UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended ~~October~~April 1, ~~2017~~2018



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

For the transition period from to

Commission file number 1-15295

TELEDYNE TECHNOLOGIES INCORPORATED

(Exact name of registrant as specified in its charter)



Delaware		25-1843385
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1049 Camino Dos Rios Thousand Oaks, California		91360-2362
(Address of principal executive offices)		(Zip Code)

(805) 373-4545

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

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



Large accelerated filer	ý	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

There were ~~35,436,487~~35,762,990 shares of common stock, $.01 par value per share, outstanding as of ~~October 31, 2017.~~May 2, 2018.

TELEDYNE TECHNOLOGIES INCORPORATED

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE ~~THIRD~~FIRST QUARTER ENDED APRIL 1, 2018 AND ~~NINE MONTHS ENDED OCTOBER 1,~~APRIL 2, 2017 ~~AND OCTOBER 2, 2016~~

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


	Third Quarter						Nine Months						First Quarter
	2017			2016			2017			2016			2018			2017
Net sales	$	662.2		$	526.8		$	1,899.4		$	1,597.0		$	695.6		$	566.1
Costs and expenses
Cost of sales	405.8			317.0			1,178.3			978.0			438.2			357.0
Selling, general and administrative expenses	163.5			141.0			483.9			435.7			169.0			154.3
Total costs and expenses	569.3			458.0			1,662.2			1,413.7			607.2			511.3
Operating income	92.9			68.8			237.2			183.3			88.4			54.8
Interest and debt expense, net	(8.2		)	(5.6		)	(25.5		)	(17.2		)	(7.1		)	(8.2		)
Other income/(expense), net	(3.0		)	(0.8		)	(13.0		)	15.1
Non-service retirement benefit income													3.4			3.3
Other expense, net													(2.5		)	(9.3		)
Income before income taxes	81.7			62.4			198.7			181.2			82.2			40.6
Provision for income taxes	12.7			10.4			39.1			43.3			15.7			10.1
Net income	$	69.0		$	52.0		$	159.6		$	137.9		$	66.5		$	30.5

Basic earnings per common share	$	1.95		$	1.50		$	4.53		$	4.00		$	1.87		$	0.87
Weighted average common shares outstanding	35.3			34.7			35.2			34.5			35.6			35.1

Diluted earnings per common share	$	1.90		$	1.46		$	4.41		$	3.90		$	1.81		$	0.84
Weighted average diluted common shares outstanding	36.4			35.6			36.2			35.4			36.8			36.1

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

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE ~~THIRD~~FIRST QUARTER ENDED APRIL 1, 2018 AND ~~NINE MONTHS ENDED OCTOBER 1,~~APRIL 2, 2017 ~~AND OCTOBER 2, 2016~~

(Unaudited - Amounts in millions)


	Third Quarter					Nine Months				First Quarter
	2017		2016			2017		2016		2018			2017
Net income	$	69.0	$	52.0		$	159.6	$	137.9	$	66.5		$	30.5
Other comprehensive income (loss):
Foreign exchange translation adjustment	36.8		(7.7		)	91.6		3.6		17.2			4.0
Hedge activity, net of tax	1.9		(0.9		)	4.8		4.6		(1.6		)	(0.2		)
Pension and postretirement benefit adjustments, net of tax	3.2		3.3			10.0		10.8		4.3			3.5
Other comprehensive income (loss)	41.9		(5.3		)	106.4		19.0
Other comprehensive income										19.9			7.3
Comprehensive income, net of tax	$	110.9	$	46.7		$	266.0	$	156.9	$	86.4		$	37.8

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

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - Amounts in millions, except share amounts)


	October 1, 2017			January 1, 2017			April 1, 2018			December 31, 2017
Assets
Current Assets
Cash	$	82.5		$	98.6		$	79.9		$	70.9
Accounts receivable, net	466.0			383.7			386.6			388.3
Unbilled receivables, net							148.2			89.8
Inventories, net	431.9			314.2			381.8			400.2
Prepaid expenses and other current assets	60.6			49.7			63.7			62.7
Total current assets	1,041.0			846.2			1,060.2			1,011.9
Property, plant and equipment, net of accumulated depreciation and amortization of $519.4 at October 1, 2017 and $468.5 at January 1, 2017	452.1			340.8
Property, plant and equipment, net of accumulated depreciation and amortization of $548.8 at April 1, 2018 and $531.6 at December 31, 2017							441.9			442.8
Goodwill	1,748.9			1,193.5			1,802.6			1,776.7
Acquired intangibles, net	408.2			234.6			390.7			398.9
Prepaid pension assets	109.8			88.5			137.5			127.2
Other assets, net	87.5			70.8			87.2			88.9
Total Assets	$	3,847.5		$	2,774.4		$	3,920.1		$	3,846.4
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	186.0		$	138.8		$	198.0		$	191.7
Accrued liabilities	336.6			261.0			348.0			345.3
Current portion of long-term debt, capital leases and other debt	2.5			102.0			9.2			3.6
Total current liabilities	525.1			501.8			555.2			540.6
Long-term debt and capital leases	1,193.2			515.8
Long-term debt and capital lease obligations							1,019.2			1,069.3
Other long-term liabilities	275.8			202.4			289.8			289.2
Total Liabilities	1,994.1			1,220.0			1,864.2			1,899.1
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value; outstanding shares - none	—			—			—			—
Common stock, $0.01 par value; authorized 125,000,000 shares; issued shares: 37,697,865 at October 1, 2017 and January 1, 2017; outstanding shares: 35,436,187 at October 1, 2017 and 35,110,762 at January 1, 2017	0.4			0.4
Common stock, $0.01 par value; authorized 125,000,000 shares; issued shares: 37,697,865 at April 1, 2018 and December 31, 2017; outstanding shares: 35,739,323 at April 1, 2018 and 35,540,233 at December 31, 2017							0.4			0.4
Additional paid-in capital	337.1			335.7			335.8			337.3
Retained earnings	2,072.0			1,912.4			2,209.4			2,139.6
Treasury stock, 2,261,678 at October 1, 2017 and 2,587,103 at January 1, 2017	(211.3		)	(242.9		)
Treasury stock, 1,958,542 at April 1, 2018 and 2,157,632 at December 31, 2017							(180.3		)	(200.7		)
Accumulated other comprehensive loss	(344.8		)	(451.2		)	(309.4		)	(329.3		)
Total Stockholders’ Equity	1,853.4			1,554.4			2,055.9			1,947.3
Total Liabilities and Stockholders’ Equity	$	3,847.5		$	2,774.4		$	3,920.1		$	3,846.4

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

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~OCTOBER~~APRIL 1, ~~2017~~2018 AND ~~OCTOBER~~APRIL 2, ~~2016~~2017

(Unaudited - Amounts in millions)


	Nine Months						Three Months
	2017			2016			2018			2017
Operating Activities
Net income	$	159.6		$	137.9		$	66.5		$	30.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	87.4			65.6			28.8			22.8
Deferred income taxes	(1.3		)	9.0			(3.6		)	0.6
Stock-based compensation	14.3			12.2			6.5			5.4
Gain on sale of facility	—			(17.9		)
Changes in operating assets and liabilities:
Accounts receivable	(7.7		)	2.3			(27.0		)	(10.1		)
Inventories	(36.9		)	(18.9		)	(6.0		)	(21.7		)
Prepaid expenses and other assets	(1.2		)	(1.4		)	(3.6		)	(5.8		)
Accounts payable	12.6			6.9			9.7			14.0
Accrued liabilities	11.4			37.5			(11.9		)	9.7
Income taxes receivable/payable, net	11.9			26.7			14.5			8.1
Long-term assets	(12.5		)	0.8			1.5			(1.8		)
Other long-term liabilities	16.1			6.0			0.1			(0.2		)
Pension and postretirement benefits	(13.9		)	(12.3		)	(7.4		)	(5.8		)
Other operating, net	8.5			(3.7		)	3.5			7.7
Net cash provided by operating activities	248.3			250.7			71.6			53.4
Investing Activities
Purchases of property, plant and equipment	(40.5		)	(44.9		)	(19.8		)	(12.6		)
Purchase of businesses and other investments, net of cash acquired	(773.8		)	(58.5		)	—			(740.6		)
Proceeds from the sale of assets	1.1			29.6			0.2			0.3
Sales proceeds transferred to escrow as restricted cash	—			(19.5		)
Net cash used in investing activities	(813.2		)	(93.3		)	(19.6		)	(752.9		)
Financing Activities
Net proceeds from (payments on) credit facility	285.0			(150.5		)	(54.5		)	595.0
Proceeds from senior notes	268.0			—			—			100.0
Proceeds from term loan	100.0			—
Payments on senior notes and other debt	(131.7		)	(22.7		)
Proceeds from other debt	—			6.1
Proceeds from (payments on) other debt							1.6			(31.0		)
Proceeds from exercise of stock options	18.7			26.7			12.3			6.3
Other financing, net	(4.4		)	(1.1		)	(2.0		)	(1.4		)
Net cash provided by (used in) financing activities	535.6			(141.5		)	(42.6		)	668.9
Effect of exchange rate changes on cash	13.2			(1.5		)	(0.4		)	1.7
Change in cash	(16.1		)	14.4			9.0			(28.9		)
Cash—beginning of period	98.6			85.1			70.9			98.6
Cash—end of period	$	82.5		$	99.5		$	79.9		$	69.7

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

TELEDYNE TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~October~~April 1, ~~2017~~2018

Note 1. General

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Teledyne Technologies Incorporated (“Teledyne” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in notes to consolidated financial statements have been condensed or omitted pursuant to such rules and regulations, but resultant disclosures are in accordance with accounting principles generally accepted in the United States (“GAAP”) as they apply to interim reporting. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes in Teledyne’s Annual Report on Form 10-K for the fiscal year ended ~~January 1,~~December 31, 2017 (“~~2016~~2017 Form 10-K”).

In the opinion of Teledyne’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, Teledyne’s consolidated financial position as of ~~October~~April 1, ~~2017~~2018 and the consolidated results of operations, ~~and~~ consolidated comprehensive income ~~for the three and nine months then ended~~ and cash flows for the ~~nine~~three months then ended. The results of operations and cash flows for the period ended ~~October~~April 1, ~~2017~~2018 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 Pronouncements

In ~~January 2017,~~February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the computation~~No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, to address a specific consequence of the ~~implied fair value~~Tax Cuts and Jobs Act (“Tax Act”) by allowing a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act reduction of ~~goodwill to measure a goodwill impairment charge. Instead, entities will record a goodwill impairment charge based on~~ the ~~excess of a reporting unit’s carrying amount over its fair value.~~U.S. federal corporate income tax rate. The ~~new standard~~guidance is effective for ~~interim and~~all entities for annual ~~reporting~~ periods beginning after December 15, 2019, with early adoption permitted. We expect the adoption of this standard will reduce the complexity surrounding the evaluation of goodwill for impairment. The impact of this new standard for the Company will depend on the outcomes of future goodwill impairment tests.

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU requires the service cost component of net benefit costs to be disaggregated from all other components and be reported in the same line item or items as other compensation costs and allow only the service cost component to be eligible for capitalization when applicable. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and before income from operations. This ASU is effective for the Company for interim and annual periods beginning January 1, 2018. Upon adoption, the amendments in this update will be applied retrospectively for the presentation of the components of net benefit cost, and prospectively for the capitalization of the service cost component of net benefit cost. The adoption of this standard will not impact pre-tax income or earnings per share reported for the years ended December 31, 2017 and January 1, 2017 and is not expected to materially impact pre-tax income or earnings per share for the year ended December 30, 2018. The impacts to operating income from the re-classification of the other components of net benefit cost for the years ended December 31, 2017 and January 1, 2017 are immaterial. The impacts to operating income from the re-classification of the other components on net benefit cost for the year ended December 31, 2018, ~~will be known when the Company measures its plan assets and benefit obligations as of December 31, 2017.~~

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The new standard, as subsequently amended, is effective for Teledyne for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted, ~~for interim~~ and ~~annual reporting periods beginning after December 15, 2016. The new standard can~~is to be ~~adopted~~applied either in the period of adoption or retrospectively to each ~~prior reporting~~ period ~~presented or as a cumulative-effect adjustment as~~in which the effect of the ~~date of adoption.~~

~~Under~~change in the ~~new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring control of a good or service to~~U.S. federal corporate income tax rate in the ~~customer, either at a point in time or over time. Under the new standard,~~Tax Act is recognized. Teledyne expects to recognize revenue over time on most of its contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of its performance obligations, which is similar to the percentage-of-completion (“POC”) cost-to-

~~cost method currently used on certain of these contracts. Therefore, adoption of the ASU will primarily impact our contracts for which revenue~~ is currently recognized using the POC units-of-delivery and milestone methods as we expect to recognize revenue for these contracts over time using the POC cost-to-cost method. These contracts represent approximately half of the revenue currently recognized under the POC method. The percentage of Teledyne revenue recognized using any POC method was 30.5% in 2016, 31.2% in 2015, and 28.7% in 2014. Also, to a lesser extent, we expect certain ship and bill contracts for custom products and products sold to the U.S. Government, as well as service and repair contracts will be recognized over time. Accordingly, revenue will be recognized earlier in the performance period as costs are incurred, as opposed to recognizing revenue when units are delivered, milestones achieved or services performed. This change will also impact our backlog and balance sheet presentation with an expected decrease in inventories, an increase in accounts receivable (i.e., unbilled receivables) and a net increase to retained earnings to primarily reflectevaluating the impact ~~of converting certain ship and bill contracts and contracts currently applying~~this guidance will have on the ~~units-of-delivery and milestone methods to the cost-to-cost method for recognizing revenue and profits.~~

~~The Company will adopt the standard as of January 1, 2018, using the modified retrospective transition method and is currently quantifying the impact of the adoption on its~~ consolidated financial statements and ~~related~~footnote disclosures. Under the modified retrospective transition method, the Company will be required to calculate and record the cumulative-effect of adopting the new standard as of January 1, 2018, in the Company’s Quarterly Report on Form 10-Q for the first quarter of 2018. The impact of adopting the new standard to retained earnings is not known at this time, as it will be dependent on the affected contracts that have not been substantially completed as of December 31, 2017.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities.” This ASU better aligns an entity’s risk management activities and financial reporting for hedging relationships. This ASU expands and refines hedge accounting for both nonfinancial and financial risk components, and this ASU simplifies and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This ASU is effective for fiscal years beginning after December 15, 2018 and for interim periods therein, with early adoption permitted. Teledyne is currently evaluating the impact this guidance will have on the consolidated financial statements and footnote disclosures.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the computation of the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record a goodwill impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. We expect the adoption of this standard will reduce the complexity surrounding the evaluation of goodwill for impairment. The impact of this new standard for the Company will depend on the outcomes of future goodwill impairment tests.

In May 2014, the FASB issued ASU No. 2014-09 (Topic 606), Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and superseded most current revenue recognition guidance under Topic 605, Revenue Recognition. Under the new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring control of a good or service to the customer, either at a point in time or over time. The new standard requires expanded disclosures, including how and when we satisfy performance obligations as well as additional disaggregated revenue information to be provided more frequently in the reporting process.

The Company adopted the requirements of Topic 606 as of January 1, 2018, using the modified retrospective transition method which required a cumulative-effect adjustment as of the date of adoption. Adoption of Topic 606 primarily impacted contracts for which revenue prior to fiscal year 2018 was recognized using the percentage of completion (“POC”), units-of-delivery or milestone methods, as these contracts are now recognized primarily using the POC cost-to-cost method to depict the transfer of control of the good or service to the customer as the work on the contract is performed. Also, to a much lesser extent, certain contracts for customized goods and services, certain products sold to the U.S. Government, and product repair contracts are now recognized over time, as control of the good or service produced transfers to the customer over time in accordance with the guidance in Topic 606. For impacted contracts that were in process at December 31, 2017, we calculated the difference in the life to date revenue (and related costs and expenses) between legacy accounting standards and Topic 606, with the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of retained earnings, as shown below. The prior year comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. While Topic 606 includes additional disclosures, as discussed within these Notes to the Condensed Consolidated Financial Statements, comparative disclosures with prior periods are not required in the year of adoption due to our use of the modified retrospective transition method.

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption ofTopic 606 were as follows (in millions):



	Balance at December 31, 2017		Topic ASC 606 Adjustments			Balance at January 1, 2018
Assets
Accounts receivable, net	$	388.3	$	1.0		$	389.3
Unbilled receivables, net	89.8		29.0			118.8
Inventories, net	400.2		(24.8		)	375.4
Liabilities
Accrued liabilities	$	345.3	$	1.9		$	347.2
Stockholders' Equity
Retained earnings	$	2,139.6	$	3.3		$	2,142.9

In accordance with the requirements of Topic 606, the disclosure of the impact of adoption on our condensed consolidated income statement and balance sheet for the first quarter of 2018 was as follows (in millions):



	For the first quarter ended April 1, 2018
	As Reported		Topic ASC 606 Adjustments			Without ASC 606 Adoption
Assets
Accounts receivable, net	$	386.6	$	(1.2	)	$	385.4
Unbilled receivables, net	148.2		(60.3		)	87.9
Inventories, net	381.8		47.4			429.2
Liabilities
Accrued liabilities	$	348.0	$	(3.8	)	$	344.2
Stockholders' Equity
Retained earnings	$	2,209.4	$	(10.3	)	$	2,199.1



	For the first quarter ended April 1, 2018
	As Reported		Topic ASC 606 Adjustments			Without ASC 606 Adoption
Net sales	$	695.6	$	(32.4	)	$	663.2
Cost of sales	438.2		(23.2		)	415.0
Provision for income taxes	15.7		(2.2		)	13.5
Net income	$	66.5	$	(7.0	)	$	59.5

Significant Accounting Policies Update

Our significant accounting policies are detailed in “Note 2: Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2017. Significant changes to our accounting policies as a result of adopting Topic 606 are discussed below.

