Teledyne Technologies Reports Second Quarter Results

THOUSAND OAKS, Calif. — (BUSINESS WIRE) — July 24, 2019 — Teledyne Technologies Incorporated (NYSE: TDY):

  • Record quarterly sales of $782.0 million, an increase of 6.8% compared to last year
  • Record quarterly GAAP earnings per diluted share of $2.80, an increase of 20.7% compared to last year
  • Record operating margin
  • Raising full year 2019 GAAP earnings outlook to $9.86 to $9.96 per diluted share, an increase from the prior outlook of $9.45 to $9.55
  • Announced pending acquisition of the Gas and Flame Detection business of 3M for $230.0 million in cash

Teledyne today reported second quarter 2019 net sales of $782.0 million, compared with net sales of $732.5 million for the second quarter of 2018, an increase of 6.8%. Net income was $104.6 million ($2.80 per diluted share) for the second quarter of 2019, compared with $85.9 million ($2.32 per diluted share) for the second quarter of 2018, an increase of 21.8%. The second quarter of 2019 reflected net discrete income tax benefits of $4.3 million compared with net discrete income tax benefits of $3.4 million for the second quarter of 2018.

“We achieved all-time record sales and earnings per share for any quarterly period,” said Robert Mehrabian, Executive Chairman. “Operating margin was also a record, increasing 165 basis points over last year. We have increased our emphasis on margin improvement, while at the same time continuing our proven strategy of disciplined capital deployment for compound growth in earnings. As an example, we were pleased to announce the Gas and Flame Detection acquisition, which will expand our portfolio of environmental instrumentation businesses.” Al Pichelli, President and Chief Executive Officer, added, “Each business segment reported organic sales growth as Teledyne continues to benefit from our balanced portfolio of common technologies serving different, complementary markets. Strong sales of advanced detectors for medical imaging and defense electronics generated growth for our digital imaging and aerospace and defense segments. Instrumentation sales were led by continued growth of electronic test and measurement systems. Finally, marine instrumentation received outstanding orders and ended the quarter with its largest backlog in nearly four years.”

Review of Operations

Comparisons are with the second quarter of 2018, unless noted otherwise.

Instrumentation

The Instrumentation segment’s second quarter 2019 net sales were $264.1 million, compared with $262.6 million, an increase of 0.6%. Operating income was $49.0 million for the second quarter of 2019, compared with $40.9 million, an increase of 19.8%.

The second quarter 2019 net sales increase resulted from higher sales of test and measurement instrumentation, environmental instrumentation, partially offset by lower marine instrumentation sales. Sales of test and measurement instrumentation increased $7.1 million while sales of environmental instrumentation increased $1.7 million and sales of marine instrumentation decreased $7.3 million. The increase in operating income reflected the impact of higher margins across most product lines.

Digital Imaging

The Digital Imaging segment’s second quarter 2019 net sales were $251.3 million, compared with $225.3 million, an increase of 11.5%. Operating income was $52.5 million for the second quarter of 2019, compared with $43.3 million, an increase of 21.2%.

The second 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 $23.3 million in sales from the acquisition of the scientific imaging businesses of Roper Technologies, Inc. The increase in operating income in the second quarter of 2019 primarily reflected the impact of higher sales and favorable product mix, partially offset by higher research and development expense.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s second quarter 2019 net sales were $191.0 million, compared with $173.5 million, an increase of 10.1%. Operating income was $39.4 million for the second quarter of 2019, compared with $33.7 million, an increase of 16.9%.

The second quarter 2019 net sales reflected $17.8 million of higher sales of defense electronics, partially offset by $0.3 million of lower sales of aerospace electronics. The increase in operating income in the second quarter of 2019 reflected the impact of higher sales and improved margins.

Engineered Systems

The Engineered Systems segment’s second quarter 2019 net sales were $75.6 million compared with $71.1 million, an increase of 6.3%. Operating income was $7.3 million for the second quarter of 2019, compared with $7.4 million, a decrease of 1.4%.

The second quarter 2019 net sales reflected higher sales of $5.2 million of engineered products and services, partially offset by lower sales of $0.7 million of turbine engines. The higher sales of engineered products and services, primarily reflected increased sales for nuclear manufacturing and space programs. Operating income in the second quarter of 2019 decreased primarily due to product mix.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $83.2 million for the second quarter of 2019, compared with $107.9 million. The lower cash provided by operating activities in the second quarter of 2019 reflected higher working capital requirements including the timing of accounts receivable collections, partially offset by the impact of higher operating income and lower income tax payments. At June 30, 2019, cash totaled $108.1 million compared with $142.2 million at December 30, 2018. At June 30, 2019, total debt was $791.7 million, compared with $747.5 million at December 30, 2018. At June 30, 2019, $76.5 million was outstanding under the $750.0 million credit facility. The company received $10.5 million from the exercise of stock options in the second quarter of 2019, compared with $11.5 million. Capital expenditures for the second quarter of 2019 were $18.1 million, compared with $27.4 million. Depreciation and amortization expense for the second quarter of 2019 was $27.1 million, compared with $27.6 million. In June 2019, Teledyne announced the pending acquisition of the Gas and Flame Detection business of 3M Company for $230.0 million in cash. The transaction is expected to close in the third quarter of 2019.

Free Cash Flow (a)

Second Quarter

(in millions, brackets indicate use of funds)

2019

2018

Cash provided by operating activities

$

 

83.2

 

$

 

107.9

 

Capital expenditures for property, plant and equipment

 

(18.1

)

 

(27.4

)

Free cash flow

$

 

65.1

 

$

 

80.5

 

(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.


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