What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-10-27 compared with 2023-07-31 · 277 added, 239 removed, 720 unchanged (42% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

FOR THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 2023 AND OCTOBER 3, 2022

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

Second Quarter Six Months

Third Quarter Nine Months

2023 2022 2023 2022

24 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

FOR THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, 2023 AND OCTOBER 3, 2022

(Unaudited - Amounts in millions)

Second Quarter Six Months

Third Quarter Nine Months

2023 2022 2023 2022

12 unchanged sentences

(Unaudited - Amounts in millions, except share amounts)

July 2, 2023 January 1, 2023

October 1, 2023 January 1, 2023

Current Assets

5 unchanged sentences

Total current assets 2,820.5 2,817.9

Property, plant and equipment, net of accumulated depreciation and amortization of $ 905.1 at July 2, 2023 and $ 847.8 at January 1, 2023

Property, plant and equipment, net of accumulated depreciation and amortization of $ 932.1 at October 1, 2023 and $ 847.8 at January 1, 2023

Goodwill 7,899.8 7,873.0

21 unchanged sentences

issued shares:

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

47,194,766 at October 1, 2023 and 47,194,766 at January 1, 2023;

outstanding shares:

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

47,183,514 at October 1, 2023 and 46,912,635 at January 1, 2023

Additional paid-in capital 4,385.7 4,353.4

Retained earnings 5,124.4 4,561.8

Treasury stock, 123,866 shares at July 2, 2023 and 282,131 shares at January 1, 2023

Treasury stock, 11,252 shares at October 1, 2023 and 282,131 shares at January 1, 2023

( 0.8 ) ( 20.0 )

20 unchanged sentences

Balance, July 3, 2023 $ 0.5 $ 4,371.2 $ ( 6.5 ) $ 4,925.8 $ ( 712.0 ) $ 8,579.0

Net income (loss) — — — 198.6 — 198.6

Other comprehensive income (loss), net of tax — — — — ( 75.9 ) ( 75.9 )

Treasury stock issued — ( 5.7 ) 5.7 — — —

Stock-based compensation — 8.0 — — — 8.0

Exercise of stock options — 12.2 — — — 12.2

Balance, October 1, 2023 $ 0.5 $ 4,385.7 $ ( 0.8 ) $ 5,124.4 $ ( 787.9 ) $ 8,721.9

Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total

12 unchanged sentences

Balance, July 3, 2022 $ 0.5 $ 4,333.6 $ ( 24.3 ) $ 4,157.1 $ ( 605.0 ) $ 7,861.9

Net income (loss) — — — 178.3 — 178.3

Other comprehensive income (loss), net of tax — — — — ( 359.2 ) ( 359.2 )

Treasury stock issued — ( 0.5 ) 0.5 — — —

Stock-based compensation — 6.6 — — — 6.6

Exercise of stock options — 0.9 — — — 0.9

Balance, October 2, 2022 $ 0.5 $ 4,340.6 $ ( 23.8 ) $ 4,335.4 $ ( 964.2 ) $ 7,688.5

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

FOR THE NINE MONTHS ENDED OCTOBER 1, 2023 AND OCTOBER 3, 2022

(Unaudited - Amounts in millions)

9 unchanged sentences

Accounts payable ( 47.4 ) 58.9

Deferred and income taxes receivable/payable, net 8.5 ( 60.2 )

Deferred taxes and income taxes receivable (payable), net 41.0 ( 32.8 )

Prepaid expenses and other assets ( 26.3 ) 4.2

4 unchanged sentences

Purchases of property, plant and equipment ( 74.7 ) ( 58.5 )

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

Purchase of businesses, net of cash acquired ( 53.5 ) ( 11.9 )

Proceeds from disposal of fixed assets — 5.2

2 unchanged sentences

Financing Activities

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

Proceeds from (payments on) fixed rate senior notes ( 308.4 ) —

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

Payments on other debt ( 135.3 ) ( 80.1 )

Proceeds from (payments on) other debt ( 245.3 ) ( 174.7 )

Proceeds from exercise of stock options 27.2 18.4

Maturity of cross currency swap ( 13.5 ) —

Liquidation of cross currency swap — 18.3

Liquidation (maturity) of cross currency swap ( 13.5 ) 43.1

Other financing, net ( 0.7 ) ( 2.0 )

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

October 1, 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 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.

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 October 1, 2023 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the third quarter and nine months ended October 1, 2023.

The results of operations and cash flows for the periods ended October 1, 2023 and cash flows for the nine months ended October 1, 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.

16 unchanged sentences

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

During the third quarter of 2022, the Company acquired an approximate 80 % majority interest in Noiseless Acoustics Oy ("NL Acoustics"), paying $ 11.9 million in cash, net of cash acquired, during the year, with an immaterial amount payable in 2023.

NL Acoustics, located in Helsinki, Finland, designs and manufactures acoustics imaging instruments and predictive maintenance solutions.

