May 03, 2018 • 11:00 am ET



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Robert Mehrabian

increased 7.5% largely as of a result of increased sales of laboratory and life science instruments, as well as continued growth in our pollution monitoring instrumentation, particularly in China.

Sales of electronic test and measurement systems increased 12.1% overall, and 10.4% organically. Orders and sales of protocol analyzers continued to be very strong in the first quarter. Segment operating profit declined slightly, due to -- in part to cost associated with the relocation and consolidation of certain marine instrumentation facilities from the United Kingdom to the Unites States. Nevertheless, operating profit for the both environmental and electronic test and measurement instrumentation increased compared to last year.

Turning to the Digital Imaging segment. First quarter sales increased 81.4%, and as I indicated, organic growth was 21.7%. In addition to the strong growth for X-ray detectors and industrial machine vision cameras, shipments of micro electromechanical systems or MEMS products for handheld devices, semiconductor processing and life science applications continued to increase. Furthermore, sales of infrared detectors for both commercial and government applications also grew considerably.

And finally, all of the e2v product lines were strong contributors to revenue and profit. We recently celebrated the one-year anniversary of the acquisition of Teledyne e2v. And I want to highlight to our employees, customers and shareholders that we could not be more pleased with the people, technologies and the financial performance that e2v has added to Teledyne. GAAP segment operating margin increased 349 basis points from the last year. While the first quarter of 2017 was impacted by some charges, related to the e2v acquisition, 2018 operating margin, excluding this charges would have still increased 130 basis points.

In the Aerospace and Defense Electronics segment, first quarter sales increased 13 -- 17.3% due in part to the contribution from e2v, but also strong underlying organic growth of 10.3%. Commercial aerospace sales declined slightly, given some very tough after-market comparisons. However, sales of defense electronics increased significantly versus last year, due to greater sales across a number of microwave, interconnect and manufacturing service product lines. Segment operating margin increased 146 basis points to 17.8% primarily due to greater sales as well as improved margins.

In the Engineered Systems segment, first quarter revenue increased 6.5%, largely driven by greater marine defense programs. We also enjoyed increase sales related to ballistic missile defense. Operating margin declined slightly, primarily as as result of lower fixed-price turbine engine deliveries.

I should briefly comment on the new pension accounting rules. New guidance requires splitting net pension expense for income into two components; service cost and expense, which is not included in our operation, and retirement benefit cost or income, which is not below the operations on a separate line in our income statement.

Our legacy pension remains overfunded, and has been closed to new participants since 2004. But I mentioned it here, since the new accounting rules effect our historical businesses the most, especially the Engineered Systems segment, where it impacts margins by approximately 200 basis points. For reference, we have