturns and adverse competitive and industry conditions.

In addition, a breach of the negative covenants could result in an event of default with respect to the indebtedness, which, if not cured or waived, could result in the indebtedness becoming immediately due and payable and could have a material adverse effect on our business, financial condition or operating results.

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We may not be able to service our debt obligations.

Our ability to meet our expense and debt service obligations will depend on our future performance, including the cash we generate from operating activities, which will be affected by financial, business, economic and other factors, including potential changes in laws or regulations, industry conditions, industry supply and demand balance, customer preferences, the success of our products and pressure from competitors.

If we are unable to meet our debt service obligations or should we fail to comply with our financial and other negative covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell important strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities.

Our ability to meet our interest expense and debt service obligations will depend on our future performance, including the cash we generate from operating activities, which will be affected by financial, business, economic and other factors, including potential changes in laws or regulations, industry conditions, industry supply and demand, customer preferences, the success of our products and pressure from competitors.

If we are unable to meet our debt service obligations or should we fail to comply with our financial and other negative covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities.

We may not be able to, at any given time, refinance our debt, sell assets, incur additional indebtedness or issue equity securities on terms acceptable to us, in amounts sufficient to meet our needs.

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Our inability to service our obligations or refinance our debt could have a material and adverse effect on our business, financial condition or operating results.

In addition, our debt obligations may limit our ability to make required investments in capacity, technology or other areas of our business, which could have a material adverse effect on our business, financial condition or operating results.

The credit rating of Teledyne could be downgraded, which may increase borrowing costs.

There can be no assurance that the credit ratings of Teledyne’s debt will not be subject to a downgrade below investment grade.

The credit ratings of Teledyne’s debt could be subject to a downgrade below investment grade.

If a ratings downgrade were to occur, we could experience higher borrowing costs in the future and more restrictive debt covenants, which would reduce profitability and diminish operational flexibility.

A ratings downgrade could also limit our access to certain sources of debt financing.

Risks Related to our Business and Industry

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Our growth strategy includes acquisitions.

In 2021 and 2020, we expended $8.1 billion in cash and stock and $29.0 million in cash, respectively, relating to acquisitions and other investments.

In 2022 and 2021, we expended $92.6 million in cash and $8.1 billion in cash and stock, respectively, relating to acquisitions and other investments.

Acquisitions involve various inherent risks, such as:

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• potential unknown liabilities associated with a business that we acquire or in which we invest, including environmental liabilities;

• new and proposed regulations limiting the enforcement of noncompetition and nonsolicitation agreements;

• production delays associated with consolidating acquired facilities and manufacturing operations.

While we conduct financial and other due diligence in connection with our acquisitions and generally seek some form of protection, such as indemnification from the seller, insurance coverage, and sometimes placing a portion of the purchase price in escrow to cover potential liabilities, such acquired companies may have weaknesses or liabilities that are not accurately assessed or brought to our attention at the time of the acquisition.

Further, indemnities, insurance or escrow arrangements may not fully cover such matters and acquisition of public companies, such as our acquisition of FLIR, typically do include post

closing indemnities or escrows.

Further, indemnities, insurance or escrow arrangements may not fully cover such matters.

Acquisitions of public companies, such as our acquisition of FLIR, typically do not include post-closing indemnities or escrows.

In connection with our acquisitions, including those acquisitions that we do not complete, we may incur significant transaction costs.

We are required to expense, as incurred, such transaction costs, which may have a material adverse impact on our financial results.

We are experiencing component and raw material shortages due to worldwide supply chain constraints which impacts our ability to manufacture and ship all of the product for which we have demand.

Our business is being impacted by interruptions in the supply chain, due in part to the COVID pandemic, a resumption of strong worldwide demand for electronic products and components across a number of end markets, and interruption in supplier and port operations.

As a result, we are experiencing delays in delivery and shortages of certain components and raw materials needed for many of the products we manufacture, particularly certain types of semiconductors, silicon wafers, specialized raw materials and chemicals, adhesives, engineered plastics and electronic components.

These conditions are currently limiting our ability to manufacture and ship all of the product for which we have demand.

We are required to expense such transaction costs as incurred, which may have a material adverse impact on our financial results.

We are experiencing component and raw material shortages due to worldwide supply chain constraints that impact our ability to manufacture and ship all the product for which we have demand.

As a result, we are experiencing delays in delivery and shortages of certain components and raw materials needed for many of the products we manufacture, particularly certain types of semiconductors, integrated circuits, silicon wafers, specialized raw materials and chemicals, adhesives, engineered plastics and electronic components.

In some cases, we have had to commit to additional orders or longer-term contracts from suppliers to secure needed components and materials.

We expect these delays and shortages to continue in 2022 and that such shortages could result in delays in shipments to our customers during the period of such shortages.

We expect these delays and shortages to improve in 2023;

however, there is still risk and uncertainty with respect to the timing of recovery.

A limited or delayed recovery could result in delays in shipments to our customers during the period of such shortages.

Any such delays would reduce our revenue and margins for the periods affected and would also result in an increase in our inventory of other components, which would reduce our operating cash flow.

Increased prices for components and raw materials used in our products and higher labor and shipping costs could adversely impact our profitability.

Supply chain constraints and improving economic conditions have resulted in sustained increases in the prices we pay for many of the components and raw materials used in our products.

Supply chain constraints and inflation have resulted in sustained increases in the prices we pay for many of the components and raw materials used in our products.

In addition, we are experiencing higher labor costs due to increased competition for personnel in many regions in which we operate as well as general inflationary conditions, and higher shipping costs due to labor and vehicle shortages and rising energy prices.

