1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2,October 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 1-15295
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TELEDYNE TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 25-1843385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2049 CENTURY PARK EAST, SUITE 1500
LOS ANGELES, CALIFORNIA 90067-3101
(Address of principal executive offices) (Zip Code)
(310) 277-3311
(Registrant's telephone number, including area code)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No ----- -----[ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30,October 1, 2000
- -------------------------------------- -----------------------------------------------------------
Common Stock, $.01 par value per share 26,800,74031,557,959 shares
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TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements 2
Consolidated Condensed Balance Sheets --
April 2,October 1, 2000 and January 2, 2000 2
Consolidated Condensed Statements of Income --
Three and nine months ended April 2,October 1, 2000 and April 4,October 3, 1999 3
Consolidated Condensed Statements of Cash Flows --
ThreeNine months ended April 2,October 1, 2000 and April 4,October 3, 1999 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 1011
Item 3. Quantitative and Qualitative Disclosures About Market Risk 1316
PART II OTHER INFORMATION 1316
Item 2. Changes in Securities and Use of Proceeds 16
Item 6. Exhibits and Reports on Form 8-K 1316
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
APRIL 2,AT OCTOBER 1, 2000 andAND JANUARY 2, 2000
(Amounts in millions, except per share data)
April 2,October 1, January 2,
2000 2000
===================================================================================================================================== ========== ==========
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4.63.5 $ 7.1
Receivables, net 127.2 117.6127.3 109.1
Inventories, net 54.4 53.762.3 51.4
Deferred income taxes, net 24.020.5 21.7
Prepaid expenses, note receivableincome taxes and other 3.712.4 4.5
-------- --------------- -------
TOTAL CURRENT ASSETS 213.9 204.6226.0 193.8
Property, plant and equipment, at cost, net of accumulated
depreciationDepreciation and amortization of $132.6$125.2 at April 2,October 1, 2000
and $132.3$116.7 at January 2, 2000 62.2 62.162.9 56.0
Deferred income taxes, net 25.922.5 25.6
Cost in excess of net assets acquired, net 8.07.9 8.2
Other assets, 18.0net 20.8 16.9
-------- --------Net assets of discontinued operation 12.2 12.9
------- -------
TOTAL ASSETS $ 328.0352.3 $ 317.4
======== ========313.4
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 50.355.5 $ 46.944.2
Accrued liabilities 56.4 48.658.4 47.3
Income taxes payable 8.5-- 3.8
-------- --------------- -------
TOTAL CURRENT LIABILITIES 115.2 99.3113.9 95.3
Long-term debt 83.57.2 97.0
Net unrecognized actuarial gains onAccrued pension obligation 12.47.6 14.7
Accrued postretirement benefits 33.331.9 33.6
Other 38.2 28.3
28.3
-------- --------------- -------
TOTAL LIABILITIES 272.7 272.9198.8 268.9
STOCKHOLDERS' EQUITY
CommonPreferred stock, at$0.01 par value; outstanding shares 26,760,691- none -- --
Common stock, $0.01 par value; outstanding shares 31,557,959 at
.3 .3
April 2,October 1, 2000 and 26,687,002 at January 2, 2000 0.3 0.3
Additional paid-in capital 38.7124.2 37.9
Retained earnings 15.828.7 5.6
Accumulated other comprehensive income .5 .7
-------- --------0.3 0.7
------- -------
TOTAL STOCKHOLDERS' EQUITY 55.3153.5 44.5
-------- --------------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 328.0352.3 $ 317.4
================================================================ ======== ========313.4
===================================================================== ======= =======
The accompanying notes are an integral part of these financial statements.
