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Teledyne Technologies Reports First Quarter Results

Teledyne Technologies Incorporated (NYSE:TDY):

  • Orders of $1,433.2 million, an increase of 7.8% compared with last year
  • Sales of $1,350.1 million
  • First quarter GAAP operating margin of 17.4% and record first quarter non-GAAP operating margin of 21.2%
  • GAAP diluted earnings per share of $3.72 and record first quarter non-GAAP diluted earnings per share of $4.55
  • Record first quarter cash from operations of $291.0 million and all-time record free cash flow of $275.1 million
  • Revising full year 2024 GAAP diluted earnings per share outlook to $16.02 to $16.27, compared with the prior outlook of $17.15 to $17.53, and revising full year 2024 non-GAAP earnings per share outlook to $19.25 to $19.45, compared with the prior outlook of $20.35 to $20.68
  • Announced pending acquisition of Adimec Holdings B.V.
  • Recently completed acquisition of Valeport on April 10, 2024
  • Consolidated Leverage Ratio improved to 1.7x
  • Further reduction in gross debt with a $450 million debt maturity payment made after quarter-end on April 1, 2024
  • Planned capital deployment to include stock repurchases of approximately $250.0 to $300.0 million under the company’s new authorization

Teledyne today reported first quarter 2024 net sales of $1,350.1 million, compared with net sales of $1,383.3 million for the first quarter of 2023, a decrease of 2.4%. Net income attributable to Teledyne was $178.5 million ($3.72 diluted earnings per share) for the first quarter of 2024, compared with $178.7 million ($3.73 diluted earnings per share) for the first quarter of 2023, a decrease of 0.1%. The first quarter of 2024 included $49.4 million of pretax acquired intangible asset amortization expense, $2.2 million of pretax FLIR integration costs and $0.3 million of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the first quarter of 2024 was $218.3 million ($4.55 diluted earnings per share). The first quarter of 2023 included $49.7 million of pretax acquired intangible asset amortization expense and $0.3 million of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the first quarter of 2023 was $217.2 million ($4.53 diluted earnings per share). Operating margin was 17.4% for the first quarter of 2024, compared with 17.5% for the first quarter of 2023. Excluding the non-GAAP items discussed above, non-GAAP operating margin for the first quarter of 2024 was 21.2%, compared with 21.1% for the first quarter of 2023.

“We achieved record first quarter non-GAAP operating margin, adjusted earnings per share and free cash flow,” said Robert Mehrabian, Executive Chairman. “While overall orders remained strong, sales were impacted by deterioration in some of our shorter cycle imaging and instrumentation markets. We had previously assumed no full year sales growth in industrial automation as well as test and measurement markets. However, those markets weakened more than planned in the first quarter, and we now forecast full year sales in those product families to decline meaningfully in 2024. Nevertheless, we believe such sales declines will be offset by our marine, aviation and certain defense businesses resulting in flat full year sales compared with 2023. Despite those anticipated sales reductions in what are among our highest margin businesses, we believe overall operating margin will remain flat. For example, driven by organic growth and strong margin improvement at Teledyne FLIR, we were able to protect first quarter operating margin in the Digital Imaging segment despite a significant year-over-year reduction in sales related to industrial automation. Finally, given our even stronger balance sheet and record free cash flow, we believe it is an opportunistic time to add stock repurchases to our capital deployment plans.”

Review of Operations

Comparisons are with the first quarter of 2023, unless noted otherwise.

Digital Imaging

The Digital Imaging segment’s first quarter 2024 net sales were $740.8 million, compared with $772.5 million, a decrease of 4.1%. Operating income was $113.8 million for the first quarter of 2024, compared with $122.2 million, a decrease of 6.9%. The first quarter of 2024 included $2.2 million of pretax FLIR integration costs, and there were no comparable costs in the first quarter of 2023. Acquired intangible amortization expense for both the first quarter of 2024 and 2023 was $45.8 million. Excluding these items, non-GAAP operating income for the first quarter of 2024 was $161.8 million, compared with $168.0 million, a decrease of 3.7%.

