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Item 1. Financial Statements

2023-07-31 compared with 2023-04-28 · 344 added, 199 removed, 615 unchanged (47% of the section changed)

1 unchanged sentence

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE FIRST QUARTER ENDED APRIL 2, 2023 AND APRIL 3, 2022

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 2, 2023 AND JULY 3, 2022

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

First Quarter

Second Quarter Six Months

2023 2022 2023 2022

Net sales $ 1,424.7 $ 1,355.8 $ 2,808.0 $ 2,676.8

5 unchanged sentences

Operating income (loss)

256.1 229.5 498.6 453.0

Interest and debt income (expense), net ( 22.3 ) ( 22.5 ) ( 43.3 ) ( 44.8 )

Gain (loss) on debt extinguishment 1.6 10.6 1.6 10.6

Non-service retirement benefit income (expense), net 2.9 2.9 6.2 5.7

1 unchanged sentence

Income (loss) before income taxes

234.9 221.5 458.6 424.5

Provision (benefit) for income taxes 49.4 50.2 94.3 40.6

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE FIRST QUARTER ENDED APRIL 2, 2023 AND APRIL 3, 2022

FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 2, 2023 AND JULY 3, 2022

(Unaudited - Amounts in millions)

First Quarter

Second Quarter Six Months

2023 2022 2023 2022

Net income (loss) including noncontrolling interest $ 185.5 $ 171.3 $ 364.3 $ 383.9

11 unchanged sentences

(Unaudited - Amounts in millions, except share amounts)

April 2, 2023 January 1, 2023

July 2, 2023 January 1, 2023

Current Assets

5 unchanged sentences

Total current assets 2,640.7 2,817.9

Property, plant and equipment, net of accumulated depreciation and amortization of $ 876.2 at April 2, 2023 and $ 847.8 at January 1, 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

Goodwill 7,943.8 7,873.0

21 unchanged sentences

issued shares:

47,194,766 at April 2, 2023 and 47,194,766 at January 1, 2023;

47,194,766 at July 2, 2023 and 47,194,766 at January 1, 2023;

outstanding shares:

47,037,465 at April 2, 2023 and 46,912,635 at January 1, 2023

47,070,900 at July 2, 2023 and 46,912,635 at January 1, 2023

Additional paid-in capital 4,371.2 4,353.4

Retained earnings 4,925.8 4,561.8

Treasury stock, 157,301 shares at April 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 )

14 unchanged sentences

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

6 unchanged sentences

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.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED APRIL 2, 2023 AND APRIL 3, 2022

FOR THE SIX MONTHS ENDED JULY 2, 2023 AND JULY 3, 2022

(Unaudited - Amounts in millions)

4 unchanged sentences

Stock-based compensation 16.3 15.4

Debt extinguishment (income) expense ( 1.6 ) ( 10.6 )

Changes in operating assets and liabilities excluding the effect of business acquired:

9 unchanged sentences

Purchases of property, plant and equipment ( 51.7 ) ( 41.8 )

Purchase of businesses, net of cash acquired ( 52.5 ) —

Purchase of business, net of cash acquired ( 53.5 ) —

Proceeds from disposal of fixed assets — 5.1

Other investing, net 0.7 1.3

1 unchanged sentence

Financing Activities

Payments on fixed rate senior notes ( 308.4 ) ( 64.4 )

Net borrowings from (repayments made to) credit facility ( 125.0 ) —

2 unchanged sentences

Maturity of cross currency swap ( 13.5 ) —

Liquidation of cross currency swap — 18.3

Other financing, net ( 0.6 ) ( 1.9 )

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

April 2, 2023

Basis of Presentation

2 unchanged sentences

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes in Teledyne’s Annual Report on Form 10-K for the fiscal year ended January 1, 2023 (“2022 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, Teledyne’s consolidated financial position as of April 2, 2023 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the first quarter ended April 2, 2023.

The results of operations and cash flows for the periods ended April 2, 2023 and cash flows for the three months ended April 2, 2023 are not necessarily indicative of the results of operations or cash flows to be expected for any subsequent quarter or the full fiscal year.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, Teledyne’s consolidated financial position as of July 2, 2023 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the second quarter and six months ended July 2, 2023.

The results of operations and cash flows for the periods ended July 2, 2023 and cash flows for the six months ended July 2, 2023 are not necessarily indicative of the results of operations or cash flows to be expected for any subsequent quarter or the full fiscal year.

Certain prior year amounts have been reclassified to conform to the current period presentation.

Recent Accounting Standards

19 unchanged sentences

Goodwill resulting from the NL Acoustics acquisition will not be deductible for tax purposes.

