Item 15. Exhibits and Financial Statement Schedules

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Item 15. Exhibits and Financial Statement Schedules

(a) Exhibits and Financial Statement Schedules:

(1) Financial Statements

See the “Index to Financial Statements and Related Information” on page 3 6 of this Report, which is incorporated herein by

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reference.

(2) Financial Statement Schedules

See Schedule II captioned “Valuation and Qualifying Accounts” on page 74 of this Report, which is incorporated herein by reference.

(3) Exhibits

A list of exhibits filed with this Form 10-K or incorporated by reference is found in the Exhibit Index immediately following the certifications of this Report and incorporated herein by reference.

(b) Exhibits:

See Item 15(a)(3) above.

See Item 15(a)(2) above.

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INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION



			Page
Financial Statements and Related Information:
Management Statement			37
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)			38
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)			39

Consolidated Statements of Income			41
Consolidated Statements of Comprehensive Income			41
Consolidated Balance Sheets			42
Consolidated Statements of Stockholders’ Equity			43
Consolidated Statements of Cash Flows			44
Notes to Consolidated Financial Statements			45
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts			74

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MANAGEMENT STATEMENT

RESPONSIBILITY FOR PREPARATION OF THE FINANCIAL STATEMENTS AND ESTABLISHING AND MAINTAINING ADEQUATE INTERNAL CONTROL OVER FINANCIAL REPORTING

We are responsible for the preparation of the financial statements included in this Annual Report on Form 10-K. The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and include amounts that are based on the best estimates and judgments of management. The other financial information contained in this Annual Report on Form 10-K is consistent with the financial statements.

Our internal control system is designed to provide reasonable assurance concerning the reliability of the financial data used in the preparation of Teledyne financial statements, as well as to safeguard the Company’s assets from unauthorized use or disposition.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement presentation.

REPORT OF MANAGEMENT ON TELEDYNE TECHNOLOGIES INCORPORATED’S INTERNAL CONTROL OVER FINANCIAL REPORTING

We are also responsible for establishing and maintaining adequate internal control over financial reporting. We conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of January 1, 2023. In making this evaluation, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria) in Internal Control - Integrated Framework. Our evaluation included reviewing the documentation of our controls, evaluating the design effectiveness of our controls and testing their operating effectiveness. Based on this evaluation we believe that, as of January 1, 2023, the Company’s internal controls over financial reporting were effective.

Deloitte and Touche LLP, our independent registered public accounting firm, has issued its report on the effectiveness of Teledyne’s internal control over financial reporting. Their report appears on page 38 of this Annual Report.

Date: February 24, 2023



/s/ ROBERT MEHRABIAN
Robert Mehrabian
Chairman, President and Chief Executive Officer

Date: February 24, 2023



/s/ SUSAN L. MAIN
Susan L. Main
Senior Vice President and Chief Financial Officer

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Teledyne Technologies Incorporated

Thousand Oaks, California

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Teledyne Technologies Incorporated and subsidiaries (the “Company”) as of January 1, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 1, 2023, of the Company and our report dated February 24, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Teledyne Technologies Incorporated’s Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Los Angeles, California

February 24, 2023

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Teledyne Technologies Incorporated

Thousand Oaks, California

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Teledyne Technologies Incorporated and subsidiaries (the "Company") as of January 1, 2023 and January 2, 2022, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended January 1, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 1, 2023 and January 2, 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 1, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill and Indefinite-Lived Trademarks – FLIR Reporting Unit and Trademarks - Refer to Notes 2, 3, and 6 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill and indefinite lived intangible assets for impairment involves the comparison of the fair value of each reporting unit and indefinite lived intangible asset to the respective carrying value. The Company performed annual impairment tests using quantitative approaches for the FLIR reporting unit goodwill and the FLIR indefinite lived trademarks. As of the annual impairment test date, the carrying value of the FLIR reporting unit goodwill and the FLIR indefinite lived trademarks were $5,748.0 million and $685.0 million, respectively. Management used a combination of the discounted cash flow approach and the market approach to estimate fair value of the FLIR reporting unit, and the relief from royalty approach to estimate fair value of the FLIR indefinite lived trademarks. The estimation of fair value using these quantitative approaches requires management to make significant estimates and assumptions related to future revenue projections and the selected discount rates.

Given the estimation of fair value of both the FLIR reporting unit and FLIR indefinite lived trademarks requires management to make significant estimates and assumptions related to the forecasts of future revenue projections and the selection of the discount rates, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our internal fair value specialists.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future revenue projections and the discount rate used to estimate the fair value of the FLIR reporting unit and the FLIR indefinite lived trademark as of the impairment test date included the following, among others:

We tested the effectiveness of management’s controls over the forecasted future revenue projections and the selected discount rate used to both estimate the fair value and perform the quantitative impairment tests for the FLIR reporting unit and FLIR indefinite lived trademarks.
We evaluated the reasonableness of the revenue projections by comparing them to (1) FLIR and third-party historical financial data, (2) current economic factors and analyst reports of FLIR and companies in its peer group, and (3) the Company’s similar historical acquisitions and reporting units.
We performed a sensitivity analysis by varying projected revenue assumptions.
With the assistance of our fair value specialists, we performed an analysis comparing applicable industry forecasted long-term revenue growth rates to management’s projected revenues used within the valuation models.
With the assistance of our fair value specialists, we evaluated the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates of the discount rates and comparing those to the discount rates selected by management.

/s/ Deloitte & Touche LLP

Los Angeles, California

February 24, 2023

We have served as the Company's auditor since 2015.

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TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per-share amounts)


	For the Fiscal Year
	2022		2021		2020
Net sales	$	5,458.6	$	4,614.3	$	3,086.2
Costs and expenses
Cost of sales	3,128.3		2,772.9		1,905.3
Selling, general and administrative	1,156.6		1,067.8		662.0
Acquired intangible asset amortization	201.7		149.3		38.8
Total costs and expenses	4,486.6		3,990.0		2,606.1
Operating income (loss)	972.0		624.3		480.1
Interest and debt expense, net	(89.3)		(90.8)		(15.3)
Non-service retirement benefit income	11.4		11.2		12.1
Gain (loss) on debt extinguishment	10.6		(13.4)		—
Other income (expense), net	3.4		2.5		(7.2)
Income (loss) before income taxes	908.1		533.8		469.7
Provision (benefit) for income taxes	119.2		88.5		67.8
Net income (loss) including noncontrolling interest	788.9		445.3		401.9


Less: Net income (loss) attributable to noncontrolling interest	0.3		—		—
Net income (loss) attributable to Teledyne	$	788.6	$	445.3	$	401.9











Basic earnings per common share	$	16.85	$	10.31	$	10.95
Weighted average common shares outstanding	46.8		43.2		36.7




Diluted earnings per common share	$	16.53	$	10.05	$	10.62
Weighted average diluted common shares outstanding	47.7		44.3		37.9

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

TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)



	For the Fiscal Year
	2022		2021		2020
Net income (loss) including noncontrolling interest	$	788.9	$	445.3	$	401.9
Other comprehensive income (loss):
Foreign exchange translation adjustment	(343.3)		(44.4)		65.8
Hedge activity, net of tax	4.7		(5.7)		4.6
Pension and postretirement benefit adjustments, net of tax	42.1		50.2		(24.7)
Other comprehensive income (loss) (a)	(296.5)		0.1		45.7
Comprehensive income (loss) including noncontrolling interest	492.4		445.4		447.6
Less: Comprehensive income (loss) attributable to noncontrolling interest	0.3		—		—
Comprehensive income (loss) attributable to Teledyne	$	492.1	$	445.4	$	447.6

(a) Net of income tax expense of $25.0 million in 2022, income tax expense of $11.7 million for 2021 and income tax benefit of $9.8 million for 2020.

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

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TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED BALANCE SHEETS

For the Fiscal Years Ended January 1, 2023 and January 2, 2022

(in millions, except share amounts)


	2022		2021
Assets
Current Assets
Cash and cash equivalents	$	638.1	$	474.7
Accounts receivable, net	883.7		767.7
Unbilled receivables, net	274.7		316.1
Inventories, net	890.7		752.9

Prepaid expenses and other current assets	130.7		118.0

Total Current Assets	2,817.9		2,429.4
Property, plant and equipment, net	769.8		827.5
Goodwill	7,873.0		7,986.7
Acquired intangible assets, net	2,440.6		2,741.6
Prepaid pension assets	178.4		123.7

Other assets, net	274.3		321.4
Total Assets	$	14,354.0	$	14,430.3
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	505.7	$	469.5
Accrued liabilities	717.6		1,028.9
Current portion of long-term debt and other debt	300.1		—

Total Current Liabilities	1,523.4		1,498.4
Long-term debt	3,620.5		4,099.4
Long-term deferred tax liabilities	490.0		625.5

Other long-term liabilities	547.2		585.0
Total Liabilities	6,181.1		6,808.3
Commitments and Contingencies
Redeemable Noncontrolling Interest	3.7		—
Stockholders’ Equity
Preferred stock, $0.01 par value; authorized 15,000,000 shares; outstanding shares-none	—		—
Common stock, $0.01 par value; authorized 125,000,000 shares; Issued shares: 47,194,766 at January 1, 2023, and 47,194,766 at January 2, 2022; outstanding shares: 46,912,635 at January 1, 2023, and 46,692,296 at January 2, 2022	0.5		0.5
Additional paid-in capital	4,353.4		4,317.1
Retained earnings	4,561.8		3,773.2
Treasury stock, 282,131 at January 1, 2023 and 502,470 at January 2, 2022	(20.0)		(38.8)
Accumulated other comprehensive income (loss)	(726.5)		(430.0)


Total Stockholders’ Equity	8,169.2		7,622.0
Total Liabilities and Stockholders’ Equity	$	14,354.0	$	14,430.3

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

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TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)



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



































































Balance, December 29, 2019	$	0.4	$	360.5	$	2,926.0	$	(96.4)	$	(475.8)	$	2,714.7
Net income (loss)	—		—		401.9		—		—		401.9
Other comprehensive income (loss), net of tax	—		—		—		—		45.7		45.7
Treasury stock issued	—		(36.9)		—		36.9		—		—
Stock-based compensation	—		30.0		—		—		—		30.0
Exercise of stock options	—		36.3		—		—		—		36.3
Balance, January 3, 2021	0.4		389.9		3,327.9		(59.5)		(430.1)		3,228.6
Net income (loss)	—		—		445.3		—		—		445.3
Other comprehensive income (loss), net of tax	—		—		—		—		0.1		0.1
Common stock issued	0.1		3,888.6		—		—		—		3,888.7
Treasury stock issued	—		(20.7)		—		20.7		—		—
Stock-based compensation	—		33.9		—		—		—		33.9
Exercise of stock options	—		25.4		—		—		—		25.4
Balance, January 2, 2022	0.5		4,317.1		3,773.2		(38.8)		(430.0)		7,622.0
Net income (loss)	—		—		788.6		—		—		788.6
Other comprehensive income (loss), net of tax	—		—		—		—		(296.5)		(296.5)
Treasury stock issued	—		(18.8)		—		18.8		—		—
Stock-based compensation	—		31.5		—		—		—		31.5
Exercise of stock options	—		23.6		—		—		—		23.6
Balance, January 1, 2023	$	0.5	$	4,353.4	$	4,561.8	$	(20.0)	$	(726.5)	$	8,169.2

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

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TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)



	For the Fiscal Year
	2022		2021		2020
Operating Activities
Net income (loss) including noncontrolling interest	$	788.9	$	445.3	$	401.9

Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:
Depreciation and amortization	332.2		371.8		116.2

Stock-based compensation	31.5		33.9		30.0
Bridge financing and debt extinguishment (income) expense	(10.6)		30.5		—



Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable and unbilled receivables	(87.9)		(158.9)		47.8
Inventories	(155.2)		7.0		54.3
Prepaid expenses and other assets	(50.4)		11.8		(10.2)
Accounts payable	45.9		99.1		(46.3)
Accrued expenses and other liabilities	(344.2)		(5.7)		53.7
Deferred and income taxes payable, net	(35.2)		(21.4)		(28.8)




Other, net	(28.2)		11.2		0.3


Net cash provided by (used in) operating activities	486.8		824.6		618.9
Investing Activities
Purchases of property, plant and equipment	(92.6)		(101.6)		(71.4)
Purchase of businesses and other investments, net of cash acquired	(99.6)		(3,723.3)		(29.0)
Other, net	16.8		0.6		1.0





Net cash provided by (used in) investing activities	(175.4)		(3,824.3)		(99.4)
Financing Activities

Proceeds from issuance of term loans and senior notes, net	—		3,975.9		2.7
Payments on other debt	(174.8)		(1,141.7)		(100.8)

Liquidations of cross currency swap	43.1		—		—
Proceeds from stock options exercised	23.6		25.4		36.3
Payments for bridge financing and debt extinguishment	—		(30.5)		—


Other, net	(1.9)		(22.0)		—
Net cash provided by (used in) financing activities	(110.0)		2,807.1		(61.8)
Effect of exchange rate changes on cash and cash equivalents	(38.0)		(5.8)		15.9
Change in cash and cash equivalents	163.4		(198.4)		473.6
Cash and cash equivalents—beginning of period	474.7		673.1		199.5
Cash and cash equivalents—end of period	$	638.1	$	474.7	$	673.1

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

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TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 1, 2023

Note 1. Description of Business

Teledyne Technologies Incorporated (“Teledyne” or the “Company”) provides enabling technologies for industrial growth markets that require advanced technology and high reliability. These markets include factory automation and condition monitoring, aerospace and defense, air and water quality environmental monitoring, electronics design and development, medical imaging and pharmaceutical research, oceanographic research, and deepwater energy exploration and production. Following the 2021 acquisition of FLIR Systems, Inc. (“FLIR”), the Company further evolved into a global sensing and decision-support technology company, providing specialty sensors, cameras, instrumentation, algorithms and software across the electromagnetic spectrum, as well as unmanned systems, in the subsea, land and air domains. Teledyne differentiates itself from many of our direct competitors by having a customer and Company-sponsored applied research center that augments its product development expertise. The Company believes 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 the markets and industries in which it competes.

