Teledyne Technologies Reports First Quarter Results

  Teledyne Technologies Reports First Quarter Results

Business Wire

THOUSAND OAKS, Calif. -- April 24, 2013

Teledyne Technologies Incorporated (NYSE:TDY):

  *All-time record quarterly sales of $569.4 million, an increase of 15.3%
    over 2012
  *Record first quarter earnings per share of $1.07, an increase of 11.5%
    over 2012
  *Acquired RESON to complement marine instrumentation
  *Raising full year 2013 earnings outlook to $4.47 to $4.51 per share from
    $4.42 to $4.46

Teledyne today reported first quarter 2013 sales of $569.4 million, compared
with sales of $494.0 million for the first quarter of 2012, an increase of
15.3%. Net income attributable to Teledyne was $40.4 million ($1.07 per
diluted share) for the first quarter of 2013, compared with $35.7 million
($0.96 per diluted share) for the first quarter of 2012, an increase of 13.2%.

“We began 2013 with a strong quarter. Quarterly sales were an all-time record
and earnings per share increased 11.5% compared to last year,” said Robert
Mehrabian, chairman, president and chief executive officer. “In addition,
orders exceeded sales by 10%, and quarter-end backlog was also a record at
over $1.0 billion.Our commercial and international business continues to
grow.For example, instrumentation sales increased approximately 38% over last
year and contributed more than half of our profit in the first quarter.Our
government businesses, assisted by new programs and recent contract wins, were
also relatively stable in the quarter.With the acquisition of RESON, a
leading provider of multibeam sonar systems, as well as BlueView and Optech
last year, Teledyne offers 3D marine imaging systems for use from aircraft,
fixed platforms, surface vessels and AUVs over a wide range of distances and
water depths.We now provide our customers one of the most comprehensive
portfolios of marine technologies, ranging from connectors and communication
devices to sensors, imaging systems and complete underwater vehicles.”

Review of Operations (Comparisons are with the first quarter of 2012, unless
noted otherwise.)

Instrumentation

The Instrumentation segment’s first quarter 2013 sales were $221.2 million,
compared with $160.6 million, an increase of 37.7%. First quarter 2013
operating profit was $35.0 million, compared with $31.6 million, an increase
of 10.8%.

The first quarter 2013 sales increase resulted from higher sales of both
marine and electronic test and measurement instrumentation, partially offset
by reduced sales of environmental instrumentation. The higher sales of $19.6
million for marine instrumentation reflected increased sales of interconnect
systems used in offshore energy production, as well as marine acoustic sensors
and autonomous underwater vehicles and also included a total of $11.2 million
in revenue from recent acquisitions including the March 1, 2013 acquisition of
RESON A/S (“RESON”). Increased sales of $43.4 million for electronic test and
measurement instrumentation resulted from the August 2012 acquisition of
LeCroy Corporation (“LeCroy”). The decrease in sales of $2.4 million for
environmental instrumentation primarily reflected lower sales of laboratory
instruments, partially offset by increased sales of air monitoring
instrumentation. The increase in operating profit reflected the impact of
higher sales, partially offset by $1.3 million in additional intangible asset
amortization, $0.4 million in acquisition expenses and $0.2 million in
inventory purchase accounting charges related to the acquisitions.

Digital Imaging

The Digital Imaging segment’s first quarter 2013 sales were $102.4 million,
compared with $94.2 million, an increase of 8.7%. Operating profit was $5.2
million for the first quarter of 2013, compared with $4.3 million an increase
of 20.9%.

The 2013 sales increase included $9.3 million in revenue from the April 2,
2012, acquisition of a majority interest in the parent company of Optech
Incorporated (“Optech”) and greater sales of medical imaging and infrared
sensors, partially offset by decreased sales of imagers for remote sensing
applications. Operating profit in 2013 reflected the impact of higher sales,
partially offset by an operating loss of $1.4 million at Optech.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s first quarter 2013 sales were
$174.6 million, compared with $164.8 million, an increase of 5.9%. Operating
profit was $21.8 million for the first quarter of 2013, compared with $22.9
million, a decrease of 4.8%.