The minority ownership interest in shares of NL Acoustics held by certain former owners and employees is classified as a redeemable noncontrolling interest on the consolidated balance sheet due to a put option under which the third party may require the Company to purchase the remaining ownership interest, with the put option exercisable beginning in the third quarter of 2025.

The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value and its carrying amount adjusted for net income (loss) attributable to the noncontrolling interest.

Adjustments to the carrying value of the redeemable

noncontrolling interest are recorded through retained earnings.

Changes in the redeemable noncontrolling interest balance during the period were not material.

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):

26 unchanged sentences

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

First Quarter %

2023 2022 Change

Second Quarter % Six Months %

2023 2022 Change 2023 2022 Change

Net sales (a):

11 unchanged sentences

Operating income $ 256.1 $ 229.5 11.6 % $ 498.6 $ 453.0 10.1 %

(a) Net sales excludes inter-segment sales of $ 6.2 million and $ 5.5 million for the first quarter of 2023 and 2022, respectively.

(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 are those assets used in the operations of the segments.

1 unchanged sentence

Identifiable assets:

April 2, 2023 January 1, 2023

July 2, 2023 January 1, 2023

Digital Imaging $ 11,341.3 $ 11,432.3

9 unchanged sentences

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

First Quarter

Second Quarter Six Months

Instrumentation 2023 2022 2023 2022

6 unchanged sentences

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.

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 three months ended April 2, 2023, approximately 51 % of net sales in the Engineered Systems segment were derived from fixed price contracts.

First Quarter Ended

April 2, 2023

First Quarter Ended

April 2, 2023

Second Quarter Ended

Customer Type Geographic Region (c)

6 unchanged sentences

Total $ 316.8 $ 1,107.9 $ 1,424.7 $ 736.2 $ 338.7 $ 232.9 $ 116.9 $ 1,424.7

Government sales include sales as a prime contractor or subcontractor.

(b) Primarily commercial sales

Six Months Ended

Customer Type Geographic Region (c)

(in millions) U.S.

(a) Other (b) Total United States Europe Asia All other Total

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

Government sales include sales as a prime contractor or subcontractor.

(b) Primarily commercial sales

Second Quarter Ended

Customer Type Geographic Region (c)

(in millions) U.S.

(a) Other (b) Total United States Europe Asia All other Total

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

Government sale include sales as a prime contractor or subcontractor.

1 unchanged sentence

First Quarter Ended

April 3, 2022

First Quarter Ended

April 3, 2022

Six Months Ended

Customer Type Geographic Region (c)

9 unchanged sentences

With the exception of the Engineered Systems segment, net sales in each segment is primarily derived from fixed price 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

Contract Liabilities by Balance Sheet Location (in millions) April 2, 2023

Contract Liabilities by Balance Sheet Location (in millions) July 2, 2023

January 1, 2023

2 unchanged sentences

Total contract liabilities $ 237.6 $ 207.8

The Company recognized revenue of $ 67.9 million during the three months ended April 2, 2023 from contract liabilities that existed at the beginning of year.

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 April 2, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 3,198.8 million.

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.

4 unchanged sentences

Since certain contracts extend over a long period of time, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings through a cumulative catch-up basis.

This method recognizes, in the current period, the cumulative effect of the changes on current and prior quarters.

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 three months of 2023 and 2022 was $ 2.9 million of favorable operating income and $ 7.6 million favorable operating income, respectively, with both years primarily related to favorable changes in estimates that impacted revenue, and, to a lesser degree, cost of sales.

None of the effects of changes in estimates on any individual contract were material to the consolidated statements of income for any period presented.

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.

Goodwill and Intangible Assets

5 unchanged sentences

Foreign currency changes and other 13.4 6.5 1.5 — 21.4

Balance at April 2, 2023

Balance at July 2, 2023

$ 6,843.2 $ 919.7 $ 163.3 $ 17.6 $ 7,943.8

1 unchanged sentence

(in millions):

April 2, 2023 January 1, 2023

July 2, 2023 January 1, 2023

Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount

14 unchanged sentences

Cash Equivalents

The Company had $ 326.1 million and $ 167.1 million of cash equivalents at April 2, 2023 and January 1, 2023, respectively.

The Company had $ 47.1 million and $ 167.1 million of cash equivalents at July 2, 2023 and January 1, 2023, respectively.

The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets.

Accounts Receivable, net

Accounts receivable is presented net of an allowance for doubtful accounts of $ 10.6 million at April 2, 2023 and $ 11.7 million at January 1, 2023.

Accounts receivable is presented net of an allowance for doubtful accounts of $ 9.6 million at July 2, 2023 and $ 11.7 million at January 1, 2023.

Inventories, net

Inventories are stated at current cost, net of reserves for excess, slow moving and obsolete inventory.

