Teledyne Technologies Report Net Income of US$ 93.7 million in 2Q 2020

Thousand Oaks, Calif., July 22, 2020--Teledyne today reported second quarter 2020 net sales of US$7 43.3 million, compared with net sales of $782.0 million for the second quarter of 2019, a decrease of 4.9%. Net income was US$ 93.7 million ($2.48 diluted earnings per share) for the second quarter of 2020, compared with US$ 104.6 million ($2.80 diluted earnings per share) for the second quarter of 2019, a decrease of 10.4%.

The second quarter of 2020 included US$ 8.6 million in severance, facility consolidation and acquisition costs compared with US$ 1.3 million in severance, facility consolidation and acquisition costs for the second quarter of 2019. The second quarter of 2020 reflected net discrete income tax benefits of $10.4 million compared with net discrete income tax benefits of $4.3 million for the second quarter of 2019.

“Despite record economic contraction and a challenging operating environment for manufacturers, Teledyne performed extremely well in the second quarter. Our decrease in sales was limited to approximately 5% compared with both last year and the first quarter of 2020. However, overall GAAP operating margin increased sequentially 150 basis points even with $8.6 million of pretax charges,” said Robert Mehrabian, Executive Chairman. “We have aggressively cut costs to protect profitability in our shorter-cycle business, while at the same time continuing margin improvement actions in our operations with strong backlog. Furthermore, we achieved record cash flow for any second quarter period. Much uncertainty remains in 2020, and we do not know the pace of recovery in all of our industrial businesses. Nevertheless, given our strong execution and lower cost structure, as well as our very healthy balance sheet, we are well-positioned to continue compounding earnings and cash flow for quarters and years to come.”  

Review of Operations (Comparisons are with the second quarter of 2019, unless noted otherwise).

Instrumentation

The Instrumentation segment’s second quarter 2020 net sales were US$ 263.1 million, compared with US$ 264.1 million, a decrease of 0.4%. Operating income was US$ 48.5 million for the second quarter of 2020, compared with US$ 49.0 million, a decrease of 1.0%. The second quarter 2020 net sales decrease resulted from lower sales of marine instrumentation and test and measurement instrumentation, mostly offset by higher sales of environmental instrumentation. Sales of environmental instrumentation increased US$ 6.9 million, sales of test and measurement instrumentation decreased US$ 6.4 million and sales of marine instrumentation decreased US$ 1.5 million. Environmental instrumentation included US$ 21.7 million in sales from the 2019 acquisition of the gas and flame detection businesses. Test and measurement instrumentation included US$ 4.8 million in sales from the 2020 acquisition of OakGate Technology, Inc. Operating income included US$ 2.8 million in higher severance and facility consolidation costs, partially offset by improved product line margins.

Digital Imaging 

The Digital Imaging segment’s second quarter 2020 net sales were US$ 237.6 million, compared with US$ 248.4 million, a decrease of 4.3%. Operating income was US$ 46.8 million for the second quarter of 2020, compared with US$ 51.6 million, a decrease of 9.3%. The second quarter 2020 net sales primarily reflected lower sales of X-ray products for dental and medical applications and geospatial imaging products, partially offset by greater sales of infrared detectors for defense applications and US$ 3.0 million in incremental sales from a 2019 acquisition. The decrease in operating income in the second quarter of 2020 primarily reflected the impact of lower sales.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s second quarter 2020 net sales were US$ 143.1 million, compared with US$176.0 million, a decrease of 18.7%. Operating income was US$ 17.5 million for the second quarter of 2020, compared with US$ 38.6 million a decrease of 54.7%. The second quarter 2020 net sales reflected US$ 26.9 million of lower sales for aerospace electronics, and lower sales of US$ 6.0 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 the OneWeb program. Operating income in the second quarter of 2020 reflected the impact of lower sales and US$ 4.9 million in higher severance and facility consolidation costs.

Engineered Systems

The Engineered Systems segment’s second quarter 2020 net sales were US$ 99.5 million compared with US$ 93.5 million, an increase of 6.4%. Operating income was US$ 10.8 million for the second quarter of 2020, compared with US$ 9.0 million, an increase of 20.0%. The second quarter 2020 net sales reflected higher sales of US$ 5.8 million of engineered products and US$ 1.5 million for turbine engines, partially offset by lower sales of US$ 1.3 million of energy systems. The higher sales of engineered products and services primarily reflected increased sales from marine, nuclear and other manufacturing programs, as well as electronic manufacturing services products. Turbine engine sales reflected greater sales of Harpoon missile engines. The increase in operating income in the second quarter of 2020 reflected the impact of higher sales and a greater mix of manufacturing programs.  

Other

Stock option expense was US$ 5.7 million for the second quarter of 2020, compared with US$ 5.8 million. Stock option expense for fiscal year 2020 is currently expected to be US$ 25.2 million, compared with US$ 26.1 million for fiscal year 2019. Non-service retirement benefit income was US$ 3.2 million for the second quarter of 2020, compared with US$ 2.0 million. Interest expense, net of interest income, decreased to US$ 3.7 million for the second quarter of 2020 compared with $5.4 million and reflected the impact of lower average interest rates. Corporate expense decreased to US$ 13.8 million for the second quarter of 2020, compared with US$ 16.3 million and reflected lower consulting and travel expense.

Outlook

Based on its current outlook, the company’s management believes that third quarter 2020 GAAP diluted earnings per share will be in the range of US$ 2.25 to US$ 2.45 and full year 2020 GAAP diluted earnings per share will be in the range of US$ 9.45 to US$ 10.00. The company’s annual expected tax rate for 2020 is 22.8%, before discrete tax items. In addition, we currently expect significantly less discrete tax items in 2020 compared with 2019. The estimates for third quarter and full year 2020 GAAP diluted earnings per share exclude any potential charge related to Airbus OneWeb Satellites, LLC, as a result of the March 27, 2020 bankruptcy of OneWeb Global Limited and its subsidiaries.