tdy-20230702

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

FORM 10-Q

_____________________________________


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

For the quarterly period ended July 2, 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: 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 No.)
1049 Camino Dos Rios
Thousand Oaks	California	91360-2362
(Address of principal executive offices)		(Zip Code)

805 373-4545

(Registrant’s telephone number, including area code)

____________________________________

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	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 ☒

There were 47,074,611 shares of common stock, $.01 par value per share, outstanding as of July 25, 2023.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

TABLE OF CONTENTS


		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)	3

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Stockholders' Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

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

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	27

	Item 4. Controls and Procedures	27

Part II	Other Information	27

	Item 1. Legal Proceedings	27

	Item 1A. Risk Factors	27



	Item 5. Other Information	27

	Item 6. Exhibits	28

Signatures		29

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

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


	Second Quarter				Six Months
	2023		2022		2023		2022
Net sales	$	1,424.7	$	1,355.8	$	2,808.0	$	2,676.8
Costs and expenses
Cost of sales	806.3		788.6		1,597.0		1,541.2
Selling, general and administrative	313.0		286.4		613.4		577.7
Acquired intangible asset amortization	49.3		51.3		99.0		104.9
Total costs and expenses	1,168.6		1,126.3		2,309.4		2,223.8
Operating income (loss)	256.1		229.5		498.6		453.0
Interest and debt income (expense), net	(22.3)		(22.5)		(43.3)		(44.8)
Gain (loss) on debt extinguishment	1.6		10.6		1.6		10.6
Non-service retirement benefit income (expense), net	2.9		2.9		6.2		5.7
Other income (expense), net	(3.4)		1.0		(4.5)		—
Income (loss) before income taxes	234.9		221.5		458.6		424.5
Provision (benefit) for income taxes	49.4		50.2		94.3		40.6



Net income (loss) including noncontrolling interest	185.5		171.3		$	364.3	$	383.9
Less: Net income (loss) attributable to noncontrolling interest	0.2		—		0.3		—
Net income (loss) attributable to Teledyne	$	185.3	$	171.3	$	364.0	$	383.9













Basic earnings per common share	$	3.94	$	3.66	$	7.74	$	8.20
Weighted average common shares outstanding	47.0		46.8		47.0		46.8





Diluted earnings per common share	$	3.87	$	3.59	$	7.60	$	8.05
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 SECOND QUARTER AND SIX MONTHS ENDED JULY 2, 2023 AND JULY 3, 2022

(Unaudited - Amounts in millions)


	Second Quarter				Six Months
	2023		2022		2023		2022
Net income (loss) including noncontrolling interest	$	185.5	$	171.3	$	364.3	$	383.9
Other comprehensive income (loss):
Foreign exchange translation adjustment	12.3		(154.8)		8.0		(187.4)
Hedge activity, net of tax	1.6		(2.3)		4.1		4.2
Pension and postretirement benefit adjustments, net of tax	0.9		4.0		2.4		8.2
Other comprehensive income (loss)	14.8		(153.1)		14.5		(175.0)
Comprehensive income (loss) including noncontrolling interest	200.3		18.2		378.8		208.9
Less: comprehensive income (loss) attributable to noncontrolling interest	0.2		—		0.3		—


Comprehensive income (loss) attributable to Teledyne	$	200.1	$	18.2	$	378.5	$	208.9

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)


	July 2, 2023		January 1, 2023
Assets
Current Assets
Cash and cash equivalents	$	364.2	$	638.1

Accounts receivable, net	859.4		883.7
Unbilled receivables, net	305.4		274.7
Inventories, net	970.6		890.7

Prepaid expenses and other current assets	141.1		130.7

Total current assets	2,640.7		2,817.9
Property, plant and equipment, net of accumulated depreciation and amortization of $905.1 at July 2, 2023 and $847.8 at January 1, 2023	766.0		769.8
Goodwill	7,943.8		7,873.0
Acquired intangibles, net	2,349.7		2,440.6
Prepaid pension assets	186.1		178.4