The first quarter of 2024 net sales decreased primarily due to lower sales of industrial imaging cameras and micro-electro-mechanical systems (“MEMS”), partially offset by higher sales of infrared detectors and subsystems as well as unmanned systems. The decrease in operating income was primarily due to lower sales and unfavorable product mix.

Instrumentation

The Instrumentation segment’s first quarter 2024 net sales were $330.4 million, compared with $333.5 million, a decrease of 0.9%. Operating income was $86.0 million for the first quarter of 2024, compared with $80.7 million, an increase of 6.6%.

The first quarter of 2024 net sales decrease resulted from a $15.9 million decrease in sales of test and measurement instrumentation as well as a $6.8 million decrease in sales of environmental instrumentation, partially offset by a $19.6 million increase in sales of marine instrumentation. The increase in operating income primarily reflected the impact of higher marine instrumentation sales and improved marine instrumentation product margins.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s first quarter 2024 net sales were $185.7 million, compared with $173.2 million, an increase of 7.2%. Operating income was $51.9 million for the first quarter of 2024, compared with $47.0 million, an increase of 10.4%.

The first quarter of 2024 net sales reflected higher sales of $10.1 million for aerospace electronics and $2.4 million for defense electronics. The increase in operating income primarily reflected the impact of a higher percentage of segment sales being aerospace electronics, which has higher product margins.

Engineered Systems

The Engineered Systems segment’s first quarter 2024 net sales were $93.2 million, compared with $104.1 million, a decrease of 10.5%. Operating income was $2.7 million for the first quarter of 2024, compared with $10.0 million, a decrease of 73.0%.

The first quarter of 2024 net sales reflected lower sales of $10.1 million for engineered products and $0.8 million for energy systems. The lower sales for engineered products primarily reflected decreased sales from defense and maritime programs. The decrease in operating income was primarily driven by program mix and unfavorable estimate changes related to electronic manufacturing services contracts.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $291.0 million for the first quarter of 2024 compared with $203.0 million, with the increase driven by stronger working capital performance in the first quarter of 2024. Depreciation and amortization expense for the first quarter of 2024 was $78.0 million compared with $82.1 million. Stock-based compensation expense for the first quarter of 2024 was $12.0 million compared with $7.9 million, with the increase related to timing of grants, including certain grants that were fully expensed in the first quarter of 2024.

Capital expenditures for the first quarter of 2024 were $15.9 million compared with $24.4 million. Teledyne received $9.1 million from the exercise of stock options in the first quarter of 2024 compared with $10.2 million.

As of March 31, 2024, net debt was $2,333.9 million which is calculated as total debt of $3,246.3 million, net of cash and cash equivalents of $912.4 million. As of December 31, 2023, net debt was $2,596.6 million representing total debt of $3,244.9 million, net of cash and cash equivalents of $648.3 million. Subsequent to the end of the quarter, the Company made a $450 million debt maturity payment.

As of March 31, 2024, $1,128.2 million was available under the $1.15 billion credit facility, after reductions of $21.8 million in outstanding letters of credit.

 

 

First Quarter

Free Cash Flow

 

 

2024

 

 

 

2023

 

Cash provided by operating activities

 

$

291.0

 

 

$

203.0

 

Capital expenditures for property, plant and equipment

 

 

(15.9

)

 

 

(24.4

)

Free cash flow

 

 

275.1

 

 

 

178.6

 

Income Taxes

The effective tax rate for the first quarter of 2024 was 20.6%, compared with 20.1%. The first quarter of 2024 reflected net discrete income tax benefits of $4.4 million compared with $6.6 million. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 22.5% for the first quarter of 2024, compared with 23.0%.

Other

Corporate expense was $20.1 million for the first quarter of 2024 compared with $17.4 million, with the increase driven primarily by higher compensation cost, including higher stock-based compensation expenses. Non-service retirement benefit income was $2.7 million for the first quarter of 2024 compared with $3.3 million. Interest expense, net of interest income, was $12.7 million for the first quarter of 2024 compared with $21.0 million. The decrease was due to reduced outstanding borrowings with lower weighted average interest rates compared to the first quarter of 2023.

