Teledyne Technologies Reports Second Quarter Results

  Teledyne Technologies Reports Second Quarter Results

Business Wire

THOUSAND OAKS, Calif. -- July 25, 2013

Teledyne Technologies Incorporated (NYSE:TDY):

  *All-time record quarterly sales of $601.0 million
  *Record second quarter earnings per share of $1.13
  *Instrumentation segment operating profit increased 33.9%
  *Raising full year 2013 GAAP earnings outlook to $4.50 to $4.55 per share
    from $4.47 to $4.51

Teledyne today reported second quarter 2013 sales of $601.0 million, compared
with sales of $518.5 million for the second quarter of 2012, an increase of
15.9%. Net income attributable to Teledyne was $42.9 million ($1.13 per
diluted share) for the second quarter of 2013, compared with $39.5 million
($1.06 per diluted share) for the second quarter of 2012, an increase of 8.6%.

“Quarterly sales were an all-time record and increased 15.9% compared to last
year. Due to record sales to commercial and international customers, we also
achieved reasonable organic growth of 2.9% in the quarter,” said Robert
Mehrabian, chairman, president and chief executive officer. “Largely due to
recent acquisitions and charges associated with cost reduction efforts,
margins declined compared to last year. However, overall operating margin
increased 45 basis points sequentially from the first quarter of 2013.
Quarter-end backlog remained over $1.0 billion, and free cash flow of $92.8
million was very strong. Given the challenging global economy, we remain very
focused on keeping our cost structure low. Year to date, we have incurred $4.2
million in pretax charges related to severance and facility consolidations,
but have been able to cover such costs with increased earnings. Finally,
integration of our recent acquisitions is progressing very well. Yesterday, we
announced that Teledyne LeCroy demonstrated the world’s first 100 GHz
oscilloscope. The ability to capture real-time electronic signals at a
bandwidth of over 100 GHz is truly an industry milestone, one of many for
Teledyne LeCroy over the years.”

Review of Operations (Comparisons are with the second quarter of 2012, unless
noted otherwise. The 2012 results reflect a revised segment reporting
structure.)

Instrumentation

The Instrumentation segment’s second quarter 2013 sales were $257.7 million,
compared with $179.6 million, an increase of 43.5%. Second quarter 2013
operating profit was $41.1 million, compared with $30.7 million, an increase
of 33.9%.

The second quarter 2013 sales increase resulted from higher sales of both
marine and electronic test and measurement instrumentation. The higher sales
of $31.7 million for marine instrumentation reflected increased sales of
marine acoustic sensors and systems, as well as interconnect systems used in
offshore energy production, and also included a total of $20.7 million in
incremental revenue from recent acquisitions including the March 2013
acquisition of RESON A/S (“RESON”). Sales of $46.4 million for electronic test
and measurement instrumentation resulted from the August 2012 acquisition of
LeCroy Corporation (“LeCroy”). Sales for environmental instrumentation were
$65.7 million for both quarters. The increase in operating profit reflected
the impact of higher sales, partially offset by $2.0 million in additional
intangible asset amortization.

Digital Imaging

The Digital Imaging segment’s second quarter 2013 sales were $104.3 million,
compared with $110.9 million, a decrease of 6.0%. Operating profit was $7.9
million for the second quarter of 2013, compared with $7.5 million, an
increase of 5.3%.

The 2013 sales decrease primarily reflected lower sales of imagers for remote
sensing, LIDAR systems and MEMS products, partially offset by increased sales
of infrared sensors and optics. Operating profit in 2013 primarily reflected
improved profitability for LIDAR systems, partially offset by $0.4 million in
severance costs.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s second quarter 2013 sales were
$169.5 million, compared with $151.6 million, an increase of 11.8%. Operating
profit was $20.6 million for the second quarter of 2013, compared with $21.8
million, a decrease of 5.5%.

The 2013 sales increase reflected higher sales of $11.3 million from microwave
and interconnect systems. The increase also resulted from increased sales of
$6.2 million from avionics products and electronic relays and $0.4 million of
greater sales of electronic manufacturing service products. Operating profit
in 2013 decreased and reflected $1.5 million for severance and facility
consolidation costs associated with certain defense electronics businesses and
$0.4 million in higher net pension expense, partially offset by the impact of
higher sales.