The 2013 sales increase reflected higher sales of $7.1 million from both
microwave and interconnect systems collectively, which included $1.0 million
in incremental revenue from the acquisition of VariSystems Inc. in February
2012. The sales increase also reflected $1.1 million from avionics products
and electronic relays and $1.6 million for electronic manufacturing service
products. Operating profit in 2013 decreased and reflected $1.7 million for
severance and relocation costs associated with certain electronic
manufacturing businesses and $0.8 million in higher net pension expense,
partially offset by higher sales and lower LIFO expense of $0.7 million.

Engineered Systems

The Engineered Systems segment’s first quarter 2013 sales were $71.2 million
compared with $74.4 million, a decrease of 4.3%. Operating profit was $6.4
million for the first quarter 2013, compared with $6.2 million, an increase of
3.2%.

The first quarter 2013 sales decrease reflected lower energy systems sales of
$3.7 million and lower sales of $0.9 million related to turbine engines,
partially offset by higher sales of $1.4 million from engineered products and
services, including missile defense programs. Operating profit in the first
quarter of 2013 reflected the impact of higher margins for engineered products
and services, partially offset by lower sales and $1.1 million in higher net
pension expense.

Additional Financial Information

Cash Flow

Cash used by operating activities was $56.7 million for the first quarter of
2013, compared with cash used of $19.7 million. The lower cash provided by
operating activities in the first quarter of 2013 primarily reflected a
voluntary pretax $83.0 million cash contribution to the domestic pension plan,
compared with a voluntary pretax $50.0 million cash contribution to the
domestic pension plan. Free cash flow (cash provided by operating activities
less capital expenditures) was a use of cash of $73.0 million for the first
quarter of 2013, compared with a use of cash of $30.3 million and reflected
lower cash provided by operating activities, primarily due to the higher
pension contribution and higher capital expenditures. On March 1, 2013, the
company amended its $550.0 million credit facility to increase the borrowing
capacity to $750.0 million and extended the maturity date from February25,
2016 to March1, 2018. At March 31, 2013, total debt was $698.7 million, which
included $219.4 million drawn on the $750.0 million credit facility, $250.0
million in senior notes, $200.0 million in term loans, $16.1 million in other
debt and $13.2 million in capital lease obligations. Cash and cash equivalents
were $49.0 million at March 31, 2013. The company received $4.8 million from
the exercise of employee stock options in the first quarter of 2013, compared
with $7.7 million. Capital expenditures for the first quarter of 2013 were
$16.3 million, compared with $10.6 million. Depreciation and amortization
expense for the first quarter of 2013 was $21.9 million, compared with $16.8
million.

On March 1, 2013, a subsidiary of Teledyne acquired RESON for $69.7 million,
net of cash acquired. Teledyne funded the purchase from borrowings under its
credit facility.

Free Cash Flow (a)                   First Quarter
(in millions, brackets                     2013              2012
indicate use of funds)
Cash used by operating                     $ (56.7 )                 $ (19.7 )
activities
Capital expenditures for                   (16.3   )                 (10.6   )
property, plant and equipment
Free cash flow (net cash used)             (73.0   )                 (30.3   )
Pension contributions, net of              51.4                     32.5    
tax (b)
Adjusted free cash flow (net               $ (21.6 )                 $ 2.2   
cash used)
                                                                             

      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.
(a)  Adjusted free cash flow eliminates the impact of pension contributions
      on a net of tax basis. 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,
      including the impact of voluntary and required pension contributions.
      
(b)   The domestic pension cash contributions were voluntary.
      

Pension

Pension expense was $4.3 million for the first quarter of 2013 compared with
$1.7 million. Pension expense allocated to contracts pursuant to U.S.
Government Cost Accounting Standards was $3.6 million for the first quarter of
2013 compared with $3.2 million. The increase in pension expense primarily
reflected the impact of using a 4.4% discount rate to determine the benefit
obligation for the domestic plan in 2013 compared with a 5.5% discount rate
used in 2012.

