Teledyne Technologies Reports Third Quarter Results

THOUSAND OAKS, Calif. — (BUSINESS WIRE) — October 21, 2020 — Teledyne Technologies Incorporated (NYSE: TDY):

  • Sales of $749.0 million and GAAP diluted earnings per share of $2.48
  • GAAP operating margin of 16.4%, an increase of 31 bps from last year and 158 bps from the prior quarter
  • Record third quarter free cash flow of $135.1 million and all-time record free cash flow of $330.5 million nine months year to date
  • Raising midpoint and narrowing full year 2020 GAAP diluted earnings per share outlook to $9.70 to $10.00, compared with the prior outlook of $9.45 to $10.00

Teledyne today reported third quarter 2020 net sales of $749.0 million, compared with net sales of $802.2 million for the third quarter of 2019, a decrease of 6.6%. Net income was $93.9 million ($2.48 diluted earnings per share) for the third quarter of 2020, compared with $106.7 million ($2.84 diluted earnings per share) for the third quarter of 2019, a decrease of 12.0%. The third quarter of 2020 included $3.9 million in severance, facility consolidation, acquisition and other costs compared with $2.0 million in severance, facility consolidation, acquisition and other costs for the third quarter of 2019. The third quarter of 2020 reflected net discrete income tax benefits of $1.2 million compared with net discrete income tax benefits of $10.4 million for the third quarter of 2019.

“For the second consecutive quarter, GAAP operating margin increased sequentially over 150 basis points,” said Robert Mehrabian, Executive Chairman. “In fact, we achieved greater margins compared to last year in nearly every major business category except commercial aerospace. During the third quarter, our shortest-cycle environmental and test and measurement instrumentation businesses experienced a rebound from the trough in the second quarter. With non-COVID healthcare procedures now increasing, we expect a similar recovery for our medical imaging businesses late in the fourth quarter. Finally, our balance sheet has never been stronger and our acquisition pipeline is healthy. Nevertheless, we will continue to be disciplined in capital deployment.”

Review of Operations

Comparisons are with the third quarter of 2019, unless noted otherwise.

Instrumentation

The Instrumentation segment’s third quarter 2020 net sales were $263.5 million, compared with $282.9 million, a decrease of 6.9%. Operating income was $50.7 million for the third quarter of 2020, compared with $52.0 million, a decrease of 2.5%.

The third quarter 2020 net sales decrease resulted from lower sales of marine instrumentation, test and measurement instrumentation and environmental instrumentation. Sales of marine instrumentation decreased $12.9 million, sales of test and measurement instrumentation decreased $4.3 million and sales of environmental instrumentation decreased $2.2 million. Environmental instrumentation included $6.3 million in incremental sales from the 2019 acquisition of the gas and flame detection businesses. Test and measurement instrumentation included $3.1 million in sales from the 2020 acquisition of OakGate Technology, Inc.

Digital Imaging

The Digital Imaging segment’s third quarter 2020 net sales were $239.7 million, compared with $244.0 million, a decrease of 1.8%. Operating income was $45.5 million for the third quarter of 2020, compared with $41.2 million, an increase of 10.4%.

The third quarter 2020 net sales primarily reflected lower sales of X-ray products for dental and medical applications, partially offset by greater sales of infrared detectors for defense applications, geospatial imaging systems and $2.3 million in incremental sales from a 2019 acquisition. The increase in operating income in the third quarter of 2020 primarily reflected favorable product mix.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s third quarter 2020 net sales were $144.8 million, compared with $177.1 million, a decrease of 18.2%. Operating income was $26.7 million for the third quarter of 2020, compared with $39.5 million a decrease of 32.4%.

The third quarter 2020 net sales reflected $25.6 million of lower sales for aerospace electronics and lower sales of $6.7 million for defense and space electronics. The continued weakness in the commercial aerospace industry has negatively affected sales of aerospace electronics. Reduced sales of defense and space electronics resulted from lower commercial space sales. Operating income in the third quarter of 2020 primarily reflected the impact of lower sales.

Engineered Systems

The Engineered Systems segment’s third quarter 2020 net sales were $101.0 million compared with $98.2 million, an increase of 2.9%. Operating income was $12.5 million for the third quarter of 2020, compared with $10.6 million, an increase of 17.9%.

The third quarter 2020 net sales reflected higher sales of $2.0 million of engineered products and $1.5 million for turbine engines, partially offset by lower sales of $0.7 million of energy systems. The higher sales primarily reflected increased sales from space, nuclear and other manufacturing programs, as well as electronic manufacturing services products. The increase in operating income in the third quarter of 2020 reflected the impact of higher sales and a greater mix of higher margin fixed-price manufacturing programs.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $150.3 million for the third quarter of 2020, compared with $150.9 million. At September 27, 2020, cash and cash equivalents and total debt were $454.5 million and $786.7 million, respectively, compared with cash and cash equivalents and total debt of $199.5 million and $850.6 million, respectively at December 29, 2019. At September 27, 2020, $125.0 million was outstanding under the $750.0 million credit facility with available borrowing capacity under the facility, which is reduced by borrowings and certain outstanding letters of credit, of $614.7 million. The company received $1.3 million from the exercise of stock options in the third quarter of 2020 compared with $8.5 million. Capital expenditures for the third quarter of 2020 were $15.2 million, compared with $25.1 million. Depreciation and amortization expense for the third quarter of 2020 was $29.2 million, compared with $27.9 million.

Free Cash Flow (a)

 

Third Quarter

 

Nine Months

(in millions, brackets indicate use of funds)

 

2020

 

2019

 

2020

 

2019

Cash provided by operating activities

 

$

150.3

 

 

$

150.9

 

 

$

382.5

 

 

$

314.2

 

Capital expenditures for property, plant and equipment

 

(15.2)

 

 

(25.1)

 

 

(52.0)

 

 

(64.5)

 

Free cash flow

 

$

135.1

 

 

$

125.8

 

 

$

330.5

 

 

$

249.7

 

(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.


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