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, investors may wish to consider the impact of certain items resulting from our pending acquisition of FLIR which have an infrequent or non-recurring impact on operations. 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 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 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 2021 diluted earnings per common share guidance is also presented on a non-GAAP basis.

We use the term “adjusted operating income” to refer to GAAP operating income excluding transaction costs related to the pending FLIR acquisition such as advisory, legal and other consulting fees, filing fees and other costs. We use the related term, “adjusted operating margin” to refer to adjusted operating income as a percentage of net sales.

We use the term “adjusted net income” to refer to GAAP net income excluding costs related to the pending FLIR acquisition. These costs include transaction costs such as advisory, legal and other consulting fees, filing fees and interest and debt expense on debt related to the acquisition and other costs. We use the term “adjusted diluted earnings per common share” to refer to GAAP diluted earnings per common share excluding costs related to the pending FLIR acquisition transaction costs such as advisory, legal and other consulting fees, filing fees and interest and debt expense on debt related to the acquisition and other costs. We also adjust for any tax impact related to the above items.

We use the term, “total debt”, a non-GAAP measure, to refer to the sum of GAAP current portion of long-term debt and other debt and GAAP long-term debt. We use the term “net debt” to refer to the difference between total debt less GAAP cash and cash equivalents. The company believes that this supplemental non-GAAP information is useful to assist management and the investment community in analyzing the company’s liquidity.

Management excludes the effect of each of the items identified below to arrive at the applicable non-GAAP financial measure referenced in the previous table for the reasons set forth below with respect to that item:

• Transaction costs - In connection with the pending FLIR acquisition, we incurred $5.9 million in advisory, legal and other consulting fees, filing fees and other costs, which are part of selling, general and administrative expenses. We exclude these expenses to arrive at our non-GAAP measures because we believe they do not reflect the performance of our ongoing operations.

• Debt issue costs and interest expense - In connection with the pending FLIR acquisition, Teledyne completed various financing activities and incurred related interest expense totaling $33.1 million. These activities included bridge loans fees, debt extinguishment expense and interest expense on the $3.0 billion bonds issued on March 22, 2021. We exclude the interest and debt expense associated with the pending FLIR acquisition to arrive at our non-GAAP measures because we believe it does not reflect the performance of our ongoing operations.

The non-GAAP financial measures described above 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 listed above 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.

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Jason VanWees
(805) 373-4542