Teledyne Technologies(TDY) - 2024 Q3 - Quarterly Report

Part I Financial Information Financial Statements Presents unaudited condensed consolidated financial statements for Q3 and nine months ended October 1, 2023, including income, balance, and cash flow statements Condensed Consolidated Statements of Income (Loss) Net sales and net income increased in Q3 2023, with diluted EPS rising to $4.15, while nine-month net income remained flat Consolidated Income Statement Highlights (in millions, except per-share amounts) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,402.5 | $1,363.6 | $4,210.5 | $4,040.4 | | Operating Income | $264.3 | $245.2 | $762.9 | $698.2 | | Net Income Attributable to Teledyne | $198.6 | $178.3 | $562.6 | $562.2 | | Diluted Earnings Per Share | $4.15 | $3.74 | $11.75 | $11.79 | Condensed Consolidated Balance Sheets Total assets slightly decreased to $14.22 billion, while total liabilities and long-term debt significantly reduced, and stockholders' equity increased Consolidated Balance Sheet Highlights (in millions) | Metric | Oct 1, 2023 | Jan 1, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $508.6 | $638.1 | | Total Assets | $14,215.8 | $14,354.0 | | Total Liabilities | $5,489.7 | $6,181.1 | | Long-term debt, net of current portion | $2,794.0 | $3,620.5 | | Total Stockholders' Equity | $8,721.9 | $8,169.2 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $671.7 million, while overall cash and cash equivalents decreased due to investing and financing activities Consolidated Cash Flow Highlights (Nine Months Ended, in millions) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $671.7 | $249.1 | | Net cash used in investing activities | $(127.3) | $(63.9) | | Net cash used in financing activities | $(665.7) | $(115.2) | | Change in cash and cash equivalents | $(129.5) | $4.6 | Notes to Condensed Consolidated Financial Statements Detailed notes cover business acquisitions, segment performance, revenue breakdown, debt reduction, and trade compliance matters - In Q1 2023, the company acquired ChartWorld International Limited for $53.5 million in cash, which is now part of the Digital Imaging segment[24] - As of October 1, 2023, the company had remaining performance obligations of $3,122.5 million, with approximately 80% expected to be recognized as revenue within the next twelve months[40] - Total debt was reduced to $3,244.1 million at October 1, 2023, from $3,920.6 million at the start of the year, following repayments of credit facility borrowings, senior notes, and a term loan[52][132] - The company has made voluntary disclosures to U.S. authorities regarding potential export violations. The potential financial impact is not yet reasonably estimable[72] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2023 performance, highlighting sales growth, segment results, liquidity, and ongoing supply chain challenges - The company's strategy focuses on growth in its four segments through targeted acquisitions and product development, complemented by a focus on operational excellence and cost containment[79] - The company continues to experience supply chain challenges, including long lead times and cost inflation for parts, logistics, and labor, which are expected to persist through Q4 2023 and into 2024[81] - In Q3 2023, the company recorded $5.8 million in FLIR-related integration costs, including employee separation and facility consolidation costs, with an additional $3.0 to $4.0 million expected in the next six months[79][89] Results of Operations Q3 2023 net sales rose 2.9% and net income increased 11.4%, while nine-month sales grew 4.2% with a nearly flat net income Quarterly and Year-to-Date Performance vs. Prior Year | Period | Net Sales Change | Net Income Change | Diluted EPS | | :--- | :--- | :--- | :--- | | Q3 2023 | +2.9% | +11.4% | $4.15 | | Nine Months 2023 | +4.2% | +0.1% | $11.75 | - Cost of sales as a percentage of net sales decreased in both the third quarter (56.8% vs 57.6%) and the first nine months (56.9% vs 57.6%) of 2023 compared to 2022[88][97] Segment Results Q3 2023 saw sales growth in most segments, with Instrumentation leading operating income growth, and all segments showing nine-month sales and operating income increases Q3 2023 vs Q3 2022 Segment Performance (in millions) | Segment | Net Sales | Sales Change | Operating Income | Op. Income Change | | :--- | :--- | :--- | :--- | :--- | | Digital Imaging | $775.8 | (0.3)% | $136.3 | +1.9% | | Instrumentation | $329.1 | +7.4% | $85.5 | +20.3% | | Aerospace and Defense Electronics | $183.3 | +8.1% | $49.4 | +11.5% | | Engineered Systems | $114.3 | +4.1% | $10.9 | (8.4)% | - The Instrumentation segment's growth was driven by a $22.5 million increase in marine instrumentation sales due to the recovery in offshore energy markets[114] - The Engineered Systems segment's operating income declined in Q3 due to a higher mix of lower-margin cost-reimbursable space programs[127] Financial Condition, Liquidity and Capital Resources Strong financial condition with nearly $700 million debt reduction, significant increase in operating cash flow, and sufficient liquidity for future needs - Total debt decreased from $3,920.6 million at the start of 2023 to $3,244.1 million at October 1, 2023[132] - Net cash from operating activities for the first nine months of 2023 was $671.7 million, compared to $249.1 million in the prior year, partly due to deferred U.S. federal tax payments of approximately $139 million into Q4 2023[135] - As of October 1, 2023, $1,130.9 million was available under the company's $1.15 billion credit facility[132] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures previously reported in the 2022 Annual Report on Form 10-K - There were no material changes to the Quantitative and Qualitative Disclosure About Market Risk provided in the company's 2022 Form 10-K[146] Controls and Procedures Management, including CEO and CFO, concluded that disclosure controls and procedures were effective as of October 1, 2023 - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of October 1, 2023[147] Part II Other Information Legal Proceedings Information regarding legal proceedings is detailed in Note 14 of the financial statements under commitments and contingencies - Information regarding legal proceedings is provided in Part I, Item 1, Note 14, under "Commitments and Contingencies"[148] Risk Factors No material changes to risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - There are no material changes to the risk factors previously disclosed in the company's 2022 Form 10-K[148] Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q3 2023 - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended October 1, 2023[149] Exhibits Lists exhibits filed with Form 10-Q, including CEO and CFO certifications and Interactive Data Files (XBRL) - The report includes CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files[150][156]