Revenue Recognition

We determine the appropriate method by which we recognize revenue by analyzing the nature of the products or services being provided as well as the terms and conditions of contracts or arrangements entered into with our customers. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. A contract’s transaction price is allocated to each distinct good or service (i.e., performance obligation) identified in the contract, and each performance obligation is valued based on its estimated relative standalone selling price. For standard products or services, list prices generally represent the standalone selling price. For performance obligations where list price is not available, we typically use the expected cost plus a margin approach to estimate the standalone selling price for that performance obligation. Approximately 60% of our revenue is recognized at a point in time, with the remaining 40% recognized over time.

Revenue recognized at a point in time relates primarily to the sale of standard or minimally customized products, with control transferring to the customer generally upon the transfer of title. This type of revenue arrangement is typical for our commercial contracts within the Instrumentation, Digital Imaging, and Aerospace and Defense Electronics segments, and to a lesser extent for certain commercial contracts within the Engineered Systems segment relating to the sale of standard hydrogen/oxygen gas generators. In limited circumstances, customer specified acceptance criteria exist. If we cannot objectively demonstrate that the product meets those specifications prior to the shipment, the revenue is deferred until customer acceptance is obtained. Performance obligations recognized at a point in time can include variable consideration, such as product returns and sales allowances. The estimation of this variable consideration and determination of whether to include estimated amounts as a reduction in the transaction price is based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.

Revenue recognized over time relates primarily to contracts to design, develop and/or manufacture highly engineered products used in both defense and commercial applications. This type of revenue arrangement is typical of our U.S. government contracts and to a lesser extent for certain commercial contracts, with both contract types occurring across all segments. The customer typically controls the work in process as evidenced either by contractual termination clauses or by our right to payment for costs incurred to date plus a reasonable profit for products or services that do not have an alternative use . As control transfers continuously over time on these contracts, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We generally use the cost-to-cost measure of progress as this measure best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. The transaction price in these arrangements may include estimated amounts of variable consideration, including award fees, incentive fees, or other provisions that can either increase or decrease the transaction price. We estimate variable consideration at the amount to which we expect to be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the estimation uncertainty is resolved. The estimation of this variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.

The majority of our over time contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Over time contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications on over time contracts are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

For over time contracts using cost-to-cost, we have an Estimate at Completion (“EAC”) process in which management reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue and cost, and making assumptions for schedule and technical issues. This EAC process requires management’s judgment to make reasonably dependable cost estimates. Since certain contracts extend over a longer 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. 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. Revenue recognized over time using our EAC process represented approximately 35% of net sales for the first quarter of 2017. The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first quarter of 2018 was $0.2 million of favorable revenue and operating income. None of the effects of changes in estimates on any individual contract were material to the condensed consolidated statements of income for any period presented.

While extended or non-customary warranties do not represent a significant portion of our revenue, we recognize warranty services as a separate performance obligations when it is material to the contract. When extended or non-customary warranties represents a separate performance obligation, the revenue is deferred and recognized ratably over the extended warranty period.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities, which are included in accrued liabilities and other long-term liabilities) on the Condensed Consolidated Balance Sheet. Under the typical payment terms of our over time contracts, the customer pays us either performance-based payments or progress payments. Amounts billed and due from our customers are classified as receivables on the Condensed Consolidated Balance Sheet. We may receive interim payments as work progresses, although for some contracts, we may be entitled to receive an advance payment. We recognize a liability for these interim and advance payments in excess of revenue recognized and present it as a contract liability which is included within accrued liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheet, which represented $115.2 million and $14.1 million as of April 1, 2018, and $110.3 million and $15.5 million as of January 1, 2018, respectively. Contract liabilities typically are not considered a significant financing component because these cash advances are used to meet working capital demands that can be higher in the early stages of a contract, and these cash advances protect us from the other party failing to adequately complete some or all of its obligations under the contract. When revenue recognized exceeds the amount billed to the customer, we record an unbilled receivable (contract asset) for the amount we are entitled to receive based on our enforceable right to payment. The unbilled receivable balance increased from the beginning of the year by $29.4 million, or 24.7%, primarily due to work performed ahead of billings on certain over time revenue contracts primarily in our Aerospace and Defense Electronics operating segment. Contract liabilities increased slightly from the beginning of the year by $3.5 million, or 2.7%. The Company recognized revenue of $28.9 million during the quarter ended April 1, 2018 from contract liabilities that existed at the beginning of year. The Company recognizes the incremental costs of obtaining or fulfilling a contract as expense when incurred if the amortization period of the asset is one year or less. Incremental costs to obtain or fulfill contracts with an amortization period greater than one year were not material.

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of April 1, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations was $1,492.9 million. The Company expects approximately 85% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 15% recognized thereafter.

Note 2. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive income/(loss) (“AOCI”) by component, net of tax, for the ~~third~~first quarter ~~and nine months~~ ended ~~October~~April 1, ~~2017~~2018 and ~~October~~April 2, ~~2016~~2017 are as follows (in millions):

Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of July 2, 2017 $ (144.0 ) $ 0.1
$ (242.8 ) $ (386.7 )
   Other comprehensive income before reclassifications 36.8
0.6
—
37.4
   Amounts reclassified from AOCI —
1.3
3.2
4.5
Net other comprehensive income 36.8
1.9
3.2
41.9
Balance as of October 1, 2017 $ (107.2 ) $ 2.0
$ (239.6 ) $ (344.8 )

Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of July 3, 2016 $ (162.9 ) $ (1.2 ) $ (224.8 ) $ (388.9 )
   Other comprehensive loss before reclassifications (7.7 ) (0.8 ) —
(8.5 )
   Amounts reclassified from AOCI —
(0.1 ) 3.3
3.2
Net other comprehensive income (loss) (7.7 ) (0.9 ) 3.3
(5.3 )
Balance as of October 2, 2016 $ (170.6 ) $ (2.1 ) $ (221.5 ) $ (394.2 )



	Foreign Currency Translation			Cash Flow Hedges and Other			Pension and Postretirement Benefits			Total
Balance as of December 31, 2017	$	(102.0	)	$	0.5		$	(227.8	)	$	(329.3	)
Other comprehensive income (loss) before reclassifications	17.2			(2.7		)	—			14.5
Amounts reclassified from AOCI	—			1.1			4.3			5.4
Net other comprehensive income (loss)	17.2			(1.6		)	4.3			19.9
Balance as of April 1, 2018	$	(84.8	)	$	(1.1	)	$	(223.5	)	$	(309.4	)

	Foreign Currency Translation			Cash Flow Hedges and Other			Pension and Postretirement Benefits			Total
Balance as of January 1, 2017	$	(198.8	)	$	(2.8	)	$	(249.6	)	$	(451.2	)
Other comprehensive income before reclassifications	4.0			0.3			—			4.3
Amounts reclassified from AOCI	—			(0.5		)	3.5			3.0
Net other comprehensive income (loss)	4.0			(0.2		)	3.5			7.3
Balance as of April 2, 2017	$	(194.8	)	$	(3.0	)	$	(246.1	)	$	(443.9	)

Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of January 1, 2017 $ (198.8 ) $ (2.8 ) $ (249.6 ) $ (451.2 )
   Other comprehensive income (loss) before reclassifications 91.6
(1.5 ) —
90.1
   Amounts reclassified from AOCI —
6.3
10.0
16.3
Net other comprehensive income 91.6
4.8
10.0
106.4
Balance as of October 1, 2017 $ (107.2 ) $ 2.0
$ (239.6 ) $ (344.8 )

Foreign Currency Translation Cash Flow Hedges and Other Pension and Postretirement Benefits Total
Balance as of January 3, 2016 $ (174.2 ) $ (6.7 ) $ (232.3 ) $ (413.2 )
   Other comprehensive income before reclassifications 3.6
2.5
��
6.1
   Amounts reclassified from AOCI —
2.1
10.8
12.9
Net other comprehensive income 3.6
4.6
10.8
19.0
Balance as of October 2, 2016 $ (170.6 ) $ (2.1 ) $ (221.5 ) $ (394.2 )

The reclassifications out of AOCI for the ~~third~~first quarter ended April 1, 2018 and ~~nine months ended October 1,~~April 2, 2017 ~~and October 2, 2016~~ are as follows (in millions):


	Amount Reclassified from AOCI Three Months Ended			Amount Reclassified from AOCI Three Months Ended			Statement of Income	Amount Reclassified from AOCI Three Months Ended			Amount Reclassified from AOCI Three Months Ended			Statement of Income
	October 1, 2017			October 2, 2016			Presentation	April 1, 2018			April 2, 2017			Presentation
(Gain) loss on cash flow hedges:
(Gain) loss recognized in income on derivatives	$	1.8		$	(0.1	)	Cost of sales	$	1.3		$	(0.6	)	See note 2
Income tax benefit	(0.5		)	—			Income tax benefit
Income tax impact								(0.2		)	0.1			Provision for income taxes
Total	$	1.3		$	(0.1	)		$	1.1		$	(0.5	)

Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost	$	(1.5	)	$	(1.5	)	Costs and expenses	$	(1.5	)	$	(1.6	)	Costs and expenses
Amortization of net actuarial loss	6.7			6.6			Costs and expenses	7.3			7.2			Costs and expenses
Total before tax	5.2			5.1				5.8			5.6
Income tax benefit	(2.0		)	(1.8		)	Income tax benefit
Income tax impact								(1.5		)	(2.1		)	Provision for income taxes
Total	$	3.2		$	3.3			$	4.3		$	3.5

Amount Reclassified from AOCI Nine Months Ended Amount Reclassified from AOCI Nine Months Ended Statement of Income
October 1, 2017 October 2, 2016 Presentation
Loss on cash flow hedges:
Loss recognized in income on derivatives $ 8.5
$ 2.9
Cost of sales
Income tax benefit (2.2 ) (0.8 ) Income tax benefit
Total $ 6.3
$ 2.1

Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost $ (4.5 ) $ (4.5 ) Costs and expenses
Amortization of net actuarial loss 20.8
21.0
Costs and expenses
Total before tax 16.3
16.5

Income tax benefit (6.3 ) (5.7 ) Income tax benefit
Total $ 10.0
$ 10.8

Note 3. Business Combinations, Goodwill and Acquired Intangible Assets

Acquisition of e2v

On March 28, 2017, Teledyne completed the acquisition of all of the outstanding common stock of e2v technologies plc (“e2v”) for $770.7 million, including stock options and assumed debt, net of $24.4 million of cash acquired. e2v provides high performance image sensors and custom camera solutions and application specific standard products for the machine vision market. In addition, e2v provides high performance space qualified imaging sensors and arrays for space science and astronomy. e2v also produces components and subsystems that deliver high reliability radio frequency power generation for healthcare, industrial and defense applications. Finally, the company provides high reliability semiconductors and board-level solutions for use in aerospace, space and communications applications. Teledyne funded the acquisition of e2v with borrowings under its credit facility and cash on hand as well as $100.0 million in a newly issued term loan.

Most of e2v’s operations are included in the Digital Imaging and Aerospace and Defense Electronics segments. The Instrumentation segment includes a small portion of e2v’s operations. Principally located in Chelmsford, United Kingdom and Grenoble, France, e2v had sales of approximately £236 million for its fiscal year ended March 31, 2016. e2v’s results have been included since the date of the acquisition and include $181.7 million in net sales and operating income of $19.1 million, which included $9.4 million in acquisition-related costs and $7.7 million in additional intangible asset amortization expense.

The first ~~nine months~~quarter of 2017 ~~includes~~included pretax charges of ~~$28.1~~$21.2 million related to the acquisition of e2v, which included ~~$13.0~~$11.5 million in transaction costs, including stamp duty, advisory, legal and other consulting fees and other costs recorded to selling, general and administrative expenses, ~~$6.8~~$1.4 million in inventory fair value step-up amortization expense recorded to cost of sales, $2.3 million in bank bridge facility commitment expense recorded to interest expense and $6.0 million related to a foreign currency option contract expense to hedge the e2v purchase price recorded as other expense. Of these amounts, ~~$9.4~~$2.5 million impacted segment operating income.

The unaudited proforma information below, as required by GAAP, assumes that e2v had been acquired at the beginning of the ~~2016~~2017 fiscal year and includes the effect of increased interest expense on net acquisition debt and the amortization of acquired intangible assets. The ~~2016 first nine months~~2017 proforma ~~amounts~~amount also include ~~$14.9~~$12.3 million in transaction costs, including legal and other consulting fees, $11.5 million in expense related to a foreign currency option contract to hedge the e2v purchase price, $2.8 million in bridge financing costs and ~~$6.8~~$1.4 million in inventory fair value step-up amortization expense. These amounts totaling ~~$36.0~~$28.0 million ~~(which includes $2.9 million for the third quarter)~~ should be considered non-recurring costs that were necessary to complete the acquisition and are not indicative of the ongoing operations of the combined company.

This unaudited proforma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited proforma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.

The following table presents proforma net sales, net income and earnings per share data assuming e2v was acquired at the beginning of the ~~2016~~2017 fiscal year:


	Third Quarter (a)				Nine Months (a)				First Quarter (a)
(unaudited - in millions, except per share amounts)	2017		2016		2017		2016		2017
Net sales	$	662.2	$	614.6	$	1,992.4	$	1,853.0	$	659.1
Net income	$	69.0	$	55.5	$	142.2	$	126.3	$	13.1
Basic earnings per common share	$	1.95	$	1.60	$	4.04	$	3.66	$	0.37
Diluted earnings per common share	$	1.90	$	1.56	$	3.93	$	3.57	$	0.36

a) The above unaudited proforma information is presented for the e2v acquisition as it is considered a material acquisition.

The following table is a summary of the final purchase accounting allocation for e2v acquisition (dollars in millions):


Fair values allocated to the assets acquired and liabilities assumed - e2v (in millions): ~~(a)~~
Current assets, excluding cash acquired	$	152.3		$	144.6
Property, plant and equipment	104.7			90.3
Goodwill	471.1			494.3
Acquired intangible assets	173.4			172.3
Other long-term assets	8.9			8.8
Total assets acquired	910.4			910.3
Current liabilities	(78.7		)	(79.6		)
Long-term liabilities	(89.3		)	(88.3		)
Total liabilities assumed	(168.0		)	(167.9		)
Consideration transferred, net of cash acquired ~~(b)~~(a)	$	742.4		$	742.4


(a)	~~The amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date of March 28, 2017 and the end of the period to finalize the analysis.~~


~~(b)~~	Consideration transferred ~~includes~~included a $2.0 million liability for the payment to former e2v share option holders paid prior to the end of fiscal year 2017.

The following table is a summary atof the ~~acquisition date of~~final purchase accounting allocation for the acquired intangible assets and weighted average useful life in years for the e2v acquisition ~~made in 2017~~ (dollars in millions):



Intangibles subject to amortization:(a)	Intangible Assets		Weighted average useful life in years
Intangibles subject to amortization:				Intangible Assets		Weighted average useful life in years
Proprietary technology	$	97.5	11.8	$	97.5	11.8
Customer list/relationships	26.3		13.0	25.2		12.9
Backlog	2.8		0.8	2.8		0.8
Total intangibles subject to amortization	126.6		11.8	125.5		11.8
Intangibles not subject to amortization:(a)
Intangibles not subject to amortization:
Trademarks	46.8			46.8
Total acquired intangible assets	$	173.4		$	172.3


~~(a)~~	~~The amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis.~~

Other Acquisitions

On July 20, 2017, a subsidiary of Teledyne acquired assets of Scientific Systems, Inc. (“SSI”) for $31.0 million in cash. Headquartered in State College, PA, SSI manufactures precision components and specialized subassemblies used primarily in analytical and diagnostic instrumentation, such as ~~High Performance Liquid Chromatography~~high performance liquid chromatography systems (HPLC) and specific medical devices and is part of the Instrumentation segment.

