TELEDYNE TECHNOLOGIES INC

Note 7. Long-Term Debt

At September 27, 2026, $1,158.4 million was available under the $1.2 billion credit facility after reductions of $41.6 million in outstanding letters of credit. The Company’s bank credit agreements require the Company to comply with various financial and operating covenants, and at September 27, 2026, the Company was in compliance with these covenants. At September 27, 2026, Teledyne had $55.4 million in outstanding letters of credit, including $41.6 million against the Company’s credit facility. The Company plans to fund the Varex acquisition from cash on hand as well as available borrowings under its credit facility. In the second quarter of 2026, the Company repaid $450.0 million of its Fixed Rate Senior Notes due April 2026.

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 the Company operates, 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.

(a) The third quarter of 2026 and 2025 includes net discrete income tax benefits of $1.6 million and $4.9 million, respectively. The first nine months of 2026 and 2025 includes net discrete income tax benefits of $10.8 million and $17.0 million, respectively.

Note 9. Pension Plans

Note 10. Stock-Based Compensation

Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options, restricted stock awards and restricted stock units. The Company also has non-employee director stock compensation plans pursuant to which common stock, stock options and restricted stock units have been issued to its directors. The Company issues shares of common stock upon the exercise of stock options. The Company uses the Black–Scholes option pricing model to determine the fair value of stock options.

Stock-based compensation expense was $12.2 million and $31.7 million for the third quarter and first nine months of 2026, respectively, and $10.5 million and $30.7 million for the third quarter and first nine months of 2025, respectively.

Stock option activity for the third quarter and first nine months of 2026 is as follows:

(a) In the second quarter of 2026, the Company granted stock options with a grant date fair value of $253.85 per share.

Restricted stock activity for the third quarter and first nine months of 2026 is as follows:

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):

For the third quarter and first nine months of 2026 and 2025, the Company excluded less than 0.1 million of stock options in the computation of diluted earnings per share because the effect of their inclusion would have been anti-dilutive.

Stock Repurchases

In July 2025, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $2.0 billion of Teledyne’s common stock. As of September 27, 2026, $1.5 billion remained available under the repurchase authorization. The authorized stock repurchase program does not have a stated expiration date. Shares may be repurchased from time to time in open-market transactions at prevailing market prices, in privately negotiated transactions or via an accelerated stock repurchase program. Shares could be repurchased in a plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The repurchase program is expected to remain open continuously, and the number of shares purchased will depend on a variety of factors such as share price, levels of cash available, acquisitions and alternative investment opportunities available immediately or longer-term, and other regulatory, market or economic conditions. The Company currently intends to fund future share repurchases, if any, with cash on hand and available borrowings under the Company’s credit facility. During the third quarter and first nine months of 2026, the Company repurchased approximately 0.2 million shares for $94.8 million, with a weighted average price of $603.09 per share. Subsequent to the end of the third quarter of 2026, the Company repurchased 0.2 million shares for $139.0 million, with a weighted average price of $610.16 per share.

Note 12. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) (“AOCI”) by component, net of tax, as applicable, for the third quarter and nine months ended September 27, 2026, and September 28, 2025, are as follows (in millions):

The reclassifications out of AOCI to net income for the third quarter ended September 27, 2026, and September 28, 2025, are as follows (in millions):

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 has entered into certain derivative contracts to reduce the volatility from translation of the Company’s euro denominated net investments. 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:

Designated Hedging Activities

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 the Canadian companies, and in British pounds for the UK companies. As of September 27, 2026, foreign currency forward contracts in Canadian dollars designated as cash flow hedges have maturities ranging from December 1, 2026 to February 9, 2027. As of September 27, 2026, foreign currency forward contracts in British pounds designated as cash flow hedges have maturities ranging from December 9, 2026 to February 17, 2027.

The Company utilizes cross-currency swaps to hedge portions of the Company’s euro denominated net investments against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. The Company has cross-currency swaps designated as net investment hedges with a total notional amount of €450.0 million to hedge portions of the Company’s euro denominated net investments against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. These cross-currency swaps mature between September 30, 2026 and September 30, 2030.

Non-Designated Hedging Activities

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. The gain or loss resulting from a change in fair value of a derivative instrument that is not designated as an accounting hedge is recognized immediately in earnings and intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings.

Derivative Instruments

The following is a summary of the gain (loss) included in the condensed consolidated statements of income (loss) and comprehensive income (loss) related to the derivative instruments described above (in millions):

(a) Effective portion, pre-tax

Net deferred losses recorded in AOCI for the forward contracts that will mature in the next 12 months total $0.6 million, net of taxes. These losses are expected to be offset by anticipated gains in the value of the forecasted underlying hedged item.

The following is a summary of notional amounts and fair values of the Company’s derivatives recorded in the condensed consolidated balance sheets presented by instrument type and use (in millions):

All derivative assets are presented in Other current assets or Other non-current assets. All derivative liabilities are presented in Accrued liabilities or Other non-current liabilities.

Note 14. Fair Value Measurement

The Company’s financial assets and liabilities carried at fair value are primarily comprised of derivative contracts used to hedge the Company’s foreign currency risk. The Company has not elected to measure additional financial instruments or other items at fair value.

Financial Instruments Recorded at Fair Value

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

Gross derivative assets and liabilities are subject to legally enforceable master netting agreements, for which the Company has not elected to present net amounts on the condensed consolidated balance sheets. The effect of such right of setoff on the Company’s financial position was $0.7 million and $0.4 million as of September 27, 2026, and December 28, 2025, respectively.

Financial Instruments Not Recorded at Fair Value

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair values due to the short-term maturities of these assets and liabilities.

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 and is valued based on observable market data. As of September 27, 2026, and December 28, 2025, the aggregate fair values of the Company’s borrowings were $1,857.9 million and $2,359.5 million, respectively, and the carrying values were $2,038.9 million and $2,489.0 million, respectively.

Note 15. Commitments and Contingencies

Trade Compliance Matters

The Company has made voluntary disclosures for certain potential violations of trade compliance laws to applicable U.S. Government authorities, including the U.S. Department of State and the U.S. Department of Commerce. The Company has also made voluntary disclosures to authorities in jurisdictions outside the United States for certain potential violations of local export and import laws. The Company accrues amounts associated with potential violations to the extent a loss, penalty or other government action becomes probable and can be reasonably estimated. 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.

In February 2026, Teledyne FLIR LLC, together with certain of its legacy affiliates, reached a settlement agreement with the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”), concerning alleged export control compliance issues and subsequently paid a civil penalty of $1.0 million. These matters largely relate to historical conduct at FLIR Systems, Inc., which was acquired by Teledyne in May 2021. There were 19 proposed charges of alleged export violations, including inaccurate application of the BIS “de minimis” rule to foreign-produced products exported from abroad, failure of an affiliate in China to maintain the required records, and several export shipments to an address in Hong Kong on the BIS Entity List that were not identified by the screening software used by the company. The settlement amount reflects that these matters were voluntarily disclosed and that Teledyne cooperated fully with the government’s review and worked to enhance Teledyne FLIR’s export compliance program since the acquisition.

Environmental Remediation Obligations

At September 27, 2026, the Company’s reserves for environmental remediation obligations totaled $5.6 million, of which $2.9 million is included in current accrued liabilities. At December 28, 2025, the Company’s reserves for environmental remediation obligations totaled $6.0 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.

Other Claims and Legal Matters

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 has knowledge 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 determined adversely to the Company, management does not believe that the disposition of any such pending matter is likely to have a material adverse effect on the Company’s financial condition.