TDY 10-K & 10-Q changes, risk factors and insider trading

The following discussion sets forth the material risk factors that could affect Teledyne’s financial condition and operations. You should not consider any descriptions of these factors to be a complete set of all potential risks that could affect Teledyne. Any of the risk factorsfactor discussed below could by itself, or combined with other factors, materially and adversely affect our business, results of operations, financial condition, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.

•pre-existing vulnerabilities, including cybersecurity vulnerabilities, undetected malware and access management issues at the acquired business and its supply chain;

If we are unable to make acquisitions our future growth may be adversely impacted. Our ability to make acquisitions depends on a number of factors, including the availability of potential acquisition candidates at reasonable prices, competition from other bidders, the ability to obtain regulatory approvals, including under increasingly stringent merger control and foreign direct investment laws, and the availability of debt and equity financing, among other factors. For additional discussion of business acquisition, see the discussion under “Item 7. Management’s Discussion and Analysis of Operations and Financial Condition” and Note 3.

Our business in the recent past was impacted by interruptions in the supply chain, due in part to the COVID pandemic, a resumption of strong worldwide demand for electronic products and components across a number of end markets, and interruption in supplier operations.chain. As a result, we experienced delivery delays and shortages of certain components and raw materials needed for many of thecertain products we manufacture. China has also restricted the export of certain rare earth minerals and permanent magnets that are used in our products, which has in the past delayed and could in the future limit our ability to sell products that require these components or result in lower margins products that incorporate these components. Any such delays in the future would reduce our revenue and margins for the periods affected and would also result in an increase in our inventory of other components, which would reduce our operating cash flow.

In order to remain competitive, we must make substantial investments in research and development (“R&D”) of new or enhanced products and continuously upgrade our process technology and manufacturing capabilities. Our research and development efforts primarily involve engineering and design related to improving existing products and developing new products and technologies in the same or similar fields. We may be unable to fund all of our research and developmentR&D and capital investment needs or possible strategic acquisitions of businesses or product lines.needs. Our ability to raise additional capital will depend on a variety of factors, some of which will not be within our control, including the existence of bank and capital markets, investor perceptions of us, our businesses and the industries in which we operate, and general economic conditions. Failure to successfully raise needed capital or generate cash flow on a timely or cost-effective basis could have a material adverse effect on our business, results of operations and financial condition.

Each of our markets is highly competitive. Many of our competitors have, and potential competitors could have, greater name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution capabilities and greater financial, technological and personnel resources. New or existing competitors may also develop new technologies that could adversely affect the demand for our products and services. We have been experiencing increased competition for some of our key products. Furthermore, some of our patents have expired or are expiring, which could open up further competition. Additionally, some of our customers have been developing competing products or electing to vertically integrate and replace our products with their own.

In 2024both 2025 and 2023,2024, sales to customers outside the United States accounted for approximately 48% and 49% of total net sales, respectively.sales. In both 20242025 and 2023,2024, we sold products to customers in over 100 foreign countries. In 2024,2025, the top five countries for sales to international customers, ranked by net sales, were the United Kingdom, China,UK, Germany, JapanJapan, China and France and represented approximately 19%20% of our total net sales. We anticipate that future sales to international customers will continue to account for a significant and increasing percentage of our revenues.

•existing and intensifying global economic sanctions and export controls, including export controls related to China,China and sanctions related to Russia, and increasingly complex regulations related to exports of marine instruments, digital imaging and other productsRussia;

•newexisting and emerging non-U.S. regulations relating to ESG and CSR matters, which could be costly to comply with;

In early 2025, the newThe U.S. Presidential administration has announced significant new tariffs on foreign imports into the United States, specificallyparticularly fromwith Mexico and Canada, all of which were subsequently postponed priorrespect to becomingimports effective, andfrom China, and has proposed additional new tariffs that may be implemented in the future, including on member states of the European Union (“EU”) and on commodities like steel, aluminumCanada and titanium. The administration has announced additional tariffs on steel and aluminum imports and has threatened to raise tariffs on semiconductors, pharmaceuticals and other products.Mexico. High tariffs generally increase the cost of materials for our products, which could result in our products becoming less competitive or generating lower margins. The extent and duration of increased tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the United States and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected markets. Uncertainty aroundabout whether and the extent to which new tariffs will be imposed could also impact our supply chain and the cost of our products. We have significant operations in Canada and in member states of the European Union,EU, which could be negatively impacted by a trade war with the United States. With high tariffs imposed on our products, we may also need to find new suppliers and components for our products, which could result in production delays. These countries could impose retaliatory tariffs on imports from the United States. To the extent our products are the subject of retaliatory tariffs, customers may begin to seek domestic or non-U.S. sources for products that we sell, or be pressured or incentivized by foreign governments not to purchase U.S.-origin goods, which could harm our future sales in these markets. Further escalation of the “trade war” between the United States and China, or new trade wars between the United States and other countries, could result in continued or increased tariffs. Efforts to avoid tariffs are also under increased scrutiny.