12 unchanged sentences

(a) Net of cash acquired

an immaterial portion of NL Acoustics will be paid in 2023.

The Company’s cost to acquire these acquisitions was allocated to the assets acquired and liabilities assumed based upon their respective fair values as of the date of the completion of the acquisition.

The differences between the fair value of the consideration paid and the estimated fair value of the assets and liabilities acquired was recorded as goodwill.

The fair value of the acquired identifiable assets and liabilities for these acquisitions is provisional pending finalization of the Company’s acquisition accounting, including the measurement of tax basis in certain jurisdictions and the resulting deferred taxes that might arise from book and tax basis differences, if any.

The fair value of the acquired identifiable assets and liabilities for the ChartWorld and ETM acquisitions is provisional pending finalization of the Company’s acquisition accounting, including the measurement of tax basis in certain jurisdictions and the resulting deferred taxes that might arise from book and tax basis differences, if any.

Pro forma results of operations, the revenue and net income subsequent to the acquisition date, and a more detailed breakout of the major classes of assets and liabilities acquired for these acquisitions have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to the Company's financial results.

9 unchanged sentences

and Engineered Systems.

Segment results include net sales and operating income by segment but excludes corporate office expenses.

Corporate expense primarily includes various administrative expenses relating to the corporate office not allocated to our segments.

Segment results include net sales and operating income by segment but excludes corporate expenses.

Corporate expense primarily includes administrative expenses relating to the corporate office not allocated to our segments.

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

Second Quarter % Six Months %

Third Quarter % Nine Months %

2023 2022 Change 2023 2022 Change

12 unchanged sentences

Operating income $ 264.3 $ 245.2 7.8 % $ 762.9 $ 698.2 9.3 %

(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.

(a) Net sales exclude inter-segment sales of $ 7.2 million and $ 21.5 million for the third quarter and first nine months of 2023, respectively, and $ 4.8 million and $ 15.4 million for the third quarter and first nine months of 2022, respectively.

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

1 unchanged sentence

Identifiable assets:

July 2, 2023 January 1, 2023

October 1, 2023 January 1, 2023

Digital Imaging $ 11,267.8 $ 11,432.3

6 unchanged sentences

The Instrumentation segment includes three product lines:

Environmental Instrumentation, Marine Instrumentation and Test and Measurement Instrumentation.

Marine Instrumentation, Environmental Instrumentation and Test and Measurement Instrumentation.

The Company’s other three segments each contain one product line.

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

Second Quarter Six Months

Third Quarter Nine 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.

Second Quarter Ended

Third Quarter Ended

October 1, 2023

Third Quarter Ended

October 1, 2023

Customer Type Geographic Region (c)

9 unchanged sentences

Six Months Ended

Nine Months Ended

October 1, 2023

Nine Months Ended

October 1, 2023

Customer Type Geographic Region (c)

9 unchanged sentences

Second Quarter Ended

Third Quarter Ended

October 2, 2022

Third Quarter Ended

October 2, 2022

Customer Type Geographic Region (c)

9 unchanged sentences

Six Months Ended

Nine Months Ended

October 2, 2022

Nine Months Ended

October 2, 2022

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.

Net sales in the Engineered Systems segment is typically between 45 % and 55 % fixed price contracts in a given reporting period, with the balance of net sales derived from cost-reimbursable type contracts.

For the six months ended July 2, 2023, approximately 53 % of net sales in the Engineered Systems segment were derived from fixed price contracts.

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

Net sales in the Engineered Systems segment are 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 nine months ended October 1, 2023, approximately 49 % of net sales in the Engineered Systems segment were derived from fixed price contracts.

Contract Liabilities

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

Contract Liabilities by Balance Sheet Location (in millions) October 1, 2023

January 1, 2023

2 unchanged sentences

Total contract liabilities $ 237.4 $ 207.8

The Company recognized revenue of $ 114.0 million during the six months ended July 2, 2023 from contract liabilities that existed at the beginning of year.

The Company recognized revenue of $ 118.9 million during the nine months ended October 1, 2023 from contract liabilities that existed at the beginning of year.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and exclude unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity).

As of July 2, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 3,236.5 million.

As of October 1, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 3,122.5 million.

The Company expects approximately 80 % of remaining performance obligations to be recognized into revenue within the next twelve months , with the remaining 20 % recognized thereafter.

8 unchanged sentences

Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly.

The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first six months of 2023 was $ 0.5 million of unfavorable operating income and in the first six months of 2022 was $ 17.4 million favorable operating income, with the first six months of 2022 primarily related to favorable changes in estimates that impacted revenue within our Digital Imaging operating segment.

The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first nine months of 2023 was $ 1.7 million of favorable operating income compared with $ 30.5 million of favorable operating income in the first nine months of 2022, with the first nine 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.

