Teledyne Technologies Incorporated (NYSE:TDY):
- Record sales of $1,121.0 million, an increase of 50.8%
compared with last year
- Second quarter GAAP diluted earnings per share of
$1.48
- Second quarter non-GAAP diluted earnings per share of $4.61,
excluding pretax acquisition-related transaction and purchase
accounting expenses of $150.7 million ($3.13 per share)
- Second quarter GAAP operating margin of 9.3% and non-GAAP
operating margin of 22.8%
- Record second quarter cash flow from operations
- Issuing full year 2021 GAAP earnings outlook of $8.05 to
$8.45 per share and full year 2021 non-GAAP earnings outlook of
$15.25 to $15.50 per share, which excludes acquisition-related
transaction and purchase accounting expenses
- Completed the acquisition of FLIR on May 14, 2021, for
aggregate consideration of approximately $8.1 billion
Teledyne today reported second quarter 2021 net sales of
$1,121.0 million, compared with net sales of $743.3 million for the
second quarter of 2020, an increase of 50.8%. Net income was $64.7
million ($1.48 diluted earnings per share) for the second quarter
of 2021, compared with $93.7 million ($2.48 diluted earnings per
share) for the second quarter of 2020, a decrease of 30.9%. The
second quarter of 2021 net sales included $301.4 million in
incremental net sales from the acquisition of FLIR Systems, Inc.
(“FLIR”). In connection with the FLIR acquisition, Teledyne
incurred pretax expenses of $140.7 million, which included $42.3
million of transaction and integration-related costs, $52.2 million
for the settlement of FLIR employee and director stock awards,
$22.8 million in acquired intangible asset amortization expense and
$23.4 million in acquired inventory step-up expense. The second
quarter of 2021 also included $10.0 million of acquired intangible
asset amortization expense for transactions completed in prior
periods. Excluding these charges, non-GAAP net income for the
second quarter of 2021 would have been $201.0 million ($4.61 per
share). The second quarter of 2020 included pretax charges of $18.3
million which included $9.7 million in acquired intangible asset
amortization expense and $8.6 million in severance, facility
consolidation and acquisition costs. Excluding acquired intangible
asset amortization expense, non-GAAP net income for the second
quarter of 2020 would have been $101.1 million ($2.68 per share).
Operating margin was 9.3% for the second quarter of 2021, compared
with 14.8% for the second quarter of 2020. Excluding
acquisition-related transaction and purchase accounting expenses,
non-GAAP operating margin for the second quarter of 2021 was 22.8%,
compared with 16.1% for the second quarter of 2020. The second
quarter of 2021 reflected net discrete income tax expense of $4.1
million compared with net discrete income tax benefits of $10.4
million for the second quarter of 2020.
“The second quarter was truly a record for Teledyne with sales,
operating margin and earnings, excluding acquisition-related costs,
significantly greater than any prior period,” said Robert
Mehrabian, Executive Chairman. “We achieved double-digit organic
growth with such sales from digital imaging, environmental and
electronic test and measurement instrumentation increasing from 17%
to nearly 25% year-over-year. Furthermore, Teledyne FLIR performed
very well in its first few weeks under Teledyne ownership. We have
already made rapid progress integrating FLIR, increasing visibility
and accelerating the financial reporting cadence, while continuing
to enhance FLIR’s compliance standards. At the same time, we have
eliminated significant corporate overhead, consultants and other
third-party service providers. As a result, we now expect to
achieve our annualized cost savings target of $80.0 million before
the end of 2022, as opposed to 2024 as described in our final
merger proxy. I should note that the very strong non-GAAP margin
and earnings performance in the second quarter resulted, in part,
from a disproportionate amount of sales from FLIR relative to costs
in its first six weeks of consolidation. In addition, the average
share count in the second quarter only partially reflected the
stock issued in connection with the transaction. Both items are
normalized and reflected in our outlook for 2021.”
Review of Operations
Comparisons are with the second quarter of 2020, unless noted
otherwise. The Company now discloses acquired intangible asset
amortization on a separate income statement line. Acquired
intangible asset amortization was previously included in selling,
general and administrative expenses. Prior period amounts have been
reclassified to conform to the current presentation.
Digital Imaging
The Digital Imaging segment’s second quarter 2021 net sales were
$579.5 million, compared with $237.6 million, an increase of
143.9%. Operating income was $84.6 million for the second quarter
of 2021, compared with $46.8 million, an increase of 80.8%.
The second quarter 2021 net sales increase included $301.4
million of incremental net sales from the FLIR acquisition as well
as organic sales growth from industrial and scientific sensors and
cameras, micro-electro-mechanical systems (“MEMS”) and geospatial
imaging software. The second quarter of 2021 net sales reflected
the historical concentration of FLIR net sales in the second half
of the quarter. The increase in operating income in the second
quarter of 2021 reflected the historical concentration of FLIR net
sales which were disproportionately higher than the operating
expenses, partially offset by $70.2 million of FLIR
acquisition-related transaction and purchase accounting expenses,
which included $24.0 million of integration-related costs, $22.8
million in acquired intangible asset amortization expense and $23.4
million in inventory step-up expense. The increase in operating
income also reflected the impact of organic sales growth.