Recent export restrictions have had a significant impact on our business. A number of well-established customers and suppliers have become listed on government restricted party lists. In particular, U.S. export enforcement agencies have placed several Chinese companies and many of their international subsidiaries on such lists, prohibiting the export to them of most commercial and dual-use items subject to the Export Administration Regulations. Furthermore, the United States has imposed certain sectoral sanctions to limit Chinese development and manufacturing of semiconductor and supercomputer technology and have imposed comprehensive restrictions of both U.S.-origin items as well as non-U.S. items manufactured from U.S.-origin equipment. In response, China has unveiled restrictions on exports from China of certain materials and components, including gallium and germanium and which are used in semiconductor manufacturing and permanent magnets and which hashave impacted the production and pricing of some of our digital imaging and aerospace and defense products. China has also increased sanctions on certain specific U.S. companies, including two Teledyne legal entities, by adding them to its Unreliable Entity List or Export Control List, which has impacted the ability of some Teledyne subsidiaries (including those not so listed) to conduct business in China. Chinese airlines and other manufacturers are under pressure to decrease their dependence on U.S. components and products and increase the use of domestic suppliers. Many key suppliers to our businesses, whether direct or indirect, are based in China. These and other tariffs, trade restrictions and retaliatory measures could result in revenue reduction, price increases on material used in our products or significant production delays, which could adversely affect our business, financial condition, operational results and cash flows.

A military conflict between China and Taiwan would likely have a material adverse impact on our ability to sell products to customers in these areas and on our supply chain. Ongoing instability in the Middle East and the conflict between Russia and Ukraine could result in supply chain and other business disruptions.

Many countries, including China, India and Saudi Arabia, have bolstered laws or regulations requiring the use of local supplierssuppliers, personnel and in-country manufacturing, which has had a negative impact on Teledyne’s revenues of instrumentation, commercial aerospace, marine and digital imaging products, as we currently have limited manufacturing operations in these countries. Several of our competitors in countries like China may be subsidized by state actors and as a result may be able to offer competing products at much lower prices than we can. As European countries increase their defense spending, requirements to have production facilities in the EU are becoming more common to win contracts. If we are unable to respond to these requirements, we may be unable to bid on new programs or lose opportunities to competitors that are based in the EU.

We develop and manufacture products for customers in the energy exploration and production markets, commercial aerospace markets, the semiconductor industry, and the consumer electronics, telecommunications, automotive and healthcare industries; each of which has been cyclical, exhibited rapid changes and suffered from fluctuating market demands. A cyclical downturn in one or more of these markets may materially affect future operating results. The current cyclical downturn in the semiconductor market has impacted the resultsSome of our digitalproduct imagingsales are tied to artificial intelligence (“AI”)-related capital expenditures and instrumentationdata businesses.center infrastructure. Several factors could result in volatility in AI-related spending, including constraints related to electricity generation and delivery, overbuilt capacity, new AI-focused legal regulations, and a consolidation of competing independent technologies.

We perform work on a number of contracts with the U.S. Department of DefenseWar and other agencies and departments of the U.S. Government including subcontracts with government prime contractors. Sales under contracts with the U.S. Government, including sales under contracts with the U.S. Department of Defense,War, as prime contractor or subcontractor, represented 24.3%25% and 24.5%24% of our total net sales in 20242025 and 2023,2024, respectively. Performance under government contracts has inherent risks that could have a material effect on our business, results of operations, and financial condition.

Government contracts are conditioned upon the continuing availability of Congressional appropriations, and the failure of Congress to appropriate funds for programs in which we participate could negatively affect our results of operations. U.S. Government operation under a continuing resolution could impact the business by preventing new programs from starting as planned and by limiting funding on existing programs. U.S. Government shutdowns have resulted in delays in anticipated contract awards and delayed payments of invoices for several of our businesses,businesses. andIn anythe newfall of 2025, a shutdown or increase in shutdowns could have similar or worse effects. Any renewed emphasis on Federal deficit and debt reduction could lead to a further decrease in overall defense spending. Budgetary concerns could result in future contracts being awarded more on price than on other competitive factors, and smaller defense budgets could result in government in-sourcing of programsthe and more intense competition on programs that are not in-sourced, which could result in lower revenues and profits.U.S.