Inventories are primarily valued under the FIFO method or average cost method, with an immaterial amount of inventories valued under the LIFO method.

Inventories are primarily valued under the FIFO method or average cost method, with an immaterial amount of inventories valued under the LIFO

Inventory balances are summarized as follows (in millions):

April 2, 2023 January 1, 2023

July 2, 2023 January 1, 2023

Raw materials and supplies $ 600.2 $ 563.7

13 unchanged sentences

Long-Term Debt (in millions):

April 2, 2023 January 1, 2023

$ 1.15 billion credit facility due March 2026, weighted average variable rate of 5.76 % at April 2, 2023 and 5.46 % at January 1, 2023

$ 25.0 $ 125.0

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

0.65 % Fixed Rate Senior Notes due April 2023

0.95 % Fixed Rate Senior Notes due April 2024

Term loan due October 2024, variable rate of 6.11 % at April 2, 2023 and 5.63 % at January 1, 2023, swapped to a Euro fixed rate of 0.61 %

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 %

1.60 % Fixed Rate Senior Notes due April 2026

Term loan due May 2026, variable rate of 6.00 % at April 2, 2023 and 5.61 % at January 1, 2023

Term loan due May 2026, variable rate of 6.45 % at July 2, 2023 and 5.61 % at January 1, 2023

2.25 % Fixed Rate Senior Notes due April 2028

7 unchanged sentences

Total long-term debt, net of current portion $ 2,903.2 $ 3,620.5

During the first three months of 2023, the Company repaid $ 100.0 million of amounts outstanding on its credit facility.

At April 2, 2023, $ 1,103.9 million was available under the $ 1.15 billion credit facility, after reductions of $ 25.0 million in borrowings and $ 21.1 million in outstanding letters of credit.

Our bank credit agreements require Teledyne to comply with various financial and operating covenants and at April 2, 2023, the Company was in compliance with these covenants.

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 April 2, 2023 and January 1, 2023, the aggregate fair values of our borrowings were $ 3,490.7 million and $ 3,492.7 million, respectively, and the carrying values were $ 3,845.6 million and $ 3,947.1 million, respectively.

Subsequent to the end of the first quarter, on April 3, 2023, the Company repaid the $ 300.0 million of fixed rate senior notes.

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.

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 first quarter of 2023 was a 20.1 % compared with an effective income tax rate of negative 4.7 % for the first quarter of 2022.

The first quarter of 2023 includes net discrete income tax benefits of $ 6.6 million compared with net discrete income tax benefits of $ 56.5 million for the first quarter of 2022.

The first quarter of 2023 net discrete tax benefits include $ 5.9 million related to stock-based accounting.

The first quarter of 2022 net discrete income tax amounts include a non-cash income tax benefit of $ 50.0 million primarily related to the resolution of certain FLIR tax reserves and $ 6.7 million related to stock-based accounting.

Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.0 % for the first quarter of 2023 and 23.1 % for the first quarter of 2022.

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.

Pension Plans

First Quarter

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

7 unchanged sentences

Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options and restricted stock.

The Company also has non-employee Board of Director stock compensation plans, pursuant to which common stock, stock options and restricted stock have been issued to its directors.

The Company 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 $ 7.9 million for the first quarter of 2023 and $ 9.0 million the first quarter of 2022.

Stock option activity for the first three months of 2023 is as follows:

Shares Weighted Average Exercise Price

Balance at January 1, 2023

1,726,731 $ 223.43

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

Balance at April 2, 2023

1,622,944 $ 229.38

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

Restricted stock activity for the first three months of 2023 is as follows:

Restricted stock activity for the first six months of 2023 is as follows:

Shares Weighted average fair value per share

4 unchanged sentences

Forfeited/Canceled ( 5,313 ) $ 356.97

Balance at April 2, 2023

Balance at July 2, 2023

156,410 $ 363.52

1 unchanged sentence

The weighted average number of common shares used in the calculation of basic and diluted earnings per share consisted of the following (in millions):

First Quarter

Second Quarter Six Months

2023 2022 2023 2022

Weighted average basic common shares outstanding 47.0 46.8 47.0 46.8

1 unchanged sentence

Weighted average diluted common shares outstanding 47.9 47.7 47.9 47.7

For the first quarter 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.

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.

