01—Abstract
Summary
Summary of the 10-K filed February 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Teledyne Technologies Incorporated (TDY) reported fiscal 2020 net sales of $3,086.2 milliona, down from $3,163.6 million in 2019, and net income of $401.9 million ($10.62 per diluted share), compared with $402.3 million ($10.73 per diluted share) a year earlier.
Fiscal 2020 was a 53-week year. Operating income was $480.1 millionb, and the company reported cash provided by operating activities of $618.9 million and free cash flow of $547.5 million. Management described 2020 as the company's best operating margin and cash flow year in its history.
Segment results were mixed: Instrumentation, Digital Imaging and Engineered Systems grew operating income, while Aerospace and Defense Electronics fell sharply on weaker commercial aerospace demand tied to COVID-19 and Boeing 737 MAX production delays. Year-end cash rose to $673.1 millionc, and total debt was $778.5 million. The dominant event in the filing is the pending acquisition of FLIR Systems, Inc., announced January 4, 2021, in a cash and stock transaction valued at approximately $8.0 billion.
FLIR stockholders will receive $28.00d in cash and 0.0718 Teledyne shares per FLIR share, implying about $56.00 per share based on Teledyne's 5-day VWAP as of December 31, 2020. The transaction is expected to close in the middle of 2021, subject to regulatory approvals and stockholder approvals. Teledyne has arranged a $4.5 billion 364-day credit commitment to support funding, and the filing notes risks including a $250.0 million termination fee payable to FLIR in certain circumstances and a higher leverage profile after closing.
The filing also highlights risk concentrations. U.S. Government sales were approximately 26% of 2020 net sales, international sales about 45%, and offshore oil and gas exposure is a material revenue driver for the Instrumentation segment. Teledyne did not pay cash dividends and had no share repurchases since 2015.
02—Key points
Key Highlights
- Net sales were $3,086.2 million in 2020, down 2.4% from $3,163.6 million in 2019; net income was $401.9 million, down 0.1%.
- Diluted EPS was $10.62 in 2020 versus $10.73 in 2019, with 2020 pretax charges of $33.3 million and net discrete tax benefits of $34.6 million.
- Operating cash flow rose to $618.9 million from $482.1 million, and free cash flow reached $547.5 million versus $393.7 million in 2019.
- Aerospace and Defense Electronics operating income fell 43.7% to $80.8 million on lower sales, while Engineered Systems operating income rose 37.3% to $50.1 million.
- Pending FLIR acquisition valued at about $8.0 billion, expected to close mid-2021, with a $4.5 billion 364-day credit commitment arranged to fund the transaction.
- Cash and cash equivalents increased to $673.1 million at January 3, 2021, while total outstanding indebtedness was $778.5 million.
- U.S. Government contracts accounted for about 26% of 2020 net sales and sales to international customers about 45%; the company reported a backlog of about $1,700.2 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Teledyne Technologies kept $0.13.
- Revenue$3.09B100.0%
- Cost of revenue−$1.91B61.7%
- Gross profit$1.18B38.3%
- Operating costs−$700.8M22.7%
- Operating income$480.1M15.6%
- Interest, other & tax−$78.2M2.5%
- Net income$401.9M13.0%
Where FY2021 revenue went
$3.09B- Cost of revenue: $1.91B, 62% of revenue
- SG&A: $662.0M, 21% of revenue
- Net income: $401.9M, 13% of revenue
- Other operating costs: $38.8M, 1.3% of revenue
- Interest, other & tax: $78.2M, 2.5% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 26, 2021Financial Statements
| Revenue | $3.09B |
| Cost of Revenue | $1.91B |
| Gross Profit | $1.18B |
| SG&A Expenses | $662.00M |
| Operating Expenses | $2.61B |
| Operating Income | $480.10M |
| Interest Expense | $15.30M |
| Net Income | $401.90M |
| EPS (Basic) | $10.95 |
| EPS (Diluted) | $10.62 |
| Shares Outstanding (Basic) | 36.70M |
| Shares Outstanding (Diluted) | 37.90M |
05—Questions
Frequently Asked Questions
What is the FLIR acquisition and how will it be paid for?
Teledyne agreed on January 4, 2021 to acquire FLIR Systems, Inc. in a cash and stock deal valued at about $8.0 billion. FLIR stockholders receive $28.00 in cash and 0.0718 Teledyne shares per FLIR share. The filing says Teledyne expects to fund the cash portion with a combination of equity, cash on hand and permanent debt, including senior notes and bank term loans, and it has arranged a $4.5 billion 364-day credit commitment.
How did Teledyne's profitability change in 2020?
Net income was $401.9 million in 2020 compared with $402.3 million in 2019, and diluted EPS was $10.62 versus $10.73. Operating income declined 2.4% to $480.1 million, mainly because of lower Aerospace and Defense Electronics results. The effective tax rate was 14.4%, helped by $34.6 million of net discrete tax benefits.
Which segments drove performance in 2020?
Instrumentation operating income rose 6.4% to $213.2 million and Digital Imaging rose 9.2% to $192.8 million. Engineered Systems operating income increased 37.3% to $50.1 million. Aerospace and Defense Electronics was the weak spot, with net sales down 14.6% to $589.4 million and operating income down 43.7% to $80.8 million, reflecting commercial aerospace weakness tied to COVID-19 and the Boeing 737 MAX production suspension.
What are the main risks investors should note?
The filing highlights risks from the FLIR deal, including possible failure to close, a $250.0 million termination fee payable to FLIR in certain circumstances, and substantially higher post-closing debt that could affect ratings and borrowing costs. Other risks include reliance on U.S. Government contracts (about 26% of 2020 sales), exposure to China-related tariffs and export restrictions, and cyclical offshore oil and gas demand for Instrumentation products.
Does Teledyne pay dividends or repurchase shares?
No. The filing states that Teledyne does not anticipate paying cash dividends in the foreseeable future, intending to use earnings to fund growth including acquisitions. It has a repurchase program authorized for up to approximately three million shares, but no repurchases have been made since 2015 and the company has no current plans to repurchase stock.
06—Continue