Teledyne Technologies Reports Second Quarter Results

Outlook

Based on its current outlook, the company’s management believes that third quarter 2021 GAAP diluted earnings per common share will be in the range of $2.00 to $2.15 and full year 2021 GAAP diluted earnings per common share will be in the range of $8.05 to $8.45 and third quarter 2021 non-GAAP diluted earnings per common share will be in the range of $3.55 to $3.65 and full year 2021 non-GAAP diluted earnings per common share will be in the range of $15.25 to $15.50. The non-GAAP outlook excludes certain costs related to the FLIR acquisition, such as acquired intangible asset amortization, inventory step-up expense, bridge loan and debt extinguishment fees, and transaction costs and reflects the issuance of Teledyne common stock on May 14, 2021 in connection with the FLIR transaction. This outlook also excludes acquired intangible asset amortization from prior acquisitions and the remeasurement of deferred taxes related to acquired intangible assets due to changes in tax laws. The company’s annual expected tax rate for 2021 is 23.9%, before discrete tax items. In addition, we currently expect less discrete tax items in 2021 compared with 2020.

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, 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 expected effects on Teledyne of the acquisition of FLIR and related financing, the anticipated scope of the transaction, anticipated earnings enhancements, estimated cost savings and other synergies related to the transaction, costs to be incurred in achieving synergies, 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, facility closures, furloughs and travel restrictions; the inability to integrate FLIR successfully, to retain customers and key employees and to achieve operating synergies, including the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Teledyne and FLIR do business; changes in relevant tax and other laws; risks associated with indebtedness, including that incurred as a result of financing transactions undertaken in connection with the acquisition of FLIR, as well as our ability to reduce indebtedness and the timing thereof; 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; 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; 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 matters; escalating economic and diplomatic tension between China and the United States; and threats to the security of our confidential and proprietary information, including cyber security threats. 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 could further negatively affect our businesses that supply the oil and gas industry. Continued weakness in the commercial aerospace industry will negatively affect 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 3, 2021, 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 second quarter earnings conference call will be held at 11:00 a.m. (Eastern) on Wednesday, July 28, 2021. 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, July 28, 2021.

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE SECOND QUARTER AND SIX MONTHS ENDED

JULY 4, 2021 AND JUNE 28, 2020

(Unaudited - in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Second
Quarter (a)

 

Second
Quarter

 

Six
Months (a)

 

Six
Months

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

1,121.0

 

 

 

$

743.3

 

 

 

$

1,926.7

 

 

 

$

1,527.9

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Costs of sales

 

663.1

 

 

 

460.6

 

 

 

1,155.6

 

 

 

953.2

 

 

Selling, general and administrative expenses (b)

 

320.7

 

 

 

163.2

 

 

 

488.9

 

 

 

341.6

 

 

Acquired intangible asset amortization (b)

 

32.8

 

 

 

9.7

 

 

 

42.6

 

 

 

19.3

 

 

Total costs and expenses

 

1,016.6

 

 

 

633.5

 

 

 

1,687.1

 

 

 

1,314.1

 

 

Operating income

 

104.4

 

 

 

109.8

 

 

 

239.6

 

 

 

213.8

 

 

Interest and debt expense, net

 

(21.2

)

 

 

(3.7

)

 

 

(56.9

)

 

 

(7.8

)

 

Non-service retirement benefit income

 

2.8

 

 

 

3.2

 

 

 

5.6

 

 

 

5.7

 

 

Other income (expense), net

 

6.1

 

 

 

(1.4

)

 

 

5.1

 

 

 

(2.8

)

 

Income before income taxes

 

92.1

 

 

 

107.9

 

 

 

193.4

 

 

 

208.9

 

 

Provision for income taxes (c)

 

27.4

 

 

 

14.2

 

 

 

44.0

 

 

 

33.0

 

 

Net income

 

$

64.7

 

 

 

$

93.7

 

 

 

$

149.4

 

 

 

$

175.9

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

1.48

 

 

 

$

2.48

 

 

 

$

3.66

 

 

 

$

4.65

 

 

 

 

 

 

 

 

 

 

 

Weighted average diluted common shares outstanding

 

43.6

 