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TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED APRIL 2,OCTOBER 1, 2000 AND APRIL 4,OCTOBER 3, 1999
(Unaudited - Amounts in millions, except per-share amounts)
Third Quarter First Quarter
-------------------Nine Months
----------------------- -----------------------
2000 1999 ================================================================== ======= =======2000 1999
=========================================================== ======== ======== ======== ========
SALES $ 203.5201.1 $ 202.0195.0 $ 598.8 $ 570.4
COSTS AND EXPENSES
Cost of sales 147.9 151.5145.4 136.7 432.8 415.0
Selling, general and administrative expenses 36.9 30.5
------- -------
184.8 182.0
------- -------38.8 36.1 124.2 98.1
-------- -------- -------- --------
184.2 172.8 557.0 513.1
-------- -------- -------- --------
OPERATING PROFIT 18.7 20.016.9 22.2 41.8 57.3
Interest and debt expense, net 1.8(1.3) -- (4.9) --
Other income .1 .3
------- -------
EARNINGS0.5 0.2 0.9 0.7
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 17.0 20.316.1 22.4 37.8 58.0
Provision for income taxes 6.8 8.4
------- -------
NET INCOME6.4 9.2 15.0 23.9
-------- -------- -------- --------
Income from continuing operations 9.7 13.2 22.8 34.1
Discontinued operations, net of tax 0.1 0.6 0.3 1.8
-------- -------- -------- --------
Net income $ 10.29.8 $ 11.9
======= =======13.8 $ 23.1 $ 35.9
=========================================================== ======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE:
Income from continuing operations $ 0.33 $ 0.48 $ 0.83 $ 1.24
Discontinued operations -- 0.02 0.01 0.06
-------- -------- -------- --------
BASIC EARNINGS PER COMMON SHARE $ .380.33 $ .43
======= =======0.50 $ 0.84 $ 1.30
======== ======== ======== ========
Weighted average common shares outstanding 29.0 27.2 27.6 27.5
=========================================================== ======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations $ 0.32 $ 0.48 $ 0.81 $ 1.24
Discontinued operations -- 0.02 0.01 0.06
-------- -------- -------- --------
DILUTED EARNINGS PER COMMON SHARE $ .380.32 $ .43
======= =======0.50 $ 0.82 $ 1.30
======== ======== ======== ========
Weighted Average Common Shares Outstanding 27.1 27.8
================================================================== ======= =======average diluted common shares outstanding 30.2 27.2 28.3 27.5
=========================================================== ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREENINE MONTHS ENDED APRIL 2,OCTOBER 1, 2000 AND APRIL 4,OCTOBER 3, 1999
(Unaudited - Amounts in millions)
First Quarter
-------------------
2000 1999
======================================================================================================================================== ======= =======
CASH FLOW FROM OPERATING ACTIVITIES
Net income from continuing operations $ 10.222.8 $ 11.934.1
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of assets 4.3 3.111.6 8.6
Deferred income taxes (2.6) (1.8)4.2 (1.1)
Changes in operating assets and liabilities:
Increase in accounts receivables (9.6) (22.2)
(Increase) decrease(19.1) (16.1)
Increase in inventories (.8) .7(10.9) (1.1)
Increase in accounts payable 3.3 8.512.2 7.9
Increase in accrued liabilities 7.9 4.811.4 1.6
Increase in current income taxes payable 4.7receivable, net (10.3) --
DecreaseIncrease in other long-term assets (1.4) --
Increase (decrease) in other long-term liabilities 7.1 (3.6)
Decrease in accrued pension obligation (7.1) -- (1.7)
Increase (decrease) in net unrecognized actuarial gains on (2.3) --
pension obligation
Decrease in accrued postretirement benefits (.3) .1(1.7) 0.4
Other operating, net (.7) (1.3)(2.3) (0.9)
------- -------
16.5 29.8
Net cash flow from discontinued operations 2.3 1.8
------- -------
Net cash provided used by operating activities 14.1 2.118.8 31.6
------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (3.6) (3.2)
Disposals of property, plant and equipment .1 --(17.2) (13.9)
Other investing, net (.3) --(0.5) 0.3
------- -------
(17.7) (13.6)
Investing cash flow from discontinued operations (1.2) (2.2)
------- -------
Net cash used by investing activities (3.8) (3.2)(18.9) (15.8)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Net payment on revolving credit agreement (13.5)(89.8) --
Proceeds from issuance of common stock .786.3 --
Net advances with Allegheny Technologies Incorporated -- 1.1(15.8)
------- -------
Net cash provided (used)used by financing activities (12.8) 1.1(3.5) (15.8)
------- -------
Decrease in cash and cash equivalents (2.5)(3.6) --
Cash and cash equivalents--beginning of period 7.1 --
------- -------
Cash and cash equivalents--end of period $ 4.63.5 $ --
======================================================================================================================================== ======= =======
The accompanying notes are an integral part of these financial statements.
