Jason VanWees - SVP, Strategy and Mergers & Acquisitions Robert Mehrabian - Chairman, President, and CEO Susan L. Main - SVP and CFO Melanie S.

Cibik - SVP, General Counsel, and Secretary

Greg Konrad - Jefferies & Company, Inc. James A.

Ricchiuti - Needham & Company, Inc. Michael F.

Ciarmoli - KeyBanc Capital Markets, Inc. Stephen E.

Levenson - Stifel, Nicolaus & Co., Inc. Christopher D.

Quilty - Raymond James Associates Inc. Mark Jordan - Noble Financial

Good morning, everyone. This is Jason VanWees, Senior Vice President, Strategy and M&A at Teledyne.

And I’d like to welcome everyone to Teledyne’s first quarter earnings release conference call. We released our earnings earlier this morning.

Joining us today are Teledyne’s Chairman, President and CEO, Robert Mehrabian; Senior Vice President and CFO, Sue Main; and Senior Vice President, General Counsel and Secretary, Melanie Cibik. After remarks by Robert and Sue, we will ask for your questions.

However, before we get started, our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks and caveats as noted in the earnings release and of our periodic SEC filings, and of course actual results may differ materially. In order to avoid potential selective disclosures, this call is simultaneously being webcast and a replay, both via webcast and dial in will be available for approximately one month.

Here is Robert.

Thank you Jason and good morning everyone. Teledyne’s reported first quarter sales of $565 million.

Excluding the impact of foreign currency, sales were largely flat with last year. Due to continued operating discipline and cost reductions, GAAP operating margin increased 40 basis points to 11.9% and gross margin was at an all time record.

Despite lower revenue and a tax benefit of $0.06 per share in 2014, GAAP earnings per share were flat year-over-year. During the quarter, a number of technical and product introduction milestones were accomplished.

We shipped our first uncalled or micro bolometers based infrared cameras that incorporate proprietary imaging algorithms. We have significant sales related to our new ultra high power subsea connectors.

We successfully demonstrated state of the art guided musician’s technology referred to as EXACTO. And we received the largest single after market avionics order in the company's history.

Teledyne continues to have a broad and balanced portfolio of highly engineered products and our business is diversified and resilient to changes in specific end markets. Given the old prices and more precisely excess exploration vessel capacity, we expected a decline in certain offshore energy markets.

In January of this year we specifically mentioned that certain energy businesses such as geophysical sensors used in offshore oil exploration could decline as much as 25% to 35% in 2015. We continue to believe this will be the case but for a perspective this particular business represents less than 5% of Teledyne’s total revenue.

However, as all exploration related revenue declined year-over-year, our business related to offshore energy production reported record sales and the backlog remains healthy given strong orders for new product and market share gains. In other markets environmental instrumentation and avionics grew nicely from last year offsetting some declines in our U.S.

government businesses. In the first quarter sales to the U.S.

government which represented about 24% of total sales declined with much of the shortfall related to timing and orders and shipments and some gaps in ongoing programs. Foreign currency translation primarily impacted our instrumentation and digital imaging segments, but acquisitions help mitigate these declines.

In our commercial businesses, total sales increased slightly both in the U.S. and internationally.

Reported revenue even net of FX translation was stable in all major global regions with a notable exception of Europe. In the near-term we are not counting on a pickup in the global economy or a moderation in foreign currency headwinds.

Also last year we benefitted by approximately $0.50 per share in earnings from tax benefit including the R&D tax credit as well as net legal settlement. Furthermore, despite freezing our non-qualified pension plan for the top 20 executives, non-cash pension expense has increased due to the lower discount rate in 2015.

Because of these points we believe a more cautious view on sequential earnings improvement is prudent. And we have modestly adjusted our prior full year outlook by $0.11 a share or just shy of 2%.

Teledyne’s success depends on our ability to manage change, both operationally and strategically across our portfolio of businesses. In those businesses that are growing, we are continuing to invest.

In others we are staying nimble and aggressively managing cost. Also we will continue to make acquisitions to generate long-term growth as well as attractive return on invested capital through implementation of operational excellence in our acquired businesses.