 

 

37.8

 

 

 

40.8

 

 

 

37.8

 

 

a)

The second quarter of 2021 includes pretax charges of $150.7 million primarily related to the acquisition of FLIR. Of this amount, $23.7 million was recorded to cost of sales, $94.2 million was recorded to selling, general and administrative expenses and $32.8 million was recorded to acquired intangible asset amortization ($10.0 million related to prior acquisitions). The first six months of 2021 includes pretax charges of $197.0 million mostly related to the acquisition of FLIR, of which, $23.7 million was recorded to cost of sales, $100.1 million was recorded to selling, general and administrative expenses, $42.6 million was recorded to acquired intangible asset amortization, ($19.8 million related to prior acquisitions) and $30.6 million was recorded to interest expense.

b)

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.

c)

The second quarter of 2021 includes net discrete income tax expense of $4.1 million and the first six months of 2021 includes net discrete income tax benefits of $2.2 million. The second quarter and first six months of 2020 includes net discrete tax benefits of $10.4 million and $14.6 million, respectively.

 

This financial statement was prepared in accordance with U.S. generally accepted accounting principles.

TELEDYNE TECHNOLOGIES INCORPORATED

SUMMARY OF SEGMENT NET SALES AND OPERATING INCOME

FOR THE SECOND QUARTER AND SIX MONTHS ENDED

JULY 4, 2021 AND JUNE 28, 2020

(Unaudited - in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second
Quarter

 

Second
Quarter

 

%
Change

 

Six
Months

 

Six
Months

 

%
Change

 

 

2021

 

2020

 

 

2021

 

2020

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

Digital Imaging

 

$

579.5

 

 

$

237.6

 

 

143.9

%

 

$

842.8

 

 

$

484.3

 

 

74.0

%

Instrumentation

 

291.1

 

 

263.1

 

 

10.6

%

 

577.6

 

 

548.2

 

 

5.4

%

Aerospace and Defense Electronics

 

152.4

 

 

143.1

 

 

6.5

%

 

303.6

 

 

299.4

 

 

1.4

%

Engineered Systems

 

98.0

 

 

99.5

 

 

(1.5

)%

 

202.7

 

 

196.0

 

 

3.4

%

Total net sales

 

$

1,121.0

 

 

$

743.3

 

 

50.8

%

 

$

1,926.7

 

 

$

1,527.9

 

 

26.1

%

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

Digital Imaging (a)

 

$

84.6

 

 

$

46.8

 

 

80.8

%

 

$

136.6

 

 

$

90.6

 

 

50.8

%

Instrumentation

 

64.6

 

 

48.5

 

 

33.2

%

 

124.0

 

 

99.3

 

 

24.9

%

Aerospace and Defense Electronics

 

28.4

 

 

17.5

 

 

62.3

%

 

56.7

 

 

30.9

 

 

83.5

%

Engineered Systems

 

11.0

 

 

10.8

 

 

1.9

%

 

25.9

 

 

22.2

 

 

16.7

%

Corporate expense (a)

 

(84.2

)

 

(13.8

)

 

*

 

(103.6

)

 

(29.2

)

 

*

Operating income

 

104.4

 

 

109.8

 

 

(4.9

)%

 

239.6

 

 

213.8

 

 

12.1

%

Interest and debt expense, net (a)

 

(21.2

)

 

(3.7

)

 

*

 

(56.9

)

 

(7.8

)

 

*

Non-service retirement benefit income

 

2.8

 

 

3.2

 

 

(12.5)

%

 

5.6

 

 

5.7

 

 

(1.8

)%

Other income (expense), net

 

6.1

 

 

(1.4

)

 

*

 

5.1

 

 

(2.8

)

 

*

Income before income taxes

 

92.1

 

 

107.9

 

 

(14.6

)%

 

193.4

 

 

208.9

 

 

(7.4

)%

Provision for income taxes (b)

 

27.4

 

 

14.2

 

 

93.0

%

 

44.0

 

 

33.0

 

 

33.3

%

Net income

 

$

64.7

 

 

$

93.7

 

 

(30.9

)%

 

$

149.4

 

 

$

175.9

 

 