Instrumentation
The Instrumentation segment’s second quarter 2021 net sales were
$291.1 million, compared with $263.1 million, an increase of 10.6%.
Operating income was $64.6 million for the second quarter of 2021,
compared with $48.5 million, an increase of 33.2%.
The second quarter 2021 net sales increase resulted from higher
sales of environmental instrumentation and test and measurement
instrumentation, partially offset by lower sales of marine
instrumentation. Sales of environmental instrumentation and test
and measurement instrumentation increased $18.5 million and $14.5
million, respectively. Sales of marine instrumentation decreased
$5.0 million. The increase in operating income reflected the impact
of higher sales and improved margins across most product categories
resulting from ongoing margin improvement initiatives.
Aerospace and Defense Electronics
The Aerospace and Defense Electronics segment’s second quarter
2021 net sales were $152.4 million, compared with $143.1 million,
an increase of 6.5%. Operating income was $28.4 million for the
second quarter of 2021, compared with $17.5 million, an increase of
62.3%.
The second quarter 2021 net sales reflected $9.4 million of
higher sales for defense and space electronics, partially offset by
slightly lower sales of aerospace electronics of $0.1 million.
Operating income in the second quarter of 2021 reflected the impact
of higher sales and a lower cost structure due to actions taken in
2020, lower severance, facility consolidation expenses and lower
research and development costs. Operating income in the second
quarter of 2021 included $0.1 million in severance and facility
consolidation costs, compared with $5.2 million. Research and
development expense was lower by $3.1 million in the second quarter
of 2021, and primarily reflected lower spending for aerospace
electronics.
Engineered Systems
The Engineered Systems segment’s second quarter 2021 net sales
were $98.0 million compared with $99.5 million, a decrease of 1.5%.
Operating income was $11.0 million for the second quarter of 2021,
compared with $10.8 million, an increase of 1.9%.
The second quarter 2021 net sales reflected higher sales of $3.0
million of engineered products and $0.7 million for energy systems,
more than offset by lower sales of $5.2 million of turbine engines.
The higher sales for engineered products primarily reflected
increased sales from missile defense and marine manufacturing
programs. Teledyne exited the turbine engine business in the first
quarter of 2021.
Additional Financial Information
FLIR acquisition
On May 14, 2021, Teledyne completed the acquisition of FLIR in a
cash and stock transaction valued at $8.1 billion. In connection
with the acquisition of FLIR stock, Teledyne issued 9.5 million
shares of its common stock and paid $3.7 billion in cash. FLIR
manufactures thermal and visible-spectrum imaging cameras, cores
and components, marine electronics, and sensors, surveillance
systems and unmanned platforms for industrial and government
customers worldwide, and is part of the Digital Imaging
segment.
Cash Flow
Cash provided by operating activities was $211.3 million for the
second quarter of 2021, compared with $155.8 million. The higher
cash flow from operating activities for the second quarter of 2021
reflected improved working capital management, which included a
focus on inventory reduction initiatives and the cash flow
contribution from FLIR, partially offset by higher income tax
payments and after tax payments of $66.7 million for expenses
related to the FLIR acquisition. At July 4, 2021, net debt was
$4,046.9 million and comprised of cash and cash equivalents of
$695.1 million and total debt of $4,742.0 million. At January 3,
2021, net debt was $105.4 million and comprised of cash and cash
equivalents of $673.1 million and total debt of $778.5 million. The
higher debt balance at July 4, 2021, included the debt incurred to
fund the cash portion of the FLIR acquisition. At July 4, 2021,
approximately $743.5 million was available under the $1,150 million
credit facility, after reductions of $125.0 million in borrowings
and $281.5 million in outstanding letters of credit. The
outstanding letters of credit include a $260.0 million letter of
credit to the Swedish Tax Authority, related to a disputed 2018 tax
reassessment issued to a FLIR subsidiary in Sweden. The Company
received $5.1 million from the exercise of stock options in the
second quarter of 2021 compared with $18.0 million. Capital
expenditures for the second quarter of 2021 were $20.8 million
compared with $16.6 million. Depreciation and amortization expense
for the second quarter of 2021 was $59.7 million, which includes
acquired intangible asset amortization expense of $22.8 million
related to FLIR, compared with $29.0 million. Non-cash inventory
step-up expense related to FLIR was $23.4 million for the second
quarter of 2021.
