Teledyne Technologies 10-Q 2024-06-30

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-15295

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TELEDYNE TECHNOLOGIES INCORPORATED

(Exact name of registrant as specified in its charter)

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Delaware									25-1843385
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)
1049 Camino Dos Rios
Thousand Oaks			California						91360-2362
(Address of principal executive offices)									(Zip Code)

805 373-4545

(Registrant’s telephone number, including area code)

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Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, $0.01 par value			TDY			New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☒			Accelerated filer			☐
Non-accelerated filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ☐ No ☒

There were 46,784,213 shares of common stock, $.01 par value per share, outstanding as of July 19, 2024.

Table of Contents

TELEDYNE TECHNOLOGIES INCORPORATED

TABLE OF CONTENTS

						PAGE
Part I			Financial Information			2
			Item 1. Financial Statements			2
			Condensed Consolidated Statements of Income (Loss)			2
			Condensed Consolidated Statements of Comprehensive Income (Loss)			3
			Condensed Consolidated Balance Sheets			4
			Condensed Consolidated Statements of Stockholders' Equity			5
			Condensed Consolidated Statements of Cash Flows			6
			Notes to Condensed Consolidated Financial Statements			7
			Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
			Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
			Item 4. Controls and Procedures			30
Part II			Other Information			30
			Item 1. Legal Proceedings			30
			Item 1A. Risk Factors			30
			Item 5. Other Information			30
			Item 6. Exhibits			31
Signatures						32

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PART I FINANCIAL INFORMATION

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2024 AND JULY 2, 2023

(Unaudited - Amounts in millions, except per-share amounts)

			Second Quarter												Six Months
			2024						2023						2024						2023
Net sales			$	1,374.1					$	1,424.7					$	2,724.2					$	2,808.0
Costs and expenses
Cost of sales			781.5						806.3						1,551.7						1,597.0
Selling, general and administrative			296.5						313.0						592.7						613.4
Acquired intangible asset amortization			49.1						49.3						98.5						99.0
Total costs and expenses			1,127.1						1,168.6						2,242.9						2,309.4
Operating income (loss)			247.0						256.1						481.3						498.6
Interest and debt income (expense), net			(15.8)						(22.3)						(28.5)						(43.3)
Gain (loss) on debt extinguishment			—						1.6						—						1.6
Non-service retirement benefit income (expense), net			2.7						2.9						5.4						6.2
Other income (expense), net			(2.2)						(3.4)						(1.0)						(4.5)
Income (loss) before income taxes			231.7						234.9						457.2						458.6
Provision (benefit) for income taxes			51.4						49.4						97.8						94.3
Net income (loss) including noncontrolling interest			180.3						185.5						$	359.4					$	364.3
Less: Net income (loss) attributable to noncontrolling interest			0.1						0.2						0.7						0.3
Net income (loss) attributable to Teledyne			$	180.2					$	185.3					$	358.7					$	364.0
Basic earnings per common share			$	3.82					$	3.94					$	7.58					$	7.74
Weighted average common shares outstanding			47.2						47.0						47.3						47.0
Diluted earnings per common share			$	3.77					$	3.87					$	7.49					$	7.60
Weighted average diluted common shares outstanding			47.8						47.9						47.9						47.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

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TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2024 AND JULY 2, 2023

(Unaudited - Amounts in millions)

			Second Quarter												Six Months
			2024						2023						2024						2023
Net income (loss) including noncontrolling interest			$	180.3					$	185.5					$	359.4					$	364.3
Other comprehensive income (loss):
Foreign exchange translation adjustment			(5.8)						12.3						(94.6)						8.0
Hedge activity, net of tax			(2.3)						1.6						(6.5)						4.1
Pension and postretirement benefit adjustments, net of tax			2.1						0.9						4.2						2.4
Other comprehensive income (loss)			(6.0)						14.8						(96.9)						14.5
Comprehensive income (loss) including noncontrolling interest			174.3						200.3						262.5						378.8
Less: Comprehensive income (loss) attributable to noncontrolling interest			0.1						0.2						0.7						0.3
Comprehensive income (loss) attributable to Teledyne			$	174.2					$	200.1					$	261.8					$	378.5

The accompanying notes are an integral part of these condensed consolidated financial statements.

