Teledyne Technologies Reports Second Quarter Results

  Teledyne Technologies Reports Second Quarter Results

Business Wire

THOUSAND OAKS, Calif. -- July 24, 2014

Teledyne Technologies Incorporated (NYSE:TDY):

  *Second quarter sales of $597.1 million
  *All-time record quarterly earnings per share from continuing operations of
    $1.47
  *Raising full year 2014 GAAP earnings outlook to $5.31 to $5.35, an
    increase from the prior outlook of $5.10 to $5.14

Teledyne today reported second quarter 2014 sales of $597.1 million, compared
with sales of $601.0 million for the second quarter of 2013, a decrease of
0.6%. Net income attributable to Teledyne was $56.1 million ($1.47 per diluted
share) for the second quarter of 2014, compared with $42.9 million ($1.13 per
diluted share) for the second quarter of 2013, an increase of 30.8%.

“Our results demonstrate the successful transformation of Teledyne into a
higher-margin, industrial technology company,” said Robert Mehrabian,
Chairman, President and Chief Executive Officer. “With record sales to the
marine and offshore energy markets, instrumentation segment sales increased
7.3% in the quarter. In addition, greater sales of higher-margin commercial
avionics and machine vision cameras helped offset expected declines in
government sales in our digital imaging and defense electronics businesses.
Given the continued mix shift across Teledyne, as well as ongoing cost
reduction efforts, operating margin increased 164 basis points and was a
record for any quarter. Free cash flow was almost $100 million during the
first six months, enabling continued capital deployment for acquisitions and
share repurchases.”

Review of Operations (Comparisons are with the second quarter of 2013, unless
noted otherwise.)

Instrumentation

The Instrumentation segment’s second quarter 2014 sales were $276.6 million,
compared with $257.7 million, an increase of 7.3%. Second quarter 2014
operating profit was $43.8 million, compared with $41.1 million, an increase
of 6.6%.

The second quarter 2014 sales increase resulted from higher sales in the
marine instrumentation and environmental instrumentation product lines,
partially offset by lower sales of electronic test and measurement
instrumentation. The higher sales of $14.5 million for marine instrumentation
primarily reflected increased sales of interconnect systems used in offshore
energy production, and also included $3.6 million in sales from the October
2013 acquisition of C.D. Limited. Sales for environmental instrumentation
increased $6.4 million and included $7.1 million in sales from recent
acquisitions. Sales of electronic test and measurement instrumentation
decreased $2.0 million. The increase in operating profit reflected the impact
of higher sales and a $0.7 million bad debt recovery.

Digital Imaging

The Digital Imaging segment’s second quarter 2014 sales were $103.7 million,
compared with $104.3 million, a decrease of 0.6%. Operating profit was $11.7
million for the second quarter of 2014, compared with $7.9 million, an
increase of 48.1%.

Second quarter 2014 sales primarily reflected increased sales of sensors and
cameras for commercial machine vision applications, offset by lower sales of
infrared imaging sensors for government applications. Operating profit in 2014
reflected improved margins across most product lines and a greater mix of
higher margin commercial sales.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s second quarter 2014 sales were
$152.2 million, compared with $169.5 million, a decrease of 10.2%. Operating
profit was $22.9 million for the second quarter of 2014, compared with $20.6
million, an increase of 11.2%.

The second quarter 2014 sales decrease reflected lower sales of $19.7 million
from microwave and interconnect systems due to the completion of a program
with a foreign government, which impacted the first and second quarters of
2013. The second quarter of 2014 sales also reflected increased sales of $3.6
million from avionics products and electronic relays and lower sales of $1.2
million from electronic manufacturing services products. Operating profit in
the second quarter of 2014 reflected lower expenses as a result of cost
reduction actions taken in 2013, offset by the impact of lower sales. The
second quarter 2014 operating profit also reflected pension income of $0.4
million compared with $2.0 million of pension expense, and the second quarter
of 2013 included $1.5 million in severance and facility consolidation costs.

Engineered Systems

The Engineered Systems segment’s second quarter 2014 sales were $64.6 million,
compared with $69.5 million, a decrease of 7.1%. Operating profit was $6.8
million for the second quarter of 2014, compared with $5.7 million, an
increase of 19.3%.