6 unchanged sentences

Foreign currency changes and other ( 27.5 ) ( 1.9 ) 0.3 — ( 29.1 )

Balance at July 2, 2023

Balance at October 1, 2023

$ 6,808.8 $ 911.3 $ 162.1 $ 17.6 $ 7,899.8

1 unchanged sentence

(in millions):

July 2, 2023 January 1, 2023

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

The Company had $ 171.0 million and $ 167.1 million of cash equivalents at October 1, 2023 and January 1, 2023, respectively.

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

Accounts Receivable, net

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

Accounts receivable is presented net of an allowance for doubtful accounts of $ 10.7 million at October 1, 2023 and $ 11.7 million at January 1, 2023.

Inventories, net

2 unchanged sentences

Inventory balances are summarized as follows (in millions):

July 2, 2023 January 1, 2023

October 1, 2023 January 1, 2023

Raw materials and supplies $ 577.5 $ 563.7

10 unchanged sentences

Deductions ( 11.5 ) ( 7.3 )

Acquisition 0.2 1.6

Balance at end of period $ 50.7 $ 48.3

1 unchanged sentence

Long-Term Debt (in millions):

July 2, 2023 January 1, 2023

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

October 1, 2023 January 1, 2023

$ 1.15 billion credit facility due March 2026, weighted average variable rate of 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 6.45 % at July 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 6.67 % at October 1, 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 6.45 % at July 2, 2023 and 5.61 % at January 1, 2023

Term loan due May 2026, variable rate of 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 $ 2,794.0 $ 3,620.5

During the first six months of 2023, the Company repaid $ 125.0 million of amounts outstanding on its credit facility, the $ 300.0 million Fixed Rate Senior Notes due April 2023, and $ 135.0 million on its term loan due May 2026.

During the first nine 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 the remaining $ 245.0 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.

At October 1, 2023, $ 1,130.9 million was available under the $ 1.15 billion credit facility, after a reduction of $ 19.1 million in outstanding letters of credit.

Our bank credit agreements require Teledyne to comply with various financial and operating covenants and at October 1, 2023, the Company was in compliance with these covenants.

Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates.

The Company’s long-term debt is considered a level 2 input in the fair value hierarchy and is valued based on observable market data.

As of July 2, 2023 and January 1, 2023, the aggregate fair values of our borrowings were $ 2,971.5 million and $ 3,492.7 million, respectively, and the carrying values were $ 3,377.0 million and $ 3,947.1 million, respectively.

As of October 1, 2023 and January 1, 2023, the aggregate fair values of our borrowings were $ 2,823.4 million and $ 3,492.7 million, respectively, and the carrying values were $ 3,266.4 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 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.

The Company’s effective income tax rate for the third quarter and first nine months of 2023 was 19.2 % and 20.1 %, respectively, compared with an effective income tax rate for the third quarter and first nine months of 2022 of 23.0 % and 14.3 %, respectively.

The third quarter and first nine months of 2023 includes net discrete income tax benefits of $ 6.1 million and $ 14.1 million, respectively, compared with net discrete income tax benefits of $ 0.3 million and $ 57.8 million for the third quarter and first nine months of 2022, respectively.

The third quarter and first nine months of 2023 net discrete income tax benefits include $ 6.5 million and $ 13.7 million, respectively, related to stock-based accounting compared with $ 0.2 million and $ 8.7 million, of net discrete income tax benefits related to stock-based accounting for the third quarter and first nine months of 2022, respectively.

The first nine months of 2022 also includes net discrete income tax benefits of $ 49.1 million primarily related to the change in or resolution of certain acquisition-related tax reserves.

Excluding the net discrete income tax items in both periods, the effective tax rates would have been 21.7 % and 22.1 % for the third quarter and first nine months of 2023, respectively, and 23.1 % for both the third quarter and first nine months of 2022.

Pension Plans

Second Quarter Six Months

Third Quarter Nine Months

2023 2022 2023 2022

3 unchanged sentences

Expected return on plan assets ( 13.6 ) ( 14.1 ) ( 40.7 ) ( 42.2 )

Amortization of net prior service cost ( 0.4 ) ( 0.4 ) ( 0.9 ) ( 0.9 )

Amortization of net actuarial loss 2.6 5.7 5.0 11.5

Amortization of net prior service cost (income) ( 0.4 ) ( 0.4 ) ( 1.3 ) ( 1.3 )

Amortization of net actuarial loss (gain) 2.5 5.6 7.5 17.1

Pension non-service cost (income) $ ( 3.1 ) $ ( 2.9 ) $ ( 9.3 ) $ ( 8.6 )

Stock-based Compensation

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

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

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

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

The Company issues shares of common stock upon the exercise of stock options.

Stock-based compensation expense was $ 8.4 million and $ 16.3 million for the second quarter and first six months of 2023, respectively, and $ 6.4 million and $ 15.4 million for the second quarter and first six months of 2022, respectively.