Free Cash Flow (a)
Second Quarter
(in millions, brackets indicate use of
funds)
2021
2020
Cash provided by operating activities
$
211.3
$
155.8
Capital expenditures for property, plant
and equipment
(20.8
)
(16.6
)
Free cash flow
190.5
139.2
FLIR transaction related cash payments,
net of tax
66.7
—
Adjusted free cash flow
$
257.2
$
139.2
Income Taxes
The effective tax rate for the second quarter of 2021 was 29.8%,
compared with 13.2%. The second quarter of 2021 reflected net
discrete income tax expense of $4.1 million, which included $11.5
million expense related to foreign tax rate changes, partially
offset by a $5.3 million income tax benefit related to the release
of a valuation allowance and a $2.1 million income tax benefit
related to share-based accounting. The second quarter of 2020
reflected net discrete income tax benefits of $10.4 million which
included $9.8 million in income tax benefit related to share-based
accounting. Excluding the net discrete income tax items in both
periods, the effective tax rates would have been 25.3% for the
second quarter of 2021, compared with 22.8%. The higher tax rate in
the second quarter of 2021, reflects the impact of certain
non-deductible transaction and integration costs as well as the
impact of a change in the expected total year tax rate.
Other
Stock option expense was $3.6 million for the second quarter of
2021 compared with $5.7 million. Stock option expense for fiscal
year 2021 is currently expected to be $20.8 million based on
current options outstanding and stock options expected to be
granted in the third quarter of 2021, compared with $24.7 million
for fiscal year 2020. The decrease in stock option expense in the
second quarter of 2021, reflects the absence of stock option grants
in the first six months of 2021. Restricted stock unit expense for
FLIR employees was $4.4 million in the second quarter of 2021 and
is expected to be $8.2 million for fiscal year 2021 and is included
in the Digital Imaging segment results. Non-service retirement
benefit income was $2.8 million for the second quarter of 2021,
compared with $3.2 million. Interest expense, net of interest
income, increased to $21.2 million for the second quarter of 2021
compared with $3.7 million. The higher 2021 amount included
interest and debt expense on the debt incurred to fund the FLIR
acquisition. Corporate expense increased to $84.2 million for the
second quarter of 2021, compared with $13.8 million. The higher
2021 amount included $70.5 million of transaction costs related to
the FLIR acquisition, including $52.2 million for the settlement of
FLIR employee and director stock awards. Other income and expense,
was income of $6.1 million for the second quarter of 2021, compared
with expense of $1.4 million. The second quarter 2021 amount
included $4.0 million in foreign currency income, compared with
$2.5 million in foreign currency expense in the second quarter of
2020.
Outlook
Based on its current outlook, the company’s management believes
that third quarter 2021 GAAP diluted earnings per common share will
be in the range of $2.00 to $2.15 and full year 2021 GAAP diluted
earnings per common share will be in the range of $8.05 to $8.45
and third quarter 2021 non-GAAP diluted earnings per common share
will be in the range of $3.55 to $3.65 and full year 2021 non-GAAP
diluted earnings per common share will be in the range of $15.25 to
$15.50. The non-GAAP outlook excludes certain costs related to the
FLIR acquisition, such as acquired intangible asset amortization,
inventory step-up expense, bridge loan and debt extinguishment
fees, and transaction costs and reflects the issuance of Teledyne
common stock on May 14, 2021 in connection with the FLIR
transaction. This outlook also excludes acquired intangible asset
amortization from prior acquisitions and the remeasurement of
deferred taxes related to acquired intangible assets due to changes
in tax laws. The company’s annual expected tax rate for 2021 is
23.9%, before discrete tax items. In addition, we currently expect
less discrete tax items in 2021 compared with 2020.
Use of Non-GAAP Financial Measures
We report our financial results in accordance with generally
accepted accounting principles in the United States (“GAAP”). We
supplement the reporting of our financial results determined under
GAAP with certain non-GAAP financial measures. The non-GAAP
financial measures presented provides management, analysts, and
investors with additional useful information in evaluating the
performance of the company. The non-GAAP financial measures should
be considered in addition to, and not as a substitute for,
financial measures prepared in accordance with GAAP. Further
details on reasons that we use non-GAAP financial measures, a
reconciliation of these measures to the most directly comparable
GAAP measures, and other information relating to these measures are
included following our GAAP financial statements.
Forward-Looking Statements Cautionary Notice
This earnings release contains forward-looking statements, as
defined in the Private Securities Litigation Reform Act of 1995,
with respect to management’s beliefs about the financial condition,
results of operations and businesses of Teledyne in the future.
Forward-looking statements involve risks and uncertainties, are
based on the current expectations of the management of Teledyne and
are subject to uncertainty and changes in circumstances.
The forward-looking statements contained herein may include
statements relating to stock option compensation expense, and about
the expected effects on Teledyne of the acquisition of FLIR and
related financing, the anticipated scope of the transaction,
anticipated earnings enhancements, estimated cost savings and other
synergies related to the transaction, costs to be incurred in
achieving synergies, anticipated capital expenditures and product
developments, and other strategic options. Forward-looking
statements generally are accompanied by words such as “projects”,
“intends”, “expects”, “anticipates”, “targets”, “estimates”, “will”
and words of similar import that convey the uncertainty of future
events or outcomes. All statements made in this communication that
are not historical in nature should be considered forward-looking.
