Teledyne Technologies (TDY) 1 Feb 182017 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] Also as a reminder, today's teleconference is being recorded. turn over we'll Mr. your time, this the to conference host, At VanWees. Jason Please go ahead, sir.

Good This We market and morning Senior Tony. earnings before fourth you, Thank everyone. the year full earnings Strategy welcome to XXXX M&A earlier quarter to morning and Vice conference is and at our like opened. Teledyne, call. I'd release everyone Teledyne's released President, VanWees, Jason this

President President Joining Al and CFO, are me Chairman, CEO, Officer, SVP, Vice Teledyne's Chief Melanie Cibik. and Compliance Pichelli; Mehrabian; Main; Robert After Senior Chief remarks ask will questions. Officer and for we Secretary, Robert Sue Operating Counsel, by today General Sue, your and and

all before our may morning me However, this potential month. have simultaneously release In assumptions, of are and dial-in subject started, and get SEC to our materially. we earnings and in via course Webcast one available the order statements noted actual will is forward-looking call differ caveats various and this and as be avoid made you results for attorneys to being that risks replay disclosures, both approximately periodic reminded to yes, a filings, Webcast tell selective

Here is Robert.

to segment measure thank and and major in record of great the U.S. QX and XXXX organic record despite achieved acquisition a the was our mid continued with product full-year category a high overall cash record year, fourth of growth any acquisition eXv, basis, of to charges and a well you and organic Jason, X%. everyone, operating organic exceptionally Imaging in other We segment growth respectively. business of quarter. Furthermore, growth and sales full each particular, growth successful Teledyne integration our GAAP record to by Record XX% and joining tax Full-year good you, exceeding single-digit $XXX.X the call. morning XX% record achieved was date. eXv flow, businesses organic earnings, X%. nonrecurring sales, On sales in with our with with significant year of our growth XXXX largest Digital record margin, In nearly all earnings Thank Furthermore, perform we quarter. earnings for truly associated and ended a million reform. acquisition over reflected

While end markets significant years gained increased remain XXXX new traction. performance a introductions to execution of were reflected and Also, our more reductions cost leading R&D lean. cooperative, difficult prior product years disciplined in to

quarter. per to XX% total our comment to charges Turning for in back the quarterly quarter last and earnings unique given XXXX increased the do want XX.X% XX.X% of and legislation and points. the earnings the in the in primarily presentation per full first the operating increased expenses, reform fourth year. tax related to of singular Adjusted and the share GAAP margin increased XXXX our and full-year U.S. to year, compared tax results. to I results, fourth U.S. the year, quarter while on fourth charges acquisition reform and share quarter, acquisition, basis briefly related eXv was related XX% the GAAP magnitude for a revenue eXv increased XXX

for do only assets adjusted we provided amortization or compensation. for worth not that as for We such of non-cash nonrecurring items, adjusted it specific noting these charges. never ongoing results two intangible and have we is have these adjusted expenses, While earnings stock-based have

of about the full-year approximately reference, non-cash per million For expense. $XX share was $X.XX alone in amortization XXXX, or

our addition, XXX% XXXX is In outlook GAAP.

declined our year. Segment slightly to sonar of increased, and facility land-based operating our to higher increases our energy sales in primarily marine product consecutive systems, relocation and and X.X%, inventory solutions some underwater to quarter instruments. but vehicles, turning autonomous part from lines. was four business Sales sales in third of This in year-over-year quarter interconnect for line also increased sales product of application. our in margins rationalization segments, XX.X% due marine cable due marine instruments increased a Instrumentation Now segment, fourth profit last of

aggregate reminder, in a these As XXXX energy offshore in given lines product compression in XXXX, industry. declined the significantly the and

