Jason VanWees – Senior Vice President Strategy and Mergers and Acquisitions Robert Mehrabian – Chairman, President and Chief Executive Officer Sue Main – Senior Vice President and Chief Financial Officer

Greg Konrad – Jefferies Jim Ricchiuti – Needham and Company

Hi, everyone, and good morning. This is Jason VanWees, Senior Vice President Strategy and Mergers and Acquisitions at Teledyne.

And I’d like to welcome everyone to Teledyne’s first quarter 2017 earnings release conference call. We released our earnings earlier this morning before the market open.

Joining me today are Teledyne’s Chairman, President and CEO, Robert Mehrabian; Chief Operating Officer, Al Pichelli; Senior Vice President and CFO, Sue Main; and Senior Vice President, General Counsel, Chief Compliance Officer and Secretary, Melanie Cibik. After remarks by Robert and Sue, we’ll 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 made in our SEC filings and in the earnings release itself, 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’s Robert.

Thank you, Jason. Good morning, ladies and gentlemen.

Let me begin with a very short review of our history. My predecessor, Henry Singleton, founded Teledyne July of 1960.

We’ve been in operation as an independent company for 57 years, with the exception of a failed marriage between mid-1996 and late-1999. I’ve had the privilege of serving as the CEO of the company since our divorce in late 1999 or spinoff in the accepted Wall Street jargon, and this is my 70th earnings conference call.

As I noted in my annual letter to stockholders, compared to any time in the past 17 years and the most excited about our current business portfolio and the overall outlook of our markets. Now getting back to the current business, Teledyne begin 2017 with a great quarter.

We achieved organic growth across each business segment with especially strong performance in our Digital Imaging segment. Furthermore, bookings were strong in nearly all commercial businesses as well as our government imaging business resulting in a quarterly book-to-bill 1.16.

Adjusted operating margin, which excludes e2v acquisition related charges increased over 100 basis points and was a record for any first quarter. Furthermore, given the strong sales and marketing performance, adjusted earnings were $1.26 compared to our prior outlook of $1.15 to $1.17 which also excluded e2v acquisition related cost.

The adjusted earnings of $1.26 or 13.5% increase over the solid $1.11 of Q1 of last year. Before discussing our business segments, I want to make some comments about the presentation of our results in light of the recent e2v acquisition.

For the last 17 years and throughout our prior 56 acquisitions, we have consistently presented GAAP margins and earnings per share. However, this quarter in order to eliminate any confusion regarding our underlying business performance, we are presented our results with and without e2v acquisition related charges.

We felt this was necessary first because our prior earnings outlooks excluded e2v. And second, the magnitude of our largest transactions to date and it’s related one-time expenses overwhelm our core business performance.

I believe it’s also worth noting that even this time. We’ve only adjusted the results and outlook for specific short-term non-recurring transaction costs, which we expect to end – before the end of 2017.

Significant ongoing expenses such as amortization of intangible assets have always been and we remain within our reported GAAP results. For reference, in full year 2017, amortization alone will represent nearly $40 million or about $0.80 per share of expense.

Regarding Teledyne e2v, we were delighted to close that acquisition on March 28 of the first quarter. We’re proud to continue the company 70-year legacy of innovation in specialized high technology product.

The integration is proceeding rapidly and smoothly and our e2v colleagues made presentations to our Board of Directors and participated in our three day quarterly operations reviews last week. Going forward, given the complementary products in which machine vision, space imaging, medical imaging and semiconductor markets, the majority of e2v’s operations will be reported within our Digital Imaging segment.

On an annual basis, such Teledyne e2v businesses represent approximately $250 million of sales. The balance of Teledyne e2v’s businesses comprised of defense-related microwave and semiconductor devices and representing approximately $60 million of annual sales will be reported within our Aerospace and Defense Electronics segment.

Finally, a small but very important high technology business most at Teledyne known as Teledyne SP devices will be combined with Teledyne LeCroy reported within our Instrumentation segment. Now turning back to the first quarter results.

In our Instrumentation segment, first quarter sales increased 4.1% from last year’s. Sales of marine instrumentation decreased 2.9% due to lower sales of interconnect systems or offshore energy production, largely offset by increased sales of defense-related and land-based interconnect systems.

