Robert Mehrabian
Chairman, President and Chief Executive Officer at Teledyne Technologies
Thank you, Jason, and good morning, and thank you for joining our earnings call. These are exciting times for Teledyne. We have new leadership coming in but we also have continuity and resilience. Our programs, in our operations, and our ability to meet what we say, we would do in our learnings.
In the third quarter, it was all-time record, we achieved record operating margin and earnings per share. GAAP operating margin of 18.8% was a third quarter record. On a non-GAAP basis, the operating margin was 22.8%, which was an all-time record for any quarter. Likewise, GAAP earnings per share of $14.15 was a third quarter record and non-GAAP earnings per share of $5.05 was an all-time record for Teledyne. Compared to last year GAAP and non-GAAP operating margins increased 119 basis points and 86 basis points respectively and both GAAP and non-GAAP earnings per share increased approximately 11%.
Our overall third quarter performance was led by growth in our Marine, Medical, Aerospace, and certain Defense businesses coupled with vigilant cost control. There was however some deterioration in certain end markets such as industrial automation and laboratory instrumentation. Nevertheless given our focus on operational excellence, operating margins increased both sequentially and year-over-year in Digital Imaging and Instrumentation segment helping generate record earnings. Given continued debt repayment through September, which totaled about $680 million year-to-date, our consolidated leverage ratio declined to just under two times. And finally, we are pleased to have added Xena Networks to our test and measurement businesses, which also continued to perform very well in a challenging environment.
In terms of our outlook, we now see total sales for 2023 growth of about 4% or a little less than the second half versus our July outlook with the fourth quarter sales being roughly $1.45 billion. Approximately half of these change in incremental is due to incremental currency translation headwind from July to now and the balance being further deterioration in industrial automation and laboratory instrumentation markets mentioned earlier. However, given the strong margin and earnings achieved in the third quarter, we are raising our non-GAAP earnings outlook to $19.25 at the midpoint from your prior outlook of $19.10.
I will now further comment on the performance of our four segments. Third quarter sales in our Digital Imaging segment were flat compared to last year. Sales of x-ray products, infrared imaging detectors, and surveillance systems increased year-over-year but were offset by lower sales of unmanned ground systems and micro-electromechanical systems or MEMS. Sales of Commercial Marine hardware and software were flat but declined organically.
Finally, cameras and sensors for Industrial Automation declined compared to last year. Like Teledyne as a whole, the Digital Imaging business portfolio is exceptionally well-balanced across market segments and geographies. With the help of bolt-on acquisitions and growth in our medical and defense markets, we were able to offset declines in industrial automation and it's -- and a small portion of our overall portfolio that is associated with consumer discretionary spending. Despite the flat revenue margin performance improved considerably to record levels with the FLIR businesses collectively slightly higher than segment average margins.
Turning to our Instrumentation businesses. This segment consists of Marine instruments, test and measurement, and environmental instruments. Overall, third quarter sales in Instrumentation segment increased 7.4% versus last year. Sales of Marine instruments increased 20.5% in the quarter primarily due to ongoing recovery in offshore energy markets and also greater sales of acoustic imaging systems. Sales of Electronics test and measurement systems, which includes oscilloscopes, digitizers, and protocol analyzers, collectively increased 2.5%. We continue to see some softness in sales of analyzers for electronic storage and data center applications but this was more than offset by sales of devices for wire -- wireless and video protocols as well as continued strong sales of oscilloscopes. Demand for high-speed networking customers remains very healthy and we see the Xena acquisition, enhancing our offerings in this market.
Sales of environmental instruments decreased slightly compared to last year with sales of air quality and gas and flame safety analyzers offsetting some decline in drug discovery and laboratory instruments. Overall, Instrumentation segment operating profit increased over 20% in the third quarter with GAAP operating margins increasing 277 basis points to 26% and 253 basis points on a non-GAAP basis to 27%. These were all-time records for this segment.
Third quarter sales in our Aerospace and Defense Electronics segment increased 8.1% driven by growth both in Defense Electronics and Aerospace, Commercial Aerospace products. GAAP and non-GAAP operating profit decreased 11.5%. With margins 81 basis points greater than last year. Finally, in the Engineering Systems segment third quarter revenue increased 4.1%, but operating profit declined slightly given an unfavorable product but also a tough comparison with the prior year period.
So in conclusion, we are pleased to continue to do what we know best. Gross sales and margin in businesses with favorable market while cutting costs and protecting margins in those businesses where market trends are more challenging. At the same time, especially now that our leverage continues to decline, we should acquire and integrate complementary businesses.
Before turning the call to Sue, I want to thank her for more than 34 years of service to Teledyne and I wish her very-very well-earned retirement. I will greatly miss her. And finally. I want to congratulate our other executives on their well-deserved promotions announced yesterday. I and the entire Board are delighted that the same talented group of executives will continue to serve Teledyne's leadership. Sue?