Accumulated Other Comprehensive Income (Loss)

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

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 January 1, 2023

Balance at April 2, 2023

$ ( 476.6 ) $ 3.8 $ ( 254.0 ) $ ( 726.8 )

2 unchanged sentences

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 at January 2, 2022 $ ( 129.0 ) $ ( 3.4 ) $ ( 297.6 ) $ ( 430.0 )

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

1 unchanged sentence

Net other comprehensive income (loss) 8.0 4.1 2.4 14.5

Balance at April 3, 2022

Balance as of July 2, 2023

$ ( 464.3 ) $ 5.4 $ ( 253.1 ) $ ( 712.0 )

The reclassifications out of AOCI to net income for the first quarter ended April 2, 2023 and April 3, 2022 are as follows (in millions):

Amount Reclassified from AOCI for the Three Months Ended Amount Reclassified from AOCI for the Three Months Ended Statement of Income

April 2, 2023 April 3, 2022 Presentation

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:

8 unchanged sentences

Total $ 0.9 $ 4.0

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

Derivative Instruments and Hedging Activities

7 unchanged sentences

These contracts are designated and qualify as cash flow hedges.

As of April 2, 2023, the Company had foreign currency forward contracts to buy Canadian dollars and to sell U.S.

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 June 2023 to February 2025.

As of April 2, 2023, The Company had foreign currency forward contracts to buy British pounds and to sell U.S.

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 June 2023 to February 2024.

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.

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This cross currency swap is designated as cash flow hedge.

As of April 2, 2023, the Company has a cross currency swap outstanding with a notional amount of € 156.0 million and $ 150.0 million that matures in October 2024.

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.

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The amount recorded within AOCI is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings.

The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the first quarter ended April 2, 2023 and April 3, 2022 was as follows (in millions):

First Quarter

The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the 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

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For a derivative instrument that has not been designated as an accounting hedge, the change in the fair value is recognized immediately in earnings.

As of April 2, 2023, the Company had foreign currency forward contracts not designated as accounting hedges primarily in the following types and pairs (in millions):

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

2 unchanged sentences

Dollars US$ 192.1

Canadian Dollars $ 7.7 Euros € 5.3

Great Britain Pounds £ 29.7 U.S.

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Swedish Krona SEK 158.8 Euros € 13.6

Dollars US$ 13.6 Chinese Yuan ¥ 93.9

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 first quarter ended April 2, 2023 was income of $ 7.8 million.

The effect of derivative instruments not designated as accounting hedges in other income and expense for the first quarter ended April 3, 2022 was expense of $ 4.8 million.

The effect of derivative instruments not designated as accounting hedges recognized in other income and expense for the second quarter and 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.

2 unchanged sentences

All fair values for these derivative instruments were measured using Level 2 inputs in the fair value hierarchy (in millions):

Asset/(Liability) Derivative Instruments Balance sheet location April 2, 2023 January 1, 2023

Asset/(Liability) Derivative Instruments Balance sheet location July 2, 2023 January 1, 2023

Derivatives designated as hedging instruments:

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Cash flow cross currency swap Other current assets 3.1 2.7

Cash flow cross currency swap Other current liabilities — ( 14.0 )

Cash flow cross currency swap Other non-current liabilities ( 20.5 ) ( 18.3 )

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 )

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Environmental Remediation Obligations

At April 2, 2023, the Company’s reserves for environmental remediation obligations totaled $ 5.7 million, of which $ 1.5 million is included in current accrued liabilities.

At July 2, 2023, the Company’s reserves for environmental remediation obligations totaled $ 5.6 million, of which $ 1.4 million is included in current accrued liabilities.

At January 1, 2023, the Company’s reserves for environmental remediation obligations totaled $ 5.8 million.

4 unchanged sentences

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

While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial statements.

While the outcome of 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.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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We continue to evaluate our businesses to ensure that they are aligned with our strategy.

Consistent with our strategy, we completed one acquisition in the first quarter of 2023 and two acquisitions in 2022, which were all part of the Digital Imaging segment.

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.

Consistent with our strategy, we completed one acquisition in the first half of 2023 and two acquisitions in 2022, which were all part of the Digital Imaging segment.

The financial results of these acquisitions have been included since the respective date of each acquisition.

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We have experienced supply chain challenges, including increased lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand.

This has delayed our ability to convert backlog to revenue and negatively impacted our profit margins.

Although perhaps to a lesser extent, we expect inflationary and supply chain constraint trends to continue in 2023.

This has also delayed our ability to convert backlog to revenue and negatively impacted our profit margins.

Although perhaps to a lesser extent compared to recent quarters, we expect inflationary and supply chain constraint trends to continue in the second half of 2023.

Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S.

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As a result, we are exposed to movements in the exchange rates of various currencies against the U.S.

The strengthening of the U.S.

dollar relative to other currencies adversely impacted our sales in 2022, the first quarter of 2023 and may continue to do so in future periods.

The strengthening of the U.S.

dollar may also increase the price and reduce the competitiveness of some of our products sold in markets outside the United States.

See Note 13 for additional discussion around our derivative instruments and hedging activities.