We expect inflationary pressures to persist in 2023.

We may be unable to adjust our product pricing to reflect such higher costs.

In response to higher costs, we have in some cases raised prices of our products, which could put these products at a competitive disadvantage.

In other cases, we may be unable to adjust our product pricing to reflect such higher costs.

If we are unable to increase our product prices enough to offset these increased costs, our gross margins and profitability could decrease, perhaps significantly over a sustained period of time.

Our inability to attract and retain key personnel and labor shortages resulting from the COVID pandemic and improving economic conditions, could have a material adverse effect on our future success.

Our future success depends to a significant extent upon the continued service of our executive officers and other key management and technical personnel and on our ability to continue to attract, retain and motivate qualified personnel.

The lack of human capital due to very competitive labor market conditions in certain regions could impact our ability to deliver products and services.

The skilled manufacturing and specialized engineering labor market is currently very competitive.

A significant portion of our revenue depends on the availability of a highly skilled technical workforce.

It is critical that we retain, develop, and grow our workforce to protect future revenue and improve our competitive advantage.

We are experiencing increased competition for our most talented employees which may erode our competitive advantage, impair our ability to meet certain customer requirements or increase labor costs.

We have experienced and may continue to experience temporary labor shortages as a result of the COVID pandemic due to personnel contracting the virus or needing to quarantine at home as a result of exposure to the virus, as well as due to restrictive measures implemented by governments around the world to help control the spread of the virus, including shelter in place or stay at home orders, school closures, orders that reduced the availability of public transportation and other measures.

Government-imposed vaccine mandates could negatively affect the availability of personnel or could lead to the attrition of personnel.

These impacts to our labor force resulting from the COVID pandemic could materially affect our ability to manufacture, ship or deliver our products, and in certain instances may result in higher wage costs, which could adversely impact our revenue and our results of operations

We also have a mature workforce.

Some of our businesses, including our businesses in traveling wave tube and integrated microwave module design and development, draw from a pool of specialized engineering talent that is small and currently shrinking.

Some of our businesses have a need for employees with a certain level of security clearance, and competition for such employees has increased.

While we have engaged in succession planning, the loss of the services of one or more of our key employees or our failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

Escalating global trade tensions, and the conflict between Russia and Ukraine, and the adoption or expansion of tariffs and trade restrictions could negatively impact us.

China represented one of the top five countries for our international sales in 2021 and 2020.

Any tariffs or other trade restrictions affecting the import of products from China or any retaliatory trade measures taken by China in response to existing or future tariffs could have a material adverse effect on our results of operations.

Escalating global trade tensions, especially between the U.S.

and China, the conflict between Russia and Ukraine, and the adoption or expansion of tariffs and trade restrictions could negatively impact us.

Our sales to China-based customers represented approximately 5.4% and 5.6% of total revenues in 2022 and 2021, respectively.

Any tariffs or other trade restrictions affecting the import of products from China or any retaliatory trade

measures taken by China in response to existing or future tariffs could have a material adverse effect on our results of operations.

Starting in 2018, the U.S.

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goods to China, the agreement leaves in place most tariffs on Chinese goods.

The final outcome of the negotiations and agreements is not possible to predict.

Further escalation of the “trade war” between the U.S.

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Additionally, China has bolstered laws or regulations requiring the use of local China suppliers and in-country manufacturing, which has had a negative impact on Teledyne’s revenues of instrumentation, marine and digital imaging products, as we currently have limited manufacturing operations in China.

Additionally, a number of well-established customers and suppliers have become listed on Government restricted party lists without much warning.

Additionally, recent export restrictions have had a significant impact on business as well.

A number of well-established customers and suppliers have become listed on government restricted party lists.

In particular, U.S.

export enforcement agencies have placed several Chinese and Russian companies and many of their international subsidiaries on such lists, prohibiting the export to them of most commercial and dual-use items subject to the EAR.

Tariffs and trade restrictions could result in revenue reduction, price increases on material used in our products or production delays, which could adversely affect our business, financial condition, operational results and cash flows.

The conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations.

export enforcement agencies have placed several Chinese companies and many of their international subsidiaries on such lists, prohibiting the export to them of most commercial and dual-use items subject to the Export Administration Regulations.

Furthermore, the U.S.

has imposed certain sectoral sanctions to limit Chinese development and manufacturing of semiconductor and supercomputer technology and have imposed comprehensive restrictions of both U.S.-origin items as well as non-U.S.

items manufactured from U.S.-origin equipment.

These and other tariffs and trade restrictions could result in revenue reduction, price increases on material used in our products or production delays, which could adversely affect our business, financial condition, operational results and cash flows.

Sanctions on Russia imposed by multiple countries and related Teledyne policies have led to a comprehensive ban on commercial activity with that market.

The continuing conflict between Russia and Ukraine could lead to further disruption, instability and volatility in global markets and industries that could negatively impact our operations.

Energy market disruptions and shortages caused by the war could result in the shutdown of or slowdowns at our manufacturing facilities, particularly those located in Europe, and may result in substantial increases in the cost of energy.

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 impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, supply chain, partners or customers.

Recession, financial and credit market disruptions, or an economic slowdown in China, may adversely affect us.

If another global recession emerges, or if economic growth in China slows, we may experience declines in revenues, profitability and cash flows from reduced orders, payment delays, collection difficulties, increased price pressures for our products, increased risk of excess and obsolete inventories or other factors caused by the economic problems of our customers.

Our sales to China-based customers represented approximately 5.6% and 6.0% of total revenues in 2021 and 2020, respectively.

