TELEDYNE TECHNOLOGIES INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 30, 2025

Note 1. General

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Teledyne Technologies Incorporated (“Teledyne” or the “Company”) pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in notes to consolidated financial statements have been condensed or omitted pursuant to such rules and regulations, but resultant disclosures are in accordance with generally accepted accounting principles in the United States (“GAAP”) as they apply to interim reporting. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes in Teledyne’s Annual Report on Form 10-K for the fiscal year ended December 29, 2024 (“2024 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, Teledyne’s consolidated financial position as of March 30, 2025 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the first quarter ended March 30, 2025. The results of operations and cash flows for the period ended March 30, 2025 are not necessarily indicative of the results of operations or cash flows to be expected for any subsequent quarter or the full fiscal year.

Recent Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid, disaggregated by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard requires public entities, on an interim and annual basis, to provide disclosure of specified information about costs and expenses in the notes to the financial statements. The new standard is effective for fiscal years beginning after December 15, 2026, and interim periods with fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements.

Other ASUs issued but not effective until after March 30, 2025, are not expected to have a material effect on the Company’s consolidated financial position, annual results of operations and/or cash flows.

Note 2. Business Acquisitions

2025 Acquisitions

Micropac

During the first quarter of 2025, the Company acquired Micropac Industries, Inc. (“Micropac”) for approximately $51.2 million in cash, net of cash acquired. Micropac, founded in 1963 and headquartered in Garland, Texas, designs and manufactures microelectronic circuits, optoelectronic components and sensor and display assemblies primarily for military, aerospace and medical applications. Micropac will be part of the Aerospace & Defense Electronics segment. The Company funded the acquisition from cash on hand. Goodwill resulting from the Micropac acquisition will not be deductible for tax purposes.

Optical Systems and Advanced Electronics Systems businesses

During the first quarter of 2025, the Company acquired select aerospace and defense electronics businesses of Excelitas Technologies Corp. (“Excelitas”) for approximately$706.4 million in cash, net of cash acquired, and subject to certain adjustments. The acquisition includes the Optical Systems (“OS”) business known under the Qioptiq® brand based in Northern Wales, UK, as well as the U.S. based Advanced Electronic Systems (“AES”) business. The OS and AES businesses will be part of the Aerospace and Defense Electronics segment. The Company funded the acquisition from available borrowings on the credit facility as well as from cash on hand. Goodwill resulting from the acquisition of the UK operations will not be deductible for tax purposes, and goodwill resulting from the acquisition of the U.S. operations will be deductible for tax purposes.

2024 Acquisitions

Adimec

During the second quarter of 2024, the Company acquired Adimec Holding B.V. and its subsidiaries (“Adimec”) for $88.7 million in cash, net of cash acquired, and subject to certain adjustments. Adimec, founded in 1992 and headquartered in Eindhoven, Netherlands, develops customized high-performance industrial and scientific cameras. Adimec is part of the Digital Imaging segment. Goodwill resulting from the Adimec acquisition will not be deductible for tax purposes.

Valeport

During the second quarter of 2024, the Company acquired Valeport Holdings 2019 Limited and its affiliates (“Valeport”) for $35.0 million in cash, net of cash acquired, subject to certain adjustments. Valeport, founded in 1969 and headquartered in Totnes, UK, designs and manufactures underwater sensors for environmental, energy, construction and defense applications. Valeport is part of the Marine Instrumentation product line within the Instrumentation segment. Goodwill resulting from the Valeport acquisition will not be deductible for tax purposes.

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

(a) Net of cash acquired

(a) Net of cash acquired

The Company’s cost to acquire these acquisitions was allocated to the assets acquired and liabilities assumed based upon their respective fair values as of the date of the completion of the acquisition. The differences between the fair value of the consideration paid and the estimated fair value of the assets and liabilities acquired was recorded as goodwill. The fair value of the acquired identifiable assets and liabilities for the OS and AES businesses, Micropac and Adimec are provisional pending finalization of the Company’s acquisition accounting, including the measurement of tax basis in certain jurisdictions and the resulting deferred taxes that might arise from book and tax basis differences, if any. Pro forma results of operations, the revenue and net income subsequent to the acquisition date, and a more detailed breakout of the major classes of assets and liabilities acquired for these acquisitions have not been presented because the effects of these acquisitions both individually and in the aggregate were not material to the Company's financial results. The significant factors that resulted in recognition of goodwill for the 2025 and 2024 acquisitions included the acquired businesses’ market positions, growth opportunities in the markets in which they operate, their experienced work force and established operating infrastructures. The results of these acquisitions have been included in Teledyne’s results since the dates of their respective acquisition.

Note 3. Business Segments

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

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

In the first quarter of 2025, the Company completedtwo acquisitions, and the financial results of these acquisitions have been included since the date of the acquisition and are part of the Aerospace and Defense Electronics segment. See Note 2 to these Notes to Condensed Consolidated Financial Statements for information regarding these 2025 acquisitions.

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

(a) Net sales exclude inter-segment sales of $3.8 million and $4.8 million for the first quarter of 2025 and 2024, respectively.

Product Lines

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

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

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

Note 4. Revenue Recognition and Contract Balances

Approximately 70% of the Company's net sales are recognized at a point in time, with the remaining 30% of net sales recognized over time. The Company disaggregates its revenue from contracts with customers by customer type and geographic region for each segment, as management believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

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

(b) Primarily commercial sales

(c) Geographic region by destination

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

(b) Primarily commercial sales

(c) Geographic region by destination

With the exception of the Engineered Systems segment, net sales in each segment are primarily derived from fixed price contracts. Net sales in the Engineered Systems segment are typically between 45% and 55% fixed price contracts in a given reporting period, with the balance of net sales derived from cost-reimbursable type contracts. For the three months ended March 30, 2025, approximately 47% of net sales in the Engineered Systems segment were derived from fixed price contracts.

