TELEDYNE TECHNOLOGIES INC

Previous wording

Our strategy continues to emphasize growth in our four business segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics 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, product development and once again stock repurchases. 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, we seek to create new products to grow our company and expand our addressable markets. We continually evaluate our businesses to ensure that they are aligned with our strategy.

Current wording

Our strategy continues to emphasize growth in our four business segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics 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, product development and stock repurchases. 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, we seek to create new products to grow our company and expand our addressable markets. We continually evaluate our businesses to ensure that they are aligned with our strategy.

Previous wording

Consistent with our strategy, we completed two acquisitions in 2023. The financial results of the completed acquisitions have been included since the respective date of each acquisition. Subsequent to the end of the first quarter of 2024, we completed one acquisition, which is part of the Instrumentation segment. See Note 2 and Note 15 for additional information about our recent acquisitions.

Current wording

Consistent with our strategy, we completed two acquisitions each in 2024 and in 2023. The financial results of the completed acquisitions have been included since the respective date of each acquisition.

Previous wording

We had previously assumed no full year sales growth in industrial automation as well as test and measurement markets. However, those markets weakened more than planned in the first quarter, and we now forecast full year sales for products in these markets to decline meaningfully in 2024.

Current wording

We had previously assumed no full year sales growth in industrial automation markets as well as electronic test and measurement markets. However, those markets weakened more than planned in the first half of the year.

Previous wording

We have experienced supply chain challenges, including long lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand. These supply chain challenges have also delayed our ability to timely convert backlog to revenue. Although perhaps to a lesser extent compared to recent years, we expect cost inflation impacts and supply chain constraints to continue into 2024.

Current wording

We have experienced supply chain challenges, including long lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand. These supply chain challenges have also delayed our ability to timely convert backlog to revenue. Although to a lesser extent compared to recent years, we expect cost inflation impacts and supply chain constraints to continue during the remainder of 2024.

Previous wording

To date, we have not been materially impacted by the conflict in Israel and its effect on neighboring regions. We do not have material assets in Israel. Our total net sales from Israel in the first three months of 2024 and the full year 2023 was approximately 1% of total net sales, respectively. It is too early to determine the full extent of the impact this conflict could have on our business and our operations, including the impact to our suppliers from these regions, and our assessment of the potential impacts is ongoing.

Current wording

To date, we have not been materially impacted by the conflict in Israel and its effect on neighboring regions. We do not have material assets in Israel. Our total net sales to Israel in the first six months of 2024 and the full year 2023 was approximately 1% of total net sales, respectively. It is too early to determine the full extent of the impact this conflict could have on our business and our operations, including the impact to our suppliers from these regions, and our assessment of the potential impacts is ongoing.

Previous wording

The following is a discussion of our 2024 first quarter results compared with the first quarter results of 2023. Comparisons are with the corresponding reporting period of 2023, unless noted otherwise.

Current wording

The following is a discussion of our 2024 second quarter results compared with the second quarter results of 2023. Comparisons are with the corresponding reporting period of 2023, unless noted otherwise.

Previous wording

Our first quarter of 2024 net sales decreased 2.4%. Net income attributable to Teledyne for the first quarter of 2024 decreased 0.1%. Net income per diluted share was $3.72 for the first quarter of 2024, compared with net income per diluted share of $3.73.

Current wording

Our second quarter of 2024 net sales decreased 3.6%. Net income attributable to Teledyne for the second quarter of 2024 decreased 2.8%. Net income per diluted share was $3.77 for the second quarter of 2024, compared with net income per diluted share of $3.87.

Previous wording

Cost of sales decreased $20.5 million in the first quarter of 2024 primarily driven by lower net sales. Cost of sales as a percentage of net sales decreased slightly for the first quarter of 2024 to 57.0% from 57.2%.

Current wording

Cost of sales decreased $24.8 million in the second quarter of 2024 primarily driven by lower net sales. Cost of sales as a percentage of net sales increased for the second quarter of 2024 to 56.9% from 56.6%.

Previous wording

Acquired intangible asset amortization for the first quarter of 2024 was $49.4 million compared with $49.7 million.

Current wording

Acquired intangible asset amortization for the second quarter of 2024 was $49.1 million compared with $49.3 million.

Previous wording

Pension service expense is included in both cost of sales and SG&A expense. For the first quarter of 2024 and 2023, pension service expense was $1.5 million. For 2024, the weighted-average discount rate used to determine the benefit obligation for the domestic qualified pension plans is 6.86% compared with 5.71% in 2023.