Economic growth in China had slowed due to the COVID pandemic.

A possible recession in the U.S.

or globally, continued economic slowdown in China, and higher interest rates may adversely affect us.

If another global recession emerges, or if economic growth in China continues to slow, we may experience declines in revenues, profitability and cash flows from reduced orders, payment delays, collection difficulties, increased price pressures for our products, increased risk of excess and obsolete inventories or other factors caused by the economic problems of our customers.

Economic growth in China had slowed due to lockdowns implemented as part of the COVID pandemic.

With the lifting of these lockdowns by China in December 2022, COVID has begun to spread rapidly, causing additional disruptions to our customers and suppliers located in China.

Continued growth in many of our businesses, including those in our Environmental Instrumentation group, could be negatively impacted if another economic downturn occurs in China.

The COVID pandemic has increased volatility and pricing in the capital markets.

If negative conditions in the global credit markets prevent our customers from having access to credit or render them insolvent, orders for our products may decrease, which would result in lower revenue.

Likewise, if our suppliers face challenges in obtaining credit, in selling their products, or otherwise in operating their businesses or remaining solvent, they may become unable to offer the materials we use to manufacture our products.

An economic or credit crisis could also impact our ability to raise capital when needed.

These events could adversely impact our ability to manufacture affected products and could also result in reductions in our revenue, increased price competition, and increased operating costs, which could adversely affect our business, financial condition, operational results, and cash flows.

We develop and manufacture products for customers in the energy exploration and production markets, domestic and international commercial aerospace markets, the semiconductor industry, and the consumer electronics, telecommunications and automotive industries;

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A cyclical downturn in these markets may materially affect future operating results.

Due to declines in air travel since the start of the COVID pandemic, we face risk that our addressable market for retrofit products will shrink further as airlines retire a significant number of aircraft.

We also face risk that our addressable market for retrofit products will shrink further as airlines retire a significant number of aircraft in order to replace them with newer, more fuel-efficient planes.

In addition, we sell products and services to customers in industries that are sensitive to the level of general economic activity and consumer spending habits and to customers in more mature industries that are sensitive to capacity constraints.

Adverse economic conditions affecting these industries may reduce demand for our products and services, which may reduce our revenues, profits or production levels.

Reduced demand for mobile phones and other consumer electronics will result in lower sales of our cameras and sensors products in our Digital Imaging segment.

Higher interest rates may reduce capital spending by our existing and potential customers.

Some of our businesses serve industries such as power generation and petrochemical refining, which may be negatively impacted in the event of future reductions in global capital expenditures and manufacturing capacity, or as a result of global environmental sustainability efforts.

We are subject to the risks associated with international sales and international operations, and events in those countries could harm our business or results of operations.

During 2021, sales to customers outside the United States accounted for approximately 47% of our net sales, compared with 45% in 2020.

In 2021, we sold products to customers in over 100 countries.

In 2021, the top five countries for international sales were China, the United Kingdom, Germany, Japan and France, constituting approximately 20% of our total sales.

In both 2022 and 2021, sales to customers outside the United States accounted for approximately 47% of total net sales.

In both 2022 and 2021, we sold products to customers in over 100 foreign countries.

In 2022, the top five countries for sales to international customers, ranked by net sales, were China, Germany, Japan, the United Kingdom and France and represented approximately 20% of our total net sales.

We anticipate that future sales to international customers will continue to account for a significant and increasing percentage of our revenues, particularly since business and growth plans for many Teledyne businesses focus on sales outside of the United States to China and emerging markets such as India, Brazil and West Africa.

Risks associated with international sales and operations include, but are not limited to:

• political and economic instability;

• political and economic instability, including the war between Ukraine and Russia and potential hostilities between China and Taiwan;

• international terrorism;

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• changes in tax laws and tariffs;

• changes in U.S.

• additional deterioration in U.S.

- China and U.S.

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• currency exchange rate fluctuations;

• challenges relating to managing a global workforce with diverse cultures and backgrounds.

Any of these factors could have a material adverse effect on our business, results of operations and financial condition.

• challenges relating to managing a global workforce with diverse cultures, backgrounds and labor laws.

The impact of these factors is difficult to predict, but one or more of them could have a material adverse effect on our financial position, results of operations, or cash flows.

Certain international contracts may also include industrial cooperation agreements requiring specific in-country purchases, investments, manufacturing agreements or other financial obligations, known as offset obligations, and may provide for penalties if we fail to meet such requirements.

Currency exchange rate fluctuations may increase the cost of our products to international customers and therefore reduce our competitive position.

In 2022, the value of the U.S.

dollar rose dramatically and rapidly in comparison to many currencies in jurisdictions where we sell our products.

In addition to making our products manufactured in the U.S.

more expensive, a stronger dollar impacts the value of our foreign profits when translated back into dollars.

Since we report our financials in U.S.

dollars, volatility in the strength of the U.S.

dollar could have a material impact on our reported earnings.

In June 2016, the U.K.

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formally left the E.U.

on January 31, 2020 and entered a transition period until December 31, 2020 during which the U.K.

on January 31, 2020 and entered a transition period lasting until December 31, 2020 during which the U.K.

remained in both the E.U.

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dollar, or other foreign currencies, could increase the cost of raw materials and components for our U.K.-based businesses and could otherwise adversely affect the business, operations and the financial condition of our U.K.-based businesses.

We generate revenue from companies in the oil and gas industry, especially the offshore oil and gas industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and gas prices.

The oil and gas industry has historically been cyclical and characterized by significant changes in the levels of exploration and development activities.

Oil and gas prices, and market expectations of potential changes in those prices, significantly affect the levels of those activities.