I will now comment on our business segment after which Sue Main will review some of the financials in more detail and provide an earnings outlook for the second quarter and full years 2015. Turning to the instrumentation segment, first quarter sales increased 4.4% from last years.

Sales of marine instrumentation increased 5.9% despite a significant expected year-over-year decline in the sales of geophysical sensors that I previously mentioned. We also had of course negative impact of foreign currency which impacted this group specifically.

As I mentioned previously, sales to offshore energy production industry remained very strong, robust stores continued resulting in stable backlog in businesses primarily serving this market. In the environmental domain, sales increased 10.4% which was all organic and reflected increased sales of both laboratory and field instrumentation as well as greater sales of air monitoring and gas process analysis.

Sales of electronic to measurement systems declined with roughly half of the decline due to foreign currency translation. GAAP segment operating profit increased and operating margin improved 109 basis points due to higher sales and improved operating performance specially within the environmental instrument group.

Turning to the digital imaging segment, first quarter sales decreased 11.3% compared to last year’s primarily due to lower sales from U.S. government R&D contract as well as specialty centers for remote sensing applications.

These were partially offset by higher sales of x-ray sensors for medical imaging. Sales of cameras for general industrial machine vision applications increased slightly but were offset by declines in sales of cameras or semiconductor and electronic inspection.

The year-over-year decline in government R&D is largely due to the conclusion of DARPA's extreme accuracy tasked ordinance program also known as EXACTO or the guided bullet. Nevertheless a milestone was reached in February during live fire demonstration which showed that the EXACTO was able to hit moving and evading targets with extreme accuracy at sniper ranges unachievable with traditional rounds.

We are hopeful that additional funding will become available for these and similar programs later this year. GAAP operating margin continued to increase and was 77 basis points greater than last year.

Turning to aerospace and defense electronic segments, first quarter sales decreased minus 7.9% while U.S. government sales declined or commercial avionics businesses continued to perform very well.

Operating profit declined due to lower sales and lower margins in a number of defense electronic businesses. However, due to cost reduction efforts and an increase on orders recently, we expect improved sales and margins in the balance of the year.

Turning to the engineer systems segment, first quarter revenue increased 6.2% and operating margin increased 35 basis points. Both sales and margin benefitted from the greater mix of marine and space manufacturing programs and higher sales of energy system products such as commercial, hydrogen generators.

In conclusion, through acquisitions and strong cost control we were able to mitigate headwinds from foreign exchange and the timing of certain government programs. We are also confident about sequential earnings improvement.

However, we do not want to be overly optimistic or plan for a significant second hand recovery in the global economy for our specific end markets. And finally our strategy remains the same.

First, focus on highly engineered products for specialized end markets. Second, a commitment to operational excellence to improve margins.

And third, continued investment including greater emphasis on acquisitions to grow our portfolio of businesses. I will now turn the call over to Sue Main.

Thank you, Robert and good morning. I will first discuss some additional financials for the quarter not covered by Robert and then I will discuss our second quarter and full year 2015 outlook.

In the first quarter cash flow from operating activities was $16.7 million compared with a cash flow of $27.1 million for the same period of 2014. However, cash provided by operating activities in the first quarter of 2015 primarily reflected payments for legal matters, the payment of the scheduled earn out obligations, and the timing of accounts payable payments partially offset by lower income tax payments.

Free cash flow that is cash from operating activities less capital expenditures was $9 million in the first quarter of 2015 compared with $15.4 million in 2014. Capital expenditures were $7.7 million in the first quarter compared to $11.7 million for the same period of 2014.

Depreciation and amortization expense was $23.2 million in both 2015 and 2014. In February we entered into an accelerated share repurchase or ASR agreement for 1.5 million shares at an initial price of $94.68.

We ended the quarter with $719 million of net debt that is $830 million of debt in capital leases less cash of $110.2 million, for a net debt to capital ratio of 35.1%. Turning to pension and stock compensation expense, in the first quarter of 2015 growth GAAP pension income was $0.2 million due to a onetime gain of $1.2 million from the freezing of our non-qualified pension plans compared with growth pension income of $0.3 million in the same period of 2014.