Current wording

Pension service expense is included in both cost of sales and SG&A expense. For the second quarter of 2024 and 2023, pension service expense was $1.5 million. For 2024, the weighted-average discount rate used to determine the benefit obligation for the domestic qualified pension plans is 6.86% compared with 5.71% in 2023.

Previous wording

Operating income for the first quarter of 2024 decreased 3.4%. The first quarter of 2024, compared with the first quarter of 2023, reflected lower operating income in the Digital Imaging and Engineered Systems segment, partially offset by higher operating income in the Aerospace and Defense Electronics and Instrumentation segments.

Current wording

Operating income for the second quarter of 2024 decreased 3.6%. The second quarter of 2024, compared with the second quarter of 2023, reflected lower operating income in the Digital Imaging and Engineered Systems segments, partially offset by higher operating income in the Aerospace and Defense Electronics and Instrumentation segments.

Previous wording

SG&A expense, including research and development expense, decreased $4.2 million in the first quarter of 2024. SG&A expense as a percentage of net sales was 21.9% for the first quarter of 2024, compared with 21.8%. Corporate expense, which is included in SG&A expense, was $20.1 million for the first quarter of 2024, compared with $17.4 million, with the increase primarily related to higher compensation expense, including higher stock-based compensation expense. Stock-based compensation expense was $12.0 million for the first quarter of 2024 compared with $7.9 million. The first quarter of 2024 also included $2.2 million of FLIR-related integration costs, including employee separation costs, facility consolidation costs and facility lease impairments with no comparable amount in the previous year.

Current wording

SG&A expense, including research and development expense, decreased $20.7 million in the first six months of 2024 due to lower sales as well as lower research and development expense, with the lower research and development expense primarily related to FLIR integration-related cost-reduction efforts implemented in the second half of 2023. SG&A expense as a percentage of net sales for the first six months of 2024 and 2023 was 21.8%. Corporate expense, which is included in SG&A expense, was $38.4 million for the first six months of 2024, compared with $32.0 million, with the increase primarily related to higher compensation expense, including higher stock-based compensation expense. Stock-based compensation expense was $21.3 million for the first six months of 2024 compared with $16.3 million. The first six months of 2024 also included $3.2 million of FLIR-related integration costs, including employee separation costs, facility consolidation costs and facility lease impairments.

Previous wording

Interest and debt expense, net of interest income, was $12.7 million for the first quarter of 2024, compared with $21.0 million, with the decrease related to reduced outstanding borrowings with lower weighted average interest rates compared to the first quarter of 2023. Non-service retirement benefit income was $2.7 million for the first quarter of 2024 compared with $3.3 million. Other income and expense, net was income of $1.2 million for the first quarter of 2024 compared with expense of $1.1 million for the first quarter of 2023, with the difference primarily related foreign exchange gains in the first quarter of 2024 compared with foreign exchange losses in the first quarter of 2023.

Current wording

Interest and debt expense, net of interest income, was $28.5 million for the first six months of 2024, compared with $43.3 million, with the decrease related to reduced outstanding borrowings with lower weighted average interest rates compared to the first six months quarter of 2023. Non-service retirement benefit income was $5.4 million for the first six months of 2024 compared with $6.2 million for the first six months of 2023. Other income and expense, net was expense of $1.0 million for the first six months of 2024 compared with $4.5 million of other expense for the first six months of 2023, with the difference primarily related to lower foreign exchange losses in the first six months of 2024 compared with the first six months of 2023.

Previous wording

The first quarter income tax provision considers income, permanent items, tax credits, and various statutory tax rates. In both years, the first quarter discrete impact is primarily tax on stock-based compensation.

Current wording

The first six months income tax provision considers income, permanent items, tax credits, and various statutory tax rates. In both years, the first six months discrete impact is primarily tax on stock-based compensation.

Previous wording

Cost of sales decreased primarily due to decreased net sales partially offset by product mix. As a result of less favorable product mix, the cost of sales percentage increased during the period. SG&A expense and SG&A expense as a percentage of net sales decreased primarily due to lower research and development costs, partially offset by higher severance and facility consolidation cost.

Current wording

Cost of sales decreased primarily due to decreased net sales partially offset by product mix. As a result of unfavorable product mix, including lower industrial automation imaging systems net sales, the cost of sales percentage increased during the period. SG&A expense decreased due to lower net sales as well $22.3 million in lower research and development costs. SG&A expense as a percentage of net sales decreased primarily due to lower research and development cost. Research and development costs decreased primarily due to FLIR integration-related cost-reduction efforts implemented in the second half of 2023.