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

Second Quarter Six Months

Stock-based compensation expense was $ 8.0 million and $ 24.3 million for the third quarter and first nine months of 2023, respectively, and $ 6.7 million and $ 22.1 million for the third quarter and first nine months of 2022, respectively.

Stock option activity for the third quarter and first nine months of 2023 is as follows:

Third Quarter Nine Months

Shares Weighted Average Exercise Price Shares Weighted Average

5 unchanged sentences

Exercisable at end of period 1,277,837 $ 217.11 1,277,837 $ 217.11

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

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

Shares Weighted average fair value per share

4 unchanged sentences

Forfeited/Canceled ( 12,362 ) $ 363.49

Balance at July 2, 2023

Balance at October 1, 2023

150,243 $ 363.48

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):

Second Quarter Six Months

Third Quarter Nine Months

2023 2022 2023 2022

2 unchanged sentences

Weighted average diluted common shares outstanding 47.9 47.7 47.9 47.7

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

For the third quarter and first nine 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 second quarter and six months ended July 2, 2023 and July 3, 2022 are as follows (in millions):

The changes in accumulated other comprehensive income (loss) ("AOCI") by component, net of tax, for the third quarter and nine months ended October 1, 2023 and October 2, 2022 are as follows (in millions):

Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total

Balance at April 2, 2023

Balance at July 2, 2023

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

2 unchanged sentences

Net other comprehensive income (loss) ( 76.6 ) ( 1.1 ) 1.8 ( 75.9 )

Balance at July 2, 2023

Balance at October 1, 2023

$ ( 540.9 ) $ 4.3 $ ( 251.3 ) $ ( 787.9 )

Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total

Balance at April 3, 2022

Balance at July 3, 2022

$ ( 316.4 ) $ 0.8 $ ( 289.4 ) $ ( 605.0 )

2 unchanged sentences

Net other comprehensive income (loss) ( 357.1 ) ( 6.2 ) 4.1 ( 359.2 )

Balance at July 3, 2022

Balance at October 2, 2022

$ ( 673.5 ) $ ( 5.4 ) $ ( 285.3 ) $ ( 964.2 )

5 unchanged sentences

Net other comprehensive income (loss) ( 68.6 ) 3.0 4.2 ( 61.4 )

Balance as of July 2, 2023

Balance as of October 1, 2023

$ ( 540.9 ) $ 4.3 $ ( 251.3 ) $ ( 787.9 )

5 unchanged sentences

Net other comprehensive income (loss) ( 544.5 ) ( 2.0 ) 12.3 ( 534.2 )

Balance as of July 3, 2022

Balance as of October 2, 2022

$ ( 673.5 ) $ ( 5.4 ) $ ( 285.3 ) $ ( 964.2 )

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):

The reclassifications out of AOCI to net income for the third quarter and nine months ended October 1, 2023 and October 2, 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

October 1, 2023 October 2, 2022

(Gain) loss on cash flow hedges:

8 unchanged sentences

Total $ 1.8 $ 4.1

Amount Reclassified from AOCI for the Six Months Ended

Amount Reclassified from AOCI for the Nine Months Ended

Statement of Income (Loss) Presentation

July 2, 2023 July 3, 2022

October 1, 2023 October 2, 2022

(Gain) loss on cash flow hedges:

17 unchanged sentences

These contracts are designated and qualify as cash flow hedges.

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

As of October 1, 2023, the Company had foreign currency forward contracts to buy Canadian dollars and to sell U.S.

dollars totaling $ 111.9 million.

These foreign currency forward contracts have maturities ranging from September 2023 to February 2025.

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

These foreign currency forward contracts have maturities ranging from December 2023 to February 2025.

As of October 1, 2023, the Company had foreign currency forward contracts to buy British pounds and to sell U.S.

dollars totaling $ 5.2 million.

These foreign currency forward contracts have maturities ranging from September 2023 to February 2024.

These foreign currency forward contracts have maturities ranging from December 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.

4 unchanged sentences

This cross currency swap is designated as cash flow hedge.

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

As of October 1, 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.

3 unchanged sentences

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 second quarter and six months ended July 2, 2023 and July 3, 2022 was as follows (in millions):

Second Quarter Six Months

The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the third quarter and nine months ended October 1, 2023 and October 2, 2022 was as follows (in millions):

Third Quarter Nine Months

2023 2022 2023 2022

12 unchanged sentences

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

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

As of October 1, 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$ 158.8

Canadian Dollars $ 7.7 Euros € 5.3

Great Britain Pounds £ 29.7 U.S.

Danish Krone DKR 89.2 U.S.

Dollars US$ 13.0

1 unchanged sentence

Dollars US$ 87.5

Danish Krone DKR 93.0 U.S.

Great Britain Pounds £ 10.6 Euros € 12.3

Great Britain Pounds £ 57.0 U.S.

Dollars US$ 71.9

Swedish Krona SEK 207.5 Euros € 17.5

Norwegian Krone kr 64.7 U.S.

Swedish Krona SEK 150.8 U.S.

