01—Abstract
Summary
Summary of the 10-K filed February 26, 2015. Cited figures are marked; the original filing is the authoritative source.
Teledyne Technologies Incorporated (TDY) reported record fiscal 2014 results in its 10-K filed February 26, 2015.
Sales rose to $2,394.0 milliona from $2,338.6 million in 2013, and net income attributable to Teledyne increased to $217.7 million, or $5.75 per diluted share, compared with $185.0 million, or $4.87 per diluted share, in 2013. Segment operating profit and other segment income reached $338.4 million, up from $277.9 million, with the Instrumentation segment, which now accounts for 47% of sales, driving growth largely through marine instrumentation and the 2014 acquisition of Bolt Technology Corporation for $171.0 million. The company describes its shift toward commercial and international markets, with about 75% of 2014 sales going to commercial and international customers and about 45% to international customers.
Cash generation improved, with cash provided by operating activities of $287.9 millionb and free cash flow of $244.4 million, compared with $130.7 million in 2013. Total debt rose to $694.7 million at year-end 2014, and Teledyne repurchased $146.6 million of common stock during 2014. In February 2015 the board approved an additional 2,500,000-share repurchase program, and the company executed a $142.0 million accelerated share repurchase, funded partly by $120.0 million of floating-rate borrowings under its $750 million credit facility.
The filing states that the company does not anticipate paying cash dividends in the foreseeable future. Risk factors highlighted in the filing include exposure to offshore oil and gas activity, following a decline in Brent crude from $116 in June 2014 to $56c in December 2014.
The company also cites U.S. Government funding and sequestration pressures, with government sales at about 25% of total sales in 2014 compared with 32% in 2012, and fixed-price contract risk, with about 58% of 2014 U.S. Government contracts fixed-price. Goodwill totaled $1,150.6 milliond, a significant share of total assets of $2,862.2 million.
02—Key points
Key Highlights
- Sales of $2,394.0 million in 2014, up from $2,338.6 million in 2013, with Instrumentation sales rising to $1,115.5 million.
- Net income attributable to Teledyne of $217.7 million, or $5.75 per diluted share, compared with $185.0 million, or $4.87 per diluted share, in 2013.
- Segment operating profit and other segment income of $338.4 million, compared with $277.9 million in 2013.
- Cash provided by operating activities of $287.9 million and free cash flow of $244.4 million in 2014.
- Total debt of $694.7 million at December 28, 2014, including $375.0 million of senior notes and $105.0 million under the $750.0 million credit facility.
- Share repurchases of $146.6 million in 2014 and a $142.0 million accelerated share repurchase agreement entered February 2, 2015, under a new 2,500,000-share authorization.
- Roughly 75% of 2014 sales to commercial and international customers and 45% to international customers; the company has no plans to pay cash dividends in the foreseeable future.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Teledyne Technologies kept $0.09.
- Revenue$2.39B100.0%
- Cost of revenue−$1.49B62.1%
- Gross profit$906.9M37.9%
- Operating costs−$612.4M25.6%
- Operating income$294.5M12.3%
- Interest, other & tax−$78.9M3.3%
- Net income$215.6M9.0%
Where FY2014 revenue went
$2.39B- Cost of revenue: $1.49B, 62% of revenue
- SG&A: $612.4M, 26% of revenue
- Net income: $215.6M, 9.0% of revenue
- Interest, other & tax: $78.9M, 3.3% of revenue
Kept 9.0% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 26, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $2.39B$2.34B | +2.4% |
| Cost of Revenue | $1.49B$1.50B | −0.9% |
| Gross Profit | $906.90M$838.60M | +8.1% |
| SG&A Expenses | $612.40M$598.30M | +2.4% |
| Operating Expenses | $2.10B$2.10B | +0.1% |
| Operating Income | $294.50M$240.30M | +22.6% |
| Interest Expense | $19.10M$20.90M | −8.6% |
| Net Income | $215.60M$184.50M | +16.9% |
| EPS (Basic) | $5.87$4.96 | +18.3% |
| EPS (Diluted) | $5.75$4.87 | +18.1% |
| Shares Outstanding (Basic) | 37.10M37.30M | −0.5% |
| Shares Outstanding (Diluted) | 37.90M38.00M | −0.3% |
05—Questions
Frequently Asked Questions
What drove the increase in Teledyne's 2014 results?
Sales in the Instrumentation segment rose $92.7 million to $1,115.5 million, driven by marine instrumentation, which increased $74.4 million including $32.5 million from recent acquisitions. Lower cost of sales, reflecting 2013 cost reduction actions, and pension income of $1.3 million compared with pension expense of $17.5 million in 2013 also contributed to higher operating profit.
How is Teledyne financing its acquisitions and share repurchases?
The company funded acquisitions primarily from borrowings under its credit facility and cash on hand. The February 2015 accelerated share repurchase was funded by cash on hand and $120.0 million of floating-rate borrowings under the $750 million credit facility. Available borrowing capacity under the facility was $629.7 million at December 28, 2014.
What are the main risks to Teledyne's business highlighted in the filing?
The filing highlights exposure to offshore oil and gas activity, where the price of Brent crude fell from a high of $116 in June 2014 to $56 in December 2014. It also cites U.S. Government funding risk, including sequestration and fixed-price contract exposure, with about 58% of 2014 U.S. Government contracts being fixed-price, and international operations risks such as currency fluctuations.
What did Teledyne acquire in 2014 and what did it pay?
The largest 2014 acquisition was Bolt Technology Corporation, acquired November 18, 2014, for an aggregate value of $171.0 million. Other 2014 acquisitions included Oceanscience for $14.7 million, Atlas for $5.2 million and Photon for an initial $3.3 million. A February 2, 2015 acquisition of Bowtech Products Limited for $18.4 million was disclosed as a subsequent event.
Does Teledyne pay dividends, and how much cash did it return to shareholders?
Teledyne does not anticipate paying cash dividends in the foreseeable future and intends to retain earnings to fund growth, including acquisitions. In 2014 it spent $146.6 million to repurchase 1,396,290 shares at an average price of $97.70 per share, and it approved an additional 2,500,000-share repurchase program on January 27, 2015.
06—Continue