Teledyne spent $93.4 million on acquisitions and other investments in 2016. On December 6, 2016, Teledyne Instruments, Inc. acquired Hanson Research Corporation (“Hanson Research”) which specializes in analytical instrumentation for the pharmaceutical industry, for $25.0 million in cash. On November 2, 2016, Teledyne Instruments, Inc. acquired assets of IN USA, Inc. (“IN USA”) which manufactures a range of ozone generators, ozone analyzers and other gas monitoring instruments utilizing ultraviolet and infrared based technologies, for $10.2 million in cash. On May 3, 2016, Teledyne DALSA, Inc., a Canadian-based subsidiary, acquired the assets and business of CARIS, Inc. (“CARIS”) a leading developer of geospatial software designed for the hydrographic and marine community, for a cash payment of $26.2 million, net of cash acquired. On April 15, 2016, Teledyne LeCroy, Inc., a U.S.-based subsidiary, acquired assets of Quantum Data, Inc. (“Quantum Data”) which provides electronic test and measurement instrumentation and is a market leader in video protocol analysis test tools for $17.3 million in cash. On April 6, 2016, Teledyne LeCroy, Inc. also acquired Frontline Test Equipment, Inc. (“Frontline”) which provides electronic test and measurement instrumentation and is a market leader in wireless protocol analysis test tools, for $13.7 million in cash. Each of the 2016 acquisitions are part of the Instrumentation segment except for CARIS which is part of the Digital Imaging segment.

Teledyne funded the SSI acquisition and the 2016 acquisitions from borrowings under its credit facility and cash on hand. The results of all the acquisitions have been included in Teledyne’s results since the dates of the respective acquisition. The primary reasons for the 2017 and 2016 acquisitions were to strengthen and expand our core businesses through adding complementary product and service offerings, allowing greater integrated products and services, enhancing our technical capabilities or increasing our addressable markets. The significant factors that resulted in recognition of goodwill were: (a) the purchase price was based on cash flow and return on capital projections assuming integration with our businesses and (b) the calculation of the fair value of tangible and intangible assets acquired that qualified for recognition.

For a further description of the Company’s acquisition activity for fiscal year ~~2016,~~2017, please refer to Note 3 of the Notes to Consolidated Financial Statements included in our ~~2016~~2017 Form 10-K.

Goodwill and Acquired Intangible Assets

Teledyne’s goodwill was ~~$1,748.9~~$1,802.6 million at ~~October~~April 1, ~~2017~~2018 and ~~$1,193.5~~$1,776.7 million at ~~January 1,~~December 31, 2017. The increase in the balance of goodwill in ~~2017 primarily~~2018 included ~~$471.1 million in goodwill from e2v acquisition, as well as~~ the impact of exchange rate ~~changes.~~changes and adjustments for the finalization of the e2v purchase accounting allocation. Goodwill from the e2v acquisition will not be deductible for tax purposes. Teledyne’s net acquired intangible assets were ~~$408.2~~$390.7 million at ~~October~~April 1, ~~2017~~2018 and ~~$234.6~~$398.9 million at ~~January 1,~~December 31, 2017. The ~~increase in the balance of acquired intangible assets in 2017 reflected $173.4 million in intangible assets from the e2v acquisition, partially offset by $29.2 million of amortization. The~~ Company ~~is in~~completed the process of specifically identifying the amount to be assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the e2v acquisition, including the allocation by ~~segment. The amounts recorded as~~segment, resulting in an increase to goodwill of ~~October 1, 2017 are preliminary since there was insufficient time between~~$3.9 million in the ~~acquisition date and the end~~first quarter of ~~the period to finalize the analysis.~~2018. In addition, the Company is still in the

process of specifically identifying the amount to be assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the SSI acquisition made in July ~~2017 and the IN USA and Hanson Research acquisitions made in the fourth quarter of 2016.~~2017. The amounts recorded as of ~~October~~April 1, ~~2017~~2018 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis.

Note 4. Derivative Instruments

Teledyne transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. The Company’s primary foreign currency risk management objective is to protect the ~~United States~~US dollar value of future cash flows and minimize the volatility of reported earnings. All derivatives are recorded on the balance sheet at fair value. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenues and expenses denominated in Canadian dollars for our Canadian companies, including DALSA and in British pounds for our UK companies, including e2v. These contracts are designated and qualify as cash flow hedges. The Company has converted a US dollar denominated, variable rate debt obligation into a euro fixed rate obligation using a receive-float, pay fixed cross currency swap. This cross currency swap is designated as a cash flow hedge.

Cash Flow Hedging Activities

The effectiveness of the forward contract cash flow hedge, which exclude time value, and the cross currency swap cash flow hedge is assessed prospectively and retrospectively on a monthly basis using regression analysis, as well as using other timing and probability criteria. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedges and must be highly effective in offsetting changes to future cash flows on hedged transactions. The effective portion of the cash flow hedge forward contracts’ gains or losses resulting from changes in the fair value of these hedges is initially reported, net of tax, as a component of AOCI in stockholders’ equity until the underlying hedged item is reflected in our consolidated statements of income, at which time the effective amount in AOCI is reclassified to cost of sales in our consolidated statements of income. For the cross currency swap cash flow hedge, effective amounts are recorded in AOCI, and reclassified into interest expense in the consolidated statements of income. In addition, for the cross currency swap an amount is reclassified from AOCI to other income and expense each reporting period, to offset the earnings impact of the remeasurement of the hedged liability. Net deferred gains recorded in AOCI, net of tax, for the forward contracts that will mature in the next twelve months total ~~$3.8~~$1.2 million. These gains are expected to be offset by anticipated losses in the value of the forecasted underlying hedged item. Amounts related to the cross currency swap expected to be reclassified from AOCI into income in the coming twelve months total ~~$1.9~~$2.5 million.

In the event that the gains or losses in AOCI are deemed to be ineffective, the ineffective portion of gains or losses resulting from changes in fair value, if any, is reclassified to other income and expense. In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or losses on the related cash flow hedges will be reclassified from AOCI to other income and expense. During the current reporting period, all forecasted transactions occurred and, therefore, there were no such gains or losses reclassified to other income and expense. As of ~~October~~April 1, ~~2017,~~2018, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling ~~$84.4~~$100.1 million. These foreign currency forward contracts have maturities ranging from ~~December 2017~~June 2018 to February ~~2019.~~2020. Teledyne had foreign currency forward contracts designated as cash flow hedges to buy British pounds and sell U.S. dollars totaling $0.8 million. The foreign currency forward contract has a maturity of June 2018. Together these contracts had a fair value of $1.2 million. The cross currency swap has notional amounts of €93.0 million equivalent to $100.0 million, and matures in ~~September~~October 2019.

The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the ~~third~~first quarter ended April 1, 2018 and ~~nine months ended October 1,~~April 2, 2017 ~~and October 2, 2016~~ was as follows (in millions):


	Third Quarter						Nine Months						First Quarter
	2017			2016			2017			2016			2018			2017
Net gain (loss) recognized in AOCI (a)	$	1.0		$	(1.0	)	$	(1.9	)	$	3.4		$	(3.7	)	$	0.5
Net gain (loss) reclassified from AOCI into cost of sales (a)	$	(0.8	)	$	(0.1	)	$	—		$	2.9		$	1.2		$	(0.2	)
Net gain reclassified from AOCI into interest expense (a)	$	0.4		$	—		$	0.9		$	—		$	0.5		$	0.8
Net loss reclassified from AOCI into other income and expense, net (b)	$	(3.0	)	$	—		$	(9.3	)	$	—		$	(3.0	)	$	—
Net foreign exchange gain (loss) recognized in other income and expense, net (c)	$	0.8		$	0.1		$	(0.8	)	$	(0.2	)
Net foreign exchange loss recognized in other income and expense, net (c)													$	—		$	(0.1	)

a) Effective portion, pre-tax

b) Amount reclassified to offset earnings impact of liability hedged by cross currency swap

c) Amount excluded from effectiveness testing

Non-Designated Hedging Activities

In addition, the Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign-currency-denominated monetary assets and liabilities, including intercompany receivables and payables. As of ~~October~~April 1, ~~2017,~~2018, Teledyne had non-designated foreign currency contracts of this type in the following pairs (in millions):


Contracts to Buy	Contracts to Buy		Contracts to Sell			Contracts to Buy		Contracts to Sell
Currency	Amount		Currency	Amount		Amount		Currency	Amount
Canadian Dollars	C$	155.4	U.S. Dollars	US$	124.1	C$	179.3	U.S. Dollars	US$	139.7
Canadian Dollars	C$	4.0	Euros	€	2.6	C$	13.8	Euros	€	8.7
Euros	€	36.8	Great Britain Pounds	£	33.8	€	48.0	Great Britain Pounds	£	42.9
Great Britain Pounds	£	1.7	Australian Dollars	A$	2.7	£	1.4	Australian Dollars	A$	2.5
Great Britain Pounds	£	54.8	U.S. Dollars	US$	71.8	£	83.5	U.S. Dollars	US$	114.9
Singapore Dollars	S$	1.9	U.S. Dollars	US$	1.4	S$	2.0	U.S. Dollars	US$	1.5
Euros	€	14.2	U.S. Dollars	US$	17.1	€	44.1	U.S. Dollars	US$	54.5
Swiss Franc	Fr.	1.2	U.S. Dollars	US$	1.3
U.S. Dollars	US$	0.9	Japanese Yen	¥	100.0	US$	0.8	Japanese Yen	¥	80.0
Danish Krone	DKR	31.2	U.S. Dollars	US$	5.0	DKR	43.4	U.S. Dollars	US$	7.2
Swedish Krone	kr	34.2	Great Britain Pounds	£	3.3

The above table includes non-designated hedges derived from terms contained in triggered or previously designated cash flow hedges. The gains and losses on these derivatives which are not designated as hedging instruments are intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings. Teledyne does not use foreign currency forward contracts for speculative or trading purposes.

The effect of derivative instruments not designated as cash flow hedges recognized in other income and expense for the ~~third~~first quarter ~~and nine months~~ ended ~~October~~April 1, ~~2017~~2018 was ~~income of $4.8 million and~~ expense of ~~$1.7 million, respectively.~~$0.8 million. The effect of derivative instruments not designated as cash flow hedges in other income and expense for the ~~third~~first quarter ~~and nine months~~ ended ~~October~~April 2, ~~2016~~2017 was expense of ~~$1.3 million and $0.9 million, respectively.~~$6.0 million.

Fair Value of Derivative Financial Instruments

The Company has elected to use the income approach to value the derivatives, using observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR and EURIBOR) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR and EURIBOR cash and swap rates, foreign currency forward rates and cross currency basis spreads). Mid-market pricing is used as a practical expedient for fair value measurements. The fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s creditworthiness when in an asset position and the Company’s creditworthiness when in a liability position has also been factored into the fair value measurement of the derivative instruments and did not have a material impact on the fair value of these derivative instruments. Both the counterparty and the Company are expected to continue to perform under the contractual terms of the instruments.

The fair values of the Company’s derivative financial instruments are presented below. All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy (in millions):


Asset/(Liability) Derivatives	Balance sheet location	October 1, 2017			January 1, 2017			Balance sheet location	April 1, 2018			December 31, 2017
Derivatives designated as hedging instruments:
Cash flow forward contracts	Other assets	$	5.3		$	—		Other assets	$	1.5		$	3.8
Cash flow cross currency swap	Accrued liabilities	(10.0		)	—			Other assets	—			2.2
Cash flow forward contracts	Accrued liabilities	—			(1.0		)
Cash flow cross currency swap								Accrued liabilities	(14.7		)	—
Cash flow forward contracts	Other long-term liabilities	—			(0.1		)	Accrued liabilities	(0.3		)	(13.9		)
Total derivatives designated as hedging instruments		(4.7		)	(1.1		)		(13.5		)	(7.9		)
Derivatives not designated as hedging instruments:
Non-designated forward contracts	Other current assets	4.7			6.4			Other current assets	2.8			4.9
Non-designated forward contracts	Accrued liabilities	(4.1		)	(1.0		)	Accrued liabilities	(2.1		)	(1.2		)
Total derivatives not designated as hedging instruments		0.6			5.4				0.7			3.7
Total (liability) asset derivatives		$	(4.1	)	$	4.3			$	(12.8	)	$	(4.2	)

Note 5. Earnings Per Share

For the ~~third~~first quarter of ~~2017, no stock options were excluded in the computation of diluted earnings per share. For the first nine months of 2017, 600~~2018, 370,583 stock options were excluded in the computation of diluted earnings per share because they had exercise prices that were greater than the weighted average market price of the Company’s common stock during the period.

~~For the third quarter of 2016, no stock options were excluded in the computation of diluted earnings per share.~~ For the first ~~nine months~~quarter of ~~2016, 336,457~~2017, 900 stock options were excluded in the computation of diluted earnings per share because they had exercise prices that were greater than the weighted average market price of the Company’s common stock during the period.

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


	Third Quarter		Nine Months		First Quarter
	2017	2016	2017	2016	2018	2017
Weighted average basic common shares outstanding	35.3	34.7	35.2	34.5	35.6	35.1
Effect of dilutive securities (primarily stock options)	1.1	0.9	1.0	0.9	1.2	1.0
Weighted average diluted common shares outstanding	36.4	35.6	36.2	35.4	36.8	36.1

Note 6. Stock-Based Compensation Plans

Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options, restricted stock and performance shares to certain employees. The Company also has non-employee Board of Director stock compensation plans, pursuant to which non-qualified stock options and common stock, and beginning in 2015 restricted stock units, have been issued to its directors. After 2014, non-employee directors no longer receive non-qualified stock options.

Stock Incentive Plan

The following disclosures are based on stock options granted to Teledyne’s employees and directors. Stock option compensation expense was ~~$3.2 million and $11.0~~$4.9 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017,~~2018 and was ~~$2.5 million and $8.8~~$4.1 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2016.~~2017. Employee stock option grants are charged to expense evenly over the three year vesting period. For ~~2017,~~2018, the Company currently expects approximately ~~$14.4~~$21.2 million in stock option compensation expense based on stock options currently outstanding. This amount can be impacted by employee retirements and terminations or stock options granted during the remainder of the year. The Company issues shares of common stock upon the exercise of stock options.

The following assumptions were used in the valuation of stock options granted in ~~2017:~~2018:



	~~2017~~2018
Expected volatility	~~32.3%~~31.0%
Risk-free interest rate range	~~1.0%~~1.99% to ~~2.5%~~2.58%
Expected life in years	~~7.2~~6.8
Expected dividend yield	—

Based on the assumptions used in the valuation of stock options, the grant date weighted average fair value of stock options granted in ~~2017~~2018 was ~~$48.45~~$71.79 per share.

Stock option transactions for the ~~third~~first quarter ~~and nine months~~ ended ~~October~~April 1, ~~2017~~2018 are summarized as follows:


	2017								2018
	Third Quarter				Nine Months				First Quarter
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Beginning balance	2,515,100		$	82.26	2,175,442		$	70.44	2,285,703		$	83.73
Granted	—		$	—	543,880		$	123.40	371,990		$	192.00
Exercised	(104,496	)	$	66.49	(289,178	)	$	64.84	(177,383	)	$	69.38
Canceled	(13,147	)	$	104.92	(32,687	)	$	92.52	(17,300	)	$	109.03
Ending balance	2,397,457		$	82.83	2,397,457		$	82.83	2,463,010		$	100.94
Options exercisable at end of period	1,545,815		$	69.77	1,545,815		$	69.77	1,597,005		$	77.14

Performance Share Plan and Restricted Stock Award Program

In the first quarter of ~~2017,~~2018, the Company issued ~~876~~6,481 shares of Teledyne common stock asfor the ~~third and final payout~~first of three annual payouts under the ~~2012~~2015 to ~~2014~~2017 Performance Share Plan. A total of 31,117 shares remain to be issued in equal installments in 2019 and 2020.

The following table shows the restricted stock activity for the first ~~nine months of 2017:~~quarter ended 2018:


Restricted stock:	Shares		Weighted average fair value per share		Shares		Weighted average fair value per share
Balance, January 1, 2017	95,304		$	83.87
Balance, December 31, 2017					88,436		$	90.63
Granted	23,002		$	114.42	16,733		$	171.80
Vested	(30,704	)	$	87.98	(28,855	)	$	92.74
Forfeited/Canceled	(1,068	)	$	87.59
Balance, October 1, 2017	86,534		$	90.49
Balance, April 1, 2018					76,314		$	107.64

Note 7. Inventories

Inventories are stated at current cost net of reserves for excess, slow moving and obsolete inventory, less progress payments. Inventories are valued under the FIFO method, LIFO method and average cost method. Inventories at cost determined on the average cost or the FIFO methods were ~~$372.2~~$341.1 million at ~~October~~April 1, ~~2017~~2018 and ~~$268.4~~$348.6 million at ~~January 1,~~December 31, 2017. The remainder of the inventories using the LIFO method were ~~$80.1~~$50.1 million at ~~October~~April 1, ~~2017~~2018 and ~~$68.4~~$63.6 million at ~~January 1,~~December 31, 2017. Interim LIFO calculations are based on the Company’s estimates of expected year-end inventory levels and costs since an actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Because these estimates are subject to many factors beyond the Company’s control, interim results are

subject to the final year-end LIFO inventory valuation.


