01—Abstract
Summary
Summary of the 10-K filed February 25, 2019. Cited figures are marked; the original filing is the authoritative source.
Teledyne Technologies Incorporated (TDY) reported fiscal 2018 net sales of $2,901.8 milliona, up from $2,603.8 million in 2017, and net income of $333.8 million ($9.01 per diluted share), compared with $227.2 million ($6.26 per diluted share) in 2017.
Operating income rose to $416.6 millionb from $321.7 million. Growth was led by Digital Imaging, where net sales increased 23.3% to $885.2 million, helped by the March 2017 e2v acquisition, and by Instrumentation (up 7.1%) and Aerospace and Defense Electronics (up 7.8%). Operating cash flow was $446.9 million and free cash flow was $360.1 million.
Total debt fell to $748.8 millionc from $1,068.2 million at the prior year-end, and the effective tax rate dropped to 15.3% from 20.8%, aided by net discrete tax benefits of $23.8 million. The company's backlog of confirmed and funded orders was $1,568.8 million at December 30, 2018, versus $1,250.2 million a year earlier. U.S. Government sales were about 23% of net sales, and fixed-price contracts made up 67% of U.S. Government prime contracts and subcontracts.
Management disclosed that a Missile Defense Agency follow-on program was not awarded to Teledyne in November 2018 and has been put on hold pending an Agency investigation. The company also noted the partial U.S. Government shutdown that began in December 2018 delayed some contract awards and invoice payments.
In February 2019, Teledyne acquired the scientific imaging businesses of Roper Technologies, Inc. (including Princeton Instruments, Photometrics and Lumenera) for $225.0 milliond in cash, to be included in the Digital Imaging segment. The company does not pay dividends and expects to use earnings for growth, acquisitions and possibly share repurchases.
02—Key points
Key Highlights
- Net sales rose to $2,901.8 million in 2018 from $2,603.8 million in 2017; net income rose to $333.8 million from $227.2 million.
- Diluted EPS was $9.01 in 2018 versus $6.26 in 2017.
- Digital Imaging net sales increased 23.3% to $885.2 million, with operating income up 42.5% to $157.3 million, including e2v contributions.
- Total long-term debt declined to $748.8 million at December 30, 2018, from $1,068.2 million at December 31, 2017.
- Cash provided by operating activities was $446.9 million and free cash flow was $360.1 million in 2018.
- Backlog of confirmed and funded orders was $1,568.8 million at December 30, 2018, compared with $1,250.2 million a year earlier.
- The Missile Defense Agency OSF follow-on program was not awarded to Teledyne in November 2018 and is on hold pending an Agency investigation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Teledyne Technologies kept $0.12.
- Revenue$2.90B100.0%
- Cost of revenue−$1.79B61.7%
- Gross profit$1.11B38.3%
- Operating costs−$694.2M23.9%
- Operating income$416.6M14.4%
- Interest, other & tax−$82.8M2.9%
- Net income$333.8M11.5%
Where FY2018 revenue went
$2.90B- Cost of revenue: $1.79B, 62% of revenue
- SG&A: $694.2M, 24% of revenue
- Net income: $333.8M, 12% of revenue
- Interest, other & tax: $82.8M, 2.9% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 25, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.90B$2.60B | +11.4% |
| Cost of Revenue | $1.79B$1.62B | +10.3% |
| Gross Profit | $1.11B$979.80M | +13.4% |
| SG&A Expenses | $694.20M$658.10M | +5.5% |
| Operating Expenses | $2.49B$2.28B | +8.9% |
| Operating Income | $416.60M$321.70M | +29.5% |
| Interest Expense | $29.20M$25.50M | +14.5% |
| Net Income | $333.80M$227.20M | +46.9% |
| EPS (Basic) | $9.32$6.45 | +44.5% |
| EPS (Diluted) | $9.01$6.26 | +43.9% |
| Shares Outstanding (Basic) | 35.80M35.20M | +1.7% |
| Shares Outstanding (Diluted) | 37.00M36.30M | +1.9% |
05—Questions
Frequently Asked Questions
How did Teledyne perform financially in 2018?
Net sales were $2,901.8 million, up from $2,603.8 million, and operating income was $416.6 million, up from $321.7 million. Net income was $333.8 million, or $9.01 per diluted share, compared with $227.2 million, or $6.26 per diluted share, in 2017. The effective tax rate was 15.3%, versus 20.8% in 2017, with net discrete tax benefits of $23.8 million.
Which segments drove growth?
Digital Imaging was the strongest performer, with net sales up 23.3% to $885.2 million and operating income up 42.5% to $157.3 million, reflecting organic growth of $77.4 million and $90.1 million from e2v. Instrumentation net sales rose 7.1% to $1,021.2 million, and Aerospace and Defense Electronics rose 7.8% to $696.5 million. Engineered Systems net sales rose 4.4% to $298.9 million.
How much debt does Teledyne carry and how is it structured?
Total long-term debt was $748.8 million at December 30, 2018, down from $1,068.2 million a year earlier. It includes $29.0 million outstanding under a $750.0 million credit facility due December 2020, $100.0 million in a term loan due October 2019, and senior notes in U.S. dollars and euros. The company was in compliance with its covenants, reporting a Consolidated Leverage Ratio of 1.5 to 1 against a requirement of no more than 3.25 to 1.
What major events happened after year-end 2018?
On February 5, 2019, Teledyne acquired the scientific imaging businesses of Roper Technologies, Inc. for $225.0 million in cash. The businesses include Princeton Instruments, Photometrics and Lumenera, and will be part of the Digital Imaging segment. The company also stated it expected to amend its $750.0 million credit facility in the first quarter of 2019 to extend maturity from December 2020 to March 2024.
What are the key risks related to U.S. Government business?
U.S. Government sales were about 23% of 2018 net sales. Fixed-price contracts made up 67% of U.S. Government prime contracts and subcontracts in 2018, which exposes the company to cost overruns. The company had 15 U.S. Government contracts terminated for convenience in 2018. The partial government shutdown that began in December 2018 delayed some contract awards and payments, and the Missile Defense Agency OSF follow-on program was not awarded to Teledyne and has been put on hold.
06—Continue