Dollars US$ 13.8

Dollars US$ 6.7 Chinese Yuan ¥ 49.0

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 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 effect of derivative instruments not designated as accounting hedges recognized in other income and expense for the third quarter and nine months ended October 1, 2023 was expense of $ 12.9 million and $ 3.1 million, respectively.

The effect of derivative instruments not designated as accounting hedges in other income and expense for the third quarter and nine months ended October 2, 2022 was expense of $ 40.5 million and $ 70.9 million, respectively.

The 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 July 2, 2023 January 1, 2023

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

Derivatives designated as hedging instruments:

12 unchanged sentences

Commitments and Contingencies

Trade Compliance

Trade Compliance Matters

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.

7 unchanged sentences

for certain potential violations of local export laws.

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

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 outcome becomes estimable or known.

Environmental Remediation Obligations

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 October 1, 2023, the Company’s reserves for environmental remediation obligations totaled $ 5.5 million, of which $ 1.5 million is included in current accrued liabilities.

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

5 unchanged sentences

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.

Subsequent Events

On October 13, 2023, the Company acquired Xena Networks ApS and affiliates ("Xena Networks").

Xena Networks, headquartered in Denmark, is a leading provider of high-speed terabit ethernet validation, quality assurance, and production test solutions.

Xena Networks is part of the test and measurement instrumentation product line within the Instrumentation segment.

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

14 unchanged sentences

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

As part of our continuing FLIR acquisition integration efforts, and as we accelerate the relocation of select Teledyne FLIR operations to existing sites, we expect to record $10.0 million to $12.0 million of pretax costs in the second half of 2023 related to facility consolidation costs, facility lease impairments and employee separation costs.

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.

As part of our continuing FLIR acquisition integration efforts, and as we accelerate the relocation of select Teledyne FLIR operations to existing sites, we recorded $5.8 million of employee separation costs, facility consolidation costs and facility lease impairments in the third quarter of 2023.

We expect to record an additional $3.0 million to $4.0 million of pretax costs in the next six months related to employee separation costs, facility consolidation costs and facility lease impairments.

Consistent with our strategy, we completed one acquisition in the first nine months 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.

See Note 2 for additional information about our recent acquisitions.

Trends Affecting Our Business

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

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

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.

Subsequent to the end of the third quarter of 2023, we completed one acquisition, which is part of the Instrumentation segment.

See Note 2 and Note 15 for additional information about our recent acquisitions.

Trends Affecting Our Business and Other Matters

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

These supply chain challenges have also delayed our ability to timely convert backlog to revenue.

Although perhaps to a lesser extent compared to recent quarters, we expect inflationary impacts and supply chain constraints to continue through the fourth quarter of 2023 and likely into 2024.

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

dollars using exchange rates effective during the respective period.

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

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

See Note 13 for additional discussion around our derivative instruments and hedging activities used to mitigate these impacts.

To date, we have not been materially impacted by the conflict in Israel and its effect on neighboring regions.

We do not have material assets in Israel.

Our total net sales from Israel in the first nine months of 2023 and the full year 2022 was less than 1% of total net sales, respectively.

It is too early to determine the full extent of the impact this conflict could have on our business and our operations, including the impact to our suppliers from these regions, and our assessment of the potential impacts is ongoing.

Results of Operations

Second Quarter % Six Months %

Third Quarter % Nine Months %

(in millions) 2023 2022 Change 2023 2022 Change

16 unchanged sentences

* not meaningful

Second Quarter % Six Months %

Third Quarter % Nine Months %

(dollars in millions) 2023 2022 Change 2023 2022 Change

14 unchanged sentences

Total operating income (loss) $ 264.3 $ 245.2 7.8 % $ 762.9 $ 698.2 9.3 %

(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.

(a) Net sales exclude inter-segment sales of $7.2 million and $21.5 million for the third quarter and first nine months of 2023, respectively, and $4.8 million and $15.4 million for the third quarter and first nine months of 2022, respectively.

Third Quarter Results

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

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

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.

Third quarter of 2023 compared with the third quarter of 2022

Our third quarter of 2023 net sales increased 2.9%.

Net income for the third quarter of 2023 increased 11.4%, driven primarily by higher net sales and favorable product mix.

Net income per diluted share was $4.15 for the third quarter of 2023, compared with net income per diluted share of $3.74.

The third quarter of 2023 net sales, compared with the third quarter of 2022, reflected higher net sales in each segment other than the Digital Imaging segment, which decreased slightly.

The third quarter of 2023 also included $25.8 million in incremental sales from recent acquisitions.

Cost of Sales

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 $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.

Cost of sales increased $11.4 million in the third quarter of 2023.

Cost of sales as a percentage of net sales decreased for the third quarter of 2023 to 56.8% from 57.6%.

Selling, General and Administrative Expense

SG&A expense, including research and development expense, increased $8.2 million in the third quarter of 2023.