Changes in policy and budget priorities by the U.S. Presidential Administration for various defense and NASA programs could impact our Engineered Systems, Aerospace and Defense Electronics and Digital Imaging segments. Budget cuts at NASA have negatively impacted the revenues of Engineered Systems in 2025 and are expected to further impact revenues in 2026.

It is also not uncommon for the U.S. Department of DefenseWar to delay the timing of awards or change orders for major programs for six to twelve months. These delays by the U.S. Government could impact our revenues. Uncertainty over budgets or priorities with the U.S. Presidential Administration could result in further delays in funding and the timing of awards, and changes in funded programs that could have a material impact on our revenues.

Further, most of our U.S. Government contracts are subject to termination by the U.S. Government either at its convenience or upon the default of the contractor. Termination for convenience provisions provides only for the recovery of costs incurred or committed, settlement expenses, and profit on work completed prior to termination. Termination for default clauses imposes liability on the contractor for excess costs incurred by the U.S. Government in re-procuring undelivered items from another source. During 20242025 and 2023,2024, contracts terminated by the U.S. Government have not materially impacted our results of operations.operations; however, our Defense Electronics businesses have seen an increase in terminations for convenience due to shifting Government priorities.

We are seeing increased sales into the European defense market as European defense budgets increase as a result of the conflict in Ukraine, threats from Russia and other geopolitical instability. If European government funding on defense programs declines, or if defense spending priorities of the North Atlantic Treaty Organization (“NATO”)-member countries change with respect to Ukraine, existing and potential future sales would be negatively impacted. New EU cybersecurity requirements are expected to come into effect in 2026, which may impact our ability to market our products and services in the EU.

Our U.S. Government contracting businessbusinesses isare subject to government contracting regulations, including increasingly complex regulations on cybersecurity, and our failure to comply with such laws and regulations could harm our operating results and prospects.

Our U.S. Government contracting businesses, like other government contractors, are subject to various audits, reviews and investigations (including private party “whistleblower” lawsuits) relating to our compliance with applicable federal and state laws and regulations. More routinely, the U.S. Government may audit the costs we incur on our U.S. Government contracts, including allocated indirect costs. Such audits could result in adjustments to our contract costs. Any costs found to be improperly allocated to a specific contract will not be reimbursed, and such costs already reimbursed would need to be refunded. We have recorded contract revenues based upon costs we expect to realize after final audit. In a worst case scenario, should a business or division be charged with wrongdoing, or should the U.S. Government determine that the business or division is not a “presently responsible contractor,” that business or division, and conceivably our Company as a whole, could be temporarily suspended or, in the event of a conviction, could be debarred for up to three years from receiving new government contracts or government-approved subcontracts. In addition, we could expend substantial amounts defending against such charges andor inface damages, fines and penalties if such charges were proven or were to result in negotiated settlements.proven. Routine audits by U.S. Government agencies of Teledyne’s various procurement and accounting systems have the potential to result in disapproval of the audited systems by the administrative contracting officer. Disapproval could significantly impact cash flow, as up to 10% may be withheld from payments, as well as significantly impact potential contract awards and increase audit oversight of individual contract proposals.

The Department of DefenseWar as well as other U.S. Government contracting agencies have adopted rules and regulations requiring contractors to implement a set of cybersecurity measures to attain the safeguarding of contractor systems that process, store, or transmit certain information. Implementation and compliance with these cybersecurity requirements is complex and costly, and could result in unforeseen expenses, lower profitability and, in the case of non-compliance, penalties and damages, all of which could have an adverse effect on our business. The cybersecurity requirements also impact our supply base which could impact cost, schedule and performance on programs if suppliers do not meet the requirements and therefore, do not qualify to support the programs.

We also are required to procure certain materials and parts from supply sources approved by the U.S. Government. The inability of a supplier to meet our needs, the failure to obtain such approvals or the appearance of counterfeit parts in our products could have a material adverse effect on our financial position, results of operations or cash flows. Such failure or inclusion could result in claims under the False Claims Act, which could lead to civil and criminal penalties and disbarment of the applicable business unit from doing business with the U.S. Government, among other things. Risks associated with counterfeit parts could be exacerbated as a result of supply chain shortages or due to parts becoming obsolete.

Changes in production rates for major aircraft manufacturers, like Boeing and Airbus, impact our commercial aerospace businesses. Boeing and Airbus recentlyhave havein the recent past struggled to meet delivery targets due to supply chain issues and other challenges. In January 2024, the FAA ordered the temporary grounding of Boeing 737-9 MAX aircraft as a result of an incident on a Boeing 737-9 MAX where it lost a “door plug.” The FAA capped the output of Boeing 737-MAX aircraft until quality control targets are reached. A strike by machinists at Boeing in 2024 lasted almost two months and resulted in a pause in aircraft production. These factors have negatively impacted our sales to Airbus and Boeing and anyAny future pauses or reductions in manufacturing from Boeing or Airbus could negatively impact our business.

