Teledyne Technologies Incorporated (NYSE:TDY):
- Record quarterly sales of $802.2 million, an increase of
10.6% compared to last year
- Record quarterly GAAP earnings per diluted share of $2.84,
an increase of 16.9% compared to last year
- Record cash flow
- Record third quarter operating margin
- Raising full year 2019 GAAP earnings outlook to $10.37 to
$10.42 per diluted share, an increase from the prior outlook of
$9.86 to $9.96
- Completed acquisition of the Gas and Flame Detection
business of 3M
- Acquired Micralyne Inc.
Teledyne today reported third quarter 2019 net sales of $802.2
million, compared with net sales of $725.3 million for the third
quarter of 2018, an increase of 10.6%. Net income was $106.7
million ($2.84 per diluted share) for the third quarter of 2019,
compared with $90.3 million ($2.43 per diluted share) for the third
quarter of 2018, an increase of 18.2%. The third quarter of 2019
reflected net discrete income tax benefits of $10.4 million
compared with net discrete income tax benefits of $11.4 million for
the third quarter of 2018. The third quarter of 2019 included $0.3
million in severance and facility consolidation costs compared with
$4.1 million in severance and facility consolidation costs for the
third quarter of 2018.
“Once again, we achieved all-time record sales, earnings per
share and cash flow for any quarterly period,” said Robert
Mehrabian, Executive Chairman. “Due to our greater emphasis on
margin improvement, operating margin increased 150 basis points
over last year. We also closed two acquisitions in the quarter,
including the quick completion of the Gas and Flame Detection
business of 3M. In fact, each of our two 2019 corporate carve-out
acquisitions were closed within two months of announcement.” Al
Pichelli, President and Chief Executive Officer, added, “Teledyne
continued to benefit from our balanced business portfolio. Strong
sales of defense electronics and advanced detectors for medical
imaging, as well as a recovery in marine instrumentation, helped
generate total company organic growth of approximately five
percent. In addition, given recent acquisitions, every segment
reported double-digit sales growth.”
Review of Operations
Comparisons are with the third quarter of 2018, unless noted
otherwise. In the third quarter of 2019, we realigned the reporting
structure for certain business units, primarily related to certain
refinements of our management reporting structure. This change
primarily related to moving certain electronic manufacturing
services products from the Aerospace and Defense Electronics
segment to the Engineered Systems segment. Total net sales for
these products were $76.2 million for fiscal year 2018. Other
immaterial changes included moving certain United Kingdom (U.K.)
microwave product lines (previously within the Digital Imaging
segment) and certain U.K. manufactured composite parts (previously
within the Engineered Systems segment) into the Aerospace and
Defense Electronics segment. Total net sales for these U.K. product
lines were less than $20.0 million for fiscal year 2018. Previously
reported segment data has been adjusted to reflect these
changes.
Instrumentation
The Instrumentation segment’s third quarter 2019 net sales were
$282.9 million, compared with $256.2 million, an increase of 10.4%.
Operating income was $52.0 million for the third quarter of 2019,
compared with $35.7 million, an increase of 45.7%.
The third quarter 2019 net sales increase resulted from higher
sales of environmental instrumentation, marine instrumentation and
test and measurement instrumentation. Sales of environmental
instrumentation increased $17.1 million, sales of marine
instrumentation increased $8.2 million and sales of test and
measurement instrumentation increased $1.4 million. The increase in
sales in environmental instrumentation included $17.3 million in
sales from the acquisition of the Gas and Flame Detection business
of 3M. The increase in operating income reflected the impact of
higher sales and higher margins across most product lines. The
third quarter of 2019 included $0.1 million in severance and
facility consolidation costs compared with $3.2 million in
severance and facility consolidation costs for the third quarter of
2018.
Digital Imaging
The Digital Imaging segment’s third quarter 2019 net sales were
$244.0 million, compared with $220.7 million, an increase of 10.6%.
Operating income was $41.2 million for the third quarter of 2019,
compared with $42.3 million, a decrease of 2.6%.
The third quarter 2019 net sales primarily reflected higher
sales of X-ray detectors for life sciences applications and
aerospace, defense and MEMS products, as well as $23.5 million in
sales from the acquisitions of the scientific imaging businesses of
Roper Technologies, Inc. and Micralyne Inc., partially offset by
lower sales of industrial machine vision products. The decrease in
operating income in the third quarter of 2019 primarily reflected
product mix differences.
Aerospace and Defense Electronics
The Aerospace and Defense Electronics segment’s third quarter
2019 net sales were $177.1 million, compared with $160.3 million,
an increase of 10.5%. Operating income was $39.5 million for the
third quarter of 2019, compared with $33.0 million, an increase of
19.7%.
