Teledyne Technologies (TDY) 8-KTeledyne Technologies Reports Third Quarter Results

Exhibit 99.1

Review of Operations

Comparisons are with the third quarter of 2021, unless noted otherwise. In the current year, gain (loss) on debt extinguishment was presented as a separate line item on the income statement. Prior year amounts were reclassified to conform to current year presentation.

Digital Imaging

The Digital Imaging segment’s third quarter 2022 net sales were $777.9 million, compared with $760.6 million, an increase of 2.3%. Operating income was $133.7 million for the third quarter of 2022, compared with $94.9 million, an increase of 40.9%.

The third quarter of 2022 net sales increase primarily resulted from greater sales of industrial and scientific sensors and cameras, X-ray products, and commercial infrared imaging solutions, partially offset by lower sales of surveillance systems for defense applications. The third quarter of 2021 included $35.2 million in FLIR inventory step-up expense. Acquired intangible amortization expense for the third quarter of 2022 was $44.7 million compared with $50.1 million. Excluding these expenses, operating income declined slightly during the quarter.

Instrumentation

The Instrumentation segment’s third quarter 2022 net sales were $306.4 million, compared with $287.1 million, an increase of 6.7%. Operating income was $71.1 million for the third quarter of 2022, compared with $63.0 million, an increase of 12.9%.

The third quarter of 2022 net sales increase resulted from higher sales across all external product lines. Sales of test and measurement instrumentation increased $7.2 million, sales of environmental instrumentation increased $6.8 million, and sales of marine instrumentation increased $5.3 million, respectively. The increase in operating income primarily reflected the impact of higher sales and favorable product mix.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s third quarter 2022 net sales were $169.5 million, compared with $161.8 million, an increase of 4.8%. Operating income was $44.3 million for the third quarter of 2022, compared with $35.9 million, an increase of 23.4%.

The third quarter of 2022 net sales reflected higher sales of $6.9 million for aerospace electronics and $0.8 million for defense electronics. Operating income in the third quarter of 2022 reflected the impact of higher sales of aerospace electronics and improved margins across most product categories.

The Engineered Systems segment’s third quarter 2022 net sales were $109.8 million, compared with $102.4 million, an increase of 7.2%. Operating income was $11.9 million for the third quarter of 2022, compared with $11.5 million, an increase of 3.5%.

Cash provided by operating activities was $268.9 million for the third quarter of 2022, compared with $192.8 million. The third quarter of 2022 reflected stronger trade receivable collections compared with the third quarter of 2021. Depreciation and amortization expense for the third quarter of 2022 was $80.8 million compared with $90.2 million. Non-cash inventory step-up expense related to FLIR was $35.2 million for the third quarter of 2021, and there was no comparable amount recorded in the third quarter of 2022. Capital expenditures for the third quarter of 2022 were $16.7 million compared with $29.2 million.

During the third quarter of 2022, Teledyne repaid $30.0 million of floating rate debt which reduced its term loan due May 2026. Teledyne received $0.9 million from the exercise of stock options in the third quarter of 2022 compared with $5.5 million.

As of October 2, 2022, net debt was $3,439.1 million which is calculated as total debt of $3,918.4 million, net of cash and cash equivalents of $479.3 million. As of January 2, 2022, net debt was $3,624.7 million and included total debt of $4,099.4 million, net of cash and cash equivalents of $474.7 million. As of October 2, 2022, approximately $1,003.6 million was available under the $1.15 billion credit facility, after reductions of $125.0 million in outstanding borrowings and $21.4 million in outstanding letters of credit.

The effective tax rate for the third quarter of 2022 was 23.0%, compared with 20.1%. The third quarter of 2022 reflected net discrete income tax benefits of $0.3 million. The third quarter of 2021 reflected net discrete income tax benefit of $6.3 million, which included a $3.0 million income tax benefit related to share-based accounting and an income tax benefit of $4.9 million primarily related to research and development and foreign tax credits. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.1% for the third quarter of 2022, compared with 23.9%.

Corporate expense was $15.8 million for the third quarter of 2022 compared with $15.7 million. Stock option expense was $3.7 million for the third quarter of 2022 compared with $5.8 million. Non-service retirement benefit income was $2.9 million for the third quarter of 2022 compared with $2.8 million. Interest expense, net of interest income, was $22.0 million for the third quarter of 2022 compared with $23.8 million.

Based on its current outlook, the company’s management believes that fourth quarter 2022 GAAP diluted earnings per share will be in the range of $3.67 to $3.80 and full year 2022 GAAP diluted earnings per share will be in the range of $15.46 to $15.60. The company's management further believes that fourth quarter 2022 non-GAAP diluted earnings per share will be in the range of $4.46 to $4.56 and full year 2022 non-GAAP diluted earnings per share will be in the range of $17.70 to $17.80. The non-GAAP outlook excludes acquired intangible

asset amortization for all acquisitions and benefits or charges for acquisition-related tax matters. The company’s annual expected tax rate for 2022 is 23.1%, before discrete tax items.

We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). We supplement the reporting of our financial results determined under GAAP with certain non-GAAP financial measures. The non-GAAP financial measures presented provides management, financial analysts, and investors with additional useful information in evaluating the performance of the company. The non-GAAP financial measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Further details on reasons that we use non-GAAP financial measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included following our GAAP financial statements.

