01—Abstract
Summary
Summary of the 10-K filed February 24, 2023. Cited figures are marked; the original filing is the authoritative source.
Teledyne Technologies Incorporated (NYSE: TDY) reported fiscal 2022 net sales of $5,458.6 milliona, up 18.3% from $4,614.3 million in 2021, with operating income of $972.0 million versus $624.3 million, and diluted earnings per share of $16.53 compared with $10.05.
The growth was driven largely by the May 2021 acquisition of FLIR Systems, which contributed $593.7 millionb of incremental net sales in 2022, and the Digital Imaging segment, whose net sales rose 28.9% to $3,110.9 million. Net income attributable to Teledyne was $788.6 million, and the effective tax rate was 13.1%, which benefited from $86.7 million of net discrete tax benefits. Cash generation was weaker than earnings.
Net cash provided by operating activities fell to $486.8 millionc from $824.6 million, mainly because of a $296.4 million payment to the Swedish Tax Authority related to a pre-acquisition FLIR tax reassessment, along with higher inventory purchases and income tax payments. Free cash flow was $394.2 million, and adjusted free cash flow, which adds back the Swedish tax payment, was $690.6 million. Total long-term debt including unamortized issuance costs was $3,920.6 million at January 1, 2023, down from $4,099.4 million, and cash and cash equivalents were $638.1 million.
The company does not pay cash dividends and repurchased no shares since 2015. Investors should note the risk factors the filing emphasizes: supply chain constraints and cost inflation, U.S. Government contract dependence (about 25% of 2022 net sales), trade tensions with China, and goodwill of $7,873.0 milliond, which is large relative to total assets of $14,354.0 million. The filing also discloses ongoing FLIR export-control matters for which the company cannot reasonably estimate potential penalties.
02—Key points
Key Highlights
- Net sales rose 18.3% to $5,458.6 million in 2022, with $593.7 million of incremental sales from current and prior-year acquisitions, primarily FLIR.
- Operating income increased 55.7% to $972.0 million; the 2021 comparison included $350.3 million of pretax FLIR-related expenses.
- Diluted EPS was $16.53 in 2022, compared with $10.05 in 2021; net income attributable to Teledyne was $788.6 million.
- Operating cash flow fell to $486.8 million from $824.6 million, largely due to a $296.4 million Swedish tax payment; free cash flow was $394.2 million.
- Digital Imaging was the largest segment at 57% of 2022 net sales, with operating income up 59.5% to $519.3 million.
- Long-term debt declined to $3,920.6 million from $4,099.4 million after $185.0 million of repayments in 2022.
- Approximately 25% of 2022 net sales came from U.S. Government contracts, and approximately 80% of those prime and subcontracts were fixed-price.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Teledyne Technologies kept $0.16.
- Revenue$5.64B100.0%
- Cost of revenue−$3.20B56.7%
- Gross profit$2.44B43.3%
- Operating costs−$1.41B24.9%
- Operating income$1.03B18.4%
- Interest, other & tax−$148.7M2.6%
- Net income$885.7M15.7%
Where FY2023 revenue went
$5.64B- Cost of revenue: $3.20B, 57% of revenue
- Net income: $885.7M, 16% of revenue
- SG&A: $852.0M, 15% of revenue
- R&D: $356.3M, 6.3% of revenue
- Other operating costs: $196.7M, 3.5% of revenue
- Interest, other & tax: $148.7M, 2.6% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 24, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $5.64B$4.61B | +22.1% |
| Cost of Revenue | $3.20B$2.77B | +15.3% |
| Gross Profit | $2.44B$1.84B | +32.5% |
| R&D Expenses | $356.30M— | — |
| SG&A Expenses | $852.00M$1.07B | −20.2% |
| Operating Expenses | $4.60B$3.99B | +15.3% |
| Operating Income | $1.03B$624.30M | +65.7% |
| Interest Expense | $89.30M$90.80M | −1.7% |
| Net Income | $885.70M$445.30M | +98.9% |
| EPS (Basic) | $18.80$10.31 | +82.3% |
| EPS (Diluted) | $18.49$10.05 | +84.0% |
| Shares Outstanding (Basic) | 47.10M43.20M | +9.0% |
| Shares Outstanding (Diluted) | 47.90M44.30M | +8.1% |
05—Questions
Frequently Asked Questions
Why did operating cash flow decline so sharply in 2022?
Net cash provided by operating activities was $486.8 million in 2022 versus $824.6 million in 2021. The filing attributes the decline mainly to a $296.4 million payment to the Swedish Tax Authority in the first quarter of 2022 related to a disputed pre-acquisition 2018 tax reassessment of a FLIR subsidiary, greater inventory purchases to mitigate supply chain constraints, and $128.8 million higher income tax payments, partially offset by higher net income.
How much of Teledyne's revenue depends on the U.S. Government?
Approximately 25% and 26% of total net sales in 2022 and 2021, respectively, were derived from contracts with agencies of, and prime contractors to, the U.S. Government. U.S. Government sales totaled $1,359.9 million in 2022. The Department of Defense accounted for $1,065.1 million of net sales in 2022.
What is the company's capital allocation and dividend policy?
Teledyne intends to use future earnings to fund the development and growth of its businesses, including potential acquisitions, and does not anticipate paying cash dividends in the foreseeable future. It has a stock repurchase program authorized for approximately three million shares, but no repurchases have been made since 2015 and it has no current plans to repurchase stock. Capital expenditures were $92.6 million in 2022, and about $100 million is planned for 2023.
What are the main risks tied to the FLIR acquisition?
The filing discloses that FLIR's historical export control practices are under review. FLIR closed a four-year ITAR Consent Agreement in April 2022 after a final $3.5 million civil penalty installment, and it has made additional voluntary disclosures to U.S. and non-U.S. export authorities, with one second internal audit disclosure still pending. The company states it cannot reasonably estimate the time to resolve these matters or the potential amount of loss, which could be material. Goodwill for the FLIR reporting unit was $5,748.0 million, and the company reported it exceeded its carrying value by approximately 14% in its 2022 quantitative test.
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