THOUSAND OAKS, Calif.–(BUSINESS WIRE)–Teledyne Technologies Incorporated (NYSE:TDY):
Record third quarter sales of $1,363.6 million, an increase of 3.9% compared with last year
Record third quarter GAAP diluted earnings per share of $3.74 and non-GAAP diluted earnings per share of $4.54
Record GAAP operating margin of 18.0%
Non-GAAP operating margin of 21.6%
Increasing full year 2022 GAAP earnings outlook to $15.46 to $15.60 diluted earnings per share, compared with the prior outlook of $15.13 to $15.45, and full year non-GAAP earnings outlook to $17.70 to $17.80, compared with the prior outlook of $17.45 to $17.70
Record third quarter cash from operations of $268.9 million
Earlier today, announced agreement to acquire ETM-Electromatic
Teledyne today reported third quarter 2022 net sales of $1,363.6 million, compared with net sales of $1,311.9 million for the third quarter of 2021, an increase of 3.9%. Net income attributable to Teledyne was $178.3 million ($3.74 diluted earnings per share) for the third quarter of 2022, compared with $134.1 million ($2.81 diluted earnings per share) for the third quarter of 2021, an increase of 33.0%. The third quarter of 2022 included $48.9 million of pretax acquired intangible asset amortization expense and $0.8 million of acquisition related discrete tax expense. Excluding these charges, non-GAAP net income attributable to Teledyne for the third quarter of 2022 was $216.5 million ($4.54 diluted earnings per share). In the third quarter of 2021, Teledyne incurred pretax expenses of $92.3 million, which included $55.3 million in acquired intangible asset amortization expense, $35.2 million in acquired inventory step-up expense and $1.8 million of transaction and integration-related costs. In the third quarter of 2021, Teledyne also incurred $1.7 million of acquisition related discrete tax expense. Excluding these charges, non-GAAP net income attributable to Teledyne for the third quarter of 2021 was $207.2 million ($4.34 diluted earnings per share). Operating margin was 18.0% for the third quarter of 2022, compared with 14.5% for the third quarter of 2021. Excluding acquisition-related transaction and purchase accounting expenses, non-GAAP operating margin for the third quarter of 2022 was 21.6%, compared with 21.5% for the third quarter of 2021.
“We are proud of our performance this quarter, as well as Teledyne’s long history of navigating challenging markets. Despite the strong U.S. dollar, supply chain constraints and inflation, we achieved record third quarter sales, earnings, operating margin and free cash flow,” said Robert Mehrabian, Chairman, President and Chief Executive Officer. “Third quarter core sales growth was approximately 6.9% but was negatively impacted by foreign currency translation. Overall demand remained healthy with a total book to bill ratio of 1.06x due to particular strength in our longer-cycle government, marine and aviation businesses. We continue to execute our strategy, which has delivered long-term results regardless of economic conditions. That is, maintain a balanced and resilient mix of commercial and government businesses across a broad range of geographies and markets, continue to simplify operations to improve margins, and acquire and integrate complementary businesses to continuously compound earnings and cash flow. On the final point, we are pleased to have announced this morning the pending acquisition of ETM, which is uniquely complementary to both our defense electronics and healthcare imaging businesses.”
Review of Operations
Comparisons are with the third quarter of 2021, unless noted otherwise. In the current year, gain (loss) on debt extinguishment was presented as a separate line item on the income statement. Prior year amounts were reclassified to conform to current year presentation.
Digital Imaging
The Digital Imaging segment’s third quarter 2022 net sales were $777.9 million, compared with $760.6 million, an increase of 2.3%. Operating income was $133.7 million for the third quarter of 2022, compared with $94.9 million, an increase of 40.9%.
The third quarter of 2022 net sales increase primarily resulted from greater sales of industrial and scientific sensors and cameras, X-ray products, and commercial infrared imaging solutions, partially offset by lower sales of surveillance systems for defense applications. The third quarter of 2021 included $35.2 million in FLIR inventory step-up expense. Acquired intangible amortization expense for the third quarter of 2022 was $44.7 million, compared with $50.1 million. Excluding these expenses, operating income declined slightly during the quarter.
