TELEDYNE TECHNOLOGIES INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 29, 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 June 29, 2025 and the consolidated results of operations, consolidated comprehensive income (loss) and consolidated cash flows for the second quarter and six months ended June 29, 2025. The results of operations and cash flows for the period ended June 29, 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 June 29, 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 is 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 which is based in Northern Wales, UK, as well as the U.S.-based Advanced Electronics Systems (“AES”) business (collectively, “OS and AES businesses”, or “Qioptiq”). The OS and AES businesses are 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, but 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 (Qioptiq) and Micropac 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, 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. The Company’s 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 the 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. In 2024, 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 Digital Imaging and Instrumentation segments. See Note 2 to these condensed consolidated financial statements for information regarding these 2025 and 2024 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 $7.2 million and $11.0 million for the second quarter and first six months of 2025, respectively, and $8.5 million and $13.3 million for the second quarter and first six months of 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.

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 six months ended June 29, 2025, approximately 47% of net sales in the Engineered Systems segment were derived from fixed price contracts.

Contract Liabilities

The Company recognized revenue of $152.7 million during the six months ended June 29, 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 June 29, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $4,452.8 million. The Company expects approximately 73% of remaining performance obligations to be recognized into revenue within the next 12 months, with the remaining 27% 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 the 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 six months of 2025 was $1.9 million of favorable operating income compared with $2.1 million of favorable operating income in the first six 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 June 29, 2025, the FLIR reporting unit had $5,922.1 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 $102.1 million and $304.1 million of cash equivalents at June 29, 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 estimated credit losses of $14.5 million at June 29, 2025 and $15.5 million at December 29, 2024.

Inventories, Net

Inventories are stated at the lower of cost or net realizable value and primarily valued on an average cost or first-in, first-out method. Inventory adjustments are recorded when inventory is considered to be excess or obsolete based upon an analysis of actual on-hand quantities on a part-level basis to forecasted product demand and historical usage. 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 June 29, 2025, $1,168.0 million was available under the $1.2 billion credit facility after reductions of $32.0 million in outstanding letters of credit. The Company’s bank credit agreements requires it to comply with various financial and operating covenants, and at June 29, 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 second quarter of 2025 includes net discrete income tax benefits of $8.4 million and the first six months of 2025 includes net discrete income tax benefits of $12.1 million, respectively. The second quarter of 2024 includes net discrete income tax benefits of $0.7 million and the first six months of 2024 includes net discrete income tax benefits of $5.1 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 $11.3 million and $20.2 million for the second quarter and first six months of 2025, respectively, and $9.3 million and $21.3 million for the second quarter and first six months of 2024, respectively.

Stock option activity for the second quarter and first six months of 2025 is as follows:

(a) In the second quarter of 2025, the Company granted stock options with a grant date fair value of $179.30 per share.

Restricted stock activity for the second quarter and first six months of 2025 is as follows:

Note 11. Earnings Per Share

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

For the second quarter and first six months 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 second quarter and first six months of 2025, the Company didnot have any stock options that would have been anti-dilutive.

Stock Repurchases

In July 2025, our Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $2.0 billion of Teledyne’s common stock. This authorization superseded the remaining 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 intend to fund future share repurchases, if any, with cash on hand and available borrowings under the Company’s credit facility. No repurchases under any authorizations were made in the second quarter and first six months of 2025.

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 second quarter and six months ended June 29, 2025, and June 30, 2024, are as follows (in millions):

The reclassifications out of AOCI to net income for the second quarter ended June 29, 2025, and June 30, 2024 are as follows (in millions):

Note 13. Derivative Instruments and Hedging Activities

The Company’s primary exposure to market risk relates to changes in foreign currency exchange rates and interest rates. The Company’s primary foreign currency risk management objective is to protect the U.S. dollar value of future cash flows and minimize the volatility of reported earnings. During 2025, the Company entered into certain derivative contracts to reduce the volatility from translation of the Company’s euro denominated net investments. The Company does not use foreign currency forward contracts for speculative or trading purposes.

The Company mitigates exposure to foreign currency exchange rates and interest rates primarily through the following:

Designated Hedging Activities

The Company utilizes foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars for the Canadian companies, and in British pounds for the UK companies. As of June 29, 2025, foreign currency forward contracts in Canadian dollars designated as cash flow hedges have maturities ranging from September 2025 to February 2026. As of June 29, 2025, foreign currency forward contracts in British pounds designated as cash flow hedges have maturities ranging from September 2025 to February 2026.

The Company utilizes cross-currency swaps to hedge portions of the Company’s euro denominated net investments against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. In the first half 2025, the Company entered cross-currency swaps designated as net investment hedges with a total notional amount of €450.0 million to hedge portions of the Company’s euro denominated net investments against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. These cross-currency swaps mature between September 2026 and September 2030.

The Company converted a U.S. dollar denominated, variable rate debt obligation of a European subsidiary into a euro fixed rate obligation using a receive float, pay fixed cross-currency swap to reduce the variability of interest rates. This cross-currency swap matured in October 2024.

Non-Designated Hedging Activities

The Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. These foreign currency forward contracts are not designated as accounting hedges. The gain or loss resulting from a change in fair value of a derivative instrument that is not designated in accounting hedge is recognized immediately in earnings and intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings.

Derivative Instruments

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

(a) Effective portion, pre-tax

(b) Amount reclassified to offset earnings impact of liability hedged by cross-currency swap, used to hedge debt

Net deferred gains recorded in AOCI for the forward contracts that will mature in the next 12 months total $1.6 million, net of taxes. These gains are expected to be offset by anticipated losses in the value of the forecasted underlying hedged item.

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

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

Note 14. Fair Value Measurement

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

Financial Instruments Recorded at Fair Value

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

Gross derivative assets and liabilities are subject to legally enforceable master netting agreements, for which the Company has not elected to present net amounts on the condensed consolidated balance sheets. The effect of such right of setoff on the Company’s financial position was $0.2 million as of June 29, 2025, and December 29, 2024.

Financial Instruments Not Recorded at Fair Value

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

Teledyne estimates the fair value of its long-term debt based on debt of similar type, rating and maturity and at comparable interest rates. The Company’s long-term debt is considered a Level 2 and is valued based on observable market data. As of June 29, 2025, and December 29, 2024, the aggregate fair values of our borrowings were $2,446.0 million and $2,395.0 million, respectively, and the carrying values were $2,632.7 million and $2,666.2 million, respectively.

The cost, if any, to terminate off-balance sheet financial instruments (primarily letters of credit) is not significant.