Any prolonged reduction in the overall level of offshore oil and gas exploration and development activities, whether resulting from changes in oil and gas prices or otherwise, could materially and adversely affect our financial condition and the results of our businesses within our Instrumentation segment.

Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our products and services include the following:

• worldwide demand for oil and gas;

• general economic and business conditions and industry trends;

• the ability of the Organization of Petroleum Exporting Countries (“OPEC”), to set and maintain production levels;

• the level of production by non-OPEC countries;

• the ability of oil and gas companies to generate or raise funds for capital expenditures;

• domestic and foreign tax policy;

• laws and governmental regulations that restrict exploration and development of oil and gas in various offshore jurisdictions;

• laws and governmental regulation that restrict the use of hydraulic fracturing;

• technological changes;

• the political environment of oil-producing regions;

• the price and availability of alternative fuels;

• climate change regulations that provide incentives to conserve energy, use electric vehicles or use alternative energy sources, or that impose restrictions on the development and extraction of oil and gas.

Teledyne manufactures seismic energy sources, interconnects and data acquisition products that are used in offshore energy exploration.

When crude oil and natural gas prices are low, the level of marine seismic exploration activity typically decreases, potentially resulting in reduced demand for our products used in offshore energy exploration.

In addition, a decline in the level of capital spending by oil and natural gas companies may result in a reduced rate of development of new energy reserves, which could adversely affect demand for our products related to energy production, and, in certain instances, result in the cancellation, modification or rescheduling of existing orders and a reduction in customer-funded research and development related to next generation products.

Our inability to attract and retain key personnel and labor shortages could have a material adverse effect on our future success.

The lack of human capital due to very competitive labor market conditions in certain regions could impact our ability to deliver products and services.

The skilled manufacturing and specialized engineering labor market is currently very competitive.

A significant portion of our revenue depends on the availability of a highly skilled technical workforce.

It is critical that we retain, develop,

and grow our workforce to protect future revenue and improve our competitive advantage.

We are experiencing increased competition for our most talented employees which may erode our competitive advantage, impair our ability to meet certain customer requirements or increase labor costs.

These impacts to our labor force resulting from a COVID pandemic resurgence could materially affect our ability to manufacture, ship or deliver our products, and in certain instances may result in higher wage costs, which could adversely impact our revenue and our results of operations

We also have a mature workforce.

Some of our businesses, including our businesses in engineered systems as well as in traveling wave tube and integrated microwave module design and development, draw from a pool of specialized engineering talent that is small and, in some cases, currently shrinking.

Some of our businesses have a need for employees with a certain level of security clearance, and competition for such employees has increased.

Higher tax rates may harm our results of operations and cash flow.

As Teledyne expands globally, increases in the United States of the taxation of foreign income and expenses may harm our results of operations and cash flow.

The relative amount of income we earn in other jurisdictions could reduce our net income and increase our cash payments.

Additionally, the U.S.

Presidential administration proposed a higher U.S.

federal statutory corporate income tax rate of 28% compared to the current rate of 21%.

Such increased income tax rate in the U.S.

or in other jurisdictions could also reduce our net income and increase our cash payments.

Increases in the United States on the taxation of foreign income and expense may harm our results of operations and cash flow.

The relative amount of income we earn in jurisdictions outside the U.S.

could reduce our net income and increase our cash payments.

Additionally, beginning in 2023, the U.S.

has adopted a 15% corporate alternative minimum tax for certain large corporations.

Teledyne does not expect to be subject to this tax in 2023;

however, Teledyne is closely monitoring the potential impact of the U.S.

corporate minimum tax.

Many other jurisdictions are in the process of enacting corporate global 15% minimum tax rules, which could apply to Teledyne beginning in 2024.

Teledyne is monitoring the potential impact of these foreign minimum tax rules.

Increased tax due to corporate minimum taxes in the U.S.

or in other jurisdictions could reduce our net income and increase our cash payments.

Changes in future business conditions could cause business investments, goodwill and other long-lived assets to become impaired, resulting in significant losses and write-downs that would reduce our operating income.

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For additional discussion of business investments, goodwill and other long-lived assets, see the discussion under “Item 7.

Management’s Discussion and Analysis of Operations and Financial Condition” and Note 3 of the Notes to Consolidated Financial Statements.

Management’s Discussion and Analysis of Operations and Financial Condition” and Note 3.

Our revenue from U.S.

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Government, including sales under contracts with the U.S.

Department of Defense, as prime contractor or subcontractor, represented approximately 26% of our total net sales in both 2021 and 2020.

Department of Defense, as prime contractor or subcontractor, represented approximately 25% and 26% of our total net sales in 2022 and 2021, respectively.

Performance under government contracts has inherent risks that could have a material effect on our business, results of operations, and financial condition.

Government contracts are conditioned upon the continuing availability of Congressional appropriations and the failure of Congress to appropriate funds for programs in which we participate could negatively affect our results of operations.

Government shutdowns have resulted in delays in anticipated contract awards and delayed payments of invoices for several of our businesses and any new shutdown could have similar or worse effects.

Government shutdowns have resulted in delays in anticipated contract awards and delayed payments of invoices for several of

our businesses and any new shutdown could have similar or worse effects.

The failure by Congress to approve future budgets on a timely basis could delay procurement of our products and services and cause us to lose future revenues.

Any renewed emphasis on Federal deficit and debt reduction could lead to a further decrease in overall defense spending.

Budgetary concerns could result in future contracts being awarded more on price than on other competitive factors, and smaller defense

budgets could result in government in-sourcing of programs and more intense competition on programs that are not in-sourced, which could result in lower revenues and profits.