Instrumentation
The Instrumentation segment’s third quarter 2022 net sales were $306.4 million, compared with $287.1 million, an increase of 6.7%. Operating income was $71.1 million for the third quarter of 2022, compared with $63.0 million, an increase of 12.9%.
The third quarter of 2022 net sales increase resulted from higher sales across all external product lines. Sales of test and measurement instrumentation increased $7.2 million, sales of environmental instrumentation increased $6.8 million, and sales of marine instrumentation increased $5.3 million, respectively. The increase in operating income primarily reflected the impact of higher sales and favorable product mix.
Aerospace and Defense Electronics
The Aerospace and Defense Electronics segment’s third quarter 2022 net sales were $169.5 million, compared with $161.8 million, an increase of 4.8%. Operating income was $44.3 million for the third quarter of 2022, compared with $35.9 million, an increase of 23.4%.
The third quarter of 2022 net sales reflected higher sales of $6.9 million for aerospace electronics and $0.8 million for defense electronics. Operating income in the third quarter of 2022 reflected the impact of higher sales of aerospace electronics and improved margins across most product categories.
Engineered Systems
The Engineered Systems segment’s third quarter 2022 net sales were $109.8 million, compared with $102.4 million, an increase of 7.2%. Operating income was $11.9 million for the third quarter of 2022, compared with $11.5 million, an increase of 3.5%.
Additional Financial Information
Cash Flow
Cash provided by operating activities was $268.9 million for the third quarter of 2022, compared with $192.8 million. The third quarter of 2022 reflected stronger trade receivable collections compared with the third quarter of 2021. Depreciation and amortization expense for the third quarter of 2022 was $80.8 million compared with $90.2 million. Non-cash inventory step-up expense related to FLIR was $35.2 million for the third quarter of 2021, and there was no comparable amount recorded in the third quarter of 2022. Capital expenditures for the third quarter of 2022 were $16.7 million compared with $29.2 million.
During the third quarter of 2022, Teledyne repaid $30.0 million of floating rate debt which reduced its term loan due May 2026. Teledyne received $0.9 million from the exercise of stock options in the third quarter of 2022, compared with $5.5 million.
As of October 2, 2022, net debt was $3,439.1 million which is calculated as total debt of $3,918.4 million, net of cash and cash equivalents of $479.3 million. As of January 2, 2022, net debt was $3,624.7 million and included total debt of $4,099.4 million, net of cash and cash equivalents of $474.7 million. As of October 2, 2022, approximately $1,003.6 million was available under the $1.15 billion credit facility, after reductions of $125.0 million in outstanding borrowings and $21.4 million in outstanding letters of credit.
Third Quarter
Free Cash Flow
2022
2021
Cash provided by operating activities
$
268.9
$
192.8
Capital expenditures for property, plant and equipment
(16.7
)
(29.2
)
Free cash flow
252.2
163.6
FLIR transaction related cash payments, net of tax
—
2.1
Adjusted free cash flow
$
252.2
$
165.7
Income Taxes
The effective tax rate for the third quarter of 2022 was 23.0%, compared with 20.1%. The third quarter of 2022 reflected net discrete income tax benefits of $0.3 million. The third quarter of 2021 reflected net discrete income tax benefit of $6.3 million, which included a $3.0 million income tax benefit related to share-based accounting and an income tax benefit of $4.9 million primarily related to research and development and foreign tax credits. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.1% for the third quarter of 2022, compared with 23.9%.
Other
Corporate expense was $15.8 million for the third quarter of 2022, compared with $15.7 million. Stock option expense was $3.7 million for the third quarter of 2022, compared with $5.8 million. Non-service retirement benefit income was $2.9 million for the third quarter of 2022, compared with $2.8 million. Interest expense, net of interest income, was $22.0 million for the third quarter of 2022, compared with $23.8 million.
Outlook
Based on its current outlook, the company’s management believes that fourth quarter 2022 GAAP diluted earnings per share will be in the range of $3.67 to $3.80 and full year 2022 GAAP diluted earnings per share will be in the range of $15.46 to $15.60. The company’s management further believes that fourth quarter 2022 non-GAAP diluted earnings per share will be in the range of $4.46 to $4.56 and full year 2022 non-GAAP diluted earnings per share will be in the range of $17.70 to $17.80. The non-GAAP outlook excludes acquired intangible asset amortization for all acquisitions and benefits or charges for acquisition-related tax matters. The company’s annual expected tax rate for 2022 is 23.1%, before discrete tax items.