By its nature, forward-looking information is not a guarantee of
future performance or results and involves risks and uncertainties
because it relates to events and depends on circumstances that will
occur in the future.
Actual results could differ materially from these
forward-looking statements. Many factors could change anticipated
results, including ongoing challenges and uncertainties posed by
the COVID pandemic for businesses and governments around the world,
including production, supply, contractual and other disruptions,
facility closures, furloughs and travel restrictions; the inability
to integrate FLIR successfully, to retain customers and key
employees and to achieve operating synergies, including the
possibility that the anticipated benefits of the transaction are
not realized when expected or at all, including as a result of the
impact of, or problems arising from, the integration of the two
companies or as a result of the strength of the economy and
competitive factors in the areas where Teledyne and FLIR do
business; changes in relevant tax and other laws; risks associated
with indebtedness, including that incurred as a result of financing
transactions undertaken in connection with the acquisition of FLIR,
as well as our ability to reduce indebtedness and the timing
thereof; 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; operating results of FLIR being
lower than anticipated; disruptions in the global economy; 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
the COVID pandemic; impacts from the United Kingdom’s 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; the continuing review
and resolution of FLIR’s export matters; escalating economic and
diplomatic tension between China and the United States; 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 new regulations or restrictions relating to energy
production could further negatively affect our businesses that
supply the oil and gas industry. Continued weakness in the
commercial aerospace industry will 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, 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.
Additional factors that could cause results to differ materially
from those described above can be found in Teledyne’s Annual Report
on Form 10-K for the year ended January 3, 2021, and subsequent
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all
of which are on file with the SEC and available in the “Investors”
section of Teledyne’s website, teledyne.com, under the heading
“Investor Information” and in other documents Teledyne files with
the SEC.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time.
Teledyne assumes 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.
A live webcast of Teledyne’s second quarter earnings conference
call will be held at 11:00 a.m. (Eastern) on Wednesday, July 28,
2021. To access the call, go to
www.teledyne.com/investors/events-and-presentations 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, July 28, 2021.
TELEDYNE TECHNOLOGIES
INCORPORATED
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
FOR THE SECOND QUARTER AND SIX
MONTHS ENDED
JULY 4, 2021 AND JUNE 28,
2020
(Unaudited - in millions, except
per share amounts)
Second Quarter (a)
Second Quarter
Six Months (a)
Six Months
2021
2020
2021
2020
Net sales
$
1,121.0
$
743.3
$
1,926.7
$
1,527.9
Costs and expenses:
Costs of sales
663.1
460.6
1,155.6
953.2
Selling, general and administrative
expenses (b)
320.7
163.2
488.9
341.6
Acquired intangible asset amortization
(b)
32.8
9.7
42.6
19.3
Total costs and expenses
1,016.6
633.5
1,687.1
1,314.1
Operating income
104.4
109.8
239.6
213.8
Interest and debt expense, net
(21.2
)
(3.7
)
(56.9
)
(7.8
)
Non-service retirement benefit income
2.8
3.2
5.6
5.7
Other income (expense), net
6.1
(1.4
)
5.1
(2.8
)
Income before income taxes
92.1
107.9
193.4
208.9
Provision for income taxes (c)
27.4
14.2
44.0
33.0
Net income
$
64.7
$
93.7
$
149.4
$
175.9
Diluted earnings per common share
$
1.48
$
2.48
$
3.66
$
4.65
Weighted average diluted common shares
outstanding
43.6
37.8
40.8
37.8
a)
The second quarter of 2021 includes pretax
charges of $150.7 million primarily related to the acquisition of
FLIR. Of this amount, $23.7 million was recorded to cost of sales,
$94.2 million was recorded to selling, general and administrative
expenses and $32.8 million was recorded to acquired intangible
asset amortization ($10.0 million related to prior acquisitions).
The first six months of 2021 includes pretax charges of $197.0
million mostly related to the acquisition of FLIR, of which, $23.7
million was recorded to cost of sales, $100.1 million was recorded
to selling, general and administrative expenses, $42.6 million was
recorded to acquired intangible asset amortization, ($19.8 million
related to prior acquisitions) and $30.6 million was recorded to
interest expense.
b)
Acquired intangible asset amortization was
previously included in selling, general and administrative
expenses. Prior period amounts have been reclassified to conform to
the current presentation.
c)
The second quarter of 2021 includes net
discrete income tax expense of $4.1 million and the first six
months of 2021 includes net discrete income tax benefits of $2.2
million. The second quarter and first six months of 2020 includes
net discrete tax benefits of $10.4 million and $14.6 million,
respectively.
This financial statement was prepared in
accordance with U.S. generally accepted accounting principles.