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TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - Amounts in millions, except share amounts)

			June 30, 2024						December 31, 2023
Assets
Current Assets
Cash and cash equivalents			$	443.2					$	648.3
Accounts receivabl

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Overview

Teledyne provides enabling technologies for industrial growth markets that require advanced technology and high reliability. These markets include aerospace and defense, factory automation, air and water quality environmental monitoring, electronics design and development, oceanographic research, deepwater oil and gas exploration and production, medical imaging and pharmaceutical research. Our products include digital imaging sensors, cameras and systems within the visible, infrared and X-ray spectra, monitoring and control instrumentation for marine and environmental applications, harsh environment interconnects, electronic test and measurement equipment, aircraft information management systems, and defense electronics and satellite communication subsystems. We also supply engineered systems for defense, space, environmental and energy applications. We differentiate ourselves from many of our direct competitors by having a customer- and Company-sponsored applied research center that augments our product development expertise. We believe our technological capabilities, innovation and the ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we compete.

Strategy

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.

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.

Trends Affecting Our Business and Other Matters

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.

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.

Sales recorded and costs incurred recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. See Note 13 for additional discussion around our derivative instruments and hedging activities used to mitigate these impacts.

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.

As part of a continuing effort to reduce costs and improve operating performance, we may take and have taken actions to consolidate and relocate certain facilities and reduce headcount across various businesses, reducing our exposure to weaker end markets. We continue to seek cost reductions in our businesses.

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Results of Operations

			Second Quarter												%						Six Months												%
(in millions)			2024						2023						Change						2024						2023						Change
Net sales			$	1,374.1					$	1,424.7					(3.6)		%				$	2,724.2					$	2,808.0					(3.0)		%
Costs and expenses
Cost of sales			781.5						806.3						(3.1)		%				1,551.7						1,597.0						(2.8)		%
Selling, general and administrative ("SG&A")			296.5						313.0						(5.3)		%				592.7						613.4						(3.4)		%
Acquired intangible asset amortization			49.1						49.3						(0.4)		%				98.5						99.0						(0.5)		%
Total costs and expenses			1,127.1						1,168.6						(3.6)		%				2,242.9						2,309.4						(2.9)		%
Operating income (loss)			247.0						256.1						(3.6)		%				481.3						498.6						(3.5)		%
Interest and debt income (expense), net			(15.8)						(22.3)						(29.1)		%				(28.5)						(43.3)						(34.2)		%
Gain (loss) on debt extinguishment			—						1.6						*						—						1.6						*
Non-service retirement benefit income (expense)			2.7						2.9						(6.9)		%				5.4						6.2						(12.9)		%
Other income (expense), net			(2.2)						(3.4)						(35.3)		%				(1.0)						(4.5)						(77.8)		%
Income before income taxes			231.7						234.9						(1.4)		%				457.2						458.6						(0.3)		%
Provision (benefit) for income taxes			51.4						49.4						4.0		%				97.8						94.3						3.7		%
Net income (loss) including noncontrolling interest			180.3						185.5						(2.8)		%				359.4						364.3						(1.3)		%
Less: Net income (loss) attributable to noncontrolling interest			0.1						0.2						(50.0)		%				0.7						0.3						133.3		%
Net income (loss) attributable to Teledyne			$	180.2					$	185.3					(2.8)		%				$	358.7					$	364.0					(1.5)		%

• not meaningful

			Second Quarter												%						Six Months												%
(dollars in millions)			2024						2023						Change						2024						2023						Change
Net sales (a):
Digital Imaging			$	739.4					$	793.3					(6.8)		%				$	1,480.2					$	1,565.8					(5.5)		%
Instrumentation			333.5						328.4						1.6		%				663.9						661.9						0.3		%
Aerospace and Defense Electronics			194.4						186.0						4.5		%				380.1						359.2						5.8		%
Engineered Systems			106.8						117.0						(8.7)		%				200.0						221.1						(9.5)		%
Total net sales			$	1,374.1					$	1,424.7					(3.6)		%				$	2,724.2					$	2,808.0					(3.0)		%
Operating income (loss):
Digital Imaging			$	113.5					$	124.6					(8.9)		%				$	227.3					$	246.8					(7.9)		%
Instrumentation			87.2						81.4						7.1		%				173.2						162.1						6.8		%
Aerospace and Defense Electronics			57.1						53.2						7.3		%				109.0						100.2						8.8		%
Engineered Systems			7.5						11.5						(34.8)		%				10.2						21.5						(52.6)		%
Corporate expense			(18.3)						(14.6)						25.3		%				(38.4)						(32.0)						20.0		%
Total operating income (loss)			$	247.0					$	256.1					(3.6)		%				$	481.3					$	498.6					(3.5)		%
(a) Net sales exclude inter-segment sales of $8.5 million and $13.3 million for the second quarter and six months of 2024, respectively, and $8.1 million and $14.3 million for the second quarter and six months of 2023, respectively,

