Teledyne Technologies Incorporated

Ladies and gentlemen, thank you for standing by. Welcome to the Teledyne fourth quarter earnings release conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. If you should require assistance during the call, please press star, then zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jason VanWees. Please go ahead.

Thank you. Good morning, everyone. This is Jason VanWees, Executive Vice President, and I want to welcome everyone to Teledyne's fourth quarter and full year 2019 earnings release conference call. We released our earnings earlier this morning for the market open. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian, President and CEO, Al Pacelli, Senior Vice President and CFO, Sue Main, and SVP General Counsel, Chief Compliance Officer and Secretary, Melanie Cibik. After remarks by Robert, Alan, and Sue, we will ask for questions. Of course, though, before we get started, our attorneys have reminded me to tell you that all four of the statements made this morning are subject to various risks and caveats as noted in the earnings release and our periodic SEC filings. And in order to avoid potential selective disclosures, this call is simultaneously being webcast and a replay both via webcast and dial-in 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. For the second consecutive quarter, we achieved all-time record sales, earnings per share and free cash flow. Likewise, full year 2019 was by any measure a record year. Each of sales, earnings, gap operating margin and free cash flow were all-time records. Fourth quarter and full year sales increased 11.5% and 9% respectively. Organic growth for both periods also exceeded 4%, including some modest currency headwinds, about 0.6% in Q4 and about 1% headwind for the full year 2019. In addition, for both the fourth quarter and full year, Gap operating margin expanded just under 120 basis points. Fourth quarter earnings were $3.06, exceeding $3 per share for the first time, an increase of 24.9% compared to last year. While we've increased our emphasis on margin improvement, we are continuing our proven strategy of disciplined Capsule Deployment for Compound Growth in Earnings and Cash Flow. In 2019, we deployed $484 million on complementary acquisitions, and earlier this month, we announced the acquisition of OakGate Technology, a software and hardware company focused on the test, validation, and operating performance of solid-state electronic storage media. This is our third bolt-on acquisition for Teledyne LaCroix and allows Teledyne to provide a complete set of protocol analysis software and hardware used from the design of new data storage devices to the use of search devices in hyperscale cloud storage networks. Teledyne continues to benefit from our balanced portfolio of common technologies serving different complementary markets. We begin 2020 with growth in our defense businesses expected to offset declines in sales of OEM avionics. Marine instrumentation continues to recover with growing sales but also with orders having exceeded sales for the sixth consecutive quarter. In digital imaging, we expect to see continual strength in certain high growth markets like microelectromechanical system or MEMS and a modest recovery in certain commercial machine vision markets such as the semiconductor industry. Given the short cycle nature of our environmental and electronic test and measurement instrumentation businesses, at this point, we're only projecting low single-digit GDP-like organic growth. Finally, our balance sheet remains exceptionally strong with a quarter-end leverage ratio of 1.4x, and we're continuing to pursue acquisition opportunities. Before turning the call to Al, I want to emphasize that all of our financial results this morning are reported on a GAAP basis with no adjustments for amortization, stock compensation, acquisition charges, purchase accounting, restructuring or other charges. I will now I will now comment on the performance of our four business segments.