Many of our products are used by industrial customers and municipalities to monitor ambient air quality, water quality and gas and particulate emissions in order comply with regulatory requirements issued by the U.S. Environmental Protection Agency and other federal agencies. The new Presidential Administration has signaled its intent to scalescaled back many of these regulations, which could result in decreased demand for our products.products, especially if funding from individual states do not make up for the shortfall in federal funding. The new Presidential Administration has also signaled its intent to rollrolled back green energy initiatives, which could harm our energy systems business that manufactures hydrogen-based energy generation systems.systems and which also is likely to reduce the number of federally funded hydrogen generation projects, which lowers demand for our process instrumentation products.

As of December 29,28, 2024,2025, we had $2,665.0$2,488.0 million total outstanding indebtedness in senior notes. As of December 29,28, 2024,2025, no borrowings were outstanding under our $1.20 billion credit facility. Teledyne incurred a significant amount of indebtedness in connection with the financing of the acquisition of FLIR in 2021. The agreements we entered into with respect to our indebtedness, including the agreements we entered into to finance the FLIR acquisition and in connection with the assumption of FLIR’s existing senior notes,indebtedness contain negative covenants, that, subject to certain exceptions, include limitations on indebtedness related to our credit facility, liens, dispositions, investments and mergers and other fundamental changes. Our ability to comply with these negative covenants can be affected by events beyond our control. The indebtedness and these negative covenants may also have the effect, among other things, of limiting our ability to obtain additional financing, if needed, reducing the funds available to make acquisitions or capital expenditures, reducing our flexibility in planning for or reacting to changes in our business or market conditions, and making us more vulnerable to economic downturns and adverse competitive and industry conditions. In addition, a breach of the negative covenants could result in an event of default with respect to the indebtedness, which, if not cured or waived, could result in the indebtedness becoming immediately due and payable and could have a material adverse effect on our business, financial condition or operating results. Any future indebtedness incurred under our credit facility will expose us to interest rate risk.

Our ability to meet our interest expense and debt service obligations will depend on our future performance, including the cash we generate from operating activities, which will be affected by financial, business, economic and other factors, including potential changes in laws or regulations, industry conditions, industry supply and demand, customer preferences, the success of our products and pressure from competitors. If we are unable to meet our debt service obligations or should we fail to comply with our financial and other negative covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities.securities Weand we may not be able to,to attake anysuch given time, refinance our debt, sell assets, incur additional indebtedness or issue equity securitiesactions on terms acceptable to us,us and in amounts sufficient to meet our needs. If we are able to raise additional funds through the issuance of equity securities, such issuance would also result in dilution to our stockholders. Our inability to service our obligations or refinance our debt could have a material and adverse effect on our business, financial condition or operating results.

The credit ratings of Teledyne’s debt could be subject to a downgrade below investment grade.grade If a ratings downgrade were to occur, wewhich could experienceresult in higher borrowing costs in the future and more restrictive debt covenants,covenants whichin wouldthe reduce profitability and diminish operational flexibility. A ratings downgrade could also limit our access to certain sources of debt financing.future.

Increases in the United States on the taxation of foreign income and expense may harm our results of operations and cash flow. The relative amount of income we earn in jurisdictions outside the United States could reduce our net income and increase our cash payments. Additionally, beginning in 2023, the United States has adopted a 15% corporate alternative minimum tax for certain large corporations. Teledyne does not expect to be subject to this tax in 2023 or 2024; however, Teledyne iscontinues closelyto monitoringmonitor the potential impact of the U.S. corporate minimum tax. Many other jurisdictions have also enacted corporate global 15% minimum tax rules, which appliedapply to Teledyne beginning in 2024.Teledyne. Teledyne is monitoring the impact of these foreign minimum tax rules. Increased tax due to corporate minimum taxes in the United States or in other jurisdictions could reduce our net income and increase our cash payments.