Actual results could differ materially from these forward-looking statements. Many factors could change anticipated results, including ongoing challenges and uncertainties posed by the COVID pandemic for businesses and governments around the world, including production, supply, contractual and other disruptions, such as COVID related lockdowns, facility closures, furloughs and travel restrictions; the inability to achieve operating synergies with respect to the FLIR acquisition; changes in relevant tax and other laws; foreign currency exchange risks; rising interest rates; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages; higher inflation, including wage competition and higher shipping costs; labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards; operating results of FLIR being lower than anticipated; disruptions in the global economy; the ongoing conflict between Russia and Ukraine, including the impact to energy prices and availability, especially in Europe; customer and supplier bankruptcies; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction measures or changes to U.S. and foreign government spending and budget priorities triggered by the COVID pandemic, inflation, rising interest costs, and economic conditions; impacts from the United Kingdom’s exit from the European Union; uncertainties related to the policies of the U.S. Presidential Administration; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s export and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and proprietary information, including cybersecurity threats; and natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint. Lower oil and natural gas prices, as well as instability in the Middle East or other oil producing regions, and new regulations or restrictions relating to energy production, including those implemented in response to climate change, could further negatively affect our businesses that supply the oil and gas industry.

Weakness in the commercial aerospace industry negatively affects the markets of our commercial aviation businesses. In addition, financial market fluctuations affect the value of the company’s pension assets. Changes in the policies of U.S. and foreign governments, including economic sanctions, could result, over time, in reductions or realignment in defense or other government spending and further changes in programs in which the company participates.

TELEDYNE TECHNOLOGIES INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

TELEDYNE TECHNOLOGIES INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with GAAP. However, management believes that, in order to more fully understand our short-term and long-term financial and operational trends, and to aid in comparability with our competitors, investors and financial analysts may wish to consider the impact of certain items resulting from our acquisitions which have an infrequent or non-recurring impact on operations or assist in understanding our operations pre-acquisition. Accordingly, we present non-GAAP financial measures as a supplement to the financial measures we present in accordance with GAAP. These non-GAAP financial measures provide management, investors and financial analysts with additional means to understand and evaluate the operating results and trends in our ongoing business by adjusting for certain expenses and other items. Management believes these non-GAAP financial measures also provide additional means of evaluating period-over-period operating performance. In addition, management understands that some investors and financial analysts find this information helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors. The company’s 2022 diluted earnings per common share guidance is also presented on a non-GAAP basis.

The non-GAAP financial measures are not meant to be considered superior to, or a substitute for, our financial statements prepared in accordance with GAAP. There are material limitations associated with non-GAAP financial measures because they exclude charges that have an effect on our reported results and, therefore, should not be relied upon as the sole financial measures by which to evaluate our financial results. Management compensates and believes that investors should compensate for these limitations by viewing the non-GAAP financial measures in conjunction with the GAAP financial measures. In addition, the non-GAAP financial measures included in this earnings announcement may be different from, and therefore may not be comparable to, similar measures used by other companies. The non-GAAP financial measures are also used by our management to evaluate our operating performance and benchmark our results against our historical performance and the performance of our peers.

Our non-GAAP measures are as follows:

These non-GAAP measures provided a supplemental view of income before taxes, net income, and diluted earnings per common share. These non-GAAP measures exclude certain costs related to the FLIR acquisition, such as acquired intangible asset amortization, amortization of inventory step-up, bridge loan and debt extinguishment fees, and transaction costs such as advisory, legal and other consulting fees, filing fees, employee separation costs and other costs. These non-GAAP measures also exclude acquired intangible asset amortization from prior acquisitions, the remeasurement of deferred taxes related to acquired intangible assets due to changes in tax laws, and the tax benefits or costs related to the settlement or other resolution of the FLIR tax reserves. We adjust for any income tax impact related to these items to take into account the tax treatment and related tax rate and changes in tax rates that apply to each adjustment in the applicable tax jurisdiction. Generally, this results in the tax impact at the U.S. marginal tax rate for certain adjustments, including the majority of amortization of intangible assets, whereas the tax impact of other adjustments, including transaction expenses, depend on whether the amounts are deductible in the respective tax jurisdictions and the applicable tax rates in those jurisdictions. We also adjust for any post-acquisition interest on certain income tax reserves related to FLIR. We believe these measures provide investors and management with additional means to understand and evaluate the operating results of our business by adjusting for certain expenses and other items and present an alternative view of our performance compared to prior periods.

We define non-GAAP operating margin as non-GAAP operating income divided by net sales. These non-GAAP measures exclude certain costs related to the FLIR acquisition, such as acquired intangible asset amortization, amortization of inventory step-up, and transaction costs such as advisory, legal and other consulting fees, filing fees, employee separation costs and other costs. These non-GAAP measures also exclude acquired intangible asset amortization from prior acquisitions. We believe these measures provide investors and management with additional means to understand and evaluate the operating results of our business by adjusting for certain expenses and other items and present an alternative view of our performance compared to prior periods.

These non-GAAP measures represent our earnings per common share outlook for the third quarter 2022 and total year 2022 on a fully diluted basis, excluding acquired intangible asset amortization for all acquisitions and acquisition-related tax matters.

We define adjusted cash provided by operating activities as cash provided by operating activities (a measure prescribed by GAAP) adjusted for the payment of a pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary in Sweden. We define free cash flow as cash provided by operating activities (a measure prescribed by GAAP) less capital expenditures for property, plant and equipment. Adjusted free cash flow eliminates the impact of cash paid for transaction related expenses for the FLIR acquisition on a net of tax basis as well as the payment of a pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary in Sweden. We believe that this supplemental non-GAAP information is useful to assist management and the investment community in analyzing the company’s ability to generate cash flow.