Stock compensation expense was $3.8 million in the first quarter of 2015 compared with $2.6 million in the first quarter of 2014. Finally turning to our outlook, management currently believes that GAAP earnings per share from continuing operations in the second quarter of 2015 will be in the range of $1.30 to $1.34 per share.

We expect full year 2015 earnings per share of approximately $5.60 to $5.65. The 2015 full year effective tax rate is expected to be 29.5% I do want to emphasize a few items regarding our 2015 outlook compared to 2014.

First our pension assumption included discount rate decreased of 90 basis points and changes in the mortality assumptions which will increase non-cash pension expense in 2015. Second, 2014 results benefitted from net legal settlement, significant discreet tax items including $0.06 in the first quarter of 2014, and the 2014 R&D tax credit which is not currently effective for 2015 as well as a slightly lower tax rate.

I will now pass the call back to Robert.

Thank you Susan. We would now like to take your questions.

Linda, if you are ready to proceed with the questions and answers please go ahead.

Good morning.

Good morning Greg.

How are doing, just want to start with your update in your prepared remarks you mentioned that most markets were stable with exception of Europe, can you maybe give a little bit more color around that in terms of just different end markets?

I think Europe was down Greg, but I would say about 5% to 6% somewhere in between those two overall. Approximately 10% of our sales are in foreign currency and in the first quarter the foreign currency translation basically overall impacted our revenue by 1.5%

That makes sense and then just in terms of U.S. government, you mentioned imagers for remote sensing were down in the quarter, was that tied to any specific program and what is the opportunity pipeline for that business?

The first one that I mentioned on the government is we have a very successful demonstration of our program called EXACTO which is basically a 50 millimeter bullet that can be guided by sniper team. That program came to an end and that was a pretty large program for us in our scientific business here.

We expect some additional funding later but there is gap in funding there. We also have some gaps in our space programs specially classic wide and if you minored shortages in our microwave businesses but we expect these to pickup between Q3 and Q4.

So I think most of the government program declines are temporary and timing related.

Thank you.

Thank you Greg.

Thank you. Good morning, I was wondering if you could Robert perhaps elaborate on the growth you are seeing in environmental, you cited that as being one of the areas that’s strong and same with commercial avionics which I guess has been strong now for a couple of quarters.

Right, let me start with the environmental and then go to commercial avionics Jim. On the environmental we have a variety of programs ranging from water to air quality to pharmaceutical laboratory techniques to some food and beverage techniques.

And food and beverage I think should be using our processes to detect impurities. By and large we’ve seen improvements in our air quality monitoring program in both China and India.

China recently adopted a cap program for sulphur dioxide and narcs [ph] mass emissions which provides sales opportunities for us. We also have stack flow monitoring system.

Air quality monitoring in China has stabilized but it has picked up more in the U.S. ambient air quality monitoring and its better than it was last year.

There is also some new APA standards for ozone, ground level ozone detection. So all of these are helping us.

In the remainder, if I move over to commercial aircraft then avionics as you know Jim, there is a tremendous backlog at both Boeing and Airbus in 2015 that’s anticipated to be about 11,500 planes with potential additional backlog this year of about 1500. Now we have content on various aircraft that is substantial for the size of the business that we have.

Our backlog means some of these programs that I just mentioned exceeds to $600 million and its multiyear backlog. And of course we have self sourced on a number of programs at Boeing.

And so this is gaining market share by the way, in the retrofit domain specially with our wireless grounding [ph] products. So we’re kind of bullish about this business.

The industry is doing well, the aircraft manufacturers have tremendous backlog, and the airlines are actually making money, expected to make maybe $25 billion this year. So that’s a good business for us.

Okay, and one final question, I wonder if you can comment on the bookings in the quarter and to the extent you can maybe talk a little bit about how the bookings were in the various segments?

Okay, overall bookings for the company was one, it varies from a higher 1.3 to 1.4 down to a lower 0.85. And fundamentally if I went through the segment I would say that aerospace and defense is close to one, insurance by and large are about 0.95, environmental is slightly over one, digital imaging is under one at about 0.85, and our engineering system business is significantly over one because we want some long venture programs there.