Outlook

Based on its current outlook, the company’s management believes that second quarter 2024 GAAP diluted earnings per share will be in the range of $3.57 to $3.70 and full year 2024 GAAP diluted earnings per share will be in the range of $16.02 to $16.27. The company’s management further believes that second quarter 2024 non-GAAP diluted earnings per share will be in the range of $4.40 to $4.50 and full year 2024 non-GAAP diluted earnings per share will be in the range of $19.25 to $19.45. The non-GAAP outlook excludes acquired intangible asset amortization for all acquisitions, further FLIR integration costs and acquisition-related tax matters. The company’s annual expected tax rate for 2024 is 22.5%, before discrete tax items.

Use of Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). We supplement the reporting of our financial results determined under GAAP with certain non-GAAP financial measures. The non-GAAP financial measures presented provides management, financial analysts, and investors with additional useful information in evaluating the performance of the company. The non-GAAP financial measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Further details on reasons that we use non-GAAP financial measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included following our GAAP financial statements.

Forward-Looking Statements Cautionary Notice

This earnings release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, with respect to management’s beliefs about the financial condition, results of operations, acquisitions and product synergies, integration costs, tax matters and businesses of Teledyne in the future. Forward-looking statements involve risks and uncertainties, are based on the current expectations of the management of Teledyne and are subject to uncertainty and changes in circumstances.

The forward-looking statements contained herein may include statements relating to stock-based compensation expense, tax rates, anticipated capital expenditures, stock repurchases, and product developments, and other strategic options. Forward-looking statements generally are accompanied by words such as “projects”, “intends”, “expects”, “anticipates”, “targets”, “estimates”, “will” and words of similar import that convey the uncertainty of future events or outcomes. All statements made in this communication that are not historical in nature should be considered forward-looking. By its nature, forward-looking information is not a guarantee of future performance or results and involves risks and uncertainties because it relates to events and depends on circumstances that will occur in the future.

Actual results could differ materially from these forward-looking statements. Many factors could change anticipated results, including: changes in relevant tax and other laws; foreign currency exchange risks; rising interest rates; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages; higher inflation, including wage competition and higher shipping costs; labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards; disruptions in the global economy; the ongoing conflict in Israel and neighboring regions, including related protests and the disruption to global shipping routes; the ongoing conflict between Russia and Ukraine, including the impact to energy prices and availability, especially in Europe; customer and supplier bankruptcies; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction measures or changes to U.S. and foreign government spending and budget priorities triggered by inflation, rising interest costs, and economic conditions; impacts from the United Kingdom’s exit from the European Union; uncertainties related to the 2024 U.S. Presidential election; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s trade compliance and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and proprietary information, including cybersecurity threats; risks related to artificial intelligence; natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint. Lower oil and natural gas prices, as well as instability in the Middle East or other oil producing regions, and new regulations or restrictions relating to energy production, including those implemented in response to climate change, could further negatively affect our businesses that supply the oil and gas industry. Weakness in the commercial aerospace industry negatively affects the markets of our commercial aviation businesses. Ongoing issues with Boeing’s 737 MAX product line could result in manufacturing delays and lower sales of our products to Boeing. In addition, financial market fluctuations affect the value of the company’s pension assets. Changes in the policies of U.S. and foreign governments, including economic sanctions, could result, over time, in reductions or realignment in defense or other government spending and further changes in programs in which the company participates.

While the company’s growth strategy includes possible acquisitions, we cannot provide any assurance as to when, if or on what terms any acquisitions will be made. Acquisitions involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain key management and customers and achieve identified financial and operating synergies. There are additional risks associated with acquiring, owning and operating businesses internationally, including those arising from U.S. and foreign government policy changes or actions and exchange rate fluctuations.

Additional factors that could cause results to differ materially from those described above can be found in Teledyne’s Annual Report on Form 10-K for the year ended December 31, 2023, as well as subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are on file with the SEC and available in the “Investors” section of Teledyne’s website, teledyne.com, under the heading “Investor Information” and in other documents Teledyne files with the SEC.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. Teledyne assumes no obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

A live webcast of Teledyne’s first quarter earnings conference call will be held at 11:00 a.m. (Eastern) on Wednesday, April 24, 2024. To access the call, go to www.teledyne.com/investors/events-and-presentations approximately ten minutes before the scheduled start time. A replay will also be available for one month starting at 12:00 p.m. (Eastern) on Wednesday, April 24, 2024.