	Balance at						Balance at
Inventories (in millions):	October 1, 2017			January 1, 2017			April 1, 2018			December 31, 2017
Raw materials and supplies	$	201.2		$	146.0		$	202.3		$	200.2
Work in process	193.4			147.8			138.9			157.9
Finished goods	57.7			43.0			50.0			54.1
	452.3			336.8			391.2			412.2
Progress payments	(8.4		)	(9.1		)	—			(1.4		)
Reduction to LIFO cost basis	(12.0		)	(13.5		)	(9.4		)	(10.6		)
Total inventories, net	$	431.9		$	314.2		$	381.8		$	400.2

Note 8. Warranty Reserve

Some of the Company’s products are subject to specified warranties, and the Company provides for the estimated cost of product warranties. The adequacy of the warranty reserve is assessed regularly, and the reserve is adjusted as necessary based on a review of historic warranty experience with respect to the applicable business or products, as well as the length and actual terms of the warranties. The warranty reserve is included in current and long-term accrued liabilities on the balance sheet.


	Nine Months						First Quarter
Warranty Reserve (in millions):	2017			2016			2018			2017
Balance at beginning of year	$	18.4		$	17.1		$	21.1		$	18.4
Accruals for product warranties charged to expense	4.8			7.0			3.1			1.8
Cost of product warranty claims	(5.3		)	(4.7		)	(2.2		)	(1.6		)
Acquisitions	3.1			0.3			—			3.0
Balance at end of period	$	21.0		$	19.7		$	22.0		$	21.6

Note 9. Income Taxes

The income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which the Company operates. However, losses in certain jurisdictions and discrete items, such as the resolution of uncertain tax positions, are treated separately.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) was enacted. The Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering corporate income tax rates, implementing the territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. As a result of the Tax Act, Teledyne incurred provisional charges of $4.7 million in the fourth quarter of 2017 primarily due to the repatriation tax and the remeasurement of U.S. deferred tax assets and liabilities. The impacts of the Tax Act may differ from this estimate, possibly materially (and the amount of the provisional charge may accordingly be adjusted over the course of 2018), due to changes in interpretations and assumptions Teledyne has made, guidance that may be issued, and actions Teledyne may take as a result of the Tax Act. In the first quarter of 2018, the provisional charge was adjusted by an additional $0.6 million.

The Company’s effective income tax rate for the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2018 was ~~15.6% and 19.7%, respectively.~~19.1%. The Company’s effective income tax rate for the ~~third~~first quarter ~~and~~of 2017 was 24.9%. The first ~~nine months~~quarter of ~~2016 was 16.7% and 23.9% respectively. The third quarter and first nine months of 2017~~2018 includes net discrete income tax benefits of ~~$9.9~~$2.1 million. This amount includes a $3.0 million income tax benefit related to share-based accounting, and ~~$15.9~~an increase in the provisional charge. The first quarter of 2017 included net discrete tax benefits of $1.4 million ~~respectively.~~which included a net discrete tax benefit of $1.6 million related to share-based accounting. Excluding the net discrete income tax ~~items~~benefits in both ~~2017~~ periods and the impact of the Tax Act, the effective tax rates would have been 27.7% for both the third quarter and first nine months of 2017. The 2017 first nine months net discrete tax benefits includes a $7.7 million income tax benefit as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitation, of which $7.4 million was recorded in the third quarter of 2017. The first nine months of 2017 also includes an $8.5 million income tax benefit related to the release of valuation allowance for which the deferred tax assets are now determined more-likely-than-not to be realizable, of which $0.4 million was recorded in the third quarter. The first nine months of 2017 includes a $4.6 million income tax expense related to adjustments for uncertain tax positions. The 2017 third quarter and first nine months net discrete tax benefits also includes $2.3 million and $5.1 million, respectively, related to share-based accounting. The third quarter and first nine months of 2016 included net discrete income tax benefits of $6.6 million and $1.5 million, respectively. The first nine months of 2016 reflected $6.7 million in income tax expense related to the $17.9 million gain on the sale of a former operating facility. The 2016 third quarter and first nine months also included $4.0 million and $5.8 million, respectively, in net discrete tax benefits related to share-based accounting. Excluding net discrete income tax items in both 2016 periods, and the gain and related taxes on the facility sale in 2016, the effective tax rates would have been 27.2% for the third quarter and 27.4%21.7% for the first ~~nine months~~quarter of ~~2016.~~2018 and 28.3% for the first quarter of 2017.

Note 10. Long-Term Debt, Capital Lease and Letters of Credit

Balance at
Long-Term Debt (in millions): October 1, 2017 January 1, 2017
$750.0 million credit facility due December 2020, weighted average rate of 2.41% at October 1, 2017 $ 285.0
$ —
Term loans due through January 2022, weighted average rate of 2.61% at October 1, 2017 and 1.90% at January 1, 2017 182.5
182.5
4.74% Fixed Rate Senior Notes due and repaid September 2017 —
100.0
Term loan due October 2019, variable rate of 2.49% swapped to a Euro fixed rate of 0.7055% at October 1, 2017 100.0
—
2.61% Fixed Rate Senior Notes due December 2019 30.0
30.0
5.30% Fixed Rate Senior Notes due September 2020 75.0
75.0
2.81% Fixed Rate Senior Notes due November 2020 25.0
25.0
3.09% Fixed Rate Senior Notes due December 2021 95.0
95.0
3.28% Fixed Rate Senior Notes due November 2022 100.0
100.0
0.70% €50 Million Fixed Rate Senior Notes due April 2022
59.0
—
0.92% €100 Million Fixed Rate Senior Notes due April 2023
118.2
—
1.09% €100 Million Fixed Rate Senior Notes due April 2024
118.2
—
Other debt at various rates due through 2018 3.0
4.2
Total debt 1,190.9
611.7
Less: current portion of long-term debt and debt issuance costs (a) (3.4 ) (102.0 )
Total long-term debt $ 1,187.5
$ 509.7

~~(a) Includes debt issue costs associated with the term loans and senior notes of $2.2 million at October 1, 2017 and $1.4 million at January 1, 2017.~~



	Balance at
Long-Term Debt (in millions):	April 1, 2018			December 31, 2017
$750.0 million credit facility due December 2020, weighted average rate of 3.047% at April 1, 2018 and 2.72% at December 31, 2017	$	110.5		$	165.0
Term loans due through January 2022, weighted average rate of 3.13% at April 1, 2018 and 2.94% at December 31, 2017	175.5			175.5
Term loan due October 2019, variable rate of 3.0% swapped to a Euro fixed rate of 0.7055%	100.0			100.0
2.61% Fixed Rate Senior Notes due December 2019	30.0			30.0
5.30% Fixed Rate Senior Notes due September 2020	75.0			75.0
2.81% Fixed Rate Senior Notes due November 2020	25.0			25.0
3.09% Fixed Rate Senior Notes due December 2021	95.0			95.0
3.28% Fixed Rate Senior Notes due November 2022	100.0			100.0
0.70% €50 Million Fixed Rate Senior Notes due April 2022	61.6			60.0
0.92% €100 Million Fixed Rate Senior Notes due April 2023	123.2			120.0
1.09% €100 Million Fixed Rate Senior Notes due April 2024	123.2			120.0
Other debt at various rates due through 2018	4.6			2.7
Total debt	1,023.6			1,068.2
Less: current portion of long-term debt and debt issuance costs	(9.7		)	(4.3		)
Total long-term debt	$	1,013.9		$	1,063.9

Available borrowing capacity under the $750.0 million credit facility, which is reduced by borrowings and certain outstanding letters of credit, was ~~$447.5~~$614.1 million at ~~October~~April 1, ~~2017.~~2018. The credit agreements require the Company to comply with various financial and operating covenants and at ~~October~~April 1, ~~2017,~~2018, the Company was in compliance with these covenants. In March 2017, Teledyne entered into a $100.0 million term loan with a maturity date of October 30, 2019. Subsequently, in March 2017, Teledyne entered into a cross currency swap to effectively convert the $100.0 million term loan to a €93.0 million denominated instrument with a fixed euro interest rate of 0.7055%. The proceeds from the term loan were used in connection with the acquisition of e2v.

On April 18, 2017, Teledyne entered into a note purchase agreement for a private placement of €250.0 million of senior unsecured notes due through April 2024. Teledyne used the proceeds of the private placement, among other things, to repay indebtedness and for general corporate purposes.

Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The Company’s long-term debt is considered a level 2 fair value hierarchy and is valued based on observable market data. The estimated fair value of Teledyne’s long-term debt at ~~October~~April 1, ~~2017~~2018 and ~~January 1,~~December 31, 2017, approximated the carrying value.

At ~~October~~April 1, ~~2017,~~2018, the Company had ~~$7.0~~$6.7 million in capital leases, of which ~~$1.3~~$1.4 million is current. At ~~January 1,~~December 31, 2017, the Company had ~~$7.4~~$6.7 million in capital leases, of which $1.3 million was current. At ~~October~~April 1, ~~2017,~~2018, Teledyne had ~~$20.9~~$28.1 million in outstanding letters of credit.

Note 11. Lawsuits, Claims, Commitments, Contingencies and Related Matters

For a further description of the Company’s commitments and contingencies, reference is made to Note 14 of the Company’s financial statements as of and for the fiscal year ended ~~January 1,~~December 31, 2017, included in the ~~2016~~2017 Form 10-K.

At ~~October~~April 1, 2018, the Company’s reserves for environmental remediation obligations totaled $4.8 million, of which $0.6 million is included in current accrued liabilities. At December 31, 2017, the Company’s reserves for environmental remediation obligations totaled ~~$5.5 million, of which $1.7 million is included in current accrued liabilities. At January 1, 2017, the Company’s reserves for environmental remediation obligations totaled $7.0~~$5.1 million. The Company periodically evaluates whether it may be able to recover a portion of future costs for environmental liabilities from its insurance carriers and from third parties. The timing of expenditures depends on a number of factors that vary by site, including the nature and extent of contamination, the number of potentially responsible parties, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. The Company expects that it will expend present accruals over many years and will complete remediation of all sites with which it has been identified in up to 30 years.

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.

Note 12. Pension Plans and Postretirement Benefits

For the domestic pension plan, the discount rate decreased to ~~4.54%~~4.02% in ~~2017~~2018 compared with a ~~4.91%~~4.54% discount rate used in ~~2016.~~2017. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was ~~$3.5~~$3.2 million and ~~$10.4~~$3.5 million for the ~~third~~first quarter of 2018 and ~~first nine months of both~~ 2017, ~~and 2016,~~ respectively. Pension expense determined under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government. Teledyne did not make any cash pension contributions to its domestic qualified pension plan ~~in 2017 or 2016.~~since 2013. No cash pension contributions are planned for ~~2017~~2018 for the domestic qualified pension plan.


	Third Quarter						Nine Months						First Quarter
Net periodic pension benefit (income) expense (in millions):	2017			2016			2017			2016
Service cost — benefits earned during the period	$	2.7		$	2.8		$	8.1		$	8.4
													2018			2017
Service cost — benefits earned during the period (in millions)													$	2.7		$	2.6

Pension non-service income (in millions):
Interest cost on benefit obligation	9.1			10.2			27.4			30.4			$	8.1		$	9.2
Expected return on plan assets	(18.3		)	(18.8		)	(54.9		)	(56.3		)	(17.9		)	(18.3		)
Amortization of prior service cost	(1.5		)	(1.5		)	(4.5		)	(4.5		)	(1.5		)	(1.5		)
Amortization of net actuarial loss	7.3			6.8			21.9			20.4			7.9			7.3
Net periodic pension income	$	(0.7	)	$	(0.5	)	$	(2.0	)	$	(1.6	)
Pension non-service income													$	(3.4	)	$	(3.3	)

Teledyne sponsors several postretirement defined benefit plans that provide health care and life insurance benefits for certain eligible retirees.


	Third Quarter						Nine Months						First Quarter
Net periodic postretirement benefits expense (in millions):	2017			2016			2017			2016
Postretirement benefits non-service (income)/expense (in millions):													2018			2017
Interest cost on benefit obligation	$	0.1		$	0.1		$	0.3		$	0.4		$	0.1		$	0.1
Amortization of net actuarial gain	(0.1		)	(0.1		)	(0.3		)	(0.3		)	(0.1		)	(0.1		)
Net periodic postretirement expense	$	—		$	—		$	—		$	0.1
Postretirement benefits non-service (income)/expense													$	—		$	—

Note 13. Segment Information

Teledyne is a leading provider of sophisticated instrumentation, digital imaging products and software, aerospace and defense electronics, and engineered systems. Our customers include government agencies, aerospace prime contractors, energy exploration and production companies, major industrial companies and airlines. The Company has four reportable segments: Instrumentation; Digital Imaging; Aerospace and Defense Electronics; and Engineered Systems.

Segment results include net sales and operating income by segment but excludes equity income or loss, unusual non-recurring legal matter settlements, interest income and expense, gains and losses on the disposition of assets, sublease rental income and non-revenue licensing and royalty income, domestic and foreign income taxes and corporate office expenses. Corporate expense includes various administrative expenses relating to the corporate office and certain non-operating expenses, including certain acquisition related transaction costs, not allocated to our segments.

As part of a continuing effort to reduce costs and improve operating performance, the Company has taken actions to consolidate and relocate certain facilities and reduce headcount across various businesses, reducing our exposure to weak end markets and high cost locations. Teledyne incurred $2.6 million and $6.1 million in expense related to these efforts for the third quarter and first nine months of 2017, respectively. Teledyne incurred $3.1 million and $15.3 million in expense related to these efforts for the third quarter and first nine months of 2016, respectively. At October 1, 2017, Teledyne had a liability of $0.9 million included in other current liabilities related to these charges.

The following table presents Teledyne’s segment disclosures (dollars in millions):

Third Quarter % Nine Months %
2017 2016 Change 2017 2016 Change
Net sales(a):
Instrumentation $ 232.5
$ 208.3
11.6 % $ 699.1
$ 652.1
7.2 %
Digital Imaging 191.5
98.5
94.4 % 493.8
287.8
71.6 %
Aerospace and Defense Electronics 165.1
153.5
7.6 % 489.8
464.1
5.5 %
Engineered Systems 73.1
66.5
9.9 % 216.7
193.0
12.3 %
Total net sales $ 662.2
$ 526.8
25.7 % $ 1,899.4
$ 1,597.0
18.9 %
Operating income(b):
Instrumentation $ 34.8
$ 28.1
23.8 % $ 96.0
$ 79.6
20.6 %
Digital Imaging 31.9
11.7
172.6 % 73.6
30.6
140.5 %
Aerospace and Defense Electronics 29.4
31.5
(6.7 )% 88.0
83.6
5.3 %
Engineered Systems 10.0
8.6
16.3 % 28.0
22.2
26.1 %
Corporate expense (13.2 ) (11.1 ) 18.9 % (48.4 ) (32.7 ) 48.0 %
Operating income $ 92.9
$ 68.8
35.0 % $ 237.2
$ 183.3
29.4 %



	First Quarter						%
	2018			2017			Change
Net sales(a):
Instrumentation	$	239.0		$	232.8		2.7	%
Digital Imaging	206.4			113.8			81.4	%
Aerospace and Defense Electronics	178.2			151.9			17.3	%
Engineered Systems	72.0			67.6			6.5	%
Total net sales	$	695.6		$	566.1		22.9	%
Operating income:
Instrumentation	$	27.8		$	30.2		(7.9	)%
Digital Imaging (b)	34.6			15.1			129.1	%
Aerospace and Defense Electronics	31.7			24.8			27.8	%
Engineered Systems	7.2			7.4			(2.7	)%
Corporate expense (b)	(12.9		)	(22.7		)	(43.2	)%
Operating income	$	88.4		$	54.8		61.3	%



(a)	Net sales excludes inter-segment sales of ~~$6.4~~$5.2 million and ~~$17.8~~$3.9 million for the ~~third~~first quarter of 2018 and ~~first nine months of~~ 2017, ~~respectively, and $4.2 million and $16.2 million for the third quarter and first nine months of 2016,~~ respectively.
(b)	The ~~third~~first quarter of 2017 ~~includes~~included pretax charges of ~~$2.9~~$12.9 million ~~related to the~~in acquisition ~~of e2v which was recorded in the Digital Imaging segment. The first nine months of 2017 includes pretax charges of $19.8 million~~transaction costs related to the acquisition of e2v, of which, ~~$9.1~~$2.5 million was recorded in the Digital Imaging segment ~~$0.3 million was recorded in the Aerospace and Defense Electronics segment~~ and $10.4 million was recorded into corporate expense.