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, financial 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 continuing expected effects on Teledyne of the acquisition of FLIR and synergies related to the transaction, 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, such as COVID related lockdowns, facility closures, furloughs and travel restrictions; the inability to achieve operating synergies with respect to the FLIR acquisition; changes in relevant tax and other laws; foreign currency exchange risks; rising interest rates; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages; higher inflation, including wage competition and higher shipping costs; labor shortages and competition for skilled personnel; 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; the ongoing conflict between Russia and Ukraine, including the impact to energy prices and availability, especially in Europe; 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, inflation, rising interest costs, and economic conditions; 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 and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and proprietary information, including cybersecurity threats; and natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint. 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, including those implemented in response to climate change, could further negatively affect our businesses that supply the oil and gas industry. Weakness in the commercial aerospace industry negatively affects 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 2, 2022, 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 third quarter earnings conference call will be held at 11:00 a.m. (Eastern) on Wednesday, October 26, 2022. 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, October 26, 2022.
TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
OCTOBER 2, 2022 AND OCTOBER 3, 2021
(Unaudited – in millions, except per share amounts)
Third Quarter
Third Quarter (a)
Nine Months
Nine Months (a)
2022
2021
2022
2021
Net sales
$
1,363.6
$
1,311.9
$
4,040.4
$
3,238.6
Costs and expenses:
Costs of sales
785.8
787.7
2,327.0
1,943.3
Selling, general and administrative expenses
283.7
279.3
861.4
768.2
Acquired intangible asset amortization (b)
48.9
55.3
153.8
97.9
Total costs and expenses
1,118.4
1,122.3
3,342.2
2,809.4
Operating income
245.2
189.6
698.2
429.2
Interest and debt expense, net
(22.0
)
(23.8
)
(66.8
)
(67.3
)
Gain (loss) on debt extinguishment
—
—
10.6
(13.4
)
Non-service retirement benefit income
2.9
2.8
8.6
8.4
Other income (expense), net
5.2
(0.7
)
5.2
4.4
Income before income taxes
231.3
167.9
655.8
361.3
Provision for income taxes (c)
53.1
33.8
93.7
77.8
Net income including noncontrolling interest
178.2
134.1
562.1
283.5
Less: Net income (loss) attributable to noncontrolling interest
(0.1
)
—
(0.1
)
—
Net income attributable to Teledyne
$
178.3
$
134.1
$
562.2
$
283.5
Diluted earnings per share attributable to Teledyne common shareholders
$
3.74
$
2.81
$
11.79
$
6.58
Weighted average diluted Teledyne common shares outstanding
47.7
47.7
47.7
43.1
a)
The third quarter of 2021 includes pretax charges of $92.3 million primarily related to the acquisition of FLIR. Of this amount, $35.2 million was recorded to cost of sales, $1.8 million was recorded to selling, general and administrative expenses and $55.3 million was recorded to acquired intangible asset amortization ($9.7 million related to prior acquisitions). The first nine months of 2021 includes pretax charges of $289.3 million mostly related to the acquisition of FLIR, of which, $58.9 million was recorded to cost of sales, $102.1 million was recorded to selling, general and administrative expenses, $97.9 million was recorded to acquired intangible asset amortization, ($29.5 million related to prior acquisitions) and $30.6 million was recorded to interest expense.
b)
The third quarter and first nine months of 2022 includes pretax charges of $40.9 million and $127.4 million in acquired intangible asset amortization related to FLIR, respectively.
c)
The third quarter and first nine months of 2022 includes net discrete income tax benefits of $0.3 million and $57.8 million, respectively. The third quarter and first nine months of 2021 includes net discrete income tax benefits of $6.3 million and $8.5 million, respectively.
This financial statement was prepared in accordance with U.S. GAAP.