On December 29,28, 2024,2025, Teledyne’s goodwill was $7,990.5$8,687.6 million and net acquired intangible assets were $2,012.9$2,100.1 million. We are required to test annually both acquired goodwill and other indefinite-lived intangible assets for impairment based upon a fair value approach, rather than amortizing the value over time. We have chosen to perform our annual impairment reviews of goodwill and other indefinite-lived intangible assets during the fourth quarter of each fiscal year. As a result of these annual tests, we recorded $52.5 million of pretax, non-cash trademark impairments in 2024 in the Digital Imaging and Instrumentation segments, and no comparable amounts were recorded in 2025. We are also required to test goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors. If the fair market value is less than the carrying value, including goodwill, we could be required to record a non-cash impairment charge. The valuation of reporting units requires judgment in estimating future cash flows, discount rates and estimated product life cycles. In making these judgments, we evaluate the financial health of the business, including such factors as industry performance, changes in technology and operating cash flows. As we have grown through acquisitions, the amount of goodwill and net acquired intangible assets is a significant portion of our total assets. As a result, the amount of any annual or interim impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken. Goodwill and acquired intangibles assets of recently acquired reporting units generally represent a higher inherent risk of impairment, which typically decreases as the businesses are integrated into the Company. We also may be required to record an earnings charge or incur unanticipated expenses if, as a result of a change in strategy or other reason, we were to determine the value of other assets had been impaired.

For additional discussion of business acquisitions, goodwill and other long-lived assets, see the discussion under “Item 7. Management’s Discussion and Analysis of Operations and Financial Condition” and NoteNotes 3.3 and 6.

Climate change may have an increasingly adverse impact on our business and those of our customers, partners and suppliers. While we seek to mitigate the risks associated with climate change on our operations, there are inherent climate-related risks globally. As discussed under the risk factor below headed “Natural and man-made disasters could adversely affect our business, results of operations and financial condition,” some of our manufacturing facilities are located in regions that may be impacted by severe weather events, like hurricanes or ice storms, or in areas prone to wildfires, droughts and rising sea levels, the frequency and severity of which may increase as a result of climate change. These events could result in potential damage to our physical assets asand wellmay asresult in disruptions in manufacturing activities. Severe weatheractivities and wildfire events may impair the ability of our employees to work effectively. Climate change, including the increasing frequency and intensity of extreme weather events, its impact on our supply chain and critical infrastructure worldwide and its potential to increase political instability in regions where we, our customers, partners and our suppliers do business, may disrupt our business and may cause us to experience higher employee attrition and higher costs to maintain or resume operations. The effects of climate change also may impact our decisions to construct new facilities or maintain existing facilities in the areas most prone to physical risks, which could similarly increase our operating and material costs. We could also face indirect financial risks passed through the supply chain that could result in higher prices for our products and the resources needed to produce them.

Legislative and regulatory measures currently under consideration or being implemented by government authorities to address climate change could require reductions in our GHG or other emissions, establish a carbon tax or increase fuel or energy taxes. We have also voluntarily announced goals to reduce our GHG emissions by a target date. These legal requirements, in addition to emission reduction efforts that we voluntarily undertake, are expected to result in increased capital expenditures and compliance costs and could result in higher costs required to operate and maintain our facilities, procure raw materials and energy, and may require us to acquire emission credits or carbon offsets. These costs and restrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our operations and product design activities. Proposed rules under the Federal Acquisition Regulation and similar rules in other jurisdictions such as the United Kingdom require or will require major contractors to disclose enhanced information on GHG emissions and commit to GHG emission reduction targets. If we are unable to comply with these rules, we may be ineligible to receive future contract awards from the United States and other governments. The inconsistent international, regional and/or national requirements associated with climate change regulations also create economic and regulatory uncertainty.

Increased investorInvestor focus and activism related to climate change and sustainability may hinder our access to capital, as investors may reconsider their capital investment as a result of their assessment of our sustainability practices. We may face increasing pressure regarding our sustainability disclosures and practices. Additionally, members of the investment community may screen companies such as ours for sustainability performance before investing in our stock. If we are unable to meet the sustainability standards set by these investors, or if we are unable to meet GHG reduction targets we communicate to the public, we may lose investors, our stock price may be negatively impacted, and our reputation may be negatively affected.

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

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, anAn 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 our financial position, results of operations or cash flows in and following the period in which such outcome becomes estimable or known.flows.

We have been joined, among a number of defendants (often over 100), in lawsuits alleging injury or death as a result of exposure to asbestos. In addition, because of the prominent “Teledyne” name, we may continue to be mistakenly joined in lawsuits involving a company or business that was not assumed by us as part of our 1999 spin-off.spin-off from Allegheny Teledyne Incorporated. To date, we have not incurred material liabilities in connection with these lawsuits. However, our historical insurance coverage, including that of our predecessors, may not fully cover such claims and the defense of such matters. Coverage typically depends on the year of purported exposure and other factors. Nonetheless, we intend to vigorously defend our position against these claims.