Marine Instrumentation orders, however, increased over 20% from last year and were at the highest level in two years. With the demand balance across subsea vehicles, mine countermeasures and other solar systems and land-based cables interconnect and corrosion sensors.

In the environmental domain, sales increased 9.8% and operating margin and operating profit also increased. Largely as a result of continued growth in pollution and particulate monitoring instrumentation and the recent acquisition of Hanson Research and strong margin performance across the majority of product lines.

Sales of electronic, test and measurement systems increased 13.6% overall, with organic growth of 4%. Sales of protocol analyzers used by engineers to troubleshoot data communication systems and test interoperability of devices continue to be very healthy.

Segment operating profit and operating margin decreased, but this was solely due to lower sales margins and product mix within our marine instrumentations. Margins for our environmental and electronic test and instrumentation product lines improved 157 basis points and 132 basis points respectively from last year.

Turning to Digital Imaging, first quarter sales increased 26.6%, with organic growth of 14.9%. The organic increase in sales was relatively broad-based, including strong growth for industrial machine vision cameras, micro electro-mechanical systems or MEMS, and laser-based mapping systems.

In addition to strong sales, orders were excellent with a book-to-bill of 1.58. This statistics exclude the $7.2 million of revenue from Teledyne e2v at the end of the quarter and over $200 million of assumed backlog from the acquisition.

GAAP operating margin increased 432 basis points from last year and excluding $2.5 million of e2v acquisition-related costs in this segment, operating margin increased 652 basis points. In the Aerospace and Defense Electronics segment, first quarter sales declined slightly as a result of divestiture of Teledyne Printed Circuit Technology in July 2016.

Excluding the divestiture, organic sales grew 3.1%, primarily as a result of increased sales of commercial avionics. Segment operating margin increased 146 basis points from last year to 17.2%.

In the Engineering Systems segment, first quarter revenue increased 5.1% and operating margin improved 72 basis points. The higher revenue resulted from increased sales of cruise missile engines, commercial hydrogen generators and missile defense engineering services.

In conclusion, I’m very pleased with our great start in 2017. First, our businesses performed exceptionally well.

Second, we closed what I believe to be one of Teledyne’s best acquisitions. While Teledyne e2v is our largest acquisition to-date, it is a company made up of a combination of strong businesses, all of which are large bolt-ons to existing businesses inside Teledyne.

As I mentioned earlier, the integration is going very well, and we’re very impressed with the quality of e2v management, employees and technologies. Just as an example, while Teledyne e2v represents approximately 13% of Teledyne’s pro forma combined revenue, e2v’s patent represent approximately 40% of our combined portfolio of over 2,000 issued active patents.

Finally, we’re committed to maintaining strong cash flow and a healthy balance sheet. Given the e2v transaction, our debt-to-EBITDA leverage ratio increased to 3.0 in the first quarter compared to 1.7 at year-end 2016.

However, our aggregate cost of debt decreased by approximately 100 basis points given the very favorable terms of the e2v acquisition-related financing. I will now turn the call over to Sue.

Thank you, Robert, and good morning, everyone. 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 2017 outlook.

In the first quarter, cash flow from operating activity was $53.4 million compared with cash flow of $69.1 million for the same period of 2016. While cash flow declined from last year, it was, nevertheless, the second-highest level for any Teledyne first quarter.

The lower cash provided by operating activities in the first quarter of 2017, primarily reflected the impact of transaction-related expense payments for the e2v acquisition and the timing of accounts receivable collections. Free cash flow that is cash from operating activities less capital expenditures was $40.8 million for the first quarter of 2017 compared with $54.9 in 2016.

Capital expenditures were $12.6 million in the first quarter compared to $14.2 million for the same period of 2016. Depreciation and amortization expense was $22.8 million in the first quarter compared to $21.1 million for the same period of 2016.

We ended the quarter with approximately $1.24 billion of net debt, that is approximately $1.31 billion debt and capital leases less cash of $69.7 million or a net debt to capital ratio of 43.7%. Stock option compensation expense was $4.1 million in the first quarter of 2017 compared to $3.4 million in the first quarter of 2016.