Identifiable assets are those assets used in the operations of the segments. Corporate assets primarily consist of cash, deferred taxes, net pension assets/liabilities and other assets (in millions):


Identifiable assets:	October 1, 2017		January 1, 2017		April 1, 2018		December 31, 2017
Instrumentation	$	1,428.1	$	1,361.0	$	1,412.2	$	1,413.6
Digital Imaging	1,501.6		671.1		1,540.9		1,496.4
Aerospace and Defense Electronics	619.6		449.4		627.2		605.5
Engineered Systems	104.6		93.9		111.5		107.0
Corporate	193.6		199.0		228.3		223.9
Total identifiable assets	$	3,847.5	$	2,774.4	$	3,920.1	$	3,846.4

Product Lines

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

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

Third Quarter Nine Months
Instrumentation 2017 2016 2017 2016
Marine Instrumentation $ 101.8
$ 97.6
$ 318.3
$ 314.3
Environmental Instrumentation 77.7
63.8
230.2
200.4
Test and Measurement Instrumentation 53.0
46.9
150.6
137.4
Total $ 232.5
$ 208.3
$ 699.1
$ 652.1



	First Quarter
Instrumentation	2018		2017
Marine Instrumentation	$	104.2	$	109.5
Environmental Instrumentation	81.2		75.5
Test and Measurement Instrumentation	53.6		47.8
Total	$	239.0	$	232.8

We also disaggregate our revenue from contracts with customers by customer type, contract-type and geographic region for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. As we adopted Topic 606 using the modified retrospective transition method, prior period information was not adjusted for Topic 606 and comparative disclosures for disaggregated revenue are not required in the year of adoption.



	First Quarter Ended April 1, 2018
	Customer Type
(in millions)	US Government (a)		Commercial		Total
Net Sales:
Instrumentation	$	12.8	$	226.2	$	239.0
Digital Imaging	22.4		184.0		206.4
Aerospace and Defense Electronics	65.2		113.0		178.2
Engineered Systems	59.0		13.0		72.0
	$	159.4	$	536.2	$	695.6

a) Includes sales as a prime contractor or subcontractor.



	First Quarter Ended April 1, 2018
	Contract Type
(in millions)	Fixed Price		Cost Type		Total
Net Sales:
Instrumentation	$	234.1	$	4.9	$	239.0
Digital Imaging	186.9		19.5		206.4
Aerospace and Defense Electronics	177.6		0.6		178.2
Engineered Systems	23.2		48.8		72.0
	$	621.8	$	73.8	$	695.6



	First Quarter Ended April 1, 2018
	Geographic Region
(in millions)	United States		Europe		All other		Total
Net sales:
Instrumentation	$	191.0	$	39.4	$	8.6	$	239.0
Digital Imaging	56.8		62.4		87.2		206.4
Aerospace and Defense Electronics	154.1		23.4		0.7		178.2
Engineered Systems	70.2		1.8		—		72.0
	$	472.1	$	127.0	$	96.5	$	695.6

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

Teledyne Technologies Incorporated provides enabling technologies for industrial growth ~~markets. We have evolved from a company that was primarily focused on aerospace and defense to one that serves multiple~~ markets that require advanced technology and high reliability. These markets include aerospace and defense, factory automation, air and water quality environmental monitoring, electronics design and development, oceanographic research, deepwater oil and gas exploration and production, ~~oceanographic research, air~~medical imaging and ~~water quality environmental monitoring, factory automation and medical imaging.~~pharmaceutical research. Our products include digital imaging sensors, cameras and systems within the visible, infrared and X-ray spectra, monitoring and control instrumentation for marine and environmental applications, harsh environment interconnects, electronic test and measurement equipment, ~~digital imaging sensors and cameras,~~ aircraft information management systems, and defense electronics and satellite communication subsystems. We also supply engineered systems for defense, space, environmental and energy applications. We differentiate ourselves from many of our direct competitors by having a customer and ~~company sponsored~~company-sponsored applied research center that augments our product development expertise.

Effective January 1, 2018, Teledyne adopted Accounting Standards Update No. 2014-09 (Topic 606), “Revenue from Contracts with Customers”, using the modified retrospective transition method. Prior period comparative information is not adjusted and is reported under the accounting standards in effect for that period. The cumulative effect of adopting the new standard resulted in an immaterial increase to retained earnings as of January 1, 2018. See Note 1 to these condensed consolidated financial statements for additional information.

Strategy/Overview

Our strategy continues to emphasize growth in our core markets of instrumentation, digital imaging, aerospace and defense electronics and engineered systems. Our core markets are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment among capital expenditures, acquisitions and share repurchases. We aggressively pursue operational excellence to continually improve our margins and earnings. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and internal research and development, we seek to create new products to grow our company and expand our addressable markets. We continue to evaluate our businesses to ensure that they are aligned with our strategy.

On March 28, 2017, we ~~completed our largest acquisition to date. We~~ purchased all of the common stock of e2v technologies plc (“e2v”) for $770.7 million, including stock options and assumed debt, net of $24.4 million of cash acquired. Most of e2v's operations are included in the Digital Imaging and Aerospace and Defense Electronics segments. The Instrumentation segment includes a small portion of e2v’s operations. See the Recent Acquisitions section for more information on the acquisition.

~~In the third quarter of 2016, Teledyne completed the disposition of the net assets of its Printed Circuit Technology (“PCT”) business for $9.3 million in cash.~~

~~Our~~ Recent Acquisitions

Acquisition of e2v

e2v, with principal locations in Chelmsford, United Kingdom and Grenoble, France, which was acquired on March 28, 2017, had sales of approximately £236 million for its fiscal year ended March 31, 2016. Teledyne funded the acquisition of e2v with borrowings under its credit facility and cash on hand as well as $100.0 million in ~~newly issued~~ term loans. ~~In connection with the acquisition of e2v, Teledyne incurred $2.9 million and $28.1 million in acquisition related costs during the third quarter and first nine months of 2017, respectively.~~

e2v provides high performance image sensors and custom camera solutions and application specific standard products for the machine vision market. In addition, e2v provides high performance space qualified imaging sensors and arrays for space science and astronomy. e2v also produces components and subsystems that deliver high reliability radio frequency power generation for healthcare, industrial and defense applications. Finally, ~~the company~~e2v provides high reliability semiconductors and board-level solutions for use in aerospace, space and communications applications.

Other ~~Acquisitions~~Acquisition

On July 20, 2017, ~~a subsidiary of~~ Teledyne Instruments, Inc. completed the acquisition of assets of Scientific Systems, Inc. (“SSI”) for $31.0 million in cash. A subsequent cash payment of $0.3 million related to a purchase price adjustment was made in the fourth quarter of 2017. Headquartered in State College, Pa., SSI manufactures precision components and specialized subassemblies used primarily in analytical and diagnostic instrumentation, such as ~~High Performance Liquid Chromatography (HPLC)~~high performance liquid chromatography systems and specific medical ~~devices~~devices. SSI designs and ~~is part of the Instrumentation segment. SSI is a world leader in the design and manufacture of~~manufactures high pressure positive-displacement piston pumps for a wide variety of analytical, clinical, sample prep and fluid-metering ~~applications.~~

~~Teledyne spent $93.4 million on acquisitions~~applications and other investments in fiscal year 2016. On December 6, 2016, Teledyne Instruments, Inc. acquired Hanson Research Corporation (“Hanson Research”) which specializes in analytical instrumentation for the pharmaceutical industry, for $25.0 million in cash. On November 2, 2016, Teledyne Instruments, Inc. acquired assets of IN USA, Inc. (“IN USA”) which manufactures a range of ozone generators, ozone analyzers and other gas monitoring instruments utilizing ultraviolet and infrared based technologies, for $10.2 million in cash. On May 3, 2016, Teledyne DALSA, Inc., a Canada-based subsidiary, acquired the assets and business of CARIS, Inc. (“CARIS”) a leading developer of geospatial software designed for the hydrographic and marine community, for a cash payment of $26.2 million, net of cash acquired. On April 15, 2016, Teledyne

~~LeCroy, Inc., a U.S.-based subsidiary, acquired assets of Quantum Data, Inc. (“Quantum Data”) which provides electronic test and measurement instrumentation and~~ is a market leader in video protocol analysis test tools for $17.3 million in cash. On April 6, 2016, Teledyne LeCroy, Inc. also acquired Frontline Test Equipment, Inc. (“Frontline”) which provides electronic test and measurement instrumentation and is a market leader in wireless protocol analysis test tools, for $13.7 million in cash. Each of the 2016 acquisitions are part of the Instrumentation ~~segment except for CARIS which is part of the Digital Imaging~~ segment.

Teledyne funded the SSI acquisition ~~and the 2016 acquisitions~~ from borrowings under its credit facility and cash on hand. The results of the acquisitions have been included in Teledyne’s results since the dates of each respective acquisition.

For a further description of the Company’s acquisition activity for the fiscal year ~~2016,~~2017, please refer to Note 3 of the Notes to Consolidated Financial Statements included in our ~~2016~~2017 Annual Report on Form 10-K (“~~2016~~2017 Form 10-K”).

Results of Operations


	Third Quarter						Nine Months						First Quarter
(in millions)	2017			2016			2017			2016			2018			2017
Net sales	$	662.2		$	526.8		$	1,899.4		$	1,597.0		$	695.6		$	566.1
Costs and expenses
Cost of sales	405.8			317.0			1,178.3			978.0			438.2			357.0
Selling, general and administrative expenses	163.5			141.0			483.9			435.7			169.0			154.3
Total costs and expenses	569.3			458.0			1,662.2			1,413.7			607.2			511.3
Operating income	92.9			68.8			237.2			183.3			88.4			54.8
Interest expense, net	(8.2		)	(5.6		)	(25.5		)	(17.2		)	(7.1		)	(8.2		)
Other income/(expense), net	(3.0		)	(0.8		)	(13.0		)	15.1
Non-service retirement benefit income													3.4			3.3
Other expense, net													(2.5		)	(9.3		)
Income before income taxes	81.7			62.4			198.7			181.2			82.2			40.6
Provision for income taxes	12.7			10.4			39.1			43.3			15.7			10.1
Net income	$	69.0		$	52.0		$	159.6		$	137.9		$	66.5		$	30.5


	Third Quarter						%		Nine Months						%		First Quarter						%
(dollars in millions)	2017			2016			Change		2017			2016			Change		2018			2017			Change
Net sales(a):
Instrumentation	$	232.5		$	208.3		11.6	%	$	699.1		$	652.1		7.2	%	$	239.0		$	232.8		2.7	%
Digital Imaging	191.5			98.5			94.4	%	493.8			287.8			71.6	%	206.4			113.8			81.4	%
Aerospace and Defense Electronics	165.1			153.5			7.6	%	489.8			464.1			5.5	%	178.2			151.9			17.3	%
Engineered Systems	73.1			66.5			9.9	%	216.7			193.0			12.3	%	72.0			67.6			6.5	%
Total net sales	$	662.2		$	526.8		25.7	%	$	1,899.4		$	1,597.0		18.9	%	$	695.6		$	566.1		22.9	%
Operating income:
Instrumentation	$	34.8		$	28.1		23.8	%	$	96.0		$	79.6		20.6	%	$	27.8		$	30.2		(7.9	)%
Digital Imaging	31.9			11.7			172.6	%	73.6			30.6			140.5	%
Digital Imaging(b)																	34.6			15.1			129.1	%
Aerospace and Defense Electronics	29.4			31.5			(6.7	)%	88.0			83.6			5.3	%	31.7			24.8			27.8	%
Engineered Systems	10.0			8.6			16.3	%	28.0			22.2			26.1	%	7.2			7.4			(2.7	)%
Corporate expense(b)	(13.2		)	(11.1		)	18.9	%	(48.4		)	(32.7		)	48.0	%	(12.9		)	(22.7		)	(43.2	)%
Total operating income	$	92.9		$	68.8		35.0	%	$	237.2		$	183.3		29.4	%	$	88.4		$	54.8		61.3	%


(a)	Net sales excludes inter-segment sales of ~~$6.4~~$5.2 million and ~~$17.8~~$3.9 million for the ~~third~~first quarter of 2018 and 2017, respectively.


(b)	The first ~~nine months~~quarter of 2017 ~~respectively,~~included pretax charges of $12.9 million in acquisition transaction costs related to the acquisition of e2v, of which, $2.5 million was recorded in the Digital Imaging segment and ~~$4.2~~$10.4 million ~~and $16.2 million for the third quarter and first nine months of 2016, respectively.~~was recorded to corporate expense.

The table below presents net sales and cost of sales by segment and total company:


	Third Quarter						Nine Months						First Quarter
(dollars in millions)	2017			2016			2017			2016			2018			2017
Instrumentation
Net sales	$	232.5		$	208.3		$	699.1		$	652.1		$	239.0		$	232.8
Cost of sales	$	129.3		$	116.1		$	398.1		$	364.3		$	139.3		$	135.4
Cost of sales as a % of net sales	55.6		%	55.7		%	57.0		%	55.9		%	58.3		%	58.1		%
Digital Imaging
Net sales	$	191.5		$	98.5		$	493.8		$	287.8		$	206.4		$	113.8
Cost of sales	$	116.8		$	57.5		$	308.6		$	174.0		$	125.1		$	69.9
Cost of sales as a % of net sales	61.0		%	58.4		%	62.5		%	60.5		%	60.6		%	61.4		%
Aerospace and Defense Electronics
Net sales	$	165.1		$	153.5		$	489.8		$	464.1		$	178.2		$	151.9
Cost of sales	$	103.0		$	90.6		$	299.6		$	284.2		$	115.1		$	96.0
Cost of sales as a % of net sales	62.4		%	59.0		%	61.2		%	61.2		%	64.6		%	63.2		%
Engineered Systems
Net sales	$	73.1		$	66.5		$	216.7		$	193.0		$	72.0		$	67.6
Costs of sales	$	56.7		$	52.8		$	172.0		$	155.5		$	58.7		$	55.7
Cost of sales as a % of net sales	77.6		%	79.4		%	79.4		%	80.6		%	81.5		%	82.4		%
Total Company
Net sales	$	662.2		$	526.8		$	1,899.4		$	1,597.0		$	695.6		$	566.1
Costs of sales	$	405.8		$	317.0		$	1,178.3		$	978.0		$	438.2		$	357.0
Cost of sales as a % of net sales	61.3		%	60.2		%	62.0		%	61.2		%	63.0		%	63.1		%

~~Third~~First quarter of ~~2017~~2018 compared with the ~~third~~first quarter of ~~2016~~2017

Our ~~third~~first quarter of ~~2017~~2018 net sales were ~~$662.2~~$695.6 million, compared with net sales of ~~$526.8~~$566.1 million for the ~~third~~first quarter of ~~2016,~~2017, an increase of ~~25.7%~~22.9%. The increase in net sales, resulted from organic growth and from acquisitions, primarily e2v. Net income was ~~$69.0~~$66.5 million for the ~~third~~first quarter of 2018, compared with $30.5 million for the first quarter of 2017, ~~compared with $52.0 million for the third quarter of 2016,~~ an increase of ~~32.7%~~118.0%. Net income per diluted share was ~~$1.90~~$1.81 for the ~~third~~first quarter of ~~2017,~~2018, compared with net income per diluted share of ~~$1.46~~$0.84 for the ~~third~~first quarter of ~~2016.~~2017. The ~~third~~first quarter of 2017 ~~includes~~included pretax ~~charges~~acquisition costs of ~~$2.9~~$21.2 million related to the acquisition of e2v.

Net sales

The ~~third~~first quarter of ~~2017~~2018 net sales, compared with the ~~third~~first quarter of ~~2016~~2017 net sales, reflected higher net sales in each segment. The ~~third~~first quarter of ~~2017~~2018 included organic growth of ~~$45.3~~$44.0 million and ~~$90.1~~$85.5 million in incremental net sales from recent acquisitions, primarily e2v.

Cost of Sales

Cost of sales increased ~~$88.8~~$81.2 million in the ~~third~~first quarter of ~~2017,~~2018, compared with the ~~third~~first quarter of ~~2016,~~2017, which primarily reflected the impact of higher sales. Cost of sales as a percentage of net sales decreased slightly for the ~~third~~first quarter of ~~2017 increased~~2018 to ~~61.3%~~63.0%, compared with ~~60.2%~~63.1% for the ~~third~~first quarter of ~~2016, which reflects the impact of the e2v acquisition which carries a higher cost of sales percentage than the overall Teledyne cost of sales percentage.~~

Certain contracts are accounted for under the percentage of completion (“POC”) method and related contract cost and revenue estimates for significant contracts are reviewed and reassessed quarterly. The net aggregate effects of these changes in estimates on contracts accounted for under the POC accounting method, in the third quarters of 2017 and 2016, were $2.7 million and $0.9 million of unfavorable operating income, respectively. None of the effects of changes in estimates on any individual contract were material to the condensed consolidated statements of income for any period presented.2017.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, including research and development and bid and proposal expense, increased ~~$22.5~~$14.7 million in the ~~third~~first quarter of ~~2017,~~2018, compared with the ~~third~~first quarter of ~~2016,~~2017, which primarily reflected the impact of higher ~~sales.~~sales, partially offset by $11.5 million in acquisition-related charges incurred in the first quarter of 2017. Selling, general and administrative expenses for the ~~third~~first quarter of ~~2017,~~2018, as a percentage of net sales decreased to ~~24.7%~~24.3% compared with ~~26.7%~~27.2% for the ~~third~~first quarter of ~~2016~~2017 and reflected the impact of the e2v acquisition which carries a lower selling, general and administrative expense percentage than the overall Teledyne selling, general and administrative

expense ~~percentage.~~percentage, as well as the impact of $11.5 million in acquisition-related charges incurred in the first quarter of 2017. Corporate expense, which is included in selling, general and administrative expenses, was ~~$13.2~~$12.9 million for the ~~third~~first quarter of 2018, compared with $22.7 million for the first quarter of 2017. The first quarter of 2017 ~~compared with $11.1~~amount included pretax acquisition-related charges of $10.4 million ~~for~~related to the ~~third~~e2v acquisition. In the first quarter of ~~2016~~2018 and ~~reflected higher compensation expense. In the third quarter of~~ 2017, ~~and 2016,~~ we recorded a total of ~~$3.2~~$4.9 million and ~~$2.5~~$4.1 million, respectively, in stock option compensation expense.

