Item 1. Financial Statements

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE FIRST QUARTER ENDED APRIL 2, 2023 AND APRIL 3, 2022

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

			First Quarter
			2023						2022
Net sales			$	1,383.3					$	1,321.0
Costs and expenses
Cost of sales			790.7						752.6
Selling, general and administrative			300.4						291.3
Acquired intangible asset amortization			49.7						53.6
Total costs and expenses			1,140.8						1,097.5
Operating income (loss)			242.5						223.5
Interest and debt income (expense), net			(21.0)						(22.3)
Non-service retirement benefit income (expense), net			3.3						2.8
Other income (expense), net			(1.1)						(1.0)
Income (loss) before income taxes			223.7						203.0
Provision (benefit) for income taxes			44.9						(9.6)
Net income (loss) including noncontrolling interest			178.8						212.6
Less: Net income (loss) attributable to noncontrolling interest			0.1						—
Net income (loss) attributable to Teledyne			$	178.7					$	212.6
Basic earnings per common share			$	3.81					$	4.55
Weighted average common shares outstanding			46.9						46.7
Diluted earnings per common share			$	3.73					$	4.46
Weighted average diluted common shares outstanding			47.9						47.7

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE FIRST QUARTER ENDED APRIL 2, 2023 AND APRIL 3, 2022

(Unaudited - Amounts in millions)

			First Quarter
			2023						2022
Net income (loss) including noncontrolling interest			$	178.8					$	212.6
Other comprehensive income (loss):
Foreign exchange translation adjustment			(4.3)						(32.6)
Hedge activity, net of tax			2.5						6.5
Pension and postretirement benefit adjustments, net of tax			1.5						4.2
Other comprehensive income (loss)			(0.3)						(21.9)
Comprehensive income (loss) including noncontrolling interest			178.5						190.7
Comprehensive (income) loss attributable to noncontrolling interest			0.1						—
Comprehensive income (loss) attributable to Teledyne			$	178.4					$	190.7

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - Amounts in millions, except share amounts)

			April 2, 2023						January 1, 2023
Assets
Current Assets
Cash and cash equivalents			$	665.2					$	638.1
Accounts receivable, net			827.9						883.7
Unbilled receivables, net			292.2						274.7
Inventories, net			951.7						890.7
Prepaid expenses and other current assets			145.4						130.7
Total current assets			2,882.4						2,817.9
Property, plant and equipment, net of accumulated depreciation and amortization of $876.2 at April 2, 2023 and $847.8 at January 1, 2023			765.3						769.8
Goodwill			7,925.5						7,873.0
Acquired intangibles, net			2,405.4						2,440.6
Prepaid pension assets			182.4						178.4
Other assets, net			268.3						274.3
Total Assets			$	14,429.3					$	14,354.0
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current Liabilities
Accounts payable			$	495.0					$	505.7
Accrued liabilities			692.9						717.6
Current portion of long-term debt			300.1						300.1
Total current liabilities			1,488.0						1,523.4
Long-term debt, net of current portion			3,520.3						3,620.5
Long-term deferred tax liabilities			482.4						490.0
Other long-term liabilities			569.2						547.2
Total Liabilities			6,059.9						6,181.1
Commitments and contingencies
Redeemable Noncontrolling Interest			3.7						3.7
Stockholders’ Equity
Preferred stock, $0.01 par value; outstanding shares - none			—						—
Common stock, $0.01 par value; authorized 125,000,000 shares; issued shares: 47,194,766 at April 2, 2023 and 47,194,766 at January 1, 2023; outstanding shares: 47,037,465 at April 2, 2023 and 46,912,635 at January 1, 2023			0.5						0.5
Additional paid-in capital			4,360.9						4,353.4
Retained earnings			4,740.5						4,561.8
Treasury stock, 157,301 shares at April 2, 2023 and 282,131 shares at January 1, 2023			(9.4)						(20.0)
Accumulated other comprehensive income (loss)			(726.8)						(726.5)
Total Stockholders’ Equity			8,365.7						8,169.2
Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity			$	14,429.3					$	14,354.0

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In millions)