The third quarter 2019 net sales reflected $20.8 million of
higher sales of defense electronics, partially offset by lower
sales of $4.0 million for aerospace electronics. The increase in
operating income in the third quarter of 2019 reflected the impact
of higher sales and improved margins.
Engineered Systems
The Engineered Systems segment’s third quarter 2019 net sales
were $98.2 million compared with $88.1 million, an increase of
11.5%. Operating income was $10.6 million for the third quarter of
2019, compared with $9.6 million, an increase of 10.4%.
The third quarter 2019 net sales reflected higher sales of $9.3
million of engineered products and services and higher sales of
$1.6 million for turbine engines, partially offset by lower sales
of $0.8 million of energy systems. The higher sales of engineered
products and services primarily reflected increased sales for
marine manufacturing, missile defense and space programs, as well
as electronic manufacturing services products. Operating income in
the third quarter of 2019 increased primarily due to higher
sales.
Additional Financial Information
Cash Flow
Cash provided by operating activities was $150.9 million for the
third quarter of 2019, compared with $141.9 million. The higher
cash provided by operating activities in the third quarter of 2019
reflected the impact of higher operating income and cash flow from
recent acquisitions, partially offset by higher income tax
payments. At September 29, 2019, cash totaled $128.5 million
compared with $142.5 million at December 30, 2018. At September 29,
2019, total debt was $925.4 million, compared with $747.5 million
at December 30, 2018. At September 29, 2019, $225.0 million was
outstanding under the $750.0 million credit facility. The company
received $8.5 million from the exercise of stock options in the
third quarter of 2019, compared with $12.3 million. Capital
expenditures for the third quarter of 2019 were $25.1 million,
compared with $20.9 million. Depreciation and amortization expense
for the third quarter of 2019 was $27.9 million, compared with
$27.3 million. On August 1, 2019, Teledyne acquired the Gas and
Flame Detection business of 3M for $230.0 million in cash. On
August 30, 2019, Teledyne acquired Micralyne Inc. for $25.0 million
in cash.
Free Cash Flow (a)
Third Quarter
(in millions, brackets indicate use of
funds)
2019
2018
Cash provided by operating activities
$
150.9
$
141.9
Capital expenditures for property, plant
and equipment
(25.1
)
(20.9
)
Free cash flow
$
125.8
$
121.0
(a)
The company defines free cash flow as cash
provided by operating activities (a measure prescribed by generally
accepted accounting principles) less capital expenditures for
property, plant and equipment. The company believes that this
supplemental non-GAAP information is useful to assist management
and the investment community in analyzing the company’s ability to
generate cash flow.
Income Taxes
The effective tax rate for the third quarter of 2019 was 13.5%
compared with 9.9%. The third quarter of 2019 reflected net
discrete income tax benefits of $10.4 million. This amount
primarily included $7.8 million in income tax benefit as a result
of the remeasurement of uncertain tax positions due to expiration
of statute of limitations and a favorable tax settlement, as well
as a $3.5 million income tax benefit related to share-based
accounting. The third quarter of 2018 reflected net discrete income
tax benefits of $11.4 million. This amount primarily included $4.4
million in income tax benefit as a result of the remeasurement of
uncertain tax positions due to expiration of statute of limitations
and a $5.0 million income tax benefit related to share-based
accounting. Excluding the net discrete income tax benefits in both
periods, the effective tax rates would have been 21.9% for the
third quarter of 2019 and 21.3% for the third quarter of 2018.
Other
Stock option expense was $5.7 million for the third quarter of
2019, compared with $4.6 million. Stock option expense for fiscal
year 2019 is currently expected to be $26.2 million, compared with
$19.8 million for fiscal year 2018. Non-service retirement benefit
income was $1.9 million for the third quarter of 2019, compared
with $3.4 million. Interest expense, net of interest income,
decreased to $5.5 million for the third quarter of 2019 compared
with $6.0 million. Corporate expense was $14.6 million for the
third quarter of 2019, compared with $15.1 million.
Recent Accounting Pronouncements
Effective December 31, 2018, the beginning of our 2019 fiscal
year, Teledyne adopted the requirements of Accounting Standards
Update (“ASU”) No. 2016-02, “Leases (Topic 842)” using the modified
retrospective transition option of applying the new guidance at the
adoption date. In addition, we elected the package of practical
expedients permitted under the transition guidance within the new
standard, which among other things, allowed us to carry forward the
historical lease classification. Adoption of the new guidance
resulted in the recording of right-of-use assets and a lease
liability for 2019. Prior period comparative information was not
adjusted. At September 29, 2019, Teledyne has right-of-use assets
of $130.2 million included in long-term other assets and a total
lease liability for operating leases of $141.5 million of which
$122.6 million is included in other long-term liabilities and $18.9
million is included in accrued liabilities.