Strategy/Overview

Our strategy continues to emphasize growth in our four business segments: Digital Imaging, Instrumentation, Aerospace and Defense ElectronicsElectronics, and Engineered Systems. The markets in which we sell our enabling technologies are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our business with targeted acquisitions and through product development. We continue to focus on balanced and disciplined capital deployment among capital expenditures, acquisitions, stock repurchases and product development. We aggressively pursue operational excellence to continually improve our margins and earnings by emphasizing cost containment and evaluating cost reductions in all aspects of our business. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and through targeted research and development,R&D, we seek to create new products to grow our company and expand our addressable markets. We continually evaluate our businesses and products to ensure that they are aligned with our strategy.

Sales recorded and costs incurred recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. SeeWe Itemtry 7A.to Marketreduce Risk,this Notepotential 1volatility in reported earnings primarily through derivative instruments and hedging activities. See Note 14 for additional discussion around our derivative instruments and hedging activities.activities used to mitigate these impacts.

Consistent with our strategy, we completed four acquisitions in 2025 and two acquisitions each in 2024 and in 2023.2024. The financial results of these acquisitions have been included since the respective date of each acquisition. Our 20242025 and 20232024 acquisitions were within the Digital ImagingImaging, Instrumentation and InstrumentationAerospace and Defense Electronics segments. See Note 3 for additional information about our 20242025 and 20232024 business acquisitions. Subsequent to the end of fiscalthe year 2024,year, we have completed twoone acquisitions.acquisition which will be included within the Instrumentation segment. See Note 18 for additional information.

Net Sales:

Net sales increased across three of our four business segments. Total year 20242025 net sales included $49.4$270.1 million in incremental net sales from current and prior year acquisitions. Refer to “Business Segment Operating Results” later in this section for additional discussion of changes in net sales. SalesIn both 2025 and 2024, sales to international customers represented approximately 48% of total net salessales. inApproximately 202425% and 49% of net sales in 2023. Approximately 24% and 25% of our total net sales forin 20242025 and 2023,2024, respectively, were derived from contracts with agencies of, or prime contractors to, the U.S. Government.

Cost of sales increased in 2024,2025, primarily driven by the impact of higher net sales as well as higher engineering costs.sales. Cost of sales as a percentage of net sales for 20242025 was 57.1%,57.2%, compared with 56.7%57.1% for 2023.2024. Refer to “Business Segment Operating Results” later in this section for additional discussion of changes in cost of sales.

Selling, general and administrative (“SG&A”) expense increased in 2024,2025, primarily driven by higher sales across most segments. Selling, general and administrativeSG&A expense as a percentage of net sales was 15.9%15.2% for 2024,2025, compared with 15.1%15.9% for 2023.2024. Corporate expense in 20242025 was $77.8$87.5 million, compared with $65.6$77.8 million in 2023,2024, with the increase primarily related to higher compensation expense, including higher stock-based compensation as well as higher consulting and legal costs.

Research and developmentR&D expense decreasedincreased in 2024,2025, primarily driven by a decreaseincreases within theour Digital ImagingImaging, segment.Aerospace and Defense Electronics, and Instrumentation segments.

Acquired intangible asset amortization for 20242025 was $198.0$216.6 million, compared with $196.7$198.0 million for 2023.2024, with the increase primarily related to current and prior year acquisitions.

Operating income decreasedincreased in 20242025, primarily driven by higher operating income in each segment, including incremental operating income related to current and prior year acquisitions as well as $52.5 million of pretax, non-cash trademark impairments recorded in 2024. No comparativetrademark amountsimpairments were recorded in 2023.2025.

The income tax provision considers income, permanent items, tax credits,credits and various statutory tax rates. The effective tax rate decreasedincreased in 20242025 compared towith 20232024, primarily due to lower reversals of unrecognized tax benefits in 2024 as well as lower research and development tax credits in 2024.2025. See Note 9 for further information regarding our income taxes.

Our 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, components and subsystems for wireless and satellite communicationscommunications, and general aviation batteries.

Our Aerospace and Defense Electronics segment net sales for 20242025 increased 6.9%, compared with 2023.36.3%. Operating income for 20242025 increased 11.1%, compared with 2023.18.2%.

TheTotal 2024year 2025 net sales increaseincluded compared with 2023 reflected $34.7$244.2 million ofin higherincremental net sales from current year acquisitions. Net sales increased due to a $277.6 million increase for defense electronics and $15.6a $4.3 million of higher salesincrease for aerospace electronics.

Our Engineered Systems segment net sales for 20242025 increaseddecreased 0.3%, compared with 2023.0.9%. Operating income for 20242025 decreasedincreased 26.4%, compared with 2023.41.6%.