Results of Operations

First Quarter

(in millions) 2023 2022 % Change

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 %

4 unchanged sentences

Total costs and expenses 1,168.6 1,126.3 3.8 % 2,309.4 2,223.8 3.8 %

Operating income 242.5 223.5 8.5 %

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 %

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* not meaningful

First Quarter

(dollars in millions) 2023 2022 % Change

Second Quarter % Six Months %

(dollars in millions) 2023 2022 Change 2023 2022 Change

Net sales (a):

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Total operating income (loss) $ 256.1 $ 229.5 11.6 % $ 498.6 $ 453.0 10.1 %

(a) Net sales excludes inter-segment sales of $6.2 million and $5.5 million for the first quarter of 2023 and 2022, respectively.

First Quarter Results

The following is a discussion of our 2023 first quarter results compared with the first quarter results of 2022.

(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 2023 second quarter results compared with the second quarter results of 2022.

Comparisons are with the corresponding reporting period of 2022, unless noted otherwise.

First quarter of 2023 compared with the first quarter of 2022

Our first quarter of 2023 net sales increased 4.7%.

Net income for the first quarter of 2023 decreased 15.9%, primarily driven by higher income tax expense in the first quarter of 2023, as discussed below.

Net income per diluted share was $3.73 for the first quarter of 2023, compared with net income per diluted share of $4.46.

The first quarter of 2023 net sales, compared with the first quarter of 2022 net sales, reflected higher net sales in each segment.

Second quarter of 2023 compared with the second quarter of 2022

Our second quarter of 2023 net sales increased 5.1%.

Net income for the second quarter of 2023 increased 8.2%, primarily driven by higher net sales.

Net income per diluted share was $3.87 for the second quarter of 2023, compared with net income per diluted share of $3.59.

The second quarter of 2023 net sales, compared with the second quarter of 2022, reflected higher net sales in each segment.

Cost of Sales

Cost of sales increased $38.1 million in the first quarter of 2023.

Cost of sales as a percentage of net sales increased slightly for the first quarter of 2023 to 57.2% from 57.0%.

Cost of sales increased $17.7 million in the second quarter of 2023.

Cost of sales as a percentage of net sales decreased for the second quarter of 2023 to 56.6% from 58.2%.

Selling, General and Administrative Expenses

SG&A expenses, including research and development expense, increased $9.1 million in the first quarter of 2023.

SG&A expenses as a percentage of net sales for the first quarter of 2023 decreased slightly to 21.7% from 22.1%.

Corporate expense, which is included in SG&A expenses, was $17.4 million for the first quarter of 2023, compared with $16.1 million, with the increase primarily related to higher professional fees during the period.

Stock-based compensation expense was $7.9 million for the first quarter of 2023 compared with $9.0 million, with the decrease related primarily due to timing of grants in previous years.

SG&A expenses, including research and development expense, increased $26.6 million in the second quarter of 2023.

SG&A expenses as a percentage of net sales for the second quarter of 2023 increased to 22.0% from 21.1%.

Corporate expense, which is included in SG&A expenses, was $14.6 million for the second quarter of 2023, compared with $14.7 million.

Stock-based compensation expense was $8.4 million for the second quarter of 2023 compared with $6.4 million, with the increase due to timing of grants in previous years.

Acquired Intangible Asset Amortization

Acquired intangible asset amortization for the first quarter of 2023 was $49.7 million compared with $53.6 million, with the decrease from the previous year related primarily to foreign currency translation impacts as well as finalization of FLIR purchase accounting in the second quarter of 2022.

Acquired intangible asset amortization for the second quarter of 2023 was $49.3 million compared with $51.3 million, with the decrease from the previous year related primarily to foreign currency translation impacts as well as certain finite-lived intangibles within the test and measurement instrumentation product line becoming fully amortized in the third quarter of 2022.

Pension Service Expense

Pension service expense is included in both cost of sales and selling general and administrative expense.

For the first quarter of 2023, pension service expense was $1.5 million, compared with $2.2 million.

For the second quarter of 2023, pension service expense was $1.5 million, compared with $2.1 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 quarter of 2023 increased 8.5%.

The first quarter of 2023, compared with the first quarter of 2022, reflected higher operating income in each business segment.

Operating income for the second quarter of 2023 increased 11.6%.

The second quarter of 2023, compared with the second quarter of 2022, reflected higher operating income in each business segment.

Non-operating Income and Expenses

Interest and debt expense, net of interest income, was $21.0 million for the first quarter of 2023, compared with $22.3 million.

Non-service retirement benefit income was $3.3 million for the first quarter of 2023 compared with $2.8 million for the first quarter of 2022.

Other income and expense, net was expense of $1.1 million for the first quarter of 2023 compared with other expense of $1.0 million for the first quarter of 2022.

