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Teledyne Technologies Reports Fourth Quarter Results

The 2012 sales decrease reflected lower sales of $2.5 million for electronic manufacturing service products partially offset by higher sales of $0.7 million from avionics products and electronic relays, as well as greater sales of $1.5 million from microwave devices and interconnects, which included $4.7 million in revenue from the February 2012 acquisition of VariSystems Inc. Operating profit in 2012 reflected reduced margins, as well as $1.7 million of severance and relocation costs, within certain electronic manufacturing service businesses.

Engineered Systems

The Engineered Systems segment’s fourth quarter 2012 sales were $69.3 million, compared with $70.0 million, a decrease of 1.0%. Operating profit was $6.6 million for the fourth quarter 2012, compared with operating profit of $6.5 million, an increase of 1.5%.

The fourth quarter 2012 sales decrease reflected lower sales of $1.3 million from energy systems, mostly offset by higher sales for engineered products and services. Operating profit in the fourth quarter of 2012 increased slightly and reflected higher margins for energy systems.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $121.9 million for the fourth quarter of 2012, compared with $79.8 million. The higher cash provided by operating activities in the fourth quarter of 2012 reflected the impact of higher net income and lower income tax payments. Free cash flow (cash provided by operating activities less capital expenditures) was $99.6 million for the fourth quarter of 2012, compared with $65.7 million and reflected higher cash provided by operating activities, which reflected the impact of higher net income and lower income tax payments, partially offset by higher capital expenditures. At December 30, 2012, total debt was $558.2 million, which included $250.0 million in senior notes, $79.1 million drawn on the $550.0 million credit facility, $200.0 million in term loans, $14.8 million in other debt and $14.3 million in capital lease obligations. On October 22, 2012, Teledyne entered into $200.0 million of term loans with a maturity date of October 22, 2015. The proceeds were applied against our credit facility. In the first quarter of 2013, the company made an $83.0 million pretax cash contribution to its domestic pension plan. Cash and cash equivalents were $45.8 million at December 30, 2012. The company received $7.7 million from the exercise of employee stock options in the fourth quarter of 2012, compared with $3.9 million. Capital expenditures for the fourth quarter of 2012 were $22.3 million, compared with $14.1 million. Depreciation and amortization expense for the fourth quarter of 2012 was $21.9 million, compared with $16.8 million.
               
Free Cash Flow(a) Fourth Fourth Total Total
Quarter Quarter Year Year
(in millions, brackets indicate use of funds) 2012 2011 2012 2011
 
Cash provided by operating activities from continuing operations $ 121.9 $ 79.8 $ 189.5 $ 219.5
Capital expenditures for property, plant and equipment   (22.3 )   (14.1 )   (65.3 )   (41.7 )
Free cash flow 99.6 65.7 124.2 177.8
Pension contributions, net of tax (b)           60.3     44.0  
Adjusted free cash flow $ 99.6   $ 65.7   $ 184.5   $ 221.8  
(a)     The company defines free cash flow as cash provided by operating activities from continuing operations (a measure prescribed by generally accepted accounting principles) less capital expenditures for property, plant and equipment. Adjusted free cash flow eliminates the impact of pension contributions on a net of tax basis. The company believes that this supplemental non-GAAP information is useful to assist management and the investment community in analyzing the company’s ability to generate cash flow, including the impact of voluntary and required pension contributions.
(b) The domestic pension cash contributions were voluntary.
 

Pension

Pension expense was $1.6 million for the fourth quarter of 2012 compared with $1.5 million. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $3.7 million for the fourth quarter of 2012 compared with $3.7 million.

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