Teledyne Technologies Reports Second Quarter Results

THOUSAND OAKS, Calif. — (BUSINESS WIRE) — July 28, 2021 — 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.

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