Second Quarter Results

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.

Second quarter of 2024 compared with the second quarter of 2023

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.

Net Sales

The second quarter of 2024 net sales, compared with the second quarter of 2023, reflected lower net sales in the Digital Imaging and Engineered Systems segments, partially offset by higher net sales in the Aerospace and Defense Electronics and Instrumentation segments. The second quarter of 2024 also included $11.7 million in incremental sales from recent acquisitions.

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Cost of Sales

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%.

Selling, General and Administrative Expense

SG&A expense, including research and development expense, decreased $16.5 million in the second quarter of 2024 due to lower sales as well as lower research and development expense, with the lower research and development expense primarily related to continued FLIR integration-related cost-reduction efforts implemented in the second half of 2023. SG&A expense as a percentage of net sales decreased to 21.5% for the second quarter of 2024, compared with 22.0%, primarily due to lower research and development expense. Corporate expense, which is included in SG&A expense, was $18.3 million for the second quarter of 2024, compared with $14.6 million, with the increase primarily related to higher compensation expense and increased legal contingencies for a legacy environmental reserve. Stock-based compensation expense was $9.3 million for the second quarter of 2024 compared with $8.4 million.

Acquired Intangible Asset Amortization

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

Pension Service Expense

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.

Operating Income

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.

Non-operating Income and Expense

Interest and debt expense, net of interest income, was $15.8 million for the second quarter of 2024, compared with $22.3 million, with the decrease related to reduced outstanding borrowings with lower weighted average interest rates compared to the second quarter of 2023. Non-service retirement benefit income was $2.7 million for the second quarter of 2024 compared with $2.9 million. Other income and expense, net was expense of $2.2 million for the second quarter of 2024 compared with expense of $3.4 million for the second quarter of 2023.

Income Tax

The second quarter income tax provision considers income, permanent items, tax credits, and various statutory tax rates.

						Second Quarter
(Dollars in millions)						2024						2023
Provision (benefit) for income taxes (a)						$	51.4					$	49.4
Income (loss) before income taxes						$	231.7					$	234.9
Effective tax rate						22.2%						21.0%
(a) The second quarter of 2024 includes net discrete income tax benefits of $0.7 million and the second quarter of 2023 includes net discrete income tax benefits of $1.4 million.

First six months of 2024 compared with the first six months of 2023

The first six months of 2024 net sales decreased 3.0%. Net income for the first six months of 2024 decreased 1.5%. Net income per diluted share was $7.49 for the first six months of 2024, compared with net income per diluted share of $7.60.

Net Sales

The first six months of 2024 net sales, compared with the first six months of 2023 net sales, reflected lower net sales in the Digital Imaging and Engineered Systems segments, partially offset by higher net sales in the Aerospace and Defense Electronics and Instrumentation segments. The first six months of 2024 also included $14.2 million in incremental sales from recent acquisitions.

Cost of Sales

Cost of sales decreased $45.3 million in the first six months of 2024 and reflected the impact of lower sales. Cost of sales as a percentage of net sales increased slightly for the first six months of 2024 to 57.0% from 56.9%.

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Selling, General and Administrative Expense

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.

Acquired Intangible Asset Amortization

Acquired intangible asset amortization for the first six months of 2024 was $98.5 million compared with $99.0 million.

Pension Service Expense

Pension service expense is included in both cost of sales and SG&A expense. For the first six months of 2024, pension service expense was $3.0 million compared with $3.0 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.

