THOUSAND OAKS, Calif. — (BUSINESS WIRE) — October 25, 2023 — Teledyne Technologies Incorporated (NYSE: TDY):

• Record third quarter sales of $1,402.5 million, an increase of 2.9% compared with last year
• Record third quarter GAAP operating margin of 18.8% and diluted earnings per share of $4.15
• All-time record non-GAAP operating margin of 22.8% and diluted earnings per share of $5.05
• Increasing full year 2023 GAAP earnings outlook to $15.82 to $15.96 diluted earnings per share, compared with the prior outlook of $15.60 to $15.88, and increasing full year non-GAAP earnings outlook to $19.20 to $19.30 diluted earnings per share, compared with the prior outlook of $19.00 to $19.20
• Consolidated Leverage Ratio improved to slightly below 2.0x
• Acquired Xena Networks on October 13, 2023

Teledyne today reported third quarter 2023 net sales of $1,402.5 million, compared with net sales of $1,363.6 million for the third quarter of 2022, an increase of 2.9%. Net income attributable to Teledyne was $198.6 million ($4.15 diluted earnings per share) for the third quarter of 2023, compared with $178.3 million ($3.74 diluted earnings per share) for the third quarter of 2022, an increase of 11.4%. The third quarter of 2023 included $49.1 million of pretax acquired intangible asset amortization expense, $5.8 million of pretax FLIR integration costs and $1.0 million of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the third quarter of 2023 was $241.9 million ($5.05 diluted earnings per share). The third quarter of 2022 included $48.9 million of pretax acquired intangible asset amortization expense as well as $0.8 million of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the third quarter of 2022 was $216.5 million ($4.54 diluted earnings per share). Operating margin was 18.8% for the third quarter of 2023, compared with 18.0% for the third quarter of 2022. Excluding the non-GAAP items discussed above, non-GAAP operating margin for the third quarter of 2023 was 22.8%, compared with 21.6% for the third quarter of 2022.

“In the third quarter, we achieved record operating margin and earnings per share,” said Robert Mehrabian, Chairman, President and Chief Executive Officer. “The results across Teledyne were once again driven by our balanced business portfolio. Our overall performance was led by growth in our marine, medical, aerospace and certain defense businesses, coupled with vigilant cost control. While sales increased year-over-year, revenue was impacted by a stronger U.S. dollar throughout the third quarter and some deterioration in certain end markets, such as industrial automation and laboratory instrumentation. Nevertheless, given our focus on operational excellence, operating margin increased sequentially and year-over-year in the Digital Imaging and Instrumentation segments, helping generate record earnings. We remain highly confident in our balanced and resilient mix of commercial and government businesses and our ability to acquire and integrate complementary businesses. We were pleased to have added Xena Networks to our test and measurement business, which also continued to perform very well in a challenging environment.”

Review of Operations

Comparisons are with the third quarter of 2022, unless noted otherwise.

Digital Imaging

The Digital Imaging segment’s third quarter 2023 net sales were $775.8 million, compared with $777.9 million, a decrease of 0.3%. Operating income was $136.3 million for the third quarter of 2023, compared with $133.7 million, an increase of 1.9%.

The third quarter of 2023 net sales included $25.8 million in incremental sales from recent acquisitions, as well as greater sales of x-ray products, infrared imaging detectors and surveillance systems, offset by lower sales of unmanned ground systems for defense applications, micro-electro-mechanical systems (“MEMS”), commercial maritime products and industrial imaging cameras. The increase in operating income was primarily due to favorable product mix, partially offset by $5.8 million of FLIR-related integration costs recorded in the third quarter of 2023. Acquired intangible amortization expense for the third quarter of 2023 was $45.4 million compared with $44.7 million.

Instrumentation

The Instrumentation segment’s third quarter 2023 net sales were $329.1 million, compared with $306.4 million, an increase of 7.4%. Operating income was $85.5 million for the third quarter of 2023, compared with $71.1 million, an increase of 20.3%.

The third quarter of 2023 net sales increase resulted from higher sales across the marine instrumentation and test and measurement instrumentation product lines. Sales of marine instrumentation increased $22.5 million and sales of test and measurement instrumentation increased $2.0 million. Sales of environmental instrumentation decreased $1.8 million. The increase in operating income primarily reflected the impact of higher sales and favorable product mix.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s third quarter 2023 net sales were $183.3 million, compared with $169.5 million, an increase of 8.1%. Operating income was $49.4 million for the third quarter of 2023, compared with $44.3 million, an increase of 11.5%.

The third quarter of 2023 net sales reflected higher sales of $7.0 million for aerospace electronics and $6.8 million for defense electronics. The increase in operating income primarily reflected the impact of higher sales.

Engineered Systems

The Engineered Systems segment’s third quarter 2023 net sales were $114.3 million, compared with $109.8 million, an increase of 4.1%. Operating income was $10.9 million for the third quarter of 2023, compared with $11.9 million, a decrease of 8.4%.

The third quarter of 2023 net sales reflected higher sales of $2.7 million for engineered products and $1.8 million for energy systems. The decrease in operating income was primarily driven by program mix, with the third quarter of 2023 having a higher percentage of lower margin space program revenue.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $278.2 million for the third quarter of 2023 compared with $268.9 million. Depreciation and amortization expense for the third quarter of 2023 was $76.9 million compared with $80.8 million. Stock-based compensation expense for the third quarter of 2023 was $8.0 million compared with $6.7 million.

Capital expenditures for the third quarter of 2023 were $23.0 million compared with $16.7 million. Teledyne received $12.2 million from the exercise of stock options in the third quarter of 2023 compared with $0.9 million.

As of October 1, 2023, net debt was $2,735.5 million which is calculated as total debt of $3,244.1 million, net of cash and cash equivalents of $508.6 million. As of January 1, 2023, net debt was $3,282.5 million and included total debt of $3,920.6 million, net of cash and cash equivalents of $638.1 million. During the first nine months of 2023, Teledyne repaid approximately $680 million of debt, including $300.0 million of debt that matured in April 2023 and $370.0 million of floating rate debt under its term loan due May 2026 and under its credit facility. Teledyne also repurchased and retired $10.0 million of its Fixed Rate Senior Notes due April 2031, recording a $1.6 million non-cash gain on the extinguishment of this debt.

As of October 1, 2023, $1,130.9 million was available under the $1.15 billion credit facility, after reductions of $19.1 million in outstanding letters of credit.