The Company's businesses are aligned in four segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems.

Note 2. Summary of Significant Accounting Policies

Fiscal Year

The Company operates on a 52- or 53-week fiscal year convention ending on the Sunday nearest to December 31. Fiscal year 2022 was a 52-week fiscal year and ended on January 1, 2023. Fiscal year 2021 was a 52-week fiscal year and ended on January 2, 2022. Fiscal year 2020 was a 53-week fiscal year and ended on January 3, 2021. References to the years 2022, 2021 and 2020 are intended to refer to the respective fiscal year unless otherwise noted.

Basis of Presentation

Certain prior year amounts have been reclassified to conform to the current period presentation. In the current year, gain (loss) on debt extinguishment is presented as separate line item on the income statement.

Principles of Consolidation

The consolidated financial statements include the accounts of Teledyne and its majority-owned subsidiaries. Intercompany accounts and intercompany transactions have been eliminated.

Foreign Currency Translation

The Company’s foreign entities’ accounts are generally measured using local currency as the functional currency. Assets and liabilities of these entities are translated at the exchange rate in effect at year-end. Revenues and expenses are translated at average month end rates of exchange prevailing during the year. Unrealized translation gains and losses arising from differences in exchange rates from period to period are included as a component of accumulated other comprehensive income (loss) ("AOCI").

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to sales returns and allowances, allowance for doubtful accounts, inventories, goodwill, intangible assets, asset valuations, income taxes, warranty obligations, pension and other postretirement benefits, long-term contracts, environmental, workers’ compensation and general liability, employee benefits and other contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances at the time, the results of which form the basis for making its judgments. Actual results may differ materially from these estimates under different assumptions or conditions. Management believes that the estimates used are reasonable.

Cash and Cash Equivalents

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

Accounts Receivable, Contract Assets and Contract Liabilities

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities). Under the typical payment terms of the Company's over time contracts, the customer pays the Company either performance-based payments or progress payments. Amounts billed

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and due from the Company's customers are classified as receivables on the consolidated balance sheets. The Company may receive interim payments as work progresses, although for some contracts, the Company may be entitled to receive an advance payment. The Company recognizes a liability for these interim and advance payments in excess of revenue recognized and present it as a contract liability. Contract liabilities typically are not considered a significant financing component because these cash advances are used to meet working capital demands that can be higher in the early stages of a contract, and these cash advances protect us from the other party failing to adequately complete some or all of its obligations under the contract. When revenue recognized exceeds the amount billed to the customer, the Company records an unbilled receivable (contract asset) for the amount entitled to be received based on an enforceable right to payment.

The Company evaluates the collectability of its accounts receivable and contract assets based on a combination of factors, and judgment is required in the estimation process. If the Company becomes aware of a customer’s inability to meet its financial obligations, a specific allowance is recorded to reduce the net receivable to the amount reasonably believed to be collectible from the customer. For all other customers, the Company uses an aging schedule and recognizes allowances for doubtful accounts based on the creditworthiness of the debtor, the age and status of outstanding receivables, the current business environment and historical collection experience adjusted for current expectations for the customers or industry. Accounts receivable are written off against the allowance for uncollectible accounts when the Company determines amounts are no longer collectible. Trade credit is extended based upon evaluations of each customer’s ability to perform its obligations, which are updated periodically.

Inventories

Inventories are stated at the lower of cost or net realizable value and primarily valued on an average cost or first-in, first-out method. Inventory reserves are recorded when inventory is considered to be excess or obsolete based upon an analysis of actual on-hand quantities on a part-level basis to forecasted product demand and historical usage.

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are determined using a combination of accelerated and straight-line methods over the estimated useful lives of the various asset classes. Buildings and building improvements are depreciated over periods not exceeding 45 years, equipment over 5 to 18 years, computer hardware and software over 3 to 7 years and leasehold improvements over the shorter of the estimated remaining lives or lease terms. Significant improvements are capitalized while maintenance and repairs are charged to expense as incurred. Depreciation expense on property, plant and equipment was $129.8 million in 2022, $115.2 million in 2021 and $76.6 million in 2020.

Goodwill, Acquired Intangible Assets and Other Long-Lived Assets

Goodwill and acquired intangible assets with indefinite lives are not amortized but tested at least annually for impairment. The Company performs an annual impairment test for goodwill and other indefinite-lived intangible assets in the fourth quarter of each year, or more often as circumstances require. The Company uses qualitative and quantitative approaches when testing goodwill for impairment. For selected reporting units under the qualitative approach, the Company performs a qualitative evaluation of events and circumstances impacting the reporting unit to determine the likelihood of goodwill impairment. Based on that qualitative evaluation, if the Company determines it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. Otherwise, the Company performs a quantitative impairment test. A quantitative impairment test, if applicable, is used to identify potential goodwill impairment and then measure the amount of goodwill impairment loss, if any. The Company performs quantitative tests for reporting units at least once every three years. However, for certain reporting units the Company may perform a quantitative impairment test more frequently.

The Company reviews intangible and other long-lived assets subject to depreciation or amortization for impairment whenever events or circumstances indicate that the carrying value of the asset may not be recoverable. Acquired intangible assets with finite lives are amortized and reflected in the segment’s operating income over their estimated useful lives. The Company assesses the recoverability of the carrying value of assets held for use based on a review of projected undiscounted cash flows. Impairment losses, where identified, are determined as the excess of the carrying value over the estimated fair value of the long-lived asset, and reflected in selling, general and administrative expense at the respective business segment.

Pension and Postretirement Costs

The Company’s accounting for its defined benefit pension plans requires that amounts recognized in financial statements be determined on an actuarial basis, rather than as contributions are made to the plan. In consultation with actuaries, the Company determines the appropriate assumptions for use in determining the liability for future pension benefits. Net actuarial gains or losses are amortized to expense on a plan-by-plan basis when they exceed the accounting corridor. The accounting corridor is a defined range within which amortization of net gains and losses is not required and is equal to 10% of the greater of the market-related value of assets or benefit obligations. Gains or losses outside of the corridor are subject to amortization.

Product Warranties

Some of the Company’s products are subject to standard warranties, and the Company reserves for the estimated cost of product warranties on a product-specific basis. Facts and circumstances related to a product warranty matter and cost estimates

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to return, repair and/or replace the product are considered when establishing a product warranty reserve. The adequacy of preexisting warranty reserves is assessed regularly, and the reserve is adjusted as necessary based on a review of historical warranty experience with respect to the applicable business or products, as well as the length and actual terms of the warranties, which are typically one year. The product warranty reserve is included in current accrued liabilities and long-term liabilities on the consolidated balance sheets.

Environmental Liabilities

Costs that mitigate or prevent future environmental contamination or extend the life, increase the capacity or improve the safety or efficiency of property utilized in current operations are capitalized. Other costs that relate to current operations or an existing condition caused by past operations are expensed in the period incurred. Environmental liabilities are recorded when the Company’s liability is probable and the costs are reasonably estimable, which is generally not later than the completion of the feasibility study or the Company’s recommendation of a remedy or commitment to an appropriate plan of action. The accruals are reviewed periodically and, as investigations and remediations proceed, adjustments are made as necessary. Accruals for losses from environmental remediation obligations do not consider the effects of inflation, and anticipated expenditures are not discounted to their present value. The accruals are not reduced by possible recoveries from insurance carriers or other third parties but do reflect anticipated allocations among potentially responsible parties at federal Superfund sites or similar state-managed sites and an assessment of the likelihood that such parties will fulfill their obligations at such sites. The measurement of environmental liabilities by the Company is based on currently available facts, present laws and regulations, and current technology. Such estimates take into consideration the Company’s prior experience in site investigation and remediation, the data concerning cleanup costs available from other companies and regulatory authorities, and the professional judgment of the Company’s environmental personnel in consultation with outside environmental specialists, when necessary.

Revenue Recognition

The Company determines the appropriate method by which it recognizes revenue by analyzing the nature of the products or services being provided as well as the terms and conditions of contracts or arrangements entered into with our customers. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. A contract’s transaction price is allocated to each distinct good or service (i.e., performance obligation) identified in the contract, and each performance obligation is valued based on its estimated relative standalone selling price. For standard products or services, list prices generally represent the standalone selling price. For performance obligations where list price is not available, the Company typically uses the expected cost plus a margin approach to estimate the standalone selling price for that performance obligation. Approximately 70% of revenue is recognized at a point in time, with the remaining 30% recognized over time.

Revenue recognized at a point in time relates primarily to the sale of standard or minimally customized products, with control transferring to the customer generally upon the transfer of title. This type of revenue arrangement is typical for our commercial contracts within the Digital Imaging, Instrumentation, and Aerospace and Defense Electronics segments. If the Company cannot objectively demonstrate that the product meets those specifications prior to the shipment, the revenue is deferred until customer acceptance is obtained. The transaction price in these arrangements can include variable consideration, such as product returns and sales allowances. The estimation of this variable consideration and determination of whether to include estimated amounts as a reduction in the transaction price is based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company.

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

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amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.

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

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

The Company recognizes the incremental costs of obtaining or fulfilling a contract as expense when incurred if the amortization period of the asset is one year or less. Incremental costs to obtain or fulfill contracts with an amortization period greater than one year were not material.

Shipping and Handling

Shipping and handling fees reimbursed by customers are classified as revenue while shipping and handling costs incurred by the Company are classified as cost of sales in the accompanying consolidated statements of income.

Research and Development and Bid and Proposal Costs

Selling, general and administrative expenses include research and development and bid and proposal costs which are expensed as incurred and were $360.6 million in 2022, $299.3 million in 2021 and $196.0 million in 2020. The 2022 and 2021 amounts included $177.2 million and $113.8 million, respectively, in research and development and bid and proposal costs incurred by Teledyne FLIR, with the 2021 Teledyne FLIR amount representing a partial year due to the timing of the acquisition.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are recorded as right-of-use assets and operating lease liabilities. Finance leases are included in property and equipment, current accrued liabilities, and other long-term liabilities in the consolidated balance sheets.

Operating lease right-of-use assets represent a right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and use an implicit rate when readily available. Since most of the Company's leases do not provide an implicit rate, the Company uses the incremental borrowing rate to determine the present value of lease payments. The rate will take into consideration the underlying asset’s economic environment, including the length of the lease term and currency that the lease is payable in. The Company's lease agreements may include options to extend or early terminate the lease term at either a fixed cost, fixed increase or market value adjustment. The Company evaluates the likelihood of exercising each renewal option based on many factors, including the length of the renewal option and the future new lease cost, if known, or the estimated future new lease cost if it is not a fixed amount and will include those renewal options that are reasonably certain to be exercised for purposes of calculating the lease liability and corresponding right-of-use asset. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Stock-based Compensation Costs

The Company recognizes compensation expense for its stock-based compensation programs, which include stock options, restricted stock, restricted stock units (RSUs), and performance shares. The fair value of share-based compensation is determined at the grant date and the recognition of the related expense is generally recorded over the period in which the share-based compensation vests. Since 2019, stock options granted to our Chairman, President and Chief Executive Officer are expensed immediately, as stock options continue to vest after retirement. The Company issues shares of common stock upon the exercise of stock options.