Okay, great that’s helpful Robert. I’ll jump back in the queue.

You bet, thank you.

Hey, good morning guys, it's actually Mike Ciarmoli. So Robert, just on the guidance specifically, it sounds like there is some conservatism on the economy but I mean is there anything specific driving that $0.11, I mean are you looking -- is it just conservatism or is it -- are you seeing specific weakness in certain pockets because I mean this would be, correct me if I am wrong but this is the first time you are guiding to down year-over-year GAAP earnings, I mean since I can remember at least going back to 2000.

Let me just make two comments, its going back to 2001. But I wouldn’t say its conservatism, I would use the word prudent in a more appropriate word.

We are not counting on any tax benefits. You can't put tax, we have very small amount of tax benefit compared to last year we had about $0.38 between tax and onetime tax benefits and R&D.

And you can predict earnings based on that. If R&D tax credit doesn’t pass or if we get some audit letter or something happens then you can count on that.

So we kind of exclude most of that. Second, everyday whether you read the paper or listen to the Fed or read our other industrial companies like ours everybody is cautious because of what the foreign exchange.

We haven’t seen foreign exchange changes of this magnitude for a long time. And the other thing we have to be cautious about is that our tax rate changes depending on how much foreign earnings we have and with Europe being in the tank right now, we can’t just really count on that either.

So we are taking the guidance down less than 2%. I think it is prudent at this point with everything that’s going on in the world and with the oil price being half of what it was last year at this time.

Okay, that’s fair. And should we think about was the pension gain in the guidance for the year and should we assume that you guys do the full buy back on the ASR?

Yes, let me the answer the second one first. ASR is done for practical purposes.

You basically reach an agreement with a financial institution, you take the shares and they buy those shares overtime and the difference in the price of the shares either becomes a positive or a negative number in terms of cash. But the shares are out.

In terms of the pension, because of the change in this contract as Sue mentioned we expect overall a pension headwind of about $0.06 for the year versus last year. Now if you look at it and say, we also have frozen our non-qualified pension excluding that it’s more like $0.08.

By freezing the non-qualified pension providing compensate of the employees like myself we were able to shave off a couple of pennies of that negative number. So, by and large we do have a pension headwind of $0.06 year-over-year including the non-qualified freights.

Got it I mean on the order front especially on the subsea, I mean you guys it sounds like with new products gaining share you guys seem pretty confident. I know there is some press out there but maybe more so on the offshore drilling side that we could see cancellations but in terms of I guess your sub, your order flow production I mean it seems like backlogs everything holding up fairly well?

Backlog is about 0.95 right now and as you will know, the -- about 62% of newer discoveries since 2010 have been in deep water and that’s where we excel. And those programs have long legs on it than multiple year, tens of billions of dollars investment that you can’t shut them off quickly like you do in fracking.

And there we have both new products and we have for example new high power products which we are gaining market share with these products that go let’s say 6 kilowatts with 900 amps and we also have pressure temperature sensors. We also have Ethernet products, optical and electro optical products, so we are increasing content and gaining share.

Got it, perfect. Thanks guys, I’ll jump back in the queue.

Thank you.

Thanks, good morning everybody.

Good morning Steve.

On the government revenues where you said there was a timing difference, can you tell was that administrative or was it related to funding, is it something that will continue or something that will catch up.

It’s both. Some of it is administrative and I would say those are just programs that are getting pushed off a little bit.

Some of it is like funding gap at the present time. I mentioned the EXACTO program and some of it Steve is on us.

We have agents travelling wave tubes to program that is really looking for strong production. And in Q1 since we hadn’t made these travelling wave tubes for a number of years, we stumble a little bit.

We solved the problem now and some of it is on us. And so it’s a mixture of three things, you didn’t mention to stumble but I will.

But we’ve recovered now and that program is moving ahead as it should be.

Got it, thank you for that information. So that’s retrofit I take it for the most part.

Actually on the agents program these are new products. We have retrofit products but we also have -- these are also we make spares for existing radar.

So they are not retrofit as such but there is spares.