TELEDYNE TECHNOLOGIES INCORPORATED
SUMMARY OF SEGMENT NET SALES AND OPERATING INCOME
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
OCTOBER 2, 2022 AND OCTOBER 3, 2021
(Unaudited – $ in millions)
Third Quarter
Third Quarter
% Change
Nine Months
Nine Months
% Change
2022
2021
2022
2021
Net sales:
Digital Imaging
$
777.9
$
760.6
2.3
%
$
2,304.2
$
1,603.4
43.7
%
Instrumentation
306.4
287.1
6.7
%
927.8
864.7
7.3
%
Aerospace and Defense Electronics
169.5
161.8
4.8
%
504.5
465.4
8.4
%
Engineered Systems
109.8
102.4
7.2
%
303.9
305.1
(0.4
) %
Total net sales
$
1,363.6
$
1,311.9
3.9
%
$
4,040.4
$
3,238.6
24.8
%
Operating income:
Digital Imaging (a)
$
133.7
$
94.9
40.9
%
$
367.3
$
231.5
58.7
%
Instrumentation
71.1
63.0
12.9
%
216.3
187.0
15.7
%
Aerospace and Defense Electronics
44.3
35.9
23.4
%
131.3
92.6
41.8
%
Engineered Systems
11.9
11.5
3.5
%
29.9
37.4
(20.1
) %
Corporate expense (a)
(15.8
)
(15.7
)
0.6
%
(46.6
)
(119.3
)
(60.9
) %
Operating income
245.2
189.6
29.3
%
698.2
429.2
62.7
%
Interest and debt expense, net (a)
(22.0
)
(23.8
)
(7.6
) %
(66.8
)
(67.3
)
(0.7
) %
Gain (loss) on debt extinguishment (a)
—
—
*
10.6
(13.4
)
*
Non-service retirement benefit income
2.9
2.8
3.6
%
8.6
8.4
2.4
%
Other income (expense), net
5.2
(0.7
)
*
5.2
4.4
18.2
%
Income before income taxes
231.3
167.9
37.8
%
655.8
361.3
81.5
%
Provision for income taxes (b)
53.1
33.8
57.1
%
93.7
77.8
20.4
%
Net income including noncontrolling interest
178.2
134.1
32.9
%
562.1
283.5
98.3
%
Less: Net income (loss) attributable to noncontrolling interest
(0.1
)
—
*
(0.1
)
—
*
Net income attributable to Teledyne
$
178.3
$
134.1
33.0
%
$
562.2
$
283.5
98.3
%
* not meaningful
a)
The third quarter and first nine months of 2022 includes pretax charges of $40.9 million and $127.4 million in acquired intangible asset amortization related to FLIR, respectively. The third quarter of 2021 includes pretax charges of $82.6 million related to the acquisition of FLIR, of which, $82.3 million was recorded in the Digital Imaging segment and $0.3 million was recorded to corporate expense. The first nine months of 2021 includes pretax charges of $259.8 million related to the acquisition of FLIR, of which, $152.5 million was recorded in the Digital Imaging segment, $76.7 million was recorded to corporate expense and $30.6 million was recorded to interest and debt expense.
b)
The third quarter and first nine months of 2022 includes net discrete income tax benefits of $0.3 million and $57.8 million, respectively. The third quarter and first nine months of 2021 includes net discrete income tax benefits of $6.3 million and $8.5 million, respectively.
This financial statement was prepared in accordance with U.S. GAAP.
TELEDYNE TECHNOLOGIES INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited – in millions)
October 2, 2022
January 2, 2022
ASSETS
Cash and cash equivalents
$
479.3
$
474.7
Accounts receivable and unbilled receivables, net
1,079.9
1,083.8
Inventories, net
834.1
752.9
Prepaid expenses and other current assets
126.1
118.0
Total current assets
2,519.4
2,429.4
Property, plant and equipment, net
747.9
827.5
Goodwill and acquired intangible assets, net
10,140.0
10,728.3
Prepaid pension assets
141.3
123.7
Other assets, net
282.8
321.4
Total assets
$
13,831.4
$
14,430.3
LIABILITIES AND EQUITY
Accounts payable
$
499.5
$
469.5
Accrued liabilities
619.0
1,028.9
Current portion of long-term debt
300.0
—
Total current liabilities
1,418.5
1,498.4
Long-term debt, net of current portion
3,618.4
4,099.4
Other long-term liabilities
1,131.6
1,210.5
Total liabilities
6,168.5
6,808.3
Total equity
7,662.9
7,622.0
Total liabilities and equity
$
13,831.4
$
14,430.3
Contacts
Jason VanWees
(805) 373-4542