The second quarter 2014 sales decrease primarily reflected lower sales of
engineered products and services of $3.4 million, which primarily reflected
lower sales of missile defense systems. Sales of turbine engines decreased
$2.0 million while energy systems sales increased by $0.5 million. Operating
profit in the second quarter of 2014 reflected pension income of $0.4 million
compared with $1.7 million of pension expense, partially offset by the impact
of lower sales.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $94.0 million for the second quarter
of 2014, compared with $112.8 million. The lower cash provided by operating
activities in the second quarter of 2014 reflected the timing of accounts
receivable collections, payments of accrued severance and facility
consolidation costs, higher income tax payments, partially offset by the
receipt of $10.0 million related to a legal settlement. Free cash flow (cash
provided by operating activities less capital expenditures) was $85.1 million
for the second quarter of 2014, compared with $92.8 million and reflected
lower cash provided by operating activities. At June29, 2014, total debt was
$509.2 million, which included $30.0 million drawn on the $750.0 million
credit facility. Cash and cash equivalents were $103.4 million at June29,
2014. The company received $6.5 million from the exercise of stock options in
the second quarter of 2014, compared with $2.4 million. Capital expenditures
for the second quarter of 2014 were $8.9 million, compared with $20.0 million.
Depreciation and amortization expense for the second quarter of 2014 was $23.4
million, compared with $22.1 million. In the second quarter of 2014, the
company used $12.0 million to repurchase 126,474 shares of its common stock
under its stock repurchase program authorized in October 2011. On March 31,
2014, a subsidiary of Teledyne acquired Photon Machines, Inc., a supplier of
laser-based sample introduction equipment, for an initial payment of $3.3
million.

                          
Free Cash Flow (a)              Second Quarter
(in millions,
brackets indicate               2014                         2013
use of funds)
Cash provided by
operating                       $   94.0                          $  112.8
activities
Capital
expenditures for                (8.9       )                      (20.0     )
property, plant and
equipment
Free cash flow                  85.1                             92.8      
                                                                            
(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.


Pension

Pension income was $0.4 million for the second quarter of 2014 compared with
pension expense of $4.4 million. The change to pension income in 2014 from
pension expense in 2013 primarily reflected the impact of using a 5.4%
discount rate to determine the benefit obligation for the domestic plan in
2014 compared with a 4.4% discount rate used in 2013. Pension expense
allocated to contracts pursuant to U.S. Government Cost Accounting Standards
(“CAS”) was $3.4 million for the second quarter of 2014 compared with $3.6
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 2014 was 28.3% compared with
27.6%. The second quarter of 2013 reflected $0.9 million of net tax benefits
for discrete items. Excluding the net tax benefits for discrete items in 2013
the effective tax rate would have been 29.1% for the second quarter of 2013.

Stock Option Compensation Expense

For the second quarter of 2014, the company recorded a total of $3.6 million
in stock option expense, of which $2.4 million was recorded in the operating
segment results and $1.2 million was recorded as corporate 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.

Other

Interest expense, net of interest income, was $4.6 million for the second
quarter of 2014, compared with $5.1 million, and primarily reflected lower
average debt levels. Corporate expense was $10.9 million for the second
quarter of 2014, compared with $10.4 million. Other income and expense was
income of $8.2 million for the second quarter of 2014 and included a net gain
on legal settlements of $8.6 million.

Outlook

Based on its current outlook, the company’s management believes that third
quarter 2014 earnings per diluted share will be in the range of approximately
$1.26 to $1.30 and the full year 2014 earnings per diluted share outlook is
expected to be in the range of approximately $5.31 to $5.35, an increase from
the prior outlook of $5.10 to $5.14. The company’s effective tax rate for 2014
is expected to be 28.7%, 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, stock repurchases, 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 as amended by the Bipartisan Budget Act of 2013.
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, including economic
sanctions, 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 2013 Annual Report
on Form 10-K and subsequent 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, July24, 2014. 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, July24, 2014.

                                                             
TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SECOND QUARTER AND SIX MONTHS ENDED

JUNE 29, 2014 AND JUNE 30, 2013

(Unaudited - in millions, except per share amounts)
                                                                          
                        Second          Second          Six               Six

                        Quarter         Quarter         Months            Months
                        2014            2013            2014              2013
Net sales               $ 597.1         $ 601.0         $ 1,170.6         $ 1,170.4
Costs and
expenses:
Costs of sales          368.4           383.6           720.1             749.0
Selling, general
and                     154.4          152.5          310.2            297.6     
administrative
expenses
Total costs and         522.8          536.1          1,030.3          1,046.6   
expenses
Operating income        74.3            64.9            140.3             123.8
Other
income/(expense),       8.2             —               8.8               (0.5      )
net
Interest and debt       (4.6    )       (5.1    )       (9.3      )       (10.5     )
expense, net
Income before           77.9            59.8            139.8             112.8
income taxes
Provision for           22.1           16.5           38.0             29.7      
income taxes
Net income              55.8            43.3            101.8             83.1
Noncontrolling          0.3            (0.4    )       0.1              0.2       
interest
Net income
attributable to         $ 56.1         $ 42.9         $ 101.9          $ 83.3    
Teledyne
Diluted earnings        $ 1.47         $ 1.13         $ 2.67           2.20      
per common share
Weighted average
diluted common          38.1           38.0           38.2             37.9      
shares
outstanding
                                                                                    