Budgetary concerns could result in future contracts being awarded more on price than on other competitive factors, and smaller defense budgets could result in government in-sourcing of programs and more intense competition on programs that are not in-sourced, which could result in lower revenues and profits.

Rising inflation may result in a shift in U.S.

defense spending between various programs based on priorities, which may result in a reduction or loss of expected revenues on programs in which we participate.

Also, defense spending does not necessarily correlate to continued business for us, because not all of the programs in which we participate or have current capabilities may be provided with continued funding.

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Our Aerospace and Defense Electronics segment may be impacted by volume or price reductions in connection with the F-35 Joint Strike Fighter program, to the extent they are imposed.

Navy Health and Research would affect our results.

In 2021 and 2020, our largest contract with the U.S.

Government was the MO&I contract, which represented 1.0% and 1.5% of our total net sales, respectively.

In June 2020, Teledyne Brown Engineering, Inc.

was notified that NASA had awarded to another contractor the Marshall Operations, Systems, Services, and Integration (“MOSSI”) contract, which represented a combination of the Huntsville Operations Support Center contract and the MO&I contract.

Subsequently, Teledyne Brown Engineering, Inc.

filed a protest challenging such award, which protest was sustained and which sustainment triggered the cancelation of the MOSSI request for proposal and requiring a new award solicitation to begin.

The MO&I contract continues through June 2022 with options to extend up through December 2022.

NASA released the new acquisition solicitation, the Marshall Operations, Systems, Services, and Integration II, in August 2021.

Notification of award is expected in the second half of 2022.

There is no guarantee that Teledyne will be awarded this new contract.

The timing of program cycles can affect our results of operations for a quarter or year, and cancellations of significant programs such as the International Space Station (“ISS”), Marshall Operations, Systems, Services, and Integration II ("MOSSI II"), the Shallow Water Combat Submersible (“SWCS”) or Advanced Aerodynamic and Instrumentation Features and Simulation ("A2IFS") would affect our results.

In 2022 and 2021, the Mission Operations and Integration ("MO&I") contract represented more than 10% of net sales in the Engineered Systems segment.

The MO&I contract ended December 2022 and was replaced with the MOSSI II contract, which was awarded to Teledyne Brown Engineering in September 2022 with an effective start date in January 2023 for the base two-year period.

The remaining option years are proposed through 2030, but there is no guarantee the options will be awarded if the ISS support is cancelled.

Of the total expected contract value, approximately 10% is dedicated to the Indefinite Delivery / Indefinite Quantity ("IDIQ") contract type.

There is no guarantee this IDIQ portion will be fully funded.

In 2021, we were awarded the A2IFS contract and received partial funding in 2022.

We are currently uncertain how much additional funding will be provided for performance.

It is also not uncommon for the U.S.

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Government could impact our revenues.

Delays in procurements, awards and modifications to contracts have negatively impacted revenue in 2021.

This trend is continuing in 2022 and may also impact future revenue.

Delays in procurements, awards and modifications to contracts have negatively impacted revenue in 2022, primarily within our Engineered Systems segment.

These delays are continuing in 2023 and may also impact future revenue.

Uncertainty over budgets or priorities with the U.S.

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Government in re-procuring undelivered items from another source.

We had no U.S.

Government contracts terminated for convenience or default in 2021 or in 2020.

During 2022 and 2021, contracts terminated by the U.S.

Government have not materially impacted our results of operations.

Government contracting business is subject to government contracting regulations, including increasingly complex regulations on cybersecurity, and our failure to comply with such laws and regulations could harm our operating results and prospects.

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Government agencies of Teledyne’s various procurement and accounting systems have the potential to result in disapproval of the audited systems by the administrative contracting officer.

Disapproval could significantly impact cash flow, as up to 10% may be withheld from payments.

Disapproval could significantly impact cash flow, as up to 10% may be withheld from payments, as well as significantly impact potential contract awards and increase audit oversight of individual contract proposals.

The Department of Defense as well as other U.S.

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The cybersecurity requirements also impact our supply base which could impact cost, schedule and performance on programs if suppliers do not meet the requirements and therefore, do not qualify to support the programs.

We also are required to procure certain materials and parts from supply sources approved by the U.S.

The inability of a supplier to meet our needs, the failure to obtain such approvals or the appearance of counterfeit parts in our products could have a material adverse effect on our financial position, results of operations or cash flows.

Such failure or inclusion could result in claims under the False Claims Act, which could lead to civil and criminal penalties and disbarment of the applicable business unit from doing business with the U.S.

Government, among other things.

Risks associated with counterfeit parts could be exacerbated as a result of current supply chain shortages or due to parts becoming obsolete.

The oil and gas industry has historically been cyclical and characterized by significant changes in the levels of exploration and development activities.

Oil and gas prices, and market expectations of potential changes in those prices, significantly affect the levels of those activities.

Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our products and services include the following:

• worldwide demand for oil and gas;

• the ability of the Organization of Petroleum Exporting Countries (“OPEC”), to set and maintain production levels;

• the level of production by non-OPEC countries;

• the war between Russia and Ukraine, including the implementation of price controls on Russian oil exports and restrictions on oil and gas exports imposed by Russia;

• the ability of oil and gas companies to generate or raise funds for capital expenditures;

• domestic and foreign tax policy;

• laws and governmental regulations that restrict exploration and development of oil and gas in various offshore jurisdictions or the use of hydraulic fracturing;

• laws and governmental regulation that restrict the use of hydraulic fracturing;

• technological changes;

• the political environment of oil-producing regions;

• the price and availability of alternative fuels;

Teledyne manufactures seismic energy sources, interconnects and data acquisition products that are used in offshore energy exploration.