Operating Income

Operating income for the first six months of 2024 decreased 3.5%. The first six months of 2024, compared with the first six months 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.

Non-operating Income and Expense

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.

Income Tax

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.

												Six Months
(Dollars in millions)																		2024						2023
Provision (benefit) for income taxes (a)																		$	97.8					$	94.3
Income (loss) before income taxes																		$	457.2					$	458.6
Effective tax rate																		21.4%						20.6%
(a) The first six months of 2024 includes net discrete income tax benefits of $5.1 million and the first six months of 2023 includes net discrete income tax benefits of $8.0 million, respectively.

Segment Results

Segment results include net sales and operating income by segment but exclude corporate office expenses. Corporate expense primarily includes various administrative expenses relating to our corporate office not allocated to our segments. See Note 3 to these condensed consolidated financial statements for additional segment information.

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Digital Imaging

			Second Quarter												Change												Six Months												Change
(dollars in millions)			2024						2023						$						%						2024						2023						$						%
Net sales			$	739.4					$	793.3					$	(53.9)					(6.8)		%				$	1,480.2					$	1,565.8					$	(85.6)					(5.5)		%
Cost of sales			$	411.2					$	427.2					$	(16.0)					(3.7)		%				$	819.8					$	846.5					$	(26.7)					(3.2)		%
SG&A expense			$	169.4					$	195.9					$	(26.5)					(13.5)		%				$	342.0					$	381.1					$	(39.1)					(10.3)		%
Acquired intangible asset amortization			$	45.3					$	45.6					$	(0.3)					(0.7)		%				$	91.1					$	91.4					$	(0.3)					(0.3)		%
Operating income			$	113.5					$	124.6					$	(11.1)					(8.9)		%				$	227.3					$	246.8					$	(19.5)					(7.9)		%
As a percentage of net sales:
Cost of sales			55.6		%				53.9		%																55.3		%				54.1		%
SG&A expense			22.9		%				24.7		%																23.1		%				24.3		%
Acquired intangible asset amortization			6.1		%				5.7		%																6.2		%				5.8		%
Operating income			15.4		%				15.7		%																15.4		%				15.8		%

Second quarter of 2024 compared with the second quarter of 2023

Net sales decreased primarily due to lower sales of industrial automation imaging systems, X-ray products and commercial infrared imaging systems, partially offset by higher sales of infrared detectors and surveillance systems. Sales of industrial automation imaging systems decreased $46.9 million, sales of X-ray products decreased $13.7 million, sales of commercial infrared imaging systems decreased $13.5 million, sales of surveillance systems increased $10.9 million and sales of infrared detectors increased $9.0 million.

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.

Operating income decreased primarily due to lower net sales and unfavorable product mix during the period partially offset by lower research and development costs, and operating income as a percentage of net sales decreased during the period primarily due to unfavorable product mix partially offset by lower research and development costs.

First six months of 2024 compared with the first six months of 2023

Net sales decreased primarily due to lower sales of industrial automation imaging systems, commercial infrared imaging systems and X-ray products, partially offset by higher sales of infrared detectors and surveillance systems. Sales of industrial automation imaging systems decreased $91.4 million, sales of commercial infrared imaging systems decreased $15.8 million, sales of X-ray products decreased $13.4 million, sales of infrared detectors increased $13.8 million and sales of surveillance systems increased $11.5 million.

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 primarily due to lower net sales and $41.3 million in lower research and development costs. SG&A expense as a percentage of net sales decreased primarily due primarily due to lower research and development costs. Research and development costs decreased primarily due to FLIR integration-related cost-reduction efforts implemented in the second half of 2023.

Operating income decreased primarily due to lower net sales and unfavorable product mix during the period partially offset by lower research and development costs. Operating income as a percentage of net sales decreased during the period primarily due to unfavorable product mix partially offset by lower research and development costs.