(15.1

)%

* not meaningful

a)

The second quarter of 2021 includes pretax charges of $140.7 million related to the acquisition of FLIR, of which, $70.2 million was recorded in the Digital Imaging segment and $70.5 million was recorded to corporate expense. The first six months of 2021 includes pretax charges of $177.2 million related to the acquisition of FLIR, of which, $70.2 million was recorded in the Digital Imaging segment, $76.4 million was recorded to corporate expense and $30.6 million was recorded to interest and debt expense.

b)

The second quarter of 2021 includes net discrete income tax expense of $4.1 million and the first six months of 2021 includes net discrete income tax benefits of $2.2 million. The second quarter and first six months of 2020 includes net discrete tax benefits of $10.4 million and $14.6 million, respectively.

 

This financial statement was prepared in accordance with U.S. generally accepted accounting principles.

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited – in millions)

 

 

 

July 4, 2021

 

January 3, 2021

ASSETS

 

 

 

 

Cash and cash equivalents

 

$

695.1

 

 

$

673.1

 

Accounts receivable, net

 

963.3

 

 

624.1

 

Inventories, net

 

867.2

 

 

347.3

 

Prepaid expenses and other current assets

 

125.3

 

 

78.1

 

Total current assets

 

2,650.9

 

 

1,722.6

 

Property, plant and equipment, net

 

873.0

 

 

489.3

 

Goodwill and acquired intangible assets, net (a)

 

10,281.7

 

 

2,559.7

 

Prepaid pension asset

 

80.6

 

 

67.9

 

Other assets, net

 

336.7

 

 

245.3

 

Total assets

 

$

14,222.9

 

 

$

5,084.8

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Accounts payable

 

$

399.6

 

 

$

229.1

 

Accrued liabilities

 

653.7

 

 

434.2

 

Current portion of long-term debt and other debt

 

 

 

97.6

 

Total current liabilities

 

1,053.3

 

 

760.9

 

Long-term debt, net of current portion

 

4,742.0

 

 

680.9

 

Other long-term liabilities

 

1,115.2

 

 

414.4

 

Total liabilities

 

6,910.5

 

 

1,856.2

 

Total stockholders’ equity (b)

 

7,312.4

 

 

3,228.6

 

Total liabilities and stockholders’ equity

 

$

14,222.9

 

 

$

5,084.8

 

a)

The increase in goodwill and acquired intangible assets primarily reflects the estimated amounts related to the acquisition of FLIR on May 14, 2021.

b)

The increase in total stockholders' equity primarily reflects the value of Teledyne common stock issued in connection with the acquisition of FLIR on May 14, 2021.

 

This financial statement was prepared in accordance with U.S. generally accepted accounting principles.

TELEDYNE TECHNOLOGIES INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

FOR THE SECOND QUARTER AND SIX MONTHS ENDED JULY 4, 2021 AND JUNE 28, 2020

(Unaudited - in millions, except per share amounts)

 

 

Second Quarter 2021

 

Second Quarter 2020

 

Income
before
income
taxes

 

Net income

 

Diluted
earnings per
common
share

 

Income
before
income
taxes

 

Net income

 

Diluted
earnings per
common
share

GAAP

$

92.1

 

 

$

64.7

 

 

$

1.48

 

 

$

107.9

 

 

$

93.7

 

 

$

2.48

 

Adjusted for specified items:

 

 

 

 

 

 

 

 

 

 

 

FLIR transaction and integration costs

94.5

 

 

80.7

 

 

1.85

 

 

 

 

 

 

 

FLIR inventory step-up expense

23.4

 

 

18.0

 

 

0.41

 

 

 

 

 

 

 

Acquired intangible asset amortization

32.8

 

 

25.2

 

 

0.59

 

 

9.7

 

 

7.4

 

 

0.20

 

Tax rate changes on acquired intangible assets

 

 

12.4

 

 

0.28

 

 

 

 

 

 

 

Non-GAAP

$

242.8

 

 

$

201.0

 

 

$

4.61

 

 

$

117.6

 

 

$

101.1

 

 

$

2.68

 

 

 

Six Months 2021

 

Six Months 2020

 

Income
before
income
taxes

 