Got it, last question on the strength of the dollar, are there any foreign acquisition targets that were too expensive for you before that maybe the strong dollar will help you with now?

Yes, just an example of that is earlier this morning we announced that we bought the remaining 49% of optic just to light our company lasers company, that what we initially decided to, what we always wanted to buy out but now it was 20% cheaper than it was when the first time we looked at it a while back. And there are other foreign acquisitions especially in Europe that we are looking at also when you have cash parts in Canada or overseas.

That cash earns essentially nothing. And we had over $100 million outside the U.S.

So we intend to use that cash. Good question, thank you.

Okay, thank you.

Thanks Robert, I wanted to follow up on your comments earlier about the oil and gas market. I think you had said your geophysical sensors was you were predicting down 25 to 35 and my question was are you sticking with that original guidance that you provided previously or have you ratcheted that down?

Yes, I think Chris it’s probably going to be closer to 40%. It depends, we have probably -- we don’t have -- I am not able to mention the name but we have probably the singular customer that still has vessels and is very successful in what they do because of the 3D accuracy of their streamer cables which we produced for them and their ability to get data, really robust data from those.

But having said all of that, everybody is parking their vessels now including our largest customer. So we don’t see any light at the end of that tunnel.

It is down about 39 to be precise, it is down about 39% this quarter. On the flip side of that Chris is that similar cables are used in the military and we are bidding on couple of very large programs because we have unique capabilities in making these large streamer cables.

And as I met former navy men know this better than I, those are the kinds of things that are used around vessels to detect acoustic signals.

Okay, also you mentioned what percent of business was exchanged or revenues were exposed to foreign currency?

The thing is we have about 45% international sales of which 10% are directly affected by foreign currency. And when we look at that carefully, that cost is about 8 million in revenue and about 1.5% of our revenue.

The flip side of that also, also the negative side of that as you note no traces that, yes, you get less revenue because of the foreign currency. But you also are selling in foreign currency and you have to lower your prices to be able to compete.

So it’s a double whammy but we’re weathering it, we are taking cost out and we’ll be fine.

But how about with Canada, I mean you just got a nice discount on your cost to sales there with DALSA?

Yes, on Canada is the flip side that’s why I said 10% because we are 45% international sales. Canada is the flip side where we produce products in Canadian dollars and we sell them primarily in U.S.

dollars. So that’s the flip side of the benefit that’s why it only comes down to 10% otherwise it would be as high as 25%.

Okay and the Bolt acquisition, I know you were projecting that business to be down just due to the end markets they serve, is it about on track for your expectations underperforming or outperforming?

It is -- when we acquired the exploration market was about where it is now, the projection. The sales are a bit weaker, not much but are a bit weaker than what we were start to projecting.

But the operating profit is on plan and we are very aggressively integrating that. And as you know once we begin our integration processes our margins equal.

So the profits are pretty well good.

Okay, and I just wanted to confirm was it true that with the DARPA, EXACTO video that, that was you as the untrained shooter?

I wish I could say yes, but the fact is it was one of our -– actually I think it was one of our customers that was testing it and by the way the shooters were engineers here, so it was interesting experience.

But that said both scary and good I guess. Good luck on that program.

Thank you Chris.

Good morning Robert, question on the engineering services business. I know a few years back you had a couple of programs that had long gestation periods, for example special forces delivery vehicle.

I was wondering is there anything in that portfolio that may mature into volume productions in the latter part of the year that will move the needle for that segment?

Yes, I think let me just make a broad comment. I think in that segment we expect incremental improvements in revenue as we go through the year.

The first program underwater vehicle is called the shallow water or SWCS vehicle that’s used for navy Cos. And we will go into low rate initial production next year.

I think we will have two boats maybe three next year max, but these are very sizable boats and we have the test facilities which are the more important also part of the program which is a very large water pool to be able to test these boats. That’s a very good program for us and very successful and the total potential revenue in that program is about $380 million.

The other program again related to underwater that we’ve had is our program for gliders, underwater vehicles that use buoyancy to go up and down. And in that program we have about so far up to end of 2014 we gained that we’ve sold about $28 million.