Scientific Systems, result instruments. from and of represents growth sales While test In analyzers, and eXv XX.X% and known protocol organically. overall especially fourth the instruments. offshore as The Devices overall trends of including Hanson Sales laboratory Multimedia the measurement energy Research the were increased systems in quarter. as electronic in total High SP continued and HDMI are increased as and acquired XX.X% of XX.X% of domain, well acquisitions as in as life the monitoring reasonably industrial Definition business we Bluetooth increase long-term only or and as current and products about X.X%, Teledyne Interface XXXX, X% well largely about environmental in beyond. SSI, upside Sales of strong and sales industry of sales, and a increased science sale included optimistic organically XXXX

products In was increase addition, electronic for and a to test record. operating continued margin measurement and

to adding life Digital systems. strong the major of our machine quarter. in contributor, revenue sciences The detectors growth approximately basis Teledyne and with businesses, segment across Imaging million increase for vision XX%. margin laser-based for last applications mapping from of with segment, XX.X%, and defense Turning organic eXv points geospatial increased in XXX increased growth year. commercial sales was $XX broad-based GAAP a particularly both the cameras, fourth X-ray quarter sales was organic industrial operating

even majority year XXXX segment year-over-year slightly quarter defense a Operating sales basis from also the sales, comments, programs. margin sales the revenue due solely strong the Aerospace believe outlook. the manufacturing my excluding While want the of for operating tax In across In XXXX last space contribution greater Teledyne Segment from Electronics due tough exceeded but related growth to eXv that reversal by offer greater organic X.X% revenue margin some growth of XXX and year. approximately record. U.S. three a missile microwave eXv quarter's quarters higher increased increased in Defense segment, In in included want of marine that of and will categories. reflected will mix organic revenue Engineered not improved X% concluding to primarily I from fourth sales to fourth Teledyne highest benefit and X.X%. benefited deceleration, on increased reform product X% of favorable the the the businesses, segment, avionics, I was XX.X% to XXXX. interconnect XX.X% defense The due declined to acquisition and underlying driven quarter commercial margins operating and some record the We and margin prior points be devices. four emphasize growth for this that fact costs, greater to product currently next our comparison. full and this in be our perspective but the represent does to rather compared but numbers the organic XXXX Systems

the Digital whole growing eXv and product While of was contributor rate some Teledyne XXXX. grow the margin which lines lower Imaging Teledyne medical the are are collectively defense-related of businesses, than and DALSA strong businesses high the to to very at in likely a

XX% reflects tax lower but also U.S., compensation loss offsets foreign as reduction of on exports, of tax lower that effective in such estimate basis well by also negative to to U.S. tax rate approximately income, U.S. from anticipated XX% total will U.S. some level some XXX as benefit and reform, We the forward. profit unknown by deductions, result XXX discrete federal a points for tax as the compared be rate higher state our potential as and manufacturing items This currently to of favorable the periods. impact related prior state going

I following the X.X now the to company, as has our eXv Teledyne most future. full most growth acquisition. now mix, I'll our Sue. XXXX, rewarding. foreseeable to successful in and business we our nine Furthermore, the solid in reduced due record I months right leverage independent cash its Finally, emphasize the was to an want Also, X.X that financial strength call from flow, and foundation, profitable to XXth year the the personally turn to continue over believe

$X.XX some I the million in $XX.X leases cash and fourth Robert Thank income, in for less by activities full-year billion lower million $XX.X the million $XX to Capital from compared cash fourth quarter of first than the in debt. $X.X million XXXX, with covered Teledyne and debt-to-capital $XX.X operating fourth million with of quarter is the compared of cash reflected impact net ended of quarter Depreciation for you, will provided were additional cash $XX.X of and expense cash the the debt more million same million capital million $XX.X I quarter quarter net compared of $XX.X for of ratio flow, of $XXX.X XXXX. same XXXX. operating activities Robert, in then quarter, our fourth flow flow the same In expenditures, morning capital quarter $XXX.X first for a from higher the is XXXX. of quarter, higher with record eXv compared flow and of discuss discuss financials of to outlook. primarily not for was XX.X%. amortization good to payments. operating and billion fourth The period that XXXX. expenditures We That cash operating doubled Free in tax will less period the approximately million cash from income XXXX and the activities everyone. period the XXXX by was