Income Taxes

The Company is subject to income taxes in the Unites States and numerous foreign jurisdictions. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for temporary differences between the tax basis of assets and liabilities and their reported amount in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating the Company's ability to recover its deferred tax assets

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within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates the Company is using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

Income tax positions must meet a more-likely-than-not recognition in order to be recognized in the financial statements. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. As new information becomes available, the assessment of the recognition threshold and the measurement of the associated tax benefit of uncertain tax positions may result in financial statement recognition or derecognition.

Business Acquisitions

Business acquisitions are accounted for under the acquisition method by assigning the purchase price to tangible and intangible assets acquired and liabilities assumed. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill.

Earnings Per Common Share

Basic and diluted earnings per common share are computed based on net income (loss) attributable to Teledyne. The weighted average number of common shares outstanding during the period is used in the calculation of basic earnings per share. This number of shares is increased by contingent shares that could be issued under various compensation plans as well as by the dilutive effect of stock options based on the treasury stock method in the calculation of diluted earnings per common share.

Derivative Instruments and Hedging Activities

Teledyne transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. The Company’s primary foreign currency risk objective is to protect the U.S. dollar value of future cash flows and minimize the volatility of reported earnings. The Company's foreign currency objective is achieved through the following:

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.
The Company has converted U.S. dollar denominated, variable rate and fixed rate debt obligations of a European subsidiary, into euro fixed rate obligations using a receive float, pay fixed cross currency swap, and a receive fixed, pay fixed cross currency swap. These cross currency swaps are designated as cash flow hedges.
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.

In addition, the Company has converted domestic U.S. variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap. The interest rate swap is designated as a cash flow hedge.

The effectiveness of the cash flow hedge forward contracts 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 contracts’ gains or losses resulting from changes in the fair value of these hedges is initially reported, net of tax, as a component of AOCI in stockholders’ equity until the underlying hedged item is reflected in our consolidated statements of income, at which time the effective amount in AOCI is reclassified to revenue in our consolidated statements of income.

In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or losses on the related cash flow hedges will be reclassified from AOCI to other income and expense. During the current reporting period, all forecasted transactions occurred and, therefore, there were no such gains or losses reclassified to other income and expense, due to missed forecasts.

Fair Value Measurements

Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The Company considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The fair value hierarchy comprises three levels. Level 1 relates to quoted prices in active markets for identical assets or liabilities. Level 2 relates to observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent

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transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 are unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy; for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Related Party Transactions

For all periods presented, the Company had no material related party transactions that required disclosure.

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. This standard does not affect recognition, measurement or financial statement presentation of supplier finance obligations. The guidance requires retrospective application to all periods in which a balance sheet is presented, except for the rollforward requirement, which will be applied prospectively. The ASU becomes effective January 1, 2023, except for the rollforward, which is effective on January 1, 2024. The Company is currently evaluating the impact of this guidance on our consolidated financial statements.

Other ASU's issued but not effective until after January 1, 2023 are not expected to have a material effect on the Company’s consolidated financial position, annual results of operations and/or cash flows.

Note 3. Business Acquisitions

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.

The minority ownership interest in shares of NL Acoustics held by a third party is classified as a redeemable noncontrolling interest on the consolidated balance sheet due to a put option under which the third party may require the Company to purchase the remaining ownership interest, with the put option exercisable beginning in the third quarter of 2025. The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value and its carrying amount adjusted for net income (loss) attributable to the noncontrolling interest. Adjustments to the carrying value of the redeemable noncontrolling interest are recorded through retained earnings. Changes in the redeemable noncontrolling interest balance during the period were not material.

The following tables show the purchase price (net of cash acquired), goodwill acquired, and acquired intangible assets for the acquisitions made in 2022 (in millions):


	2022
Acquisitions	Acquisition Date	Cash Paid (a)		Goodwill Acquired		Acquired Intangible Assets
ETM	October 28, 2022	$	87.7	$	32.6	$	20.9
NL Acoustics (acquisition of 80% interest)	July 15, 2022	11.9		11.6		3.8


Total		$	99.6	$	44.2	$	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 2022 acquisitions was allocated to the assets acquired and liabilities assumed based

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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 the 2022 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 the 2022 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 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.

2021 Acquisition

On May 14, 2021, Teledyne acquired the outstanding stock of FLIR for approximately $8.1 billion, comprising of net cash payments of $3.7 billion, Teledyne share issuances of $3.9 billion, and the assumption of FLIR debt of $0.5 billion. FLIR stockholders received $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share, and Teledyne issued approximately 9.5 million shares at $409.41 per share. See Note 8 for information regarding financing activities undertaken in connection with the FLIR acquisition.

FLIR is an industrial technology company focused on intelligent sensing solutions for defense and industrial applications. FLIR offers a diversified portfolio that serves a number of applications in government and defense, industrial, and commercial markets. FLIR technologies include thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and advanced threat-detection solutions. FLIR is part of the Digital Imaging segment. Goodwill resulting from the FLIR acquisition will not be deductible for tax purposes.

The primary reasons for the FLIR acquisition were to achieve synergies in merging with a business that has the same core business model based on proprietary sensor technologies, but with different products and markets; the opportunity to add new and complementary products with FLIR’s products based on different semiconductor technologies for imaging across different wavelengths than Teledyne products, and the opportunity to serve different customers and applications, with minimal overlapping technologies and markets; the expectation of combining two businesses that both provide sensors, cameras and sensor systems to customers and both business portfolios being balanced among commercial and government markets and geographies, but in the case of thermal imaging, with Teledyne primarily producing extremely high-performance infrared detectors used for astronomy and space-based imaging applications compared to FLIR’s products ranging from air and ground imaging systems to commercial thermography instruments and automotive advanced driver assistance systems; and the opportunity to add FLIR’s suite of imaging sensor products based on different semiconductor technologies for different wavelengths to Teledyne’s offerings.

The significant factors that resulted in recognition of goodwill include 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 this acquisition have been included in Teledyne’s results since the dates of acquisition.

The following table presents the final purchase price allocation for FLIR, as the measurement period closed in the second quarter of 2022. The Company accounted for the FLIR acquisition under the acquisition method and measured identifiable assets acquired and liabilities assumed of the acquiree at the fair values on the closing date. The Company has completed the process of specifically identifying the amounts assigned to certain assets, including acquired intangible assets, and liabilities and the related impact on taxes and goodwill for the FLIR acquisition. The fair values of acquired intangibles were determined based on estimates and assumptions deemed reasonable by the Company.

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Final fair values allocated to the assets acquired and liabilities assumed - FLIR (in millions):	2022
Cash and cash equivalents	$	287.7
Accounts receivable, net	241.3
Unbilled receivables, net	72.1
Inventories, net	519.4
Prepaid expenses and other current assets	54.8
Total current assets	1,175.3

Property, plant and equipment	354.1
Goodwill	5,939.7
Acquired intangible assets	2,490.0
Other long-term assets	141.9
Total assets acquired	10,101.0

Accounts payable	144.7
Accrued liabilities	612.1
Total current liabilities acquired	756.8

Long-term debt, net	496.8
Long-term deferred tax liabilities	603.3
Other long-term liabilities	335.5
Total liabilities assumed	2,192.4
Consideration transferred	$	7,908.6

Consideration transferred, net of cash acquired (a)	$	7,620.9


(a)			The consideration included approximately $3.9 billion of Teledyne shares issued to existing shareholders of the acquired company. This $3.9 billion of equity consideration is a non-cash transaction. An immaterial portion of the cash consideration for certain vested FLIR restricted stock awards was deferred at the election of the award holder and will be paid out in future periods.

During fiscal year 2018, the Swedish Tax Authority (“STA”) issued a reassessment of tax for the year ending December 31, 2012 to one of FLIR’s non-operating subsidiaries in Sweden. The total taxes, penalties and interest levied by the STA totals SEK 3.1 billion ($364.7 million based on exchange rates as of the acquisition date). In March 2020, FLIR received an adverse judgment from the First Instance Court of Sweden regarding the STA’s reassessment. FLIR appealed the decision to the Administrative Court of Appeal in Stockholm, Sweden (the “Appellate Court”). Teledyne recorded a liability for this uncertain tax position that reflects the most likely outcome for this tax matter under the acquisition method for business combinations in the third quarter of 2021, which was included within accrued liabilities on the consolidated balance sheet. On January 26, 2022, the Administrative Court of Appeal in Stockholm, Sweden generally affirmed the March 2020 ruling of the First Instance Court and determined an estimated tax liability in the amount of SEK 2.765 billion. Teledyne paid the tax on February 2, 2022 totaling $296.4 million. The Company requested for permission to appeal this ruling to the Swedish Administrative Supreme Court. In the fourth quarter of 2022, the appeal was denied.

During the second quarter of 2022, the Company finalized the measurement period including reviewing and identifying acquisition accounting adjustments for a number of acquired tax positions of FLIR that meet the definition of an acquired uncertain tax position. In addition to the STA matter described above, the Company recorded $187.6 million of purchase accounting adjustments for the accrual of other uncertain tax positions of FLIR. These amounts are primarily included within other long-term liabilities on the consolidated balance sheets.

The following table is a summary at the acquisition date of the acquired intangible assets and weighted average useful life in years for the FLIR acquisition (dollars in millions):



Intangibles subject to amortization:	Intangible Assets		Weighted average useful life in years
Proprietary technology	$	1,355.0	9.7
Customer list/relationships	450.0		14.4


Total acquired intangibles subject to amortization	1,805.0		10.9






Intangibles not subject to amortization:
Trademarks	685.0		n/a
Total acquired intangible assets	$	2,490.0

Goodwill	$	5,939.7	n/a

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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 2020 fiscal year. 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 unaudited proforma information below, as required by GAAP, assumes that FLIR had been acquired at the beginning of the 2020 fiscal year and includes the effect of transaction accounting adjustments. These adjustments include the financing and interest costs associated with debt to fund the acquisition, amortization of acquired intangible assets, depreciation of the fair value step-up of acquired property, plant and equipment, amortization of inventory fair value step-up (assumed to be fully amortized in 2020), and tax related effects as well as the issuance of Teledyne common stock in connection with the acquisition.

The following table presents proforma net sales, net income and earnings per common share data assuming FLIR was acquired at the beginning of the 2020 fiscal year:



(unaudited - in millions, except per share amounts)	2021 (a)		2020 (a)
Net sales	$	5,235.6	$	5,009.9
Net income	$	571.7	$	399.6
Basic earnings per common share	$	13.23	$	8.65
Diluted earnings per common share	$	12.91	$	8.43
(a) The above unaudited proforma information is only presented for the FLIR acquisition as it is considered a material acquisition.

Note 4. Business Segments

Teledyne's businesses are aligned in four reportable segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics and Engineered Systems. The Company manages, evaluates and aggregates its operating segments for segment reporting purposes primarily on the basis of product and service type, production process, distribution methods, type of customer, management organization, sales growth potential and long-term profitability. The Digital Imaging segment includes high-performance sensors, cameras and systems, within the visible, infrared and X-ray spectra for use in industrial, government and medical applications, as well as micro electromechanical systems (“MEMS”) and high-performance, high-reliability semiconductors including analog-to-digital and digital-to-analog converters. This segment also includes our sponsored and centralized research laboratories which benefit government programs and commercial businesses. Teledyne acquired FLIR in May 2021. Teledyne FLIR technologies include thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and advanced threat-detection solutions. The Instrumentation segment provides monitoring and control instruments for marine, environmental, industrial and other applications, electronic test and measurement equipment and harsh environment interconnect products. The Aerospace and Defense Electronics segment provides sophisticated electronic components and subsystems and communications products, including defense electronics, harsh environment interconnects, data acquisition and communications equipment for aircraft and components and subsystems for wireless and satellite communications, as well as general aviation batteries. The Engineered Systems segment provides innovative systems engineering and integration, advanced technology application, software development and manufacturing solutions for defense, space, environmental and energy applications.

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.