			Common Stock						Additional Paid-in Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Total
Balance, January 1, 2023			$	0.5					$	4,353.4					$	(20.0)					$	4,561.8					$	(726.5)					$	8,169.2
Net income (loss)			—						—						—						178.7						—						178.7
Other comprehensive income (loss), net of tax			—						—						—						—						(0.3)						(0.3)
Treasury stock issued			—						(10.6)						10.6						—						—						—
Stock-based compensation			—						7.9						—						—						—						7.9
Exercise of stock options			—						10.2						—						—						—						10.2
Balance, April 2, 2023			0.5						4,360.9						(9.4)						4,740.5						(726.8)						8,365.7

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

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED APRIL 2, 2023 AND APRIL 3, 2022

(Unaudited - Amounts in millions)

			Three Months
			2023						2022
Operating Activities
Net income (loss) including noncontrolling interest			$	178.8					$	212.6
Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:
Depreciation and amortization			82.1						86.9
Stock-based compensation			7.9						9.0
Changes in operating assets and liabilities excluding the effect of business acquired:
Accounts receivable and unbilled receivables			50.0						(57.2)
Inventories			(57.6)						(56.6)
Accounts payable			(10.8)						33.1
Deferred and income taxes receivable/payable, net			7.2						5.6
Prepaid expenses and other assets			(11.3)						(2.4)
Accrued expenses and other liabilities			(34.6)						(451.5)
Other operating, net			(8.7)						3.8
Net cash provided by (used in) operating activities			203.0						(216.7)
Investing Activities
Purchases of property, plant and equipment			(24.4)						(21.0)
Purchase of businesses, net of cash acquired			(52.5)						—
Other investing, net			—						1.4
Net cash provided by (used in) investing activities			(76.9)						(19.6)
Financing Activities
Net borrowings from (repayments made to) credit facility			(100.0)						32.0
Payments on other debt			(0.1)						—
Proceeds from exercise of stock options			10.2						12.7
Maturity of cross currency swap			(13.5)						—
Other financing, net			—						(2.1)
Net cash provided by (used in) financing activities			(103.4)						42.6
Effect of exchange rate changes on cash			4.4						3.3
Change in cash and cash equivalents			27.1						(190.4)
Cash and cash equivalents—beginning of period			638.1						474.7
Cash and cash equivalents—end of period			$	665.2					$	284.3

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

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

April 2, 2023

Note 1. General

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Teledyne Technologies Incorporated (“Teledyne” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in notes to consolidated financial statements have been condensed or omitted pursuant to such rules and regulations, but resultant disclosures are in accordance with generally accepted accounting principles in the United States (“GAAP”) as they apply to interim reporting. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes in Teledyne’s Annual Report on Form 10-K for the fiscal year ended January 1, 2023 (“2022 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, Teledyne’s consolidated financial position as of April 2, 2023 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the first quarter ended April 2, 2023. The results of operations and cash flows for the periods ended April 2, 2023 and cash flows for the three months ended April 2, 2023 are not necessarily indicative of the results of operations or cash flows to be expected for any subsequent quarter or the full fiscal year.

Recent Accounting Standards

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

Note 2. Business Acquisitions

2023 Acquisitions

ChartWorld

During the first quarter of 2023, the Company acquired ChartWorld International Limited and affiliates ("ChartWorld") for $52.5 million in cash, net of cash acquired, and subject to certain adjustments. ChartWorld, headquartered in Cyprus, with additional locations in Germany, Singapore, Canada and Japan, is a provider of digital marine navigation hardware and software provided through an affordable subscription-based model. ChartWorld is part of the Digital Imaging segment. Goodwill resulting from the ChartWorld acquisition will not be deductible for tax purposes.

2022 Acquisitions

ETM

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

NL Acoustics

During the third quarter of 2022, the Company acquired an approximate 80% majority interest in Noiseless Acoustics Oy ("NL Acoustics"), paying $11.9 million in cash, net of cash acquired, during the year, with an immaterial amount payable in 2023. NL Acoustics, located in Helsinki, Finland, designs and manufactures acoustics imaging instruments and predictive maintenance solutions. NL Acoustics is part of the Digital Imaging segment. Goodwill resulting from the NL Acoustics acquisition will not be deductible for tax purposes.