provisional end to of of $X.X million, per quarter step-up Our compared minor to million the $X.XX leverage Jobs ratio or quarter of we was net year tax part $XX.X X.Xx This the related fourth eXv $X.XX Tax basis, million of tax resulting a deferred Cuts and a at in of was the offset related the Also in favorable pre-tax in and at primarily quarter XXXX. On fourth full Stock XXXX eXv quarter, option recorded resulted to $X.X million. fourth of $XX quarter X.Xc from there items gain was the the XXXX in charge U.S. In adjustment with the million the charges fourth compensation by of approximately fourth other a of of end liabilities reduction a related of share. million, Act. million inventory third share, charges the partially repatriation quarter as or $X.X XXXX. transaction. in expense compared $X.X $XX.X were amortization a a the

management first Robert. to the full tax $X.XX quarter be of lower will per be in currently will per the earnings outlook, to the share share, share GAAP before our XXXX of discrete $X.XX for items, pass earnings XXXX XXXX range year outlook in the XXXX call per expected our now GAAP in the to to and rate back in believes Turning currently periods. is is XX.X% estimated The than $X.XX. I $X.XX full-year is prior to which

much, very you to are now the Thank if please and questions your to ahead. Sue. take questions. We'd answers, go proceed Operator, like with ready you

first Instructions] Konrad go [Operator question ahead. Our from comes Please with Greg Jefferies.

of a bit little wanted a seemed Just there? on about start pieces light, can the talk just quick the Instrumentation about to moving margin, it quarter, maybe in question terms you

Sure. our and the There marine margins still operations. because the consolidate One our test our other In is somewhat we declined parts businesses. and some businesses our are two to of primarily are continuing to electronic that. is marine businesses, and measurement environmental

margins United As our there declined an are and where a from the X.X%. operation an in some That's relocating are as that Florida, the to of to changes example, we that consequence marine we businesses. took, Kingdom

had flipside, of and were the of the margins test points XX measurement margins. Environmental basis had margins Instrumentation On really to good and XX.X% rest XX.X%. up

But of to I lowered two forward, combination again. that behind the the to with margins charges think the us, XX.X%. the will overall increase it's marine the So, going hopefully marine double-digit margins

margins And you you a this on provide Can bit little the outlook color generally an you. just expectations then, for give around us Thank segment. for time XXXX? by

cognizant things, Yes. should that of. There are two we Greg, be

some it's our components will EPS new legacy line. is now What's we healthy, periods our going first change is pension, has hires accounting in split that been a pension restate years. been expense is accounting margin. financial Other and current there operating to above won't cost expect to I done current we which it's below improve closed but first, what that, new XX XXX% at in about over are is pension keep guidance overall XX as issued prior be the our basis move very lower said that The happened the margin and the basis Nevertheless, operating XX in pension benefits. into the in Having income compared that and future to that, operating guidance cause two for to this requires components. it's accounting program charges for would is will for will pension we the going for XXXX comparability. forward, in points service course change will income, One, years. about if points, the XX to were current for next statements, system prior year, of contraction margin the overfunded

noted, improvement However, the because we that we of our just forward. in on restate in all help of margin we I there's three pension XX because think in with any did accounting are all back XXXX effect end for now I year XX% change any stock some have give and system with? you next a Did have not that earnings, That's XXXX, I basis just we'll up can options the issue the but hitting years this we from stock a broader stock from options contraction and options margin comparison. questions taking new margin the accounting, versus going other recognizing the XX.X% point margins year, about will

thing, to size to back just XXXX. I'm charge the of do want the I the walk one trying to what marine? in go just was into

maybe million, $X.X about approximately was little It a more.

should then announcing a last just I since for step-ups of customers think been it tax And indication like towards calls in CapEx companies reform, listening in of in of part mean growth? terms your we one and to line Thanks. directed from me, earnings seems large a type there's one that lot budgets CapEx, business how probably top spending, is about of terms that your of any