TELEDYNE TECHNOLOGIES
INCORPORATED
SUMMARY OF SEGMENT NET SALES
AND OPERATING INCOME
FOR THE SECOND QUARTER AND SIX
MONTHS ENDED
JULY 4, 2021 AND JUNE 28,
2020
(Unaudited - in millions)
Second Quarter
Second Quarter
% Change
Six Months
Six Months
% Change
2021
2020
2021
2020
Net sales:
Digital Imaging
$
579.5
$
237.6
143.9
%
$
842.8
$
484.3
74.0
%
Instrumentation
291.1
263.1
10.6
%
577.6
548.2
5.4
%
Aerospace and Defense Electronics
152.4
143.1
6.5
%
303.6
299.4
1.4
%
Engineered Systems
98.0
99.5
(1.5
)%
202.7
196.0
3.4
%
Total net sales
$
1,121.0
$
743.3
50.8
%
$
1,926.7
$
1,527.9
26.1
%
Operating income:
Digital Imaging (a)
$
84.6
$
46.8
80.8
%
$
136.6
$
90.6
50.8
%
Instrumentation
64.6
48.5
33.2
%
124.0
99.3
24.9
%
Aerospace and Defense Electronics
28.4
17.5
62.3
%
56.7
30.9
83.5
%
Engineered Systems
11.0
10.8
1.9
%
25.9
22.2
16.7
%
Corporate expense (a)
(84.2
)
(13.8
)
*
(103.6
)
(29.2
)
*
Operating income
104.4
109.8
(4.9
)%
239.6
213.8
12.1
%
Interest and debt expense, net (a)
(21.2
)
(3.7
)
*
(56.9
)
(7.8
)
*
Non-service retirement benefit income
2.8
3.2
(12.5)
%
5.6
5.7
(1.8
)%
Other income (expense), net
6.1
(1.4
)
*
5.1
(2.8
)
*
Income before income taxes
92.1
107.9
(14.6
)%
193.4
208.9
(7.4
)%
Provision for income taxes (b)
27.4
14.2
93.0
%
44.0
33.0
33.3
%
Net income
$
64.7
$
93.7
(30.9
)%
$
149.4
$
175.9
(15.1
)%
* not meaningful
a)
The second quarter of 2021
includes pretax charges of $140.7 million related to the
acquisition of FLIR, of which, $70.2 million was recorded in the
Digital Imaging segment and $70.5 million was recorded to corporate
expense. The first six months of 2021 includes pretax charges of
$177.2 million related to the acquisition of FLIR, of which, $70.2
million was recorded in the Digital Imaging segment, $76.4 million
was recorded to corporate expense and $30.6 million was recorded to
interest and debt expense.
b)
The second quarter of 2021
includes net discrete income tax expense of $4.1 million and the
first six months of 2021 includes net discrete income tax benefits
of $2.2 million. The second quarter and first six months of 2020
includes net discrete tax benefits of $10.4 million and $14.6
million, respectively.
This financial statement was prepared in
accordance with U.S. generally accepted accounting principles.
TELEDYNE TECHNOLOGIES
INCORPORATED
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited – in millions)
July 4, 2021
January 3, 2021
ASSETS
Cash and cash equivalents
$
695.1
$
673.1
Accounts receivable, net
963.3
624.1
Inventories, net
867.2
347.3
Prepaid expenses and other current
assets
125.3
78.1
Total current assets
2,650.9
1,722.6
Property, plant and equipment, net
873.0
489.3
Goodwill and acquired intangible assets,
net (a)
10,281.7
2,559.7
Prepaid pension asset
80.6
67.9
Other assets, net
336.7
245.3
Total assets
$
14,222.9
$
5,084.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable
$
399.6
$
229.1
Accrued liabilities
653.7
434.2
Current portion of long-term debt and
other debt
—
97.6
Total current liabilities
1,053.3
760.9
Long-term debt, net of current portion
4,742.0
680.9
Other long-term liabilities
1,115.2
414.4
Total liabilities
6,910.5
1,856.2
Total stockholders’ equity (b)
7,312.4
3,228.6
Total liabilities and stockholders’
equity
$
14,222.9
$
5,084.8
a)
The increase in goodwill and
acquired intangible assets primarily reflects the estimated amounts
related to the acquisition of FLIR on May 14, 2021.
b)
The increase in total
stockholders' equity primarily reflects the value of Teledyne
common stock issued in connection with the acquisition of FLIR on
May 14, 2021.
This financial statement was prepared in
accordance with U.S. generally accepted accounting principles.