Pension ~~Income/~~Service Expense

Pension ~~income or~~service expense is included in both cost of sales and selling general and administrative expense. The ~~third~~first quarter of ~~2017~~2018 included pension ~~income~~service expense of ~~$0.7~~$2.7 million, compared with pension ~~income~~service expense of ~~$0.5~~$2.6 million for the ~~third~~first quarter of ~~2016.~~2017. For ~~2017,~~2018, the discount rate used to determine the benefit obligation for the domestic plan was ~~4.54~~4.02 percent compared with ~~4.91~~4.54 percent in ~~2016.~~2017. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $3.2 million for the first quarter of 2018, compared with $3.5 million for ~~both~~ the ~~third~~first quarter of ~~2017 and the third quarter of 2016.~~2017. Pension expense determined allowable under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government.

Operating Income

Operating income was ~~$92.9~~$88.4 million for the ~~third~~first quarter of 2018, compared with $54.8 million for the first quarter of 2017, ~~compared with $68.8 million for the third quarter of 2016,~~ an increase of ~~35.0%~~61.3%. The ~~third~~first quarter of 2018, compared with the first quarter of 2017, ~~compared with the third quarter of 2016,~~ reflected higher operating income in ~~each segment, except~~ the Digital Imaging and Aerospace and Defense ~~Electronics~~Electronic segments, partially offset by lower operating income in the Instrumentation and Engineered Systems segments. Operating income in the first quarter of 2017 included pretax acquisition costs of $12.9 million related to the e2v acquisition, of which $10.4 million was recorded to corporate expense and $2.5 million was recorded in the Digital Imaging segment. The incremental operating income included in the results for the ~~third~~first quarter of ~~2017~~2018 from recent acquisitions was ~~$11.1~~$17.6 million which ~~included~~reflected $3.9 million in additional intangible asset amortization expense.

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

Interest expense, net of interest income, was $7.1 million for the first quarter of 2018, compared with $8.2 million for the ~~third~~first quarter of 2017. Interest expense in the first quarter of 2017 included $2.3 million related to the e2v acquisition. The first quarter of 2018 included non-service retirement benefit income of $3.4 million, compared with ~~$5.6~~non-service retirement benefit income of $3.3 million for the ~~third~~first quarter of ~~2016 and reflected the impact of higher debt levels, primarily to fund the acquisition of e2v.~~2017. Other income and expense was expense of ~~$3.0~~$2.5 million for the ~~third~~first quarter of ~~2017,~~2018, compared with expense of ~~$0.8~~$9.3 million for the ~~third~~first quarter of ~~2016.~~2017. Other income and expense in the first quarter of 2017 amount included pretax charges of $6.0 million related to the e2v acquisition.

Income Taxes

The income tax provision is calculated using an estimated annual effective tax rate, based upon estimates of annual income, permanent items, statutory tax rates and planned tax strategies in the various jurisdictions in which we operate except that certain loss jurisdictions and discrete items, such as the resolution of uncertain tax positions and share-based accounting income tax benefits, are treated separately.

The Company’s effective income tax rate for the ~~third~~first quarter of ~~2017~~2018 was ~~15.6%~~19.1%, compared with ~~16.7%~~24.9% for the ~~third~~first quarter of ~~2016.~~

2017. The ~~third~~first quarter of ~~2017~~2018 reflected ~~$9.9 million in~~ net discrete income tax benefits ~~which included~~of $2.1 million. This amount includes a ~~$7.4 million income tax benefit as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitation and a $2.3~~$3.0 million income tax benefit related to share-based ~~accounting.~~accounting, and an increase in the provisional charge. The ~~third~~first quarter of ~~2016~~2017 included net discrete ~~income~~ tax benefits of ~~$6.6~~$1.4 million which included a net discrete tax benefit of ~~which $4.0~~$1.6 million related to share-based accounting. Excluding the net discrete income tax ~~items~~benefits in ~~2017,~~both periods and the impact of the Tax Act, the effective tax ~~rate~~rates would have been ~~27.7%~~21.7% for the ~~third~~first quarter of ~~2017. Excluding net discrete income tax items in 2016, the effective tax rate would have been 27.2%~~2018 and 28.3% for the ~~third~~first quarter of ~~2016.~~2017. The Company’s effective tax rate for fiscal year ~~2017~~2018 is expected to be ~~27.7%~~21.4%, based on the projected mix of earnings before tax by jurisdiction, excluding the impact of any matters that would be treated as discrete.

~~First nine months of 2017 compared with the first nine months of 2016~~

Our first nine months of 2017 net sales were $1,899.4 million, compared with net sales of $1,597.0 million for the first nine months of 2016, an increase of 18.9%. The increase in net sales resulted from organic growth and from acquisitions, primarily e2v. Net income was $159.6 million for the first nine months of 2017, compared with $137.9 million for the first nine months of 2016, an increase of 15.7%. Net income per diluted share was $4.41 for the first nine months of 2017, compared with net income per diluted share of $3.90 for the first nine months of 2016. The first nine months of 2017 includes pretax charges of $28.1 million related to the acquisition of e2v, of which, $6.8 million was recorded to cost of sales, $13.0 million was recorded to selling, general and administrative expenses, $2.3 million was recorded to interest expense and $6.0 million was recorded as other expense. The amount recorded to cost of sales related to the inventory fair value step-up amortization expense. The amount recorded to selling, general and administrative expenses related to transaction costs, including stamp duty, advisory, legal and other consulting fees and other costs. The amount recorded to interest expense related to funds-certain bank bridge facility commitment expense for the £625.0 million bridge credit facility entered into in December 2016 to fund the acquisition and related transaction costs in order to meet the requirement under the U.K. City Code on Takeovers and Mergers that we have sufficient and certain resources available to fund the consideration for the acquisition. The amount recorded to other expense related to a foreign currency option contract expense to hedge the e2v purchase price.

~~Net sales~~

The first nine months of 2017 net sales, compared with the first nine months of 2016 net sales, reflected higher net sales in each segment. The first nine months of 2017 included organic growth of $96.6 million and $205.8 million in incremental net sales from recent acquisitions, primarily e2v.

~~Cost of Sales~~

Cost of sales increased $200.3 million in the first nine months of 2017, compared with the first nine months of 2016, which primarily reflected the impact of higher sales. Cost of sales as a percentage of net sales for the nine months of 2017 increased to 62.0%, compared with 61.2% for the first nine months of 2016. The net aggregate effects of changes in estimates on contracts accounted for under the POC accounting method in the first nine months of 2017 and 2016 were $9.2 million and $1.7 million of unfavorable operating income, respectively.

~~Selling, general and administrative expenses~~

~~Selling, general and administrative expenses, including research and development and bid and proposal expense, increased by~~

$48.2 million in the first nine months of 2017, compared with the first nine months of 2016, and primarily reflected the impact of higher sales and $13.0 million in acquisition transaction expense related to the e2v acquisition. Selling, general and administrative expenses for the first nine months of 2017, as a percentage of net sales, decreased to 25.5% compared with 27.3% for the first nine months of 2016 despite the impact of $13.0 million in expense related to the e2v acquisition. Corporate expense, which is included in selling, general and administrative expenses, was $48.4 million for the first nine months of 2017, compared with $32.7 million for the first nine months of 2016 and reflected $10.4 million in expense related to the e2v acquisition. In the first nine months of 2017 and 2016, we recorded a total of $11.0 million and $8.8 million, respectively, in stock option compensation expense.

~~Pension Income/Expense~~

The first nine months of 2017 included pension income of $2.0 million, compared with pension income of $1.6 million in the first nine months of 2016. Pension expense allocated to contracts pursuant to CAS was $10.4 million in both the first nine months of 2017 and 2016.

~~Operating Income~~

Operating income was $237.2 million for the first nine months of 2017, compared with $183.3 million for the first nine months of 2016, an increase of 29.4%. The first nine months of 2017, compared with the first nine months of 2016, reflected higher operating income in each segment, partially offset by higher corporate expense. The incremental operating income included in the results for the first nine months of 2017 from recent acquisitions was $21.1 million which included $9.0 million in additional intangible asset amortization expense.

~~Interest Expense and Other Income/Expense~~

Interest expense, net of interest income, was $25.5 million for the first nine months of 2017, compared with $17.2 million for the first nine months of 2016 and reflected the impact of higher debt levels, as well as $2.3 million in fees related to the terminated bridge facility in connection with the acquisition of e2v. Other income and expense was expense of $13.0 million for the first nine months of 2017, compared with income of $15.1 million for the first nine months of 2016. Other expense in the first nine months of 2017 reflected $6.0 million of expense for a foreign currency option contract related to the e2v acquisition as well as higher foreign currency expense. Other income for the nine months of 2016 included a gain of $17.9 million on the sale of a former operating facility.

~~Income Taxes~~

The Company’s effective income tax rate for the first nine months of 2017 was 19.7% compared with 23.9% for the first nine months of 2016. The first nine months of 2017 reflected $15.9 million in net discrete income tax benefits, which included an $8.5 million income tax benefit related to the release of valuation allowance for which the deferred tax assets are now determined more-likely-than-not to be realizable and a $7.7 million income tax benefit as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitation, partially offset by $4.6 million related to adjustments for uncertain tax positions. The first nine months of 2017 also includes $5.1 in net discrete tax benefits related to share-based accounting. The first nine months of 2016 net discrete tax benefits of $1.5 million, which includes $5.8 in net discrete tax benefits related to share-based accounting and $6.7 million in income tax expense related to the $17.9 million gain on the sale of the operating facility. Excluding the net discrete income tax items in both periods, and the gain and related taxes on the facility sale in 2016, the effective tax rates would have been 27.7% for the first nine months of 2017 and 27.4% for the first nine months of 2016.

Segment Results

Segment results include net sales and operating income by segment but excludes equity income or loss, unusual non-recurring legal matter settlements, interest income and expense, gains and losses on the disposition of assets, sublease rental income and non-revenue licensing and royalty income, domestic and foreign income taxes and corporate office expenses. Corporate expense includes various administrative expenses relating to the corporate office and certain nonoperating expenses, including certain acquisition related transaction costs, not allocated to our segments. See Note 13 to these condensed consolidated financial statements for additional segment information.

Instrumentation


	Third Quarter						Nine Months						First Quarter
(dollars in millions)	2017			2016			2017			2016			2018			2017
Net sales	$	232.5		$	208.3		$	699.1		$	652.1		$	239.0		$	232.8
Cost of sales	$	129.3		$	116.1		$	398.1		$	364.3		$	139.3		$	135.4
Selling, general and administrative expenses	$	68.4		$	64.1		$	205.0		$	208.2		$	71.9		$	67.2
Operating income	$	34.8		$	28.1		$	96.0		$	79.6		$	27.8		$	30.2
Cost of sales as a % of net sales	55.6		%	55.7		%	57.0		%	55.9		%	58.3		%	58.1		%
Selling, general and administrative expenses % of sales	29.4		%	30.8		%	29.3		%	31.9		%	30.1		%	28.9		%
Operating income as a % of net sales	15.0		%	13.5		%	13.7		%	12.2		%	11.6		%	13.0		%

~~Third~~First quarter of ~~2017~~2018 compared with the ~~third~~first quarter of ~~2016~~2017

The Instrumentation segment’s ~~third~~first quarter of 2018 net sales were $239.0 million, compared with $232.8 million in the first quarter of 2017, ~~net sales were $232.5 million, compared with $208.3 million in the third quarter of 2016,~~ an increase of ~~11.6%~~2.7%. Operating income for the ~~third~~first quarter of ~~2017~~2018 was ~~$34.8~~$27.8 million, compared with operating income of ~~$28.1~~$30.2 million in the ~~third~~first quarter of ~~2016, an increase~~2017, a decrease of ~~23.8%~~7.9%.

The ~~third~~first quarter of ~~2017~~2018 net sales increase resulted from resulted from higher sales of ~~environmental instrumentation, marine~~test and measurement instrumentation and ~~test and measurement~~environmental instrumentation, as well as the contribution from recent ~~acquisitions. Sales of environmental instrumentation increased $13.9 million and primarily reflected higher~~acquisitions, partially offset by lower sales of ~~air monitoring instruments and $6.9 million in incremental sales from recent acquisitions, including SSI. Sales of~~ marine ~~instrumentation increased $4.2 million and primarily reflected higher sales of interconnect systems.~~instrumentation. Sales of test and measurement instrumentation increased ~~$6.1~~$5.8 million and included ~~$1.4~~$0.8 million in incremental sales from recent acquisitions. Sales of environmental instrumentation increased $5.7 million and included $4.5 million in incremental sales from recent acquisitions. Sales of marine instrumentation decreased $5.3 million and primarily reflected lower sales of sensors for energy exploration and unfavorable timing of U.S. Government sales, partially offset by higher sale of sonar systems. The ~~increase~~decrease in operating income reflected lower sales in marine instruments and costs associated with the relocation of certain marine instrumentation facilities, partially offset by the impact of greater sales of test and ~~the $2.6 million collection of a previously reserved receivable.~~measurement instrumentation and environmental instrumentation.

The ~~third~~first quarter of ~~2017~~2018 cost of sales increased ~~$13.2~~$3.9 million, compared with the ~~third~~first quarter of ~~2016,~~2017, and reflected the impact of higher sales. The cost of sales percentage for the ~~third~~first quarter of ~~2017 decreased~~2018 increased slightly to ~~55.6%~~58.3% compared with ~~55.7%~~58.1% for the ~~third~~first quarter of ~~2016. Third~~2017. First quarter ~~2017~~2018 selling, general and administrative expenses, including research and development expense, increased ~~$4.3~~$4.7 million, compared with the ~~third~~first quarter of ~~2016~~2017 and reflected the impact of higher sales. The selling, general and administrative expense percentage ~~decreased~~increased to ~~29.4%~~30.1% in the ~~third~~first quarter of 2018 from 28.9% in the first quarter of 2017 ~~from 30.8% in the third~~and reflected higher research and development expense.

Digital Imaging



	First Quarter
(dollars in millions)	2018			2017
Net sales	$	206.4		$	113.8
Cost of sales	$	125.1		$	69.9
Selling, general and administrative expenses	$	46.7		$	28.8
Operating income	$	34.6		$	15.1
Cost of sales as a % of net sales	60.6		%	61.4		%
Selling, general and administrative expenses % of sales	22.6		%	25.3		%
Operating income as a % of net sales	16.8		%	13.3		%

First quarter of ~~2016 and reflected the $2.6 million collection of a previously reserved receivable.~~

~~First nine months of 2017~~2018 compared with the first ~~nine months~~quarter of ~~2016~~

2017

The ~~Instrumentation~~Digital Imaging segment’s first ~~nine months~~quarter of ~~2017~~2018 net sales were ~~$699.1~~$206.4 million, compared with ~~$652.1~~$113.8 million in the first ~~nine months~~quarter of ~~2016,~~2017, an increase of ~~7.2%~~81.4%. Operating income was $34.6 million for the first ~~nine months~~quarter of ~~2017 was $96.0 million,~~2018, compared with operating income of ~~$79.6~~$15.1 million in the first ~~nine months~~quarter of ~~2016,~~2017, an increase of ~~20.6%~~129.1%.

The first nine months of 2017 net sales increase resulted from higher sales of environmental instrumentation, marine instrumentation and test and measurement instrumentation, as well as the contribution from recent acquisitions. Sales of environmental instrumentation increased $29.8 million and primarily reflected higher sales of air monitoring instruments and $15.9 million in incremental sales from recent acquisitions. Sales of test and measurement instrumentation increased $13.2 million and included $6.0 million in incremental sales from recent acquisitions. Sales of marine instrumentation increased by $4.0 million. The increase in operating income was primarily due to greater sales and improved margins for environmental and test and measurement instrumentation and lower severance, facility consolidation and asset impairment expenses with marine instrumentation. The first nine months of 2016 included $7.9 million in higher severance, facility consolidation and asset impairment costs.

The first nine months of 2017 cost of sales increased by $33.8 million, compared with the first nine months of 2016, and primarily reflected the impact of higher sales, partially offset by lower severance and facility consolidation expenses. The cost of sales percentage increased to 57.0% from 55.9%. The first nine months of 2017 selling, general and administrative

expenses, including research and development expense, decreased by $3.2 million, compared with the first nine months of 2016 and reflected the impact of lower research and development expense and lower severance and facility consolidation costs and asset impairment expenses, partially offset the impact of higher sales. The selling, general and administrative expense percentage decreased to 29.3% in the first nine months of 2017 from 31.9% in the first nine months of 2016 and reflected the impact of lower severance and facility consolidation expenses and asset impairment expense.