Outlook
Based on its current outlook, the company’s management believes
that fourth quarter 2019 GAAP earnings per diluted share will be in
the range of $2.71 to $2.76 and full year 2019 GAAP earnings per
diluted share will be in the range of $10.37 to $10.42, an increase
from the prior outlook of $9.86 to $9.96. The company’s annual
estimated tax rate for 2019 is 21.9%, before discrete items.
Forward-Looking Statements Cautionary Notice
This press release contains forward-looking statements, as
defined in the Private Securities Litigation Reform Act of 1995,
relating to sales, earnings, stock option compensation expense and
taxes. Forward-looking statements are generally accompanied by
words such as “estimate”, “project”, “predict”, “believes” or
“expect”, that convey the uncertainty of future events or outcomes.
All statements made in this press release 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 the
anticipated results, including: disruptions in the global economy;
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; impacts from the United Kingdom’s pending exit
from the European Union; uncertainties related to the policies of
the U.S. Presidential Administration; the imposition and expansion
of, and responses to, trade sanctions and tariffs; and threats to
the security of our confidential and proprietary information,
including cyber security threats. Lower oil and natural gas prices,
as well as instability in the Middle East or other oil producing
regions, and regulations or restrictions relating to energy
production, including with respect to hydraulic fracturing, could
further negatively affect the company’s businesses that supply the
oil and gas industry. Increasing fuel costs and disruptions from
the grounding of Boeing’s 737 Max aircraft could negatively affect
the markets of our commercial aviation businesses. In addition,
financial market fluctuations affect the value of the company’s
pension assets.
Changes in the policies of U.S. and foreign governments, 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 the company’s 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 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
policy changes and exchange rate fluctuations.
While the company believes its internal and disclosure 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.
Readers are urged to read the company’s periodic reports filed
with the Securities and Exchange Commission (“SEC”) for a more
complete description of the company, its businesses, its strategies
and the various risks that the company faces. Various risks are
identified in Teledyne’s 2018 Annual Report on Form 10-K and
subsequent Quarterly Reports on Form 10-Q. The company assumes no
duty to publicly update or revise any forward-looking statements,
whether as a result of new information or otherwise.
A live webcast of Teledyne’s third quarter earnings conference
call will be held at 11:00 a.m. (Eastern) on Wednesday, October 23,
2019. To access the call, go to www.teledyne.com approximately ten
minutes before the scheduled start time. A replay will also be
available for one month starting at 12:00 p.m. (Eastern) on
Wednesday, October 23, 2019.
TELEDYNE TECHNOLOGIES
INCORPORATED
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
FOR THE THIRD QUARTER AND NINE
MONTHS ENDED
SEPTEMBER 29, 2019 AND
SEPTEMBER 28, 2018
(Unaudited - in millions, except
per share amounts)
Third Quarter
Third Quarter
Nine Months
Nine Months
2019
2018
2019
2018
Net sales
$
802.2
$
725.3
$
2,329.4
$
2,153.4
Costs and expenses:
Costs of sales
487.7
446.2
1,415.2
1,331.4
Selling, general and administrative
expenses
185.8
173.6
556.3
516.6
Total costs and expenses
673.5
619.8
1,971.5
1,848.0
Operating income
128.7
105.5
357.9
305.4
Interest and debt expense, net
(5.5
)
(6.0
)
(16.3
)
(19.8
)
Non-service retirement benefit income
1.9
3.4
6.1
10.1
Other expense, net
(1.7
)
(2.7
)
(3.5
)
(8.9
)
Income before income taxes
123.4
100.2
344.2
286.8
Provision for income taxes
16.7
9.9
57.6
44.1
Net income
$
106.7
$
90.3
$
286.6
$
242.7
Diluted earnings per common share
$
2.84
$
2.43
$
7.66
$
6.56
Weighted average diluted common shares
outstanding
37.6
37.2
37.4
37.0