The minority ownership interest in shares of NL Acoustics held by certain former owners and employees 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 these acquisitions (in millions):

						2023
Acquisitions						Acquisition Date						Cash Paid (a)						Goodwill Acquired						Acquired Intangible Assets
ChartWorld						January 3, 2023						$	52.5					$	48.4					$	11.3
(a) Net of cash acquired
						2022
Acquisitions						Acquisition Date						Cash Paid (a)						Goodwill Acquired						Acquired Intangible Assets
ETM						October 28, 2022						$	87.7					$	33.5					$	20.9
NL Acoustics (acquisition of 80% interest)						July 15, 2022						11.9						11.6						3.8
Total												$	99.6					$	45.1					$	24.7
(a) Net of cash acquired; an immaterial portion of NL Acoustics will be paid in 2023.

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

Note 3. Business Segments

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

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

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

			First Quarter												%
			2023						2022						Change
Net sales (a):
Digital Imaging			$	772.5					$	750.5					2.9		%
Instrumentation			333.5						308.9						8.0		%
Aerospace and Defense Electronics			173.2						166.2						4.2		%
Engineered Systems			104.1						95.4						9.1		%
Total net sales			$	1,383.3					$	1,321.0					4.7		%
Operating income:
Digital Imaging			$	122.2					$	115.7					5.6		%
Instrumentation			80.7						71.6						12.7		%
Aerospace and Defense Electronics			47.0						42.9						9.6		%
Engineered Systems			10.0						9.4						6.4		%
Corporate expense			(17.4)						(16.1)						8.1		%
Operating income			$	242.5					$	223.5					8.5		%
(a) Net sales excludes inter-segment sales of $6.2 million and $5.5 million for the first quarter of 2023 and 2022, respectively.

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

Identifiable assets:						April 2, 2023						January 1, 2023
Digital Imaging						$	11,406.6					$	11,432.3
Instrumentation						1,634.6						1,626.4
Aerospace and Defense Electronics						554.5						540.1
Engineered Systems						188.3						200.3
Corporate						645.3						554.9
Total identifiable assets						$	14,429.3					$	14,354.0

Product Lines

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

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

			First Quarter
Instrumentation			2023						2022
Marine Instrumentation			$	128.2					$	111.9
Environmental Instrumentation			117.9						114.0
Test and Measurement Instrumentation			87.4						83.0
Total			$	333.5					$	308.9

Note 4. Revenue Recognition and Contract Balances

Approximately 70% of the Company's net sales are recognized at a point in time, with the remaining 30% of net sales recognized over time. The Company disaggregates its revenue from contracts with customers by customer type and geographic region for each segment, as management believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. With the exception of the Engineered Systems segment, net sales in each segment is primarily derived from fixed price contracts. Net sales in the Engineered Systems segment is typically between 45% and 55% fixed price contracts in a given reporting period, with the balance of net sales derived from cost-reimbursable type contracts. For the three months ended April 2, 2023, approximately 51% of net sales in the Engineered Systems segment were derived from fixed price contracts.

			First Quarter Ended April 2, 2023																					First Quarter Ended April 2, 2023
			Customer Type																					Geographic Region (c)
(in millions)			U.S. Govt. (a)						Other (b)						Total									United States						Europe						Asia						All other						Total
Net sales:
Digital Imaging			$	130.4					$	642.1					$	772.5								$	334.4					$	197.3					$	158.4					$	82.4					$	772.5
Instrumentation			23.0						310.5						333.5									138.0						97.2						67.5						30.8						333.5
Aerospace and Defense Electronics			64.7						108.5						173.2									120.1						29.5						17.0						6.6						173.2
Engineered Systems			93.4						10.7						104.1									103.3						—						0.2						0.6						104.1
Total			$	311.5					$	1,071.8					$	1,383.3								$	695.8					$	324.0					$	243.1					$	120.4					$	1,383.3

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

(b) Primarily commercial sales

(c) Geographic region by destination

			First Quarter Ended April 3, 2022																					First Quarter Ended April 3, 2022
			Customer Type																					Geographic Region (c)
(in millions)			U.S. Govt. (a)						Other (b)						Total									United States						Europe						Asia						All other						Total
Net sales:
Digital Imaging			$	141.5					$	609.0					$	750.5								$	337.2					$	183.8					$	149.6					$	79.9					$	750.5
Instrumentation			22.4						286.5						308.9									133.4						80.9						65.6						29.0						308.9
Aerospace and Defense Electronics			59.9						106.3						166.2									123.9						22.6						14.2						5.5						166.2
Engineered Systems			86.4						9.0						95.4									95.0						—						0.2						0.2						95.4
Total			$	310.2					$	1,010.8					$	1,321.0								$	689.5					$	287.3					$	229.6					$	114.6					$	1,321.0