~~Digital Imaging~~

Third Quarter Nine Months
(dollars in millions) 2017 2016 2017 2016
Net sales $ 191.5
$ 98.5
$ 493.8
$ 287.8
Cost of sales $ 116.8
$ 57.5
$ 308.6
$ 174.0
Selling, general and administrative expenses $ 42.8
$ 29.3
$ 111.6
$ 83.2
Operating income $ 31.9
$ 11.7
$ 73.6
$ 30.6
Cost of sales as a % of net sales 61.0 % 58.4 % 62.5 % 60.5 %
Selling, general and administrative expenses % of sales 22.3 % 29.7 % 22.6 % 28.9 %
Operating income as a % of net sales 16.7 % 11.9 % 14.9 % 10.6 %

~~Third~~ quarter of ~~2017 compared with the third quarter of 2016~~

The Digital Imaging segment’s third quarter of 2017 net sales were $191.5 million, compared with $98.5 million in the third quarter of 2016, an increase of 94.4%. Operating income was $31.9 million for the third quarter of 2017, compared with operating income of $11.7 million in the third quarter of 2016, an increase of 172.6%.

~~The third quarter of 2017 net sales~~2018 included ~~$70.1~~$69.5 million in incremental sales from the ~~acquisition of e2v.~~e2v acquisition. The ~~third~~first quarter ~~2017~~2018 net sales also reflected higher sales of X-ray detectors for life sciences applications, infrared sensors for U.S. Government programs and machine vision cameras for industrial ~~applications and X-ray detectors for life sciences~~ applications. The increase in operating income in the ~~third~~first quarter of ~~2017~~2018 reflected the impact of higher sales, favorable product mix and incremental operating profit from e2v. Operating income in 2017 included $2.5 million in acquisition-related costs related to the e2v ~~partially offset by acquisition-related charges of $2.9 million.~~acquisition. The incremental operating profit included in the results

for the ~~third~~first quarter of ~~2017~~2018 from recent acquisitions was ~~$10.2~~$15.6 million, which ~~included $2.9~~reflected $3.0 million in additional intangible asset amortization expense.

The ~~third~~first quarter of ~~2017~~2018 cost of sales increased ~~$59.3~~$55.2 million, compared with the ~~third~~first quarter of ~~2016~~2017 and primarily reflected the impact of higher sales. The cost of sales percentage for the ~~third~~first quarter of ~~2017 increased~~2018 decreased to ~~61.0%~~60.6%, compared with ~~58.4%~~61.4% for the ~~third~~first quarter of ~~2016, and reflects the impact of the e2v acquisition which carries a higher cost of sales percentage than the other digital imaging businesses.~~2017. Selling, general and administrative expenses, including research and development and bid and proposal expense, increased to ~~$42.8~~$46.7 million in the ~~third~~first quarter of ~~2017,~~2018, from ~~$29.3~~$28.8 million in ~~2016~~2017 and reflected the impact of higher net ~~sales and certain acquisition-related costs related to the e2v acquisition.~~sales. The selling, general and administrative expense percentage decreased to ~~22.3%~~22.6% in the ~~third~~first quarter of ~~2017~~2018 from ~~29.7%~~25.3% in the ~~third~~first quarter of ~~2016~~2017 and reflected the impact of the e2v acquisition which carries a lower selling, general and administrative expense percentage than the other digital imaging businesses.

Aerospace and Defense Electronics



	First Quarter
(dollars in millions)	2018			2017
Net sales	$	178.2		$	151.9
Cost of sales	$	115.1		$	96.0
Selling, general and administrative expenses	$	31.4		$	31.1
Operating income	$	31.7		$	24.8
Cost of sales as a % of net sales	64.6		%	63.2		%
Selling, general and administrative expenses % of sales	17.6		%	20.5		%
Operating income as a % of net sales	17.8		%	16.3		%

First ~~nine months~~quarter of ~~2017~~2018 compared with the first ~~nine months~~quarter of ~~2016~~2017

The ~~Digital Imaging~~Aerospace and Defense Electronics segment’s first ~~nine months~~quarter of ~~2017~~2018 net sales were ~~$493.8~~$178.2 million, compared with ~~$287.8~~$151.9 million in the first ~~nine months~~quarter of ~~2016,~~2017, an increase of ~~71.6%~~17.3%. Operating income was ~~$73.6~~$31.7 million for the first ~~nine months~~quarter of ~~2017,~~2018, compared with operating income of ~~$30.6~~$24.8 million in the first ~~nine months~~quarter of ~~2016,~~2017, an increase of ~~140.5%~~27.8%.

The first ~~nine months~~quarter of ~~2017~~2018 net sales ~~included $152.7~~reflected $28.7 million ~~in incremental sales from recent acquisitions, primarily e2v. The first nine months sales also reflected~~of higher sales of ~~machine vision cameras for industrial applications, micro electro-mechanical systems (“MEMS”), geospatial hardware and software and X-ray detectors for life sciences applications.~~defense electronics, partially offset by $2.4 million of lower sales of aerospace electronics. The higher sales of defense electronics included $10.7 million in sales from e2v. The increase in operating income in the first ~~nine months~~quarter of ~~2017~~2018 primarily reflected the impact of higher ~~sales, favorable product mix and incremental operating profit from e2v, partially offset by acquisition-related charges of $9.1 million.~~sales. The incremental operating profit included in the results for the first ~~nine months of 2017 from recent acquisitions was $16.6 million, which included $6.4 million in additional intangible asset amortization expense.~~

The first nine months of 2017 cost of sales increased to $308.6 million from $174.0 million for the first nine months of 2016 and reflected the impact of higher sales. The cost of sales percentage in 2017 increased to 62.5% compared with 60.5% in the first nine months of 2016 and reflected the impact of the e2v acquisition which carries a higher cost of sales percentage than the other digital imaging businesses. Selling, general and administrative expenses, including research and development and bid and proposal expense, increased to $73.6 million for the first nine months of 2017, from $30.6 million in first nine months of 2016 and reflected the impact of higher net sales and certain acquisition-related costs related to the e2v acquisition. The selling, general and administrative expense percentage decreased to 22.6% in the first nine months of 2017 from 28.9% in the first nine months of 2016 and reflected the impact of the e2v acquisition which carries a lower selling, general and administrative expense percentage than the other digital imaging businesses.

~~Aerospace and Defense Electronics~~

Third Quarter Nine Months
(dollars in millions) 2017 2016 2017 2016
Net sales $ 165.1
$ 153.5
$ 489.8
$ 464.1
Cost of sales $ 103.0
$ 90.6
$ 299.6
$ 284.2
Selling, general and administrative expenses $ 32.7
$ 31.4
$ 102.2
$ 96.3
Operating income $ 29.4
$ 31.5
$ 88.0
$ 83.6
Cost of sales as a % of net sales 62.4 % 59.0 % 61.2 % 61.2 %
Selling, general and administrative expenses % of sales 19.8 % 20.5 % 20.8 % 20.8 %
Operating income as a % of net sales 17.8 % 20.5 % 18.0 % 18.0 %

~~Third~~ quarter of ~~2017 compared with the third quarter of 2016~~

The Aerospace and Defense Electronics segment’s third quarter of 2017 net sales were $165.1 million, compared with $153.5 million in the third quarter of 2016, an increase of 7.6%. Operating income was $29.4 million for the third quarter of 2017, compared with operating income of $31.5 million in the third quarter of 2016, a decrease of 6.7%.

The third quarter of 2017 net sales reflected $11.5 million of higher sales of microwave and interconnect systems and higher sales of $1.9 million for electronic manufacturing services products, partially offset by $1.8 million of lower sales of avionics products and electronic relays. The higher sales of microwave and interconnect systems included $11.7 million in sales from e2v. Operating income in the third quarter of 2017 reflected the impact of higher sales, more than offset by unfavorable product mix. The incremental operating profit included in the results for the third quarter of 20172018 from e2v was $1.1 million, which included ~~$0.2~~$0.4 million in additional intangible asset amortization expense.

The ~~third~~first quarter of ~~2017~~2018 cost of sales increased $12.4 million, compared with the third quarter of 2016 and reflected the impact of higher sales. Cost of sales as a percentage of sales for the third quarter of 2017 increased to 62.4% from 59.0% in the third quarter of 2016 and reflected favorable product mix. Selling, general and administrative expenses, including research and development and bid and proposal expense increased to $32.7 million in the third quarter of 2017, compared with the $31.4 million in the third quarter of 2016 and reflected the impact of higher sales. The selling, general and administrative expense percentage decreased to 19.8% in the third quarter of 2017, compared with 20.5% in the third quarter of 2016.

~~First nine months of 2017 compared with the first nine months of 2016~~

The Aerospace and Defense Electronics segment’s first nine months of 2017 net sales were $489.8 million, compared with $464.1 million in the first nine months of 2016, an increase of 5.5%. Operating income was $88.0 million for the first nine months of 2017, compared with operating income of $83.6 million in the first nine months of 2016, an increase of 5.3%.

The first nine months of 2017 net sales reflected $29.4 million of higher sales of microwave and interconnect systems and higher sales of $8.2 million of avionics products and electronic relays, partially offset by $11.9 million of lower sales for electronic manufacturing services products. The higher sales of microwave and interconnect systems included $31.2 million in sales from e2v. Operating income in the first nine months of 2017 reflected the impact of higher sales, overall improved margins and favorable product mix. The incremental operating profit included in the results for the first nine months of 2017 from e2v was $4.3 million, which included $1.0 million in additional intangible asset amortization expense.

~~The first nine months of 2017 cost of sales increased by $15.4~~$19.1 million, compared with the first ~~nine months~~quarter of ~~2016,~~2017 and reflected the impact of higher sales. Cost of sales as a percentage of sales for the first ~~nine months~~quarter of ~~2017 remained at 61.2%~~2018 increased to 64.6% from 63.2% in the first ~~nine months~~quarter of ~~2017, compared with the first nine months of 2016.~~2017. Selling, general and administrative expenses, including research and development and bid and proposal expense increased to ~~$102.2~~$31.4 million in the first ~~nine months~~quarter of ~~2017,~~2018, compared with ~~$96.3~~the $31.1 million ~~for~~in the first ~~nine months~~quarter of ~~2016~~2017 and reflected the impact of higher ~~sales.~~sales, partially offset by lower research and development and bid and proposal expense. The selling, general and administrative expense percentage ~~remained at 20.8%~~decreased to 17.6% in the first ~~nine months~~quarter of 2018, compared with 20.5% in the first quarter of 2017 ~~compared with~~and reflected the ~~first nine months~~impact of ~~2016.~~lower research and development and bid and proposal expense.

Engineered Systems


	Third Quarter						Nine Months						First Quarter
(dollars in millions)	2017			2016			2017			2016			2018			2017
Net sales	$	73.1		$	66.5		$	216.7		$	193.0		$	72.0		$	67.6
Cost of sales	$	56.7		$	52.8		$	172.0		$	155.5		$	58.7		$	55.7
Selling, general and administrative expenses	$	6.4		$	5.1		$	16.7		$	15.3		$	6.1		$	4.5
Operating income	$	10.0		$	8.6		$	28.0		$	22.2		$	7.2		$	7.4
Cost of sales as a % of net sales	77.6		%	79.4		%	79.4		%	80.6		%	81.5		%	82.4		%
Selling, general and administrative expenses % of sales	8.7		%	7.7		%	7.7		%	7.9		%	8.5		%	6.7		%
Operating income as a % of net sales	13.7		%	12.9		%	12.9		%	11.5		%	10.0		%	10.9		%

~~Third~~First quarter of ~~2017~~2018 compared with the ~~third~~first quarter of ~~2016~~2017

The Engineered Systems segment’s ~~third~~first quarter of 2018 net sales were $72.0 million, compared with $67.6 million in the first quarter of 2017, ~~net sales were $73.1 million, compared with $66.5 million in the third quarter of 2016,~~ an increase of ~~9.9%~~6.5%. Operating income was ~~$10.0~~$7.2 million for the ~~third~~first quarter of ~~2017,~~2018, compared with operating income of ~~$8.6~~$7.4 million in the ~~third~~first quarter of ~~2016, an increase~~2017, a decrease of ~~16.3%~~2.7%.

The ~~third~~first quarter of ~~2017~~2018 net sales reflected higher sales of ~~$5.3~~$5.1 million of engineered products and services and ~~$4.7~~$0.4 million of ~~turbine engines,~~energy systems products, partially offset by lower sales of ~~$3.4~~$1.1 million of ~~energy systems products.~~turbine engines. The higher sales of engineered products and services primarily reflected greater ~~sales from~~ marine manufacturing programs and missile defense programs. ~~The higher sales of turbine engines reflected greater sales for the Joint Air-to-Surface Standoff Missile (“JASSM”) and Harpoon missile programs.~~

Operating income in the ~~third~~first quarter of ~~2017, compared~~2018 decreased slightly, due in part to ~~the third~~lower turbine engine sales.

The first quarter of ~~2016 reflected the impact of higher sales and a greater proportion of higher margin manufacturing programs. The third quarter of 2017~~2018 cost of sales increased ~~$3.9~~$3.0 million, compared with the ~~third~~first quarter of ~~2016~~2017 and reflected the impact of higher sales and product mix differences. Cost of sales as a percentage of sales for the ~~third~~first quarter of ~~2017~~2018 decreased to ~~77.6%~~81.5% from ~~79.4%~~82.4% in the ~~third~~first quarter of ~~2016~~2017 and reflected product mix differences. Selling, general and administrative expenses, including research and development and bid and proposal expense, increased to ~~$6.4~~$6.1 million for the ~~third~~first quarter of ~~2017,~~2018, compared with ~~$5.1~~$4.5 million for the ~~third~~first quarter of ~~2016~~2017 and reflected the impact of higher ~~sales.~~sales and increased bid and proposal spending. The selling, general and administrative expense percentage was ~~8.7% for the third quarter of 2017, compared with 7.7% for the third quarter of 2016.~~

~~First nine months of 2017 compared with the first nine months of 2016~~

The Engineered Systems segment’s first nine months of 2017 net sales were $216.7 million, compared with $193.0 million in the first nine months of 2016, an increase of 12.3%. Operating income was $28.0 million8.5% for the first ~~nine months~~quarter of ~~2017,~~2018, compared with ~~operating income of $22.2 million in~~6.7% for the first ~~nine months~~quarter of ~~2016, an increase of 26.1%.~~

~~The first nine months of~~ 2017 sales reflected higher sales of $15.9 million of engineered products and services and $10.0 million of turbine engines, partially offset by lower sales of $2.2 million of energy systems products. The higher sales of engineered products and services primarily reflected greater sales from missile defense, space and marine manufacturing programs. The higher sales of turbine engines reflected greater sales for the JASSM missile program. Operating income in the first nine months of 2017, compared to the first nine months of 2016 reflected the impact of higher sales and a greater proportion of higher margin manufacturing programs

~~The first nine months of 2017 cost of sales increased by $16.5 million, compared with the first nine months of 2016,~~ and reflected the impact of higher sales. Cost of sales as a percentage of sales for the first nine months of 2017 decreased to 79.4% from 80.6% in the first nine months of 2016. Selling, general and administrative expenses, including research and development andincreased bid and proposal expense, increased to $16.7 million for the first nine months of 2017, compared with $15.3 million for the first nine months of 2016. The selling, general and administrative expense percentage decreased slightly to 7.7% for the first nine months of 2017 compared with 7.9% for the first nine months of 2016.spending.

Financial Condition, Liquidity and Capital Resources

Our net cash provided by operating activities was ~~$248.3~~$71.6 million for the first ~~nine~~three months of ~~2017,~~2018, compared with net cash provided by operating activities of ~~$250.7~~$53.4 million for the first ~~nine~~three months of ~~2016.~~2017. The ~~lower~~higher cash provided by operating activities in the first ~~nine~~three months of 2018 reflected the impact of higher operating income and cash flow from e2v. The first quarter of 2017 reflected the impact of transaction related payments for the e2v ~~acquisition and higher income tax payments, partially offset by the impact of higher operating income and cash flow from e2v.~~

acquisition. Our net cash used in investing activities was ~~$813.2~~$19.6 million for the first ~~nine~~three months of ~~2017,~~2018, compared with net cash used by investing activities of ~~$93.3~~$752.9 million for the first ~~nine~~three months of ~~2016.~~2017. The 2017 amount ~~includes $742.4~~included $740.6 million for the acquisition of e2v. On July 20, 2017, a subsidiary of Teledyne acquired assets of Scientific Systems, Inc. (“SSI”) for $31.0 million in cash. Headquartered in State College, PA, SSI manufactures precision components and specialized subassemblies used primarily in analytical and diagnostic instrumentation, such as High Performance Liquid Chromatography systems and specific medical devices and is part of the Instrumentation segment. The 2016 amount includes $58.5 million for acquisitions and other investments. See “Our Recent Acquisitions” section of this Management’s Discussion and Analysis for additional information on the e2v acquisition and acquisitions made in 2017 and in 2016. Capital expenditures for the first ~~nine~~three months of 2018 and 2017 ~~and 2016~~ were ~~$40.5~~$19.8 million and ~~$44.9~~$12.6 million, respectively.