Engineered Systems

The Engineered Systems segment’s second quarter 2013 sales were $69.5 million
compared with $76.4 million, a decrease of 9.0%. Operating profit was $5.7
million for the second quarter 2013, compared with $7.4 million, a decrease of
23.0%.

The second quarter 2013 sales decrease reflected lower sales of engineered
products and services of $7.0 million and lower energy systems sales of $2.6
million, partially offset by higher sales of $2.7 million related to turbine
engines. Operating profit in the second quarter of 2013 reflected the impact
of lower sales and $1.1 million in higher net pension expense.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $112.8 million for the second
quarter of 2013, compared with $69.0 million. The higher cash provided by
operating activities in the second quarter of 2013 primarily reflected the
timing of accounts receivable collections, cash provided from the 2012 LeCroy
acquisition, partially offset by higher income tax payments. Free cash flow
(cash provided by operating activities less capital expenditures) was $92.8
million for the second quarter of 2013, compared with $51.9 million and
reflected higher cash provided by operating activities. At June 30, 2013,
total debt was $628.1 million, which included $151.4 million drawn on the
$750.0 million credit facility, $250.0 million in senior notes, $200.0 million
in term loans, $13.8 million in other debt and $12.9 million in capital lease
obligations. Cash and cash equivalents were $70.1 million at June 30, 2013.
The company received $2.4 million from the exercise of employee stock options
in the second quarter of 2013, compared with $1.7 million. Capital
expenditures for the second quarter of 2013 were $20.0 million, compared with
$17.1 million. Depreciation and amortization expense for the second quarter of
2013 was $22.1 million, compared with $18.1 million.

On May 8, 2013, a subsidiary of Teledyne acquired Axiom IC B.V., for an
initial payment of $4.0 million, net of cash acquired, with an additional $1.3
million expected to be paid in equal installments over three years. The
acquisition was funded from borrowings under the credit facility.

Free Cash Flow(a)             Second Quarter
(in millions,
brackets indicate                 2013                        2012
use of funds)
Cash provided by
operating                         $   112.8                       $   69.0
activities
Capital
expenditures for                  (20.0       )                   (17.1     )
property, plant
and equipment
Free cash flow                    $   92.8                       $   51.9  
(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. 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.

Pension

Pension expense was $4.4 million for the second quarter of 2013 compared with
$1.6 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. Pension
expense allocated to contracts pursuant to U.S. Government Cost Accounting
Standards (“CAS”) was $3.6 million for the second quarter of 2013 compared
with $2.7 million. Pension expense determined allowable under CAS can
generally be recovered through the pricing of products and services sold to
the U.S. Government.

Income Taxes

The effective tax rate for the second quarter of 2013 was 27.6% compared with
30.5%. The decrease reflected a change in the proportion of domestic and
international income, as well as $0.9 million in net tax benefits for discrete
items in the second quarter of 2013. Excluding the net tax benefits in the
second quarter of 2013, the effective tax rate would have been 29.1%.

Stock Option Compensation Expense

For the second quarter of 2013, the company recorded a total of $2.8 million
in stock option expense, of which $1.8 million was recorded in the operating
segment results and $1.0 million was recorded as corporate expense. For the
second quarter of 2012, the company recorded a total of $2.0 million in stock
option expense, of which $1.4 million was recorded in the operating segment
results and $0.6 million was recorded as corporate expense.

Other

In the second quarter of 2013, the company incurred total severance and
facility consolidation costs of $2.1 million. Interest expense, net of
interest income, was $5.1 million for the second quarter of 2013, compared
with $4.1 million, and primarily reflected higher debt levels. Corporate
expense was $10.4 million for the second quarter of 2013, compared with $7.7
million and reflected higher compensation and professional fees expense. Other
income and expense was less than $0.1 million for the second quarter of 2013,
compared with income of $1.4 million. Other income and expense in the second
quarter of 2012 included a $0.6 million gain on the purchase of the majority
interest in the parent company of Optech Incorporated.

Outlook

Based on its current outlook, the company’s management believes that third
quarter 2013 earnings per diluted share will be in the range of approximately
$1.10 to $1.15, inclusive of estimated pretax severance and facility
consolidation costs of $3.2 million, partially offset by $1.9 million of
anticipated net tax benefits. The full year 2013 earnings per diluted share
outlook is expected to be in the range of approximately $4.50 to $4.55,
inclusive of estimated pretax severance and facility consolidation costs
during full year 2013 of $9.1 million. The company’s effective tax rate for
2013 is expected to be 29.5%, before discrete items.