Information on the Company’s business segments was as follows (in millions):



Net sales (a):	2022		2021		2020
Digital Imaging	$	3,110.9	$	2,412.9	$	986.0
Instrumentation	1,254.0		1,166.9		1,094.5
Aerospace and Defense Electronics	682.4		628.7		589.4
Engineered Systems	411.3		405.8		416.3
Total net sales	$	5,458.6	$	4,614.3	$	3,086.2

Operating income (loss):	2022		2021		2020
Digital Imaging	$	519.3	$	325.6	$	192.8
Instrumentation	295.3		253.7		213.2
Aerospace and Defense Electronics	184.1		133.2		80.8
Engineered Systems	39.2		48.6		50.1

Corporate expense	(65.9)		(136.8)		(56.8)
Total operating income (loss)	$	972.0	$	624.3	$	480.1

(a) Net sales excludes inter-segment sales of $25.3 million and $20.2 million for fiscal years 2022 and 2021, respectively.

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Depreciation and amortization (in millions):	2022		2021		2020
Digital Imaging (a)	$	279.0	$	309.2	$	49.2
Instrumentation	32.6		38.1		38.3
Aerospace and Defense Electronics	12.4		13.2		13.7
Engineered Systems	4.4		7.2		9.2
Corporate	3.8		4.1		5.8
Total depreciation and amortization	$	332.2	$	371.8	$	116.2

(a) The fiscal year 2022 amount for Digital Imaging included $167.6 million of acquired asset intangible amortization related to FLIR. The fiscal year 2021 amount included $106.4 million of acquired inventory step-up expense and $110.3 million of acquired asset intangible amortization related to FLIR.


Capital expenditures (in millions):	2022		2021		2020
Digital Imaging	$	63.9	$	64.2	$	33.4
Instrumentation	9.3		13.3		18.0
Aerospace and Defense Electronics	8.0		8.4		10.4
Engineered Systems	5.3		12.9		7.5
Corporate	6.1		2.8		2.1
Total capital expenditures	$	92.6	$	101.6	$	71.4

Identifiable assets are those assets used in the operations of the segments. Corporate assets primarily consist of cash and cash equivalents, deferred taxes, pension assets and other assets.


Identifiable assets (in millions):	2022		2021		2020
Digital Imaging	$	11,432.3	$	11,756.8	$	2,000.8
Instrumentation	1,626.4		1,640.3		1,676.2
Aerospace and Defense Electronics	540.1		536.3		567.6
Engineered Systems	200.3		179.2		175.1
Corporate	554.9		317.7		665.1

Total identifiable assets	$	14,354.0	$	14,430.3	$	5,084.8

Information on the Company’s sales by geographic region and long-lived assets by major geographic area was as follows:


Sales by geographic region (in millions):	2022		2021		2020
United States	$	2,872.6	$	2,466.4	$	1,700.9
Europe	1,157.3		958.5		616.9
Asia	971.5		807.9		597.6
All other regions	457.2		381.5		170.8


Total sales	$	5,458.6	$	4,614.3	$	3,086.2


Long-lived assets (in millions):	2022		2021		2020
United States	$	7,873.1	$	9,446.3	$	1,707.0
Canada	1,169.7		763.5		372.9
United Kingdom	825.8		622.4		539.5
France	427.4		463.7		505.1
All other countries	1,225.4		679.3		201.7
Total long-lived assets	$	11,521.4	$	11,975.2	$3,326.2

Long-lived assets consist of property, plant and equipment, goodwill, acquired intangible assets, prepaid pension assets and other long-term assets including deferred compensation assets but excluding any deferred tax assets. In 2021, provisional amounts for goodwill and intangible assets were primarily included in the United States as the FLIR acquisition was provisional at that time. The all other countries category primarily consists of Teledyne’s other operations in Europe, primarily in Sweden, Norway, Belgium and Estonia.

Product Lines

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

Table of Contents

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



Instrumentation:	2022		2021		2020
Environmental Instrumentation	$	465.0	$	446.3	$	411.3
Marine Instrumentation	460.7		424.1		426.3
Test and Measurement Instrumentation	328.3		296.5		256.9
Total	$	1,254.0	$	1,166.9	$	1,094.5

As part of a continuing effort to reduce costs and improve operating performance, as well as to respond to the impact of the COVID pandemic, beginning in 2020 the Company took actions to reduce headcount across various businesses, reducing our exposure to weak end markets, such as commercial aerospace. Teledyne also exited certain facilities no longer needed. In 2021, the Company took actions to integrate FLIR into our businesses resulting in higher severance and facility closure costs in the Digital Imaging segment. In 2021, the Company incurred $26.4 million of severance and facility consolidation costs, primarily related to our Digital Imaging Segment. Severance and facility consolidation costs incurred in 2022 were not material, and, at January 1, 2023, an immaterial amount remains to be paid related to these actions.

Note 5. Revenue Recognition and Contract Balances

The Company disaggregates its revenue from contracts with customers by customer type and geographic region for each of our segments, as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. With the exception of the Engineered Systems segment, net sales in each of our segments is 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 related to cost-reimbursable type contracts. For 2022, 2021 and 2020, approximately 49%, 47%, and 53% of net sales in the Engineered Systems segment was derived from fixed-price contracts.


	Fiscal Year Ended January 1, 2023						Fiscal Year Ended January 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	$	619.1	$	2,491.8	$	3,110.9	$	1,416.6	$	749.7	$	637.8	$	306.8	$	3,110.9
Instrumentation	108.1		1,145.9		1,254.0		554.5		311.5		267.1		120.9		1,254.0
Aerospace and Defense Electronics	266.3		416.1		682.4		494.6		96.1		65.3		26.4		682.4
Engineered Systems	366.4		44.9		411.3		406.9		—		1.3		3.1		411.3
Total	$	1,359.9	$	4,098.7	$	5,458.6	$	2,872.6	$	1,157.3	$	971.5	$	457.2	$	5,458.6

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

(b) Primarily commercial sales


	Fiscal Year Ended January 2, 2022						Fiscal Year Ended January 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	$	515.9	$	1,897.0	$	2,412.9	$	1,082.6	$	567.8	$	510.3	$	252.2	$	2,412.9
Instrumentation	91.6		1,075.3		1,166.9		512.6		298.5		247.5		108.3		1,166.9
Aerospace and Defense Electronics	227.2		401.5		628.7		469.0		92.1		48.6		19.0		628.7
Engineered Systems	358.4		47.4		405.8		402.2		0.1		1.5		2.0		405.8
Total	$	1,193.1	$	3,421.2	$	4,614.3	$	2,466.4	$	958.5	$	807.9	$	381.5	$	4,614.3

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

(b) Primarily commercial sales

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	Fiscal Year Ended January 3, 2021						Fiscal Year Ended January 3, 2021
	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	$	120.9	$	865.1	$	986.0	$	387.0	$	245.2	$	310.7	$	43.1	$	986.0
Instrumentation	80.6		1,013.9		1,094.5		471.1		279.2		238.9		105.3		1,094.5
Aerospace and Defense Electronics	229.9		359.5		589.4		429.4		92.4		46.6		21.0		589.4
Engineered Systems	386.8		29.5		416.3		413.4		0.1		1.4		1.4		416.3
Total	$	818.2	$	2,268.0	$	3,086.2	$	1,700.9	$	616.9	$	597.6	$	170.8	$	3,086.2

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

(b) Primarily commercial sales

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. Since certain contracts extend over a longer period of time, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings through a cumulative catch-up basis. This method recognizes, in the current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly. The majority of revenue recognized over time uses an EAC process. The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in 2022 and 2021 was approximately $29.9 million of favorable operating income and $26.8 million favorable operating income, respectively, with both years primarily related to favorable changes in estimates that impacted revenue, and, to a lesser degree, cost of sales within the Digital Imaging operating segment. None of the effects of changes in estimates on any individual contract were material to the consolidated statements of income for any period presented.

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of January 1, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,099.3 million. The Company expects approximately 76% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 24% recognized thereafter.

The unbilled receivable balance decreased from the beginning of the year by $41.4 million, or 13.1%, primarily due to achieving billing milestones on certain contracts within the Digital Imaging segment, including FLIR defense-related contracts. Contract liabilities decreased from the beginning of the year by $3.5 million, or 1.7% primarily due to the decrease in customer advances and credits in our Digital Imaging segment partially offset by an increase in customer advances in our Engineered Systems segment. The Company recognized revenue of $144.4 million during the year ended January 1, 2023 from contract liabilities that existed at the beginning of year.

Note 6. Goodwill and Intangible Assets


Goodwill (in millions):	Digital Imaging		Instrumentation		Aerospace and Defense Electronics		Engineered Systems		Total















Balance at January 3, 2021	$	997.8	$	968.8	$	165.8	$	17.6	$	2,150.0
Current year acquisitions	5,905.5		—		—		—		5,905.5
Foreign currency changes and other	(35.8)		(32.9)		(0.1)		—		(68.8)
Balance at January 3, 2022	6,867.5		935.9		165.7		17.6		7,986.7
Current year acquisitions	78.5		—		—		—		78.5
Foreign currency changes and other	(165.6)		(22.7)		(3.9)		—		(192.2)
Balance at January 1, 2023	$	6,780.4	$	913.2	$	161.8	$	17.6	$	7,873.0

In the fourth quarter of 2022, the Company performed a quantitative test for the FLIR reporting unit and qualitative tests for all other reporting units. The results of our annual impairment tests of goodwill indicated that no impairment existed in 2022, 2021 or 2020.

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	2022						2021
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Acquired intangible assets (in millions):
Proprietary technology	$	1,667.7	$	497.4	$	1,170.3	$	1,767.7	$	358.2	$	1,409.5
Customer list/relationships	596.1		177.0		419.1		616.2		141.8		474.4
Patents	0.6		0.6		—		0.6		0.6		—
Non-compete agreements	0.9		0.9		—		0.9		0.9		—
Definite-lived trademarks	7.1		4.4		2.7		4.5		3.9		0.6
Backlog	16.1		15.8		0.3		16.3		16.3		—
Acquired intangible assets subject to amortization	2,288.5		696.1		1,592.4		2,406.2		521.7		1,884.5
Acquired intangible assets not subject to amortization:
Indefinite-lived trademarks	848.2		—		848.2		857.1		—		857.1
Total acquired intangible assets	$	3,136.7	$	696.1	$	2,440.6	$	3,263.3	$	521.7	$	2,741.6

Amortizable acquired intangible assets are amortized on a straight-line basis over their estimated useful lives ranging from one to 15 years. Consistent with Teledyne’s growth strategy, the Company seeks to acquire companies in markets characterized by high barriers to entry and that include specialized products not likely to be commoditized. Given our markets and highly engineered nature of our products, the rates of new technology development and customer acquisition and/or attrition are often not volatile. As such, Teledyne believes the value of acquired intangible assets decline in a linear, as opposed to an accelerated fashion, and the Company believes amortization on a straight-line basis is appropriate. Recorded impairment charges to intangible assets were not material in 2022, 2021 or 2020. The expected future amortization expense for the next five years is as follows (in millions): 2023 - $195.2; 2024 - $193.1; 2025 - $187.7; 2026 - $185.4; 2027 - $178.8.