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Instrumentation

			Second Quarter												Change												Six Months												Change
(dollars in millions)			2024						2023						$						%						2024						2023						$						%
Net sales			$	333.5					$	328.4					$	5.1					1.6		%				$	663.9					$	661.9					$	2.0					0.3		%
Cost of sales			$	170.0					$	172.5					$	(2.5)					(1.4)		%				$	341.2					$	352.9					$	(11.7)					(3.3)		%
SG&A expense			$	72.7					$	71.0					$	1.7					2.4		%				$	142.5					$	139.7					$	2.8					2.0		%
Acquired intangible asset amortization			$	3.6					$	3.5					$	0.1					2.9		%				$	7.0					$	7.2					$	(0.2)					(2.8)		%
Operating income			$	87.2					$	81.4					$	5.8					7.1		%				$	173.2					$	162.1					$	11.1					6.8		%
As a percentage of net sales:
Cost of sales			51.0		%				52.5		%																51.3		%				53.3		%
SG&A expense			21.8		%				21.6		%																21.5		%				21.1		%
Acquired intangible asset amortization			1.1		%				1.1		%																1.1		%				1.1		%
Operating income			26.1		%				24.8		%																26.1		%				24.5		%

Second quarter of 2024 compared with the second quarter of 2023

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 $20.4 million due to the ongoing recovery in offshore energy markets as well as stronger defense market sales. Sales of Test and Measurement Instrumentation and Environmental Instrumentation decreased $13.5 million and $1.8 million, respectively, with the decrease in Test and Measurement Instrumentation primarily due to end market weakness.

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.

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.

For six months of 2024 compared with the first six months of 2023

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.

Cost of sales decreased primarily due to favorable product mix, and the cost of sales percentage decreased due to favorable product mix, including increased margins in our Marine Instrumentation product line. SG&A expense increased primarily due to higher net sales.

Operating income increased primarily due to higher net sales and favorable product mix, including improved margins in our Marine Instrumentation product line. Operating income as a percentage of net sales increased primarily due to increased net sales and favorable product mix.

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Aerospace and Defense Electronics

			Second Quarter												Change												Six Months												Change
(dollars in millions)			2024						2023						$						%						2024						2023						$						%
Net sales			$	194.4					$	186.0					$	8.4					4.5		%				$	380.1					$	359.2					$	20.9					5.8		%
Cost of sales			$	107.5					$	107.3					$	0.2					0.2		%				$	215.4					$	211.0					$	4.4					2.1		%
SG&A expense			$	29.6					$	25.3					$	4.3					17.0		%				$	55.3					$	47.6					$	7.7					16.2		%
Acquired intangible asset amortization			$	0.2					$	0.2					$	—					—		%				$	0.4					$	0.4					$	—					—		%
Operating income			$	57.1					$	53.2					$	3.9					7.3		%				$	109.0					$	100.2					$	8.8					8.8		%
As a percentage of net sales:
Cost of sales			55.3		%				57.7		%																56.7		%				58.7		%
SG&A expense			15.2		%				13.6		%																14.5		%				13.3		%
Acquired intangible asset amortization			0.1		%				0.1		%																0.1		%				0.1		%
Operating income			29.4		%				28.6		%																28.7		%				27.9		%

Second quarter of 2024 compared with the second quarter of 2023

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

Cost of sales increased slightly due to higher net sales partially offset by favorable product mix, and the cost of sales percentage decreased due to favorable product mix. SG&A expense increased primarily due to higher net sales as well as a $2.4 million increase in research and development costs.

Operating income and operating income as a percent of net sales increased primarily due to increased net sales and favorable product mix during the period.

First six months of 2024 compared with the first six months of 2023

Net sales increased due to a $14.1 million increase for aerospace electronics and a $6.8 million increase for defense electronics.

Cost of sales increased primarily due to higher net sales partially offset by favorable product mix and improved margins, and the cost of sales percentage decreased as a result. SG&A expense as well as the SG&A expense percentage increased primarily due to a $3.2 million increase in research and development costs.

Operating income and operating income as a percent of net sales increased primarily due to increased net sales during the period, favorable product mix and improved product margins.