I I among think we our did growth. growth are seeing CapEx customers. project CapEx

with capital, cautious year. We have very this been our except generally

have projects capital We in that investments. important three or are invest for very to in, two us

in capacity foundry Bromont, one Canada, right is now. under constraints The is first in our MEMS Canada,

all we not that able We have work to so our are needs. much customer meet of

next So million least year $XX at that and $XX we by more million are expand going between another feet. square to invest facility somewhere and XX,XXX

are dental of businesses, Second, X-rays, in Toronto. for which medical Canada applications, X-ray our again in in do We are capacity-limited. businesses we most CMOS that near detector our in work our and

the Netherlands. have in We also operation another

former It going starved lastly, be operations our lot Philips are to to We take serious over some – been to Europe the our to capital some in facility, to And start then especially a we for facility part bought upgrade expand needs. we'll products. of cleanroom in detectors there where capital capacity of eXv. been has making have also make investments Chanceford making and investments we a of our meet

move the So, $XX $XX about that million, to for us, CapEx these with will which normal approximately we $XX $XX think million are CapEx another to million. our additions million expenditures,

Thank you.

next Company. question Our Jim from & with comes ahead. Needham go Please Ricchiuti

area growth to want you, suggesting? of the it's heard just terms this of sure X%, really that Rob, in you're somewhat what make I organic in is year,

are asking? XXXX, organic you growth XXXX No, which one or year's this –

sorry, I'm XXXX.

am XXXX, don't marine it's would year are everything grow we currently XXXX much. expect see. estimating Partially yes, based because the you that We will grow, on currently, estimating think we are about right. X%. we it to be I

other and over about The our better is that and are side X%. test we Also should X%. than in Imaging, measurements, expecting that Digital environmental do

at looking acquisition at So, now overall another X% moment this growth we we about organic X% Total think are impact. right and X%.

Imaging. difficult you Got up it. have And comparisons with some coming Digital

looks are the think Imaging in part year. the mentioned say experienced the you anticipating year XXXX? the like business. areas in another the industrial Digital that viewing what Digital have the machine you you I'm it So vision wondering DALSA of business of How after going Imaging? for other to you decelerations Are good is outlook

am Jim, fairly Digital about Imaging. I positive

at of we the when Our the year. ended X.XX about book-to-bill all the year end is for of XXXX

about infrared know, estimated I'm of that Imaging, that Digital some So, that right market that in bodes it because as to really well are new the introduced We short Imaging and about area, is conservative. market. lot U.S. say Overall, I'm domain. that Digital products better have The have that we imaging would introducing do of new business of And problem in part based do is positive a very you in we the positive be new It think products being a is I'm then are well going doing we businesses. finally, but government now Thousand imaging we Oaks Camarillo, I infrared grow it where digital some have with here could XX%. are because business. in but we about only products both forward. also very cycle the is

We are located in show reinvest done is margin you which We we business all some in know, new getting traction, the all as there which don't the we've and lab because programs. develop since we in improvements research that traction really acquired XXXX, income good classified XXXX. that our here to products,

all, Imaging comps, be is areas, the in because A&D all it think be So, put in avionics as aftermarket there going will that think where will in we tough we the in you do we well. some to record But section/segment of especially Digital had other it, product. work in

maybe Imaging So, positive conservative. a Digital very little about, I'm

book-to-bill for segments? Robert, it believe the business, Imaging the major was and question for the for you And give the be Company provided alluded able for year, it give would Digital the you for you can I and the book-to-bill us to the to quarter last me, the

try. I'll

I the Company quarter. X it's think for the to for closer

our Systems, it's for X. right is Instrument over whole In little AD&E, being the X.XX. And overall X, quarter the that. T&M year it's with Aerospace but Electronics, Engineered and to marine X.X now it's back being to alone Digital Imaging, environmental Going below a about it's closer and X.XX. for below which X area, Defense about is the

know, that's you As that. business, to lumpy a a longer-term take view of you so got government

overall. So, to are overall if for quarter we X look at close the you

year, X% the X.XX. up, about so it's up are you X.XX. we If we're sorry, look at whole I'm

it. Thank Got you.