The estimated remaining useful lives by asset category as of January 1, 2023, are as follows:


Acquired intangibles subject to amortization						Weighted average remaining useful life in years
Proprietary technology						7.5
Customer list/relationships						10.7
Patents						1.3
Backlog						0.7
Trademarks						4.0
Total acquired intangibles subject to amortization						8.2

Note 7. Supplemental Balance Sheet Information


Accounts Receivable and Unbilled Receivables (in millions):	Balance at year-end
	2022		2021
Commercial and other billed receivables	$	763.1	$	672.9
U.S. Government and prime contractors billed receivables	132.3		108.6
	895.4		781.5
Allowance for doubtful accounts	(11.7)		(13.8)
Account receivable, net	$	883.7	$	767.7

Commercial and other unbilled receivables, net	$	148.3	$	158.3
U.S. Government and prime contractors unbilled receivables, net	126.4		157.8
Unbilled receivables, net	$	274.7	$	316.1

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Inventories (in millions):	Balance at year-end
	2022		2021
Raw materials and supplies	$	563.7	$	479.8
Work in process	156.8		123.0
Finished goods	170.2		150.1
Total inventories, net	$	890.7	$	752.9


Property, plant and equipment (in millions):	Balance at year-end
	2022		2021
Land	$	103.6	$	105.6
Buildings	436.4		448.9
Equipment and software and other	1,077.6		1,016.3
	1,617.6		1,570.8
Accumulated depreciation and amortization	(847.8)		(743.3)
Total property, plant and equipment, net	$	769.8	$	827.5


Accrued liabilities (in millions):	Balance at year-end
	2022		2021
Compensation, benefit and other employee related accruals	$	205.1	$	215.1
Contract liabilities	187.6		186.0
Warranty reserve	43.3		41.8
Operating lease liabilities	29.4		28.3
Derivative liabilities	27.8		4.4
Unrecognized tax benefits, including accrued interest and penalties	—		341.0
Other	224.4		212.3
Total accrued liabilities	$	717.6	$	1,028.9


Other long-term liabilities (in millions):	Balance at year-end
	2022		2021
Unrecognized tax benefits, including accrued interest and penalties	$	176.3	$	150.7
Operating lease liabilities	125.9		138.0
Deferred compensation liabilities	92.2		115.5
Pension and postretirement related liabilities	50.2		67.2
Contract liabilities	20.2		25.3
Derivative liabilities	19.4		9.6
Warranty reserve	7.0		7.7
Other	56.0		71.0
Total other long-term liabilities	$	547.2	$	585.0

A rollforward of the warranty reserve, including both short and long-term reserve balances, for the years 2022, 2021 or 2020 is as follows:


Warranty Reserve (in millions):	2022		2021		2020
Balance at beginning of year	$	49.5	$	22.4	$	24.8
Product warranty expense	12.6		11.9		3.3
Deductions	(14.3)		(10.1)		(8.2)
Acquisition-related	2.5		25.3		2.5
Balance at end of year	$	50.3	$	49.5	$	22.4

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Note 8. Long-Term Debt


Long-Term Debt (dollars in millions):	January 1, 2023		January 2, 2022
$1.15 billion credit facility, due March 2026, weighted average variable rate of 5.46% at January 1, 2023 and 1.20% at January 2, 2022	$	125.0	$	125.0



0.65% Fixed Rate Senior Notes due April 2023	300.0		300.0
0.95% Fixed Rate Senior Notes due April 2024, callable after April 2022	450.0		450.0
Term loan due October 2024, variable rate of 5.63% at January 1, 2023 and 1.35% at January 2, 2022, swapped to a Euro fixed rate of 0.612%	150.0		150.6
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 and 1.35% at January 2, 2022	245.0		355.0
2.25% Fixed Rate Senior Notes due April 2028	700.0		700.0
2.50% Fixed Rate Senior Notes due August 2030	485.0		500.0
2.75% Fixed Rate Senior Notes due April 2031	1,040.0		1,100.0







Other debt	2.1		0.7
Debt issuance costs	(26.5)		(31.9)
Total long-term debt	3,920.6		4,099.4
Current portion of long-term debt and other debt	(300.1)		—
Total long-term debt, net of current portion	$	3,620.5	$	4,099.4

Excluding interest and fees, no payments are due under the $1.15 billion unsecured credit facility (“credit facility”) until it matures in March 2026. Borrowings under our credit facility and term loans are at variable rates which are, at our option, tied to a base rate, Eurocurrency rate or equivalent as defined in our credit agreements. Available borrowing capacity under the credit facility, which is reduced by borrowings and certain outstanding letters of credit, was $1,003.7 million at January 1, 2023. The credit agreement and term loans require the Company to comply with various financial and operating covenants and at January 1, 2023, the Company was in compliance with these covenants. At January 1, 2023, Teledyne had $38.6 million in outstanding letters of credit.

During 2022, the Company repaid $185.0 million of debt. The Company made $110.0 million of floating rate debt payments on its term loan due May 2026. The Company also repurchased and retired $75.0 million of its Fixed Rate Senior Notes due August 2030 and April 2031, recording a $10.6 million non-cash gain on the extinguishment of this debt.

During 2021, the Company completed various financing activities as follows, with activity through the first half of 2021 primarily related to funding the cash portion of the FLIR acquisition:

On January 4, 2021, the Company entered into a $4.5 billion short term stand-by bridge facility to support the completion of the FLIR acquisition, resulting in debt expense of $17.2 million.
On March 4, 2021, the Company entered into a $1.0 billion Term Loan Credit Agreement (maturing May 2026) and an Amended and Restated Credit Agreement (maturing March 2026) with capacity of $1.15 billion. The terms of the $1.0 billion Term Loan Credit Agreement allow for prepayments, at the Company’s option, at any time or from time to time, in whole or in part without premium or penalty.
On March 17, 2021, the Company called $493.3 million of existing fixed rate senior notes and incurred debt extinguishment expenses of $13.4 million, which is included in interest and debt expense, net.
On March 22, 2021, the Company completed all permanent financing for the acquisition of FLIR and terminated the $4.5 billion stand-by bridge facility. The permanent financing consists of $3.0 billion investment-grade bonds (the “Notes”), including $300.0 million aggregate principal amount of 0.65% Notes due 2023, $450.0 million aggregate principal amount of 0.95% Notes due 2024, $450.0 million aggregate principal amount of 1.60% Notes due 2026, $700.0 million aggregate principal amount of 2.25% Notes due 2028 and $1.1 billion aggregate principal amount of 2.75% Notes due 2031. Teledyne may redeem the $450.0 million of 0.95% Notes due 2024 at any time or from time to time, in whole or in part, at the Company’s option, from and after April 1, 2022, at a redemption price equal to 100% of the principal amount of the Notes redeemed.
As part of the acquisition of FLIR, the Company assumed and guaranteed FLIR’s $500.0 million, 2.50% Fixed Rate Senior Notes due August 2030.
In the second half of 2021, the Company made $645.0 million of floating rate debt payments on its term loan due May 2026.

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Maturities of long-term debt as of January 1, 2023 (in millions):


Fiscal year
2023	$	300.1
2024	601.0
2025	0.3
2026	820.3
2027	0.3
Thereafter	2,225.1
Total principal payments	3,947.1
Debt issuance costs	(26.5)
Total debt	$	3,920.6

The Company has no sinking fund requirements.

Total interest expense including credit facility fees and other bank charges was $89.3 million in 2022, $104.8 million in 2021 and $15.8 million in 2020. Cash payments for interest and credit facility fees and other bank charges totaled $79.3 million, $117.2 million and $19.1 million for 2022, 2021 and 2020, respectively. The 2021 amount included $30.5 million paid for bond financing and debt extinguishment costs.

Note 9. Income Taxes

Income (loss) before income taxes included the following (in millions):


	2022		2021		2020
Domestic operations	$	490.3	$	108.0	$	289.5
Foreign operations	417.8		425.8		180.2
Total income (loss) before income taxes	$	908.1	$	533.8	$	469.7

The provision for income taxes included the following (in millions):


	2022		2021		2020
Current provision (benefit)
Federal	$	47.2	$	43.0	$	25.3
State	14.8		10.8		7.0
Foreign	47.8		57.5		39.1
Total current provision (benefit)	109.8		111.3		71.4
Deferred provision (benefit)
Federal	(39.0)		(39.7)		(0.5)
State	0.3		(0.1)		2.3
Foreign	48.1		17.0		(5.4)
Total deferred provision (benefit)	9.4		(22.8)		(3.6)
Provision (benefit) for income taxes	$	119.2	$	88.5	$	67.8

The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate:


	2022		2021		2020
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of federal benefit	1.7		1.8		2.0
Research and development tax credits	(1.8)		(3.4)		(3.4)
Investment tax credits	(0.5)		(1.1)		(1.0)

Foreign rate differential	1.5		1.4		0.6
Net accruals (reversals) for unrecognized tax benefits	(7.9)		(2.4)		0.7
Stock-based compensation	(1.1)		(2.5)		(4.5)
U.S. export sales	(2.0)		(1.3)		(2.5)
Acquisition-related costs	—		1.7		—
Other	2.2		1.4		1.5
Effective income tax rate	13.1%		16.6	%	14.4	%

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse.

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The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense were as follows (in millions):



Deferred income tax assets:	2022		2021
Long-term:
Accrued liabilities	$	32.0	$	52.6
Inventory valuation	30.3		41.5
Accrued vacation	8.3		9.6
Deferred compensation and other benefit plans	12.7		39.1
Postretirement benefits other than pensions	1.0		1.7
Operating lease liabilities	29.9		38.7
Capitalization of research and development	70.8		34.1
Tax credit and net operating loss carryforward	44.6		47.4
Other	32.6		—
Valuation allowance	(16.1)		(12.7)
Total deferred income tax assets	246.1		252.0

Deferred income tax liabilities:
Long-term:
Intangible amortization	646.9		751.5
Property, plant and equipment differences	31.9		37.8

Operating lease right-of-use assets	26.7		35.0
Unremitted earnings of foreign subsidiaries	3.1		15.9
Other	12.9		7.9
Total deferred income tax liabilities	721.5		848.1

Net deferred income tax liabilities	$	475.4	$	596.1

The Company is not permanently reinvested with respect to unremitted earnings of most of its foreign subsidiaries. The Company is subject to U.S. income tax on substantially all of these foreign earnings, while any remaining foreign earnings are eligible for potential U.S. tax deductions. As of January 1, 2023, the incremental tax cost to repatriate these earnings was not material.

The Company continues to make an indefinite reinvestment assertion on its material foreign subsidiaries in Canada, as the unremitted earnings of the Company’s Canadian foreign subsidiaries held for indefinite reinvestment are used to finance Canadian operations and investments. The Company estimates that future cash generation from non-Canadian operations will be sufficient to meet future domestic cash requirements. Determination of the unrecognized deferred tax liability for unremitted Canadian earnings is not practicable due to uncertainty and overall complexity of the potential calculations.

In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including recent financial performance, scheduled reversals of temporary differences, projected future taxable income, availability of taxable income in carryback periods and tax planning strategies. Based on a review of such information, management believes that it is possible that some portion of deferred tax assets will not be realized as a future benefit and therefore has recorded a valuation allowance. In 2022, the valuation allowance for deferred tax assets increased by $3.4 million in 2022.

At January 1, 2023, the Company had approximately $45.1 million of net operating loss carryforward primarily from the Company’s entities in Denmark, France, the Netherlands and the United Kingdom, of which $36.3 million have no expiration dates and $8.8 million have expiration dates ranging from 2023 to 2040. The Company had Canadian capital loss carryforward in the amount of $3.9 million which has no expiration date. Also, the Company had aggregate Canadian federal and provincial investment tax credits of $13.2 million, which have expiration dates ranging from 2030 to 2042. The Company had Spanish federal research and development credit carryforward in the amount of $0.3 million, which have expiration dates ranging from 2025 to 2028. In addition, the Company had domestic federal and state net operating loss carryforward of $24.7 million and $162.3 million, respectively. Generally, federal net operating loss carryforward amounts are limited in their use by earnings of certain acquired subsidiaries. Of the $24.7 million federal net operation loss carryforward, $15.3 million have no expiration dates and $9.4 million have expiration dates ranging from 2024 to 2037. The state net operating loss carryforward amounts have expiration dates ranging from 2023 to 2043. Finally, the Company had state tax credits of $13.9 million, of which $9.4 million have no expiration date and $4.5 million have expiration dates ranging from 2023 to 2035.

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Unrecognized tax benefits (in millions):	2022		2021		2020
Beginning of year	$	402.0	$	32.3	$	24.5
Increase due to FLIR acquisition	—		413.8		—
Increase for tax positions taken during the current period	2.7		6.3		9.4
Increase in prior year tax positions	0.2		2.5		5.1
Reduction related to settlements with taxing authorities	(223.3)		(1.6)		(1.9)
Reduction related to lapse of the statute of limitations	(26.4)		(20.7)		(4.9)
Impact of exchange rate changes	7.6		(30.6)		0.1

End of year	$	162.8	$	402.0	$	32.3

In the next 12 months, the Company anticipates the total unrecognized tax benefit for various federal, state and foreign tax items may be reduced by $89.1 million due to the expiration of statutes of limitation for various federal, state and foreign tax issues.

Teledyne recognized net tax benefits and expense for interest and penalties related to unrecognized tax benefits within the provision for income taxes in our statements of operations of $12.2 million of expense, $2.4 million of expense and $0.1 million of expense, for 2022, 2021 and 2020, respectively. Interest and penalties in the amount of $45.6 million, $160.8 million and $1.2 million were recognized in the 2022, 2021 and 2020 statement of financial position, respectively. In 2021, interest and penalties of $157.0 million were accrued as a result of the acquisition of FLIR. Substantially all of the unrecognized tax benefits as of January 1, 2023, if recognized, would affect our effective tax rate.