TELEDYNE TECHNOLOGIES
INCORPORATED
SUMMARY OF SEGMENT NET SALES
AND OPERATING INCOME
FOR THE THIRD QUARTER AND NINE
MONTHS ENDED
SEPTEMBER 29, 2019 AND
SEPTEMBER 28, 2018
(Unaudited - in millions)
Third Quarter
Third Quarter
% Change
Nine Months
Nine Months
% Change
2019
2018
2019
2018
Net sales:
Instrumentation
$
282.9
$
256.2
10.4
%
$
803.5
$
757.8
6.0
%
Digital Imaging (a)
244.0
220.7
10.6
%
724.8
652.0
11.2
%
Aerospace and Defense Electronics (a)
177.1
160.3
10.5
%
519.7
474.2
9.6
%
Engineered Systems (a)
98.2
88.1
11.5
%
281.4
269.4
4.5
%
Total net sales
$
802.2
$
725.3
10.6
%
$
2,329.4
$
2,153.4
8.2
%
Operating income:
Instrumentation
$
52.0
$
35.7
45.7
%
$
140.9
$
104.4
35.0
%
Digital Imaging (a)
41.2
42.3
(2.6
)%
129.4
119.2
8.6
%
Aerospace and Defense Electronics (a)
39.5
33.0
19.7
%
110.6
96.4
14.7
%
Engineered Systems (a)
10.6
9.6
10.4
%
26.0
27.2
(4.4
)%
Corporate expense
(14.6
)
(15.1
)
(3.3
)%
(49.0
)
(41.8
)
17.2
%
Operating income
128.7
105.5
22.0
%
357.9
305.4
17.2
%
Interest and debt expense, net
(5.5
)
(6.0
)
(8.3
)%
(16.3
)
(19.8
)
(17.7
)%
Non-service retirement benefit income
1.9
3.4
(44.1
)%
6.1
10.1
(39.6
)%
Other expense, net
(1.7
)
(2.7
)
(37.0
)%
(3.5
)
(8.9
)
(60.7
)%
Income before income taxes
123.4
100.2
23.2
%
344.2
286.8
20.0
%
Provision for income taxes
16.7
9.9
68.7
%
57.6
44.1
30.6
%
Net income
$
106.7
$
90.3
18.2
%
$
286.6
$
242.7
18.1
%
(a)
The 2018 periods have been adjusted to
reflect the realignment of the reporting structure for certain
business units, primarily related to certain refinements of our
management reporting structure. This change primarily related to
moving certain electronic manufacturing services products from the
Aerospace and Defense Electronics segment to the Engineered Systems
segment. Other immaterial changes included moving certain United
Kingdom (U.K.) microwave product lines (previously within the
Digital Imaging segment) and certain U.K. manufactured composite
parts (previously within the Engineered Systems segment) into the
Aerospace and Defense Electronics segment.
TELEDYNE TECHNOLOGIES
INCORPORATED
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited – in millions)
September 29, 2019
December 30, 2018
ASSETS
Cash
$
128.5
$
142.5
Accounts receivable, net
643.7
561.8
Inventories, net
404.4
364.3
Prepaid expenses and other current
assets
61.5
45.8
Total current assets
1,238.1
1,114.4
Property, plant and equipment, net
468.2
442.6
Goodwill and acquired intangible assets,
net
2,447.7
2,079.5
Prepaid pension asset
108.0
88.2
Other assets, net (a)
217.6
84.6
Total assets
$
4,479.6
$
3,809.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable
$
244.9
$
227.8
Accrued liabilities (a)
384.5
355.6
Current portion of long-term debt and
other debt
206.1
137.4
Total current liabilities
835.5
720.8
Long-term debt
719.3
610.1
Other long-term liabilities (a)
353.8
248.7
Total liabilities
1,908.6
1,579.6
Total stockholders’ equity
2,571.0
2,229.7
Total liabilities and stockholders’
equity
$
4,479.6
$
3,809.3
a)
Effective December 31, 2018, Teledyne
adopted the requirements of Accounting Standards Update (“ASU”) No.
2016-02, “Leases (Topic 842)” using the modified retrospective
transition option of applying the new guidance at the adoption
date. Prior periods were not changed. At September 29, 2019,
Teledyne has right-of-use assets of $130.2 million included in
long-term other assets, net and a total lease liability of $141.5
million for operating leases of which long-term liabilities
includes $122.6 million and accrued liabilities includes $18.9
million.
TELEDYNE TECHNOLOGIES
INCORPORATED
SUMMARY OF QUARTERLY SEGMENT
NET SALES AND OPERATING INCOME
(Unaudited - in
millions)
Adjusted to current reporting
structure
First Quarter
Second Quarter
Six Months
2019
2019
2019
Net sales:
Instrumentation
$
256.5
$
264.1
$
520.6
Digital Imaging (a)
232.4
248.4
480.8
Aerospace and Defense Electronics (a)
166.6
176.0
342.6
Engineered Systems (a)
89.7
93.5
183.2
Total net sales
$
745.2
$
782.0
$
1,527.2
(a)
Adjusted to reflect the realignment in the
third quarter of 2019, of our reporting structure for certain
business units, primarily related to certain refinements of our
management reporting structure.
