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Teledyne Technologies Reports Third Quarter Results



  Teledyne Technologies Reports Third Quarter Results

Business Wire

THOUSAND OAKS, Calif. -- October 24, 2013

Teledyne Technologies Incorporated (NYSE:TDY):

  * Sales of $571.6 million increased 4.4% compared to last year
  * All-time record quarterly earnings per share from continuing operations of
    $1.23
  * Third quarter 2013 includes pretax charges of $14.3 million primarily
    related to severance and facility consolidations, offset by net discrete
    tax benefits of $11.6 million
  * Raising full year 2013 GAAP earnings outlook to $4.64 to $4.67 per share
    from $4.50 to $4.55
  * Acquired assets of CETAC Technologies

Teledyne today reported third quarter 2013 sales of $571.6 million, compared
with sales of $547.4 million for the third quarter of 2012, an increase of
4.4%. Net income attributable to Teledyne was $46.8 million ($1.23 per diluted
share) for the third quarter of 2013, compared with $42.7 million ($1.14 per
diluted share) for the third quarter of 2012, an increase of 9.6%.

“In the third quarter, our commercial industrial businesses collectively
performed very well. As an example, our instrumentation segment generated
organic revenue growth of 12.7 percent,” said Robert Mehrabian, chairman,
president and chief executive officer. “Also in the quarter, we undertook more
aggressive actions to optimize our business portfolio and lower our expenses,
further reducing our exposure to weak end markets and high cost locations.
Simultaneously, we continued to invest, both internally and through
acquisition, in growing commercial markets. In the past several weeks, we
acquired two companies within our environmental and marine instrumentation
businesses. Given the ongoing transformation of our business portfolio,
coupled with a substantially reduced cost structure, we believe we have
positioned the company for continued success.”

The third quarter of 2013 reflected pretax charges totaling $14.3 million for
severance and facility consolidation expense and environmental reserves. The
charges were comprised of $5.3 million in severance related costs and $9.0
million in facility closure and relocation costs, which included $5.3 million
of environmental reserves. The charges impacted each business segment as
follows: Aerospace and Defense Electronics, $8.7 million; Engineered Systems,
$2.7 million; Digital Imaging, $1.9 million; and Instrumentation, $1.0
million. The third quarter of 2013 also reflected net discrete tax benefits
totaling $11.6 million. The tax benefits for the third quarter of 2013 are
primarily due to the remeasurement of uncertain tax positions and expirations
of the statute of limitations.

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

Instrumentation

The Instrumentation segment’s third quarter 2013 sales were $256.6 million,
compared with $206.3 million, an increase of 24.4%. Third quarter 2013
operating profit was $39.9 million, compared with $31.8 million, an increase
of 25.5%.

The third quarter 2013 sales increase primarily resulted from higher sales of
both marine and electronic test and measurement instrumentation. The higher
sales of $37.0 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 $14.8 million in
incremental revenue from recent acquisitions including the March 2013
acquisition of RESON A/S (“RESON”). The higher sales of $11.7 million for
electronic test and measurement instrumentation reflected a full quarter
contribution from the August 2012 acquisition of LeCroy Corporation
(“LeCroy”). Sales for environmental instrumentation increased $1.6 million and
included $2.2 million in sales from the August 30, 2013 acquisition of assets
of CETAC Technologies (“CETAC”). The increase in operating profit reflected
the impact of higher sales, partially offset by $1.0 million in severance and
facility consolidation expenses.

Digital Imaging

The Digital Imaging segment’s third quarter 2013 sales were $105.2 million,
compared with $108.1 million, a decrease of 2.7%. Operating profit was $11.5
million for the third quarter of 2013, compared with $7.6 million, an increase
of 51.3%.

The 2013 sales decrease primarily reflected lower sales of LIDAR systems and
MEMS products, partially offset by increased sales of sensors and cameras for
commercial machine vision and medical applications, and infrared sensors and
cameras for commercial and scientific applications. Operating profit in 2013
primarily reflected favorable product mix differences, partially offset by
$1.9 million in severance and related expenses.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s third quarter 2013 sales were
$143.1 million, compared with $151.7 million, a decrease of 5.7%. Operating
profit was $9.3 million for the third quarter of 2013, compared with $22.2
million, a decrease of 58.1%.

The 2013 sales decrease reflected lower sales of $14.5 million from microwave
and interconnect systems. The lower sales were partially offset by increased
sales of $5.5 million from avionics products and electronic relays and $0.4
million of increased sales of electronic manufacturing services products.
Operating profit in 2013 reflected the impact of lower sales, as well as $3.4
million for severance and facility consolidation costs associated with certain
defense electronics businesses and a $5.3 million charge for estimated
environmental liabilities.

Engineered Systems

The Engineered Systems segment’s third quarter 2013 sales were $66.7 million
compared with $81.3 million, a decrease of 18.0%. Operating profit was $2.7
million for the third quarter 2013, compared with $8.3 million, a decrease of
67.5%.

