THOUSAND OAKS Jul 30, 2015 (Thomson StreetEvents) -- Edited Transcript of Teledyne Technologies Inc earnings conference call or presentation Thursday, July 30, 2015 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Jason VanWees Teledyne Technologies Incorporated - SVP, Strategy and Mergers & Acquisitions * Robert Mehrabian Teledyne Technologies Incorporated - Chairman, President and CEO * Sue Main Teledyne Technologies Incorporated - SVP and CFO ================================================================================ Conference Call Participants ================================================================================ * Greg Konrad Jefferies LLC - Analyst * Jim Ricchiuti Needham & Company - Analyst * Michael Ciarmoli KeyBanc Capital Markets - Analyst * Mark Jordan Noble Financial Group - Analyst * George Godfrey C.L. King & Associates - Analyst * Steve Levenson Stifel Nicolaus & Company - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the Teledyne second-quarter earnings conference call. (Operator Instructions) Also as a reminder, today's teleconference is being recorded. And at this time I'll turn the conference call over to your host, Mr. Jason VanWees. Please go ahead, sir. -------------------------------------------------------------------------------- Jason VanWees, Teledyne Technologies Incorporated - SVP, Strategy and Mergers & Acquisitions [2] -------------------------------------------------------------------------------- Thank you. Good morning, everyone. This is Jason VanWees, Senior Vice President Strategy and M&A at Teledyne. And I'd like to welcome everyone to Teledyne's second-quarter earnings release conference call. We released our earnings earlier this morning before the market opened. Joining us this morning are Teledyne's Chairman, President and CEO Robert Mehrabian; Senior Vice President and CFO Sue Main; and Senior Vice President, General Counsel and Secretary Melanie Cibik. After remarks by Robert and Sue, we will ask for your questions. However, before we get started, our attorneys have reminded me to tell you that 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 of course 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 dial-in will be available for approximately one month. Here is Robert. -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [3] -------------------------------------------------------------------------------- Thank you, Jason, and good morning, everyone. Following the first quarter of 2015, I mentioned that we are confident that Teledyne would achieve sequential improvements in earnings. In the second quarter, earnings per share increased 12% sequentially and revenue increased in all of our four business segments even with greater currency headwind. GAAP earnings per share of $1.34 decreased from last year's $1.47. However, I should note that greater non-operating legal settlements received last year versus this year accounted for $5.3 million or $0.10 per share of year-over-year variance. Second-quarter sales were $577.7 million and reflected the strong US dollar and negative currency translation as well as expected declines in certain energy-related markets. While these impacts were most concentrated in our instrumentation segment, this segment's operating profit increased and segment operating margin increased 101 basis points compared to last year due to strong operating discipline. I want to emphasize that while oil exploration related revenue declined year over year as expected, our businesses related to offshore energy production increased and reported new record sales. Backlog also remained relatively healthy with overall book to bill of approximately 0.9 across all of our marine instrumentation products. We continue to benefit from our balanced business portfolio, not just in our instrumentation segment but across Teledyne due to the strength and diversity of our highly engineered products. While sales to some commercial markets declined, total government -- US government sales increased in the quarter. More broadly, after two years of contraction following the sequestration process and budget cuts, we believe we've reached an inflection point in our government businesses which represent approximately 25% of total sales. In the second quarter, our defense electronics businesses had the highest orders in two years with strength in all major product categories. So despite lower sales in the first half, we expect growth in the second half. Furthermore, our engineered system segment is growing. And while there are more difficult comparisons in the second half, we expect to grow year over year even though we expect full-year revenue this year from one of our flagship programs, the Shallow Water Combat Submersible vehicle, to decrease slightly as we transition from engineering development to production in 2016. Foreign currency translation primarily impacted our instrumentation and digital imaging segments, but acquisitions helped mitigate these declines. Sales to international customers primarily decreased due to currency translation. Specifically, while sales to Europe held up well despite currency, we did note a decline in sales to Asia and South America across a number of our product lines. Finally, we remain nimble, aggressively managing our cost structure and deploying capital judiciously. For example, we have reduced total headcount by 4.3% in the first half of 2015 in response to declines in some markets. At the same time, we've completed approximately $200 million worth of acquisitions and share repurchases year to date, and our