Adjusted to current reporting
structure
First Quarter
Second Quarter
Six Months
2019
2019
2019
Operating income:
Instrumentation
$
39.9
$
49.0
$
88.9
Digital Imaging (a)
36.6
51.6
88.2
Aerospace and Defense Electronics (a)
32.5
38.6
71.1
Engineered Systems (a)
6.4
9.0
15.4
Corporate expense
(18.1
)
(16.3
)
(34.4
)
Operating income
$
97.3
$
131.9
$
229.2
(a)
Adjusted to reflect the realignment in the
third quarter of 2019, of our reporting structure for certain
business units, primarily related to certain refinements of our
management reporting structure.
Originally reported
First Quarter
Second Quarter
Six Months
2019
2019
2019
Net sales:
Instrumentation
$
256.5
$
264.1
$
520.6
Digital Imaging
235.3
251.3
486.6
Aerospace and Defense Electronics
180.4
191.0
371.4
Engineered Systems
73.0
75.6
148.6
Total net sales
$
745.2
$
782.0
$
1,527.2
Originally reported
First Quarter
Second Quarter
Six Months
2019
2019
2019
Operating income:
Instrumentation
$
39.9
$
49.0
$
88.9
Digital Imaging
37.0
52.5
89.5
Aerospace and Defense Electronics
33.8
39.4
73.2
Engineered Systems
4.7
7.3
12.0
Corporate expense
(18.1
)
(16.3
)
(34.4
)
Operating income
$
97.3
$
131.9
$
229.2
TELEDYNE TECHNOLOGIES
INCORPORATED
SUMMARY OF QUARTERLY SEGMENT
NET SALES AND OPERATING INCOME
(Unaudited - in
millions)
Adjusted to current reporting
structure
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
2018
2018
2018
2018
2018
Net sales:
Instrumentation
$
239.0
$
262.6
$
256.2
$
263.4
$
1,021.2
Digital Imaging (a)
208.3
223.0
220.7
223.3
875.3
Aerospace and Defense Electronics (a)
156.4
157.5
160.3
166.0
640.2
Engineered Systems (a)
91.9
89.4
88.1
95.7
365.1
Total net sales
$
695.6
$
732.5
$
725.3
$
748.4
$
2,901.8
(a)
Adjusted to reflect the realignment in the
third quarter of 2019, of our reporting structure for certain
business units, primarily related to certain refinements of our
management reporting structure.
Adjusted to current reporting structure
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
2018
2018
2018
2018
2018
Operating income:
Instrumentation
$
27.8
$
40.9
$
35.7
$
43.0
$
147.4
Digital Imaging (a)
33.8
43.1
42.3
36.3
155.5
Aerospace and Defense Electronics (a)
30.8
32.6
33.0
35.4
131.8
Engineered Systems (a)
8.9
8.7
9.6
10.7
37.9
Corporate expense
(12.9
)
(13.8
)
(15.1
)
(14.2
)
(56.0
)
Operating income
$
88.4
$
111.5
$
105.5
$
111.2
$
416.6
(a)
Adjusted to reflect the realignment in the
third quarter of 2019, of our reporting structure for certain
business units, primarily related to certain refinements of our
management reporting structure.
Originally reported
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
2018
2018
2018
2018
2018
Net sales:
Instrumentation
$
239.0
$
262.6
$
256.2
$
263.4
$
1,021.2
Digital Imaging
211.0
225.3
223.0
225.9
885.2
Aerospace and Defense Electronics
173.6
173.5
171.1
178.3
696.5
Engineered Systems
72.0
71.1
75.0
80.8
298.9
Total net sales
$
695.6
$
732.5
$
725.3
$
748.4
$
2,901.8
Originally reported
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
2018
2018
2018
2018
2018
Operating income:
Instrumentation
$
27.8
$
40.9
$
35.7
$
43.0
$
147.4
Digital Imaging
34.6
43.3
42.3
37.1
157.3
Aerospace and Defense Electronics
31.7
33.7
33.3
36.5
135.2
Engineered Systems
7.2
7.4
9.3
8.8
32.7
Corporate expense
(12.9
)
(13.8
)
(15.1
)
(14.2
)
(56.0
)
Operating income
$
88.4
$
111.5
$
105.5
$
111.2
$
416.6
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version on businesswire.com: https://www.businesswire.com/news/home/20191023005277/en/
Jason VanWees (805) 373-4542
Teledyne Technologies (NYSE:TDY)
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