Current accrued liabilities on the consolidated balance sheet as of January 2, 2022 included unrecognized tax benefits, including accrued interest and penalties, of $341.0 million. Teledyne paid $296.4 million related to this accrued liability balance on February 2, 2022.

Teledyne files income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. The Company has substantially concluded on all U.S. federal income tax matters for all years through 2011, Canadian income tax matters for all years through 2012, Swedish income tax matters for all years through 2016, Norwegian income tax matters for all years through 2017, Belgian income tax matters for all years through 2019, French income tax matters for all years through 2019 and United Kingdom income tax matters for all years through 2014.

Cash payments for federal, foreign and state income taxes were $212.4 million for 2022, which are net of $20.1 million in tax refunds. Cash payments for federal, foreign and state income taxes were $83.6 million for 2021, which are net of $22.4 million in tax refunds. Cash payments for federal, foreign and state income taxes were $74.5 million for 2020, which are net of $8.1 million in tax refunds.

Note 10. Pension Plans and Postretirement Benefits

Pension Plans

Teledyne has two domestic qualified defined benefit pension plans covering substantially all U.S. employees hired before January 1, 2004, excluding FLIR U.S. employees. All FLIR U.S. employees participate in a defined contribution plan, as FLIR had no legacy U.S. pension plans. As of January 1, 2004, new Teledyne hires participate in a defined contribution plan only. The Company also has several small domestic non-qualified and foreign-based defined benefit pension plans. The measurement date for the Company’s pension plans is December 31.

The domestic qualified pension plans allow participants to elect a lump-sum payment at retirement. In 2022, 2021 and 2020, the Company made lump sum payments of $24.8 million, $24.5 million and $24.9 million, respectively, from the domestic qualified pension plans assets to certain participants in the plan. Each year beginning with 2014, the Society of Actuaries released revised mortality tables, which updated life expectancy assumptions. In consideration of these tables, each year the Company reviews the mortality assumptions used in determining our pension and postretirement obligations.

Net periodic benefit expense (income) allocation


	Domestic						Foreign
	2022		2021		2020		2022		2021		2020
Service cost - benefits earned during the period (in millions)	$	7.6	$	9.3	$	9.3	$	1.0	$	1.3	$	1.1

	Domestic						Foreign
Pension non-service (income) expense (in millions):	2022		2021		2020		2022		2021		2020
Interest cost on benefit obligation	$	22.8	$	21.6	$	26.5	$	0.8	$	0.7	$	0.9
Expected return on plan assets	(54.9)		(55.8)		(56.0)		(1.1)		(1.0)		(1.1)
Amortization of prior service cost	(1.8)		(3.6)		(6.0)		—		0.1		0.1
Amortization of actuarial loss	22.7		26.3		22.5		—		0.4		0.3
Settlements/Curtailment	—		—		—		(0.1)		—		—

Pension non-service (income) expense	$	(11.2)	$	(11.5)	$	(13.0)	$	(0.4)	$	0.2	$	0.2

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Obligations and funded status

The expected long-term rate of return on plan assets is reviewed annually, taking into consideration the Company’s asset allocation, historical returns on the types of assets held, the current economic environment, and prospective expectations. Teledyne determines the discount rate based on a model which matches the timing and amount of expected benefit payments to maturities of high-quality corporate bonds priced as of the pension plan measurement date. The yields on the bonds are used to derive a discount rate for the obligation.

The following assumptions were used to measure the net benefit income or expense within each respective year for the domestic qualified plans and the foreign plans:


Pension Plan Assumptions:	Weighted-average discount rate	Weighted-average increase in future compensation levels	Expected weighted-average long-term rate of return

Domestic plans - 2022	2.91% - 3.08%	2.75%	6.58% - 7.80%
Domestic plans - 2021	2.55% - 2.78%	2.75%	6.71% - 7.80%
Domestic plans - 2020	3.38% - 3.52%	2.75%	6.71% - 7.80%

Foreign plans - 2022	0.20% - 1.80%	1.00% - 2.50%	1.00% - 2.70%
Foreign plans - 2021	0.10% - 1.20%	1.00% - 2.50%	0.80% - 2.50%
Foreign plans - 2020	0.20% - 1.80%	1.00% - 2.50%	1.00% - 3.00%

For its domestic and foreign pension plans the Company is projecting a weighted-average long-term rate of return on plan assets of 6.85% and 4.48% in 2023, respectively.


	Domestic				Foreign
	2022		2021		2022		2021
Changes in benefit obligation (in millions):
Benefit obligation - beginning of year	$	799.3	$	846.8	$	60.2	$	70.4
Service cost - benefits earned during the year	7.6		9.3		1.0		1.3
Interest cost on projected benefit obligation	22.8		21.6		0.8		0.7
Actuarial (gain) loss	(179.1)		(11.8)		(12.0)		(7.4)
Benefits paid	(67.6)		(66.6)		(1.6)		(2.2)


Other - including foreign currency, settlements/curtailments	—		—		(3.2)		(2.6)



Benefit obligation - end of year	$	583.0	$	799.3	$	45.2	$	60.2

Accumulated benefit obligation - end of year	$	580.5	$	795.4	$	42.2	$	55.8

The key assumptions used to measure the benefit obligation at each respective year-end were:


Key assumptions:	Domestic Plans			Foreign Plans
	2022	2021	2020	2022	2021	2020
Discount rate	5.71% - 5.72%	2.91% - 3.08%	2.55% - 2.78%	2.20% - 4.80%	0.20% - 1.80%	0.10% - 1.20%
Salary growth rate	2.75%	2.75%	2.75%	1.50% - 3.00%	1.00% - 2.50%	1.00% -2.50%

Plan assets


	Domestic				Foreign
	2022		2021		2022		2021
Changes in plan assets (in millions):
Fair value of net plan assets - beginning of year	$	864.3	$	854.5	$	52.9	$	54.4
Actual return on plan assets	(79.2)		74.1		(12.6)		0.3

Employer contribution - other benefit plan	2.2		2.3		1.5		1.9
Foreign currency changes	—		—		(4.6)		(1.6)
Benefits paid	(67.6)		(66.6)		(1.7)		(2.2)
Other	—		—		(0.5)		0.1

Fair value of net plan assets - end of year	$	719.7	$	864.3	$	35.0	$	52.9

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The following tables sets forth the funded status and amounts recognized in the consolidated balance sheets at year-end 2022 and 2021 for the domestic qualified and nonqualified pension plans and the foreign-based pension plans for benefits provided to certain employees (in millions):


		Domestic				Foreign
		2022		2021		2022		2021
Funded (unfunded) status		$	136.7	$	65.0	$	(10.2)	$	(7.3)

Amounts recognized in the consolidated balance sheets as a debit (credit):
Balance sheet item	Balance sheet location
Prepaid pension assets	Other assets, net - noncurrent	$	178.4	$	118.9	$	—	$	4.8
Accrued pension obligations short-term	Accrued liabilities	(3.9)		(3.7)		(0.5)		(0.4)
Accrued pension obligations long-term	Other long-term liabilities	(37.8)		(50.2)		(9.7)		(11.7)

Net amount recognized		$	136.7	$	65.0	$	(10.2)	$	(7.3)

Amounts recognized in AOCI:
Net prior service cost (credit)		$	(1.2)	$	(3.0)	$	0.5	$	0.6
Net loss		330.2		397.7		5.6		3.4
Net amount recognized, before tax effect		$	329.0	$	394.7	$	6.1	$	4.0

Amounts for pension plans with accumulated benefit obligations in excess of fair value of plan assets are as follows (in millions):


	2022		2021
Projected benefit obligation	$	84.4	$	79.2
Accumulated benefit obligation	$	81.6	$	74.9
Fair value of plan assets	$	32.7	$	15.6

At year-end 2022 and 2021 the Company had an accumulated non-cash reduction to stockholders’ equity of $255.5 million and $297.6 million, respectively, related to its pension and postretirement plans. The accumulated non-cash reductions to stockholders’ equity did not affect net income and were recorded net of accumulated deferred taxes of $77.6 million at year end 2022 and $100.9 million at year end 2021.

At January 1, 2023, the estimated amounts of the minimum liability adjustment that are expected to be recognized as components of net periodic benefit cost during 2023 for the pension plans are: net loss $10.1 million and net prior service credit $1.7 million.


Estimated future pension plan benefit payments (in millions):	Domestic		Foreign
2023	$	55.2	$	2.4
2024	$	54.3	$	2.1
2025	$	55.0	$	2.3
2026	$	56.5	$	2.6
2027	$	53.9	$	2.5
2028 - 2032	$	244.2	$	13.3

Investments

The Company has an active management policy for the pension assets in the qualified domestic pension plans. As of January 1, 2023, the long-term asset allocation target for the domestic plans consists of approximately 35% in equity instruments, approximately 54% in fixed income instruments and approximately 11% in alternatives.

The pension plans' investments are stated at fair value. Plan investments that are considered a level 1 fair value hierarchy and are valued at quoted market prices in active markets. Plan investments that are considered a level 2 fair value hierarchy and are valued based on observable market data. Plan investments that would be considered a level 3 fair value hierarchy are valued based on management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

Certain investments measured at fair value using net asset values as a practical expedient are not required to be categorized in the fair value hierarchy table listed below. As such, the total fair value of these net asset values based investments has been included in the table below to permit reconciliation to the plan asset amounts previously disclosed.

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The fair values of the Company’s net pension assets, by fair value hierarchy, for both the U.S. and foreign pension plans as of January 1, 2023, by asset category are as follows (in millions):



Asset category:(a)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents (b)	$	—	$	48.3	$	—	$	48.3


Equity securities	2.8		185.7		—		188.5


U.S. government securities and futures	225.9		11.2		—		237.1

Corporate bonds	—		22.4		—		22.4



Insurance contracts related to foreign plans	—		10.7		—		10.7
Fair value of net plan assets at the end of the year	$	228.7	$	278.3	$	—	$	507.0

Investments measured at net asset value:


Alternatives							$	177.5
Mutual funds (c)							4.3


Mortgage-backed securities							53.6
High yield bonds							12.3
Fair value of net plan assets at the end of the year							$	247.7

(a) There were no transfers of plan assets between the three levels of the fair value hierarchy during the year.

(b) Reflects cash and cash equivalents held in overnight cash investments.

The fair values of the Company’s net pension assets, by fair value hierarchy, for both the U.S. and foreign pension plans as of January 2, 2022, by asset category are as follows (in millions):



Asset category: (a)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents (b)	$	—	$	69.0	$	—	$	69.0

Equity securities	2.4		230.0		—		232.4



U.S. government securities and futures	242.8		13.0		—		255.8

Corporate bonds	—		33.3		—		33.3




Insurance contracts related to foreign plans	—		15.5		—		15.5
Fair value of net plan assets at the end of the year	$	245.2	$	360.8	$	—	$	606.0

Investments measured at net asset value:


Alternatives							$	211.8
Mutual funds (c)							7.3


Mortgage-backed securities							54.7
High yield bonds							37.4
Fair value of net plan assets at the end of the year							$	311.2

(a) There were no transfers of plan assets between the three levels of the fair value hierarchy during the year.

(b) Reflects cash and cash equivalents held in overnight cash investments.

U.S. equities are valued at the closing price reported in an active market on which the individual securities are traded. U.S. equities and non-U.S. equities are also valued at the net asset value provided by the independent administrator or custodian of the commingled fund. The net asset value is based on the value of the underlying equities, which are traded on an active market. Corporate bonds are valued using inputs such as the closing price reported, if traded on an active market, values derived from comparable securities of issuers with similar credit ratings, or under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments. Fixed income investments are also valued at the net asset value provided by the independent administrator or custodian of the fund. The net asset value is based on the underlying assets, which are valued using inputs such as the closing price reported, if traded on an active market, values derived from comparable securities of issuers with similar credit ratings, or under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments. Alternative investments are primarily valued at the net asset value as determined by the independent administrator or custodian of the fund. The net asset value is based on the underlying investments, which are valued using inputs such as quoted market prices of identical instruments or values derived from comparable securities of issuers with similar credit ratings, or under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments.