Contract Liabilities

The Company recognized revenue of $98.3 million during the three months ended March 30, 2025, from contract liabilities that existed at the beginning of year.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the period end date and exclude unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of March 30, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $4,214.5 million. The Company expects approximately 77% of remaining performance obligations to be recognized into revenue within the next 12 months, with the remaining 23% recognized thereafter.

Changes in Contract Estimates at Completion

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

The net aggregate effects of these changes in estimates on contracts accounted for under the cost-to-cost method in the first three months of 2025 was $2.3 million of favorable operating income compared with $0.3 million of unfavorable operating income in the first three months of 2024. None of the effects of changes in estimates on any individual contract were material to the condensed consolidated statements of income (loss) for any period presented.

Note 5. Goodwill and Acquired Intangible Assets

Goodwill

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

Acquired intangible assets

Acquired intangible assets consisted of the following (in millions):

An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Based on the results of the Company’s annual assessment in the fourth quarter of 2024, all reporting units with the exception of the FLIR reporting unit in the Digital Imaging segment had estimated fair values that significantly exceeded their respective carrying value. At the assessment date in the fourth quarter of 2024, the estimated fair value of the FLIR reporting unit exceeded its carrying value by approximately $420 million, or 5%, and the FLIR reporting unit had $5,856.5 million of goodwill at the prior year assessment date. As of March 30, 2025, the FLIR reporting unit had $5,873.4 million of goodwill, with the change in value from the prior year assessment date related to the impact of foreign currency translation.

Although the assumptions used in the Company’s prior year discounted cash flow model and market approach are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results of the FLIR reporting unit. Changes in forecast estimates or the application of alternative assumptions could produce significantly different results. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure.

Although no impairment existed for the FLIR reporting unit as of the prior year assessment date, a non-cash impairment of goodwill could result from a number of circumstances, including different assumptions used in determining the fair value of the reporting unit, changes to customer spending priorities, or a sharp increase in interest rates without a corresponding increase in future net sales.

For all reporting units, including the FLIR reporting unit, there have been no events or changes in circumstances which indicate that it is more likely than not that the fair value of the reporting unit is below its carrying value. As such, no interim impairment review was required. The Company will perform its annual analysis during the fourth quarter of 2025.

Based on the results of the Company’s annual assessment in the fourth quarter of 2024, the estimated fair value of all material indefinite-lived trademarks, with the exception of the FLIR indefinite-lived trademark, significantly exceeded their respective carrying value. At the prior year annual assessment date, the FLIR indefinite-lived trademark value was reduced to $635.8 million, which represented the estimated fair value of the asset as of the prior year assessment date.

The most significant assumptions utilized in the determination of the fair value of the FLIR trademark were the net sales growth rates (including residual growth rates), discount rate, and royalty rate. Although the FLIR sales forecasts were based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results of the FLIR business. Changes in sales forecast estimates or the application of alternative assumptions could produce significantly different results. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. The royalty rate was driven by historical and estimated future profitability of the underlying FLIR business. The royalty rate may be impacted by significant adverse changes in long-term operating margins. Subsequent to the assessment made in the prior year, additional non-cash impairment of the trademark could result from a number of circumstances, including different assumptions used in determining the fair value of the trademark, changes to customer spending priorities, or a sharp increase in interest rates without a corresponding increase in future net sales.

For all indefinite-lived trademarks, including the FLIR trademark, there have been no events or changes in circumstances which indicate that it is more likely than not that the fair value of the trademark is below its carrying value. As such, no interim impairment review was required. The Company will perform its annual analysis during the fourth quarter of 2025.

Note 6. Supplemental Balance Sheet Information

Cash Equivalents

The Company had $99.7 million and $304.1 million of cash equivalents at March 30, 2025, and December 29, 2024, respectively. The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets.

Accounts Receivable, Net

Accounts receivable is presented net of an allowance for doubtful accounts of $15.6 million at March 30, 2025 and $15.5 million at December 29, 2024.

Inventories, Net

Inventories are stated at current cost, net of reserves for excess, slow moving and obsolete inventory. Inventories are primarily valued under the first-in, first-out method or the average cost method. Inventory balances are summarized as follows (in millions):

Product Warranty Costs

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

Note 7. Long-Term Debt

At March 30, 2025, $855.5 million was available under the $1.2 billion credit facility after reductions of $315.0 million in outstanding borrowings and $29.5 million in outstanding letters of credit. The Company’s bank credit agreements requires it to comply with various financial and operating covenants, and at March 30, 2025, the Company was in compliance with these covenants.

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 first quarter of 2025 includes net discrete income tax benefits of $3.7 million and $4.4 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 $8.9 million and $12.0 million for the first quarter of 2025 and 2024, respectively.

Stock option activity for the first quarter of 2025 is as follows:

On April 22, 2025, the Company granted approximately 63,000 stock options at an exercise price of $461.10 per share and a grant date fair value of $179.30 per share.

Restricted stock activity for the first quarter of 2025 is as follows:

On April 22, 2025, the Company granted approximately 71,000 time-based restricted stock units with a grant date fair value of $461.10 per share.

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 first quarter of 2024, the Company excluded approximately 0.2 million of stock options in the computation of diluted earnings per share because the effect of their inclusion would have been anti-dilutive. For the first quarter of 2025, the Company didnot have any stock options that would have been anti-dilutive.

Stock Repurchases

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 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 2025 or 2024.

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 first quarter ended March 30, 2025, and March 31, 2024, are as follows (in millions):

The reclassifications out of AOCI to net income for the first quarter ended March 30, 2025, and March 31, 2024 are as follows (in millions):