in Next go is queue with George CLK. ahead. Please Godfrey

I bit Digital cautious Defense, more you Aerospace the on Robert, that little first say question, segment, hear and in you're a Imaging? did that offsetting optimism

which little systems commercial some Yes, radar with and do part Boeing two has a to to George. our parts defense aircraft. avionics, communication aircraft and acquisitions that, of There's bit. One is

aftermarket. microwave year, even a are domain had say, partially such moving defense We warfare more resolution year cautious investments in problems product positive this great electronic our are continuing the up the sequestration, little because our the that about that portion, or we in flipside, budgets with because in we we the especially a I are have adversaries. should The because the of

expect rest our businesses. uptick an we So, of in the Electronics Defense

two essentially think know, in note satellites the divided are for have, be we XX and we future. or in to we X,XXX you not Defense our the are with all up. so also for XXXX expecting in we going be like signal that's engineering which expect the going forward. There modestly I ship next launch channelizers, launched sometime products would to as be OneWeb. are the systems, do and over should channels, combining do related. to satellite that to into and have there Electronics And which the These relatively it's are permit contract the we products provided together, in we the some So, defense up, if serious new that have we opportunities year that growth be, going

expensive at to relocation. oil where margin XX level XX? to $XXX achievable I be justified there XXXX like anything then that quarter much Thank that to you so or be I'm down understanding back looking level. talked barrel, over example might due or and be a prices looking Instrumentation say not for If you. at how they was the tied much margin you. about that were purchasing that go requires is one-time margins, when when or charges Thank it. at margin just or trying to tied the is perhaps Instrumentation Got how oil some And equipment XX%, this companies $XX can get to it's at is an a very XX of

That's mentioned are, a you marine question. years XX%. good were The about margins

even two recall, XXXX between it you'll $XXX revenue One, was in happened. to million. $XXX And XXXX $XXX As down our XXXX over XXXX We million. things marine finished closer million. and went

serious which we've fairly same is to The of of and oil bought rest primarily on a maintain had But The content have for by our at their platforms, in our our that's reduce in remained significantly from majority contraction. to products commitments time marine to So, offshore be order gas and us contraction price get about but margins business. us. businesses happened to good. to exploration long-term XX%, XX% effective majority, enabled it's the production

– XXX concurrently costs of taken coming course significantly, by to employees. oil with have have of prices the back though to So, cut the out XXX way, we that our almost

trees, go projected Christmas was to XXX ocean. equipment the Christmas the very XXXX XXX in XXXX close to in the from see know, the We a are price, improvements realized. production. bottom to low. offshore oil-head to hit trees. doubled as on which see $XX. signs XXX. to XX oil We you take XX and year almost months become is high XX from three On the They to Brent to go some to year, commitments this XXXX to XXXX anywhere of that of months

Now was the XXX. average remember, the about years before you mentioned XXXX, going back

get traction, reduced think production is $XXX at So, but than going their profitable it's there of to to everybody be and businesses the I has breakeven deepwater I less partially oil for at to think offshore because don't those $XX. has get some cost don't up now just

XX%. Whether were increasing go the where I that between they don't and And question. that your so, but margins are should certainly improves XX, in go to ever hope we'll begin expect while they'll get somewhere for answers know XXXX, on the then. would in now volume what I they was XX%, best above QX, where we

it's or acquisition last be Yes, been it eXv margin Imaging fundamentally changed and segment. in Thank that structure does, Digital Is question proven function can of have just thinking profitable home-run fundamentally is, Robert. their and products then my segments you more just of you being And other the I'm a to to significantly the improve much. into operations, a has just able then IP very been those Teledyne? that you bring

just back, at part. if I great other But a look acquisition, first go it measure when XXXX Let the I we been acquisition had acquired me in our by us. answer large compressed It's any DALSA, relatively margins. for it

eXv hand, about In their lower on Now, has and XXXX this XX%. million. margins. is while we margins other eXv's margins, DALSA DALSA are intangible But enjoyed the year Imaging amortization. has partially this good good it approaching eXv because for overall please have the recall margins amortization $XX that year Digital than for example,