Defined Benefit Postretirement Plans

The Company sponsors several postretirement defined benefit plans covering certain salaried and hourly employees. The plans provide health care and life insurance benefits for certain eligible retirees. Total cost for these plans was less than

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$1.0 million for each fiscal year 2022, 2021 and 2020.

Deferred Contribution Plans

The Company’s contributions associated with its 401(k) plans were $29.7 million, $15.2 million and $13.8 million, for 2022, 2021 and 2020, respectively.

Deferred Compensation Plans

The Company has non-qualified executive deferred compensation plans that provide supplemental retirement income benefits for a select group of management. This plan permits eligible employees to make salary and bonus deferrals that are 100% vested. Teledyne has an unsecured obligation to pay in the future the value of the deferred compensation adjusted to reflect the performance, whether positive or negative, of selected investment measurement options chosen by each participant during the deferral period. In addition, the Company has separate deferred compensation plans acquired in connection with the FLIR and ETM acquisitions, and these plans were frozen at the end of fiscal years 2021 and 2022, respectively.

As of January 1, 2023 and January 2, 2022, $92.2 million and $115.5 million, respectively, is included in other long-term liabilities related to deferred compensation liabilities on the consolidated balance sheets. Additionally, the Company purchased life insurance policies on certain participants to potentially offset these unsecured obligations. These policies are recorded at their cash surrender value as determined by the insurance carrier. The cash surrender value of these policies was $94.7 million and $113.4 million, as of January 1, 2023 and January 2, 2022, respectively, and is primarily included in other non-current assets on the consolidated balance sheets.

Note 11. Stockholders’ Equity


Common stock and treasury stock activity:	Common Stock	Treasury Stock















Balance, December 29, 2019	37,697,865	1,149,899
Issued	—	(403,641)
Balance, January 3, 2021	37,697,865	746,258
Issued	9,496,901	(243,788)
Balance, January 2, 2022	47,194,766	502,470
Issued	—	(220,339)
Balance, January 1, 2023	47,194,766	282,131

In 2021, Teledyne issued approximately 9.5 million shares in connection with the FLIR acquisition. See Note 3 for additional information about the FLIR acquisition. Shares issued from treasury stock include stock options exercised as well as shares issued under certain other compensation plans.

Treasury Stock

In January 2016, the Company’s Board of Directors authorized a stock repurchase program authorizing the Company to repurchase up to 3,000,000 shares of its common stock. The number of shares that the Company may repurchase will depend on a variety of factors, such as share price, levels of cash and borrowing capacity available, alternative investment opportunities available immediately or longer-term, and other regulatory, market or economic conditions. Although the Company has no current plans to repurchase stock, future repurchases, if any, are expected to be funded with cash on hand and borrowings under the Company’s credit facility. No repurchases were made since 2015.

Preferred Stock

Authorized preferred stock may be issued with designations, powers and preferences designated by the Board of Directors. There were no shares of preferred stock issued or outstanding in 2022, 2021 or 2020.

Stock Incentive Plans

Teledyne has long-term incentive plans which provide its Board of Directors the flexibility to grant restricted stock, restricted stock units, performance shares, non-qualified stock options, incentive stock options and stock appreciation rights to officers and employees of Teledyne. During 2022, 2021 and 2020, the Company has granted time-based stock options, time-based restricted stock unit awards, and performance-based restricted stock unit awards. Employee stock options become exercisable in one-third increments on the first, second and third anniversary of the grant and have a maximum 10-year life. Employee time-based restricted stock units vest in one-third increments on the first, second and third anniversary of the grant. Performance-based restricted stock awards granted during 2022, 2021 and 2020 may be earned based upon a time-based component and the performance of the Company's return to stockholders over a three-year period.

In 2021, the Company discontinued the Performance Share Plan ("PSP"), with an immaterial amount of compensation expense recorded in 2022 and 2021. Teledyne’s PSP provided grants of performance share units, which key officers and executives could earn if Teledyne met specified performance objectives over a three-year period. Awards were payable in cash and to the extent available, shares of Teledyne common stock.

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Stock Options

The Company recorded $17.9 million, $20.0 million, and $24.7 million for stock option expense for 2022, 2021 and 2020, respectively. The Company issues shares of common stock upon the exercise of stock options.

The total pretax intrinsic value of options exercised during 2022 and 2021 (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) was $53.7 million and $64.2 million, respectively. At January 1, 2023, the intrinsic value of stock options outstanding was $312.6 million and the intrinsic value of stock options exercisable was $306.1 million. During 2022 and 2021, the amount of cash received from the exercise of stock options was $23.6 million and $25.4 million, respectively.

At January 1, 2023, there was $27.3 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 1.5 years.

The fair value of stock options is determined by using a lattice-based option pricing model. The Company uses a combination of its historical stock price volatility and the volatility of exchange traded options, if any, on the Company stock to compute the expected volatility for purposes of valuing stock options granted. The period used for the historical stock price corresponded to the expected term of the options. The period used for the exchange traded options, if any, included the longest-dated options publicly available, generally three months. The expected dividend yield is based on Teledyne’s practice of not paying dividends. The risk-free rate of return is based on the yield of U.S. Treasury Strips with terms equal to the expected life of the options as of the grant date. The expected life in years is based on historical actual stock option exercise experience.


Stock option valuation assumptions:	2022	2021	2020
Expected dividend yield	n/a	n/a	n/a
Expected volatility	26.5%	27.8%	23.7%
Risk-free interest rate	3.33%	0.09% to 1.58%	1.50% to 1.75%
Expected life in years	6.4	5.2	6.6

Based on the assumptions used in the valuation of stock options, the grant date weighted average fair value of stock options granted in 2022, 2021 and 2020 was $124.44, $134.88 and $106.26, respectively.

Stock option transactions for Teledyne’s stock option plans are summarized as follows:



	2022			2021			2020
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Beginning balance	1,793,857	$	206.08	1,819,147	$	170.10	1,988,576	$	130.67
Granted	135,751	$	360.39	211,973	$	440.48	247,273	$	382.91
Exercised	(179,828)	$	131.44	(213,384)	$	118.55	(382,554)	$	95.22
Canceled or expired	(23,049)	$	397.36	(23,879)	$	328.15	(34,148)	$	252.43
Ending balance	1,726,731	$	223.43	1,793,857	$	206.08	1,819,147	$	170.10
Options exercisable at end of period	1,395,949	$	182.53	1,328,191	$	148.73	1,242,786	$	118.57

The following table provides certain information with respect to stock options outstanding and stock options exercisable at January 1, 2023, under the stock option plans.


	Stock Options Outstanding				Stock Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Exercise Price		Remaining life in years	Shares	Weighted Average Exercise Price
$40.70-$99.99	395,285	$	84.21	2.0	395,285	$	84.21
$100.00-$199.99	519,692	$	153.53	4.6	519,692	$	153.53
$200.00-$299.99	279,956	$	217.67	6.1	279,956	$	217.67
$300.00-$399.99	338,503	$	373.88	8.2	135,248	$	382.91
$400.00-$445.21	193,295	$	440.89	8.7	65,768	$	440.90



	1,726,731	$	223.43	5.4	1,395,949	$	182.53

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Restricted Stock

The following table shows restricted stock award activity:


	Employee Time-Based Restricted Stock Units			Employee Performance-Based Restricted Stock Awards			Non-Employee Directors Restricted Stock Units
Restricted Stock:	Shares	Weighted average fair value per share		Shares	Weighted average fair value per share		Shares		Weighted average fair value per share
Balance, December 29, 2019	—	$	—	56,412	$	158.62	$	9,067	$	199.90
Granted	—	$	—	10,080	$	360.33	3,692		$	312.41
Vested	—	$	—	(23,087)	$	114.74	(2,640)		$	249.72
Forfeited/Canceled	—	$	—	—	$	—	(353)		$	311.17
Balance, January 3, 2021	—	$	—	43,405	$	228.80	9,766		$	224.94
Granted	62,974	$	409.41	10,227	$	334.92	2,592		$	450.27
Vested	(8,720)	$	409.41	(15,423)	$	176.64	(5,300)		$	227.90
Forfeited/Canceled	(4,903)	$	409.41	(380)	$	176.64	—		$	—
Balance, January 2, 2022	49,351	$	409.41	37,829	$	279.27	7,058		$	308.54
Granted	89,472	$	360.39	19,492	$	427.51	3,904		$	451.13
Vested	(15,698)	$	409.41	(17,522)	$	200.00	(1,440)		$	450.27
Forfeited/Canceled	(5,653)	$	399.20	(398)	$	388.15	—		$	—
Balance, January 1, 2023	117,472	$	372.51	39,401	$	386.76	9,522		$	345.57

Employee Time-based Restricted Stock Units

Prior to 2021, the Company had no outstanding employee restricted stock units subject only to time-based vesting. As part of the acquisition of FLIR, the Company assumed certain unvested restricted stock units that were issued by FLIR in March 2021. The unvested restricted stock units were converted to 62,974 Teledyne restricted stock units. In October 2022, the Company granted 89,472 restricted stock units with a weighted average fair value of $360.39 per share. The Company recorded $7.8 million in compensation expense related to restricted stock units to employees for both fiscal years 2022 and 2021. The majority of the expense related to these restricted stock units is included in the Digital Imaging segment results. This amount can be impacted by employee retirements, terminations or other awards granted during the remainder of the year. At January 1, 2023, there was $36.8 million of total estimated unrecognized compensation cost related to non-vested awards which is expected to be recognized over a weighted-average period of approximately 2.5 years.

Employee Performance-based Restricted Stock Awards

Under Teledyne’s restricted stock award program key officers and executives receive a grant of stock equal to a specified percentage of the participant’s annual base salary at the date of grant. The restricted stock is subject to transfer and forfeiture restrictions during an applicable “restricted period”. The restrictions have both time-based and performance-based components. The restricted period expires (and the restrictions lapse) on the third anniversary of the date of grant, subject to the achievement of stated performance objectives over a specified three-year performance period. If employment is terminated (other than by death, retirement or disability) during the restricted period, the stock grant is forfeited.

The estimated expense for restricted stock awards with both time-based and performance-based components to employees is based on a lattice-based simulation which takes into consideration several factors including volatility, risk free interest rates and the correlation of Teledyne’s stock price with the comparator, the S&P 500 Index for awards granted since 2021, the Russell 1000 Index for awards granted from 2018 to 2020 and the Russell 2000 for awards granted prior to 2018. The Company recorded $5.1 million, $3.5 million and $3.3 million in compensation expense related to restricted stock awards to employees, for fiscal years 2022, 2021 and 2020, respectively. At January 1, 2023, there was $6.7 million of total estimated unrecognized compensation cost related to non-vested awards which is expected to be recognized over a weighted-average period of approximately 1.5 years.

Non-Employee Directors Restricted Stock

Non-employee directors each received restricted stock units valued at $170,000 in 2022, $130,000 in 2021 and $110,000 in 2020 or valued at half the amount for a person who becomes a director for the first time after the date of the Annual Meeting. The restricted stock units generally vest one year following the date of grant and are settled in shares of common stock on the date of vesting unless a director has elected to defer settlement of the award until his or her separation from Board service. The annual expense related to non-employee director’s restricted stock units was $1.7 million for 2022, $1.2 million for 2021 and

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$1.1 million for 2020, with an immaterial amount of unrecognized compensation cost that will be recognized over the first half of 2023.

Note 12. Earnings Per Share

The following table sets forth the computations of basic and diluted earnings per common share (amounts in millions, except per share data):



Earnings Per Common Share:	2022		2021		2020
Net income attributable to Teledyne	$	788.6	$	445.3	$	401.9
Basic earnings per common share:
Weighted average common shares outstanding	46.8		43.2		36.7



Basic earnings per common share	$	16.85	$	10.31	$	10.95

Diluted earnings per share:
Weighted average common shares outstanding	46.8		43.2		36.7
Effect of diluted securities (primarily stock options)	0.9		1.1		1.2
Weighted average diluted common shares outstanding	47.7		44.3		37.9



Diluted earnings per common share	$	16.53	$	10.05	$	10.62

In 2022, 2021 and 2020, the Company excluded approximately 0.2 million of stock options in the computation of diluted earnings per share because the effect of their inclusion would have been anti-dilutive.