TELEDYNE TECHNOLOGIES
INCORPORATED
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
FOR THE SECOND QUARTER AND SIX
MONTHS ENDED JULY 4, 2021 AND JUNE 28, 2020
(Unaudited - in millions, except
per share amounts)
Second Quarter 2021
Second Quarter 2020
Income before income
taxes
Net income
Diluted earnings per common
share
Income before income
taxes
Net income
Diluted earnings per common
share
GAAP
$
92.1
$
64.7
$
1.48
$
107.9
$
93.7
$
2.48
Adjusted for specified items:
FLIR transaction and integration costs
94.5
80.7
1.85
—
—
—
FLIR inventory step-up expense
23.4
18.0
0.41
—
—
—
Acquired intangible asset amortization
32.8
25.2
0.59
9.7
7.4
0.20
Tax rate changes on acquired intangible
assets
—
12.4
0.28
—
—
—
Non-GAAP
$
242.8
$
201.0
$
4.61
$
117.6
$
101.1
$
2.68
Six Months 2021
Six Months 2020
Income before income
taxes
Net income
Diluted earnings per common
share
Income before income
taxes
Net income
Diluted earnings per common
share
GAAP
$
193.4
$
149.4
$
3.66
$
208.9
$
175.9
$
4.65
Adjusted for specified items:
FLIR transaction and integration costs
100.4
86.5
2.12
—
—
—
FLIR inventory step-up expense
23.4
18.0
0.44
—
—
—
Acquired intangible asset amortization
42.6
32.7
0.80
19.3
14.7
0.39
Tax rate changes on acquired intangible
assets
—
12.4
0.31
—
—
—
Bridge loan and debt extinguishment
fees
30.6
23.3
0.57
—
—
—
Non-GAAP
$
390.4
$
322.3
$
7.90
$
228.2
$
190.6
$
5.04
Second Quarter 2021
Second Quarter 2020
Operating income
Operating margin
Operating income
Operating margin
GAAP
$
104.4
9.3
%
$
109.8
14.8
%
Adjusted for specified items:
FLIR transaction and integration costs
94.5
—
FLIR inventory step-up expense
23.4
—
Acquired intangible asset amortization
32.8
9.7
Non-GAAP
$
255.1
22.8
%
$
119.5
16.1
%
Six Months 2021
Six Months 2020
Operating income
Operating margin
Operating income
Operating margin
GAAP
$
239.6
12.4
%
$
213.8
14.0
%
Adjusted for specified items:
FLIR transaction and integration costs
100.4
—
FLIR inventory step-up expense
23.4
—
Acquired intangible asset amortization
42.6
19.3
Non-GAAP
$
406.0
21.1
%
$
233.1
15.3
%
July 4, 2021
January 3, 2021
Current portion of long-term debt and
other debt - GAAP
$
—
$
97.6
Long-term debt - GAAP
4,742.0
680.9
Total debt - non-GAAP
4,742.0
778.5
Less cash and cash equivalents - GAAP
(695.1
)
(673.1
)
Net debt - non-GAAP
$
4,046.9
$
105.4
Third Quarter 2021
Total Year 2021
Low
High
Low
High
GAAP Diluted Earnings Per Common Share
Outlook
$
2.00
$
2.15
$
8.05
$
8.45
Adjusted for specified non-GAAP items:
FLIR transaction and integration costs
0.09
0.08
2.10
2.04
FLIR inventory step-up expense
0.57
0.55
1.63
1.58
Acquired intangible asset amortization
0.89
0.87
2.67
2.63
Tax rate changes on acquired intangible
assets
—
—
0.28
0.28
Bridge loan and debt extinguishment
fees
—
—
0.52
0.52
Non-GAAP Diluted Earnings Per Common
Share Outlook
$
3.55
$
3.65
$
15.25
$
15.50
Explanation of Non-GAAP Financial Measures
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 acquisitions 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 and investors 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 also
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.
The non-GAAP financial measures 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 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.
Our non-GAAP measures are as follows:
Non-GAAP Income before income taxes, net income and diluted
earnings per common share
These non-GAAP measures provided a supplemental view of income
before taxes, net income, and diluted earnings per common share.
These non-GAAP measures exclude certain costs related to the FLIR
acquisition, such as acquired intangible asset amortization,
amortization of inventory step-up, bridge loan and debt
extinguishment fees, and transaction costs such as advisory, legal
and other consulting fees, filing fees, employee separation costs
and other costs. These non-GAAP measures also exclude acquired
intangible asset amortization from prior acquisitions and the
remeasurement of deferred taxes related to acquired intangible
assets due to changes in tax laws. We adjust for any income tax
impact related to these items to take into account the tax
treatment and related tax rate and changes in tax rates that apply
to each adjustment in the applicable tax jurisdiction. Generally,
this results in tax impact at the U.S. marginal tax rate for
certain adjustments, including the majority of amortization of
intangible assets, whereas the tax impact of other adjustments,
including transaction expenses, depend on whether the amounts are
deductible in the respective tax jurisdictions and the applicable
tax rates in those jurisdictions. We believe these measures provide
investors and management with additional means to understand and
evaluate the operating results of our business by adjusting for
certain expenses and other items and present an alternative view of
our performance compared to prior periods.