Previous wording

Cost of sales decreased primarily due to lower net sales. The cost of sales percentage decreased due to favorable product mix, including increased margins in our marine instrumentation product line. SG&A expense increased slightly due to higher research and development expense in the period, and SG&A expense as a percentage of net sales also increased slightly.

Current wording

Cost of sales decreased primarily due to favorable product mix. The cost of sales percentage decreased due to favorable product mix, including improved margins in our Marine Instrumentation product line. SG&A expense increased slightly due to higher research and development expense in the period, and SG&A expense as a percentage of net sales also increased slightly.

Previous wording

Operating income increased primarily due to stronger marine instrumentation sales and improved margins, and operating income as a percentage of net sales increased due to improved product margins at marine instrumentation.

Current wording

Operating income increased primarily due to higher Marine Instrumentation sales and improved margins, and operating income as a percentage of net sales increased due to improved product margins at Marine Instrumentation.

Previous wording

Net sales decreased due to lower sales at our test and measurement instrumentation and environmental instrumentation product lines, partially offset by increased sales in our marine instrumentation product line. Sales of marine instrumentation increased $19.6 million due to the ongoing recovery in offshore energy markets. Sales of test and measurement instrumentation and environmental instrumentation decreased $15.9 million and $6.8 million, respectively, due to end market weakness.

Current wording

Net sales increased due to higher sales in our Marine Instrumentation product line, partially offset by lower sales at our Test and Measurement Instrumentation and Environmental Instrumentation product lines. Sales of Marine Instrumentation increased $40.0 million due to the ongoing recovery in offshore energy markets as well as stronger defense market sales. Sales of Test and Measurement Instrumentation decreased $29.4 million, and sales of Environmental Instrumentation decreased $8.6 million, respectively, primarily due to end market weakness.

Previous wording

Net sales increased due to a $10.1 million increase in aerospace electronics and a $2.4 million increase in defense electronics.

Current wording

Net sales increased due to a $4.4 million increase in defense electronics and a $4.0 million increase in aerospace electronics.

Previous wording

Net sales decreased due to lower sales of $10.1 million for engineered products and lower sales of $0.8 million for energy systems.

Current wording

Net sales decreased due to lower sales of $8.9 million for engineered products and lower sales of $1.3 million for energy systems.

Previous wording

Cost of sales decreased primarily due to lower net sales as well as certain unfavorable changes in contract estimates. The cost of sales percentage increased during the period due primarily to product mix and unfavorable changes in contract estimates. SG&A expense increased slightly, and SG&A expense as a percentage of net sales increased.

Current wording

Cost of sales decreased primarily due to lower net sales as well as unfavorable program mix. The cost of sales percentage increased during the period due primarily to unfavorable program mix. SG&A expense increased due to higher selling expense, and SG&A expense as a percentage of net sales increased.

Previous wording

Our principal cash and capital requirements are to fund working capital needs, capital expenditures, income tax payments, and debt service requirements, as well as acquisitions. We may deploy cash for the stock repurchase program. It is anticipated that cash on hand, operating cash flow, together with available borrowings under our $1.15 billion credit facility, will be sufficient to meet these requirements. To support acquisitions, we may need to raise additional capital. No cash pension contributions have been made since 2013 or are planned for the remainder of 2024 for the domestic qualified pension plans.

Current wording

Our principal cash and capital requirements are to fund working capital needs, capital expenditures, income tax payments, and debt service requirements, as well as acquisitions. We may deploy cash for the stock repurchase program. It is anticipated that cash on hand, operating cash flow, together with available borrowings under our $1.20 billion credit facility, will be sufficient to meet these requirements. To support acquisitions, we may need to raise additional capital. No cash pension contributions have been made since 2013 or are planned for the remainder of 2024 for the domestic qualified pension plans.

Previous wording

Cash and cash equivalents totaled $912.4 million at March 31, 2024 compared with $648.3 million at December 31, 2023. Cash equivalents consist of highly liquid money-market mutual funds with maturities of three months or less when purchased.

Current wording

Cash and cash equivalents totaled $443.2 million at June 30, 2024 compared with $648.3 million at December 31, 2023. Cash equivalents consist of highly liquid money-market mutual funds with maturities of three months or less when purchased.

Previous wording

Total debt at March 31, 2024 was $3,246.3 million compared with $3,244.9 million at December 31, 2023. Subsequent to the end of the first quarter of 2024, the Company made a $450 million debt maturity payment on the Senior notes due April 2024.