As noted in the earnings release, the first quarter of 2017 contained $21.2 million of pre-tax charges related to the e2v acquisition. Included in cost of sales for our Digital Imaging segment was $1.4 million related to inventory step-up amortization.

Included in SG&A expense was $11.5 million comprised of stamp duty, a 50 basis points UK transaction tax and financial advisory legal accounting and other fees. Of this $10.4 million was included in corporate expense and $1.1 million was included in the Digital Imaging segment.

Included in other expense was $6.0 million for foreign currency option contract to hedge the purchase price. Finally, a commitment fee expense of $2.3 million related to UK specific certain funds bridge financing facility was included in interest expense.

While the majority of costs were expensed in the first quarter, we expect an additional cost of approximately $7.5 million or $0.14 to $0.15 per share in the remainder of 2017. Most of these will relate to inventory step-up amortization and restructuring cost and will be included in the Digital Imaging segment and to a lesser degree in the Aerospace and Defense Electronics segments.

Turning to our outlook, management currently believe that GAAP earnings per share in the second quarter of 2017 will be in the range of $1.20 to $1.25 per share. Adjusted earnings per share, which excluded transaction related costs are expected to be in the range of $1.27 to $1.32.

And for the full year 2017, our GAAP earnings per share outlook is $5.20 to $5.30. Adjusted full year earnings per share are expected to be in the range of $5.76 to $5.86.

This compares to our prior outlook of $5.40 to $5.50, which excluded e2v. The 2017 full year effective tax rate, excluding any discrete items, is expected to be 28.3%.

I will now pass the call back to Robert.

Thank you, Sue. We would now like to take your questions.

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

Good morning and great quarter.

Thank you, Greg.

I just wanted to start with e2v, I mean multiple times you’ve mentioned about how complementary the two portfolios are. And I was hoping you could discuss maybe some of the product development [indiscernible] the combination and how should we think about revenue synergies over time?

Sure, Greg. Let me start with professional imaging as an example.

We currently make machine vision cameras, as well as sensors. And they make machine vision sensors.

The difference between the sensors are that they’re stronger in CMOS sensors than we are, and most importantly, in two-dimensional area scan CMOS sensors. The area that we expect would contribute to growth is their ability to do three-dimensional imaging, which we do not have currently in our professional imaging portfolio, even though we do have it in our laser imaging portfolio that we do from above ground or underground.

This is our multiple laser scans of object. Second, we have extra oral dental sensors in our professional imaging and they have intra-oral dental sensors and a very healthy IP portfolio in that area.

And we think that would benefit us significantly to generate new products and revenues. In the RF power domain, we make traveling wave tubes, large ones.

They make magnetrons, which are used for cancer therapy radiation. Those are similar technologies.

The underlying technologies in amplifying electromagnetic waves are very similar on those two technologies. On the other hand, while we make large wave tubs, traveling wave tubes, they make small traveling wave tubes, both of these are again microwave power modules.

And we would benefit from each others technologies. Just as importantly, couple to a traveling wave tube is usually you have to have a power supply.

That supplies the power to the traveling wave tube, as the traveling wave tube then magnifies the electromagnetic waves. They make the part amplifies where both their solid state and small mini traveling wave tubes.

We do not have that technology and we’d like to develop it for our larger traveling wave tubes. I’ll just make one other very quick observation.

There are many similar things. Let me give one in space imaging.

We are well-known and respected, the best in the world for space imaging, in the infrared domain, whether it’s on satellites looking up or on various scopes like large hobbled telescopes looking down and looking up. They are great, as well as our first ground-based telescopes.

They’re very good, the world’s best in the visible area. I think we can combine their product in the visible domain with our products in the infrared domain and present a unique set of capabilities to a wide range of customers, including classified programs.

Those are just some of the examples. There are many others that I can’t give, Greg.

Thank you. That was great.

And then if we look at the guidance that you gave for the year, last quarter versus the adjusted guidance in this quarter, it’s up about $0.35. How much of that is attributable to e2v, excluding transaction expenses, versus the change in outlook for the rest of the business?

I think about $0.20 to $0.25 is from e2v. Let’s just say $0.20 and $0.10 to $0.15 is from our core businesses – existing businesses.

Thank you. And then, just…

Yes, go ahead, please.