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

(b) Primarily commercial sales

(c) Geographic region by destination

Contract Liabilities

			Balance at
Contract Liabilities by Balance Sheet Location (in millions)			April 2, 2023						January 1, 2023
Accrued liabilities			$	221.5					$	187.6
Other long-term liabilities			20.7						20.2
Total contract liabilities			$	242.2					$	207.8

The Company recognized revenue of $67.9 million during the three months ended April 2, 2023 from contract liabilities that existed at the beginning of year.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and exclude unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of April 2, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,198.8 million. The Company expects approximately 82% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 18% recognized thereafter.

Changes in Contract Estimates at Completion

For over time contracts using the cost-to-cost method, the Company has an Estimate at Completion (“EAC”) process in which management reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue, determining reasonably dependable cost estimates, and making assumptions for schedule and technical issues. The majority of revenue recognized over time uses an EAC process. Since certain contracts extend over a long period of time, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings through a cumulative catch-up basis. This method recognizes, in the current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly.

The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first three months of 2023 and 2022 was $2.9 million of favorable operating income and $7.6 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. None of the effects of changes in estimates on any individual contract were material to the consolidated statements of income for any period presented.

Note 5. Goodwill and Intangible Assets

Goodwill

The carrying value of goodwill by segment was as follows (in millions):

			Digital Imaging						Instrumentation						Aerospace and Defense Electronics						Engineered Systems						Total
Balance at January 1, 2023			6,780.4						913.2						161.8						17.6						7,873.0
Current year acquisitions			48.4						—						—						—						48.4
Foreign currency changes and other			(0.3)						3.8						0.6						—						4.1
Balance at April 2, 2023			$	6,828.5					$	917.0					$	162.4					$	17.6					$	7,925.5

Acquired intangible assets (in millions):						April 2, 2023																		January 1, 2023
						Gross carrying amount						Accumulated amortization						Net carrying amount						Gross carrying amount						Accumulated amortization						Net carrying amount
Proprietary technology						$	1,673.8					$	538.2					$	1,135.6					$	1,667.7					$	497.4					$	1,170.3
Customer list/relationships						604.4						187.7						416.7						596.1						177.0						419.1
Patents						0.6						0.6						—						0.6						0.6						—
Non-compete agreements						0.9						0.9						—						0.9						0.9						—
Trademarks						9.9						4.7						5.2						7.1						4.4						2.7
Backlog						16.2						16.0						0.2						16.1						15.8						0.3
Total intangibles subject to amortization						2,305.8						748.1						1,557.7						2,288.5						696.1						1,592.4
Intangibles not subject to amortization:
Trademarks						847.7						—						847.7						848.2						—						848.2
Total acquired intangible assets						$	3,153.5					$	748.1					$	2,405.4					$	3,136.7					$	696.1					$	2,440.6

An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. There have been no events or changes in circumstances which indicate an interim impairment review is required in 2023. The Company will perform its annual analysis during the fourth quarter of 2023.

Note 6. Supplemental Balance Sheet Information

Cash Equivalents

The Company had $326.1 million and $167.1 million of cash equivalents at April 2, 2023 and January 1, 2023, respectively. The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets.

Accounts Receivable, net

Accounts receivable is presented net of an allowance for doubtful accounts of $10.6 million at April 2, 2023 and $11.7 million at January 1, 2023.

Inventories, net

Inventories are stated at current cost, net of reserves for excess, slow moving and obsolete inventory. Inventories are primarily valued under the FIFO method or average cost method, with an immaterial amount of inventories valued under the LIFO method. Inventory balances are summarized as follows (in millions):

			Balance at
			April 2, 2023						January 1, 2023
Raw materials and supplies			$	577.1					$	563.7
Work in process			178.9						156.8
Finished goods			195.7						170.2
Total inventories, net			$	951.7					$	890.7

Product Warranty Costs

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

			Three Months
Warranty Reserve (in millions):			2023						2022
Balance at beginning of year			$	50.3					$	49.5
Product warranty expense			4.3						0.6
Deductions			(4.2)						(4.8)
Balance at end of period			$	50.4					$	45.3