The global trade environment continues to be highly dynamic. There have been continuing significant tariffs and trade sanctions between the United States and other countries, including China. China has also restricted the export of certain rare earth minerals that we use in our products, which could disrupt the supply chain for these minerals and components made from these materials. Tariffs, trade restrictions and retaliatory measures could result in revenue reductions, cost increases on material used in our products or significant production delays, which could adversely affect our business, financial condition, operational results and cash flows. Our manufacturing facilities span across many countries which helps us mitigate the impact of certain tariffs and trade restrictions. Also, consistent with our strategy, we continually optimize our operations and take measures to contain costs to reduce the impact from tariffs.tariffs or other inflationary pressures. We may also implement additional pricing actions to mitigate the impact of these tariffs.tariffs or other inflationary pressures. We have been working to minimize potential delivery delays and shortages of components and raw materials needed for certain products we manufacture. To date, we believe our strategies have helped minimize our exposure to these conditions. In February 2026, the U.S. Supreme Court issued a ruling invalidating certaintariffs tariffs.under SignificantInternational uncertaintyEmergency existsEconomic regardingPowers Act (IEEPA). We filed for IEEPA refunds during the timingfirst half of 2026, and amountwe began receiving these refunds in the second quarter of any2026. potentialWe tariffalso refunds.continue to pay tariffs, as required. We will continue to assess these developments as additional information becomes available.

Further U.S. Government shutdowns could negatively impact our businesses. Previous U.S. Government shutdowns have resulted in delays in anticipated contract awards, issuances of export licenses, shipments and payments of invoices for several of our businesses.

The Company iscontinues currentlyto benefitingbenefit from increased global defense spending.

(a) Net sales exclude inter-segment sales of $5.3$18.0 million and $3.8$23.3 million for the firstsecond quarter and six months of 20262026, respectively, and $7.2 million and $11.0 million for the second quarter and six months of 2025, respectively.

FirstSecond Quarter Results

The following is a discussion of our 2026 firstsecond quarter results compared with the firstsecond quarter results of 2025. Comparisons are with the corresponding reporting period of 2025 unless noted otherwise.

Our firstsecond quarter of 2026 net sales increased 7.6%, primarily due to higher sales in most segments.9.8%. Net income attributable to Teledyne for the firstsecond quarter of 2026 increased 20.3%,19.9%, primarily driven by an increase in sales and an increase in overall operating margin. Net income per diluted share was $4.85$5.37 for the firstsecond quarter of 2026, compared with net income per diluted share of $3.99.$4.43.

The firstsecond quarter of 2026 net sales compared with the firstsecond quarter of 2025 reflected higher net sales in the Digital Imaging, Instrumentation and Aerospace and Defense Electronics segments, partially offset by lower net sales in the Engineered Systemseach segment. The firstsecond quarter of 2026 included $33.3$12.2 million in incremental sales from recent acquisitions, which are included within the Digital Imaging,Imaging and Instrumentation and Aerospace and Defense Electronics segments.

Cost of sales increased $55.9$55.3 million in the firstsecond quarter of 2026, primarily driven by higher net sales.sales partially offset by tariff refunds, primarily within the Digital Imaging segment. Cost of sales as a percentage of net sales decreased for the firstsecond quarter of 2026, to 56.8%55.6% from 57.3%.57.4%.

Selling, general and administrative (“SG&A”) expense increased $3.5$29.3 million in the firstsecond quarter of 2026 primarily due to higher net sales, including net sales related to 2026 and 2025 acquisitions. SG&A expense as a percentage of net sales decreasedincreased to 15.2%15.6% for the firstsecond quarter of 2026 compared with 16.1%.15.2%. Corporate expense, which is included in SG&A expense, was $19.0$28.0 million for the firstsecond quarter of 2026 compared with $22.2$21.7 million, with the decreaseincrease related to lowerhigher transactioncompensation andcosts, integrationincluding costs.incentive compensation as well as higher professional services. Stock-based compensation expense was $5.6$13.9 million for the firstsecond quarter of 2026 compared with $8.9$11.3 million.

R&D expense increased $10.3$7.8 million in the firstsecond quarter of 2026 primarily due to higher R&D expense in the Digital Imaging segment.

Acquired intangible asset amortization for the firstsecond quarter of 2026 was $57.6$56.0 million compared with $52.0$54.6 million, with the increase primarily related to 20252026 and 20262025 acquisitions across multiple segments.

Pension service expense is included in both cost of sales and SG&A expense. For the firstsecond quarter of 2026 and 2025, pension service expense was $1.2 million and $1.5 million, respectively.

Operating income for the firstsecond quarter of 2026 increased 13.5%.19.8%. The firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, reflected higher operating income in eachthe segment,Digital Imaging, Aerospace and Defense Electronics and Engineered Systems segments, including incremental operating income related to 2026 and 2025 acquisitions.