The third quarter 2013 sales decrease reflected lower sales of engineered
products and services of $16.5 million, partially offset by higher energy
systems sales of $1.8 million and a slight increase in sales of turbine
engines. The lower sales of engineered products and services primarily
reflected decreased sales of manufacturing programs and missile defense
engineering services. Operating profit in the third quarter of 2013 reflected
the impact of lower sales and $2.7 million in severance and facility
consolidation expenses, as well as $1.1 million in higher net pension expense.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $49.5 million for the third quarter
of 2013, compared with $18.3 million. The higher cash provided by operating
activities in the third quarter of 2013 primarily reflected the absence of any
pension contributions in the third quarter of 2013. The third quarter of 2012
reflected a voluntary pretax $42.8 million cash contribution to the domestic
pension plan. Free cash flow (cash provided by operating activities less
capital expenditures) was $31.8 million for the third quarter of 2013,
compared with $30.8 million and reflected higher cash provided by operating
activities. At September 29, 2013, total debt was $643.1 million, which
included $161.5 million drawn on the $750.0 million credit facility, $250.0
million in senior notes, $200.0 million in term loans, $17.4 million in other
debt and $14.2 million in capital lease obligations. Cash and cash equivalents
were $88.7 million at September 29, 2013. The company received $2.8 million
from the exercise of employee stock options in the third quarter of 2013,
compared with $2.8 million. Capital expenditures for the third quarter of 2013
were $17.7 million, compared with $15.3 million. Depreciation and amortization
expense for the third quarter of 2013 was $23.1 million, compared with $21.5
million.

On August 30, 2013, a subsidiary of Teledyne acquired the assets of CETAC for
$26.4 million. In the fourth quarter, a subsidiary of Teledyne acquired C.D.
Limited for $22.5 million. These acquisitions were funded from borrowings
under the credit facility and cash on hand.

Free Cash Flow(a)                         Third Quarter
(in millions,
brackets indicate use                     2013                  2012
of funds)
Cash provided by                          $    49.5             $   18.3
operating activities
Capital expenditures
for property, plant                       (17.7        )        (15.3      )
and equipment
Free cash flow                            31.8                  3.0
Pension
contributions, net of                     —                     27.8        
tax (b)
Adjusted free cash                        $    31.8             $   30.8    
flow
(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.
(b) The domestic pension cash contributions were voluntary.
 

Pension

Pension expense was $4.3 million for the third quarter of 2013 compared with
$1.7 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 third quarter of 2013 compared with
$3.1 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 third quarter of 2013 was 0.6% compared with
24.5%. The decrease primarily reflected $11.6 million in net tax benefits for
discrete items in the third quarter of 2013. The third quarter of 2012
reflected $3.1 million in net tax benefits for discrete items due to the
expiration of the statute of limitations. Excluding the net tax benefits in
both periods, the effective tax rates would have been 25.2% for the third
quarter of 2013 and 30.0% for the third quarter of 2012. The lower 2013 tax
rate, excluding the net discrete tax benefits in both quarters, primarily
reflected a change in the proportion of domestic and foreign income and
increased federal tax credits for research and development.

Stock Option Compensation Expense

For the third quarter of 2013, the company recorded a total of $3.0 million in
stock option expense, of which $2.0 million was recorded in the operating
segment results and $1.0 million was recorded as corporate expense. For the
third quarter of 2012, the company recorded a total of $2.3 million in stock
option expense, of which $1.6 million was recorded in the operating segment
results and $0.7 million was recorded as corporate expense.

Other

Interest expense, net of interest income, was $5.1 million for the third
quarter of 2013, compared with $4.5 million, and primarily reflected higher
debt levels. Corporate expense was $10.4 million for the third quarter of
2013, compared with $9.6 million and reflected higher compensation and
professional fees expense. Other income and expense was expense of $0.7
million for the third quarter of 2013, compared with income of $1.2 million.

Outlook

Based on its current outlook, the company’s management believes that fourth
quarter 2013 earnings per diluted share will be in the range of approximately
$1.21 to $1.24, inclusive of estimated pretax severance and facility
consolidation costs of $3.7 million. The full year 2013 earnings per diluted
share outlook is expected to be in the range of approximately $4.64 to $4.67,
inclusive of estimated pretax severance and facility consolidation costs and
environmental reserves during full year 2013 of $22.4 million. The company’s
effective tax rate for 2013 is expected to be 28.3%, 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, facility
consolidation and environmental remediation 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 Reports on 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 third quarter earnings conference call will be
held at 11:00 a.m. (Eastern) on Thursday, October 24, 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, October 24, 2013.

