Teledyne Technologies Incorporated

Ladies and gentlemen, thank you for standing by, and welcome to the Teledyne Fourth Quarter Earnings Call. At this time, phone lines are in a listen-only mode, and we will have an opportunity for a question-and-answer session. As a reminder, today's conference call is being recorded. If you should require operator assistance, you may press star and then zero. An operator will assist you offline. At this time, I'll turn the conference over to our host, Jason VanWees. Please go ahead.

Thank you, Nick. Good morning, everyone. This is Jason VanWees, Executive Vice President at Teledyne, and I'd like to welcome everyone to Teledyne's fourth quarter and full year 2018 earnings release conference call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian, President and CEO, Al Pacelli, Senior Vice President and CFO, Sue Main, and Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary, Melanie Cibik. After remarks by Robert Allen Su, we will ask for your questions. Of course, before we get started, our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks, and caveats, as noted in the earnings release and our periodic SEC filings, and actual results may differ materially. In order to avoid potential selective disclosures, this call is simultaneously being webcast and a replay, both via webcast and dialing, will be available for approximately one month. Here's Robert.

Thank you, Jason, and good morning, everyone, and thank you for joining our earnings call. I am exceptionally pleased with Teledyne's results. Fourth quarter and full year sales and gap earnings per share were all-time records. In the fourth quarter, sales increased 6.2%, all of which was organic. In addition, each business segment experienced growth in sales and operating profit with the vast majority of our commercial and defense businesses growing nicely. Earnings per share of $2.45 increased 33.2% compared to last year. Gap operating margin was 14.9% and increased 143 basis points from last year. Finally, annual free cash flow of $360.1 million was also a record and allowed us to end 2018 with the lowest leverage ratio in over four years. Before turning the call to Al Paceli, please allow me to digress for one moment. Today, the story of Teledyne is about consistent and continuous improvement in financial performance, continuous improvement in operations, and prudent capital allocation. It is a story about building a portfolio of related companies and related products with common underlying technologies but serving different customers and markets. Markets that are complementary subject to different business cycles and demand drivers. In other words, balanced. Balanced in a way to reduce volatility. For example, within digital imaging, strong sales of x-ray detectors and generators for healthcare applications more than offset some softness of standard products related to industrial machine vision. Within instrumentation, sales of environmental and electronic test and measurement instruments increased year over year, with electronic test and measurement particularly strong. This, again, more than offset a decline in sales of marine instrumentation. However, operating margin in each of those product lines improved. Finally, organic sales growth of defense electronics was 11.9%, which more than offset Some expected declines and very tough comparisons in our commercial aerospace markets. I will now pass the call to Al Pacelli, and he'll comment on the performance of our four business segments.