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE FIRST QUARTER ENDED

MARCH 31, 2024 AND APRIL 2, 2023

(Unaudited - in millions, except per share amounts)

 

 

 

First Quarter

 

First Quarter

 

 

 

2024

 

 

 

2023

 

Net sales

 

$

1,350.1

 

 

$

1,383.3

 

Costs and expenses:

 

 

 

 

Costs of sales

 

 

770.2

 

 

 

790.7

 

Selling, general and administrative

 

 

296.2

 

 

 

300.4

 

Acquired intangible asset amortization

 

 

49.4

 

 

 

49.7

 

Total costs and expenses

 

 

1,115.8

 

 

 

1,140.8

 

Operating income (loss)

 

 

234.3

 

 

 

242.5

 

Interest and debt income (expense), net

 

 

(12.7

)

 

 

(21.0

)

Non-service retirement benefit income (expense), net

 

 

2.7

 

 

 

3.3

 

Other income (expense), net

 

 

1.2

 

 

 

(1.1

)

Income (loss) before income taxes

 

 

225.5

 

 

 

223.7

 

Provision (benefit) for income taxes

 

 

46.4

 

 

 

44.9

 

Net income (loss) including noncontrolling interest

 

 

179.1

 

 

 

178.8

 

Less: Net income (loss) attributable to noncontrolling interest

 

 

0.6

 

 

 

0.1

 

Net income (loss) attributable to Teledyne

 

$

178.5

 

 

$

178.7

 

 

 

 

 

 

Diluted earnings per common share

 

$

3.72

 

 

$

3.73

 

 

 

 

 

 

Weighted average diluted common shares outstanding

 

 

48.0

 

 

 

47.9

 

This condensed consolidated financial statement was prepared in accordance with U.S. GAAP.

TELEDYNE TECHNOLOGIES INCORPORATED

SUMMARY OF SEGMENT NET SALES AND OPERATING INCOME

FOR THE FIRST QUARTER ENDED

MARCH 31, 2024 AND APRIL 2, 2023

(Unaudited - $ in millions)

 

 

 

First Quarter

 

First Quarter

 

% Change

 

 

 

2024

 

 

 

2023

 

 

Net sales:

 

 

 

 

 

 

Digital Imaging

 

$

740.8

 

 

$

772.5

 

 

(4.1

)%

Instrumentation

 

 

330.4

 

 

 

333.5

 

 

(0.9

)%

Aerospace and Defense Electronics

 

 

185.7

 

 

 

173.2

 

 

7.2

%

Engineered Systems

 

 

93.2

 

 

 

104.1

 

 

(10.5

)%

Total net sales

 

$

1,350.1

 

 

$

1,383.3

 

 

(2.4

)%

Operating income (loss):

 

 

 

 

 

 

Digital Imaging

 

$

113.8

 

 

$

122.2

 

 

(6.9

)%

Instrumentation

 

 

86.0

 

 

 

80.7

 

 

6.6

%

Aerospace and Defense Electronics

 

 

51.9

 

 

 

47.0

 

 

10.4

%

Engineered Systems

 

 

2.7

 

 

 

10.0

 

 

(73.0

)%

Corporate expense

 

 

(20.1

)

 

 

(17.4

)

 

15.5

%

Operating income (loss)

 

 

234.3

 

 

 

242.5

 

 

(3.4

)%

Interest and debt income (expense), net

 

 

(12.7

)

 

 

(21.0

)

 

(39.5

)%

Non-service retirement benefit income (expense), net

 

 

2.7

 

 

 

3.3

 

 

(18.2

)%

Other income (expense), net

 

 

1.2

 

 

 

(1.1

)

 

*

Income (loss) before income taxes

 

 

225.5

 

 

 

223.7

 

 

0.8

%

Provision (benefit) for income taxes

 

 

46.4

 

 

 

44.9

 

 

3.3

%

Net income (loss) including noncontrolling interest

 

 

179.1

 

 

 

178.8

 

 

0.2

%

Less: Net income (loss) attributable to noncontrolling interest

 

 

0.6

 

 

 

0.1

 

 

*

Net income (loss) attributable to Teledyne

 

$

178.5

 

 

$

178.7

 

 

(0.1

)%

* not meaningful

 

This condensed consolidated financial statement was prepared in accordance with U.S. GAAP.