We may not have sufficient resources to fund all future research and development and capital expenditures or possible acquisitions.

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Our research and development efforts primarily involve engineering and design related to improving existing products and developing new products and technologies in the same or similar fields.

Our Teledyne Scientific Company subsidiary, which serves as our primary research center, has been actively promoting and funding joint research and development projects with other Teledyne businesses, including Teledyne Oil & Gas, Teledyne Defense Electronics, Teledyne Digital Imaging and our Test and Measurement businesses.

Our Teledyne Scientific Company subsidiary, which serves as our primary research center, has been actively promoting and funding joint research and development projects with other Teledyne businesses, including Teledyne Marine, Teledyne Defense Electronics, Teledyne Digital Imaging and our Test and Measurement businesses.

The business of Teledyne e2v, for which the design and development of specialized technology for high performance systems and equipment is integral, also requires substantial investments in research and development.

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If such proposals are adopted and enacted, we may incur significant additional costs to achieve compliance, which could have a material adverse effect on our business, financial condition and results of operations.

Recent trends by China’s aviation authority to relax restrictions on airspace may be reversed, and anticipated new regulations loosening airspace restrictions may not materialize, which could impact sales prospects in China for our commercial aerospace businesses.

Increasing competition could reduce the demand for our products and services.

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Additionally, some of our customers have been developing competing products or electing to vertically integrate and replace our products with their own.

For example, Airbus is providing a wireless product, FOMAX, which now competes directly with Teledyne Controls hardware and services.

For example, Airbus is providing a wireless product, FOMAX, which competes directly with Teledyne Controls hardware and services.

Furthermore, Boeing has announced a vertical integration program, which includes avionics.

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We are experiencing increasing competition in our digital imaging businesses from Chinese manufacturers which offer lower cost products with increasingly advanced technical capabilities.

Smaller defense budgets both in the United States and Europe could result in additional competition for new and existing defense programs.

Product liability claims, product recalls and field service actions could have a material adverse effect on our reputation, business, results of operations and financial condition and we may have difficulty obtaining product liability and other insurance coverage.

As a manufacturer and distributor of a wide variety of products, including monitoring instruments, products used in offshore oil and gas production, products used in transportation and commercial aviation and products used in medical devices (including X-Ray detectors), our results of operations are susceptible to adverse publicity regarding the quality or safety of our products.

In part, product liability claims challenging the safety of our products may result in a decline in sales for a product, which could adversely affect our results of operations.

As a manufacturer and distributor of a wide variety of products, including monitoring instruments, gas and flame detection instruments, products used in offshore oil and gas production, products used in transportation and commercial aviation, products used in maritime navigation and products used in medical devices (including X-ray detectors), our results of operations are susceptible to adverse publicity regarding the quality or safety of our products.

Product liability claims challenging the safety of our products may result in a decline in sales for a product, which could adversely affect our results of operations.

This could be the case even if the claims themselves are proven to be untrue or settled for immaterial amounts.

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To date, we have not incurred material liabilities in connection with these lawsuits.

However, our historical insurance coverage, including that of our

predecessors, may not fully cover such claims and the defense of such matters.

However, our historical insurance coverage, including that of our predecessors, may not fully cover such claims and the defense of such matters.

Coverage typically depends on the year of purported exposure and other factors.

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For example, Teledyne Digital Imaging has an internal single source of supply for CCD semiconductor wafers used to assemble image sensors and an external single source of supply for CMOS semiconductor wafers used to assemble X-ray panel products.

Furthermore, sole source supply is more common among our businesses that are heavily involved in research and development because there can be few suppliers in the world capable of producing the products or providing the services with the right highly specialized technology.

Furthermore, sole source supply is more common among our businesses that are

heavily involved in research and development because there can be few suppliers in the world capable of producing the products or providing the services with the right highly specialized technology.

Teledyne LeCroy continues to outsource a portion of its research and development activities to third-party engineering firms in Malaysia and India where it may be more difficult for us to enforce our intellectual property rights.

Teledyne LeCroy also uses an engineering firm located in Ukraine that may be adversely impacted by the conflict between Russian and Ukraine, which in turn may delay some product development efforts.

We have also outsourced from time to time the manufacturing of certain parts, components, subsystems and even finished products to single or limited sources, including international sources.

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Distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivables and financial results.

Violations of the Foreign Corrupt Practices Act (“FCPA”) or similar anti-bribery laws by distributors or other third-party intermediaries could have a material impact on our business.

Violations of the Foreign Corrupt Practices Act or similar anti-bribery laws by distributors or other third-party intermediaries could have a material impact on our business.

Competitors could also block our access to such parties.

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We, like other industry participants, are subject to various federal, state, local and international environmental laws and regulations.

We may be subject to increasingly stringent environmental standards in the future, particularly as GHG emissions and climate change regulations and initiatives increase.

We may be subject to increasingly stringent environmental standards in the future, particularly as greenhouse gas (“GHG”) emissions and climate change regulations and initiatives proliferate.

Future developments, administrative actions or liabilities relating to environmental and climate change matters could have a material adverse effect on our business, results of operations or financial condition.

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manufacturing operations, increase prices for energy, fuel and transportation, require us to accommodate changes in parameters, such as the way parts are manufactured, and may, in some cases, require us to redesign certain of our products.

This, or other federal or state regulations, could lead to increased costs, which we may not be able to

recover from customers, delays in product shipments and loss of market share to competitors.