                                                                                    

                                                                                         
TELEDYNE TECHNOLOGIES INCORPORATED

SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT

FOR THE SECOND QUARTER AND SIX MONTHS ENDED

JUNE 29, 2014 AND JUNE 30, 2013

(Unaudited - in millions)
                                                                                                            
                        Second          Second          %               Six               Six               %

                        Quarter         Quarter         Change          Months            Months            Change
                        2014            2013                            2014              2013
Net sales:
Instrumentation         $ 276.6         $ 257.7         7.3     %       $ 535.5           $ 490.4           9.2     %
Digital Imaging         103.7           104.3           (0.6  ) %       205.6             206.7             (0.5  ) %
Aerospace and
Defense                 152.2           169.5           (10.2 ) %       305.5             332.6             (8.1  ) %
Electronics
Engineered              64.6           69.5           (7.1  ) %       124.0            140.7            (11.9 ) %
Systems
Total net sales         $ 597.1        $ 601.0        (0.6  ) %       $ 1,170.6        $ 1,170.4        —       %
Segment operating
profit:
Instrumentation         $ 43.8          $ 41.1          6.6     %       $ 81.3            $ 77.7            4.6     %
Digital Imaging         11.7            7.9             48.1    %       21.4              13.1              63.4    %
Aerospace and
Defense                 22.9            20.6            11.2    %       46.7              40.8              14.5    %
Electronics
Engineered              6.8            5.7            19.3    %       12.9             12.1             6.6     %
Systems
Segment operating       85.2            75.3            13.1    %       162.3             143.7             12.9    %
profit
Corporate expense       (10.9   )       (10.4   )       4.8     %       (22.0     )       (19.9     )       10.6    %
Operating income        74.3            64.9            14.5    %       140.3             123.8             13.3    %
Other
income/(expense),       8.2             —               *               8.8               (0.5      )       *
net
Interest and debt       (4.6    )       (5.1    )       (9.8  ) %       (9.3      )       (10.5     )       (11.4 ) %
expense, net
Income before           77.9            59.8            30.3    %       139.8             112.8             23.9    %
income taxes
Provision for           22.1           16.5           33.9    %       38.0             29.7             27.9    %
income taxes
Net income              55.8            43.3            28.9    %       101.8             83.1              22.5    %
Noncontrolling          0.3            (0.4    )       *               0.1              0.2              (50.0 ) %
interest
Net income
attributable to         $ 56.1         $ 42.9         30.8    %       $ 101.9          $ 83.3           22.3    %
Teledyne
                                                                                                                    
* not meaningful
                                                                                                                    
                                                                                                                    

                                                 
TELEDYNE TECHNOLOGIES INCORPORATED

CONSOLIDATED CONDENSED BALANCE SHEETS

(Current period unaudited – in millions)
                                                             
                               June 29, 2014                 December 29, 2013
ASSETS
Cash and cash                  $   103.4                     $     66.0
equivalents
Accounts receivable, net       376.3                         378.0
Inventories, net               318.1                         294.3
Prepaid expenses and           60.7                          60.8
other current assets
Total current assets           858.5                         799.1
Property, plant and            346.5                         357.7
equipment, net
Goodwill and acquired          1,301.2                       1,308.7
intangible assets, net
Prepaid pension asset          232.7                         222.0
Other assets, net              67.3                          63.6
Total assets                   $   2,806.2                   $     2,751.1
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Accounts payable               $   149.7                     $     147.5
Accrued liabilities            258.7                         267.1
Current portion of
long-term debt and             5.0                           3.5
capital leases
Total current                  413.4                         418.1
liabilities
Long-term debt and
capital lease                  504.2                         549.0
obligations
Other long-term                263.7                         265.3
liabilities
Total liabilities              1,181.3                       1,232.4
Total stockholders’            1,624.9                       1,518.7
equity
Total liabilities and          $   2,806.2                   $     2,751.1
stockholders’ equity
                                                                   

Contact:

Teledyne Technologies Incorporated
Jason VanWees, (805) 373-4542
 
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