TELEDYNE TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited – in millions)

 

 

 

March 31, 2024

 

December 31, 2023

ASSETS

 

 

 

 

Cash and cash equivalents

 

$

912.4

 

$

648.3

Accounts receivable and unbilled receivables, net

 

 

1,182.7

 

 

 

1,202.1

 

Inventories, net

 

 

933.2

 

 

 

917.7

 

Prepaid expenses and other current assets

 

 

195.3

 

 

 

213.3

 

Total current assets

 

 

3,223.6

 

 

 

2,981.4

 

Property, plant and equipment, net

 

 

760.0

 

 

 

777.0

 

Goodwill and acquired intangible assets, net

 

 

10,163.1

 

 

 

10,280.9

 

Prepaid pension assets

 

 

207.4

 

 

 

203.3

 

Other assets, net

 

 

285.1

 

 

 

285.3

 

Total assets

 

$

14,639.2

 

 

$

14,527.9

 

LIABILITIES AND EQUITY

 

 

 

 

Accounts payable

 

$

409.0

 

 

$

384.7

 

Accrued liabilities

 

 

767.6

 

 

 

781.3

 

Current portion of long-term debt

 

 

600.2

 

 

 

600.1

 

Total current liabilities

 

 

1,776.8

 

 

 

1,766.1

 

Long-term debt, net of current portion

 

 

2,646.1

 

 

 

2,644.8

 

Other long-term liabilities

 

 

883.1

 

 

 

891.2

 

Total liabilities

 

 

5,306.0

 

 

 

5,302.1

 

Redeemable noncontrolling interest

 

 

5.2

 

 

 

4.6

 

Total stockholders’ equity

 

 

9,328.0

 

 

 

9,221.2

 

Total liabilities and equity

 

$

14,639.2

 

 

$

14,527.9

 

This condensed consolidated financial statement was prepared in accordance with U.S. GAAP.

TELEDYNE TECHNOLOGIES INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

FOR THE FIRST QUARTER ENDED MARCH 31, 2024 AND APRIL 2, 2023

(Unaudited - in millions, except per share amounts)

 

 

First Quarter 2024

 

First Quarter 2023

 

Income

(loss)

before

income

taxes

 

Net (loss)

income

attributable

to Teledyne

 

Diluted

earnings

per

common

share

 

Income

(loss)

before

income

taxes

 

Net (loss)

income

attributable

to Teledyne

 

Diluted

earnings

per

common

share

GAAP

$

225.5

 

$

178.5

 

$

3.72

 

$

223.7

 

$

178.7

 

$

3.73

Adjusted for specified items:

 

 

 

 

 

 

 

 

 

 

 

FLIR integration costs

 

2.2

 

 

 

1.7

 

 

 

0.03

 

 

 

 

 

 

 

 

 

 

Acquired intangible asset amortization

 

49.4

 

 

 

37.8

 

 

 

0.79

 

 

 

49.7

 

 

 

38.2

 

 

 

0.79

 

Acquisition-related tax matters

 

 

 

 

0.3

 

 

 

0.01

 

 

 

 

 

 

0.3

 

 

 

0.01

 

Non-GAAP

$

277.1

 

 

$

218.3

 

 

$

4.55

 

 

$

273.4

 

 

$

217.2

 

 

$

4.53

 

 

 

First Quarter 2024

 

First Quarter 2023

 

 

Operating

income (loss)

 

Operating

margin

 

Operating

income (loss)

 

Operating

margin

GAAP

 

$

234.3

 

17.4

%

 

$

242.5

 

17.5

%

Adjusted for specified items:

 

 

 

 

 

 

 

 

FLIR integration costs

 

 

2.2

 

 

 

 

 

 

 

 

Acquired intangible asset amortization

 

 

49.4

 

 

 

 

 

49.7

 

 

 

Non-GAAP

 

$

285.9

 