Engineered Systems

			Second Quarter												Change												Six Months												Change
(dollars in millions)			2024						2023						$						%						2024						2023						$						%
Net sales			$	106.8					$	117.0					$	(10.2)					(8.7)		%				$	200.0					$	221.1					$	(21.1)					(9.5)		%
Cost of sales			$	92.8					$	99.3					$	(6.5)					(6.5)		%				$	175.3					$	186.6					$	(11.3)					(6.1)		%
SG&A expense			$	6.5					$	6.2					$	0.3					4.8		%				$	14.5					$	13.0					$	1.5					11.5		%
Operating income			$	7.5					$	11.5					$	(4.0)					(34.8)		%				$	10.2					$	21.5					$	(11.3)					(52.6)		%
As percentage of net sales:
Cost of sales			86.9		%				84.9		%																87.7		%				84.4		%
SG&A expense			6.1		%				5.3		%																7.2		%				5.9		%
Operating income			7.0		%				9.8		%																5.1		%				9.7		%

Second quarter of 2024 compared with the second quarter of 2023

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

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.

Operating income and operating income as a percentage of net sales decreased primarily due to unfavorable program mix.

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First six months of 2024 compared with the first six months of 2023

Net sales decreased primarily due to lower sales of $19.0 million for engineered products and lower sales of $2.1 million for energy systems.

Cost of sales decreased primarily due to lower net sales. The cost of sales percentage increased slightly. SG&A expense increased primarily due to higher net sales. SG&A expense as a percentage of net sales increased.

Operating income decreased primarily due to lower net sales. Operating income as a percentage of net sales decreased slightly.

Financial Condition, Liquidity and Capital Resources

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.

Cash and Cash Equivalents

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.

Long-term Debt

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.

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.

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.

Our liquidity is not dependent upon the use of off-balance sheet financial arrangements. We have no off-balance sheet financing arrangements that incorporate the use of special purpose entities or unconsolidated entities.

We may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

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 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

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.

During the second quarter of 2024, we repurchased approximately 0.5 million shares for $193.8 million with a weighted-average price of $391.92 per share. Subsequent to the end of the second quarter of 2024, we repurchased approximately 0.2 million shares for $84.5 million with a weighted-average price of $394.43 per share.

Cash Flows:

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.

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.

Net cash used in financing activities was $637.9 million for the first six months of 2024 compared with net cash used in financing activities of $567.8 million, with the first six months of 2024 including a $450 million debt maturity payment on the Senior Notes due April 2024, and share repurchases of $193.8 million. During the first six months of 2023, we repaid $570.0 million of debt, including paying $300.0 million of debt that matured in April 2023 and making $260.0 million of floating rate debt payments which reduced our term loan due June 2029 by $135.0 million and reduced our outstanding credit facility

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balance by $125.0 million. In addition, during the second quarter of 2023, we repurchased and retired $10.0 million of our Fixed Rate Senior Notes due April 2031, and we recorded a $1.6 million non-cash gain on the extinguishment of this debt.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are those that are reflective of significant judgments and uncertainties and may potentially result in materially different results under different assumptions and conditions. Our critical accounting policies are the following: accounting for revenue recognition; accounting for business combinations, goodwill, and acquired intangible assets; and accounting for income taxes.

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.

Safe Harbor Cautionary Statement Regarding Forward-Looking Information

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.

Actual results could differ materially from these forward-looking statements. Many factors could change anticipated results, including: 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; disruptions in the global economy; the ongoing conflict in Israel and neighboring regions, including related protests and the disruption to global shipping routes; 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 inflation, rising interest costs, and economic conditions; impacts from the United Kingdom’s exit from the European Union; uncertainties related to the 2024 U.S. Presidential election; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s trade compliance 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; risks related to artificial intelligence; 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. Ongoing issues with Boeing’s 737 MAX product line could result in manufacturing delays and lower sales of our products to Boeing. 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.

While our growth strategy includes possible acquisitions, we cannot provide any assurance as to when, if or on what terms any acquisitions will be made. Acquisitions involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain key management and customers and achieve identified financial and operating synergies. There are additional risks associated with acquiring, owning and operating businesses internationally, including those arising from U.S. and foreign government policy changes or actions and exchange rate fluctuations.

We continue to take action to assure compliance with the internal controls, disclosure controls and other requirements of the Sarbanes-Oxley Act of 2002. While we believe our control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and may not be detected.

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Readers are urged to read our periodic reports filed with the Securities and Exchange Commission for a more complete description of our company, its businesses, its strategies and the various risks that we face. Various risks are identified in our 2023 Form 10-K and subsequent Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. We assume no obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.