The Company’s effective income tax rate for the first quarter of 2023 was a 20.1% compared with an effective income tax rate of negative 4.7% for the first quarter of 2022.

The first quarter of 2023 includes net discrete income tax benefits of $6.6 million compared with net discrete income tax benefits of $56.5 million.

The first quarter of 2023 net discrete tax benefits include $5.9 million related to stock-based accounting.

The first quarter of 2022 net discrete income tax amounts include a non-cash income tax benefit of $50.0 million primarily related to the resolution of certain FLIR tax reserves and $6.7 million related to stock-based accounting.

Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.0% for the first quarter of 2023 and 23.1% for the first quarter of 2022.

Interest and debt expense, net of interest income, was $22.3 million for the second quarter of 2023, compared with $22.5 million.

Non-service retirement benefit income was $2.9 million for both the second quarter of 2023 and 2022.

Other income and expense, net was expense of $3.4 million for the second quarter of 2023 compared with income of $1.0 million for the second quarter of 2022.

The Company’s effective income tax rate for the second quarter of 2023 was 21.0% compared with an effective income tax rate of 22.7% for the second quarter of 2022.

The second quarter of 2023 includes net discrete income tax benefits of $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.

The first six months of 2023 net sales, compared with the first six months of 2022 net sales, reflected higher net sales in each segment.

Cost of Sales

Cost of sales increased $55.8 million in the first six months of 2023.

Cost of sales as a percentage of net sales decreased for the first six months of 2023 to 56.9% from 57.6%.

Selling, General and Administrative Expenses

SG&A expenses, including research and development expense, increased $35.7 million in the first six months of 2023.

SG&A expenses as a percentage of net sales for the first six months of 2023 increased slightly to 21.8% from 21.6%.

Corporate expense, which is included in SG&A expenses, was $32.0 million for the first six months of 2023, compared with $30.8 million, with the increase primarily related to higher professional fees during the period.

Stock-based compensation expense was $16.3 million for the first six months of 2023 compared with $15.4 million.

Acquired Intangible Asset Amortization

Acquired intangible asset amortization for the first six months of 2023 was $99.0 million compared with $104.9 million, with the decrease from the previous year related primarily to foreign currency translation impacts, finalization of FLIR purchase accounting in the second quarter of 2022 and certain finite-lived intangibles within the test and measurement instrumentation product line becoming fully amortized in the third quarter of 2022.

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.

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 benefits include $7.2 million related to stock-based accounting.

The first six months of 2022 net discrete income tax amounts include a non-cash income tax benefit of $49.4 million primarily related to the resolution of certain FLIR tax reserves and $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 22.3% for the first six months of 2023 and 23.1% for the first six months of 2022.

Segment Results

3 unchanged sentences

Digital Imaging

First Quarter

(dollars in millions) 2023 2022 $ Change % Change

Second Quarter Change Six Months Change

(dollars in millions) 2023 2022 $ % 2023 2022 $ %

Net sales $ 793.3 $ 775.8 $ 17.5 2.3 % $ 1,565.8 $ 1,526.3 $ 39.5 2.6 %

3 unchanged sentences

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 54.3 % 54.0 %

SG&A expense as a % of net sales 24.0 % 24.1 %

Acquired intangible asset amortization as a % of net sales 5.9 % 6.5 %

Operating income as a % of net sales 15.8 % 15.4 %

First quarter of 2023 compared with the first quarter of 2022

Net sales increased primarily due to $25.0 million of increme ntal sales from acquisitions as well as greater sales of industrial and scientific cameras and x-ray detectors, 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 increased slightly during the period.

SG&A increased primarily due to the impact of higher net sales, and SG&A as a percentage of net sales decreased slightly

during the period.

As a percentage of net sales:

Cost of sales 53.9 % 56.0 % 54.1 % 55.0 %

SG&A expense 24.7 % 22.8 % 24.3 % 23.5 %

Acquired intangible asset amortization 5.7 % 6.0 % 5.8 % 6.2 %

Operating income 15.7 % 15.2 % 15.8 % 15.3 %

Second quarter of 2023 compared with the second quarter of 2022

Net sales increased primarily due to $28.8 million of incremental sales from acquisitions as well as greater sales of x-ray products, commercial infrared imaging components and solutions, and industrial and scientific cameras sales, partially offset by lower sales of unmanned ground systems for defense applications.

Cost of sales decreased primarily due to product mix partially offset by the increase in net sales.

As a result, the cost of sales percentage decreased during the period.

SG&A and SG&A as a percentage of net sales increased primarily due to the impact of higher net sales and higher employee compensation costs and travel costs.

Research and development expense also increased $4.9 million compared to the previous period.

Acquired intangible asset amortization expense decreased slightly primarily due to foreign currency translation impacts.

