The second quarter 2017 sales reflected $20.4 million of higher sales of microwave and interconnect systems and higher sales of $2.6 million for avionics products and electronic relays, partially offset by $8.2 million of lower sales of electronic manufacturing services products due, in part, to the 2016 divestiture of Teledyne Printed Circuit Technology. The higher sales of microwave and interconnect systems included $19.4 million in sales from e2v. Operating income in the second quarter of 2017 reflected the impact of higher sales, overall improved margins and favorable product mix.
Engineered Systems
The Engineered Systems segment’s second quarter 2017 sales were $76.0 million, compared with $62.2 million, an increase of 22.2%. Operating income was $9.1 million for the second quarter of 2017, compared with $5.6 million, an increase of 62.5%.
The second quarter 2017 sales reflected higher sales of $10.3 million of engineered products and services and $3.2 million of turbine engines and $0.3 million of energy systems products. The higher sales of engineered products and services primarily reflected greater marine manufacturing and missile defense programs. Operating income in the second quarter of 2017 reflected the impact of higher sales and a greater proportion of higher margin manufacturing programs.
Additional Financial Information
Cash Flow
Cash provided by operating activities was $87.0 million for the second quarter of 2017, compared with $83.6 million. The higher cash provided by operating activities in the second quarter of 2017 reflected cash flow from e2v and the impact of higher operating income, partially offset by higher income tax payments. At July 2, 2017, cash totaled $81.7 million and total debt, including capital lease obligations, was $1,255.8 million. At July 2, 2017, $255.0 million was outstanding under the $750.0 million credit facility. The company received $5.4 million from the exercise of stock options in the second quarter of 2017, compared with $7.0 million. Capital expenditures for the second quarter of 2017 were $12.3 million, compared with $16.3 million. Depreciation and amortization expense for the second quarter of 2017 was $33.2 million, compared with $21.7 million. On April 18, 2017, Teledyne entered into a note purchase agreement for a private placement of €250.0 million of senior unsecured notes, due through April 2024. Teledyne used the proceeds of the private placement among other things, to repay indebtedness and for general corporate purposes. On July 20, 2017, Teledyne acquired assets of SSI.
| Free Cash Flow (a) | Second Quarter | |||||||||||||
| (in millions, brackets indicate use of funds) | 2017 | 2016 | ||||||||||||
| Cash provided by operating activities | $ | 87.0 | $ | 83.6 | ||||||||||
| Capital expenditures for property, plant and equipment | (12.3 | ) | (16.3 | ) | ||||||||||
| Free cash flow | $ | 74.7 | $ | 67.3 | ||||||||||
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| (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. | ||