Other assets, net	270.0		274.3
Total Assets	$	14,156.3	$	14,354.0
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current Liabilities
Accounts payable	$	459.4	$	505.7
Accrued liabilities	724.0		717.6
Current portion of long-term debt	450.1		300.1

Total current liabilities	1,633.5		1,523.4
Long-term debt, net of current portion	2,903.2		3,620.5

Long-term deferred tax liabilities	462.3		490.0
Other long-term liabilities	574.4		547.2
Total Liabilities	5,573.4		6,181.1
Commitments and contingencies
Redeemable Noncontrolling Interest	3.9		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 July 2, 2023 and 47,194,766 at January 1, 2023; outstanding shares: 47,070,900 at July 2, 2023 and 46,912,635 at January 1, 2023	0.5		0.5
Additional paid-in capital	4,371.2		4,353.4
Retained earnings	4,925.8		4,561.8
Treasury stock, 123,866 shares at July 2, 2023 and 282,131 shares at January 1, 2023	(6.5)		(20.0)
Accumulated other comprehensive income (loss)	(712.0)		(726.5)
Total Stockholders’ Equity	8,579.0		8,169.2


Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity	$	14,156.3	$	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 STOCKHOLDERS' EQUITY

(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


	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

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

(Unaudited - Amounts in millions)


	Six Months
	2023		2022
Operating Activities
Net income (loss) including noncontrolling interest	$	364.3	$	383.9


Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:
Depreciation and amortization	162.1		169.6

Stock-based compensation	16.3		15.4
Debt extinguishment (income) expense	(1.6)		(10.6)

Changes in operating assets and liabilities excluding the effect of business acquired:
Accounts receivable and unbilled receivables	9.9		(67.5)
Inventories	(75.3)		(103.9)

Accounts payable	(49.7)		32.8

Deferred and income taxes receivable/payable, net	8.5		(60.2)
Prepaid expenses and other assets	(16.3)		16.2
Accrued expenses and other liabilities	(18.6)		(405.1)



Other operating, net	(6.1)		9.6


Net cash provided by (used in) operating activities	393.5		(19.8)
Investing Activities
Purchases of property, plant and equipment	(51.7)		(41.8)
Purchase of business, net of cash acquired	(53.5)		—
Proceeds from disposal of fixed assets	—		5.1
Other investing, net	0.7		1.3
Net cash provided by (used in) investing activities	(104.5)		(35.4)
Financing Activities




Payments on fixed rate senior notes	(308.4)		(64.4)
Net borrowings from (repayments made to) credit facility	(125.0)		—

Payments on other debt	(135.3)		(80.1)
Proceeds from exercise of stock options	15.0		17.5
Maturity of cross currency swap	(13.5)		—
Liquidation of cross currency swap	—		18.3
Other financing, net	(0.6)		(1.9)
Net cash provided by (used in) financing activities	(567.8)		(110.6)
Effect of exchange rate changes on cash	4.9		(30.1)
Change in cash and cash equivalents	(273.9)		(195.9)
Cash and cash equivalents—beginning of period	638.1		474.7
Cash and cash equivalents—end of period	$	364.2	$	278.8

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)

July 2, 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 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, 2023 (“2022 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, Teledyne’s consolidated financial position as of July 2, 2023 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the second quarter and six months ended July 2, 2023. The results of operations and cash flows for the periods ended July 2, 2023 and cash flows for the six months ended July 2, 2023 are not necessarily indicative of the results of operations or cash flows to be expected for any subsequent quarter or the full fiscal year. Certain prior year amounts have been reclassified to conform to the current period presentation.

Recent Accounting Standards

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations. This standard requires annual disclosure of the key terms of supplier finance programs, obligations outstanding with a description of where the amounts are presented in the financial statements, a rollforward of such amounts, and interim disclosure of amounts outstanding as of the end of each period. The adoption of ASU 2022-04 did not have an impact on the Company's disclosures as the impact of supplier finance programs is not material to the Company's financial statements.