Operating income increased primarily due to increased net sales during the period, and operating income as a percentage of net sales increased slightly during the period.

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

Net sales increased primarily due to $53.9 million of increme ntal sales from acquisitions as well as greater sales of x-ray products, commercial infrared imaging components and solutions, and industrial and scientific cameras sales, partially offset by lower sales of unmanned ground systems for defense applications.

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 decreased primarily due to foreign currency translation impacts as well as finalization of FLIR purchase accounting in the second quarter of 2022.

1 unchanged sentence

Instrumentation

First Quarter

(dollars in millions) 2023 2022 $ Change % Change

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 %

3 unchanged sentences

Operating income $ 81.4 $ 73.6 $ 7.8 10.6 % $ 162.1 $ 145.2 $ 16.9 11.6 %

Cost of sales as a % of net sales 54.1 % 53.0 %

SG&A expense as a % of net sales 20.6 % 22.2 %

Acquired intangible asset amortization as a % of net sales 1.1 % 1.6 %

Operating income as a % of net sales 24.2 % 23.2 %

First quarter of 2023 compared with the first quarter of 2022

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

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 increased primarily due to higher net sales.

The cost of sales percentage decreased due to 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.

Operating income and operating income as a percentage of net sales increased primarily due to increased net sales and lower acquired intangible asset amortization.

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

Net sales increased due to higher sales across all product lines.

Sales of marine instrumentation increased $28.4 million, sales of test and measurement instrumentation increased $8.4 million and sales of environmental instrumentation increased $3.7 million, respectively.

Cost of sales increased primarily due to higher net sales.

The cost of sales percentage increased due to change in product mix.

SG&A expense increased slightly due to higher net sales partially offset by $0.6 million of lower research and development expense during the period.

SG&A expense as a percentage of net sales decreased primarily due to increased net sales and lower research and development spending in the period.

Operating income and operating income as a percentage of net sales increased primarily due to increased net sales and decreased research and development expense during the period.

Cost of sales increased primarily due to higher net sales, and the cost of sales percentage increased slightly.

SG&A expense increased slightly due to higher net sales.

SG&A expense as a percentage of net sales decreased slightly in the period.

Operating income and operating income as a percentage of net sales increased primarily due to increased net sales and lower acquired intangible asset amortization.

Aerospace and Defense Electronics

First Quarter

(dollars in millions) 2023 2022 $ Change % Change

Second Quarter Change Six Months Change

(dollars in millions) 2023 2022 $ % 2023 2022 $ %

Net sales $ 186.0 $ 168.8 $ 17.2 10.2 % $ 359.2 $ 335.0 $ 24.2 7.2 %

3 unchanged sentences

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 59.9 % 62.0 %

SG&A expense as a % of net sales 12.9 % 12.1 %

Acquired intangible asset amortization as a % of net sales 0.1 % 0.1 %

Operating income as a % of net sales 27.1 % 25.8 %

First quarter of 2023 compared with the first quarter of 2022

As a percentage of net sales:

Cost of sales 57.7 % 61.1 % 58.7 % 61.6 %

SG&A expense 13.6 % 12.7 % 13.3 % 12.3 %

Acquired intangible asset amortization 0.1 % 0.1 % 0.1 % 0.1 %

Operating income 28.6 % 26.1 % 27.9 % 26.0 %

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 slightly, primarily due to higher net sales partially offset by the impact of improved product margins across certain 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 personnel costs as well as increased research and development expenses.

Cost of sales increased primarily due to higher net sales partially offset by the impact of improved product margins across certain defense electronics product categories, and the cost of sales percentage decreased due to these improved product margins.

SG&A expense as well as the SG&A expense percentage increased primarily due to higher compensation costs as well as increased research and development expense.

Operating income and operating income as a percent of net sales increased primarily due to increased net sales and higher product margins during the period.

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

Net sales increased due to a $13.6 million increase for defense electronics and a $10.6 million increase for aerospace electronics.

SG&A expense as well as the SG&A expense percentage increased primarily due higher compensation costs as well as increased research and development expense.

Operating income and operating income as a percent of net sales increased primarily due to increased net sales and higher product margins during the period.

Engineered Systems

First Quarter

(dollars in millions) 2023 2022 $ Change % Change

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 %

2 unchanged sentences

Operating income $ 11.5 $ 8.6 $ 2.9 33.7 % $ 21.5 $ 18.0 $ 3.5 19.4 %

Cost of sales as a % of net sales 83.9 % 84.4 %

SG&A expense as a % of net sales 6.5 % 5.7 %

Operating income as a % of net sales 9.6 % 9.9 %

First quarter of 2023 compared with the first quarter of 2022

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 2023 compared with the second quarter of 2022

Net sales increased due to higher sales of $14.8 million for engineered products and higher sales of $3.5 million for energy systems.