SG&A expense as a percentage of net sales was 20.8% for both the third quarter of 2023 and 2022.

Corporate expense, which is included in SG&A expense, was $17.8 million for the third quarter of 2023, compared with $15.8 million, with the increase primarily related to higher professional fees during the period.

Stock-based compensation expense was $8.0 million for the third quarter of 2023 compared with $6.7 million.

The third quarter of 2023 also included $5.8 million of FLIR-related integration costs, including employee separation costs, facility consolidation costs and facility lease impairments with no comparable amount in the previous year.

Acquired Intangible Asset Amortization

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.

Acquired intangible asset amortization for the third quarter of 2023 was $49.1 million compared with $48.9 million.

Pension Service Expense

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

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

Pension service expense is included in both cost of sales and SG&A expense.

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

Operating income for the third quarter of 2023 increased 7.8%.

The third quarter of 2023, compared with the third quarter of 2022, reflected higher operating income in each business segment other than the Engineered Systems segment.

Non-operating Income and Expense

Interest and debt expense, net of interest income, was $18.4 million for the third quarter of 2023, compared with $22.0 million, with the decrease related to reduced outstanding borrowings with lower weighted average interest rates compared to the third quarter of 2022.

Non-service retirement benefit income was $3.1 million for the third quarter of 2023 compared with $2.9 million.

Other income and expense, net was expense of $2.9 million for the third quarter of 2023 compared with income of $5.2 million for the third quarter of 2022, with the difference primarily related foreign exchange losses in the third quarter of 2023 compared with foreign exchange gains in the third quarter of 2022.

The third quarter of 2022 also included higher income from deferred compensation plan activity.

The Company’s effective income tax rate for the third quarter of 2023 was 19.2% compared with an effective income tax rate of 23.0% for the third quarter of 2022.

The third quarter of 2023 includes net discrete income tax benefits of $6.1 million compared with net discrete income tax benefits of $0.3 million.

The third quarter of 2023 net discrete income tax benefits include $6.5 million related to stock-based accounting compared with $0.2 million.

Excluding the net discrete income tax items in both periods, the effective rate would have been 21.7% for the third quarter of 2023 and 23.1% for the third quarter of 2022.

First nine months of 2023 compared with the first nine months of 2022

The first nine months of 2023 net sales increased 4.2%.

Net income for the first nine months of 2023 increased 0.1%.

Net income per diluted share was $11.75 for the first nine months of 2023, compared with net income per diluted share of $11.79.

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

The first nine months of 2023 also included $79.7 million in incremental sales from recent acquisitions.

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.

Cost of sales increased $67.2 million in the first nine months of 2023.

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

Selling, General and Administrative Expense

SG&A expense, including research and development expense, increased $43.9 million in the first nine months of 2023.

SG&A expense as a percentage of net sales for the first nine months of 2023 increased slightly to 21.5% from 21.3%.

Corporate expense, which is included in SG&A expense, was $49.8 million for the first nine months of 2023, compared with $46.6 million, with the increase primarily related to higher professional fees during the period.

Stock-based compensation expense was $24.3 million for the first nine months of 2023 compared with $22.1 million.

The first nine months of 2023 also included $5.8 million of FLIR-related integration costs, including employee separation costs, facility consolidation costs and facility lease impairments.

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.

Acquired intangible asset amortization for the first nine months of 2023 was $148.1 million compared with $153.8 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 the first nine months of 2023, pension service expense was $4.5 million compared with $6.5 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.

Operating income for the first nine months of 2023 increased 9.3%.

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

Non-operating Income and Expense

Interest and debt expense, net of interest income, was $61.7 million for the first nine months of 2023, compared with $66.8 million.

Non-service retirement benefit income was $9.3 million for the first nine months of 2023 compared with $8.6 million for the first nine months of 2022.

Other income and expense, net was expense of $7.4 million for the first nine months of 2023 compared with $5.2 million of other income for the first nine months of 2022, with the difference primarily related to foreign exchange losses in the first nine months of 2023 compared with foreign exchange gains in the first nine months of 2022.

The Company’s effective income tax rate for the first nine months of 2023 was 20.1% compared with an effective income tax rate of 14.3% for the first nine months of 2022.

The first nine months of 2023 includes net discrete income tax benefits of $14.1 million compared with net discrete income tax benefits of $57.8 million.

The first nine months of 2023 net discrete tax benefits include $13.7 million related to stock-based accounting as compared with $8.7 million.

The first nine months of 2022 also includes net discrete income tax benefits of $49.1 million primarily related to the change in or resolution of certain acquisition-related tax reserves.

Excluding the net discrete income tax items in both periods, the effective tax rates would have been 22.1% for the first nine months of 2023 and 23.1% for the first nine months of 2022.

Segment Results

Segment results include net sales and operating income by segment but exclude corporate office expenses.

Corporate expense primarily includes various administrative expenses relating to the corporate office not allocated to our segments.