Note 7. Long-Term Debt

			Balance at
Long-Term Debt (in millions):			April 2, 2023						January 1, 2023
$1.15 billion credit facility due March 2026, weighted average variable rate of 5.76% at April 2, 2023 and 5.46% at January 1, 2023			$	25.0					$	125.0
0.65% Fixed Rate Senior Notes due April 2023			300.0						300.0
0.95% Fixed Rate Senior Notes due April 2024			450.0						450.0
Term loan due October 2024, variable rate of 6.11% at April 2, 2023 and 5.63% at January 1, 2023, swapped to a Euro fixed rate of 0.61%			150.0						150.0
1.60% Fixed Rate Senior Notes due April 2026			450.0						450.0
Term loan due May 2026, variable rate of 6.00% at April 2, 2023 and 5.61% at January 1, 2023			245.0						245.0
2.25% Fixed Rate Senior Notes due April 2028			700.0						700.0
2.50% Fixed Rate Senior Notes due August 2030			485.0						485.0
2.75% Fixed Rate Senior Notes due April 2031			1,040.0						1,040.0
Other debt			0.6						2.1
Debt discount and debt issuance costs			(25.2)						(26.5)
Total debt, net			3,820.4						3,920.6
Less: current portion of long-term debt			(300.1)						(300.1)
Total long-term debt, net of current portion			$	3,520.3					$	3,620.5

During the first three months of 2023, the Company repaid $100.0 million of amounts outstanding on its credit facility.

At April 2, 2023, $1,103.9 million was available under the $1.15 billion credit facility, after reductions of $25.0 million in borrowings and $21.1 million in outstanding letters of credit. Our bank credit agreements require Teledyne to comply with various financial and operating covenants and at April 2, 2023, the Company was in compliance with these covenants.

Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The Company’s long-term debt is considered a level 2 input in the fair value hierarchy and is valued based on observable market data. As of April 2, 2023 and January 1, 2023, the aggregate fair values of our borrowings were $3,490.7 million and $3,492.7 million, respectively, and the carrying values were $3,845.6 million and $3,947.1 million, respectively.

Subsequent to the end of the first quarter, on April 3, 2023, the Company repaid the $300.0 million of fixed rate senior notes.

Note 8. Income Taxes

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

The Company’s effective income tax rate for the first quarter of 2023 was a 20.1% compared with an effective income tax rate of negative 4.7% for the first quarter of 2022. The first quarter of 2023 includes net discrete income tax benefits of $6.6 million compared with net discrete income tax benefits of $56.5 million for the first quarter of 2022. The first quarter of 2023 net discrete tax benefits include $5.9 million related to stock-based accounting. The first quarter of 2022 net discrete income tax amounts include a non-cash income tax benefit of $50.0 million primarily related to the resolution of certain FLIR tax reserves and $6.7 million related to stock-based accounting. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.0% for the first quarter of 2023 and 23.1% for the first quarter of 2022.

Note 9. Pension Plans

			First Quarter
			2023						2022
Service cost — benefits earned during the period (in millions)			$	1.5					$	2.2
Pension non-service cost (income) (in millions):
Interest cost on benefit obligation			$	8.4					$	5.9
Expected return on plan assets			(13.6)						(14.0)
Amortization of net prior service cost			(0.5)						(0.5)
Amortization of net actuarial loss			2.4						5.8
Pension non-service cost (income)			$	(3.3)					$	(2.8)

Note 10. Stock-based Compensation

Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options and restricted stock. The Company also has non-employee Board of Director stock compensation plans, pursuant to which common stock, stock options and restricted stock have been issued to its directors. The Company issues shares of common stock upon the exercise of stock options.

Stock-based compensation expense was $7.9 million for the first quarter of 2023 and $9.0 million the first quarter of 2022.

Stock option activity for the first three months of 2023 is as follows:

			Shares						Weighted Average Exercise Price
Balance at January 1, 2023			1,726,731						$	223.43
Exercised			(95,748)						$	106.51
Canceled			(8,039)						$	415.27
Balance at April 2, 2023			1,622,944						$	229.38
Exercisable at end of period			1,366,491						$	197.58

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

			Shares						Weighted average fair value per share
Balance at January 1, 2023			166,395						$	368.62
Granted			15,573						$	361.64
Vested			(22,555)						$	389.60
Forfeited/Canceled			(5,313)						$	356.97
Balance at April 2, 2023			154,100						$	357.28