These are used by the navy for sensing in front of battleships, sensing the properties of the water so they can predict acoustic signals more accurately. And we project that in the next five years we will have another $50 million of revenues in our glider program.

So those are the two big programs that relate to water and underwater capabilities.

Okay, given the currency headwinds which you face, could you make some comments as to what type of growth rate overall or by segments that you might expect for the year now?

I’ll just give it to you in an organic mould if I may, and I think the currency will remain -- will hit us the same as it has throughout the year. So it’s -- right now it’s affecting just 1.5%.

Let’s say we’ll stay there. I think what will happen that on a GAAP basis we probably would end up with positive revenue between very low single-digits between 1% and 2%.

So we will make up the 1.5 and gain between 1% and 2%. I think if you look, you ask me about the segments I think digital imaging will be flat.

It doesn’t have as much foreign currency headwind because of what Chris asked and I answered, nevertheless there is some softness in that market especially in flat panel quality inspections in Southeast Asia. I think our aerospace and defense will be up probably a couple of percent, engineered systems will be up as they were in Q1 maybe a couple of percent overall, and instrument should be relatively flat.

The FX there is hitting us harder than other areas. The FX is affecting us about 2.5% in instrument.

So even with that I think we should be up about a percent.

Okay, thank you very much.

You bet Mark.

Just wanted to follow up on the questions about acquisitions, is it fair to say that looking at the portfolio you are looking to perhaps ease up more of the instrumentation business and I would assume that you probably full up in the energy area, so is that would you look more in environmental and electronic?

You are quite right Jim. I think, but the instrumentation and digital imaging I would say they carry -- there is a large spread there.

We have an instrumentation for example, we have LeCroy which is test and measurement. I like that area, I like the area because in terms of our poor competencies across the company in digitization and microwave and in general digital analytics of signals we would like to see if we can get something there.

But if you move away from there it is the more traditional areas and we are always looking for environmental acquisitions. And underwater I think we might do some more but it would be non-oil related.

It would be more in the domain of being able to analyze signals or do large scale mapping of ocean currents and densities, etc. And lastly I think the one area that is in digital now obviously is x-rays.

We are making good progress there. We have really the world’s most sensitive CMOS x-ray sensors that give you the best digital images at very low dosages.

And we’d like to make more acquisitions in that area to kind of enhance our ability to supply our customer a more system level products.

Got it, that’s helpful and just on the subject of LeCroy, excluding currency is that, Robert is the business flattish?

Yes, it is probably down about a percent year-over-year not because just of currency effect will be about 1.5%, maybe as much as 2% but what affected is Europe has been the strongest market and since Europe regardless of currency is stagnant, relatively stagnant. We’ve taken a little bit of a hit there.

The flip side of that is that they have introduced a significant number of new products and we expect that those would do very well. They have of course the highest bandwidth, 100 gigahertz product at the very top and then introduce some new products at the lower range.

And there is the company that really developed a whole new market for 12 bit scope. So we are very comfortable with that business staying where it is for now till Europe does better and until the FX problem is partially mitigated.

Got it, thank you.

Thank you.

Hey, thanks its Mike again. Hey Robert, just real quick, the acquired revenue contribution issue from Bowtech and taken the remaining stake in Optic, is that a meaningful portion of revenues or can you talk maybe just in general how significant contribution or negligible?

The optic is none because we own 51% Kevin, as you know you consolidate revenue. You put earnings or losses, the portion that you don’t own you put it below the line.

So from a revenue perspective that will not contribute because it is already consolidated, has been in our revenue stream since we own the -- we bought the 51%. On Bolt and more recently we just bought Bowtech which is an underwater visual camera company.

I think we will have about $45 million to $55 million in revenue this year from those two acquisitions. And these are incremental obviously.

Perfect, thanks guys.

Thank you.

Operator, thank you very much. We will just stop there and I’ll now ask Jason to conclude our conference call please.

Thanks Robert and again thanks everyone for joining us this morning. If you have any follow-up questions of course please feel free to call me on the number listed on the earnings release.

And, all our releases are available on our website teledyne.com. Operator if you could please conclude the call and provide the replay details, we'd certainly appreciate it.

Good bye everyone.