 

21.2

%

 

$

292.2

 

 

21.1

%

 

First Quarter 2024

 

GAAP

Operating

Income (loss)

 

Acquired

intangible

asset

amortization

 

FLIR

integration

costs

 

Non-GAAP

Operating

Income (loss)

 

 

 

 

 

 

 

 

Digital Imaging

$

113.8

 

$

45.8

 

$

2.2

 

$

161.8

Instrumentation

 

86.0

 

 

 

3.4

 

 

 

 

 

 

89.4

 

Aerospace and Defense Electronics

 

51.9

 

 

 

0.2

 

 

 

 

 

 

52.1

 

Engineered Systems

 

2.7

 

 

 

 

 

 

 

 

 

2.7

 

Corporate expense

 

(20.1

)

 

 

 

 

 

 

 

 

(20.1

)

Total

$

234.3

 

 

$

49.4

 

 

$

2.2

 

 

$

285.9

 

 

First Quarter 2023

 

GAAP

Operating

Income (loss)

 

Acquired

intangible

asset

amortization

 

FLIR

integration

costs

 

Non-GAAP

Operating

Income (loss)

 

 

 

 

 

 

 

 

Digital Imaging

$

122.2

 

$

45.8

 

$

 

$

168.0

Instrumentation

 

80.7

 

 

 

3.7

 

 

 

 

 

 

84.4

 

Aerospace and Defense Electronics

 

47.0

 

 

 

0.2

 

 

 

 

 

 

47.2

 

Engineered Systems

 

10.0

 

 

 

 

 

 

 

 

 

10.0

 

Corporate expense

 

(17.4

)

 

 

 

 

 

 

 

 

(17.4

)

Total

$

242.5

 

 

$

49.7

 

 

$

 

 

$

292.2

 

 

TELEDYNE TECHNOLOGIES INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited - in millions)

 

 

 

March 31, 2024

 

December 31, 2023

Current portion of long-term debt

 

$

600.2

 

 

$

600.1

 

Long-term debt

 

 

2,646.1

 

 

 

2,644.8

 

Total debt - non-GAAP

 

 

3,246.3

 

 

 

3,244.9

 

Less cash and cash equivalents

 

 

(912.4

)

 

 

(648.3

)

Net debt - non-GAAP

 

$

2,333.9

 

 

$

2,596.6

 

 

 

Second Quarter 2024

 

Twelve Months 2024

 

 

Low

 

High

 

Low

 

High

GAAP Diluted Earnings Per Common Share Outlook

 

$

3.57

 

$

3.70

 

$

16.02

 

$

16.27

Adjusted for specified items:

 

 

 

 

 

 

 

 

FLIR integration costs

 

 

0.02

 

 

 

0.01

 

 

 

0.05

 

 

 

0.04

 

Acquired intangible asset amortization

 

 

0.81

 

 

 

0.79

 

 

 

3.18

 

 

 

3.14

 

Non-GAAP Diluted Earnings Per Common Share Outlook

 

$

4.40

 

 

$

4.50

 

 

$

19.25

 

 

$

19.45

 

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with GAAP. However, management believes that, in order to more fully understand our short-term and long-term financial and operational trends, and to aid in comparability with our competitors, investors and financial analysts may wish to consider the impact of certain items resulting from our acquisitions which have an infrequent or non-recurring impact on operations or assist in understanding our operations pre-acquisition. Accordingly, we present non-GAAP financial measures as a supplement to the financial measures we present in accordance with GAAP. These non-GAAP financial measures provide management, investors and financial analysts with additional means to understand and evaluate the operating results and trends in our ongoing business by adjusting for certain expenses and benefits. Management believes these non-GAAP financial measures also provide additional means of evaluating period-over-period operating performance. In addition, management understands that some investors and financial analysts find this information helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors. The company’s diluted earnings per common share outlook guidance is also presented on a non-GAAP basis.