Note 11. Earnings Per Share

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

			First Quarter
			2023						2022
Weighted average basic common shares outstanding			46.9						46.7
Effect of dilutive securities (primarily stock options)			1.0						1.0
Weighted average diluted common shares outstanding			47.9						47.7

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

Note 12. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) ("AOCI") by component, net of tax, for the first quarter ended April 2, 2023 and April 3, 2022 are as follows (in millions):

			Foreign Currency Translation						Cash Flow Hedges and Other						Pension and Postretirement Benefits						Total
Balance at January 1, 2023			$	(472.3)					$	1.3					$	(255.5)					$	(726.5)
Other comprehensive income (loss) before reclassifications			(4.3)						9.8						—						5.5
Amounts reclassified from AOCI			—						(7.3)						1.5						(5.8)
Net other comprehensive income (loss)			(4.3)						2.5						1.5						(0.3)
Balance at April 2, 2023			$	(476.6)					$	3.8					$	(254.0)					$	(726.8)
			Foreign Currency Translation						Cash Flow Hedges and Other						Pension and Postretirement Benefits						Total
Balance at January 2, 2022			$	(129.0)					$	(3.4)					$	(297.6)					$	(430.0)
Other comprehensive income (loss) before reclassifications			(32.6)						11.3						—						(21.3)
Amounts reclassified from AOCI			—						(4.8)						4.2						(0.6)
Net other comprehensive income (loss)			(32.6)						6.5						4.2						(21.9)
Balance at April 3, 2022			$	(161.6)					$	3.1					$	(293.4)					$	(451.9)

The reclassifications out of AOCI to net income for the first quarter ended April 2, 2023 and April 3, 2022 are as follows (in millions):

			Amount Reclassified from AOCI for the Three Months Ended						Amount Reclassified from AOCI for the Three Months Ended			Statement of Income
			April 2, 2023						April 3, 2022			Presentation
(Gain) loss on cash flow hedges:
Gain recognized in income on derivatives			$	(9.8)					$	(6.5)		See Note 13
Income tax impact			2.5						1.7			Provision for income taxes
Total			$	(7.3)					$	(4.8)
Amortization of defined benefit pension and postretirement plan items:
Amortization of prior service cost			$	(0.4)					$	3.5		Costs and expenses
Amortization of net actuarial loss			2.4						2.0			Costs and expenses
Total before tax			2.0						5.5
Income tax impact			(0.5)						(1.3)			Provision for income taxes
Total			$	1.5					$	4.2

Note 13. Derivative Instruments and Hedging Activities

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

Mitigation Approach			Quantitative Information on Approach
The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars for our Canadian companies, and in British pounds for our U.K. companies. These contracts are designated and qualify as cash flow hedges.			As of April 2, 2023, the Company had foreign currency forward contracts to buy Canadian dollars and to sell U.S. dollars totaling $134.9 million. These foreign currency forward contracts have maturities ranging from June 2023 to February 2025. As of April 2, 2023, The Company had foreign currency forward contracts to buy British pounds and to sell U.S. dollars totaling $12.3 million. These foreign currency forward contracts have maturities ranging from June 2023 to February 2024.
The Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. These foreign currency forward contracts are not designated as accounting hedges.			See Non-Designated Hedging Activities section below.
The Company has converted a U.S. dollar denominated, variable rate debt obligation of a European subsidiary into euro fixed rate obligation using a receive float, pay fixed cross currency swap to reduce the variability of interest rates. This cross currency swap is designated as cash flow hedge.			As of April 2, 2023, the Company has a cross currency swap outstanding with a notional amount of €156.0 million and $150.0 million that matures in October 2024.

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

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Designated Hedging Activities

For a derivative instrument designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the condensed consolidated balance sheets in AOCI to the extent the derivative instrument is effective in mitigating the exposure related to the anticipated transaction. The amount recorded within AOCI is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings. The effect of derivative instruments designated as cash flow hedges in the condensed consolidated financial statements for the first quarter ended April 2, 2023 and April 3, 2022 was as follows (in millions):

			First Quarter
			2023						2022
Net gain (loss) recognized in AOCI - Foreign Exchange Contracts (a)			$	13.6					$	13.7
Net gain (loss) reclassified from AOCI into revenue - Foreign Exchange Contracts (a)			$	(1.9)					$	(0.2)
Net gain (loss) recognized in AOCI - Interest Rate Contracts			$	—					$	1.3
Net gain (loss) reclassified from AOCI into other income and expense, net - Foreign Exchange Contracts (b)			$	10.1					$	6.2
Net gain (loss) reclassified from AOCI into interest expense - Foreign Exchange Contracts			$	1.5					$	0.9
Net gain (loss) reclassified from AOCI into interest expense - Interest Rate Contracts			$	0.6					$	(0.4)

(a) Effective portion, pre-tax

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

Net deferred losses recorded in AOCI for the forward contracts that will mature in the next twelve months total $3.1 million, net of taxes. 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 swap expected to be reclassified from AOCI into income in the next twelve months total $7.0 million.