Corporate expense primarily includes various administrative expenses relating to our corporate office not allocated to our segments.

See Note 3 to these condensed consolidated financial statements for additional segment information.

Digital Imaging

Second Quarter Change Six Months Change

Third Quarter Change Nine Months Change

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

9 unchanged sentences

Operating income 17.6 % 17.2 % 16.4 % 15.9 %

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.

Third quarter of 2023 compared with the third quarter of 2022

The third quarter of 2023 net sales included $25.8 million in incremental sales from recent acquisitions, as well as greater sales of x-ray products, infrared imaging detectors and surveillance systems, offset by lower sales of unmanned ground systems for defense applications, micro-electro-mechanical systems (“MEMS”), commercial maritime products and industrial imaging cameras.

Cost of sales decreased primarily due to favorable product mix as well as the decrease in net sales.

As a result of more

favorable product mix, the cost of sales percentage decreased during the period.

SG&A expense and SG&A expense as a percentage of net sales increased primarily due to higher selling expense, including travel costs.

The third quarter of 2023 also included $5.8 million of FLIR-related integration costs, including employee separation costs, facility consolidation costs and facility lease impairments.

Acquired intangible asset amortization expense increased slightly during the period.

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

First nine months of 2023 compared with the first nine months of 2022

Net sales increased primarily due to $79.7 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, commercial maritime products and MEMS.

Cost of sales decreased primarily due to favorable product mix partially offset by increased net sales, and the cost of sales percentage decreased during the period due to favorable product mix.

SG&A expense and SG&A expense as a percentage of net sales increased primarily due to the impact of higher net sales, higher selling expense, including travel costs as well as increased research and development expense of $11.1 million.

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

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

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

Instrumentation

Second Quarter Change Six Months Change

Third Quarter Change Nine Months Change

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

9 unchanged sentences

Operating income 26.0 % 23.2 % 25.0 % 23.3 %

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.

Third quarter of 2023 compared with the third quarter of 2022

Net sales increased due to higher sales at our marine instrumentation and test and measurement instrumentation product lines.

Sales of marine instrumentation increased $22.5 million due to the ongoing recovery in offshore energy markets, and sales of test and measurement instrumentation increased $2.0 million, respectively.

Sales of environmental instrumentation decreased $1.8 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.

The cost of sales percentage decreased due to favorable product mix.

SG&A expense increased due to higher net sales partially offset by $0.3 million of lower research and development expense, and SG&A expense as a percentage of net sales decreased in the period due to primarily to lower research and development expense on higher net sales.

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

Operating income increased primarily due to higher net sales and product mix.

Operating income as a percentage of net sales increased primarily due to higher net sales and product mix as well as lower research and development expense.

For nine months of 2023 compared with the first nine 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, 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.

Sales of marine instrumentation increased $50.9 million due to the ongoing recovery in offshore energy markets, sales of test and measurement instrumentation increased $10.4 million, and sales of environmental instrumentation increased $1.9 million, respectively.

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

SG&A expense increased due to higher net sales partially offset by $0.3 million of lower research and

development expense.

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

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

Operating income increased primarily due to higher net sales and product mix.

Operating income as a percentage of net sales increased primarily due to increased net sales and product mix, lower research and development expense and lower acquired intangible asset amortization.

Aerospace and Defense Electronics

Second Quarter Change Six Months Change

Third Quarter Change Nine Months Change

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

9 unchanged sentences

Operating income 26.9 % 26.2 % 27.6 % 26.1 %

Second quarter of 2023 compared with the second quarter of 2022

Net sales increased due to a $9.6 million increase for defense electronics and a $7.6 million increase for aerospace electronics.

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

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

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

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

Third quarter of 2023 compared with the third quarter of 2022

Net sales increased due to a $7.0 million increase for aerospace electronics and a $6.8 million increase for defense electronics.

Cost of sales increased primarily due to higher net sales, and the cost of sales percentage decreased due to favorable product mix.

SG&A expense increased primarily due to higher net sales, and the SG&A expense percentage was consistent with the previous period.

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

First nine months of 2023 compared with the first nine months of 2022

Net sales increased due to a $20.4 million increase for defense electronics and a $17.6 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.

Cost of sales increased primarily due to higher net sales partially offset by favorable product mix and increased margins, and the cost of sales percentage decreased as a result.

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

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

Engineered Systems

Second Quarter Change Six Months Change

Third Quarter Change Nine Months Change

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

7 unchanged sentences

Operating income 9.5 % 10.8 % 9.7 % 9.8 %

Second quarter of 2023 compared with the second quarter of 2022

Third quarter of 2023 compared with the third quarter of 2022

Net sales increased due to higher sales of $2.7 million for engineered products and higher sales of $1.8 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

The cost of sales percentage increased during the period due to a higher percentage of cost-reimbursable type space programs in the third quarter 2023, which typically carry a lower margin than fixed price contracts.

SG&A expense increased slightly, and SG&A expense as a percentage of net sales stayed consistent with the previous year.