                                                                     
                                                                       
TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THIRD QUARTER AND NINE MONTHS ENDED

SEPTEMBER 29, 2013 AND SEPTEMBER 30, 2012

(Unaudited, - in millions, except per share amounts)
                                                                       
                                                                       
                          Third         Third         Nine            Nine
                          Quarter       Quarter       Months          Months
                          2013          2012          2013            2012
Net sales                 $ 571.6       $ 547.4       $ 1,742.0       $ 1,559.9
Costs and
expenses:
Costs of sales            369.0         349.0         1,118.0         1,020.1
Selling, general
and                       149.6         138.1         447.2           364.3      
administrative
expenses
Total costs and           518.6         487.1         1,565.2         1,384.4    
expenses
Income before
other expense and         53.0          60.3          176.8           175.5
income taxes
Other
income/(expense),         (0.7    )     1.2           (1.2      )     2.2
net
Interest and debt         (5.1    )     (4.5    )     (15.6     )     (12.6     )
expense, net
Income before             47.2          57.0          160.0           165.1
income taxes
Provision for             0.3           13.9          30.0            46.8       
income taxes
Net income                46.9          43.1          130.0           118.3
Noncontrolling            (0.1    )     (0.4    )     0.1             (0.4      )
interest
Net income
attributable to           $ 46.8        $ 42.7        $ 130.1         $ 117.9    
Teledyne
                                                                       
Diluted earnings          $ 1.23        $ 1.14        $ 3.42          $ 3.16     
per common share
Weighted average
diluted common            38.1          37.4          38.0            37.3       
shares
outstanding
                                                                                 
                                                                                 

                                                                                                   
                                                                                                             
TELEDYNE TECHNOLOGIES INCORPORATED

SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT (a)

FOR THE THIRD QUARTER AND NINE MONTHS ENDED

SEPTEMBER 29, 2013 AND SEPTEMBER 30, 2012

(Unaudited, - in millions)
                                                                                                             
                                                                                                             
                          Third         Third                       Nine            Nine
                                                      %                                             %
                          Quarter       Quarter       Change        Months          Months          Change
                          2013          2012                        2013            2012                     
Net sales:
Instrumentation           $ 256.6       $ 206.3       24.4    %     $ 747.0         $ 561.1         33.1    %
Digital Imaging           105.2         108.1         (2.7  ) %     311.9           313.2           (0.4  ) %
Aerospace and
Defense                   143.1         151.7         (5.7  ) %     475.7           453.5           4.9     %
Electronics
Engineered                66.7          81.3          (18.0 ) %     207.4           232.1           (10.6 ) %
Systems
Total net sales           $ 571.6       $ 547.4       4.4     %     $ 1,742.0       $ 1,559.9       11.7    %
Operating profit
and other segment
income:
Instrumentation           $ 39.9        $ 31.8        25.5    %     $ 117.6         $ 98.1          19.9    %
Digital Imaging           11.5          7.6           51.3    %     24.6            19.4            26.8    %
Aerospace and
Defense                   9.3           22.2          (58.1 ) %     50.1            62.9            (20.3 ) %
Electronics
Engineered                2.7           8.3           (67.5 ) %     14.8            21.9            (32.4 ) %
Systems
Segment operating
profit and other          63.4          69.9          (9.3  ) %     207.1           202.3           2.4     %
segment income
Corporate expense         (10.4   )     (9.6    )     8.3     %     (30.3     )     (26.8     )     13.1    %
Other
income/(expense),         (0.7    )     1.2           *             (1.2      )     2.2             *
net
Interest and debt         (5.1    )     (4.5    )     13.3    %     (15.6     )     (12.6     )     23.8    %
expense, net
Income before             47.2          57.0          (17.2 ) %     160.0           165.1           (3.1  ) %
income taxes
Provision for             0.3           13.9          (97.8 ) %     30.0            46.8            (35.9 ) %
income taxes
Net income                46.9          43.1          8.8     %     130.0           118.3           9.9     %
Noncontrolling            (0.1    )     (0.4    )     (75.0 ) %     0.1             (0.4      )     *
interest
Net income
attributable to           $ 46.8        $ 42.7        9.6     %     $ 130.1         $ 117.9         10.3    %
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)
                                                              
                                                              
                                      September 29, 2013     December 30, 2012
ASSETS
Cash and cash equivalents             $    88.7              $     45.8
Accounts receivable, net              368.9                  350.3
Inventories, net                      304.0                  281.2
Deferred income taxes, net            30.1                   39.8
Prepaid expenses and other            51.2                   27.7
assets
Total current assets                  842.9                  744.8
Property, plant and equipment,        361.0                  349.5
net
Goodwill and acquired                 1,304.2                1,255.9
intangible assets, net
Other assets, net                     112.2                  56.2
Total assets                          $    2,620.3           $     2,406.4
LIABILITIES AND STOCKHOLDERS’
EQUITY
Accounts payable                      $    159.7             $     148.6
Accrued liabilities                   242.1                  256.7
Current portion of long-term          4.5                    2.0
debt and capital leases
Total current liabilities             406.3                  407.3
Long-term debt and capital            638.6                  556.2
lease obligations
Other long-term liabilities           215.8                  239.5
Total liabilities                     1,260.7                1,203.0
Total stockholders’ equity            1,359.6                1,203.4
Total liabilities and                 $    2,620.3           $     2,406.4
stockholders’ equity
                                                                    

Contact:

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