Non-Designated Hedging Activities

For a derivative instrument that has not been designated as an accounting hedge, the change in the fair value is recognized immediately in earnings. As of April 2, 2023, the Company had foreign currency forward contracts not designated as accounting hedges primarily in the following types and pairs (in millions):

Contracts to Buy									Contracts to Sell
Currency						Amount						Currency						Amount
Canadian Dollars						$	185.6					U.S. Dollars						US$	136.7
Great Britain Pounds						£	50.3					U.S. Dollars						US$	60.7
Euros						€	50.5					U.S. Dollars						US$	53.6
Danish Krone						DKR	107.9					U.S. Dollars						US$	15.5
Swedish Krona						SEK	163.5					Euros						€	14.7
U.S. Dollars						US$	13.6					Chinese Yuan						¥	93.9

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

The effect of derivative instruments not designated as accounting hedges recognized in other income and expense for the first quarter ended April 2, 2023 was income of $7.8 million. The effect of derivative instruments not designated as accounting hedges in other income and expense for the first quarter ended April 3, 2022 was expense of $4.8 million. The income or expense was largely offset by losses or gains in the value of the underlying hedged item excluding the impact of forward points.

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Fair Value of Derivative Financial Instruments

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

Asset/(Liability) Derivative Instruments			Balance sheet location						April 2, 2023						January 1, 2023
Derivatives designated as hedging instruments:
Cash flow forward contracts			Other current assets						$	1.4					$	0.4
Cash flow forward contracts			Accrued liabilities						(4.5)						(6.8)
Interest rate contracts			Other current assets						—						0.7
Cash flow cross currency swap			Other current assets						2.3						2.7
Cash flow cross currency swap			Other current liabilities						—						(14.0)
Cash flow cross currency swap			Other non-current liabilities						(20.5)						(18.3)
Total derivatives designated as hedging instruments									(21.3)						(35.3)
Derivatives not designated as hedging instruments:
Non-designated forward contracts			Other current assets						8.5						3.5
Non-designated forward contracts			Accrued liabilities						(4.8)						(7.0)
Total derivatives not designated as hedging instruments									3.7						(3.5)
Total derivative instruments, net									$	(17.6)					$	(38.8)

Note 14. Commitments and Contingencies

Trade Compliance

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. ("FLIR"), to resolve various export allegations under the International Traffic in Arms Regulations (“ITAR”). In connection with this Consent Agreement and other export matters, while FLIR and its successor by mergers, Teledyne FLIR, have enhanced the trade compliance program more broadly, implemented remedial measures and have undergone external and internal audits of the trade compliance program, adverse disclosures and findings could cause additional expenses in connection with further remedial measures or potential penalties.

The Company has made other voluntary disclosures to the U.S. Department of State and the U.S. Department of Commerce, including to the Bureau of Industry and Security (“BIS”) with respect to Teledyne FLIR shipments of products from non-U.S. jurisdictions which were not licensed due to incorrect de minimis calculation methodology under the Export Administration Regulations. The Company has also made voluntary disclosures to export authorities in jurisdictions outside the U.S. for certain potential violations of local export laws. At this time, based on available information, we are unable to reasonably estimate the time it may take to resolve these matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with these matters. However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial position, results of operations or cash flows in and following the period in which such outcome becomes estimable or known.

Environmental Remediation Obligations

At April 2, 2023, the Company’s reserves for environmental remediation obligations totaled $5.7 million, of which $1.5 million is included in current accrued liabilities. At January 1, 2023, the Company’s reserves for environmental remediation obligations totaled $5.8 million. The Company 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 pay the amounts recorded over many years and will complete remediation of all sites with which it has been identified in up to 30 years.

Legal Matters

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

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