Interest and debt expense, net of interest income, was $12.3$13.6 million for the firstsecond quarter of 2026 compared with $17.3$17.6 million, with the decrease related to lower outstanding borrowings compared to the firstsecond quarter of 2025. Non-service retirement benefit income was $2.7$2.6 million for the firstsecond quarter of 2026 compared with $2.8$2.7 million. Other income (expense), net, was expense of $5.9$0.9 million for the firstsecond quarter of 2026 andcompared forwith the first quarterexpense of 2025.$2.7 million. Other income (expense), net, primarily consisted of foreign currency exchange losses for the firstsecond quarter of 2026 and for the first quarter of 2025.

The firstsecond quarter of both the 2026 and 2025 income tax provision considers income, permanent items, tax credits and various statutory tax rates.

(a) The firstsecond quarter of 2026 and 2025 includes net discrete income tax benefits of $8.0$1.2 million and $3.7$8.4 million, respectively.

Net sales increased primarily due to higher sales of infrared imaging detectors, components and subsystems for both defense and commercial applications as well as higher surveillance systems, industrial and unmannedscientific airimaging systemssystems, forand defenseX-ray applications.products. Sales of infrared imaging detectors, components and subsystems increased $18.9$29.0 million, sales of surveillance systems increased $8.9$15.5 million, and sales of unmannedindustrial airand scientific imaging systems increased $11.4$9.1 million, and sales of X-ray products increased $7.1 million. The firstsecond quarter of 2026 included $8.0$6.1 million in incremental Digital Imaging sales from recent acquisitions.

Cost of sales increased primarily due to higher net sales,sales as well as increased inventory reserves, partially offset by favorable product mix.mix and tariff refunds. The cost of sales percentage decreased during the period due to favorable product mix.mix and tariff refunds. SG&A expense increased primarily due to higher net sales, and SG&A expense as a percentage of net sales decreased. R&D expense and R&D expense as a percentage of net sales increased primarily due to the timing of FLIR product development activities, including both defense and commercial development activities. Acquired intangible asset amortization increased,increased slightly, and acquired intangible asset amortization as a percentage of net sales decreased.

Operating income increased primarily due to higher net sales andsales, favorable product mix,mix and tariff refunds, partially offset by higher R&D expense as a percentage of net sales. As a result, operating income as a percentage of net sales increased.

Net sales increased due to higher sales in the Marine Instrumentation and Environmental Instrumentationeach product lines.line. Sales of Marine Instrumentation increased $13.5$9.7 million due to stronger offshore energy and defense markets. Sales of Environmental Instrumentation increased $7.3$7.2 million primarily due to stronger sales of gas detection products. Test and Measurement Instrumentation decreasedincreased $2.7$3.3 million. The firstsecond quarter of 2026 included $5.0$6.1 million in incremental Environmental Instrumentation sales from recent acquisitions.

Cost of sales increased due to higher net sales and unfavorable product mix. TheAs a result, the cost of sales percentage increased. SG&A expense increased, and SG&A expense as a percentage of net sales increased. R&D expense increased in each product line,slightly, and R&D expense as a percentage of net sales decreased slightly. Acquired intangible asset amortization and acquired intangible asset amortization as a percentage of net sales increased slightly due to the 2026 acquisition of DD-Scientific.

Cost of sales increased due to higher net sales.sales Theand unfavorable product mix. As a result, the cost of sales percentage decreased due to favorable product mix.increased. SG&A expense increased, and SG&A expense as a percentage of net sales decreased due to higher transaction and integration costs in 2025 as a result of acquisitions.increased. R&D expense increased,increased in each product line, and R&D expense as a percentage of net sales remaineddecreased reasonably consistent between the two periods.slightly. Acquired intangible asset amortization andincreased due to the 2026 acquisition of DD-Scientific while acquired intangible asset amortization as a percentage of net sales increasedremained primarilyconsistent duefor toboth the 2025 acquisitions.periods.

Operating income increased primarily due to increased net sales, and operating income as a percentage of net sales increaseddecreased primarily due to favorableunfavorable product mix.

Net sales decreasedincreased primarily due to lowerhigher sales of $2.7 million for engineered products and lower sales of $0.1 million for energy systems.products.

Cost of sales decreasedincreased primarily due to lowerhigher net salessales, andpartially offset by favorable program mix. Cost of sales as a percentage decreased due to favorable program mix. SG&A expense increased slightly due to higher employee compensation costs, and SG&A expense as a percentage of net sales increased due to higher employee compensation costs.decreased.

Operating income increased primarily due to favorable program mix, partially offset by lowerhigher net sales and favorable program mix. As a result, operating income as a percentage of net sales increased due to favorable program mix.increased.