Net income

 

Diluted
earnings per
common
share

 

Income
before
income
taxes

 

Net income

 

Diluted
earnings per
common
share

GAAP

$

193.4

 

 

$

149.4

 

 

$

3.66

 

 

$

208.9

 

 

$

175.9

 

 

$

4.65

 

Adjusted for specified items:

 

 

 

 

 

 

 

 

 

 

 

FLIR transaction and integration costs

100.4

 

 

86.5

 

 

2.12

 

 

 

 

 

 

 

FLIR inventory step-up expense

23.4

 

 

18.0

 

 

0.44

 

 

 

 

 

 

 

Acquired intangible asset amortization

42.6

 

 

32.7

 

 

0.80

 

 

19.3

 

 

14.7

 

 

0.39

 

Tax rate changes on acquired intangible assets

 

 

12.4

 

 

0.31

 

 

 

 

 

 

 

Bridge loan and debt extinguishment fees

30.6

 

 

23.3

 

 

0.57

 

 

 

 

 

 

 

Non-GAAP

$

390.4

 

 

$

322.3

 

 

$

7.90

 

 

$

228.2

 

 

$

190.6

 

 

$

5.04

 

 

Second Quarter 2021

 

Second Quarter 2020

 

 

Operating
income

 

Operating
margin

 

Operating
income

 

Operating
margin

GAAP

 

$

104.4

 

 

9.3

%

 

$

109.8

 

 

14.8

%

Adjusted for specified items:

 

 

 

 

 

 

 

 

FLIR transaction and integration costs

 

94.5

 

 

 

 

 

 

 

FLIR inventory step-up expense

 

23.4

 

 

 

 

 

 

 

Acquired intangible asset amortization

 

32.8

 

 

 

 

9.7

 

 

 

Non-GAAP

 

$

255.1

 

 

22.8

%

 

$

119.5

 

 

16.1

%

 

 

Six Months 2021

 

Six Months 2020

 

 

Operating
income

 

Operating
margin

 

Operating
income

 

Operating
margin

GAAP

 

$

239.6

 

 

12.4

%

 

$

213.8

 

 

14.0

%

Adjusted for specified items:

 

 

 

 

 

 

 

 

FLIR transaction and integration costs

 

100.4

 

 

 

 

 

 

 

FLIR inventory step-up expense

 

23.4

 

 

 

 

 

 

 

Acquired intangible asset amortization

 

42.6

 

 

 

 

19.3

 

 

 

Non-GAAP

 

$

406.0

 

 

21.1

%

 

$

233.1

 

 

15.3

%

 

 

July 4, 2021

 

January 3, 2021

Current portion of long-term debt and other debt - GAAP

 

$

 

 

 

$

97.6

 

 

Long-term debt - GAAP

 

4,742.0

 

 

 

680.9

 

 

Total debt - non-GAAP

 

4,742.0

 

 

 

778.5

 

 

Less cash and cash equivalents - GAAP

 

(695.1

)

 

 

(673.1

)

 

Net debt - non-GAAP

 

$

4,046.9

 

 

 

$

105.4

 

 

 

 

Third Quarter 2021

 

Total Year 2021

 

 

Low

 

High

 

Low

 

High

GAAP Diluted Earnings Per Common Share Outlook

 

$

2.00

 

 

$

2.15

 

 

$

8.05

 

 

$

8.45

 

Adjusted for specified non-GAAP items:

 

 

 

 

 

 

 

 

FLIR transaction and integration costs

 

0.09

 

 

0.08

 

 

2.10

 

 

2.04

 

FLIR inventory step-up expense

 

0.57

 

 

0.55

 

 

1.63

 

 

1.58

 

Acquired intangible asset amortization

 

0.89

 

 

0.87

 

 

2.67

 

 

2.63

 

Tax rate changes on acquired intangible assets

 

 

 

 

 

0.28

 

 

0.28

 

Bridge loan and debt extinguishment fees

 

 

 

 

 

0.52

 

 

0.52

 

Non-GAAP Diluted Earnings Per Common Share Outlook

 

$

3.55

 

 

$

3.65

 

 

$

15.25

 

 

$

15.50

 


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