Cost of sales increased primarily due to higher net sales.

The cost of sales percentage decreased slightly.

SG&A expense increased slightly primarily due to higher net sales, and SG&A expense as a percentage of net sales decreased due primarily to

net sales growth in excess of general and administrative expenses, which these expenses were at similar levels in both periods.

Operating income and operating income as a percentage of net sales increased primarily due to increased net sales.

Operating income as a percentage of net sales increased primarily due to higher net sales growth and lower SG&A expense as a percentage of net sales.

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

Net sales increased due primarily to higher sales of $19.6 million for engineered products and higher sales of $7.4 million for energy systems.

1 unchanged sentence

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 research and development expense of $0.8 million during the period.

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 development expense, including higher bid and proposal costs.

Operating income increased primarily due to increased net sales.

Operating income as a percentage of net sales decreased slightly primarily due to higher research and development expense, including higher bid and proposal costs.

Operating income as a percentage of 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

4 unchanged sentences

Cash and Cash Equivalents

Cash and cash equivalents totaled $665.2 million at April 2, 2023 compared with $638.1 million at January 1, 2023.

Cash 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 April 2, 2023 was $3,820.4 million compared with $3,920.6 million at January 1, 2023.

Subsequent to the end of the first quarter, on April 3, 2023, the Company repaid $300.0 million of its senior fixed rate notes.

At April 2, 2023, $1,103.9 million was available under the $1.15 billion credit facility, after reductions of $25.0 million in borrowings and $21.1 million in outstanding letters of credit.

Total debt at July 2, 2023 was $3,353.3 million compared with $3,920.6 million at January 1, 2023.

At July 2, 2023, $1,131.1 million was available under the $1.15 billion credit facility, after reductions of $18.9 million in outstanding letters of credit.

Our bank credit agreements, which includes our $1.15 billion credit facility expiring March 2026, our $110.0 million term loan due May 2026 and our $150.0 million term loan due October 2024, require us to comply with various financial and operating covenants.

At April 2, 2023, we were in compliance with these covenants.

At July 2, 2023, we were in compliance with these covenants.

Our liquidity is not dependent upon the use of off-balance sheet financial arrangements.

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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.

Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

The amounts involved may be material.

Net cash provided by operating activities was $203.0 million for the first three months of 2023 compared with net cash used in operating activities of $216.7 million.

The first three months of 2023 reflected higher accounts receivable collections compared with the first quarter of 2022.

The first three months of 2022 included a payment of $296.4 million to the Swedish Tax Authority related to a disputed pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary.

Net cash used in investing activities was $76.9 million for the first three months of 2023 compared with $19.6 million.

During the first three months of 2023, we spent $52.5 million on acquisitions.

Capital expenditures for the first three months of 2023 and 2022 were $24.4 million and $21.0 million, respectively.

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 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 $103.4 million for the first three months of 2023 compared with net cash provided by financing activities of $42.6 million.

During the first three months of 2023, we made $100.0 million of floating rate debt payments which reduced borrowings outstanding on our credit facility.

Proceeds from the exercise of stock options were $10.2 million for the first three months of 2023 compared with $12.7 million for the first three months of 2022.

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 $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.

Proceeds from the exercise of stock options were $15.0 million for the first six months of 2023 compared with $17.5 million for the first six months of 2022.

Subsequent to the end of the second quarter of 2023, the Company repaid $50.0 million outstanding on its term loan due May 2026.

Critical Accounting Policies and Estimates

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Actual results could differ materially from these forward-looking statements.

Many factors could change the anticipated results, including:

ongoing challenges and uncertainties posed by the COVID pandemic for businesses and governments around the world, including production, supply, contractual and other disruptions, such as COVID-related lockdowns, facility closures, furloughs and travel restrictions;

Many factors could change anticipated results, including:

ongoing challenges and uncertainties posed by the lingering COVID pandemic for businesses and governments around the world;

changes in relevant tax and other laws;

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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;

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;

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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;

and foreign government spending and budget priorities triggered by inflation, rising interest costs, and economic conditions;

impacts from the United Kingdom’s exit from the European Union;

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the imposition and expansion of, and responses to, trade sanctions and tariffs;

the continuing review and resolution of FLIR’s export and tax matters;

the continuing review and resolution of FLIR’s trade compliance and tax matters;

escalating economic and diplomatic tension between China and the United States;

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While 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, including the recent acquisition of ChartWorld, involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain key management and customers and achieve identified financial and operating synergies.

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.

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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, its businesses, its strategies and the various risks that we face.

Various risks are identified in our 2022 Form 10-K.

Various risks are identified in 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.

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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-Q

Item 1. Financial Statements