This, or other federal or state regulations, could lead to increased costs, which we may not be able to recover from customers, delays in product shipments and loss of market share to competitors.

For example, Teledyne Battery Products unit makes lead acid batteries in California and is subject to a variety of environmental regulations and inspections, which have increased over time.

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For additional discussion of environmental matters, see the discussion under the caption “Other Matters – Environmental” of “Item 7.

Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 14 of the Notes to Consolidated Financial Statements.

Management’s Discussion and Analysis of Results of Operation and Financial Condition” and Note 17.

We may not be able to sell or reconfigure businesses, facilities or product lines that we determine no longer meet with our growth strategy or that should be consolidated.

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While we seek to mitigate the risks associated with climate change on our operations, there are inherent climate-related risks globally.

As discussed under the risk factor below headed “Natural and man-made disasters could adversely affect our business, results of operations and financial condition,” some of our manufacturing facilities are located in regions that may be impacted by severe weather events, like hurricanes or ice storms, or in areas prone to wildfires, the frequency and severity of which may increase as a result of climate change.

As discussed under the risk factor below headed “Natural and man-made disasters could adversely affect our business, results of operations and financial condition,” some of our manufacturing facilities are located in regions that may be impacted by severe weather events, like hurricanes or ice storms, or in areas prone to wildfires, droughts and rising sea levels, the frequency and severity of which may increase as a result of climate change.

These events could result in potential damage to our physical assets as well as disruptions in manufacturing activities.

Some of our manufacturing facilities are in areas that may be at risk due to rising sea levels.

Moreover, some of our manufacturing facilities are in areas that could experience decreased access to water and reliable energy due to climate issues.

Severe weather and wildfire events may impair the ability of our employees to work effectively.

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Regulations associated with climate change could adversely affect our business.

Legislative and regulatory measures currently under consideration or being implemented by government authorities to address climate change could require reductions in our greenhouse gas or other emissions, establish a carbon tax or increase fuel or energy taxes.

Legislative and regulatory measures currently under consideration or being implemented by government authorities to address climate change could require reductions in our GHG or other emissions, establish a carbon tax or increase fuel or energy taxes.

We have also voluntarily announced goals to reduce our GHG emissions by a target date.

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These costs and restrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our operations and product design activities.

Proposed rules under the Federal Acquisition Regulation will require major contractors to disclose enhanced information on GHG emissions and commit to GHG emission reduction targets.

If these rules become effective and we are unable to comply, we may be ineligible to receive future federal contract awards.

The inconsistent international, regional and/or national requirements associated with climate change regulations also create economic and regulatory uncertainty.

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Natural and man-made disasters could adversely affect our business, results of operations and financial condition.

Several of our facilities, as a result of their locations, could be subject to a catastrophic loss caused by earthquakes, hurricanes, tornados, floods, ice storms or other natural disasters.

Many of our production facilities and our headquarters are located in California and thus are in areas with above average seismic activity and may also be at risk of damage due to wildfire.

Several of our facilities, as a result of their locations, could be subject to a catastrophic loss caused by earthquakes, hurricanes, tornados, floods, ice storms, rising sea levels, droughts or other natural disasters.

Many of our production facilities and our headquarters are located in California and thus are in areas with above average seismic activity and may also be at risk of damage due to wildfire or mudslides.

In November 2018, wildfires impacted areas near our headquarters and principal research and development center in Thousand Oaks, California, resulting in temporary disruptions and evacuations of employees who lived nearby.

Local utilities may impose blackouts during high fire risk weather conditions, which could result in disruptions to our businesses located in California, including our headquarters.

In the event of a major earthquake, tornado, hurricane or catastrophic event such as fire, power loss, telecommunications failure, vandalism, cyber-attack, war, terrorist attack or health epidemic (including COVID), we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our production, breaches of data security and loss of critical data, all of which could harm our business, results of operations and financial condition.

Teledyne FLIR’s Goleta facility which is a single source supplier of sensors used throughout the FLIR business, is located near a runway of the Santa Barbara Airport and could be severely damaged in the event of an airplane crash.

Teledyne DALSA’s semiconductor facilities in Quebec, Canada have been impacted by loss of electrical power caused by severe ice storms.

In January 2023, heavy rains in California resulted in a mudslide that blocked road access to our facility in Tracy, California that makes energetic devices, resulting in several days of plant closure.

In December 2022, an attack by political extremists on our facility in Presteigne, Wales that makes printed circuit boards resulted in damage to the facility and interrupted some productions lines for a period of time.

Teledyne FLIR’s components operations is a single source supplier of certain sensors used throughout the FLIR business, and a disruption in business due to a disaster could have a material adverse impact on the businesses of Teledyne FLIR.

Teledyne's facilities in Quebec, Canada have been impacted by loss of electrical power caused by severe ice storms.

In addition, we have manufacturing facilities in the southeastern United States and Texas that have been threatened or struck by major hurricanes.

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Our facilities in Alabama, Florida, Nebraska, Tennessee and Virginia have also been threatened by tornados.

If any of our California facilities, including our California headquarters or Teledyne FLIR’s manufacturing facility in Goleta, California, were to experience a catastrophic earthquake or wildfire loss or if any of our Alabama, Florida, Nebraska, Tennessee or Texas facilities were to experience a catastrophic hurricane, storm, tornado or other natural disaster, or if DALSA’s facilities in Quebec experience long-term loss of electrical power, such event could disrupt our operations, delay production, shipments and revenue, and result in large expenses to repair or replace the facility or facilities.