Note 2. Business Acquisitions

2023 Acquisitions

ChartWorld

During the first quarter of 2023, the Company acquired ChartWorld International Limited and affiliates ("ChartWorld") for $53.5 million in cash, net of cash acquired, and subject to certain adjustments. ChartWorld, headquartered in Cyprus, with additional locations in Germany, Singapore, Canada and Japan, is a provider of digital marine navigation hardware and software 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 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 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, with an immaterial amount payable in 2023. 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	$	49.4	$	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	$	33.2	$	20.9
NL Acoustics (acquisition of 80% interest)	July 15, 2022	11.9		11.7		3.8


Total		$	99.6	$	44.9	$	24.7
(a) Net of cash acquired; an immaterial portion of NL Acoustics will be paid in 2023.

The Company’s cost to acquire these acquisitions was allocated to the assets acquired and liabilities assumed based upon their respective fair values as of the date of the completion of the acquisition. The differences between the fair value of the consideration paid and the estimated fair value of the assets and liabilities acquired was recorded as goodwill. The fair value of the acquired identifiable assets and liabilities for these acquisitions is provisional pending finalization of the Company’s acquisition accounting, including the measurement of tax basis in certain jurisdictions and the resulting deferred taxes that might arise from book and tax basis differences, if any. 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 these acquisitions have been included in Teledyne’s results since the dates of 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 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 office expenses. Corporate expense primarily includes various administrative expenses relating to the corporate office not allocated to our segments.

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


	Second Quarter				%		Six Months				%
	2023		2022		Change		2023		2022		Change
Net sales (a):
Digital Imaging	$	793.3	$	775.8	2.3	%	$	1,565.8	$	1,526.3	2.6	%
Instrumentation	328.4		312.5		5.1	%	661.9		621.4		6.5	%

Aerospace and Defense Electronics	186.0		168.8		10.2	%	359.2		335.0		7.2	%
Engineered Systems	117.0		98.7		18.5	%	221.1		194.1		13.9	%
Total net sales	$	1,424.7	$	1,355.8	5.1	%	$	2,808.0	$	2,676.8	4.9	%
Operating income:
Digital Imaging	$	124.6	$	117.9	5.7	%	$	246.8	$	233.6	5.7	%
Instrumentation	81.4		73.6		10.6	%	162.1		145.2		11.6	%

Aerospace and Defense Electronics	53.2		44.1		20.6	%	100.2		87.0		15.2	%
Engineered Systems	11.5		8.6		33.7	%	21.5		18.0		19.4	%
Corporate expense	(14.6)		(14.7)		(0.7)	%	(32.0)		(30.8)		3.9	%
Operating income	$	256.1	$	229.5	11.6	%	$	498.6	$	453.0	10.1	%
(a) Net sales excludes inter-segment sales of $8.1 million and $14.3 million for the second quarter and first six months of 2023, respectively, and $5.1 million and $10.6 million for the second quarter and first six months of 2022, respectively.

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


Identifiable assets:	July 2, 2023		January 1, 2023
Digital Imaging	$	11,341.3	$	11,432.3
Instrumentation	1,637.8		1,626.4

Aerospace and Defense Electronics	568.6		540.1
Engineered Systems	215.9		200.3
Corporate	392.7		554.9
Total identifiable assets	$	14,156.3	$	14,354.0

Product Lines

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

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


	Second Quarter				Six Months
Instrumentation	2023		2022		2023		2022

Marine Instrumentation	$	127.4	$	115.3	$	255.6	$	227.2
Environmental Instrumentation	115.3		115.5		233.2		229.5

Test and Measurement Instrumentation	85.7		81.7		173.1		164.7
Total	$	328.4	$	312.5	$	661.9	$	621.4

Note 4. Revenue Recognition and 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.