Our goodwill was ~~$1,748.9~~$1,802.6 million at ~~October~~April 1, ~~2017~~2018 and ~~$1,193.5~~$1,776.7 million at ~~January 1,~~December 31, 2017. The increase in the balance of goodwill in ~~2017~~2018 included ~~$471.1 million in goodwill from the e2v acquisition, as well as~~ the impact of exchange rate ~~changes. Goodwill from~~changes and adjustments for the finalization of the e2v ~~acquisition will not be deductible for tax purposes.~~purchase accounting allocation. Teledyne’s net acquired intangible assets were ~~$408.2~~$390.7 million at ~~October~~April 1, ~~2017~~2018 and ~~$234.6~~$398.9 million at ~~January 1,~~December 31, 2017. The ~~increase in the balance of acquired intangible assets in 2017 reflected $173.4 million in acquired intangible assets from the e2v acquisition, partially offset by $29.2 million of amortization. The~~ Company ~~is in~~completed the process of specifically identifying the amount to be assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the e2v ~~acquisition.~~acquisition, resulting in an increase to goodwill of $3.9 million in the first quarter of 2018. The ~~amounts recorded as of October 1, 2017 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis. In addition, the~~ Company is still in the process of specifically identifying the amount to be assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the SSI acquisition made in July ~~2017 and the IN USA and Hanson Research acquisitions made in the fourth quarter of 2016.~~2017. The amounts recorded as of ~~October~~April 1, ~~2017~~2018 are preliminary since there was insufficient time between the acquisition date and the end of the period to finalize the analysis.

Financing activities ~~provided~~used cash of ~~$535.6~~$42.6 million for the first ~~nine~~three months of ~~2017,~~2018, compared with cash ~~used~~provided by financing activities of ~~$141.5~~$668.9 million for the first ~~nine~~three months of ~~2016.~~2017. Financing activities for the first ~~nine~~three months of 2018 reflected net payments against the $750.0 million credit facility of $54.5 million. Financing activities for the first three months of 2017 reflected net borrowings from the $750.0 million credit facility of ~~$285.0~~$595.0 million and the proceeds from a $100.0 million term loan, ~~and~~primarily to fund the proceeds from the private placement of €250.0 million of senior unsecured notes. The first nine months of 2016 included net payments on debt of $167.1 million, which included net payments on the credit facility of $150.5 million.e2v acquisition. Proceeds from the exercise of stock options were ~~$18.7~~$12.3 million and ~~$26.7~~$6.3 million for the first ~~nine~~three months of ~~2017~~2018 and ~~2016,~~2017, respectively. In March 2017, Teledyne entered into a $100.0 million term loan with a maturity date of October 30, 2019. Subsequently, in March 2017, Teledyne entered into a cross currency swap to effectively convert the $100.0 million term loan to a 93.0 million Euro denominated instrument with a fixed euro interest rate of 0.7055%. The proceeds from the term loan were used in connection with the acquisition of e2v. ~~On April 18, 2017, Teledyne entered into a note purchase agreement for a private placement of €250.0 million of senior unsecured notes due through 2024.~~ Teledyne used the proceeds of the private placement to, among other things, repay indebtedness incurred in connection with the acquisition of e2v and for general corporate purposes.

Our principal cash and capital requirements are to fund working capital needs, capital expenditures, income tax payments, pension contributions, debt service requirements and the stock repurchase program, as well as acquisitions. It is anticipated that operating cash flow, together with available borrowings under the credit facility described below, will be sufficient to meet these requirements over the next twelve months. We may raise other forms of debt capital, depending on financial, market and economic conditions. We may need to raise additional capital to support acquisitions. We currently expect to spend upapproximately $80.0 million to ~~$70.0~~$90.0 million for capital expenditures in ~~2017,~~2018, of which ~~$40.5~~$19.8 million has been spent in the first ~~nine~~three months of ~~2017.~~2018. No cash pension contributions have been made ~~in 2017~~since 2013 or are planned for the remainder of ~~2017~~2018 for the domestic qualified pension plan.

Total debt, including capital lease obligations, at ~~October~~April 1, ~~2017~~2018 was ~~$1,195.7~~$1,028.4 million. At ~~October~~April 1, ~~2017, $285.0~~2018, $110.5 million was outstanding under the $750.0 million credit facility. At ~~October~~April 1, ~~2017,~~2018, Teledyne had ~~$20.9~~$28.1 million in outstanding letters of credit. Available borrowing capacity under the $750.0 million credit facility, which is reduced by borrowings and certain outstanding letters of credit, was ~~$447.5~~$614.1 million at ~~October~~April 1, ~~2017.~~2018. The credit agreements require the Company to comply with various financial and operating covenants and at ~~October~~April 1, ~~2017,~~2018, the Company was in compliance with these covenants.

As of ~~October~~April 1, ~~2017,~~2018, the Company had an adequate amount of margin between required financial covenant ratios (as required by applicable credit agreements) and our actual ratios. At ~~October~~April 1, ~~2017,~~2018, the required financial ratios and the actual ratios were as follows:



$750.0 million Credit Facility expires December 2020 and ~~$182.5~~$175.5 million term loans due through January 2022 (issued in October 2012) and $100.0 million term loan due October 2019 (issued in March 2017)
Financial Covenants	Requirement	Actual Measure
Consolidated Leverage Ratio (Net Debt/EBITDA) (a)	No more than 3.25 to 1	~~2.6~~2.2 to 1
Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)	No less than 3.0 to 1	~~10.9~~15.2 to 1

$~~620.4~~633.0 million Private Placement Senior Notes due from 2019 to 2024
Financial Covenants	Requirement	Actual Measure
Consolidated Leverage Ratio (Net Debt/EBITDA) (a)	No more than 3.25 to 1	~~2.6~~2.2 to 1
Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)	No less than 3.0 to 1	~~10.9~~15.2 to 1


a)	The Consolidated Leverage Ratio is equal to Net Debt/EBITDA as defined in our private placement note purchase agreement and our $750.0 million credit agreement.


b)	The Consolidated Interest Coverage Ratio is equal to EBITDA/Interest as defined in our private placement note purchase agreement and our $750.0 million credit agreement.

Our liquidity is not dependent upon the use of off-balance sheet financial arrangements. We have no off-balance sheet financing arrangements that incorporate the use of special purpose entities or unconsolidated entities.

Critical Accounting Policies

Our critical accounting policies are those that are reflective of significant judgments and uncertainties, and may potentially result in materially different results under different assumptions and conditions. Our critical accounting policies are the following: revenue recognition; accounting for pension plans; accounting for business combinations, goodwill, acquired intangible assets and other long-lived assets; and accounting for income taxes.

For additional discussion of the application of the critical accounting policies and other accounting policies, see Note 1 to these condensed consolidated financial statements and also Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Note 2 of the Notes to Consolidated Financial Statements included in Teledyne’s ~~2016~~2017 Form 10-K.

Safe Harbor Cautionary Statement Regarding Forward-Looking Information

From time to time we make, and this report contains, forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995, directly or indirectly relating to sales, earnings, operating margin, growth opportunities, acquisitions and divestitures, product sales, capital expenditures, pension matters, stock option compensation expense, the credit facility, interest expense, severance and relocation and facility consolidation costs, environmental remediation costs, stock repurchases, taxes, exchange ~~rates~~rate fluctuations and strategic plans. Forward-looking statements are generally accompanied by words such as “estimate”, “project”, “predict”, “believes” or “expect”, that convey the uncertainty of future events or outcomes. All statements made in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other sections of this Form 10-Q that are not historical in nature should be considered forward-looking.

Actual results could differ materially from these forward-looking statements. Many factors could change the anticipated results, including: disruptions in the global economy; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction measures; ~~risks associated with our acquisition of e2v, including failure to successfully integrate the business;~~ impacts from the United Kingdom’s decision to exit the European Union; uncertainties related to the policies of the ~~new~~ U.S. Presidential Administration; and threats to the security of our confidential and proprietary information, including cyber security threats. Lower oil and natural gas prices, as well as instability in the Middle East or other oil producing regions, and new regulations or restrictions relating to energy production, including with respect to hydraulic fracturing, could negatively affect the Company’s businesses that supply the oil and gas industry. Increasing fuel costs could negatively affect the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of the Company’s pension assets.

Information regarding the impact of the Tax Act consists of preliminary estimates which are forward-looking statements and are subject to change, possibly materially, as the company completes its financial statements. Information regarding the impact of the Tax Act is based on our current calculations, as well as our current interpretations, assumptions and expectations relating to the Tax Act, which are subject to change.

Changes in the policies of U.S. and foreign governments, could result, over time, in reductions and realignment in defense or other government spending and further changes in programs in which the company participates.

While the company’s growth strategy includes possible acquisitions, we cannot provide any assurance as to when, if or on what terms any acquisitions will be made. Acquisitions involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain customers and achieve identified financial and operating synergies. There are additional risks associated with acquiring, owning and operating businesses outside of the United States, including those arising from U.S. and foreign government policy changes or actions and exchange rate fluctuations.

While we believe our internal and disclosure control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.

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 Teledyne’s ~~2016~~2017 Form 10-K and this Form 10-Q.

We assume no duty to publicly update or revise any forward-looking statements, whether as a result of new information or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Except as set forth below, there were no material changes to the information provided under “Item 7A, Quantitative and Qualitative Disclosure About Market Risk” included in our ~~2016~~2017 Form 10-K.

Market Risk

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Foreign currency forward contracts are used primarily to hedge anticipated exposures. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Foreign Currency Exchange Rate Risk

Notwithstanding our efforts to mitigate portions of our foreign currency exchange rate risks, there can be no assurance that our hedging activities will adequately protect us against the risks associated with foreign currency fluctuations. A hypothetical 10 percent price change in the U.S. dollar from its value at ~~October~~April 1, ~~2017~~2018 would result in a decrease or increase in the fair value of our foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars by approximately ~~$8.4~~$10.0 million. A hypothetical 10 percent price change in the U.S. dollar from its value at ~~October~~April 1, ~~2017~~2018 would result in a decrease or increase in the fair value of our foreign currency forward contracts designated as a cash flow hedges to buy British Pounds and to sell U.S. dollars by approximately $0.1 million. A hypothetical 10 percent price change in the U.S. dollar from its value at ~~October~~April 1, ~~2017~~2018 would result in a decrease or increase in the fair value of our Euro/U.S. Dollar cross currency swap designated as a cash flow hedge by approximately ~~$10.2~~$10.0 million. For additional information please see Derivative Instruments discussed in Note 4 to these condensed consolidated financial statements.

Interest Rate Exposure

We are exposed to market risk through the interest rate on our borrowings under our $750.0 million credit facility and our ~~$282.5~~$275.5 million in term loans. Borrowings under our credit facility and our term loans are at variable rates which are, at our option, tied to a Eurocurrency rate equal to LIBOR (London Interbank Offered Rate) plus an applicable rate or a base rate as defined in our credit agreements. Eurocurrency rate loans may be denominated in U.S. dollars or an alternative currency as defined in the credit agreements. Eurocurrency or LIBOR based loans under the credit facility typically have terms of one, two, three or nine months and the interest rate for each such loan is subject to change if the loan is continued or converted following the applicable maturity date. The Company has not drawn any loans with a term longer than three months under the credit facility. Base rate loans have interest rates that primarily fluctuate with changes in the prime rate. Interest rates are also subject to change based on our consolidated leverage ratio as defined in the credit agreements. As of ~~October~~April 1, ~~2017,~~2018, we had ~~$567.5~~$386.0 million in outstanding indebtedness under our credit facility and term loans. A 100 basis point increase in interest rates would result in an increase in annual interest expense of approximately ~~$5.7~~$3.9 million, assuming the ~~$567.5~~$386.0 million in debt was outstanding for the full year.



Item 4.	Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934, are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to provide reasonable assurance that information required to be disclosed by us in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our Chairman ~~President~~ and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, with the participation and assistance of other members of management, have reviewed the effectiveness of our disclosure controls and procedures and have concluded that the disclosure controls and procedures, as of ~~October~~April 1, ~~2017,~~2018, are effective at the reasonable assurance level.

~~In connection~~Effective January 1, 2018, we adopted Topic 606, Revenue from Contracts with Customers. This new revenue standard is not expected to have a material impact on our ~~evaluation during~~ongoing operations. During the ~~quarterly period~~quarter ended ~~October~~April 1, ~~2017,~~2018, we ~~have made no~~finalized changes into our internal controls ~~over~~related to revenue recognition based upon our implementation plan for Topic 606, which included changes related to certain accounting policies, new contract review requirements and new financial ~~reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.~~disclosure data requirements

PART II OTHER INFORMATION



Item 1.	Legal Proceedings

See Item 1 of Part 1, “Financial Statements -- Note 11 -- Lawsuits, Claims, Commitments, Contingencies and Related Matters.”



Item 1A.	Risk Factors

There are no material changes to the risk factors previously disclosed in our ~~2016~~2017 Form 10-K in response to Item 1A to Part 1 of Form 10-K. See also Part I Item 3, Quantitative and Qualitative Disclosures About Market Risk, for updated disclosures about interest rate exposure and exchange rate risks.



Item 2.	Unregistered sales of equity securities and use of proceeds

The Teledyne Technologies Incorporated Employee Stock Purchase Plan (the “Plan”) allows employees to purchase shares of Teledyne common stock through regular payroll deductions. The Plan includes a 25% employer matching feature. The Plan administrator purchases shares of Teledyne common stock on the open market, and then allocates the shares to participants’ Plan accounts. In March 2018, we determined that participants in the Plan may have purchased more shares of Teledyne common stock than were registered under the Securities Act of 1933. We did not receive any consideration in connection with such purchases, which were funded with participants’ payroll deduction plus the employer match. On April 27, 2018, we filed a registration statement on Form S-8 to register future transactions by the Plan.



Item 5.	Other Information

As previously reported on a Current Report on Form 8-K, on April 24, 2018, Al Pichelli, the Chief Operating Officer of Teledyne, assumed the title of President. Robert Mehrabian will continue as Teledyne's Chairman and Chief Executive Officer. In connection with the forgoing, Teledyne and Robert Mehrabian entered into Amendment Two to Dr. Mehrabian’s Fifth Amended and Restated Employment Agreement, to update Dr. Mehrabian’s title and reflect his current annual base salary. A copy of the Amendment Two is incorporated herein by reference as Exhibit 10.1.



Item 6.	Exhibits



(a)	Exhibits


	Exhibit 10.1	Amendment Two to Fifth Amended and Restated Agreement between Robert Mehrabian and Teledyne Technologies Incorporated.

	Exhibit 31.1	302 Certification – Robert Mehrabian

	Exhibit 31.2	302 Certification – Susan L. Main

	Exhibit 32.1	906 Certification – Robert Mehrabian

	Exhibit 32.2	906 Certification – Susan L. Main

	Exhibit 101 (INS)	XBRL Instance Document

	Exhibit 101 (SCH)	XBRL Schema Document

	Exhibit 101 (CAL)	XBRL Calculation Linkbase Document

	Exhibit 101 (LAB)	XBRL Label Linkbase Document XBRL Schema Document

	Exhibit 101 (PRE)	XBRL Presentation Linkbase Document XBRL Schema Document

	Exhibit 101 (DEF)	XBRL Definition Linkbase Document XBRL Schema Document

SIGNATURES

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



	TELEDYNE TECHNOLOGIES INCORPORATED



DATE: ~~November 6, 2017~~May 7, 2018	By:	/s/ Susan L. Main
		Susan L. Main, Senior Vice President and
		Chief Financial Officer
		(Principal Financial Officer and Authorized Officer)

Teledyne Technologies Incorporated

Index to Exhibits



Exhibit Number	Description

Exhibit 10.1	Amendment Two to Fifth Amended and Restated Employment Agreement between Robert Mehrabian and Teledyne Technologies Incorporated.

Exhibit 31.1	302 Certification – Robert Mehrabian

Exhibit 31.2	302 Certification – Susan L. Main

Exhibit 32.1	906 Certification – Robert Mehrabian

Exhibit 32.2	906 Certification – Susan L. Main

Exhibit 101 (INS)	XBRL Instance Document

Exhibit 101 (SCH)	XBRL Schema Document

Exhibit 101 (CAL)	XBRL Calculation Linkbase Document

Exhibit 101 (DEF)	XBRL Definition Linkbase Document XBRL Schema Document

Exhibit 101 (LAB)	XBRL Label Linkbase Document XBRL Schema Document

Exhibit 101 (PRE)	XBRL Presentation Linkbase Document XBRL Schema Document



		PAGE
Part I	Financial Information	2

	Item 1. Financial Statements	2

	Condensed Consolidated Statements of Income	2

	Condensed Consolidated Statements of Comprehensive Income	2

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Cash Flows	4

	Notes to Condensed Consolidated Financial Statements	5

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19	21

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	30

	Item 4. Controls and Procedures	31	30

Part II	Other Information	31

	Item 1. Legal Proceedings	31

	Item 1A. Risk Factors	31

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31

	Item 5. Other Information	31

	Item 6. Exhibits	32

Signatures		33