Income Taxes

The effective tax rate for the first quarter of 2013 was 24.9% compared with
30.3%. The decrease reflected $2.7 million in net tax benefits in the first
quarter of 2013 compared with $1.1 million. The net tax benefits in 2013
primarily relate to research and development tax credits and the Subpart F
controlled foreign corporation look-through exception for 2012, made
retroactively by the American Taxpayer Relief Act of 2012 signed into law on
January 2, 2013. Excluding the net tax benefits in both periods, the effective
tax rates would have been 30.0% in the first quarter of 2013 and 32.5% in the
first quarter of 2012.

Stock Option Compensation Expense

For the first quarter of 2013, the company recorded a total of $1.8 million in
stock option expense, of which $0.5 million was recorded as corporate expense
and $1.3 million was recorded in the operating segment results. For the first
quarter of 2012, the company recorded a total of $1.5 million in stock option
expense, of which $0.4 million was recorded as corporate expense and $1.1
million was recorded in the operating segment results.

Other

Interest expense, net of interest income, was $5.4 million for the first
quarter of 2013, compared with $4.0 million, and reflected higher debt levels.
Corporate expense was $9.5 million for the first quarter of 2013, compared
with $9.5 million. Other expense was $0.5 million for the first quarter of
2013, compared with expense of $0.4 million.

Outlook

Based on its current outlook, the company’s management believes that second
quarter 2013 earnings per diluted share, including acquisition related
expenses, will be in the range of approximately $1.03 to $1.06. The full year
2013 earnings per diluted share outlook, including acquisition related
expenses, is expected to be in the range of approximately $4.47 to $4.51, an
increase from the prior outlook of $4.42 to $4.46.

For the second quarter and full year outlook, the company expects additional
severance and relocation costs associated with certain electronic
manufacturing services businesses. The company's effective tax rate for 2013
is expected to be 30.0%, excluding retroactive adjustments.

Forward-Looking Statements Cautionary Notice

This press release contains forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995, relating to earnings, growth
opportunities, product sales, capital expenditures, pension matters, stock
option compensation expense, interest expense, severance and relocation costs,
taxes, and strategic plans. Forward-looking statements are generally
accompanied by words such as “estimate”, “project”, “predict”, “believes” or
“expect”, that convey the uncertainty of future events or outcomes. All
statements made in this press release that are not historical in nature should
be considered forward-looking.

Actual results could differ materially from these forward-looking statements.
Many factors could change the anticipated results, including: disruptions in
the global economy; 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; and cuts to defense
spending resulting from future deficit reduction measures and including
potential automatic cuts to defense spending that have been triggered by the
Budget Control Act of 2011. Increasing fuel costs could negatively affect the
markets of our commercial aviation businesses. 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 with respect to hydraulic fracturing, could negatively affect the
company’s businesses that supply the oil and gas industry. In addition,
financial market fluctuations affect the value of the company’s pension
assets.

Changes in the policies of U.S.and foreign governments could result, over
time, in reductions and realignment in defense or other government spending
and further changes in programs in which the company participates.

While the company’s growth strategy includes possible acquisitions, we cannot
provide any assurance as to when, if or on what terms any acquisitions will be
made. Acquisitions involve various inherent risks, such as, among others, our
ability to integrate acquired businesses, retain customers and achieve
identified financial and operating synergies. There are additional risks
associated with acquiring, owning and operating businesses internationally,
including those arising from U.S.and foreign policy changes and exchange rate
fluctuations.

While the company believes its internal and disclosure control systems are
effective, there are inherent limitations in all control systems, and
misstatements due to error or fraud may occur and may not be detected.

Readers are urged to read the company’s periodic reports filed with the
Securities and Exchange Commission (“SEC”) for a more complete description of
the company, its businesses, its strategies and the various risks that the
company faces. Various risks are identified in Teledyne’s 2012 Annual Report
on Form 10-K. The company assumes no duty to publicly update or revise any
forward-looking statements, whether as a result of new information or
otherwise.

A live webcast of Teledyne’s first quarter earnings conference call will be
held at 11:00 a.m. (Eastern) on Wednesday, April 24, 2013. To access the call,
go to www.earnings.com or www.teledyne.com approximately ten minutes before
the scheduled start time. A replay will also be available for one month at
these same sites starting at 12:00 p.m. (Eastern) on Wednesday, April 24,
2013.

TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED

MARCH 31, 2013 AND APRIL 1, 2012

(Unaudited, - in millions, except per share amounts)
                                                         
                                                 First               First

                                                 Quarter             Quarter
                                                 2013                2012
Net sales                                        $ 569.4             $ 494.0
Costs and expenses:
Costs of sales                                   365.4               328.1
Selling, general and administrative              145.1              110.4   
expenses
Total costs and expenses                         510.5              438.5   
Income before other expense and                  58.9                55.5
income taxes
Other expense, net                               (0.5    )           (0.4    )
Interest and debt expense, net                   (5.4    )           (4.0    )
Income before income taxes                       53.0                51.1
Provision for income taxes                       13.2               15.5    
Net income                                       39.8                35.6
Add: net loss attributable to                    0.6                0.1     
noncontrolling interest
Net income attributable to Teledyne              $ 40.4             $ 35.7  
                                                                    
Diluted earnings per common share                $ 1.07             $ 0.96  
Weighted average diluted common                  37.8               37.2    
shares outstanding
                                                                             

TELEDYNE TECHNOLOGIES INCORPORATED

SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT

FOR THE THREE MONTHS ENDED

MARCH 31, 2013 AND APRIL 1, 2012

(Unaudited, - in millions)
                                                      
                                 First             First

                                 Quarter           Quarter
                                 2013              2012              % Change
Net sales:
Instrumentation                  $ 221.2           $ 160.6           37.7   %
Digital Imaging                  102.4             94.2              8.7    %
Aerospace and                    174.6             164.8             5.9    %
Defense Electronics
Engineered Systems               71.2             74.4             (4.3  ) %
Total net sales                  $ 569.4          $ 494.0          15.3   %
Operating profit and
other segment
income:
Instrumentation                  $ 35.0            $ 31.6            10.8   %
Digital Imaging                  5.2               4.3               20.9   %
Aerospace and                    21.8              22.9              (4.8  ) %
Defense Electronics
Engineered Systems               6.4              6.2              3.2    %
Segment operating
profit and other                 68.4              65.0              5.2    %
segment income
Corporate expense                (9.5    )         (9.5    )         —      %
Other expense, net               (0.5    )         (0.4    )         25.0   %
Interest and debt                (5.4    )         (4.0    )         35.0   %
expense, net
Income before income             53.0              51.1              3.7    %
taxes
Provision for income             13.2             15.5             (14.8 ) %
taxes
Net income                       39.8              35.6              11.8   %
Add: net loss
attributable to                  0.6              0.1              500.0  %
noncontrolling
interest
Net income
attributable to                  $ 40.4           $ 35.7           13.2   %
Teledyne
                                                                             

TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED CONDENSED BALANCE SHEETS

(Current period unaudited – in millions)
                                                  
                                      March 31, 2013         December 30, 2012
ASSETS
Cash and cash equivalents             $  49.0                $     45.8
Accounts receivable, net              372.1                  350.3
Inventories, net                      304.5                  281.2
Deferred income taxes,                33.7                   39.8
net
Prepaid expenses and                  34.5                  27.7
other assets
Total current assets                  793.8                  744.8
Property, plant and                   351.2                  349.5
equipment, net
Goodwill and acquired                 1,294.9                1,255.9
intangible assets, net
Other assets, net                     90.5                  56.2
Total assets                          $  2,530.4            $     2,406.4
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Accounts payable                      $  160.0               $     148.6
Accrued liabilities                   232.9                  256.7
Current portion of
long-term debt and                    3.7                   2.0
capital leases
Total current liabilities             396.6                  407.3
Long-term debt and                    695.0                  556.2
capital lease obligations
Other long-term                       205.3                 239.5
liabilities
Total liabilities                     1,296.9                1,203.0
Total stockholders’                   1,233.5               1,203.4
equity
Total liabilities and                 $  2,530.4            $     2,406.4
stockholders’ equity

Contact:

Teledyne Technologies Incorporated
Investor Contact:
Jason VanWees, 805-373-4542
or
Media Contact:
Robyn McGowan, 805-373-4540
 
Press spacebar to pause and continue. Press esc to stop.