Current wording

Total debt at June 30, 2024 was $2,797.4 million compared with $3,244.9 million at December 31, 2023. In the first half of 2024, we made a $450 million debt maturity payment on the Senior notes due April 2024.

Previous wording

At March 31, 2024, $1,128.2 million was available under the $1.15 billion credit facility, after reductions of $21.8 million in outstanding letters of credit.

Current wording

At June 30, 2024, $1,177.7 million was available under the $1.20 billion credit facility, after reductions of $22.3 million in outstanding letters of credit.

Previous wording

Our bank credit agreements, which includes our $1.15 billion credit facility expiring March 2026 and our $150.0 million term loan due October 2024, require us to comply with various financial and operating covenants. At March 31, 2024, we were in compliance with these covenants.

Current wording

Our bank credit agreements, which includes our $1.20 billion credit facility expiring June 2029 and our $150.0 million term loan due October 2024, require us to comply with various financial and operating covenants. At June 30, 2024, we were in compliance with these covenants.

Previous wording

In April 2024, our Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $1.25 billion of Teledyne’s common stock. This authorization superseded prior open stock repurchase programs authorized by the Board of Directors. The newly 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

Current wording

In April 2024, our Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $1.25 billion of our common stock. This authorization superseded prior open stock repurchase programs authorized by the Board of Directors. The newly 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

Previous wording

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 with cash on hand and available borrowings under the Company's credit facility. No repurchases under any authorizations were made in the first quarter of 2024.

Current wording

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. We currently intend to fund future share repurchases with cash on hand and available borrowings under our credit facility.

Previous wording

Net cash provided by operating activities was $291.0 million for the first three months of 2024 compared with $203.0 million, driven primarily by stronger working capital conversion in the first three months of 2024.

Current wording

Net cash provided by operating activities was $609.7 million for the first six months of 2024 compared with $393.5 million, driven primarily by stronger working capital conversion in the first six months of 2024, including stronger account receivable collection and higher contract liabilities from customer advances.

Previous wording

Net cash used in investing activities was $15.9 million for the first three months of 2024 compared with $76.9 million. During the first three months of 2024, we spent $0.0 million on acquisitions as compared with $52.5 million. Capital expenditures for the first three months of 2024 and 2023 were $15.9 million and $24.4 million, respectively. We currently plan to invest approximately $100 million for capital expenditures in 2024.

Current wording

Net cash used in investing activities was $157.1 million for the first six months of 2024 compared with $104.5 million. During the first six months of 2024, we spent $123.6 million on acquisitions as compared with $53.5 million. Capital expenditures for the first six months of 2024 and 2023 were $33.6 million and $51.7 million, respectively. We currently plan to invest approximately $100 million for capital expenditures in 2024.

Previous wording

For additional discussion of the application of the critical accounting policies and other accounting policies, see Note 1 to these condensed consolidated Financial Statements and also Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Note 2 of the Notes to Consolidated Financial Statements included in Teledyne’s 2023 Form 10-K.

Current wording

For additional discussion of the application of the critical accounting policies and other accounting policies, see Note 1 to the condensed consolidated Financial Statements and also Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Note 2 of the Notes to Consolidated Financial Statements included in Teledyne’s 2023 Form 10-K.

Previous wording

From time to time we make, and this report contains, forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995, directly or indirectly relating to sales, earnings, operating margin, growth opportunities, acquisitions, product sales, capital expenditures, stock repurchases, pension matters, stock-based compensation expense, the credit facility, interest expense, severance, relocation and facility consolidation costs, environmental remediation costs, taxes, exchange rate fluctuations and strategic plans. Forward-looking statements are generally accompanied by words such as “estimate”, “project”, “predict”, “believe” or “expect”, that convey the uncertainty of future events or outcomes. All statements made in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other sections of this Form 10-Q that are not historical in nature should be considered forward-looking.

Current wording

From time to time we make, and this report contains, forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995, directly or indirectly relating to sales, sales growth, earnings, operating margin, growth opportunities, acquisitions, product sales, capital expenditures, stock repurchases, pension matters, stock-based compensation expense, the credit facility, interest expense, severance, relocation and facility consolidation costs, environmental remediation costs, taxes, exchange rate fluctuations and strategic plans. Forward-looking statements are generally accompanied by words such as “estimate”, “project”, “predict”, “believe” or “expect”, that convey the uncertainty of future events or outcomes. All statements made in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other sections of this Form 10-Q that are not historical in nature should be considered forward-looking.