Non-GAAP Operating income and operating margin
We define non-GAAP operating margin as non-GAAP operating income
divided by net sales. These non-GAAP measures exclude certain costs
related to the FLIR acquisition, such as acquired intangible asset
amortization, amortization of inventory step-up, and transaction
costs such as advisory, legal and other consulting fees, filing
fees, employee separation costs and other costs. These non-GAAP
measures also exclude acquired intangible asset amortization from
prior acquisitions. We believe these measures provide investors and
management with additional means to understand and evaluate the
operating results of our business by adjusting for certain expenses
and other items and present an alternative view of our performance
compared to prior periods
Non-GAAP Total debt and net debt
We define non-GAAP total debt as the sum of current portion of
long-term debt and other debt and long-term debt. We define net
debt as the difference between non-GAAP total debt less cash and
cash equivalents. The company believes that this supplemental
non-GAAP information is useful to assist investors and management
in analyzing the company’s liquidity.
Non-GAAP Diluted earnings per common share outlook
These non-GAAP measures represent our earnings per common share
outlook for the third quarter 2021 and total year 2021 on a fully
diluted basis, excluding certain costs related to the FLIR
acquisition, such as acquired intangible asset amortization,
amortization of inventory step-up, bridge loan and debt
extinguishment fees, and transaction costs such as advisory, legal
and other consulting fees, filing fees, employee separation costs
and other costs. These non-GAAP measures also exclude acquired
intangible asset amortization from prior acquisitions and the
remeasurement of deferred taxes related to acquired intangible
assets due to changes in tax laws.
Non-GAAP Free cash flow and adjusted free cash flow
We define 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. Adjusted free cash flow eliminates the impact of cash
paid for transaction related expenses for the FLIR acquisition on a
net of tax basis. We believe 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.
Management excludes the effect of each of the items identified
below to arrive at the applicable non-GAAP financial measure
referenced in the previous tables for the reasons set forth below
with respect to that item:
- FLIR transaction and integration
costs - Included in our GAAP presentation of cost of sales
and selling, general and administrative expenses are expenses
incurred in connection with our acquisitions of FLIR and primarily
include legal, accounting, other professional fees as well as
integration-related costs such as employee separation costs and
facility lease impairments. Employee separation costs include
required change-in-control payments, cash settlement of FLIR
employee and director stock awards, as well as other employee
severance amounts. We exclude these costs from our non-GAAP
measures because we believe it does not reflect our ongoing
financial performance.
- FLIR inventory step-up expense –
The purchase accounting entries associated with our acquisition of
FLIR require us to record inventory at its fair value, which is
sometimes greater than the previous book value of inventory.
Included in our GAAP presentation, the increase in inventory value
is amortized to cost of sales over the period that the related
inventory is sold. We exclude inventory step-up amortization from
our non-GAAP measures because it is a non-cash expense that we do
not believe is indicative of our ongoing operating results.
- Acquired intangible asset
amortization – Included in our GAAP presentation of selling,
general and administrative expense is amortization of acquired
intangible assets in connection with the acquisition of FLIR and
prior acquisitions. We believe that by excluding the amortization
of acquired intangible assets, which primarily represents purchased
technology and customer relationships, as well as purchase order
and contract backlog, this provides an alternative way for
investors to compare our operations pre-acquisition to those post
acquisition and to those of our competitors that have pursued
internal growth strategies. However, we note that companies that
grow internally will incur costs to develop intangible assets that
will be expensed in the period incurred, which may make a direct
comparison more difficult.
- Bridge loan and debt extinguishment
fees - Included in our GAAP presentation of interest and
debt expense are expenses incurred in connection with the financing
activities to fund the FLIR acquisition. We exclude these expenses,
many of which are one-time costs, from our non-GAAP measures
because we believe it does not reflect our ongoing financial
performance.
- Tax rate changes on acquired intangible
assets – In June 2021, the United Kingdom Parliament enacted
legislation to increase the corporate tax rate to 25% effective
April 2023. Accordingly, the tax rate changes required us to
remeasure our deferred taxes related to acquired intangible
assets.
APPENDIX A
The following tables are presented to show the reconciliation of
GAAP operating income to non-GAAP operating income by segment for
2021 and each quarter of 2020.