If any of our California facilities were to experience a catastrophic earthquake or wildfire loss, or if any of our Alabama, Florida, Nebraska, Tennessee or Texas facilities were to experience a catastrophic hurricane, storm, tornado or other natural disaster, or if Teledyne’s facilities in Quebec experience long-term loss of electrical power, such event could disrupt our operations, delay production, shipments and revenue, result in large expenses to repair or replace the facility or facilities and could have a material adverse effect on our business.

In addition, the insurance we maintain may be insufficient to cover our losses resulting from disasters, cyber-attacks or other business interruptions, and any incidents may result in loss of, or increased costs of, such insurance.

In addition, our existing disaster recovery and business continuity plans (including those relating to our information technology systems) may not be fully responsive to, or minimize losses associated with, catastrophic events.

Our existing disaster recovery and business continuity plans (including those relating to our information technology systems) may not be fully responsive to, or minimize losses associated with, catastrophic events.

Disasters also have an indirect adverse impact on our business.

For example, in 2018, a fire at a Netherlands-based facility of a key supplier of printed circuit boards resulted in delivery disruptions to the electronics industry, including to businesses in our Digital Imaging segment.

Adverse findings in matters related to FLIR’s historical export control practices could materially impact us.

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.

to resolve allegations regarding various violations 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 potential penalties or further remedial measures.

In April 2021, FLIR resolved allegations of misrepresentations made to the U.S.

Department of Commerce, Bureau of Industry and Security (“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.

This case was closed without further action by BIS with the issuance of a warning letter.

The second internal audit was completed in October 2022, for which a voluntary disclosure was also filed and is still pending disposition.

FLIR has 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 from non-U.S.

jurisdictions which were not authorized due to a potentially incorrect de minimis calculation methodology under the EAR.

Furthermore, FLIR has made voluntary disclosures to export authorities in jurisdictions outside the U.S.

for certain potential violations of local export laws, which may increase its penalty exposure.

We may not be able to enforce or protect our intellectual property rights, or third parties may claim we infringe their intellectual rights, each which may harm our ability to compete and thus harm our business.

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Our customers and suppliers have also experienced successful cyber-attacks, which in some cases resulted in payments by or to us being unlawfully diverted.

We continue to train our personnel and update our infrastructure, security tools and processes to protect against security incidents, including both external and internal threats, and to prevent their occurrence.

Company personnel and third parties have been tasked to prevent, deter, detect, respond to, and investigate such incidents, however it is possible that we might not prevent or be aware of or be able to react to an incident or its magnitude and effects.

Company personnel and third parties have been tasked to prevent, deter, detect, respond to, and investigate such incidents;

however, it is possible that we might not prevent or be aware of or be able to react to an incident or its magnitude and effects.

The theft, corruption, unauthorized use or publication of our intellectual property or confidential business information due to a cyber-attack could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business.

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and international privacy and other laws, including GDPR, Health Insurance Portability and Accountability Act, Payment Card Industry Data Security Standard, and California Consumer Privacy Act and subject us to private consumer or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability.

The systemic cybersecurity risk environment is elevated, in part by remote working driven by COVID pandemic concerns, particularly at our customer and supplier partner organizations.

The systemic cybersecurity risk environment is elevated, in part by geopolitical conflicts and tensions, including the war between Ukraine and Russia, the spread of remote working and increased supply chain-related cyber-risks.

Provisions of our governing documents, applicable law, and our Change in Control Severance Agreements could make an acquisition of Teledyne more difficult.

Our Restated Certificate of Incorporation, our Amended and Restated Bylaws and the General Corporation Law of the State of Delaware contain several provisions, such as our classified Board, that could make the acquisition of control of Teledyne, in a transaction not approved by our Board, more difficult.

We have also entered into Change in Control Severance Agreements with ten members of our current management, which could have an anti-takeover effect.

Our Restated Certificate of Incorporation, our Fourth Amended and Restated Bylaws and the General Corporation Law of the State of Delaware contain several provisions, such as our classified Board, that could make the acquisition of control of Teledyne, in a transaction not approved by our Board, more difficult.

We have also entered into Change in Control Severance Agreements with eight members of our current management, which could have an anti-takeover effect.

These provisions may prevent or discourage attempts to acquire our Company.

Our Amended and Restated Bylaws (“Bylaws”) designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain lawsuits between us and our stockholders, which could limit our stockholders’ ability to obtain a judicial forum that it finds favorable for such lawsuits and make it more costly for our stockholders to bring such lawsuits, which may have the effect of discouraging such lawsuits.

Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf, (ii) action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, Restated Certificate of Incorporation or Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of the Restated Certificate of Incorporation or Bylaws or (v) action asserting a claim governed by the internal affairs doctrine.

Our Fourth Amended and Restated Bylaws (“Bylaws”) designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain lawsuits between us and our stockholders, which could limit our stockholders’ ability to obtain a judicial forum that it finds favorable for such lawsuits and make it more costly for our stockholders to bring such lawsuits, which may have the effect of discouraging such lawsuits.

Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf, (ii) action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, Restated Certificate of Incorporation or Bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine.

Our Bylaws further provide that the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act of 1933, as amended, including all causes of action asserted against any defendant to such complaint.

Our Bylaws also provide that any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and consented to this forum selection provision.

However, this forum selection provision is not intended to apply to any actions brought under the Securities Act of 1933 (the "Securities Act"), as amended, or the Exchange Act.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

Accordingly, the forum selection provision in our Bylaws will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.

However, this forum selection provision is not intended to apply to any actions brought under the Exchange Act.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and accordingly, the forum selection provision in our Bylaws will not relieve us of our duties to comply with the Exchange Act and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.

Nevertheless, this forum selection provision in our Bylaws may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers and other employees, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors