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 1, ~~2017~~2023



¨☐			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~~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)~~ No.)

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

~~(805)~~805 373-4545

(Registrant’s telephone number, including area code)

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer

☒

Accelerated filer

☐

~~Large accelerated filer~~

~~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~~47,184,697 shares of common stock, $.01 par value per share, outstanding as of October ~~31, 2017.~~23, 2023.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

TABLE OF CONTENTS

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

FOR THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, ~~2017~~2023 AND OCTOBER ~~2, 2016~~3, 2022

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

Third Quarter Nine Months
2017 2016 2017 2016
Net sales $ 662.2
$ 526.8
$ 1,899.4
$ 1,597.0
Costs and expenses
Cost of sales 405.8
317.0
1,178.3
978.0
Selling, general and administrative expenses 163.5
141.0
483.9
435.7
Total costs and expenses 569.3
458.0
1,662.2
1,413.7
Operating income 92.9
68.8
237.2
183.3
Interest and debt expense, net (8.2 ) (5.6 ) (25.5 ) (17.2 )
Other income/(expense), net (3.0 ) (0.8 ) (13.0 ) 15.1
Income before income taxes 81.7
62.4
198.7
181.2
Provision for income taxes 12.7
10.4
39.1
43.3
Net income $ 69.0
$ 52.0
$ 159.6
$ 137.9

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

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


	Third Quarter				Nine Months
	2023		2022		2023		2022
Net sales	$	1,402.5	$	1,363.6	$	4,210.5	$	4,040.4
Costs and expenses
Cost of sales	797.2		785.8		2,394.2		2,327.0
Selling, general and administrative	291.9		283.7		905.3		861.4
Acquired intangible asset amortization	49.1		48.9		148.1		153.8
Total costs and expenses	1,138.2		1,118.4		3,447.6		3,342.2
Operating income (loss)	264.3		245.2		762.9		698.2
Interest and debt income (expense), net	(18.4)		(22.0)		(61.7)		(66.8)
Gain (loss) on debt extinguishment	—		—		1.6		10.6
Non-service retirement benefit income (expense), net	3.1		2.9		9.3		8.6
Other income (expense), net	(2.9)		5.2		(7.4)		5.2
Income (loss) before income taxes	246.1		231.3		704.7		655.8
Provision (benefit) for income taxes	47.3		53.1		141.6		93.7



Net income (loss) including noncontrolling interest	198.8		178.2		$	563.1	$	562.1
Less: Net income (loss) attributable to noncontrolling interest	0.2		(0.1)		0.5		(0.1)
Net income (loss) attributable to Teledyne	$	198.6	$	178.3	$	562.6	$	562.2













Basic earnings per common share	$	4.22	$	3.81	$	11.97	$	12.01
Weighted average common shares outstanding	47.1		46.8		47.0		46.8





Diluted earnings per common share	$	4.15	$	3.74	$	11.75	$	11.79
Weighted average diluted common shares outstanding	47.9		47.7		47.9		47.7

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 1, ~~2017~~2023 AND OCTOBER ~~2, 2016~~3, 2022

(Unaudited - Amounts in millions)

Third Quarter Nine Months
2017 2016 2017 2016
Net income $ 69.0
$ 52.0
$ 159.6
$ 137.9
Other comprehensive income (loss):
Foreign exchange translation adjustment 36.8
(7.7 ) 91.6
3.6
Hedge activity, net of tax 1.9
(0.9 ) 4.8
4.6
Pension and postretirement benefit adjustments, net of tax 3.2
3.3
10.0
10.8
Other comprehensive income (loss) 41.9
(5.3 ) 106.4
19.0
Comprehensive income, net of tax $ 110.9
$ 46.7
$ 266.0
$ 156.9


	Third Quarter				Nine Months
	2023		2022		2023		2022
Net income (loss) including noncontrolling interest	$	198.8	$	178.2	$	563.1	$	562.1
Other comprehensive income (loss):
Foreign exchange translation adjustment	(76.6)		(357.1)		(68.6)		(544.5)
Hedge activity, net of tax	(1.1)		(6.2)		3.0		(2.0)
Pension and postretirement benefit adjustments, net of tax	1.8		4.1		4.2		12.3
Other comprehensive income (loss)	(75.9)		(359.2)		(61.4)		(534.2)
Comprehensive income (loss) including noncontrolling interest	122.9		(181.0)		501.7		27.9
Less: Comprehensive income (loss) attributable to noncontrolling interest	0.2		(0.1)		0.5		(0.1)


Comprehensive income (loss) attributable to Teledyne	$	122.7	$	(180.9)	$	501.2	$	28.0

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - Amounts in millions, except share amounts)

October 1, 2017 January 1, 2017
Assets
Current Assets
Cash $ 82.5
$ 98.6
Accounts receivable, net 466.0
383.7
Inventories, net 431.9
314.2
Prepaid expenses and other current assets 60.6
49.7
Total current assets 1,041.0
846.2
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
Goodwill 1,748.9
1,193.5
Acquired intangibles, net 408.2
234.6
Prepaid pension assets 109.8
88.5
Other assets, net 87.5
70.8
Total Assets $ 3,847.5
$ 2,774.4
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable $ 186.0
$ 138.8
Accrued liabilities 336.6
261.0
Current portion of long-term debt, capital leases and other debt 2.5
102.0
Total current liabilities 525.1
501.8
Long-term debt and capital leases 1,193.2
515.8
Other long-term liabilities 275.8
202.4
Total Liabilities 1,994.1
1,220.0
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
Additional paid-in capital 337.1
335.7
Retained earnings 2,072.0
1,912.4
Treasury stock, 2,261,678 at October 1, 2017 and 2,587,103 at January 1, 2017 (211.3 ) (242.9 )
Accumulated other comprehensive loss (344.8 ) (451.2 )
Total Stockholders’ Equity 1,853.4
1,554.4
Total Liabilities and Stockholders’ Equity $ 3,847.5
$ 2,774.4


	October 1, 2023		January 1, 2023
Assets
Current Assets
Cash and cash equivalents	$	508.6	$	638.1

Accounts receivable, net	854.7		883.7
Unbilled receivables, net	340.2		274.7
Inventories, net	962.0		890.7

Prepaid expenses and other current assets	155.0		130.7

Total current assets	2,820.5		2,817.9
Property, plant and equipment, net of accumulated depreciation and amortization of $932.1 at October 1, 2023 and $847.8 at January 1, 2023	754.1		769.8
Goodwill	7,899.8		7,873.0
Acquired intangibles, net	2,287.4		2,440.6
Prepaid pension assets	190.0		178.4

Other assets, net	264.0		274.3
Total Assets	$	14,215.8	$	14,354.0
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current Liabilities
Accounts payable	$	454.9	$	505.7
Accrued liabilities	777.1		717.6
Current portion of long-term debt	450.1		300.1

Total current liabilities	1,682.1		1,523.4
Long-term debt, net of current portion	2,794.0		3,620.5

Long-term deferred tax liabilities	449.9		490.0
Other long-term liabilities	563.7		547.2
Total Liabilities	5,489.7		6,181.1
Commitments and contingencies
Redeemable Noncontrolling Interest	4.2		3.7
Stockholders’ Equity
Preferred stock, $0.01 par value; outstanding shares - none	—		—
Common stock, $0.01 par value; authorized 125,000,000 shares; issued shares: 47,194,766 at October 1, 2023 and 47,194,766 at January 1, 2023; outstanding shares: 47,183,514 at October 1, 2023 and 46,912,635 at January 1, 2023	0.5		0.5
Additional paid-in capital	4,385.7		4,353.4
Retained earnings	5,124.4		4,561.8
Treasury stock, 11,252 shares at October 1, 2023 and 282,131 shares at January 1, 2023	(0.8)		(20.0)
Accumulated other comprehensive income (loss)	(787.9)		(726.5)
Total Stockholders’ Equity	8,721.9		8,169.2


Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity	$	14,215.8	$	14,354.0

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS' EQUITY

~~FOR THE NINE MONTHS ENDED OCTOBER 1, 2017 AND OCTOBER 2, 2016~~(In millions)


	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, January 1, 2023	$	0.5	$	4,353.4	$	(20.0)	$	4,561.8	$	(726.5)	$	8,169.2
Net income (loss)	—		—		—		178.7		—		178.7
Other comprehensive income (loss), net of tax	—		—		—		—		(0.3)		(0.3)
Treasury stock issued	—		(10.6)		10.6		—		—		—
Stock-based compensation	—		7.9		—		—		—		7.9
Exercise of stock options	—		10.2		—		—		—		10.2
Balance, April 2, 2023	0.5		4,360.9		(9.4)		4,740.5		(726.8)		8,365.7
Net income (loss)	—		—		—		185.3		—		185.3
Other comprehensive income (loss), net of tax	—		—		—		—		14.8		14.8
Treasury stock issued	—		(2.9)		2.9		—		—		—
Stock-based compensation	—		8.4		—		—		—		8.4
Exercise of stock options	—		4.8		—		—		—		4.8
Balance, July 3, 2023	$	0.5	$	4,371.2	$	(6.5)	$	4,925.8	$	(712.0)	$	8,579.0
Net income (loss)	—		—		—		198.6		—		198.6
Other comprehensive income (loss), net of tax	—		—		—		—		(75.9)		(75.9)
Treasury stock issued	—		(5.7)		5.7		—		—		—
Stock-based compensation	—		8.0		—		—		—		8.0
Exercise of stock options	—		12.2		—		—		—		12.2
Balance, October 1, 2023	$	0.5	$	4,385.7	$	(0.8)	$	5,124.4	$	(787.9)	$	8,721.9

~~(Unaudited - Amounts in millions)~~

Nine Months
2017 2016
Operating Activities
Net income $ 159.6
$ 137.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 87.4
65.6
Deferred income taxes (1.3 ) 9.0
Stock-based compensation 14.3
12.2
Gain on sale of facility —
(17.9 )
Changes in operating assets and liabilities:
Accounts receivable (7.7 ) 2.3
Inventories (36.9 ) (18.9 )
Prepaid expenses and other assets (1.2 ) (1.4 )
Accounts payable 12.6
6.9
Accrued liabilities 11.4
37.5
Income taxes receivable/payable, net 11.9
26.7
Long-term assets (12.5 ) 0.8
Other long-term liabilities 16.1
6.0
Pension and postretirement benefits (13.9 ) (12.3 )
Other operating, net 8.5
(3.7 )
Net cash provided by operating activities 248.3
250.7
Investing Activities
Purchases of property, plant and equipment (40.5 ) (44.9 )
Purchase of businesses and other investments, net of cash acquired (773.8 ) (58.5 )
Proceeds from the sale of assets 1.1
29.6
Sales proceeds transferred to escrow as restricted cash —
(19.5 )
Net cash used in investing activities (813.2 ) (93.3 )
Financing Activities
Net proceeds from (payments on) credit facility 285.0
(150.5 )
Proceeds from senior notes 268.0
—
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 exercise of stock options 18.7
26.7
Other financing, net (4.4 ) (1.1 )
Net cash provided by (used in) financing activities 535.6
(141.5 )
Effect of exchange rate changes on cash 13.2
(1.5 )
Change in cash (16.1 ) 14.4
Cash—beginning of period 98.6
85.1
Cash—end of period $ 82.5
$ 99.5


	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, January 2, 2022	$	0.5	$	4,317.1	$	(38.8)	$	3,773.2	$	(430.0)	$	7,622.0
Net income (loss)	—		—		—		212.6		—		212.6
Other comprehensive income (loss), net of tax	—		—		—		—		(21.9)		(21.9)
Treasury stock issued	—		(11.6)		11.6		—		—		—
Stock-based compensation	—		7.0		—		—		—		7.0
Exercise of stock options	—		12.7		—		—		—		12.7
Balance, April 3, 2022	0.5		4,325.2		(27.2)		3,985.8		(451.9)		7,832.4

Net income (loss)	—		—		—		171.3		—		171.3
Other comprehensive income (loss), net of tax	—		—		—		—		(153.1)		(153.1)

Treasury stock issued	—		(2.9)		2.9		—		—		—
Stock based compensation	—		6.5		—		—		—		6.5
Exercise of stock options	—		4.8		—		—		—		4.8
Balance, July 3, 2022	$	0.5	$	4,333.6	$	(24.3)	$	4,157.1	$	(605.0)	$	7,861.9
Net income (loss)	—		—		—		178.3		—		178.3
Other comprehensive income (loss), net of tax	—		—		—		—		(359.2)		(359.2)
Treasury stock issued	—		(0.5)		0.5		—		—		—
Stock-based compensation	—		6.6		—		—		—		6.6
Exercise of stock options	—		0.9		—		—		—		0.9

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

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(Unaudited - Amounts in millions)


	Nine Months
	2023		2022
Operating Activities
Net income (loss) including noncontrolling interest	$	563.1	$	562.1


Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:
Depreciation and amortization	239.0		250.4

Stock-based compensation	24.3		22.1
Debt extinguishment (income) expense	(1.6)		(10.6)

Changes in operating assets and liabilities excluding the effect of business acquired:
Accounts receivable and unbilled receivables	(31.1)		(40.2)
Inventories	(77.2)		(135.1)

Accounts payable	(47.4)		58.9

Deferred taxes and income taxes receivable (payable), net	41.0		(32.8)
Prepaid expenses and other assets	(26.3)		4.2
Accrued expenses and other liabilities	(13.4)		(403.0)



Other operating, net	1.3		(26.9)


Net cash provided by (used in) operating activities	671.7		249.1
Investing Activities
Purchases of property, plant and equipment	(74.7)		(58.5)
Purchase of businesses, net of cash acquired	(53.5)		(11.9)
Proceeds from disposal of fixed assets	—		5.2
Other investing, net	0.9		1.3
Net cash provided by (used in) investing activities	(127.3)		(63.9)
Financing Activities




Proceeds from (payments on) fixed rate senior notes	(308.4)		—
Net borrowings from (repayments made to) credit facility	(125.0)		—

Proceeds from (payments on) other debt	(245.3)		(174.7)
Proceeds from exercise of stock options	27.2		18.4

Liquidation (maturity) of cross currency swap	(13.5)		43.1
Other financing, net	(0.7)		(2.0)
Net cash provided by (used in) financing activities	(665.7)		(115.2)
Effect of exchange rate changes on cash	(8.2)		(65.4)
Change in cash and cash equivalents	(129.5)		4.6
Cash and cash equivalents—beginning of period	638.1		474.7
Cash and cash equivalents—end of period	$	508.6	$	479.3

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

October 1, ~~2017~~2023

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 generally accepted 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, ~~2017~~2023 (“~~2016~~2022 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 1, ~~2017~~2023 and the consolidated results of operations, ~~and~~ consolidated comprehensive income ~~for the three~~(loss) and ~~nine months then ended and~~consolidated cash flows for the third quarter and nine months ~~then ended.~~ended October 1, 2023. The results of operations and cash flows for the ~~period~~periods ended October 1, ~~2017~~2023 and cash flows for the nine months ended October 1, 2023 are not necessarily indicative of the results of operations or cash flows to be expected for any subsequent quarter or the full fiscal year. Certain prior year amounts have been reclassified to conform to the current period presentation.

Recent Accounting ~~Pronouncements~~Standards

In ~~January 2017,~~September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the computation~~2022-04, Liabilities-Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations. This standard requires annual disclosure of the ~~implied fair value~~key terms of ~~goodwill to measure~~supplier finance programs, obligations outstanding with a ~~goodwill impairment charge. Instead, entities will record a goodwill impairment charge based on~~description of where 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 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 costamounts are ~~required to be~~ presented in the ~~income statement separately from the service cost component~~financial statements, a rollforward of such amounts, 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~~disclosure of amounts outstanding as of the ~~components~~end of ~~net benefit cost, and prospectively for the capitalization of the service cost component of net benefit cost.~~each period. The adoption of ~~this standard will~~ASU 2022-04 did not have an impact ~~pre-tax income or earnings per share reported for~~on 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 obligationsCompany's disclosures 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 be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption.

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. Under the new standard, 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 reflect the impact of ~~converting certain ship and bill contracts and contracts currently applying the units-of-delivery and milestone methods~~supplier finance programs is not material to the ~~cost-to-cost method for recognizing revenue and profits.~~Company's financial statements.

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 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

Note 2. Business Acquisitions

2023 Acquisitions

ChartWorld

During the first quarter of ~~2018. The impact of adopting~~2023, 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~~Company acquired ChartWorld International Limited 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.

~~Note 2. Accumulated Other Comprehensive Loss~~

~~The changes in accumulated other comprehensive income/(loss) (~~“~~AOCI~~”) ~~by component, net of tax, for the third quarter and nine months ended~~ ~~October 1, 2017~~ ~~and October 2, 2016 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 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 quarter and nine months ended October 1, 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
October 1, 2017 October 2, 2016 Presentation
(Gain) loss on cash flow hedges:
(Gain) loss recognized in income on derivatives $ 1.8
$ (0.1 ) Cost of sales
Income tax benefit (0.5 ) —
Income tax benefit
Total $ 1.3
$ (0.1 )

Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost $ (1.5 ) $ (1.5 ) Costs and expenses
Amortization of net actuarial loss 6.7
6.6
Costs and expenses
Total before tax 5.2
5.1

Income tax benefit (2.0 ) (1.8 ) Income tax benefit
Total $ 3.2
$ 3.3

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”~~affiliates ("ChartWorld") 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$53.5 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 of 2017 includes pretax charges of $28.1 million related to the acquisition of e2v, which included $13.0 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 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 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 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 proforma amounts also include $14.9 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 million in inventory fair value step-up amortization expense. These amounts totaling $36.0 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 fiscal year:~~

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

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

Fair values allocated to the assets acquired and liabilities assumed - e2v (in millions): (a)
Current assets, excluding cash acquired $ 152.3
Property, plant and equipment 104.7
Goodwill 471.1
Acquired intangible assets 173.4
Other long-term assets 8.9
Total assets acquired 910.4
Current liabilities (78.7 )
Long-term liabilities (89.3 )
Total liabilities assumed (168.0 )
Consideration transferred, net of cash acquired (b) $ 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 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 at the acquisition date of 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
Proprietary technology $ 97.5
11.8
Customer list/relationships 26.3
13.0
Backlog 2.8
0.8
Total intangibles subject to amortization 126.6
11.8
Intangibles not subject to amortization:(a)
Trademarks 46.8

Total acquired intangible assets $ 173.4


~~(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 systems 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~~subject to certain adjustments. ChartWorld, headquartered in Cyprus, with additional locations in Germany, Singapore, Canada and Japan, 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 testprovider of digital marine navigation hardware 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 whichsoftware provided through an affordable subscription-based model. ChartWorld is part of the Digital Imaging segment. Goodwill resulting from the ChartWorld acquisition will not be deductible for tax purposes.

2022 Acquisitions

ETM

During the fourth quarter of 2022, Teledyne ~~funded~~acquired ETM-Electromatic, Inc. ("ETM") for $87.7 million in cash, net of cash acquired, and subject to certain adjustments. ETM, headquartered in Newark, California, designs and manufactures high-power microwave and high-energy X-ray subsystems for cancer radiotherapy, defense and X-ray security applications. ETM is part of the ~~SSI~~Digital Imaging segment. Goodwill resulting from the ETM acquisition will not be deductible for tax purposes.

NL Acoustics

During the third quarter of 2022, the Company acquired an approximate 80% majority interest in Noiseless Acoustics Oy ("NL Acoustics"), paying $11.9 million in cash, net of cash acquired, during the year. NL Acoustics, located in Helsinki, Finland, designs and manufactures acoustics imaging instruments and predictive maintenance solutions. NL Acoustics is part of the Digital Imaging segment. Goodwill resulting from the NL Acoustics acquisition will not be deductible for tax purposes. For further information about the Company's redeemable noncontrolling interest, refer to the Company's 2022 Form 10-K.

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


	2023
Acquisitions	Acquisition Date	Cash Paid (a)		Goodwill Acquired		Acquired Intangible Assets
ChartWorld	January 3, 2023	$	53.5	$	55.9	$	11.3

(a) Net of cash acquired
	2022
Acquisitions	Acquisition Date	Cash Paid (a)		Goodwill Acquired		Acquired Intangible Assets
ETM	October 28, 2022	$	87.7	$	33.5	$	20.9
NL Acoustics (acquisition of 80% interest)	July 15, 2022	11.9		11.7		3.8


Total		$	99.6	$	45.2	$	24.7
(a) Net of cash acquired

The Company’s cost to acquire these acquisitions was allocated to the assets acquired and liabilities assumed based upon their respective fair values as of the date of the completion of the acquisition. The differences between the fair value of the consideration paid and the ~~2016~~estimated fair value of the assets and liabilities acquired was recorded as goodwill. The fair value of the acquired identifiable assets and liabilities for the ChartWorld and ETM acquisitions is provisional pending finalization of the Company’s acquisition accounting, including the measurement of tax basis in certain jurisdictions and the resulting deferred taxes that might arise from ~~borrowings under its credit facility~~book and ~~cash on hand.~~tax basis differences, if any. Pro forma results of operations, the revenue and net income subsequent to the acquisition date, and a more detailed breakout of the major classes of assets and liabilities acquired for these acquisitions have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to the Company's financial results. The significant factors that resulted in recognition of goodwill for the 2022 and 2023 acquisitions included the acquired businesses’ market positions, growth opportunities in the markets in which they operate, their experienced work force and established operating infrastructures. The results of ~~all the~~these acquisitions have been included in Teledyne’s results since the dates of ~~the~~their respective acquisition.

Note 3. Business Segments

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

Segment results include net sales and operating income by segment but excludes corporate expenses. Corporate expense primarily includes administrative expenses relating to the corporate office not allocated to our segments.

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


	Third Quarter				%		Nine Months				%
	2023		2022		Change		2023		2022		Change
Net sales (a):
Digital Imaging	$	775.8	$	777.9	(0.3)	%	$	2,341.6	$	2,304.2	1.6	%
Instrumentation	329.1		306.4		7.4	%	991.0		927.8		6.8	%

Aerospace and Defense Electronics	183.3		169.5		8.1	%	542.5		504.5		7.5	%
Engineered Systems	114.3		109.8		4.1	%	335.4		303.9		10.4	%
Total net sales	$	1,402.5	$	1,363.6	2.9	%	$	4,210.5	$	4,040.4	4.2	%
Operating income:
Digital Imaging	$	136.3	$	133.7	1.9	%	$	383.1	$	367.3	4.3	%
Instrumentation	85.5		71.1		20.3	%	247.6		216.3		14.5	%

Aerospace and Defense Electronics	49.4		44.3		11.5	%	149.6		131.3		13.9	%
Engineered Systems	10.9		11.9		(8.4)	%	32.4		29.9		8.4	%
Corporate expense	(17.8)		(15.8)		12.7	%	(49.8)		(46.6)		6.9	%
Operating income	$	264.3	$	245.2	7.8	%	$	762.9	$	698.2	9.3	%
(a) Net sales exclude inter-segment sales of $7.2 million and $21.5 million for the third quarter and first nine months of 2023, respectively, and $4.8 million and $15.4 million for the third quarter and first nine months of 2022, respectively.

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


Identifiable assets:	October 1, 2023		January 1, 2023
Digital Imaging	$	11,267.8	$	11,432.3
Instrumentation	1,643.1		1,626.4

Aerospace and Defense Electronics	570.9		540.1
Engineered Systems	210.7		200.3
Corporate	523.3		554.9
Total identifiable assets	$	14,215.8	$	14,354.0

Product Lines

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

The following table provides a summary of the net sales by product line for the ~~2017~~Instrumentation segment (in millions):


	Third Quarter				Nine Months
Instrumentation	2023		2022		2023		2022

Marine Instrumentation	$	132.5	$	110.0	$	388.1	$	337.2
Environmental Instrumentation	113.0		114.8		346.2		344.3

Test and Measurement Instrumentation	83.6		81.6		256.7		246.3
Total	$	329.1	$	306.4	$	991.0	$	927.8

Note 4. Revenue Recognition and ~~2016 acquisitions~~Contract Balances

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


	Third Quarter Ended October 1, 2023						Third Quarter Ended October 1, 2023
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	151.5	$	624.3	$	775.8	$	358.6	$	196.6	$	150.0	$	70.6	$	775.8
Instrumentation	27.0		302.1		329.1		142.5		93.7		64.1		28.8		329.1
Aerospace and Defense Electronics	69.8		113.5		183.3		123.7		35.1		17.0		7.5		183.3
Engineered Systems	102.5		11.8		114.3		112.6		—		0.8		0.9		114.3
Total	$	350.8	$	1,051.7	$	1,402.5	$	737.4	$	325.4	$	231.9	$	107.8	$	1,402.5

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

(b) Primarily commercial sales


	Nine Months Ended October 1, 2023						Nine Months Ended October 1, 2023
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	413.1	$	1,928.5	$	2,341.6	$	1,049.4	$	601.2	$	460.8	$	230.2	$	2,341.6
Instrumentation	71.3		919.7		991.0		419.9		286.1		196.2		88.8		991.0
Aerospace and Defense Electronics	205.9		336.6		542.5		369.8		100.8		49.5		22.4		542.5
Engineered Systems	299.0		36.4		335.4		330.3		—		1.4		3.7		335.4
Total	$	989.3	$	3,221.2	$	4,210.5	$	2,169.4	$	988.1	$	707.9	$	345.1	$	4,210.5

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

(b) Primarily commercial sales


	Third Quarter Ended October 2, 2022						Third Quarter Ended October 2, 2022
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	156.3	$	621.6	$	777.9	$	367.6	$	182.8	$	158.8	$	68.7	$	777.9
Instrumentation	29.5		276.9		306.4		149.4		63.6		64.4		29.0		306.4
Aerospace and Defense Electronics	62.8		106.7		169.5		136.5		10.3		16.6		6.1		169.5
Engineered Systems	99.1		10.7		109.8		109.4		—		0.3		0.1		109.8
Total	$	347.7	$	1,015.9	$	1,363.6	$	762.9	$	256.7	$	240.1	$	103.9	$	1,363.6

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

(b) Primarily commercial sales


	Nine Months Ended October 2, 2022						Nine Months Ended October 2, 2022
	Customer Type						Geographic Region (c)
(in millions)	U.S. Govt. (a)		Other (b)		Total		United States		Europe		Asia		All other		Total
Net sales:
Digital Imaging	$	463.4	$	1,840.8	$	2,304.2	$	1,053.1	$	549.9	$	472.1	$	229.1	$	2,304.2
Instrumentation	79.1		848.7		927.8		417.2		219.0		204.1		87.5		927.8
Aerospace and Defense Electronics	184.3		320.2		504.5		387.8		55.9		43.9		16.9		504.5
Engineered Systems	274.4		29.5		303.9		302.3		—		0.9		0.7		303.9
Total	$	1,001.2	$	3,039.2	$	4,040.4	$	2,160.4	$	824.8	$	721.0	$	334.2	$	4,040.4

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

(b) Primarily commercial sales

With the exception of the Engineered Systems segment, net sales in each segment are primarily derived from fixed price contracts. Net sales in the Engineered Systems segment are typically between 45% and 55% fixed price contracts in a given reporting period, with the balance of net sales derived from cost-reimbursable type contracts. For the nine months ended October 1, 2023, approximately 49% of net sales in the Engineered Systems segment were derived from fixed price contracts.

Contract Liabilities


	Balance at
Contract Liabilities by Balance Sheet Location (in millions)	October 1, 2023		January 1, 2023
Accrued liabilities	$	215.5	$	187.6
Other long-term liabilities	21.9		20.2



Total contract liabilities	$	237.4	$	207.8

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

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and exclude unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of October 1, 2023, the aggregate amount of the transaction price allocated to ~~strengthen~~remaining performance obligations was $3,122.5 million. The Company expects approximately 80% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 20% recognized thereafter.

Changes in Contract Estimates at Completion

For over time contracts using the cost-to-cost method, the Company has an Estimate at Completion (“EAC”) process in which management reviews the progress and ~~expand~~execution of our ~~core businesses~~performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue, determining reasonably dependable cost estimates, and making assumptions for schedule and technical issues. The majority of revenue recognized over time uses an EAC process. Since certain contracts extend over a long period of time, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings through ~~adding complementary product~~a cumulative catch-up basis. This method recognizes, in the

current period, the cumulative effect of the changes on current and ~~service offerings, allowing greater integrated products~~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 ~~services, enhancing~~revenue estimates for significant contracts are generally reviewed and reassessed quarterly.

The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first nine months of 2023 was $1.7 million of favorable operating income compared with $30.5 million of favorable operating income in the first nine months of 2022, with the first nine months of 2022 primarily related to favorable changes in estimates that impacted revenue within our ~~technical capabilities or increasing our addressable markets.~~ Digital Imaging operating segment. None of the effects of changes in estimates on any individual contract were material to the consolidated statements of income (loss) for any period presented.

Note 5. Goodwill and Intangible Assets

Goodwill

The ~~significant factors that resulted in recognition~~carrying value of goodwill ~~were: (a)~~by segment was as follows (in millions):


	Digital Imaging		Instrumentation		Aerospace and Defense Electronics		Engineered Systems		Total


















Balance at January 1, 2023	$	6,780.4	$	913.2	$	161.8	$	17.6	$	7,873.0
Current year acquisitions	55.9		—		—		—		55.9
Foreign currency changes and other	(27.5)		(1.9)		0.3		—		(29.1)
Balance at October 1, 2023	$	6,808.8	$	911.3	$	162.1	$	17.6	$	7,899.8


Acquired intangible assets (in millions):	October 1, 2023						January 1, 2023
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Proprietary technology	$	1,652.4	$	608.6	$	1,043.8	$	1,667.7	$	497.4	$	1,170.3
Customer list/relationships	599.0		206.2		392.8		596.1		177.0		419.1
Patents	0.6		0.6		—		0.6		0.6		—
Non-compete agreements	0.9		0.9		—		0.9		0.9		—
Trademarks	9.9		5.4		4.5		7.1		4.4		2.7
Backlog	16.2		16.2		—		16.1		15.8		0.3
Total intangibles subject to amortization	2,279.0		837.9		1,441.1		2,288.5		696.1		1,592.4
Intangibles not subject to amortization:
Trademarks	846.3		—		846.3		848.2		—		848.2
Total acquired intangible assets	$	3,125.3	$	837.9	$	2,287.4	$	3,136.7	$	696.1	$	2,440.6

An evaluation of the ~~purchase price was based~~carrying value of goodwill and indefinite-lived intangibles is required to be performed on ~~cash flow~~an annual basis and ~~return~~ on ~~capital projections assuming integration with our businesses and (b) the calculation of~~an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of ~~tangible~~a reporting unit below its carrying value. There have been no events or changes in circumstances which indicate an interim impairment review is required in 2023. The Company will perform its annual analysis during the fourth quarter of 2023.

Note 6. Supplemental Balance Sheet Information

Cash Equivalents

The Company had $171.0 million and ~~intangible assets acquired that qualified~~$167.1 million of cash equivalents at October 1, 2023 and January 1, 2023, respectively. The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets.

Accounts Receivable, net

Accounts receivable is presented net of an allowance for ~~recognition.~~

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

~~Goodwill and Acquired Intangible Assets~~

~~Teledyne’s goodwill was $1,748.9~~$10.7 million at October 1, ~~2017~~2023 and ~~$1,193.5~~$11.7 million at January 1, ~~2017.~~2023.

Inventories, net

Inventories are stated at current cost, net of reserves for excess, slow moving and obsolete inventory. Inventories are primarily valued under the FIFO method or average cost method, with an immaterial amount of inventories valued under the LIFO

method. Inventory balances are summarized as follows (in millions):


	Balance at
	October 1, 2023		January 1, 2023
Raw materials and supplies	$	577.5	$	563.7
Work in process	202.8		156.8
Finished goods	181.7		170.2
Total inventories, net	$	962.0	$	890.7

Product Warranty Costs

Some of the Company’s products are subject to specified warranties, and the Company provides for the estimated cost of product warranties. The ~~increase in~~adequacy of the ~~balance~~warranty reserve is assessed regularly, and the reserve is adjusted as necessary based on a review of ~~goodwill in 2017 primarily included $471.1 million in goodwill from e2v acquisition,~~historic warranty experience with respect to the applicable business or products, as well as the ~~impact~~length and actual terms of ~~exchange rate changes. Goodwill from~~ the ~~e2v acquisition will not be deductible for tax purposes. Teledyne’s net acquired intangible assets were $408.2~~warranties. The warranty reserve is included in current accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.


	Nine Months
Warranty Reserve (in millions):	2023		2022
Balance at beginning of year	$	50.3	$	49.5
Product warranty expense	11.7		4.5
Deductions	(11.5)		(7.3)
Acquisition	0.2		1.6
Balance at end of period	$	50.7	$	48.3

Note 7. Long-Term Debt


	Balance at
Long-Term Debt (in millions):	October 1, 2023		January 1, 2023
$1.15 billion credit facility due March 2026, weighted average variable rate of 5.46% at January 1, 2023	$	—	$	125.0


0.65% Fixed Rate Senior Notes due April 2023	—		300.0
0.95% Fixed Rate Senior Notes due April 2024	450.0		450.0
Term loan due October 2024, variable rate of 6.67% at October 1, 2023 and 5.63% at January 1, 2023, swapped to a Euro fixed rate of 0.61%	150.0		150.0
1.60% Fixed Rate Senior Notes due April 2026	450.0		450.0
Term loan due May 2026, variable rate of 5.61% at January 1, 2023	—		245.0
2.25% Fixed Rate Senior Notes due April 2028	700.0		700.0
2.50% Fixed Rate Senior Notes due August 2030	485.0		485.0
2.75% Fixed Rate Senior Notes due April 2031	1,030.0		1,040.0











Other debt	1.4		2.1
Debt discount and debt issuance costs	(22.3)		(26.5)
Total debt, net	3,244.1		3,920.6
Less: Current portion of long-term debt	(450.1)		(300.1)
Total long-term debt, net of current portion	$	2,794.0	$	3,620.5

During the first nine months of 2023, the Company repaid $125.0 million of amounts outstanding on its credit facility, the $300.0 million Fixed Rate Senior Notes due April 2023, and the remaining $245.0 million on its term loan due May 2026. The Company also repurchased and retired $10.0 million of its Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt.

At October 1, 2023, $1,130.9 million was available under the $1.15 billion credit facility, after a reduction of $19.1 million in outstanding letters of credit. Our bank credit agreements require Teledyne to comply with various financial and operating covenants and at October 1, 2017 and $234.6 million at January 1, 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 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 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,2023, the Company ~~is still~~was 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. 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.

~~Note 4. Derivative Instruments~~compliance with these covenants.

Teledyne ~~transacts business in various foreign currencies~~estimates the fair value of its long-term debt based on debt of similar type, rating and ~~has international sales~~maturity and ~~expenses denominated in foreign currencies, subjecting the Company to foreign currency risk.~~at comparable interest rates. The Company’s ~~primary foreign currency risk management objective~~long-term debt is to protect the United States 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 convertedconsidered 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 changeslevel 2 input in the fair value ~~of these hedges~~hierarchy and 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 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 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 lossesvalued based 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.observable market data. As of October 1, ~~2017, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars~~2023 and ~~to sell U.S. dollars totaling $84.4 million. These foreign currency forward contracts have maturities ranging from December 2017 to February 2019. The cross currency swap has notional amounts~~January 1, 2023, the aggregate fair values of ~~€93.0 million equivalent to $100.0~~our borrowings were $2,823.4 million and ~~matures in September 2019.~~$3,492.7 million, respectively, and the carrying values were $3,266.4 million and $3,947.1 million, respectively.

Note 8. Income Taxes

The ~~effect~~income tax provision is calculated using an estimated annual effective tax rate, based upon estimates of ~~derivative instruments designated as cash flow hedges~~annual income, permanent items, statutory tax rates and planned tax strategies in the ~~condensed consolidated financial statements~~various jurisdictions in which we operate except that certain loss jurisdictions and discrete items, such as the resolution of uncertain tax positions and stock-based accounting income tax benefits, are treated separately.

The Company’s effective income tax rate for the third quarter and first nine months ~~ended October 1, 2017~~of 2023 was 19.2% and ~~October 2, 2016 was as follows (in millions):~~

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

~~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~~20.1%, respectively, compared with an effective income tax rate risk associated with foreign-currency-denominated monetary assets and liabilities, including intercompany receivables and payables. As of October 1, 2017, Teledyne had non-designated foreign currency contracts of this type in the following pairs (in millions):

Contracts to Buy Contracts to Sell
Currency Amount Currency Amount
Canadian Dollars C$ 155.4
U.S. Dollars US$ 124.1
Canadian Dollars C$ 4.0
Euros € 2.6
Euros € 36.8
Great Britain Pounds £ 33.8
Great Britain Pounds £ 1.7
Australian Dollars A$ 2.7
Great Britain Pounds £ 54.8
U.S. Dollars US$ 71.8
Singapore Dollars S$ 1.9
U.S. Dollars US$ 1.4
Euros € 14.2
U.S. Dollars US$ 17.1
Swiss Franc Fr. 1.2
U.S. Dollars US$ 1.3
U.S. Dollars US$ 0.9
Japanese Yen ¥ 100.0
Danish Krone DKR 31.2
U.S. Dollars US$ 5.0
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 quarter and first nine months ~~ended October 1, 2017 was~~of 2022 of 23.0% and 14.3%, respectively. The third quarter and first nine months of 2023 includes net discrete income tax benefits of ~~$4.8~~$6.1 million and ~~expense~~$14.1 million, respectively, compared with net discrete income tax benefits of ~~$1.7~~$0.3 million ~~respectively. The effect of derivative instruments not designated as cash flow hedges in other income~~ and ~~expense~~$57.8 million for the third quarter and first nine months ~~ended October 2, 2016 was expense~~ of ~~$1.3~~2022, respectively. The third quarter and first nine months of 2023 net discrete income tax benefits include $6.5 million and ~~$0.9~~$13.7 million, respectively, related to stock-based accounting compared with $0.2 million and $8.7 million, of net discrete income tax benefits related to stock-based accounting for the third quarter and first nine months of 2022, respectively. The first nine months of 2022 also includes net discrete income tax benefits of $49.1 million primarily related to the change in or resolution of certain acquisition-related tax reserves. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 21.7% and 22.1% for the third quarter and first nine months of 2023, respectively, and 23.1% for both the third quarter and first nine months of 2022.

~~Fair Value of Derivative Financial Instruments~~

Note 9. Pension Plans


	Third Quarter				Nine Months
	2023		2022		2023		2022
Service cost — benefits earned during the period (in millions)	$	1.5	$	2.2	$	4.5	$	6.5

Pension non-service cost (income) (in millions):
Interest cost on benefit obligation	$	8.4	$	6.0	$	25.2	$	17.8
Expected return on plan assets	(13.6)		(14.1)		(40.7)		(42.2)
Amortization of net prior service cost (income)	(0.4)		(0.4)		(1.3)		(1.3)
Amortization of net actuarial loss (gain)	2.5		5.6		7.5		17.1

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

Note 10. Stock-based Compensation

Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options, restricted stock awards and restricted stock units. The Company also has ~~elected~~non-employee director stock compensation plans, pursuant to ~~use~~which common stock, stock options and restricted stock units have been issued to its directors. The Company issues shares of common stock upon the ~~income approach to value the derivatives, using observable Level 2 market expectations at measurement date~~exercise of stock options.

Stock-based compensation expense was $8.0 million and ~~standard valuation techniques to convert future amounts to a single present amount. Level 2 inputs~~$24.3 million for the ~~valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR~~third quarter and ~~EURIBOR)~~first nine months of 2023, respectively, and ~~inputs other than quoted prices that are observable~~$6.7 million and $22.1 million for the ~~asset or liability (specifically LIBOR~~third quarter and ~~EURIBOR cash~~first nine months of 2022, respectively.

Stock option activity for the third quarter and ~~swap rates, foreign currency forward rates and cross currency basis spreads). Mid-market pricing~~first nine months of 2023 is ~~used~~ as ~~a practical expedient~~follows:



	Third Quarter			Nine Months
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Beginning balance	1,587,655	$	230.70	1,726,731	$	223.43

Exercised	(111,455)	$	109.23	(238,758)	$	113.83
Canceled	(2,945)	$	390.58	(14,718)	$	385.28
Ending balance	1,473,255	$	239.57	1,473,255	$	239.57
Exercisable at end of period	1,277,837	$	217.11	1,277,837	$	217.11

Restricted stock activity for ~~fair value measurements. The fair value measurement~~the first nine months 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.2023 is as follows:


	Shares	Weighted average fair value per share
Balance at January 1, 2023	166,395	$	368.62
Granted	20,645	$	372.67
Vested	(24,435)	$	394.33
Forfeited/Canceled	(12,362)	$	363.49
Balance at October 1, 2023	150,243	$	363.48

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
Derivatives designated as hedging instruments:
Cash flow forward contracts Other assets $ 5.3
$ —
Cash flow cross currency swap Accrued liabilities (10.0 ) —
Cash flow forward contracts Accrued liabilities —
(1.0 )
Cash flow forward contracts Other long-term liabilities —
(0.1 )
Total derivatives designated as hedging instruments (4.7 ) (1.1 )
Derivatives not designated as hedging instruments:
Non-designated forward contracts Other current assets 4.7
6.4
Non-designated forward contracts Accrued liabilities (4.1 ) (1.0 )
Total derivatives not designated as hedging instruments 0.6
5.4
Total (liability) asset derivatives $ (4.1 ) $ 4.3

Note 5.11. Earnings Per Share

For the third quarter of 2017, no stock options were excluded in the computation of diluted earnings per share. For the first nine months of 2017, 600 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 of 2016, 336,457 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
	2023	2022	2023	2022

Weighted average basic common shares outstanding	47.1	46.8	47.0	46.8
Effect of dilutive securities (primarily stock options)	0.8	0.9	0.9	0.9
Weighted average diluted common shares outstanding	47.9	47.7	47.9	47.7

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

~~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 million for~~For the third quarter and first nine months of ~~2017,~~2023 and ~~was $2.5 million and $8.8 million for the third quarter and first nine months of 2016. Employee stock option grants are charged to expense evenly over the three year vesting period. For 2017,~~2022, the Company ~~currently expects~~excluded approximately ~~$14.4~~0.2 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:~~



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

~~Based on the assumptions used~~ in the ~~valuation~~computation of ~~stock options,~~diluted earnings per share because the ~~grant date weighted average fair value~~effect of ~~stock options granted~~their inclusion would have been anti-dilutive.

Note 12. Accumulated Other Comprehensive Income (Loss)

The changes in ~~2017 was $48.45 per share.~~

~~Stock option transactions~~accumulated other comprehensive income (loss) ("AOCI") by component, net of tax, for the third quarter and nine months ended October 1, ~~2017~~2023 and October 2, 2022 are ~~summarized~~ as ~~follows:~~follows (in millions):


	Foreign Currency Translation		Cash Flow Hedges and Other		Pension and Postretirement Benefits		Total
Balance at July 2, 2023	$	(464.3)	$	5.4	$	(253.1)	$	(712.0)
Other comprehensive income (loss) before reclassifications	(76.6)		2.4		—		(74.2)
Amounts reclassified from AOCI	—		(3.5)		1.8		(1.7)
Net other comprehensive income (loss)	(76.6)		(1.1)		1.8		(75.9)

Balance at October 1, 2023	$	(540.9)	$	4.3	$	(251.3)	$	(787.9)

	Foreign Currency Translation		Cash Flow Hedges and Other		Pension and Postretirement Benefits		Total
Balance at July 3, 2022	$	(316.4)	$	0.8	$	(289.4)	$	(605.0)
Other comprehensive income (loss) before reclassifications	(357.1)		7.7		—		(349.4)
Amounts reclassified from AOCI	—		(13.9)		4.1		(9.8)
Net other comprehensive income (loss)	(357.1)		(6.2)		4.1		(359.2)

Balance at October 2, 2022	$	(673.5)	$	(5.4)	$	(285.3)	$	(964.2)


	Foreign Currency Translation		Cash Flow Hedges and Other		Pension and Postretirement Benefits		Total
Balance as of January 1, 2023	$	(472.3)	$	1.3	$	(255.5)	$	(726.5)
Other comprehensive income (loss) before reclassifications	(68.6)		15.2		—		(53.4)
Amounts reclassified from AOCI	—		(12.2)		4.2		(8.0)
Net other comprehensive income (loss)	(68.6)		3.0		4.2		(61.4)

Balance as of October 1, 2023	$	(540.9)	$	4.3	$	(251.3)	$	(787.9)

	Foreign Currency Translation		Cash Flow Hedges and Other		Pension and Postretirement Benefits		Total
Balance as of January 2, 2022	$	(129.0)	$	(3.4)	$	(297.6)	$	(430.0)
Other comprehensive income (loss) before reclassifications	(544.5)		28.4		—		(516.1)
Amounts reclassified from AOCI	—		(30.4)		12.3		(18.1)
Net other comprehensive income (loss)	(544.5)		(2.0)		12.3		(534.2)

Balance as of October 2, 2022	$	(673.5)	$	(5.4)	$	(285.3)	$	(964.2)

2017
Third Quarter Nine Months
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Beginning balance 2,515,100
$ 82.26
2,175,442
$ 70.44
Granted —
$ —
543,880
$ 123.40
Exercised (104,496 ) $ 66.49
(289,178 ) $ 64.84
Canceled (13,147 ) $ 104.92
(32,687 ) $ 92.52
Ending balance 2,397,457
$ 82.83
2,397,457
$ 82.83
Options exercisable at end of period 1,545,815
$ 69.77
1,545,815
$ 69.77

~~Performance Share Plan and Restricted Stock Award Program~~

~~In the first quarter~~The reclassifications out of ~~2017, the Company issued 876 shares of Teledyne common stock as the third and final payout under the 2012~~AOCI to ~~2014 Performance Share Plan.~~

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

Restricted stock: Shares Weighted average fair value per share
Balance, January 1, 2017 95,304
$ 83.87
Granted 23,002
$ 114.42
Vested (30,704 ) $ 87.98
Forfeited/Canceled (1,068 ) $ 87.59
Balance, October 1, 2017 86,534
$ 90.49

~~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 million~~ ~~at October 1, 2017 and~~ ~~$268.4 million~~ ~~at January 1, 2017. The remainder of the inventories using the LIFO method were~~ ~~$80.1 million~~ ~~at October 1, 2017 and~~ ~~$68.4 million~~ at January 1, 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
Inventories (in millions): October 1, 2017 January 1, 2017
Raw materials and supplies $ 201.2
$ 146.0
Work in process 193.4
147.8
Finished goods 57.7
43.0
452.3
336.8
Progress payments (8.4 ) (9.1 )
Reduction to LIFO cost basis (12.0 ) (13.5 )
Total inventories, net $ 431.9
$ 314.2

~~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
Warranty Reserve (in millions): 2017 2016
Balance at beginning of year $ 18.4
$ 17.1
Accruals for product warranties charged to expense 4.8
7.0
Cost of product warranty claims (5.3 ) (4.7 )
Acquisitions 3.1
0.3
Balance at end of period $ 21.0
$ 19.7

~~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.

~~The Company’s effective income tax rate~~ for the third quarter and ~~first~~ nine months ~~of 2017 was 15.6%~~ended October 1, 2023 and ~~19.7%, respectively.~~October 2, 2022 are as follows (in millions):


	Amount Reclassified from AOCI for the Quarter Ended		Amount Reclassified from AOCI for the Quarter Ended		Statement of Income (Loss) Presentation
	October 1, 2023		October 2, 2022
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives	$	(4.6)	$	(18.5)	See Note 13
Income tax impact	1.1		4.6		Provision for income taxes
Total	$	(3.5)	$	(13.9)

Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost	$	(0.4)	$	(0.4)	Costs and expenses
Amortization of net actuarial loss	2.7		5.8		Costs and expenses
Total before tax	2.3		5.4
Income tax impact	(0.5)		(1.3)		Provision for income taxes
Total	$	1.8	$	4.1


	Amount Reclassified from AOCI for the Nine Months Ended		Amount Reclassified from AOCI for the Nine Months Ended		Statement of Income (Loss) Presentation
	October 1, 2023		October 2, 2022
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives	$	(16.2)	$	(40.5)	See Note 13
Income tax impact	4.0		10.1		Provision for income taxes
Total	$	(12.2)	$	(30.4)

Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost	(1.3)		(1.2)		Costs and expenses
Amortization of net actuarial loss	7.0		17.4		Costs and expenses
Total before tax	5.7		16.2
Income tax impact	$	(1.5)	$	(3.9)	Provision for income taxes
Total	$	4.2	$	12.3

Note 13. Derivative Instruments and Hedging Activities

The Company's primary exposure to market risk relates to changes in foreign currency exchange rates and interest rates. The Company’s primary foreign currency risk management objective is to protect the U.S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company does not use foreign currency forward contracts for speculative or trading purposes.

Table of Contents

The Company mitigates exposure to foreign currency exchange rates and interest rates primarily through the following:

Mitigation Approach

Quantitative Information on Approach

The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars for our Canadian companies, and in British pounds for our U.K. companies. These contracts are designated and qualify as cash flow hedges.

As of October 1, 2023, the Company had foreign currency forward contracts to buy Canadian dollars and to sell U.S. dollars totaling $111.9 million. These foreign currency forward contracts have maturities ranging from December 2023 to February 2025. As of October 1, 2023, the Company had foreign currency forward contracts to buy British pounds and to sell U.S. dollars totaling $5.2 million. These foreign currency forward contracts have maturities ranging from December 2023 to February 2024.

The Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. These foreign currency forward contracts are not designated as accounting hedges.

See Non-Designated Hedging Activities section below.

The Company has converted a U.S. dollar denominated, variable rate debt obligation of a European subsidiary into euro fixed rate obligation using a receive float, pay fixed cross currency swap to reduce the variability of interest rates. This cross currency swap is designated as cash flow hedge.

As of October 1, 2023, the Company has a cross currency swap outstanding with a notional amount of €156.0 million and $150.0 million that matures in October 2024.

All derivative instruments are recorded on the condensed consolidated balance sheets at fair value. The accounting for gains and losses resulting from changes in fair value depends on the use of the derivative instrument and whether it is designated and qualifies for hedge accounting.

Designated Hedging Activities

For a derivative instrument designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the condensed consolidated balance sheets in AOCI to the extent the derivative instrument is effective ~~income tax rate~~in mitigating the exposure related to the anticipated transaction. The amount recorded within AOCI is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings. The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the third quarter and ~~first~~ nine months ended October 1, 2023 and October 2, 2022 was as follows (in millions):


	Third Quarter				Nine Months
	2023		2022		2023		2022
Net gain (loss) recognized in AOCI - Foreign Exchange Contracts (a)	$	4.0	$	10.2	$	20.7	$	36.0
Net gain (loss) reclassified from AOCI into revenue - Foreign Exchange Contracts (a)	$	(1.1)	$	(1.0)	$	(4.8)	$	(1.4)

Net gain (loss) recognized in AOCI - Interest Rate Contracts	$	—	$	0.3	—		$	2.3
Net gain (loss) reclassified from AOCI into other income and expense, net - Foreign Exchange Contracts (b)	$	4.2	$	17.8	$	15.0	$	38.9
Net gain (loss) reclassified from AOCI into interest expense - Foreign Exchange Contracts	$	1.9	$	1.6	$	5.6	$	3.5
Net gain (loss) reclassified from AOCI into interest expense - Interest Rate Contracts	$	—	$	0.3	$	0.6	$	(0.3)

(a) Effective portion, pre-tax

(b) Amount reclassified to offset earnings impact of ~~2016 was 16.7% and 23.9% respectively. The third quarter and first nine~~liability hedged by cross currency swap

Net deferred losses recorded in AOCI for the forward contracts that will mature in the next twelve months total $0.3 million, net of ~~2017 includes net discrete income tax benefits of $9.9 million and $15.9 million, respectively. Excluding net discrete income tax items~~taxes. These losses are expected to be offset by anticipated gains in ~~both 2017 periods,~~ 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 resultvalue 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 benefitforecasted underlying hedged item. Amounts related to the ~~release of valuation allowance for which the deferred tax assets are now determined more-likely-than-not~~cross currency swap expected to be ~~realizable, of which $0.4 million was recorded~~reclassified from AOCI into income in the ~~third quarter.~~ next twelve months total $7.5 million.

Non-Designated Hedging Activities

For a derivative instrument that has not been designated as an accounting hedge, the change in the fair value is recognized immediately in earnings. As of October 1, 2023, the Company had foreign currency forward contracts not designated as accounting hedges primarily in the following types and pairs (in millions):

Table of Contents


Contracts to Buy			Contracts to Sell
Currency	Amount			Currency	Amount
Canadian Dollars	$	214.1		U.S. Dollars	US$	158.8

Danish Krone	DKR	89.2		U.S. Dollars	US$	13.0
Euros	€	80.7		U.S. Dollars	US$	87.5
Great Britain Pounds	£	10.6		Euros	€	12.3

Great Britain Pounds	£	57.0		U.S. Dollars	US$	71.9




Swedish Krona	SEK	207.5		Euros	€	17.5
Swedish Krona	SEK	150.8		U.S. Dollars	US$	13.8
U.S. Dollars	US$	6.7		Chinese Yuan	¥	49.0

The ~~first nine months~~preceding table includes non-designated hedges derived from terms contained in previously designated cash flow hedges. The gains and losses on these derivatives instruments which are not designated as accounting hedges are intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings.

The effect of ~~2017 includes a $4.6 million~~derivative instruments not designated as accounting hedges recognized in other income ~~tax~~and 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%~~nine months ended October 1, 2023 was expense of $12.9 million and $3.1 million, respectively. The effect of derivative instruments not designated as accounting hedges in other income and expense for the ~~first~~third quarter and nine months ended October 2, 2022 was expense of ~~2016.~~$40.5 million and $70.9 million, respectively. The income or expense was largely offset by losses or gains in the value of the underlying hedged item excluding the impact of forward points.

Fair Value of Derivative Financial Instruments

The fair values of the Company’s derivative instruments are presented below. All fair values for these derivative instruments were measured using Level 2 inputs in the fair value hierarchy (in millions):


Asset/(Liability) Derivative Instruments	Balance sheet location	October 1, 2023		January 1, 2023
Derivatives designated as hedging instruments:
Cash flow forward contracts	Other current assets	$	1.5	$	0.4
Cash flow forward contracts	Accrued liabilities	(1.2)		(6.8)
Interest rate contracts	Other current assets	—		0.7


Cash flow cross currency swap	Other current assets	3.4		2.7
Cash flow cross currency swap	Accrued liabilities	—		(14.0)
Cash flow cross currency swap	Other long-term liabilities	(16.7)		(18.3)









Total derivatives designated as hedging instruments		(13.0)		(35.3)
Derivatives not designated as hedging instruments:
Non-designated forward contracts	Other current assets	5.8		3.5
Non-designated forward contracts	Accrued liabilities	(10.3)		(7.0)
Total derivatives not designated as hedging instruments		(4.5)		(3.5)
Total derivative instruments, net		$	(17.5)	$	(38.8)

Note ~~10. Long-Term Debt, Capital Lease~~14. Commitments and ~~Letters~~Contingencies

Trade Compliance Matters

Effective April 24, 2022, the United States Department 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~~State’s Office of Defense Trade Controls Compliance (“DDTC”) closed the ~~term loans and senior notes of $2.2 million at October 1, 2017 and $1.4 million at January 1, 2017.~~

~~Available borrowing capacity~~four-year Consent Agreement that had been entered into by FLIR Systems, Inc. ("FLIR"), to resolve various export allegations under the ~~$750.0 million credit facility, which is reduced~~International Traffic in Arms Regulations (“ITAR”). In connection with this Consent Agreement and other export matters, while FLIR and its successor by ~~borrowings~~mergers, Teledyne FLIR, have enhanced the trade compliance program more broadly, implemented remedial measures and ~~certain outstanding letters~~have undergone external and internal audits of ~~credit, was $447.5 million at October 1, 2017. The credit agreements require~~ the ~~Company to comply with various financial~~trade compliance program, adverse disclosures and operating covenants and at October 1, 2017, 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 usedfindings could cause additional expenses in connection with further remedial measures or potential penalties.

The Company has made other voluntary disclosures to the ~~acquisition~~U.S. Department of ~~e2v.~~

~~On April 18, 2017,~~State and the U.S. Department of Commerce, including to the Bureau of Industry and Security (“BIS”) with respect to Teledyne ~~entered into a note purchase agreement~~FLIR shipments of products from non-U.S. jurisdictions which were not licensed due to incorrect de minimis calculation methodology under the Export Administration Regulations. The Company has also made voluntary disclosures to export authorities in jurisdictions outside the U.S. for ~~a private placement~~certain potential violations 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~~local export laws. At this time, based on ~~debt~~available information, we are unable to reasonably estimate the time it may take to resolve these matters or the amount or range of ~~similar type, rating~~potential loss, penalty or other government

Table of Contents

action, if any, that may be incurred in connection with these matters. However, an unfavorable outcome could result in substantial fines and ~~maturity~~penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial position, results of operations or cash flows in and 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 1, 2017 and January 1, 2017, approximatedfollowing the ~~carrying value.~~period in which such outcome becomes estimable or known.

Environmental Remediation Obligations

At October 1, 2017, the Company had $7.0 million in capital leases, of which $1.3 million is current. At January 1, 2017, the Company had $7.4 million in capital leases, of which $1.3 million was current. At October 1, 2017, Teledyne had $20.9 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, 2017, included in the 2016 Form 10-K.

~~At October 1, 2017,~~2023, the Company’s reserves for environmental remediation obligations totaled $5.5 million, of which ~~$1.7~~$1.5 million is included in current accrued liabilities. At January 1, ~~2017,~~2023, the Company’s reserves for environmental remediation obligations totaled ~~$7.0~~$5.8 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~~pay the amounts recorded over many years and will complete remediation of all sites with which it has been identified in up to 30 years.

Legal Matters

A number of other lawsuits, claims and proceedings have been or may be asserted against the Company, including those pertaining to product liability, acquisitions, patent infringement, contracts, environmental, employment and employee benefits matters. While the outcome of ~~litigation~~such matters cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial statements.

Note ~~12. Pension Plans~~15. Subsequent Events

On October 13, 2023, the Company acquired Xena Networks ApS and ~~Postretirement Benefits~~

~~For the domestic pension plan, the discount rate decreased to 4.54%~~affiliates ("Xena Networks"). Xena Networks, headquartered in 2017 compared with a 4.91% discount rate used in 2016. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $3.5 million and $10.4 million for the third quarter 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 pension plan in 2017 or 2016. No cash pension contributions are planned for 2017 for the domestic pension plan.

Third Quarter Nine Months
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
Interest cost on benefit obligation 9.1
10.2
27.4
30.4
Expected return on plan assets (18.3 ) (18.8 ) (54.9 ) (56.3 )
Amortization of prior service cost (1.5 ) (1.5 ) (4.5 ) (4.5 )
Amortization of net actuarial loss 7.3
6.8
21.9
20.4
Net periodic pension income $ (0.7 ) $ (0.5 ) $ (2.0 ) $ (1.6 )

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

Third Quarter Nine Months
Net periodic postretirement benefits expense (in millions): 2017 2016 2017 2016
Interest cost on benefit obligation $ 0.1
$ 0.1
$ 0.3
$ 0.4
Amortization of net actuarial gain (0.1 ) (0.1 ) (0.3 ) (0.3 )
Net periodic postretirement expense $ —
$ —
$ —
$ 0.1

~~Note 13. Segment Information~~

~~Teledyne~~Denmark, 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 explorationhigh-speed terabit ethernet validation, quality assurance, 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.

Astest solutions. Xena Networks is part of ~~a continuing effort to reduce costs~~the test 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 %



~~(a)~~	Net sales excludes inter-segment sales of $6.4 million and $17.8 million for the third quarter 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 quarter of 2017 includes pretax charges of $2.9 million related to the acquisition of e2v which was recorded in the Digital Imaging segment. The first nine months of 2017 includes pretax charges of $19.8 million related to the acquisition of e2v, of which $9.1 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 in 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
Instrumentation $ 1,428.1
$ 1,361.0
Digital Imaging 1,501.6
671.1
Aerospace and Defense Electronics 619.6
449.4
Engineered Systems 104.6
93.9
Corporate 193.6
199.0
Total identifiable assets $ 3,847.5
$ 2,774.4

~~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~~measurement instrumentation product line ~~for~~within the Instrumentation ~~segment (in millions):~~segment.

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

Table of Contents

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

Overview

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 ~~deepwater oil~~factory automation and ~~gas exploration~~condition monitoring, aerospace and ~~production, oceanographic research,~~defense, air and water quality environmental monitoring, ~~factory automation~~electronics design and development, medical ~~imaging. Our products include monitoring~~imaging and pharmaceutical research, oceanographic research, and deepwater energy exploration and production. Teledyne is a global sensing and decision-support technology company: providing specialty sensors, cameras, instrumentation, ~~for marine~~algorithms and ~~environmental applications, harsh environment interconnects, electronic test~~software across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land 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.air domains. We differentiate ourselves from many of our direct competitors by having a ~~customer~~customer- and ~~company sponsored~~Company-sponsored applied research center that augments our product development expertise. We believe that technological capabilities and innovation and the ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we compete.

~~Strategy/Overview~~Strategy

Our strategy continues to emphasize growth in our ~~core~~four business segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems. The markets ~~of instrumentation, digital imaging, aerospace and defense electronics and engineered systems. Our core markets~~in which we sell our enabling technologies are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment among capital expenditures, acquisitions and ~~share repurchases.~~product development. We aggressively pursue operational excellence to continually improve our margins and ~~earnings.~~earnings by emphasizing cost containment and cost reductions in all aspects of our business. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and ~~internal~~through targeted research and development, we seek to create new products to grow our ~~company~~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,~~ As part of our continuing FLIR acquisition integration efforts, and as we ~~completed our largest acquisition~~accelerate the relocation of select Teledyne FLIR operations 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~~existing sites, we recorded $5.8 million of ~~cash acquired. Most of e2v's operations are included~~employee separation costs, facility consolidation costs and facility lease impairments 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~~2023. We expect to record an additional $3.0 million to $4.0 million of pretax costs in the next six months related to employee separation costs, facility consolidation costs and facility lease impairments.

Consistent with our strategy, we completed ~~the disposition of the net assets of its Printed Circuit Technology (“PCT”) business for $9.3 million~~one acquisition 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~~2023 and ~~custom camera solutions and application specific standard products for~~two acquisitions in 2022, which were all part of 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,Digital Imaging segment. The financial results of these acquisitions have been included since the ~~company provides high reliability semiconductors and board-level solutions for use in aerospace, space and communications applications.~~

~~Other Acquisitions~~

~~On July 20, 2017 a subsidiary~~respective date of ~~Teledyne,~~each acquisition. Subsequent to the end of the third quarter of 2023, we completed ~~the~~one acquisition, of 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 (HPLC) systems and specific medical devices andwhich is part of the Instrumentation segment. ~~SSI~~See Note 2 and Note 15 for additional information about our recent acquisitions.

Trends Affecting Our Business and Other Matters

We have experienced supply chain challenges, including long lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand. These supply chain challenges have also delayed our ability to timely convert backlog to revenue. Although perhaps to a lesser extent compared to recent quarters, we expect inflationary impacts and supply chain constraints to continue through the fourth quarter of 2023 and likely into 2024.

Sales recorded and costs incurred recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. See Note 13 for additional discussion around our derivative instruments and hedging activities used to mitigate these impacts.

To date, we have not been materially impacted by the conflict in Israel and its effect on neighboring regions. We do not have material assets in Israel. Our total net sales from Israel in the first nine months of 2023 and the full year 2022 was less than 1% of total net sales, respectively. It is too early to determine the full extent of the impact this conflict could have on our business and our operations, including the impact to our suppliers from these regions, and our assessment of the potential impacts is ongoing.

Table of Contents

Results of Operations


	Third Quarter				%		Nine Months				%
(in millions)	2023		2022		Change		2023		2022		Change
Net sales	$	1,402.5	$	1,363.6	2.9	%	$	4,210.5	$	4,040.4	4.2	%
Costs and expenses
Cost of sales	797.2		785.8		1.5	%	2,394.2		2,327.0		2.9	%
Selling, general and administrative ("SG&A")	291.9		283.7		2.9	%	905.3		861.4		5.1	%
Acquired intangible asset amortization	49.1		48.9		0.4	%	148.1		153.8		(3.7)	%
Total costs and expenses	1,138.2		1,118.4		1.8	%	3,447.6		3,342.2		3.2	%
Operating income (loss)	264.3		245.2		7.8	%	762.9		698.2		9.3	%
Interest and debt income (expense), net	(18.4)		(22.0)		(16.4)	%	(61.7)		(66.8)		(7.6)	%
Gain (loss) on debt extinguishment	—		—		—%		1.6		10.6		(84.9)	%
Non-service retirement benefit income (expense)	3.1		2.9		6.9	%	9.3		8.6		8.1	%
Other income (expense), net	(2.9)		5.2		*		(7.4)		5.2		*
Income before income taxes	246.1		231.3		6.4	%	704.7		655.8		7.5	%
Provision (benefit) for income taxes	47.3		53.1		(10.9)	%	141.6		93.7		51.1	%



Net income (loss) including noncontrolling interest	198.8		178.2		11.6	%	563.1		562.1		0.2	%



Less: Net income (loss) attributable to noncontrolling interest	0.2		(0.1)		*		0.5		(0.1)		*
Net income (loss) attributable to Teledyne	$	198.6	$	178.3	11.4	%	$	562.6	$	562.2	0.1	%

* not meaningful


	Third Quarter				%		Nine Months				%
(dollars in millions)	2023		2022		Change		2023		2022		Change
Net sales (a):
Digital Imaging	$	775.8	$	777.9	(0.3)	%	$	2,341.6	$	2,304.2	1.6	%
Instrumentation	329.1		306.4		7.4	%	991.0		927.8		6.8	%
Aerospace and Defense Electronics	183.3		169.5		8.1	%	542.5		504.5		7.5	%
Engineered Systems	114.3		109.8		4.1	%	335.4		303.9		10.4	%
Total net sales	$	1,402.5	$	1,363.6	2.9	%	$	4,210.5	$	4,040.4	4.2	%
Operating income (loss):
Digital Imaging	$	136.3	$	133.7	1.9	%	$	383.1	$	367.3	4.3	%
Instrumentation	85.5		71.1		20.3	%	247.6		216.3		14.5	%
Aerospace and Defense Electronics	49.4		44.3		11.5	%	149.6		131.3		13.9	%
Engineered Systems	10.9		11.9		(8.4)	%	32.4		29.9		8.4	%
Corporate expense	(17.8)		(15.8)		12.7	%	(49.8)		(46.6)		6.9	%
Total operating income (loss)	$	264.3	$	245.2	7.8	%	$	762.9	$	698.2	9.3	%
(a) Net sales exclude inter-segment sales of $7.2 million and $21.5 million for the third quarter and first nine months of 2023, respectively, and $4.8 million and $15.4 million for the third quarter and first nine months of 2022, respectively.

Third Quarter Results

The following is a ~~world leader in~~discussion of our 2023 third quarter results compared with the ~~design and manufacture of 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 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~~third quarter results of 2022. Comparisons are with the ~~acquisitions have been included in Teledyne’s results since the dates~~corresponding reporting period of ~~each respective acquisition.~~2022, unless noted otherwise.

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

~~Results of Operations~~

Third Quarter Nine Months
(in millions) 2017 2016 2017 2016
Net sales $ 662.2
$ 526.8
$ 1,899.4
$ 1,597.0
Costs and expenses
Cost of sales 405.8
317.0
1,178.3
978.0
Selling, general and administrative expenses 163.5
141.0
483.9
435.7
Total costs and expenses 569.3
458.0
1,662.2
1,413.7
Operating income 92.9
68.8
237.2
183.3
Interest expense, net (8.2 ) (5.6 ) (25.5 ) (17.2 )
Other income/(expense), net (3.0 ) (0.8 ) (13.0 ) 15.1
Income before income taxes 81.7
62.4
198.7
181.2
Provision for income taxes 12.7
10.4
39.1
43.3
Net income $ 69.0
$ 52.0
$ 159.6
$ 137.9

Third Quarter % Nine Months %
(dollars in millions) 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:
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 %
Total operating income $ 92.9
$ 68.8
35.0 % $ 237.2
$ 183.3
29.4 %


~~(a)~~	Net sales excludes inter-segment sales of $6.4 million and $17.8 million for the third quarter 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.

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

Third Quarter Nine Months
(dollars in millions) 2017 2016 2017 2016
Instrumentation
Net sales $ 232.5
$ 208.3
$ 699.1
$ 652.1
Cost of sales $ 129.3
$ 116.1
$ 398.1
$ 364.3
Cost of sales as a % of net sales 55.6 % 55.7 % 57.0 % 55.9 %
Digital Imaging
Net sales $ 191.5
$ 98.5
$ 493.8
$ 287.8
Cost of sales $ 116.8
$ 57.5
$ 308.6
$ 174.0
Cost of sales as a % of net sales 61.0 % 58.4 % 62.5 % 60.5 %
Aerospace and Defense Electronics
Net sales $ 165.1
$ 153.5
$ 489.8
$ 464.1
Cost of sales $ 103.0
$ 90.6
$ 299.6
$ 284.2
Cost of sales as a % of net sales 62.4 % 59.0 % 61.2 % 61.2 %
Engineered Systems
Net sales $ 73.1
$ 66.5
$ 216.7
$ 193.0
Costs of sales $ 56.7
$ 52.8
$ 172.0
$ 155.5
Cost of sales as a % of net sales 77.6 % 79.4 % 79.4 % 80.6 %
Total Company
Net sales $ 662.2
$ 526.8
$ 1,899.4
$ 1,597.0
Costs of sales $ 405.8
$ 317.0
$ 1,178.3
$ 978.0
Cost of sales as a % of net sales 61.3 % 60.2 % 62.0 % 61.2 %

Third quarter of ~~2017~~2023 compared with the third quarter of ~~2016~~2022

Our third quarter of ~~2017~~2023 net sales ~~were $662.2 million, compared with net sales of $526.8 million~~increased 2.9%. Net income for the third quarter of ~~2016, an increase of 25.7%. The increase in~~2023 increased 11.4%, driven primarily by higher net sales ~~resulted from organic growth~~ and ~~from acquisitions, primarily e2v. Net income was $69.0 million for the third quarter of 2017, compared with $52.0 million for the third quarter of 2016, an increase of 32.7%.~~favorable product mix. Net income per diluted share was ~~$1.90~~$4.15 for the third quarter of ~~2017,~~2023, compared with net income per diluted share of ~~$1.46 for the third quarter of 2016. The third quarter of 2017 includes pretax charges of $2.9 million related to the acquisition of e2v.~~$3.74.

Net ~~sales~~Sales

The third quarter of ~~2017~~2023 net sales, compared with the third quarter of ~~2016~~2022, reflected higher net sales in each segment other than the Digital Imaging segment, which decreased slightly. The third quarter of 2023 also included $25.8 million in incremental sales from recent acquisitions.

Table of Contents

Cost of Sales

Cost of sales increased $11.4 million in the third quarter of 2023. Cost of sales as a percentage of net sales decreased for the third quarter of 2023 to 56.8% from 57.6%.

Selling, General and Administrative Expense

SG&A expense, including research and development expense, increased $8.2 million in the third quarter of 2023. SG&A expense as a percentage of net sales was 20.8% for both the third quarter of 2023 and 2022. Corporate expense, which is included in SG&A expense, was $17.8 million for the third quarter of 2023, compared with $15.8 million, with the increase primarily related to higher professional fees during the period. Stock-based compensation expense was $8.0 million for the third quarter of 2023 compared with $6.7 million. The third quarter of 2023 also included $5.8 million of FLIR-related integration costs, including employee separation costs, facility consolidation costs and facility lease impairments with no comparable amount in the previous year.

Acquired Intangible Asset Amortization

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

Pension Service Expense

Pension service expense is included in both cost of sales and SG&A expense. For the third quarter of 2023, pension service expense was $1.5 million, compared with $2.2 million. For 2023, the weighted-average discount rate used to determine the benefit obligation for the domestic qualified pension plans is 5.71% compared with 2.97% in 2022.

Operating Income

Operating income for the third quarter of 2023 increased 7.8%. The third quarter of 2023, compared with the third quarter of 2022, reflected higher operating income in each business segment other than the Engineered Systems segment.

Non-operating Income and Expense

Interest and debt expense, net of interest income, was $18.4 million for the third quarter of 2023, compared with $22.0 million, with the decrease related to reduced outstanding borrowings with lower weighted average interest rates compared to the third quarter of 2022. Non-service retirement benefit income was $3.1 million for the third quarter of 2023 compared with $2.9 million. Other income and expense, net was expense of $2.9 million for the third quarter of 2023 compared with income of $5.2 million for the third quarter of 2022, with the difference primarily related foreign exchange losses in the third quarter of 2023 compared with foreign exchange gains in the third quarter of 2022. The third quarter of 2022 also included higher income from deferred compensation plan activity.

Income Tax

The Company’s effective income tax rate for the third quarter of 2023 was 19.2% compared with an effective income tax rate of 23.0% for the third quarter of 2022. The third quarter of 2023 includes net discrete income tax benefits of $6.1 million compared with net discrete income tax benefits of $0.3 million. The third quarter of 2023 net discrete income tax benefits include $6.5 million related to stock-based accounting compared with $0.2 million. Excluding the net discrete income tax items in both periods, the effective rate would have been 21.7% for the third quarter of 2023 and 23.1% for the third quarter of 2022.

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

The first nine months of 2023 net sales increased 4.2%. Net income for the first nine months of 2023 increased 0.1%. Net income per diluted share was $11.75 for the first nine months of 2023, compared with net income per diluted share of $11.79.

Net Sales

The first nine months of 2023 net sales, compared with the first nine months of 2022 net sales, reflected higher net sales in each segment. The ~~third quarter~~first nine months of ~~2017~~2023 also included ~~organic growth of $45.3 million and $90.1~~$79.7 million in incremental ~~net~~ sales from recent ~~acquisitions, primarily e2v.~~acquisitions.

Cost of Sales

Cost of sales increased ~~$88.8~~$67.2 million in the ~~third quarter~~first nine months of ~~2017, compared with the third quarter of 2016, which primarily reflected the impact of higher sales.~~2023. Cost of sales as a percentage of net sales decreased for the ~~third quarter~~first nine months of ~~2017 increased~~2023 to 61.3%, compared with 60.2% for the third 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.56.9% from 57.6%.

Selling, General and Administrative ~~Expenses~~Expense

~~Selling, general and administrative expenses,~~SG&A expense, including research and development ~~and bid and proposal~~ expense, increased ~~$22.5~~$43.9 million in the ~~third quarter~~first nine months of ~~2017, compared with the third quarter of 2016, which primarily reflected the impact of higher sales. Selling, general and administrative expenses for the third quarter of 2017,~~2023. SG&A expense as a percentage of net sales ~~decreased to 24.7% compared with 26.7%~~ for the ~~third quarter~~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 overall Teledyne selling, general and administrative~~

~~expense percentage.~~2023 increased slightly to 21.5% from 21.3%. Corporate expense, which is included in ~~selling, general~~SG&A expense, was $49.8 million for the first nine months of 2023, compared with $46.6 million, with the increase primarily related to higher professional fees during the period. Stock-based compensation expense was $24.3 million for the first nine months of 2023 compared with $22.1 million. The first nine months of 2023 also included $5.8 million of FLIR-related integration costs, including employee separation costs, facility consolidation costs and ~~administrative expenses,~~facility lease impairments.

Table of Contents

Acquired Intangible Asset Amortization

Acquired intangible asset amortization for the first nine months of 2023 was ~~$13.2~~$148.1 million ~~for~~compared with $153.8 million, with the decrease from the previous year related primarily to foreign currency translation impacts, finalization of FLIR purchase accounting in the second quarter of 2022 and certain finite-lived intangibles within the test and measurement instrumentation product line becoming fully amortized in the third quarter of 2017, compared with $11.1 million for the third quarter of 2016 and reflected higher compensation expense. In the third quarter of 2017 and 2016, we recorded a total of $3.2 million and $2.5 million, respectively, in stock option compensation expense.2022.

Pension ~~Income/~~Service Expense

Pension ~~income or~~service expense is included in both cost of sales and selling general and administrative expense. ~~The third quarter~~For the first nine months of ~~2017 included~~2023, pension ~~income of $0.7~~service expense was $4.5 million compared with ~~pension income of $0.5 million for~~$6.5 million. For 2023, the ~~third quarter of 2016. For 2017, the~~weighted-average discount rate used to determine the benefit obligation for the domestic ~~plan was 4.54 percent~~qualified pension plans is 5.71% compared with ~~4.91 percent~~2.97% in 2016. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $3.5 million for both the third quarter of 2017 and the third quarter of 2016. Pension expense determined allowable under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government.2022.

Operating Income

Operating income ~~was $92.9 million~~ for the third quarter of 2017, compared with $68.8 million for the third quarter of 2016, an increase of 35.0%. The third quarter of 2017, compared with the third quarter of 2016, reflected higher operating income in each segment, except the Aerospace and Defense Electronics segment. The incremental operating income included in the results for the third quarter of 2017 from recent acquisitions was $11.1 million which included $3.9 million in additional intangible asset amortization expense.

~~Interest Expense and Other Income/Expense~~

Interest expense, net of interest income, was $8.2 million for the third quarter of 2017, compared with $5.6 million for the third quarter of 2016 and reflected the impact of higher debt levels, primarily to fund the acquisition of e2v. Other income and expense was expense of $3.0 million for the third quarter of 2017, compared with expense of $0.8 million for the third quarter of 2016.

~~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 quarter of 2017 was 15.6%, compared with 16.7% for the third quarter of 2016.

The third quarter of 2017 reflected $9.9 million in net discrete income tax benefits, which included 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 million income tax benefit related to share-based accounting. The third quarter of 2016 included net discrete income tax benefits of $6.6 million, of which $4.0 million related to share-based accounting. Excluding the net discrete income tax items in 2017, the effective tax rate would have been 27.7% for the third quarter of 2017. Excluding net discrete income tax items in 2016, the effective tax rate would have been 27.2% for the third quarter of 2016. The Company’s effective tax rate for fiscal year 2017 is expected to be 27.7%, based on the projected mix of earnings before tax by jurisdiction, excluding the impact of any matters that would be treated as discrete.

~~First~~first nine months of ~~2017~~2023 increased 9.3%. The first nine months of 2023, compared with the first nine months of ~~2016~~2022, reflected higher operating income in each business segment.

~~Our first nine months~~Non-operating Income and Expense

Interest and debt expense, net of ~~2017 net sales were $1,899.4 million, compared with net sales of $1,597.0~~interest income, was $61.7 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~~2023, compared with $66.8 million. Non-service retirement benefit income was ~~$159.6~~$9.3 million for the first nine months of ~~2017,~~2023 compared with ~~$137.9~~$8.6 million for the first nine months of ~~2016, an increase~~2022. Other income and expense, net was expense 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$7.4 million for the first nine months of ~~2017,~~2023 compared with ~~$32.7~~$5.2 million of other income for the first nine months of ~~2016 and reflected $10.4 million in expense~~2022, with the difference primarily 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~~foreign exchange losses 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,~~2023 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 expenseforeign exchange gains 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.

2022.

Income ~~Taxes~~Tax

The Company’s effective income tax rate for the first nine months of ~~2017~~2023 was ~~19.7%~~20.1% compared with ~~23.9%~~an effective income tax rate of 14.3% for the first nine months of ~~2016.~~2022. The first nine months of ~~2017 reflected $15.9 million in~~2023 includes net discrete income tax benefits ~~which included an $8.5~~of $14.1 million compared with net discrete income tax ~~benefit related to the release~~benefits 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.$57.8 million. The first nine months of ~~2017 also includes $5.1 in~~2023 net discrete tax benefits include $13.7 million related to ~~share-based accounting.~~stock-based accounting as compared with $8.7 million. The first nine months of ~~2016~~2022 also includes net discrete income tax benefits of ~~$1.5~~$49.1 million ~~which includes $5.8 in net discrete tax benefits related to share-based accounting and $6.7 million in income tax expense~~primarily related to the ~~$17.9 million gain on the sale~~change in or resolution of ~~the operating facility.~~certain acquisition-related tax reserves. 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%~~22.1% for the first nine months of ~~2017~~2023 and ~~27.4%~~23.1% for the first nine months of ~~2016.~~

2022.

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 andexclude corporate office expenses. Corporate expense primarily includes various administrative expenses relating to ~~the~~our corporate office ~~and certain nonoperating expenses, including certain acquisition related transaction costs,~~ not allocated to our segments. See Note 133 to these condensed consolidated financial statements for additional segment information.

~~Instrumentation~~

Third Quarter Nine Months
(dollars in millions) 2017 2016 2017 2016
Net sales $ 232.5
$ 208.3
$ 699.1
$ 652.1
Cost of sales $ 129.3
$ 116.1
$ 398.1
$ 364.3
Selling, general and administrative expenses $ 68.4
$ 64.1
$ 205.0
$ 208.2
Operating income $ 34.8
$ 28.1
$ 96.0
$ 79.6
Cost of sales as a % of net sales 55.6 % 55.7 % 57.0 % 55.9 %
Selling, general and administrative expenses % of sales 29.4 % 30.8 % 29.3 % 31.9 %
Operating income as a % of net sales 15.0 % 13.5 % 13.7 % 12.2 %
Digital Imaging


	Third Quarter						Change				Nine Months						Change
(dollars in millions)	2023			2022			$		%		2023			2022			$		%
Net sales	$	775.8		$	777.9		$	(2.1)	(0.3)	%	$	2,341.6		$	2,304.2		$	37.4	1.6	%
Cost of sales	$	422.3		$	430.1		$	(7.8)	(1.8)	%	$	1,268.8		$	1,269.6		$	(0.8)	(0.1)	%
SG&A expense	$	171.8		$	169.4		$	2.4	1.4	%	$	552.9		$	527.7		$	25.2	4.8	%
Acquired intangible asset amortization	$	45.4		$	44.7		$	0.7	1.6	%	$	136.8		$	139.6		$	(2.8)	(2.0)	%
Operating income	$	136.3		$	133.7		$	2.6	1.9	%	$	383.1		$	367.3		$	15.8	4.3	%
As a percentage of net sales:
Cost of sales	54.4		%	55.3		%					54.2		%	55.1		%
SG&A expense	22.1		%	21.8		%					23.6		%	22.9		%
Acquired intangible asset amortization	5.9		%	5.7		%					5.8		%	6.1		%
Operating income	17.6		%	17.2		%					16.4		%	15.9		%

Third quarter of ~~2017~~2023 compared with the third quarter of ~~2016~~

The Instrumentation segment’s third 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%. Operating income for the third quarter of 2017 was $34.8 million, compared with operating income of $28.1 million in the third quarter of 2016, an increase of 23.8%.2022

The third quarter of ~~2017~~2023 net sales ~~increase resulted~~included $25.8 million in incremental sales from recent acquisitions, as well as greater sales of x-ray products, infrared imaging detectors and surveillance systems, offset by lower sales of unmanned ground systems for defense applications, micro-electro-mechanical systems (“MEMS”), commercial maritime products and industrial imaging cameras.

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

Table of Contents

favorable product mix, the cost of sales percentage decreased during the period. SG&A expense and SG&A expense as a percentage of net sales increased primarily due to higher selling expense, including travel costs. The third quarter of 2023 also included $5.8 million of FLIR-related integration costs, including employee separation costs, facility consolidation costs and facility lease impairments. Acquired intangible asset amortization expense increased slightly during the period.

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

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

Net sales increased primarily due to $79.7 million of incremental sales from acquisitions as well as greater sales of x-ray products, commercial infrared imaging components and solutions, and industrial and scientific cameras sales, partially offset by lower sales of unmanned ground systems for defense applications, commercial maritime products and MEMS.

Cost of sales decreased primarily due to favorable product mix partially offset by increased net sales, and the cost of sales percentage decreased during the period due to favorable product mix. SG&A expense and SG&A expense as a percentage of net sales increased primarily due to the impact of higher net sales, higher selling expense, including travel costs as well as increased research and development expense of $11.1 million. Acquired intangible asset amortization expense decreased primarily due to foreign currency translation impacts as well as finalization of FLIR purchase accounting in the second quarter of 2022.

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

Instrumentation


	Third Quarter						Change				Nine Months						Change
(dollars in millions)	2023			2022			$		%		2023			2022			$		%
Net sales	$	329.1		$	306.4		$	22.7	7.4	%	$	991.0		$	927.8		$	63.2	6.8	%
Cost of sales	$	170.2		$	163.2		$	7.0	4.3	%	$	523.1		$	494.0		$	29.1	5.9	%
SG&A expense	$	69.9		$	68.1		$	1.8	2.6	%	$	209.6		$	203.9		$	5.7	2.8	%
Acquired intangible asset amortization	$	3.5		$	4.0		$	(0.5)	(12.5)	%	$	10.7		$	13.6		$	(2.9)	(21.3)	%
Operating income	$	85.5		$	71.1		$	14.4	20.3	%	$	247.6		$	216.3		$	31.3	14.5	%
As a percentage of net sales:
Cost of sales	51.7		%	53.3		%					52.8		%	53.2		%
SG&A expense	21.2		%	22.2		%					21.1		%	22.0		%
Acquired intangible asset amortization	1.1		%	1.3		%					1.1		%	1.5		%
Operating income	26.0		%	23.2		%					25.0		%	23.3		%

Third quarter of 2023 compared with the third quarter of 2022

Net sales increased due to higher sales ~~of environmental instrumentation,~~at our marine instrumentation and test and measurement instrumentation as well as the contribution from recent acquisitions. Sales of environmental instrumentation increased $13.9 million and primarily reflected higher sales of air monitoring instruments and $6.9 million in incremental sales from recent acquisitions, including SSI.product lines. Sales of marine instrumentation increased ~~$4.2~~$22.5 million due to the ongoing recovery in offshore energy markets, and ~~primarily reflected higher~~ sales ~~of interconnect systems. Sales~~ of test and measurement instrumentation increased ~~$6.1~~$2.0 million, ~~and included $1.4 million in incremental sales from recent acquisitions. The increase in operating income reflected the impact~~respectively. Sales of ~~greater sales and the $2.6 million collection of a previously reserved receivable.~~environmental instrumentation decreased $1.8 million.

~~The third quarter of 2017 cost~~Cost of sales increased ~~$13.2 million, compared with the third quarter of 2016, and reflected the impact of~~primarily due to higher net sales. The cost of sales percentage ~~for the third quarter~~decreased due to favorable product mix. SG&A expense increased due to higher net sales partially offset by $0.3 million of ~~2017 decreased slightly to 55.6% compared with 55.7% for the third quarter of 2016. Third quarter 2017 selling, general and administrative expenses, including~~lower research and development expense, ~~increased $4.3 million, compared with~~and SG&A expense as a percentage of net sales decreased in the ~~third quarter of 2016~~period due to primarily to lower research and ~~reflected~~development expense on higher net sales. Acquired intangible asset amortization expense decreased primarily due to certain finite-lived intangibles within the ~~impact of higher sales. The selling, general~~test and ~~administrative expense percentage decreased to 29.4%~~measurement instrumentation line becoming fully amortized in the third quarter of ~~2017 from 30.8% in the third quarter~~2022.

Operating income increased primarily due to higher net sales and product mix. Operating income as a percentage of ~~2016~~net sales increased primarily due to higher net sales and ~~reflected the $2.6 million collection of a previously reserved receivable.~~product mix as well as lower research and development expense.

~~First~~For nine months of ~~2017~~2023 compared with the first nine months of ~~2016~~2022

~~The Instrumentation segment’s first nine months of 2017 net~~Net sales were $699.1 million, compared with $652.1 million in the first nine months of 2016, an increase of 7.2%. Operating income for the first nine months of 2017 was $96.0 million, compared with operating income of $79.6 million in the first nine months of 2016, an increase of 20.6%.

~~The first nine months of 2017 net sales increase resulted from~~increased due to higher sales across all product lines. Sales of ~~environmental instrumentation,~~ marine instrumentation ~~and test and measurement instrumentation, as well as~~increased $50.9 million due to the ~~contribution from recent acquisitions. Sales of environmental instrumentation increased $29.8 million and primarily reflected higher~~ongoing recovery in offshore energy markets, sales ~~of air monitoring instruments and $15.9 million in incremental sales from recent acquisitions. Sales~~ of test and measurement instrumentation increased ~~$13.2~~$10.4 million, and ~~included $6.0 million in incremental~~ sales ~~from recent acquisitions. Sales~~ of ~~marine~~environmental instrumentation increased ~~by $4.0 million. The increase in operating income was~~$1.9 million, respectively.

Cost of sales increased primarily due to ~~greater~~higher net sales, and ~~improved margins for environmental~~the cost of sales percentage decreased slightly due to favorable product mix. SG&A expense increased due to higher net sales partially offset by $0.3 million of lower research and

Table of Contents

development expense. SG&A expense as a percentage of net sales decreased in the period primarily due to lower research and development expense. Acquired intangible asset amortization expense decreased primarily due to certain finite-lived intangibles within the test and measurement instrumentation line becoming fully amortized in the third quarter of 2022.

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

Aerospace and ~~asset impairment expenses~~Defense Electronics


	Third Quarter						Change				Nine Months						Change
(dollars in millions)	2023			2022			$		%		2023			2022			$		%
Net sales	$	183.3		$	169.5		$	13.8	8.1	%	$	542.5		$	504.5		$	38.0	7.5	%
Cost of sales	$	108.1		$	101.2		$	6.9	6.8	%	$	319.1		$	307.4		$	11.7	3.8	%
SG&A expense	$	25.6		$	23.8		$	1.8	7.6	%	$	73.2		$	65.2		$	8.0	12.3	%
Acquired intangible asset amortization	$	0.2		$	0.2		$	—	—	%	$	0.6		$	0.6		$	—	—	%
Operating income	$	49.4		$	44.3		$	5.1	11.5	%	$	149.6		$	131.3		$	18.3	13.9	%
As a percentage of net sales:
Cost of sales	59.0		%	59.7		%					58.8		%	60.9		%
SG&A expense	14.0		%	14.0		%					13.5		%	12.9		%
Acquired intangible asset amortization	0.1		%	0.1		%					0.1		%	0.1		%
Operating income	26.9		%	26.2		%					27.6		%	26.1		%

Third quarter of 2023 compared with ~~marine instrumentation. The first~~the third quarter of 2022

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

Cost of sales increased primarily due to higher net sales, and the cost of sales percentage decreased due to favorable product mix. SG&A expense increased primarily due to higher net sales, and the SG&A expense percentage was consistent with the previous period.

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

First nine months of ~~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,~~2023 compared with the first nine months of ~~2016,~~2022

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

Cost of sales increased primarily ~~reflected the impact of~~due to higher net sales partially offset by ~~lower severance~~favorable product mix and ~~facility consolidation expenses.~~increased margins, and the cost of sales percentage decreased as a result. SG&A expense as well as the SG&A expense percentage increased primarily due to higher compensation costs.

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

Engineered Systems


	Third Quarter						Change				Nine Months						Change
(dollars in millions)	2023			2022			$		%		2023			2022			$		%
Net sales	$	114.3		$	109.8		$	4.5	4.1	%	$	335.4		$	303.9		$	31.5	10.4	%
Cost of sales	$	96.6		$	91.3		$	5.3	5.8	%	$	283.2		$	256.0		$	27.2	10.6	%
SG&A expense	$	6.8		$	6.6		$	0.2	3.0	%	$	19.8		$	18.0		$	1.8	10.0	%
Operating income	$	10.9		$	11.9		$	(1.0)	(8.4)	%	$	32.4		$	29.9		$	2.5	8.4	%
As percentage of net sales:
Cost of sales	84.5		%	83.2		%					84.4		%	84.2		%
SG&A expense	6.0		%	6.0		%					5.9		%	6.0		%
Operating income	9.5		%	10.8		%					9.7		%	9.8		%

Table of Contents

Third quarter of 2023 compared with the third quarter of 2022

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

Cost of sales increased primarily due to higher net sales. The cost of sales percentage increased during the period due to ~~57.0% from 55.9%. The first~~a higher percentage of cost-reimbursable type space programs in the third quarter 2023, which typically carry a lower margin than fixed price contracts. SG&A expense increased slightly, and SG&A expense as a percentage of net sales stayed consistent with the previous year.

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

First nine months of ~~2017 selling, general and administrative~~

~~expenses, including research and development expense, decreased by $3.2 million,~~2023 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 decreased2022

Net sales increased due primarily 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 included $70.1 million in incremental sales from the acquisition of e2v. The third quarter 2017 sales also reflected~~ higher sales of ~~machine vision cameras~~$22.3 million for ~~industrial applications~~engineered products and ~~X-ray detectors for life sciences applications. The increase in operating income in the third quarter of 2017 reflected the impact of~~ higher sales ~~favorable product mix and incremental operating profit from e2v, partially offset by acquisition-related charges~~ of ~~$2.9 million. The incremental operating profit included in the results~~$9.2 million for ~~the third quarter of 2017 from recent acquisitions was $10.2 million, which included $2.9 million in additional intangible asset amortization expense.~~energy systems.

~~The third quarter of 2017 cost~~Cost of sales increased ~~$59.3 million, compared with the third quarter of 2016 and~~ primarily ~~reflected the impact of~~due to higher net sales. The cost of sales percentage ~~for the third quarter of 2017~~ increased to 61.0%, compared with 58.4% for the third 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. Selling, general and administrative expenses, including research and development and bid and proposalslightly. SG&A expense increased primarily due to ~~$42.8 million in the third quarter of 2017, from $29.3 million in 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 22.3% in the third quarter of 2017 from 29.7% in the third quarter 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.

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

The Digital Imaging segment’s first nine months of 2017 net sales were $493.8 million, compared with $287.8 million in the first nine months of 2016, an increase of 71.6%. Operating income was $73.6 million for the first nine months of 2017, compared with operating income of $30.6 million in the first nine months of 2016, an increase of 140.5%.

~~The first nine months of 2017 net sales included $152.7 million in incremental sales from recent acquisitions, primarily e2v. The first nine months sales also reflected~~ 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. The increase in operating income in the first nine months of 2017 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. 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~~expense, including higher bid and proposal costs. SG&A 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 2017 from e2v was $1.1 million, which included $0.2 million in additional intangible asset amortization expense.

~~The third quarter of 2017 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%.~~ decreased slightly.

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~~increased primarily due to increased 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.sales. 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 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 remained at 61.2% in the first nine months of 2017, compared with the first nine months of 2016. Selling, general and administrative expenses, including research and development and bid and proposal expense, increased to $102.2 million in the first nine months of 2017, compared with $96.3 million for the first nine months of 2016 and reflected the impact of higher sales. The selling, general and administrative expense percentage remained at 20.8% in the first nine months of 2017, compared with the first nine months of 2016.

~~Engineered Systems~~

Third Quarter Nine Months
(dollars in millions) 2017 2016 2017 2016
Net sales $ 73.1
$ 66.5
$ 216.7
$ 193.0
Cost of sales $ 56.7
$ 52.8
$ 172.0
$ 155.5
Selling, general and administrative expenses $ 6.4
$ 5.1
$ 16.7
$ 15.3
Operating income $ 10.0
$ 8.6
$ 28.0
$ 22.2
Cost of sales as a % of net sales 77.6 % 79.4 % 79.4 % 80.6 %
Selling, general and administrative expenses % of sales 8.7 % 7.7 % 7.7 % 7.9 %
Operating income as a % of net sales 13.7 % 12.9 % 12.9 % 11.5 %

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

~~The Engineered Systems segment’s third 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%. Operating income was $10.0 million for the third quarter of 2017, compared with operating income of $8.6 million in the third quarter of 2016, an increase of 16.3%.decreased slightly.

The third quarter of 2017 net sales reflected higher sales of $5.3 million of engineered products and services and $4.7 million of turbine engines, partially offset by lower sales of $3.4 million of energy systems products. The higher sales of engineered products and services primarily reflected greater sales from marine manufacturing 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 quarter of 2017, compared to the third quarter of 2016 reflected the impact of higher sales and a greater proportion of higher margin manufacturing programs. The third quarter of 2017 cost of sales increased $3.9 million, compared with the third quarter of 2016 and reflected the impact of higher sales and product mix differences. Cost of sales as a percentage of sales for the third quarter of 2017 decreased to 77.6% from 79.4% in the third quarter of 2016 and reflected product mix differences. Selling, general and administrative expenses, including research and development and bid and proposal expense, increased to $6.4 million for the third quarter of 2017, compared with $5.1 million for the third quarter of 2016 and reflected the impact of higher sales. 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 million for the first nine months of 2017, compared with operating income of $22.2 million in the first nine months 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 and 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.

Financial Condition, Liquidity and Capital Resources

Our net cash provided by operating activities was $248.3 million for the first nine months of 2017, compared with net cash provided by operating activities of $250.7 million for the first nine months of 2016. The lower cash provided by operating activities in the first nine months 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.

Our net cash used in investing activities was $813.2 million for the first nine months of 2017, compared with net cash used by investing activities of $93.3 million for the first nine months of 2016. The 2017 amount includes $742.4 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 months of 2017 and 2016 were $40.5 million and $44.9 million, respectively.

Our goodwill was $1,748.9 million at October 1, 2017 and $1,193.5 million at January 1, 2017. The increase in the balance of goodwill in 2017 included $471.1 million in goodwill from the e2v acquisition, as well as the impact of exchange rate changes. Goodwill from the e2v acquisition will not be deductible for tax purposes. Teledyne’s net acquired intangible assets were $408.2 million at October 1, 2017 and $234.6 million at January 1, 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 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. 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. 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.

Financing activities provided cash of $535.6 million for the first nine months of 2017, compared with cash used by financing activities of $141.5 million for the first nine months of 2016. Financing activities for the first nine months of 2017 reflected net borrowings from the $750.0 million credit facility of $285.0 million and the proceeds from a $100.0 million term loan and 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. Proceeds from the exercise of stock options were $18.7 million and $26.7 million for the first nine months of 2017 and 2016, 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,~~and debt service requirements, ~~and the stock repurchase program,~~ as well as acquisitions. It is anticipated that cash on hand, operating cash flow, together with available borrowings under ~~the~~our $1.15 billion credit facility, ~~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~~requirements. To support acquisitions, we may need to raise additional ~~capital to support acquisitions. We currently expect to spend up to $70.0 million for capital expenditures in 2017, of which $40.5 million has been spent in the first nine months of 2017.~~capital. No cash pension contributions have been made ~~in 2017~~since 2013 or are planned for the remainder of ~~2017~~2023 for the domestic qualified pension ~~plan.~~plans.

Cash and Cash Equivalents

Cash and cash equivalents totaled $508.6 million at October 1, 2023 compared with $638.1 million at January 1, 2023. Cash equivalents consist of highly liquid money-market mutual funds and bank deposits with maturities of three months or less when purchased.

Long-term Debt

Total debt ~~including capital lease obligations,~~ at October 1, ~~2017~~2023 was ~~$1,195.7 million.~~ $3,244.1 million compared with $3,920.6 million at January 1, 2023.

At October 1, ~~2017, $285.0~~2023, $1,130.9 million was ~~outstanding~~available under the ~~$750.0 million~~$1.15 billion credit ~~facility. At October 1, 2017, Teledyne had $20.9~~facility, after reductions of $19.1 million in outstanding letters of credit. ~~Available borrowing capacity under the $750.0 million~~

Our bank credit agreements, which includes our $1.15 billion credit facility ~~which is reduced by borrowings~~expiring March 2026 and ~~certain outstanding letters of credit, was $447.5~~our $150.0 million atterm loan due October ~~1, 2017. The credit agreements~~2024, require ~~the Company~~us to comply with various financial and operating ~~covenants and at~~covenants. At October 1, ~~2017, the Company was~~2023, we were in compliance with these covenants.

As of October 1, 2017, 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 1, 2017, the required financial ratios and the actual ratios were as follows:



$750.0 million Credit Facility expires December 2020 and $182.5 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 to 1~~
~~Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)~~	~~No less than 3.0 to 1~~	~~10.9 to 1~~

~~$620.4 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 to 1~~
~~Consolidated Interest Coverage Ratio (EBITDA/Interest) (b)~~	~~No less than 3.0 to 1~~	~~10.9 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.

We may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Cash Flows:

Net cash provided by operating activities was $671.7 million for the first nine months of 2023 compared with $249.1 million, driven primarily by the first nine months of 2022 including a payment of $296.4 million to the Swedish Tax Authority related to a disputed pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary. The first nine months of 2023 reflected lower inventory purchases, lower income tax payments and higher accounts payable activity as compared with the first nine months of 2022. The IRS announcements related to the California floods (IR-2023-33 and IR-2023-189) postponed approximately $139 million of our second and third quarter 2023 U.S. federal income tax payments until the fourth quarter of 2023. As a result, our cash paid for income taxes in the fourth quarter of fiscal 2023 will significantly increase because of these deferred federal tax payments.

Net cash used in investing activities was $127.3 million for the first nine months of 2023 compared with $63.9 million. During the first nine months of 2023, we spent $53.5 million on acquisitions as compared with $11.9 million. Capital expenditures for the first nine months of 2023 and 2022 were $74.7 million and $58.5 million, respectively. We currently plan to invest approximately $100 million for capital expenditures in 2023.

Net cash used in financing activities was $665.7 million for the first nine months of 2023 compared with $115.2 million. During the first nine months of 2023, the Company repaid $125.0 million of amounts outstanding on its credit facility, the $300.0 million Fixed Rate Senior Notes due April 2023, and the remaining $245.0 million on its term loan due May 2026. The

Table of Contents

Company also repurchased and retired $10.0 million of its Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt. Proceeds from the exercise of stock options were $27.2 million for the first nine months of 2023 compared with $18.4 million for the first nine months of 2022.

Critical Accounting Policies and Estimates

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

For additional discussion of the application of the critical accounting policies and other accounting policies, see Note 1 to these condensed consolidated ~~financial statements~~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~~2022 Form 10-K.

Safe Harbor Cautionary Statement Regarding Forward-Looking Information

From time to time we make, and this report contains, forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995, directly or indirectly relating to sales, earnings, operating margin, growth opportunities, acquisitions, ~~and divestitures,~~ product sales, capital expenditures, pension matters, ~~stock option~~stock-based 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”~~“believe” or “expect”, that convey the uncertainty of future events or outcomes. All statements made in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other sections of this Form 10-Q that are not historical in nature should be considered forward-looking.

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

Many factors could change ~~the~~ anticipated results, including: ongoing challenges and uncertainties posed by the lingering COVID pandemic for businesses and governments around the world; changes in relevant tax and other laws; foreign currency exchange risks; rising interest rates; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages; higher inflation, including wage competition and higher shipping costs; labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards; disruptions in the global economy; the conflict in Israel and its effect on neighboring regions; the ongoing conflict between Russia and Ukraine, including the impact to energy prices and availability, especially in Europe; customer and supplier bankruptcies; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction ~~measures; risks associated with our acquisition of e2v, including failure~~measures or changes to ~~successfully integrate the business;~~U.S. and foreign government spending and budget priorities triggered by inflation, rising interest costs, and economic conditions; impacts from the United Kingdom’s ~~decision to~~ exit from the European Union; uncertainties related to the policies of the ~~new~~ U.S. Presidential Administration; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s trade compliance and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and proprietary information, including ~~cyber security threats.~~cybersecurity threats; natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint. Lower oil and natural gas prices, as well as instability in the Middle East or other oil producing regions, and new regulations or restrictions relating to energy production, including ~~with respect~~those implemented in response to ~~hydraulic fracturing,~~climate change, could further negatively affect ~~the Company’s~~our businesses that supply the oil and gas industry. ~~Increasing fuel costs could~~Weakness in the commercial aerospace industry negatively ~~affect~~affects the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of the Company’s pension assets. Changes in the policies of U.S. and foreign governments, including economic sanctions, could result, over time, in reductions ~~and~~or realignment in defense or other government spending and further changes in programs in which the ~~company~~Company participates.

In the event of a U.S. government shutdown, our business and results of operations could be impacted by disruptions to federal government operations and funding.

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

We continue to take action to assure compliance with the internal controls, disclosure controls and other requirements of the Sarbanes-Oxley Act of 2002. While we believe our ~~internal and disclosure~~ control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and may not be detected.

Table of Contents

Readers are urged to read our periodic reports filed with the Securities and Exchange Commission for a more complete description of our ~~Company,~~company, its businesses, its strategies and the various risks that we face. Various risks are identified in ~~Teledyne’s 2016~~our 2022 Form 10-K and ~~this~~subsequent Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. We assume no ~~duty~~obligation to ~~publicly~~ update ~~or revise any~~ forward-looking statements ~~whether~~to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as ~~a result of new information or otherwise.~~required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Except as set forth below, there~~There were no material changes to the information provided under “Item 7A, Quantitative and Qualitative Disclosure About Market Risk” included in our ~~2016~~2022 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 1, 2017 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 million. A hypothetical 10 percent price change in the U.S. dollar from its value at October 1, 2017 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 1, 2017 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 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 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 1, 2017, we had $567.5 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 million, assuming the $567.5 million in debt was outstanding for the full year.



~~Item 4.~~	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 1, ~~2017,~~2023, are effective at the reasonable assurance level.

In connection with our evaluation during the quarterly period ended October 1, 2017, we have made no changes in our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II OTHER INFORMATION



~~Item 1.~~	Item 1. Legal Proceedings

See Item 1 of Part 1, “Financial Statements -- Note 1114 -- ~~Lawsuits, Claims,~~ Commitments ~~Contingencies~~ and ~~Related Matters.~~Contingencies.”



Item 1A.			Risk Factors

There are no material changes to the risk factors previously disclosed in our ~~2016~~2022 Form 10-K in response to Item 1A to Part 1 of Form 10-K. See also Part I Item ~~3, Quantitative~~2, Management's Discussion and ~~Qualitative Disclosures About Market Risk,~~Analysis of Financial Condition and Results of Operations for ~~updated disclosures about interest rate exposure~~additional information regarding supply chain and foreign currency exchange rate risks.


Item 5.			Other Information

Director and Officer Trading Arrangements

None of the Company’s directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended October 1, 2023.

Table of Contents



Item 6.			Exhibits


(a)	Exhibits

~~(a)~~	~~Exhibits~~























	Exhibit 31.1	302 Certification – Robert Mehrabian

	Exhibit 31.2	302 Certification – Susan L. Main

	Exhibit 32.1	906 Certification – Robert Mehrabian

	Exhibit 32.2	906 Certification – Susan L. Main

	Exhibit 101 (INS)	XBRL Instance Document

	Exhibit 101 (SCH)	XBRL Schema Document

	Exhibit 101 (CAL)	XBRL Calculation Linkbase Document

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

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

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

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

Table of Contents

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~~October 27, 2023	By:	/s/ Susan L. Main
		Susan L. Main, Senior Vice President and
		Chief Financial Officer
		(Principal Financial Officer and Authorized Officer)

Table of Contents

Teledyne Technologies Incorporated

Index to Exhibits


Exhibit Number			Description


~~Exhibit Number~~			~~Description~~























Exhibit 31.1			302 Certification – Robert Mehrabian

Exhibit 31.2			302 Certification – Susan L. Main

Exhibit 32.1			906 Certification – Robert Mehrabian

Exhibit 32.2			906 Certification – Susan L. Main

Exhibit 101 (INS)			XBRL Instance Document

Exhibit 101 (SCH)			XBRL Schema Document

Exhibit 101 (CAL)			XBRL Calculation Linkbase Document

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

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

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

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



		PAGE
Part I	Financial Information	2

	Item 1. Financial Statements	2

	Condensed Consolidated Statements of Income (Loss)	2

	Condensed Consolidated Statements of Comprehensive Income (Loss)	23

	Condensed Consolidated Balance Sheets	34

	Condensed Consolidated Statements of Stockholders' Equity	5

	Condensed Consolidated Statements of Cash Flows	46

	Notes to Condensed Consolidated Financial Statements	57

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

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	30	27

	Item 4. Controls and Procedures	31	27

Part II	Other Information	31	27

	Item 1. Legal Proceedings	31	27

	Item 1A. Risk Factors	31	27



	Item 5. Other Information	27

	Item 6. Exhibits	32	28

Signatures		33	29



	Third Quarter						Nine Months
	2017			2016			2017			2016
Net sales	$	662.2		$	526.8		$	1,899.4		$	1,597.0
Costs and expenses
Cost of sales	405.8			317.0			1,178.3			978.0
Selling, general and administrative expenses	163.5			141.0			483.9			435.7
Total costs and expenses	569.3			458.0			1,662.2			1,413.7
Operating income	92.9			68.8			237.2			183.3
Interest and debt expense, net	(8.2		)	(5.6		)	(25.5		)	(17.2		)
Other income/(expense), net	(3.0		)	(0.8		)	(13.0		)	15.1
Income before income taxes	81.7			62.4			198.7			181.2
Provision for income taxes	12.7			10.4			39.1			43.3
Net income	$	69.0		$	52.0		$	159.6		$	137.9

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

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



	October 1, 2017			January 1, 2017
Assets
Current Assets
Cash	$	82.5		$	98.6
Accounts receivable, net	466.0			383.7
Inventories, net	431.9			314.2
Prepaid expenses and other current assets	60.6			49.7
Total current assets	1,041.0			846.2
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
Goodwill	1,748.9			1,193.5
Acquired intangibles, net	408.2			234.6
Prepaid pension assets	109.8			88.5
Other assets, net	87.5			70.8
Total Assets	$	3,847.5		$	2,774.4
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	186.0		$	138.8
Accrued liabilities	336.6			261.0
Current portion of long-term debt, capital leases and other debt	2.5			102.0
Total current liabilities	525.1			501.8
Long-term debt and capital leases	1,193.2			515.8
Other long-term liabilities	275.8			202.4
Total Liabilities	1,994.1			1,220.0
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
Additional paid-in capital	337.1			335.7
Retained earnings	2,072.0			1,912.4
Treasury stock, 2,261,678 at October 1, 2017 and 2,587,103 at January 1, 2017	(211.3		)	(242.9		)
Accumulated other comprehensive loss	(344.8		)	(451.2		)
Total Stockholders’ Equity	1,853.4			1,554.4
Total Liabilities and Stockholders’ Equity	$	3,847.5		$	2,774.4



	Amount Reclassified from AOCI Three Months Ended			Amount Reclassified from AOCI Three Months Ended			Statement of Income
	October 1, 2017			October 2, 2016			Presentation
(Gain) loss on cash flow hedges:
(Gain) loss recognized in income on derivatives	$	1.8		$	(0.1	)	Cost of sales
Income tax benefit	(0.5		)	—			Income tax benefit
Total	$	1.3		$	(0.1	)

Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost	$	(1.5	)	$	(1.5	)	Costs and expenses
Amortization of net actuarial loss	6.7			6.6			Costs and expenses
Total before tax	5.2			5.1
Income tax benefit	(2.0		)	(1.8		)	Income tax benefit
Total	$	3.2		$	3.3



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



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




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



Asset/(Liability) Derivatives	Balance sheet location	October 1, 2017			January 1, 2017
Derivatives designated as hedging instruments:
Cash flow forward contracts	Other assets	$	5.3		$	—
Cash flow cross currency swap	Accrued liabilities	(10.0		)	—
Cash flow forward contracts	Accrued liabilities	—			(1.0		)
Cash flow forward contracts	Other long-term liabilities	—			(0.1		)
Total derivatives designated as hedging instruments		(4.7		)	(1.1		)
Derivatives not designated as hedging instruments:
Non-designated forward contracts	Other current assets	4.7			6.4
Non-designated forward contracts	Accrued liabilities	(4.1		)	(1.0		)
Total derivatives not designated as hedging instruments		0.6			5.4
Total (liability) asset derivatives		$	(4.1	)	$	4.3



Restricted stock:	Shares		Weighted average fair value per share
Balance, January 1, 2017	95,304		$	83.87
Granted	23,002		$	114.42
Vested	(30,704	)	$	87.98
Forfeited/Canceled	(1,068	)	$	87.59
Balance, October 1, 2017	86,534		$	90.49



	Balance at
Inventories (in millions):	October 1, 2017			January 1, 2017
Raw materials and supplies	$	201.2		$	146.0
Work in process	193.4			147.8
Finished goods	57.7			43.0
	452.3			336.8
Progress payments	(8.4		)	(9.1		)
Reduction to LIFO cost basis	(12.0		)	(13.5		)
Total inventories, net	$	431.9		$	314.2



	Third Quarter						Nine Months
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
Interest cost on benefit obligation	9.1			10.2			27.4			30.4
Expected return on plan assets	(18.3		)	(18.8		)	(54.9		)	(56.3		)
Amortization of prior service cost	(1.5		)	(1.5		)	(4.5		)	(4.5		)
Amortization of net actuarial loss	7.3			6.8			21.9			20.4
Net periodic pension income	$	(0.7	)	$	(0.5	)	$	(2.0	)	$	(1.6	)



	Third Quarter						Nine Months
Net periodic postretirement benefits expense (in millions):	2017			2016			2017			2016
Interest cost on benefit obligation	$	0.1		$	0.1		$	0.3		$	0.4
Amortization of net actuarial gain	(0.1		)	(0.1		)	(0.3		)	(0.3		)
Net periodic postretirement expense	$	—		$	—		$	—		$	0.1