THOUSAND OAKS, Calif. — (BUSINESS WIRE) — July 27, 2022 — Teledyne Technologies Incorporated (NYSE: TDY)

• Record second quarter sales of $1,355.8 million, an increase of 20.9% compared with last year
• Organic sales growth was 8.2% including the negative impact of foreign currency translation
• Record second quarter GAAP diluted earnings per share of $3.59
• Non-GAAP diluted earnings per share of $4.43
• Revising full year 2022 GAAP earnings outlook to $15.13 to $15.45 diluted earnings per share, compared with the prior outlook of $15.34 to $15.66, and full year non-GAAP earnings outlook to $17.45 to $17.70, compared with the prior outlook of $17.75 to $18.00
• Quarter-end Consolidated Leverage Ratio declined to 2.5x
• Capital deployment included repurchases of fixed-rate debt and the recent acquisition of a majority interest in NL Acoustics

Teledyne today reported second quarter 2022 net sales of $1,355.8 million, compared with net sales of $1,121.0 million for the second quarter of 2021, an increase of 20.9%. Net income was $171.3 million ($3.59 diluted earnings per share) for the second quarter of 2022, compared with $64.7 million ($1.48 diluted earnings per share) for the second quarter of 2021, an increase of 164.8%. The second quarter of 2022 net sales included $167.6 million in incremental net sales from the acquisition of FLIR Systems, Inc. (“FLIR”), which was acquired midway through the second quarter of 2021. The second quarter of 2022 also reflected net discrete income tax benefits of $1.0 million compared with net discrete income tax expense of $4.1 million for the second quarter of 2021. The second quarter of 2022 included $51.3 million of pretax acquired intangible asset amortization expense and $0.6 million of acquisition related tax expense. Excluding these charges, non-GAAP net income for the second quarter of 2022 was $211.3 million ($4.43 diluted earnings per share). In the second quarter of 2021, Teledyne incurred pretax expenses of $150.7 million, which included $42.3 million of transaction and integration-related costs, $52.2 million for the settlement of FLIR employee and director stock awards, $32.8 million in acquired intangible asset amortization expense and $23.4 million in acquired inventory step-up expense. Excluding these charges, non-GAAP net income for the second quarter of 2021 was $201.0 million ($4.61 diluted earnings per share). Operating margin was 16.9% for the second quarter of 2022, compared with 9.3% for the second quarter of 2021. Excluding acquisition-related transaction and purchase accounting expenses, non-GAAP operating margin for the second quarter of 2022 was 20.7%, compared with 22.8% for the second quarter of 2021.

“The demand environment for Teledyne remained strong in the second quarter. In fact, we achieved record quarterly orders and ended the quarter with over $3.0 billion of backlog. Consolidated book to bill was 1.08x with particular strength at Teledyne FLIR, where orders were 25% greater than sales,” said Robert Mehrabian, Chairman, President and Chief Executive Officer. “Despite increased foreign currency headwind, organic sales growth accelerated and was 8.2% in the second quarter. Free cash flow improved from the first quarter, but inventory levels remained elevated to counter supply chain risk. Given the recent and significant appreciation of the U.S. dollar, ongoing supply chain constraints and inflation, we believe it is prudent to revise our reported revenue and adjusted earnings outlook modestly for the remainder of the year. Nevertheless, we continue to see mid-single digit organic sales growth in the second half and full year 2022 including the impact of foreign currency translation. We remain highly confident in our balanced and resilient mix of commercial and government businesses across a broad range of geographies and end markets. Finally, having reached our targeted leverage range, we are again pursuing acquisitions and are pleased to have recently completed our first bolt-on acquisition at Teledyne FLIR.”

Review of Operations

Comparisons are with the second quarter of 2021, unless noted otherwise. In the current year, gain (loss) on debt extinguishment was presented as separate line item on the income statement. Prior year amounts were reclassified to conform to current year presentation.

Digital Imaging

The Digital Imaging segment’s second quarter 2022 net sales were $775.8 million, compared with $579.5 million, an increase of 33.9%. Operating income was $117.9 million for the second quarter of 2022, compared with $84.6 million, an increase of 39.4%.

The second quarter of 2022 net sales increase included $167.6 million of incremental net sales from the FLIR acquisition as well as strong organic sales growth from industrial and scientific sensors and cameras and X-ray products. The increase in operating income in the second quarter of 2022 reflected the contribution from the FLIR acquisition as well as the impact of organic sales growth during the period. Operating income in the second quarter of 2021 reflected the concentration of FLIR net sales which were disproportionately higher than the operating expenses following the May 2021 closing date. The second quarter of 2021 also included $24.0 million of FLIR integration-related costs and $23.4 million in FLIR inventory step-up expense. Acquired intangible amortization expense for the second quarter of 2022 was $46.4 million compared with $27.4 million and reflected the timing of the FLIR acquisition midway into the second quarter of 2021.

Instrumentation

The Instrumentation segment’s second quarter 2022 net sales were $312.5 million, compared with $291.1 million, an increase of 7.4%. Operating income was $73.6 million for the second quarter of 2022, compared with $64.6 million, an increase of 13.9%.

The second quarter of 2022 net sales increase resulted from higher sales across all external product lines. Sales of marine instrumentation increased $10.4 million, sales of test and measurement instrumentation increased $8.3 million, and sales of environmental instrumentation increased $2.7 million, respectively. 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 second quarter 2022 net sales were $168.8 million, compared with $152.4 million, an increase of 10.8%. Operating income was $44.1 million for the second quarter of 2022, compared with $28.4 million, an increase of 55.3%.

The second quarter 2022 net sales reflected higher sales of $12.3 million for aerospace electronics and $4.1 million for defense electronics. Operating income in the second quarter of 2022 reflected the impact of higher sales and favorable product mix, primarily driven by the stronger sales of aerospace electronics in the quarter.

Engineered Systems

The Engineered Systems segment’s second quarter 2022 net sales were $98.7 million, compared with $98.0 million, an increase of 0.7%. Operating income was $8.6 million for the second quarter of 2022, compared with $11.0 million, a decrease of 21.8%.

The second quarter 2022 net sales reflected higher sales of $0.9 million for energy systems, partially offset by lower sales of $0.2 million for engineered products. The lower sales for engineered products primarily reflected decreased sales from electronic manufacturing services products and space programs, partially offset by higher sales from marine and other manufacturing programs. Operating income in the second quarter of 2022 primarily reflected the impact of decreased sales and lower gross margins for electronic manufacturing services products.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $196.9 million for the second quarter of 2022, compared with $211.3 million. The second quarter of 2022 reflected higher purchases of inventories and higher income tax payments compared with the second quarter of 2021. Depreciation and amortization expense for the second quarter of 2022 was $82.7 million compared with $59.7 million and reflected the timing of the FLIR acquisition midway into the second quarter of 2021. Non-cash inventory step-up expense related to FLIR was $23.4 million for the second quarter of 2021, and there was no comparable amount recorded in the second quarter of 2022. Capital expenditures for both the second quarter of 2022 and 2021 were $20.8 million.