The non-GAAP financial measures are not meant to be considered superior to, or a substitute for, our financial statements prepared in accordance with GAAP. There are material limitations associated with non-GAAP financial measures because they exclude charges that have an effect on our reported results and, therefore, should not be relied upon as the sole financial measures by which to evaluate our financial results. Management compensates and believes that investors should compensate for these limitations by viewing the non-GAAP financial measures in conjunction with the GAAP financial measures. In addition, the non-GAAP financial measures included in this earnings announcement may be different from, and therefore may not be comparable to, similar measures used by other companies. The non-GAAP financial measures are also used by our management to evaluate our operating performance and benchmark our results against our historical performance and the performance of our peers.

Our non-GAAP measures are as follows:

Non-GAAP income before income taxes, net income and diluted earnings per common share

These non-GAAP measures provided a supplemental view of income before taxes, net income, and diluted earnings per common share. These non-GAAP measures exclude certain FLIR acquisition integration-related costs, acquired intangible asset amortization, the remeasurement of deferred taxes related to acquired intangible assets due to changes in tax laws, and the tax benefits or costs related to the settlement or other resolution of the FLIR tax reserves. We also adjust for any post-acquisition interest on certain income tax reserves related to FLIR. We adjust for any income tax impact related to these items to take into account the tax treatment and related tax rate and changes in tax rates that apply to each adjustment in the applicable tax jurisdiction. Generally, this results in the tax impact at the U.S. marginal tax rate for certain adjustments, including the majority of amortization of intangible assets, whereas the tax impact of other adjustments, including transaction expenses, depend on whether the amounts are deductible in the respective tax jurisdictions and the applicable tax rates in those jurisdictions. We believe these measures provide investors and management with additional means to understand and evaluate the operating results of our business by adjusting for certain expenses and benefits and present an alternative view of our performance compared to prior periods.

Non-GAAP operating income and operating margin

We define non-GAAP operating margin as non-GAAP operating income divided by net sales. These non-GAAP measures exclude certain FLIR acquisition integration-related costs and acquired intangible asset amortization. We believe these measures provide investors and management with additional means to understand and evaluate the operating results of our business by adjusting for certain expenses and other items and present an alternative view of our performance compared to prior periods.

Non-GAAP total debt and net debt

We define non-GAAP total debt as the sum of current portion of long-term debt and other debt and long-term debt. We define net debt as the difference between non-GAAP total debt less cash and cash equivalents. The company believes that this non-GAAP information is useful to assist investors and management in analyzing the company’s liquidity.

Non-GAAP diluted earnings per common share outlook

These non-GAAP measures represent our earnings per common share outlook for the first quarter of 2024 and total year 2024 on a fully diluted basis, excluding certain FLIR integration costs, acquired intangible asset amortization for all acquisitions and acquisition-related tax matters.

Non-GAAP cash provided by operations and free cash flow

We define free cash flow as cash provided by operating activities (a measure prescribed by GAAP) less capital expenditures for property, plant and equipment. We believe that this non-GAAP information is useful to assist management and the investment community in analyzing the company’s ability to generate cash flow.

Non-GAAP line items used in tables

Management excludes the effect of each of the acquisition related items identified below to arrive at the applicable non-GAAP financial measure referenced in the tables for the reasons set forth below with respect to that item:

  • Acquired intangible asset amortization – We believe that excluding the amortization of acquired intangible assets, which primarily represents purchased technology and customer relationships, as well as purchase order and contract backlog, provides an alternative way for investors to compare our operations pre-acquisition to those post-acquisition and to those of our competitors that have pursued internal growth strategies. However, we note that companies that grow internally will incur costs to develop intangible assets that will be expensed in the period incurred, which may make a direct comparison more difficult.
  • FLIR integration costs – Included in our GAAP presentation of cost of sales and selling, general and administrative expenses are expenses (or benefits) incurred in connection with further integration-related costs related to the FLIR acquisition such as facility consolidation costs, facility lease impairments and employee separation costs. We exclude these costs from our non-GAAP measures because we believe it does not reflect our ongoing financial performance.
  • Acquisition-related tax matters – Included in our tax provision is post-acquisition interest on certain income tax reserves related to FLIR, as well as the tax benefits or costs related to the settlement or other resolution of the FLIR tax reserves. We exclude these impacts from our non-GAAP measures because we believe it does not reflect our ongoing financial performance.

 

Contacts

Jason VanWees

(805) 373-4542

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