And the overall that consequently, lower DALSA. than So, margin. eXv's are GAAP margins compresses

Going had we improve margin low And grow LeCroy, has you will Having for When we other doubled compressed doubled. what some margins. in think I eXv, margin, we thing LeCroy. of The overall time. those products that, our intangible DALSA than but It eXv question the acquisition. do domains There it our used Imaging. may carryover segments. will of more to forward, of margins with because same if those a also think asked than to with bought the have how margins since compression, a did very have with Digital said I more its

to we across a our what that some the markets to programs. they we'd outstanding had in-roads our defense across some significant we imaging course that we and infrared defense hope and bring devices other and our Between what businesses Teledyne here, we for of Imaging in we inherited and analog-to-digital I is DALSA, First, visible of products. in a cut we'll high-performance certainly defense product we Also, have the Similar here, in and our eXv, conversion practically because are be to have all into and segments. overlap, have, making the large expect to market, think space U.S. access really the of able some astronomy other which introduce between eXv bridge other not has domain businesses. digital-to-analog all own eXv, have

has acquired It the doesn't that have margin. it, it we it DALSA but been double-digit margins that margins even We've margins when it's have of didn't got highly intangibles acquisition. I So, mid But amortization with have DALSA has. a and great the now mentioned. does

Great. Thank you very much, Robert.

a in Ricchiuti the from Company. go have follow-up & queue do Please We ahead. Needham Jim with

I anniversary and I with in year little pipeline like? next the you're opportunities more about Robert, we you the eXv going it of does one look bit this find guess difficult up wonder on Just respect see where general, coming Is next month. could if the acquisitions acquisition environment? what might to a current in talk acquisition Teledyne to valuation

what think two valuation ways. we acquire we it's even extent, a certain little the to of paid in price, but excuse years would a very find a would of lot is problematic I good businesses. over have the If course right and we a not the it's right ago, thing we if pay

different and of in of lot water ranging a acquisition, have now our SSI, products portion monitoring, And air business. pollution and in Obviously very right areas. quality related anything us. focus we attractive air, that. the do to made for two is make we Our in environmental monitoring, mid-year more be particulates in Instrumentation small a and from that is the to one We would domain there, Imaging of this bit would we like Digital other year,

money, to resources So, we X have we The we the the expect we needle, have X.X, financial we will eXv. when moved about we prefer it so it debt-to-EBITDA acquired if I significantly acquisitions. course make was ratio but now was of said, our larger as the – size some right is

we cash If even significantly the generate Our $X over this million, was we that which was debt net is about year. billion. this did year, down $XXX

We should from million that million have million. about XXX capacity buy go to $XXX year-end right things now up and XXX another by by anywhere to

buy Digital if we'll the find Imaging preferences. of terms products, So, environmental we right things first, can being second our in being

luck. Thank you. Okay. Good

this Please the in Thank At continue. time, additional no questions queue. you. there's

I'll to now Thank call you, Jason please. conclude ask operator. conference our

us joining for this morning. everyone thanks again, and Robert, Thanks,

at our course conclude and If you please the free you we'd available of earnings you. news call the release Web-site. number on on please to me do have conference appreciate feel could it. and the call releases Tony, provide if Thank for questions, are audience, details the all follow-up the our replay

and Thank for through AM available this XX replay conference after Pacific you. ladies will Time at X be March running And today, midnight. gentlemen,

the using phone XXX-XXX-XXXX. conclude dial service for by thank of access may access do those entering call AT&T and AT&T and participation your any TeleConference. your does today. the Once XXX-XXX-XXXX, numbers access time at International Executive code using We dialing You of are again, XXXXXX. you may code That Executive XXX-XXX-XXXX XXXXXX. for conference the and for playback XXX-XXX-XXXX participants

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