22 Jul 2020
Robert Mehrabian, Executive Chairman says, "much uncertainty remains in 2020; we do not know the pace of recovery."Teledyne, which has several photonics-intensive divisions, has reported second quarter 2020 net sales of $743.3 million (M), compared with net sales of $782.0 M for the second quarter (Q2) of 2019, a decrease of 4.9%. Net income was $93.7 M for Q2, 2020, compared with $104.6 M for Q2, 2019, a decrease of 10.4%.
The firm’s Q2, 2020 included $8.6 M in severance, facility consolidation and acquisition costs compared with $1.3 M in severance, facility consolidation and acquisition costs for the second quarter of 2019. Q2, 2020 reflected net discrete income tax benefits of $10.4 M compared with net discrete income tax benefits of $4.3 M for the second quarter of 2019.
"Despite record economic contraction and a challenging operating environment for manufacturers, Teledyne performed extremely well in the second quarter," commented Robert Mehrabian, Executive Chairman. “Our decrease in sales was limited to approximately 5% compared with both last year and the first quarter of 2020. However, overall GAAP operating margin increased sequentially 150 basis points even with $8.6 M of pretax charges.
"We have aggressively cut costs to protect profitability in our shorter-cycle business, while at the same time continuing margin improvement actions in our operations with strong backlog. Furthermore, we achieved record cash flow for any second quarter period.
“Much uncertainty remains in 2020, and we do not know the pace of recovery in all of our industrial businesses. Nevertheless, given our strong execution and lower cost structure, as well as our very healthy balance sheet, we are well-positioned to continue compounding earnings and cash flow for quarters and years to come."
Teledyne detailed the performance of each of its divisions, comparing Q2, 2020 with Q2, 2019.
The Instrumentation segment’s sales were $263.1 M, compared with $264.1 M, a decrease of 0.4%. Operating income was $48.5 M, compared with $49.0 M, a decrease of 1.0%.
The Q2, 2020 net sales decrease resulted from lower sales of marine instrumentation and test and measurement instrumentation, mostly offset by higher sales of environmental instrumentation. Sales of environmental instrumentation increased $6.9 M, sales of test and measurement instrumentation decreased $6.4 M and sales of marine instrumentation decreased $1.5 M.
The Digital Imaging segment’s Q2, 2020 net sales were $237.6 M, compared with $248.4 M, a decrease of 4.3%. Operating income was $46.8 M for the second quarter of 2020, compared with $51.6 M, a decrease of 9.3%.
Q2, 2020 net sales primarily reflected lower sales of X-ray products for dental and medical applications and geospatial imaging products, partially offset by greater sales of infrared detectors for defense applications and $3.0 M in incremental sales from a 2019 acquisition.
The Aerospace and Defense Electronics segment’s second quarter 2020 net sales were $143.1 M, compared with $176.0 M, a decrease of 18.7%. Operating income was $17.5 M for the second quarter of 2020, compared with $38.6 M a decrease of 54.7%.
Q2, 2020 net sales reflected $26.9 M of lower sales for aerospace electronics, and lower sales of $6.0 M for defense and space electronics. The continued weakness in the commercial aerospace industry has negatively affected sales of aerospace electronics. Reduced sales of defense and space electronics resulted from the OneWeb program. Operating income in the second quarter of 2020 reflected the impact of lower sales and $4.9 M in higher severance and facility consolidation costs.
The Engineered Systems segment’s Q2, 2020 net sales were $99.5 M compared with $93.5 M, an increase of 6.4%. Operating income was $10.8 M for the second quarter of 2020, compared with $9.0 M, an increase of 20.0%.
Q2, 2020 net sales reflected higher sales of $5.8 M of engineered products and $1.5 M for turbine engines, partially offset by lower sales of $1.3 M of energy systems. The higher sales of engineered products and services primarily reflected increased sales from marine, nuclear and other manufacturing programs, as well as electronic manufacturing services products.
Based on its current outlook, the company’s management stated that third quarter 2020 (GAAP) diluted earnings per share would be in the range of $2.25 to $2.45 and full year 2020 GAAP diluted earnings per share in the range of $9.45 to $10.00. The company’s annual expected tax rate for 2020 is 22.8%, before discrete tax items.
The statement added, "In addition, we currently expect significantly less discrete tax items in 2020 compared with 2019. The estimates for third quarter and full year 2020 GAAP diluted earnings per share exclude any potential charge related to Airbus OneWeb Satellites, LLC, as a result of the March 27, 2020 bankruptcy of OneWeb Global Limited and its subsidiaries."