	Second Quarter Ended July 2, 2023						Second Quarter Ended July 2, 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	$	131.3	$	662.0	$	793.3	$	356.4	$	207.3	$	152.4	$	77.2	$	793.3
Instrumentation	21.3		307.1		328.4		139.4		95.2		64.6		29.2		328.4
Aerospace and Defense Electronics	61.0		125.0		186.0		126.0		36.2		15.5		8.3		186.0
Engineered Systems	103.2		13.8		117.0		114.4		—		0.4		2.2		117.0
Total	$	316.8	$	1,107.9	$	1,424.7	$	736.2	$	338.7	$	232.9	$	116.9	$	1,424.7

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

(b) Primarily commercial sales


	Six Months Ended July 2, 2023						Six Months Ended July 2, 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	$	261.6	$	1,304.2	$	1,565.8	$	690.8	$	404.6	$	310.8	$	159.6	$	1,565.8
Instrumentation	44.3		617.6		661.9		277.4		192.4		132.1		60.0		661.9
Aerospace and Defense Electronics	125.7		233.5		359.2		246.1		65.7		32.5		14.9		359.2
Engineered Systems	196.5		24.6		221.1		217.7		—		0.6		2.8		221.1
Total	$	628.1	$	2,179.9	$	2,808.0	$	1,432.0	$	662.7	$	476.0	$	237.3	$	2,808.0

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

(b) Primarily commercial sales


	Second Quarter Ended July 3, 2022						Second Quarter Ended July 3, 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	$	165.6	$	610.2	$	775.8	$	348.3	$	183.3	$	163.7	$	80.5	$	775.8
Instrumentation	27.2		285.3		312.5		134.4		74.5		74.1		29.5		312.5
Aerospace and Defense Electronics	61.6		107.2		168.8		127.4		23.0		13.1		5.3		168.8
Engineered Systems	88.9		9.8		98.7		97.9		—		0.4		0.4		98.7
Total	$	343.3	$	1,012.5	$	1,355.8	$	708.0	$	280.8	$	251.3	$	115.7	$	1,355.8

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

(b) Primarily commercial sales


	Six Months Ended July 3, 2022						Six Months Ended July 3, 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	$	307.1	$	1,219.2	$	1,526.3	$	685.5	$	367.1	$	313.3	$	160.4	$	1,526.3
Instrumentation	49.6		571.8		621.4		267.8		155.4		139.7		58.5		621.4
Aerospace and Defense Electronics	121.5		213.5		335.0		251.3		45.6		27.3		10.8		335.0
Engineered Systems	175.3		18.8		194.1		192.9		—		0.6		0.6		194.1
Total	$	653.5	$	2,023.3	$	2,676.8	$	1,397.5	$	568.1	$	480.9	$	230.3	$	2,676.8

(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 is primarily derived from fixed price contracts. Net sales in the Engineered Systems segment is typically between 45% and 55% fixed price contracts in a given reporting period, with the balance of net sales derived from cost-reimbursable type contracts. For the six months ended July 2, 2023, approximately 53% of net sales in the Engineered Systems segment were derived from fixed price contracts.

Contract Liabilities


	Balance at
Contract Liabilities by Balance Sheet Location (in millions)	July 2, 2023		January 1, 2023
Accrued liabilities	$	216.7	$	187.6
Other long-term liabilities	20.9		20.2



Total contract liabilities	$	237.6	$	207.8

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

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and exclude unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of July 2, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,236.5 million. The Company expects approximately 83% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 17% recognized thereafter.

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 execution of our 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 a cumulative catch-up basis. This method recognizes, in the

current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly.

The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first six months of 2023 was $0.5 million of unfavorable operating income and in the first six months of 2022 was $17.4 million favorable operating income, with the first six months of 2022 primarily related to favorable changes in estimates that impacted revenue within our Digital Imaging operating segment. None of the effects of changes in estimates on any individual contract were material to the consolidated statements of income (loss) for any period presented.

