Teledyne Technologies Reports Third Quarter Results

THOUSAND OAKS, Calif. — (BUSINESS WIRE) — October 26, 2022 — 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

 


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