Note 13. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in AOCI for the fiscal years ended January 1, 2023, and January 2, 2022:


(in millions)	Foreign Currency Translation		Cash Flow Hedges		Pension and Postretirement Benefits		Total











Balance as of January 3, 2021	$	(84.6)	$	2.3	$	(347.8)	$	(430.1)
Other comprehensive income (loss) before reclassifications	(44.4)		18.0		—		(26.4)
Amounts reclassified from AOCI	—		(23.7)		50.2		26.5
Net other comprehensive income (loss)	(44.4)		(5.7)		50.2		0.1
Balance as of January 2, 2022	(129.0)		(3.4)		(297.6)		(430.0)
Other comprehensive income (loss) before reclassifications	(343.3)		16.4		—		(326.9)
Amounts reclassified from AOCI	—		(11.7)		42.1		30.4
Net other comprehensive income (loss)	(343.3)		4.7		42.1		(296.5)
Balance as of January 1, 2023	$	(472.3)	$	1.3	$	(255.5)	$	(726.5)

The reclassification out of AOCI for the fiscal years ended January 1, 2023, and January 2, 2022, are as follows:


	2022		2021
(in millions)	Amount reclassified from AOCI		Amount reclassified from AOCI		Financial Statement Presentation
Gain (loss) on cash flow hedges:
Gain (loss) recognized in income on derivatives	$	(15.7)	$	(31.7)	See Note 14
Income tax impact	4.0		8.0		Provision for income taxes
Total	$	(11.7)	$	(23.7)

Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost	$	(1.8)	$	(3.5)	See Note 10
Amortization of net actuarial loss	22.7		26.8		See Note 10
Pension adjustments	45.2		36.6		See Note 10
Total before tax	66.1		59.9
Income tax impact	(24.0)		(9.7)
Net of tax	$	42.1	$	50.2

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Note 14. Derivative Instruments

As of January 1, 2023, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling $125.8 million. These foreign currency forward contracts have maturities ranging from March 2023 to February 2024. As of January 1, 2023, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy British pounds and to sell U.S. dollars totaling $16.8 million. These foreign currency forward contracts have maturities ranging from March 2023 to February 2024.

The cross currency swaps have notional amounts of €130.0 million and $125.0 million, and €156.0 million and $150.0 million, and mature in March 2023 and October 2024, respectively. The interest rate swap has a notional amount of $125.0 million U.S. dollars and matures in March 2023.

In addition, the Company utilizes foreign currency forward contracts which are not designated as hedging instruments for accounting purposes to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. As of January 1, 2023, Teledyne had foreign currency contracts of this type primarily in the following pairs (in millions):



Contracts to Buy			Contracts to Sell
Currency	Amount		Currency	Amount
Canadian Dollars	$	236.1	U.S. Dollars	US$	178.6
Euros	€	237.4	U.S. Dollars	US$	237.2


Great Britain Pounds	£	89.5	U.S. Dollars	US$	104.9


U.S. Dollars	US$	15.6	Swedish Krona	kr	168.8

Danish Krone	Kr.	74.6	U.S. Dollars	US$	10.0
Swedish Krona	kr	491.1	Euros	€	46.0
Norwegian Krone	kr	214.7	Swedish Krona	kr	231.4

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.

All derivatives are recorded on the balance sheet at fair value. The accounting for income 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. Teledyne does not use foreign currency forward contracts for speculative or trading purposes.

The effect of derivative instruments designated as cash flow hedges for 2022 and 2021 was as follows (in millions):


	2022		2021
Net gain (loss) recognized in AOCI - foreign exchange contracts (a)	$	17.6	$	23.6
Net gain (loss) recognized in AOCI - interest rate contracts	$	1.7	$	0.4
Net gain (loss) reclassified from AOCI into revenue/cost of sales - foreign exchange contracts	$	4.8	$	9.2
Net gain (loss) reclassified from AOCI into interest expense - foreign exchange contracts	$	5.2	$	3.4
Net gain (loss) reclassified from AOCI into interest expense -interest rate contracts	$	0.4	$	(1.6)
Net gain (loss) reclassified from AOCI into other income and expense, net - foreign exchange contracts (b)	$	15.5	$	20.7

(a)Effective portion

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

Net deferred losses recorded in AOCI, net of tax, for forward contracts that will mature in the next 12 months total $5.0 million. These losses are expected to be offset by anticipated gains in the value of the forecasted underlying hedged item. Amounts related to the cross currency swaps and interests rate swap expected to be reclassified from AOCI into income in the next 12 months total $7.2 million.

The effect of derivative instruments not designated as cash flow hedges recognized in other income and expense for 2022 and 2021 was an expense of $32.0 million and income of $21.9 million, respectively.

Note 15. Fair Value Measurements

Cash equivalents were $167.1 million at January 1, 2023 and less than $0.1 million at January 2, 2022. 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.

Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The Company’s long-term debt is considered a level 2 fair value hierarchy and is valued based on observable market data. As of January 1, 2023 and January 2, 2022, the aggregate fair values of our borrowings were $3,492.7 million and $4,146.6 million, respectively, and the carrying values were $3,947.1 million and $4,130.0 million,

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respectively.

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) Derivative Positions	Balance sheet location	January 1, 2023		January 2, 2022
Derivatives designated as hedging instruments:
Cash flow forward contracts	Other current assets	$	0.4	$	0.3
Cash flow forward contracts	Accrued liabilities	(6.8)		(1.2)
Interest rate contracts	Other current assets	0.7		—
Interest rate contracts	Accrued liabilities	—		(1.2)
Interest rate contracts	Other long-term liabilities	—		(0.1)
Cash flow cross currency swaps	Other current assets	2.7		3.9
Cash flow cross currency swaps	Accrued liabilities	(14.0)		—
Cash flow cross currency swaps	Other long-term liabilities	(18.3)		(9.4)


Total derivatives designated as hedging instruments		(35.3)		(7.7)
Derivatives not designated as hedging instruments:
Non-designated foreign currency forward contracts	Other current assets	3.5		4.7
Non-designated foreign currency forward contracts	Accrued liabilities	(7.0)		(2.1)
Total derivatives not designated as hedging instruments		(3.5)		2.6
Total asset (liability) derivatives		$	(38.8)	$	(5.1)

The carrying value of other on-balance-sheet financial instruments approximates fair value, and the cost, if any, to terminate off-balance sheet financial instruments (primarily letters of credit) is not significant.

Note 16. Leases

Operating Leases

Teledyne has more than 150 long-term operating lease agreements for manufacturing facilities and office space. These agreements frequently include one or more renewal options and may require the Company to pay for non-lease components such as utilities, taxes, insurance and maintenance expense. The Company accounts for lease and non-lease components as a single lease component when the payments are fixed. Variable payments included in the lease agreement are expensed as incurred. No lease agreement imposes a restriction on the Company’s ability to engage in financing transactions or enter into further lease agreements. At January 1, 2023, Teledyne has right-of-use assets of $142.1 million included in noncurrent other assets, net on the consolidated balance sheets.

At January 1, 2023, future minimum lease payments for operating leases with non-cancelable terms of more than one year were as follows (in millions):


Operating lease commitments:
2023	$	35.3
2024	29.5
2025	25.9
2026	20.8
2027	16.9
Thereafter	48.4
Total minimum lease payments	176.8
Less:
Imputed interest	(21.5)
Current portion (included in current accrued liabilities)	(29.4)
Present value of minimum lease payments, net of current portion	$	125.9

The weighted average remaining lease term for operating leases is approximately 7.0 years and the weighted average discount rate is approximately 3.53%. Rental expense under operating leases, including leases with a term of 12 months or less, net of immaterial sublease income, was $45.1 million in 2022, $40.9 million in 2021 and $29.4 million in 2020. Variable lease expense was $5.9 million in 2022, $5.8 million in 2021 and $5.3 million in 2020. Cash paid for amounts included in the measurement of lease liabilities was $36.9 million for 2022 and $39.7 million for 2021. Right-of-use assets obtained in

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exchange for lease obligations was $26.1 million for 2022 and $24.3 million for 2021

Finance Leases and Subleases

Our finance leases and subleases are not material.

Note 17. Commitments and Contingencies

The Company is subject to federal, state and local environmental laws and regulations which require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including sites at which the Company has been identified as a potentially responsible party under the federal Superfund laws and comparable state laws.

At January 1, 2023, the Company’s reserves for environmental remediation obligations totaled $5.8 million, of which $1.6 million is included in current accrued liabilities and the remainder included in other long-term liabilities. The Company periodically evaluates whether it may be able to recover a portion of future costs for environmental liabilities from its insurance carriers and from third parties. The timing of expenditures depends on a number of factors that vary by site, including the nature and extent of contamination, the number of potentially responsible parties, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. The Company expects that it will expend present accruals over many years and will complete remediation of all sites with which it has been identified in up to thirty years.

Effective April 24, 2022, the United States Department of State’s Office of Defense Trade Controls Compliance (“DDTC”) closed the four-year Consent Agreement that had been entered into by FLIR Systems, Inc. to resolve allegations regarding various violations of the International Traffic in Arms Regulations (“ITAR”). On April 13, 2022, Teledyne paid $3.5 million as the final installment of the civil penalty under the Consent Agreement. While FLIR and its successor by mergers, Teledyne FLIR, have enhanced the trade compliance program more broadly, implemented remedial measures and have undergone external audits of the ITAR compliance program, future adverse disclosures and findings could cause incurrence of additional expenses in connection with potential penalties or further remedial measures.

In April 2021, FLIR resolved allegations of misrepresentations made to the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”), between November 2012 and December 2013, in a commodity jurisdiction request relating to newly developed Lepton uncooled focal plane arrays by an administrative settlement and fine of $0.3 million and agreeing to perform two internal audits of its EAR export compliance programs. The first internal audit has been completed timely and another voluntary disclosure had been filed to report potential violations. This case was closed without further action by BIS with the issuance of a warning letter. The second internal audit was completed timely in October 2022, for which a voluntary disclosure was also filed and is still pending disposition.

Teledyne has made other voluntary disclosures to the U.S. Department of State and the U.S. Department of Commerce, including to BIS with respect to Teledyne FLIR shipments of products from non-U.S. jurisdictions which were not authorized due to a potentially incorrect de minimis calculation methodology under section 734.4 and Supplement No. 2 of the EAR. Furthermore, Teledyne has made voluntary disclosures to export authorities in jurisdictions outside the U.S. for certain potential violations of local export laws, which may increase its penalty exposure.

At this time, based on available information, the Company is unable to reasonably estimate the time it may take to resolve these matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with these matters. However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial position, results of operations or cash flows in and following the period in which such an outcome becomes estimable or known.

Various claims (whether based on U.S. Government or Company audits and investigations or otherwise) may be asserted against the Company related to its U.S. Government contract work, including claims based on business practices and cost classifications and actions under the False Claims Act. Although such claims are generally resolved by detailed fact-finding and negotiation, on those occasions when they are not so resolved, civil or criminal legal or administrative proceedings may ensue. Depending on the circumstances and the outcome, such proceedings could result in fines, penalties, compensatory and treble damages or the cancellation or suspension of payments under one or more U.S. Government contracts. Under government regulations, a company, or one or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. However, although the outcome of these matters cannot be predicted with certainty, management does not believe there is any audit, review or investigation currently pending against the Company of which management is aware that is likely to result in suspension or debarment of the Company, or that is otherwise likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s results of operations for that period.

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, commercial contracts, employment and employee benefits. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be

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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 condition.

Note 18. Subsequent Events

On January 3, 2023, the Company acquired ChartWorld International Limited and affiliates ("ChartWorld"). 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.

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Schedule II VALUATION AND QUALIFYING ACCOUNTS

Schedule II

VALUATION AND QUALIFYING ACCOUNTS

For the Fiscal Years Ended January 1, 2023, January 2, 2022 and January 3, 2021

(in millions)


			Additions
Description	Balance at beginning of period		Charged to costs and expenses	Acquisitions	Deductions and other (a)	Balance at end of period
Fiscal Year 2022
Allowance for doubtful accounts	$	13.8	1.6	—	(3.7)	$	11.7
Environmental reserves	$	6.3	0.2	—	(0.7)	$	5.8

Fiscal Year 2021
Allowance for doubtful accounts	$	12.3	4.5	—	(3.0)	$	13.8
Environmental reserves	$	6.5	0.4	—	(0.6)	$	6.3

Fiscal Year 2020
Allowance for doubtful accounts	$	10.2	4.1	—	(2.0)	$	12.3
Environmental reserves	$	6.0	1.1	—	(0.6)	$	6.5

(a) Represents payments except the amounts for allowance for doubtful accounts primarily represents uncollectible accounts written-off, net of recoveries.

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