TELEDYNE TECHNOLOGIES
INCORPORATED
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
SUMMARY OF QUARTERLY OPERATING
INCOME
(Unaudited - in
millions)
First Quarter 2021
GAAP Operating Income
Acquired intangible asset
amortization
Inventory step-up
expense
Transaction and integration
costs
Non-GAAP Operating
Income
Digital Imaging
$
52.0
$
4.6
$
—
$
—
$
56.6
Instrumentation
59.4
5.0
—
—
64.4
Aerospace and Defense Electronics
28.3
0.2
—
—
28.5
Engineered Systems
14.9
—
—
—
14.9
Corporate expense
(19.4
)
—
—
5.9
(13.5
)
Total
$
135.2
$
9.8
$
—
$
5.9
$
150.9
Second Quarter 2021
GAAP Operating Income
Acquired intangible asset
amortization
Inventory step-up
expense
Transaction and integration
costs
Non-GAAP Operating
Income
Digital Imaging
$
84.6
$
27.4
$
23.4
$
24.0
$
159.4
Instrumentation
64.6
5.2
—
—
69.8
Aerospace and Defense Electronics
28.4
0.2
—
—
28.6
Engineered Systems
11.0
—
—
—
11.0
Corporate expense
(84.2
)
—
—
70.5
(13.7
)
Total
$
104.4
$
32.8
$
23.4
$
94.5
$
255.1
First Six Months 2021
GAAP Operating Income
Acquired intangible asset
amortization
Inventory step-up
expense
Transaction and integration
costs
Non-GAAP Operating
Income
Digital Imaging
$
136.6
$
32.0
$
23.4
$
24.0
$
216.0
Instrumentation
124.0
10.2
—
—
134.2
Aerospace and Defense Electronics
56.7
0.4
—
—
57.1
Engineered Systems
25.9
—
—
—
25.9
Corporate expense
(103.6
)
—
—
76.4
(27.2
)
Total
$
239.6
$
42.6
$
23.4
$
100.4
$
406.0
TELEDYNE TECHNOLOGIES
INCORPORATED
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
SUMMARY OF QUARTERLY OPERATING
INCOME (continued)
(Unaudited - in
millions)
First Quarter 2020
GAAP Operating Income
Acquired intangible asset
amortization
Non-GAAP Operating
Income
Digital Imaging
$
43.8
$
4.6
$
48.4
Instrumentation
50.8
4.8
55.6
Aerospace and Defense Electronics
13.4
0.2
13.6
Engineered Systems
11.4
—
11.4
Corporate expense
(15.4
)
—
(15.4
)
Total
$
104.0
$
9.6
113.6
Second Quarter 2020
GAAP Operating Income
Acquired intangible asset
amortization
Non-GAAP Operating
Income
Digital Imaging
$
46.8
$
4.4
$
51.2
Instrumentation
48.5
5.1
53.6
Aerospace and Defense Electronics
17.5
0.2
17.7
Engineered Systems
10.8
—
10.8
Corporate expense
(13.8
)
—
(13.8
)
Total
$
109.8
$
9.7
$
119.5
Third Quarter 2020
GAAP Operating Income
Acquired intangible asset
amortization
Non-GAAP Operating
Income
Digital Imaging
$
45.5
$
4.5
$
50.0
Instrumentation
50.7
5.1
55.8
Aerospace and Defense Electronics
26.7
0.3
27.0
Engineered Systems
12.5
—
12.5
Corporate expense
(12.9
)
—
(12.9
)
Total
$
122.5
$
9.9
$
132.4
Fourth Quarter 2020
GAAP Operating Income
Acquired intangible asset
amortization
Non-GAAP Operating
Income
Digital Imaging
$
56.7
$
4.6
$
61.3
Instrumentation
63.2
4.8
68.0
Aerospace and Defense Electronics
23.2
0.2
23.4
Engineered Systems
15.4
—
15.4
Corporate expense
(14.7
)
—
(14.7
)
Total
$
143.8
$
9.6
$
153.4
The following tables have been revised from the presentation
included in our first quarter 2021 earnings release and are now
presented in the same format and include the same category of
adjustments as the current revised format in this earnings
release.
TELEDYNE TECHNOLOGIES
INCORPORATED
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
FOR THE FIRST QUARTER ENDED
APRIL 4, 2021 AND MARCH 29, 2020
(Unaudited - in millions, except
per share amounts)
First Quarter 2021
First Quarter 2020
Income before income
taxes
Net income
Diluted earnings per common
share
Income before income
taxes
Net income
Diluted earnings per common
share
GAAP
$
101.3
$
84.7
$
2.23
$
101.0
$
82.2
$
2.17
Adjusted for specified items:
FLIR transaction and integration costs
5.9
5.8
0.15
—
—
—
Acquired intangible asset amortization
9.8
7.5
0.20
9.6
7.3
0.19
Bridge loan and debt extinguishment
fees
30.6
23.3
0.61
—
—
—
Non-GAAP
$
147.6
$
121.3
$
3.19
$
110.6
$
89.5
$
2.36
First Quarter 2021
First Quarter 2020
Operating income
Operating margin
Operating income
Operating margin
GAAP
$
135.2
16.8
%
$
104.0
13.3
%
Adjusted for specified items:
FLIR transaction and integration costs
5.9
—
Acquired intangible asset amortization
9.8
9.6
Non-GAAP
$
150.9
18.7
%
$
113.6
14.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210728005340/en/
Jason VanWees (805) 373-4542
Teledyne Technologies (NYSE:TDY)
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