Sorry. Just last one for me.

I mean the book-to-bill in the quarter of 1.15, I think last quarter, you’re talking about organic growth of maybe 2% to 3%. Have you seen an acceleration in that organic growth, especially, when I look at Digital Imaging did in the quarter?

Yes. I think an organic growth in the first quarter was about 4% – over 4%.

I expect that during the year, it’d be about 5%, better than the 2% to 3% that we indicated.

Thank you.

Thank you, Greg.

Hi, good morning. Congratulations on closing the transaction.

Wanted to follow up on just the growth acceleration that you’re seeing in a couple of parts of the business. In particular, starting with the Digital Imaging, I think that you alluded to 15% organic growth.

You cited a couple of areas. I mean, how evenly was that?

It seems like the machine vision business is going very well, but I wondered if you could just give us a little bit of color on that? And is e2v seeing this same kind of momentum in this area of their business?

Yes. Let me start with our business first, Jim.

There are two areas that are contributing to our strong growth in the imaging businesses. First, is flat panel displays.

And there, we’re enjoying really strong orders, especially with OLED displays that are the new flexible displays. Plants are being built and almost all of them use our cameras, lines cameras for those displays to look at the quality.

Second, we have – as you may recall, we have a MEMS foundry in Beaumont, and that foundry is one of the three largest independent MEMS foundries in the world. We’re enjoying an exceptional year there.

We’re almost 100% booked in that foundry and that’s another growth area. I think e2v also is enjoying similar growth, specifically in barcode reading use, again that uses their cameras, as well as the 3D sensors, which I mentioned, which are very unique.

We are also seeing demand growing for our CMOS x-ray detectors at the core Teledyne businesses. So those are some examples.

Okay, that’s helpful, Robert. In the e2v 3D sensors, are the applications there for – we’ve been hearing more and more of about 3D machine vision.

Are the end markets again skewed more toward consumer electronics devices, industrial applications or inspection of in production lines that are producing consumer electronics? Or are there some other applications for their 3D sensors that go into 3D machine vision?

I would say in both areas. First, 3D sensors are used obviously in consumer electronics, but also they are used in machine vision applications because you get a more precise reading of three dimensional sizes and quality of objects that you are observing.

They are also used in, and I think we will probably start participating in, in addition to machine vision, in automotive collision and avoidance. And this gives us a whole debt capability in 3D added to what we have in our own laser-based systems.

This gives us a whole new set of capabilities to go in new markets.

Is there any unusual seasonality that we need to be mindful of with respect to the e2v business as we go through the year?

Yes, historically, what they’ve done is they’ve had – year was ended in March. And historically, what it had is a bigger quarters at the end of the year.

We’re trying to obviously, flatten that out like we trying to do with our own businesses. But historically, they started slow in their first quarter, which is this would be their first quarter and, of course, this is our second quarter.

But then they picked up. But I think that I would view that, Jim, as transition year.

This should flatten out in future years.

And last question for me, if we think about blended gross margins for Teledyne now. I mean, it seems to be that you are given the mix, and you seem to be overlaying some higher-margin businesses.

Is there a way to think, in broad terms, about your gross margins over the next one to two years?

I think our gross margins would go up from, let’s say 37.5% to 40%. But the bottom line margins are different.

The business is we buying have better in some areas, not into all areas, in some areas have better operating margins than we do. But overall, because we’re going to be adding about $0.20 to $0.24 of intangibles, what happens is that if you do on EBITDA analysis that is take the amortization out, our overall margins would increase.

But because the amortization is hitting us pretty hard, the overall bottom line margin of the company will go down somewhat, maybe 10, 20, 30 basis points. But that’s all right, because in the end, what you’re looking for is how much profit you make and what happens to your EPS.

So in that way, we should be fine.

Thanks very much.

Thank you, operator. That doesn’t seem to be any other questions are there?

Great. I will now ask Jason to conclude our conference call.

Thank you, Robert, and again thank you everyone for joining us this morning. If you do have follow-up questions, please feel free to call me.

My number is on the earnings release. And again, all the earnings releases are available on our website as well as the webcast replay.

Operator, if you could conclude the conference call and provide the replay details, that would the ideal. Thank you, everyone.