Note 5. Goodwill and Intangible Assets

Goodwill

The carrying value of goodwill 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	49.4		—		—		—		49.4
Foreign currency changes and other	13.4		6.5		1.5		—		21.4
Balance at July 2, 2023	$	6,843.2	$	919.7	$	163.3	$	17.6	$	7,943.8


Acquired intangible assets (in millions):	July 2, 2023						January 1, 2023
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Proprietary technology	$	1,664.7	$	576.3	$	1,088.4	$	1,667.7	$	497.4	$	1,170.3
Customer list/relationships	605.4		198.6		406.8		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		5.1		4.8		7.1		4.4		2.7
Backlog	16.4		16.2		0.2		16.1		15.8		0.3
Total intangibles subject to amortization	2,297.9		797.7		1,500.2		2,288.5		696.1		1,592.4
Intangibles not subject to amortization:
Trademarks	849.5		—		849.5		848.2		—		848.2
Total acquired intangible assets	$	3,147.4	$	797.7	$	2,349.7	$	3,136.7	$	696.1	$	2,440.6

An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of 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 $47.1 million and $167.1 million of cash equivalents at July 2, 2023 and January 1, 2023, respectively. The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets.

Accounts Receivable, net

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

Inventories, net

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

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


	Balance at
	July 2, 2023		January 1, 2023
Raw materials and supplies	$	600.2	$	563.7
Work in process	180.3		156.8
Finished goods	190.1		170.2
Total inventories, net	$	970.6	$	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 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 accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.


	Six Months
Warranty Reserve (in millions):	2023		2022
Balance at beginning of year	$	50.3	$	49.5
Product warranty expense	8.2		4.0
Deductions	(7.5)		(5.7)

Balance at end of period	$	51.0	$	47.8

Note 7. Long-Term Debt


	Balance at
Long-Term Debt (in millions):	July 2, 2023		January 1, 2023
$1.15 billion credit facility due March 2026, weighted average variable rate of 5.76% at July 2, 2023 and 5.46% at January 1, 2023	$	—	$	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 6.45% at July 2, 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 6.45% at July 2, 2023 and 5.61% at January 1, 2023	110.0		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	2.0		2.1
Debt discount and debt issuance costs	(23.7)		(26.5)
Total debt, net	3,353.3		3,920.6
Less: current portion of long-term debt	(450.1)		(300.1)
Total long-term debt, net of current portion	$	2,903.2	$	3,620.5

During the first six months of 2023, the Company repaid $125.0 million of amounts outstanding on its credit facility, the $300.0 million Fixed Rate Senior Notes due April 2023, and $135.0 million on its term loan due May 2026. The Company also repurchased and retired $10.0 million of its Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt. Subsequent to the end of the second quarter, the Company repaid $50.0 million on its term loan due May 2026, which reduced the remaining balance to $60.0 million.

At July 2, 2023, $1,131.1 million was available under the $1.15 billion credit facility, after a reduction of $18.9 million in outstanding letters of credit. Our bank credit agreements require Teledyne to comply with various financial and operating covenants and at July 2, 2023, the Company was in compliance with these covenants.

Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The Company’s long-term debt is considered a level 2 input in the fair value hierarchy and is valued based on observable market data. As of July 2, 2023 and January 1, 2023, the aggregate fair values of our borrowings were $2,971.5 million and $3,492.7 million, respectively, and the carrying values were $3,377.0 million and $3,947.1 million, respectively.

Note 8. 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 stock-based accounting income tax benefits, are treated separately.

The Company’s effective income tax rate for the second quarter and first six months of 2023 was 21.0% and 20.6%, respectively, compared with an effective income tax rate for the second quarter and first six months of 2022 of 22.7% and 9.6%, respectively. The second quarter and first six months of 2023 includes net discrete income tax benefits of $1.4 million and $8.0 million, respectively, compared with net discrete income tax benefits of $1.0 million and $57.5 million for the second quarter and first six months of 2022, respectively. The second quarter and first six months of 2023 net discrete tax benefits include $1.3 million and $7.2 million, respectively, related to stock-based accounting compared with $1.8 million and $8.5 million, of net discrete tax benefits related to stock-based accounting for the second quarter and first six months of 2022, respectively. The second quarter and first six months of 2023 also inc