acquisition pipeline remains robust. I will now comment on our business segments, after which our CFO, Sue Main, will review some of the financials in more detail and provide an earnings outlook for the third-quarter and full-year 2015. Turning to the instrumentation segment, second-quarter sales decreased 1.9% from last year. Sales of marine instrumentation increased 1% despite a significant expected year-over-year decline in sales of new geophysical sensors used for offshore energy exploration and the negative impact of foreign currency which particularly impacted this group of businesses. As I mentioned previously, sales to the offshore energy production industry remain very strong, and reasonable orders continued resulting stable backlog in businesses primarily serving this market. In the environmental domain, sales decreased 2.4% and reflected decreased sales of laboratory and fielding instrumentation offset by sales of air monitoring and process gas analyzers. Sales in electronic test and measurement systems declined, with roughly half of the decline due to foreign currency translation. GAAP operating profit increased in the segment, and operating margin, as I mentioned, improved 101 basis points despite lower sales due to improved operating performance and strong cost control across each major product category. Turning to the digital imaging segment, second-quarter sales decreased 12.4% compared to last year primarily due to lower sales from government, US government, research and develop contracts and reduced sales of specialty cameras for semiconductor and electronic inspection. These were partially offset by increased sales of machine vision cameras for general industrial applications and x-ray sensors for medical imaging. As in the first quarter, the year-over-year decline in government research was largely caused by gaps in a number of government programs. That said, we believe we've hit the bottom of the trough. As an example, the U.S. Air Force made a notification on June 25 on its intent to award Teledyne a sole-source contract valued at approximately $30 million for additional air crew laser eye protection spectacles. The prior phase of this program had ended in 2014, and we will be glad to resume full production later this year. Segment operating margin decreased and was 159 basis points lower than last year. Turning to aerospace and the defense electronics segment, second-quarter sales decreased 3.4% while U.S. government sales declined. Our commercial avionics business continued to perform very well. Operating profit declined due to lower sales and lower margins in a number of defense electronic businesses. However, due to cost reduction efforts and strong bookings, we expect continued sequential improvement in both sales and margins in this segment in the balance of the year. Turning to the engineered systems segment, second-quarter revenue increased 6.2% but operating profit decreased. Sales benefited from a greater mix of marine and space manufacturing programs as well as higher sales of energy system products such as commercial hydrogen generators. However, lower sales of fixed-price turbine engines and pension expense impacted margins. We also continue to invest in the development of a commercial space-based imaging business based on our multi-user system for Earth sensing, or also known as MUSES Earth observation platform. We currently expect MUSES to be operational on the International Space Station in 2016, with hyperspectral imagery beginning in 2017. And we were recently awarded a $15 million advanced data purchase contract by NASA, which will result in some near-term cash flow as well as future revenue once our space-based images become available. In summary, when we are faced with events that we cannot control like government sequestration, currency headwinds, lower oil prices or weakness in certain economies, we immediately reduce variable costs to get ahead of the curve and we also permanently reduce fixed costs wherever necessary. Since 2012 and the sequestration challenges, we have continuously reduced costs through consolidation and operational discipline. For example, we have reduced our manufacturing footprint by 7% and our work force by approximately 1,500, or over 15%, at a total cost to Teledyne of almost $30 million. Prior to this year, most of the permanent reductions in our cost structure were made within our government businesses. Now that we see this cycle improving, we expect additional margin improvement beyond that achieved over the last two years. Our response to the current market challenges is consistent with the past, but with the majority of 2015 cost actions centered in our instrumentation segment. As in all cases, we have refrained from the temptation to march down the slippery slope of non-GAAP so-called one-time accounting in vogue today. At the same time, we are offering new products to R&D and expanding our markets through acquisitions outside the United States, where we can use the strong dollars to our advantage. Finally, we have the necessary discipline, the unique technologies, the manufacturing know-how, a good cash flow and a strong balance sheet to deliver outstanding GAAP earnings now and maintain our lower cost structure during future growth. I will now turn the call over to Sue Main. -------------------------------------------------------------------------------- Sue Main, Teledyne Technologies Incorporated - SVP and CFO [4] -------------------------------------------------------------------------------- Thank you, Robert, and good morning, everyone. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third-quarter and full-year 2015 outlook. In the second quarter, cash flow from operating activities where $59 million compared to cash flow of $95 million for the same period of 2014. The lower cash provided by operating activities in the second quarter of 2015 primarily reflected lower net income of $5.8 million in expected change and controlled severance payments and higher income tax payments. Free cash flow -- that is, cash from operating activities less capital expenditures -- was $45.4 million in the second quarter of 2015 compared with $86.1 million in the same period in 2014. Capital expenditures were $13.6 million in the second quarter compared to $8.9 million for the same period of 2014. Depreciation and amortization expense was $22.8 million in the second quarter compared to $23.4 million for the same period in 2014. We ended the quarter with $704 million of net debt; that is, $765.3 million of debt and capital leases less cash of $61.3 million, or a net debt to capital ratio of 33.5%. Turning to our pension and stock compensation expense. In the second quarter of 2015, gross GAAP pension expense was $1.1 million compared to gross pension income of $0.4 million in the same period of 2014. Stock-option compensation expense was $3.3 million in the second quarter of 2015 compared with $3.6 million in the second quarter of 2014. Finally, turning to our outlook, management currently believes that GAAP earnings per share in the third quarter of 2015 will be in the range of $1.45 to $1.48 per share. We are maintaining full-year 2015 earnings per share of approximately $5.60 to $5.65. The 2015 full-year effective tax rate excluding discrete items is expected to be 29.5%. I do want to emphasize a few items regarding our 2015 outlook compared to 2014. First, our pension assumptions include a discount rate decrease of 90 basis points and changes in mortality assumptions which will increase non-cash pension expense in 2015. Second, 2014 results benefited from greater net legal settlements, significant discrete tax items and the 2014 R&D tax credit which is not currently effective for 2015, as well as a slightly lower tax rate. While our current 2015 outlook includes some estimated discrete tax items in the third quarter, we expect these to be partially offset by additional reduction in force and facility relocation costs. I will now pass the call back to Bob. -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [5] -------------------------------------------------------------------------------- Thank you, Sue. We would now like to take your questions. Operator, if you're ready to proceed with questions and answers, please go ahead. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Greg Konrad, Jefferies. -------------------------------------------------------------------------------- Greg Konrad, Jefferies LLC - Analyst [2] -------------------------------------------------------------------------------- Just looking at the outlook, just by my calculation, it looks like you had about a 150-basis-point margin improvement in the second half of the year relative to the first. And you kind of went over some of the moving pieces. I was hoping you could just give a little bit more of an outlook and where some of those improvements come from. -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [3] -------------------------------------------------------------------------------- I think you're essentially correct maybe that some of that -- the big chunk of that is going to come in our aerospace and defense electronics. As I've indicated, we have significant improvements in our defense electronics orders. And we expect that those -- and with the concurrent cost reductions that we did in the past few years to enable us to improve margins. The second segment that I think margin improvement would be effective is -- affected would be in our digital imaging. We are right now in the process of decreasing further cost reductions in that segment and we expect sequential margin improvements as we go through the rest of the year. So I would emphasize those are the two primary segments that we expect the margin improvement. -------------------------------------------------------------------------------- Greg Konrad, Jefferies LLC - Analyst [4] -------------------------------------------------------------------------------- Thank you. And just on the turbine engines, was there a contract that rolled off or is that just a temporary alignment in shipments? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [5] -------------------------------------------------------------------------------- It's primarily the same contract; they go in lots. And it depends on whether the customer has the need for the engines and whether the final customer, which is the government, is pulling the missiles up. It's a gap in -- not a huge gap, but it's nevertheless a slowdown in our shipments. We ship both JASM engines, which are joint air-to-surface missile engines, and we also ship harpoon engines that primarily now go to foreign military sales. And both of those have some gaps. We think that's also going to be weaker in Q3 and perhaps improve next year. -------------------------------------------------------------------------------- Greg Konrad, Jefferies LLC - Analyst [6] -------------------------------------------------------------------------------- Thanks. And then just last, in terms of -- you mentioned the restructuring and the headcount reductions. What was the cost in the quarter and the full year? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [7] -------------------------------------------------------------------------------- In the full year to date, the cost is approximately $3 million. We think he will go up probably to over $5 million the rest of the year, for the full year, because we are still doing restructuring, as I mentioned, in two of our segments, both instruments and digital imaging. Last year the cost reduction was about the same. This is just for the reduction in people. And so I think the facility consolidation is in addition to that. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Jim Ricchiuti, Needham and Company. -------------------------------------------------------------------------------- Jim Ricchiuti, Needham & Company - Analyst [9] -------------------------------------------------------------------------------- You gave some color on how we should think about growth in the defense portion of the business, the aerospace and defense portion. And I think also you are expecting, I guess, some modest growth in engineered systems if I heard you correctly. A wonder if you could talk a little bit about how we might think about the instrumentation and digital imaging businesses in the second half. -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [10] -------------------------------------------------------------------------------- I've got a look at the second-half numbers. Let me start with the full year for a second if I may, Jim. I think for the full year right now we expect instrumentation to be down about 1%. I think digital imaging would follow between 1% to 1.2%. I think aerospace and defense electronics should be up about 1% and perhaps engineered systems by about a couple of percent for the year. So in total, I think if you look at our sales outlook organically at least, we should be relatively flat for the year. -------------------------------------------------------------------------------- Jim Ricchiuti, Needham & Company - Analyst [11] -------------------------------------------------------------------------------- Got it. That's helpful, Robert. You mentioned the decline in the electronic instrumentation business. How much was the LeCroy business down? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [12] -------------------------------------------------------------------------------- It was down just over 10%. Half of it is currency, strictly currency related, and half of it is just a sales decline. And we think that we're going to see pressure in that domain anyways as we go forward. I think some of our competitors that we know, one of them that we are aware of has projected a 13.5% decline in their revenue in Q3. The more important part is that we are focusing on the higher-margin niche products there, and we've improved the bottom line by about 7% in our test and measurement, or 180 basis points up from last year. By the way, Jim, just an addendum, it might be worth noting the same has happened in our digital imaging in Canada also. We've seen strong bottom-line improvements and expect those to continue. -------------------------------------------------------------------------------- Jim Ricchiuti, Needham & Company - Analyst [13] -------------------------------------------------------------------------------- Got it. And lastly, Robert, if you could to the extent you're able to, you mentioned a fairly robust pipeline. Is there any sense as to areas that you might be more focused on? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [14] -------------------------------------------------------------------------------- Yes, Jim. One area that we are keen on is being able to take a lot of data from our marine instrumentation and related businesses and develop that into a set of data and imagery that would be available in the marketplace. And this would be primarily non oil and gas related. The other area that we like is we're kind of going back to some of our environmental businesses and looking at those businesses again. We started -- really, we started our acquisitions very aggressively in that domain but then they got very, very expensive. But now, I think some of that has moderated, especially in the smaller companies that we are interested in. So we're going to go back to those and we see some opportunities there, Jim. -------------------------------------------------------------------------------- Jim Ricchiuti, Needham & Company - Analyst [15] -------------------------------------------------------------------------------- Okay. Thanks very much. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Michael Ciarmoli, KeyBanc capital markets. -------------------------------------------------------------------------------- Michael Ciarmoli, KeyBanc Capital Markets - Analyst [17] -------------------------------------------------------------------------------- Robert, just maybe to stay on that theme in the second half, so it sounds like you have got better visibility into the defense electronics side, but operating income roughly flat first quarter, second quarter. There's a pretty big jump needed to get to that full-year EPS number. I think you're going to have EPS grow 22% over the first half. Are there any other one-time items, lower tax or anything else, that you see adding to that? Any other end markets that you see strengthen that might offset some of the weakening markets that we are seeing? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [18] -------------------------------------------------------------------------------- I think we're going to have a little bit of ups in discrete tax items this year, the second half. Nothing like we did last year except if the R&D tax passes. But we will not take that into our projection. But we do have a little discrete tax there. But mostly it's margin improvement in areas where we've taken serious costs out. Some that we took out last two years like defense electronics, some that we took out the first half of the year, and some that we are doing even now and expect to continue the rest of the year. So it's a combination. Mostly it's because of market and cost reductions. -------------------------------------------------------------------------------- Michael Ciarmoli, KeyBanc Capital Markets - Analyst [19] -------------------------------------------------------------------------------- Got it. And then just lastly on that, you guys sound really confident in that defense electronics and seeing maybe a trough in that market in general. Is there any risk at all around kind of the budget being delayed going into a continuing resolution? It seems like you guys have pretty good line of sight into those revenue streams. -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [20] -------------------------------------------------------------------------------- Yes, there's always the danger with anything that relates to the government. Having said that, some of our orders that we have -- for example, in traveling-wave tubes, which is one of our mainstay products -- our split between the US government and overseas government. And our commercial aviation, of course, is a different story. But I think some of our programs have legs on them and we feel okay about that. The government -- obviously anything can happen in the government. There's another part of our government business that we are kind of bullish about, maybe not so much this year but going forward, and that's in our engineered systems where we have some really good programs in the government domain. -------------------------------------------------------------------------------- Michael Ciarmoli, KeyBanc Capital Markets - Analyst [21] -------------------------------------------------------------------------------- Got it. Thank you very much, guys. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- Mark Jordan, Noble Financial. -------------------------------------------------------------------------------- Mark Jordan, Noble Financial Group - Analyst [23] -------------------------------------------------------------------------------- A question relative to the oil industry. Obviously the exploration segment of the industry is immediately impacted by a precipitous decline in oil prices whereby the development work is more longer-term in nature. What visibility do you have as how -- when does the lower energy prices potentially impact your development spending? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [24] -------------------------------------------------------------------------------- That's a great question, Mark. As you said, the seismic, which is the discovery, is down, I'm going to say, over 30%. And the other part of it is land, oil and gas that we play in, which is production, is down over 40%. But there, we primarily supply cables and some connectors. In the deep -- in the water and also just energy in general, first, we had good orders early this year. So we expect to be able to hold our own the remainder of this year. We think the production may go down a little more than it already has, but we are in a way very fortunate that we are gaining share. We've very aggressively reduced our costs in oil production, both in terms of supply chain and in terms of our own engineering and production costs. And lastly, we are bringing new products both in the optical connectors, Internet connectivity, as well as high-pressure, high-temperature connectors. And since we own a lot of that market, especially the optical connectivity market, and have a pretty strong position, probably over 50% in the electrical. Everybody to reduce cost, the oil companies are striving for standardization, and we're hoping that we will become the de facto standard in that domain. And then we also -- as processing at the bottom of the ocean becomes much more robust they need more of our products there. So it's a long way of saying I think we will be okay in 2015. In 2016, probably we might go down a little bit. Everybody's projecting that 2017 oil prices will pick up, as will production. But we're not counting on that. Right now, we're reducing cost and hunkering down. -------------------------------------------------------------------------------- Mark Jordan, Noble Financial Group - Analyst [25] -------------------------------------------------------------------------------- Okay. Could you have any comments as to what your customers are saying in the semiconductor and electronics marketplace? Everything I have read over the last couple months is that there's been under-performance. These are the expectations in the first half. Any sense of what your customer base is looking for in the second half? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [26] -------------------------------------------------------------------------------- I -- at least for us, where we look at our -- for example, our DALSA cameras that serve that market, we had a slow first half in the electronic inspection market. We expect to have some pickup in that domain because primarily because we have introduced new line scan products which are coming out. We don't -- the only other part of semiconductor -- so called semiconductor market that we participate in, Mark, is really our mems foundries in Bromont, Canada. And there, our business is really good because we produce a lot of sensors for a variety of applications including stability applications, microphones in your iPads, et cetera, et cetera. So as far as we're concerned, we are doing okay there. Also, we do have some protocol test solutions for mobile devices which are doing okay. So my visibility to the semiconductor market comes from those two different angles. -------------------------------------------------------------------------------- Mark Jordan, Noble Financial Group - Analyst [27] -------------------------------------------------------------------------------- Okay. Thank you very much. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- George Godfrey, CL King. -------------------------------------------------------------------------------- George Godfrey, C.L. King & Associates - Analyst [29] -------------------------------------------------------------------------------- First question, just thinking about the instrumentation business as we look towards 2016. If I look at 2013, the average quarterly run rate was about $255 million. In Q1 of 2014, the instrumentation revenue was $260 million. And this quarter, $271 million. If I back out the $9.5 million incremental sales on the acquisitions, it gets me around $260 million. Is that the right way to think about the baseline level in instrumentation being roughly $255 million to $260 million looking forward assuming no more shocks to the system, currency or otherwise? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [30] -------------------------------------------------------------------------------- I think, George, that's pretty good. I couldn't have said it better. That's pretty good. Of course, we are always praying for positive shocks. -------------------------------------------------------------------------------- George Godfrey, C.L. King & Associates - Analyst [31] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [32] -------------------------------------------------------------------------------- But as we said, that also assumes, George, no new acquisitions in that domain. -------------------------------------------------------------------------------- George Godfrey, C.L. King & Associates - Analyst [33] -------------------------------------------------------------------------------- Yes, absolutely. And then my second question is have you thought about what the Iran deal means for your business or had any feedback from the customers that you serve what the ratification or acceptance of that deal means for your businesses? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [34] -------------------------------------------------------------------------------- Well, the immediate effect is going to be obvious: there's going to be more oil coming onto the market. They're going to pump as hard and as fast as they can. Having said that, I think that's going to be a short-term effect for two reasons. In the long-term, energy consumption is expected to grow by 30% in the next 20 years, driven by the developing world. Second, as you look at wells and oil specifically, there is a continuing decline in the amount of oil that people are able to pump from the wells. That decline is estimated to be between 5% and 7%. If you take somewhere in between, that's 5 million barrels of oil per day per year. That's just because oil wells, the productivity of the wells goes down. You're fracking, it's going to go down over the first two years by 50% or more. In deep oil, ocean, it might go down over a five-year period. But down that it goes, there's no question about that. So when you combine those two facts and when you look at Saudis, whose oil is 90% of their government revenue, and they're burning through their foreign reserves -- since October, I think it's been close to [50 billion]. What's going to happen is there's other factors that are going to drive the price of oil up other than just some short-term Iranian oil production. -------------------------------------------------------------------------------- George Godfrey, C.L. King & Associates - Analyst [35] -------------------------------------------------------------------------------- Got it. Thank you. And then just lastly on EPS guidance, have you baked in any assumptions for share buyback in Q3 and Q4 with that guidance? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [36] -------------------------------------------------------------------------------- No. -------------------------------------------------------------------------------- George Godfrey, C.L. King & Associates - Analyst [37] -------------------------------------------------------------------------------- Great. Nice job on the management. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- (Operator Instructions) Steve Levenson, Stifel. -------------------------------------------------------------------------------- Steve Levenson, Stifel Nicolaus & Company - Analyst [39] -------------------------------------------------------------------------------- I know there's a lot of talk about M&A, but in the past you've considered selling units that may have matured. And I'm just wondering if -- I know you probably don't want to say what, but are there any things you're considering for sale now? And if so, what do you think the proceeds might come in for -- the amount of the proceeds? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [40] -------------------------------------------------------------------------------- Thanks, Steve. Right now I don't think I'm in a selling mood. I want to keep our revenue and spread our fixed costs across as much businesses as we can. There might come a day that we might want to sell something but right now I don't think so. I mean, I'm in more of a buying mood, Steve. -------------------------------------------------------------------------------- Steve Levenson, Stifel Nicolaus & Company - Analyst [41] -------------------------------------------------------------------------------- Okay. That sounds good. You were talking about the laser eye protection. What sort of commercial market or even within business jet market is there for that? I know there have been a number of incidents recently, and we don't hear much about that product for the commercial market. -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [42] -------------------------------------------------------------------------------- Yes, that product is -- Steve, is a hugely sophisticated product. Without violating anything you can have as many as 150 that position layers of different kinds. And it's totally under our control. So I don't think we can do that for any commercial market. Plus, it's a very expensive process. There are cheaper processes that other people can use for the commercial market, but we don't know of anyone really using anything right now because nothing bad has happened, as far as I know recently. -------------------------------------------------------------------------------- Steve Levenson, Stifel Nicolaus & Company - Analyst [43] -------------------------------------------------------------------------------- Okay, thanks. And just going back to the M&A side again, given that the values might not be so good for selling does that mean there's some opportunities for you to fill some holes? Are there any holes that you feel you need to fill in some of the instrumentation product lines particularly? -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [44] -------------------------------------------------------------------------------- Yes, Steve, I think there are opportunities in some of the environmental instrumentation that some sample preparations have also obviously analysis. That's a very big field. Multiple types of processes. We own a significant chunk of that market, but there are a significant number of other things that we are looking at. That would be -- if I had my druthers that would be one of our primary areas. But this whole area of being able to take a consolidated look at all the imagery that we get and being able to develop and deliver that, especially Marine imagery, that's another interesting area for us. -------------------------------------------------------------------------------- Steve Levenson, Stifel Nicolaus & Company - Analyst [45] -------------------------------------------------------------------------------- Okay. And last one, I guess this one would be for Sue. I hope I didn't miss it. You often say how much total liquidity you have available. Did you mention that? Or if not, could you mention it, please? -------------------------------------------------------------------------------- Sue Main, Teledyne Technologies Incorporated - SVP and CFO [46] -------------------------------------------------------------------------------- No, I didn't mention it. We have at least $500 million to $700 million of liquidity available. -------------------------------------------------------------------------------- Steve Levenson, Stifel Nicolaus & Company - Analyst [47] -------------------------------------------------------------------------------- Got it. Thank very much. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- Thank you. At this time there's no additional questions in queue. Please continue. -------------------------------------------------------------------------------- Robert Mehrabian, Teledyne Technologies Incorporated - Chairman, President and CEO [49] -------------------------------------------------------------------------------- Thank you, operator. I'll now ask Jason to conclude the conference call. -------------------------------------------------------------------------------- Jason VanWees, Teledyne Technologies Incorporated - SVP, Strategy and Mergers & Acquisitions [50] -------------------------------------------------------------------------------- Thank you, Robert. And, again, thanks everyone for joining us this morning. If you have follow-up questions, of course feel free to call me at the number listed in the earnings release. And all the news releases are available on our website, Teledyne.com, as is the webcast. Operator, if you could conclude today's conference call and provide the replay information, we'd appreciate it. -------------------------------------------------------------------------------- Operator [51] -------------------------------------------------------------------------------- Thank you very much. And ladies and gentlemen, this conference will be available for replay after 10 AM Pacific time today, running through August 30 at midnight. You may access the AT&T Executive playback service at any time by dialing 800-475-6701 and entering access code of 359796. International participants may dial 320-365-3844. Once again, those phone numbers are 800-475-6701 and 320-365-3844, using the access code of 359796. And that does conclude your conference call for today. We do thank you for your presentation and for using AT&T's Executive teleconference. You may now disconnect.
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