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 facility
consolidation 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, 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 and subsequent Quarterly Form 10-Q. 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 second quarter earnings conference call will be
held at 11:00 a.m. (Eastern) on Thursday, July 25, 2013. To access the call,
go to www.teledyne.com 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 Thursday, July 25, 2013.


TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
JUNE 30, 2013 AND JULY 1, 2012
(Unaudited, - in millions, except per share amounts)

                     Second       Second       Six            Six
                        Quarter         Quarter         Months            Months
                        2013            2012            2013              2012
Net sales               $ 601.0         $ 518.5         $ 1,170.4         $ 1,012.5
Costs and
expenses:
Costs of sales          383.6           343.0           749.0             671.1
Selling, general
and                     152.5          115.8          297.6            226.2     
administrative
expenses
Total costs and         536.1          458.8          1,046.6          897.3     
expenses
Income before
other expense and       64.9            59.7            123.8             115.2
income taxes
Other
income/(expense),       —               1.4             (0.5      )       1.0
net
Interest and debt       (5.1    )       (4.1    )       (10.5     )       (8.1      )
expense, net
Income before           59.8            57.0            112.8             108.1
income taxes
Provision for           16.5           17.4           29.7             32.9      
income taxes
Net income              43.3            39.6            83.1              75.2
Noncontrolling          (0.4    )       (0.1    )       0.2              —         
interest
Net income
attributable to         $ 42.9         $ 39.5         $ 83.3           $ 75.2    
Teledyne
                                                                       
Diluted earnings        $ 1.13         $ 1.06         $ 2.20           $ 2.02    
per common share
Weighted average
diluted common          38.0           37.3           37.9             37.3      
shares
outstanding
                                                                                    
                                                                                    


TELEDYNE TECHNOLOGIES INCORPORATED
SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT (a)
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
JUNE 30, 2013 AND JULY 1, 2012
(Unaudited, - in millions)

                     Second       Second                    Six            Six           
                        Quarter         Quarter         % Change        Months            Months            % Change
                        2013            2012                            2013              2012
Net sales:
Instrumentation         $ 257.7         $ 179.6         43.5   %        $ 490.4           $ 354.8           38.2  %
Digital Imaging         104.3           110.9           (6.0   )%       206.7             205.1             0.8   %
Aerospace and
Defense                 169.5           151.6           11.8   %        332.6             301.8             10.2  %
Electronics
Engineered              69.5           76.4           (9.0   )%       140.7            150.8            (6.7  )%
Systems
Total net sales         $ 601.0        $ 518.5        15.9   %        $ 1,170.4        $ 1,012.5        15.6  %
Operating profit
and other segment
income:
Instrumentation         $ 41.1          $ 30.7          33.9   %        $ 77.7            $ 66.3            17.2  %
Digital Imaging         7.9             7.5             5.3    %        13.1              11.8              11.0  %
Aerospace and
Defense                 20.6            21.8            (5.5   )%       40.8              40.7              0.2   %
Electronics
Engineered              5.7            7.4            (23.0  )%       12.1             13.6             (11.0 )%
Systems
Segment operating
profit and other        75.3            67.4            11.7   %        143.7             132.4             8.5   %
segment income
Corporate expense       (10.4   )       (7.7    )       35.1   %        (19.9     )       (17.2     )       15.7  %
Other
income/(expense),       —               1.4             (100.0 )%       (0.5      )       1.0               *
net
Interest and debt       (5.1    )       (4.1    )       24.4   %        (10.5     )       (8.1      )       29.6  %
expense, net
Income before           59.8            57.0            4.9    %        112.8             108.1             4.3   %
income taxes
Provision for           16.5           17.4           (5.2   )%       29.7             32.9             (9.7  )%
income taxes
Net income              43.3            39.6            9.3    %        83.1              75.2              10.5  %
Noncontrolling          (0.4    )       (0.1    )       300.0  %        0.2              —                *
interest
Net income
attributable to         $ 42.9         $ 39.5         8.6    %        $ 83.3           $ 75.2           10.8  %
Teledyne

*      not meaningful
          Our previously reported 2012 fiscal year segment data has been
(a)       restated to reflect a revised segment reporting structure adopted in
          the second quarter of 2013.
          


TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Current period unaudited – in millions)

                                      June 30, 2013    December 30, 2012
ASSETS
Cash and cash equivalents                $  70.1             $     45.8
Accounts receivable, net                 346.7               350.3
Inventories, net                         293.7               281.2
Deferred income taxes, net               33.9                39.8
Prepaid expenses and other assets        33.9               27.7
Total current assets                     778.3               744.8
Property, plant and equipment, net       354.4               349.5
Goodwill and acquired intangible         1,277.2             1,255.9
assets, net
Other assets, net                        104.2              56.2
Total assets                             $  2,514.1         $     2,406.4
LIABILITIES AND STOCKHOLDERS’
EQUITY
Accounts payable                         $  156.5            $     148.6
Accrued liabilities                      244.5               256.7
Current portion of long-term debt        1.9                2.0
and capital leases
Total current liabilities                402.9               407.3
Long-term debt and capital lease         626.2               556.2
obligations
Other long-term liabilities              204.4              239.5
Total liabilities                        1,233.5             1,203.0
Total stockholders’ equity               1,280.6            1,203.4
Total liabilities and                    $  2,514.1         $     2,406.4
stockholders’ equity
                                                                   
                                                                   


TELEDYNE TECHNOLOGIES INCORPORATED
SUMMARY OF QUARTERLY SEGMENT NET SALES AND OPERATING PROFIT
FOR FISCAL YEARS 2012 AND 2011
REFLECTS THE REVISED SEGMENT REPORTING STRUCTURE(a)
(Unaudited, - in millions)

                   First        Second       Third        Fourth       Total
                      Quarter                         Quarter                         Year
                      2012         Quarter      2012         Quarter      2012
                                      2012                            2012
Net sales:
Instrumentation       $ 175.2         $ 179.6         $ 206.3         $ 243.6         $ 804.7
Digital Imaging       94.2            110.9           108.1           102.7           415.9
Aerospace and
Defense               150.2           151.6           151.7           151.8           605.3
Electronics
Engineered            74.4        76.4        81.3        69.3        301.4
Systems
Total Net Sales       $ 494.0     $ 518.5     $ 547.4     $ 567.4     $ 2,127.3
                                                                                      
Operating
profit and
other segment
income:
Instrumentation       $ 35.6          $ 30.7          $ 31.8          $ 47.9          $ 146.0
Digital Imaging       4.3             7.5             7.6             5.4             24.8
Aerospace and
Defense               18.9            21.8            22.2            17.6            80.5
Electronics
Engineered            6.2         7.4         8.3         6.6         28.5
Systems
Segment
operating
profit and            $ 65.0      $ 67.4      $ 69.9      $ 77.5      $ 279.8
other segment
income
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                      First           Second          Third           Fourth          Total
                      Quarter                         Quarter                         Year
                      2011         Quarter      2011         Quarter      2011
                                      2011                            2011
Net sales:
Instrumentation       $ 165.2         $ 160.9         $ 165.4         $ 156.7         $ 648.2
Digital Imaging       66.2            96.2            95.0            92.5            349.9
Aerospace and
Defense               159.6           161.4           162.9           155.3           639.2
Electronics
Engineered            77.1        84.4        73.1        70.0        304.6
Systems
Total Net Sales       $ 468.1     $ 502.9     $ 496.4     $ 474.5     $ 1,941.9
                                                                                      
Operating
profit and
other segment
income:
Instrumentation       $ 33.5          $ 32.3          $ 33.8          $ 29.7          $ 129.3
Digital Imaging       3.9             7.6             2.3             2.3             16.1
Aerospace and
Defense               20.1            22.5            23.2            21.6            87.4
Electronics
Engineered            6.6         8.6         6.4         6.5         28.1
Systems
Segment
operating
profit and            $ 64.1      $ 71.0      $ 65.7      $ 60.1      $ 260.9
other segment
income

        Our previously reported segment data has been restated to reflect a
        revised segment reporting structure adopted in the second quarter of
(a)   2013. Two business units that were formally part of the Aerospace and
        Defense Electronics segment are now reported as part of the
        Instrumentation segment.

Contact:

Teledyne Technologies Incorporated
Investor Contact:
Jason VanWees, 805-373-4542
or
Media Contact:
Robyn McGowan, 805-373-4540
 
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