Operating income and operating income as a percentage of net sales decreased primarily due to program mix.

First nine months of 2023 compared with the first nine months of 2022

Net sales increased due primarily to higher sales of $22.3 million for engineered products and higher sales of $9.2 million for energy systems.

Cost of sales increased primarily due to higher net sales.

The cost of sales percentage decreased slightly.

SG&A expense as well as SG&A expense as a percentage of net sales increased primarily due to higher net sales as well as higher research and development expense, including higher bid and proposal costs.

The cost of sales percentage increased slightly.

SG&A expense increased primarily due to higher net sales and higher research and development expense, including higher bid and proposal costs.

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

Operating income increased primarily due to increased net sales.

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.

Operating income as a percentage of net sales decreased slightly.

Financial Condition, Liquidity and Capital Resources

4 unchanged sentences

Cash and Cash Equivalents

Cash and cash equivalents totaled $364.2 million at July 2, 2023 compared with $638.1 million at January 1, 2023.

Cash and cash equivalents totaled $508.6 million at October 1, 2023 compared with $638.1 million at January 1, 2023.

Cash equivalents consist of highly liquid money-market mutual funds and bank deposits with maturities of three months or less when purchased.

Long-term Debt

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

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

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

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

Total debt at October 1, 2023 was $3,244.1 million compared with $3,920.6 million at January 1, 2023.

At October 1, 2023, $1,130.9 million was available under the $1.15 billion credit facility, after reductions of $19.1 million in outstanding letters of credit.

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

At October 1, 2023, we were in compliance with these covenants.

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

3 unchanged sentences

The amounts involved may be material.

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.

Net cash provided by operating activities was $671.7 million for the first nine months of 2023 compared with $249.1 million, driven primarily by the first nine 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 nine months of 2023 reflected lower inventory purchases, lower income tax payments and higher accounts payable activity as compared with the first nine months of 2022.

The IRS announcements related to the California floods (IR-2023-33 and IR-2023-189) postponed approximately $139 million of our second and third quarter 2023 U.S.

federal income tax payments until the fourth 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.

Net cash used in investing activities was $127.3 million for the first nine months of 2023 compared with $63.9 million.

During the first nine months of 2023, we spent $53.5 million on acquisitions as compared with $11.9 million.

Capital expenditures for the first nine months of 2023 and 2022 were $74.7 million and $58.5 million, respectively.

We currently plan to invest approximately $100 million for capital expenditures in 2023.

Net cash used in financing activities was $567.8 million for the first six months of 2023 compared with $110.6 million.

During the first six months of 2023, we repaid $570.0 million of debt, including paying $300.0 million of debt that matured in April 2023 and making $260.0 million of floating rate debt payments which reduced our term loan due May 2026 by $135.0 million and reduced our outstanding credit facility balance by $125.0 million.

In addition, during the second quarter of 2023, Teledyne repurchased and retired $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.

Net cash used in financing activities was $665.7 million for the first nine months of 2023 compared with $115.2 million.

During the first nine 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 the remaining $245.0 million on its term loan due May 2026.

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.

Proceeds from the exercise of stock options were $27.2 million for the first nine months of 2023 compared with $18.4 million for the first nine months of 2022.

Critical Accounting Policies and Estimates

7 unchanged sentences

Safe Harbor Cautionary Statement Regarding Forward-Looking Information

From time to time we make, and this report contains, forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995, directly or indirectly relating to sales, earnings, operating margin, growth opportunities, acquisitions, including the acquisition of FLIR, product sales, capital expenditures, pension matters, stock-based compensation expense, the credit facility, interest expense, severance, relocation and facility consolidation costs, environmental remediation costs, taxes, exchange rate fluctuations and strategic plans.

From time to time we make, and this report contains, forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995, directly or indirectly relating to sales, earnings, operating margin, growth opportunities, acquisitions, product sales, capital expenditures, pension matters, stock-based compensation expense, the credit facility, interest expense, severance, relocation and facility consolidation costs, environmental remediation costs, taxes, exchange rate fluctuations and strategic plans.

Forward-looking statements are generally accompanied by words such as “estimate”, “project”, “predict”, “believe” or “expect”, that convey the uncertainty of future events or outcomes.

14 unchanged sentences

disruptions in the global economy;

the conflict in Israel and its effect on neighboring regions;

the ongoing conflict between Russia and Ukraine, including the impact to energy prices and availability, especially in Europe;

3 unchanged sentences

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 inflation, rising interest costs, and economic conditions;

and foreign government spending and budget priorities triggered by inflation, rising interest costs, and economic condit i ons;

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

12 unchanged sentences

and foreign governments, including economic sanctions, could result, over time, in reductions or realignment in defense or other government spending and further changes in programs in which the Company participates.

In the event of a U.S.

government shutdown, our business and results of operations could be impacted by disruptions to federal government operations and funding.

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.

12 unchanged sentences

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