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TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 2,October 1, 2000
1. General
The accompanying unaudited consolidated condensed financial statements
have been prepared by Teledyne Technologies Incorporated (Teledyne
Technologies or the Company) pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and disclosures
normally included in notes to consolidated financial statements have been
condensed or omitted pursuant to such rules and regulations, but resultant
disclosures are in accordance with generally accepted accounting
principles as they apply to interim reporting. The consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto in Teledyne Technologies'
Annual Report on Form 10-K for the fiscal year ended January 2, 2000 (1999
Form 10-K).
In the opinion of Teledyne Technologies' management, the accompanying
consolidated condensed financial statements contain all adjustments
(consisting of normal recurring adjustments) necessary to present fairly
Teledyne Technologies' consolidated financial position as of April 2,October 1,
2000, and the consolidated results of operations for the three and nine
months then ended and the consolidated cash flows for the quarterly
periodnine months then
ended. The results of operations and cash flows for the period ended
April 2,October 1, 2000, are not necessarily indicative of the results of
operations or cash flows to be expected for the full fiscal year.
Certain financial statements and notes for the prior year have been
changed to conform to the 2000 presentation.
Effective November 29, 1999 (the Distribution Date), Teledyne Technologies
became an independent, public company as a result of the distribution by
Allegheny Teledyne Incorporated, now known as Allegheny Technologies
Incorporated (ATI), of the Company's Common Stock, $.01 par value per
share, to holders of ATI Common Stock at a distribution ratio of one for
seven (the spin-off).
The consolidated financial statements for periods prior to the spin-off
included certain expenses (primarily corporate expense) based on an
allocation of the overall expense of ATI. ATI's historical cost basis of
assets and liabilities has been reflected in the Teledyne Technologies'
financial statements. The financial information in these financial
statements is not necessarily indicative of results of operations,
financial position and cash flows that would have occurred if Teledyne
Technologies had been a separate stand-alone entity during the periodperiods
presented or of future results. The consolidated financial statements
included herein do not reflect changes that occurred in the capitalization
and operations of Teledyne Technologies as a result of, or after, the
spin-off other than for the periodperiods following the spin-off.
The following unaudited pro forma financial information is presented for
informational purposes only and may not reflect the results of operations
or financial position of Teledyne Technologies that would have occurred
had Teledyne Technologies operated as a separate, independent company for
the 1999 periodperiods presented. The pro forma financial information should not
be relied upon as being indicative of future results. Pro forma
adjustments reflect the estimated expense impacts (primarily interest
expense and corporate expenses) that would have been incurred had Teledyne
Technologies been operated as a separate company as of the beginning of
the year and as capitalized at the time of the spin-off. As part of the
spin-off, Teledyne Technologies assumed $100 million of long-term debt
incurred by ATI. Pro forma income includes pro forma interest expense on
the long-term debt as if it had been outstanding for all periods
presented. Pro forma income adjusts corporate expenses to an annual level
of $15 million from the amount previously allocated, which was lower.
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The following is Teledyne Technologies unaudited pro forma financial
information for the third quarter and first quarternine months of 1999, compared
with the actual results for the first quartersame periods of 2000 (amounts in millions,
except per share data):
Third Quarter First Quarter
-------------------Nine Months
---------------------- ----------------------
2000 1999 ===================================================== ======= =======2000 1999
============================================== ======== ======== ======== ========
SALES $ 203.5201.1 $ 202.0195.0 $ 598.8 $ 570.4
COSTS AND EXPENSES
Cost of sales 147.9 151.5145.4 136.7 432.8 415.0
Selling, general and administrative 38.8 37.6 124.2 103.3
expenses
36.9 32.2
------- -------
184.8 183.7
------- --------------- -------- -------- --------
184.2 174.3 557.0 518.3
-------- -------- -------- --------
OPERATING PROFIT 18.7 18.316.9 20.7 41.8 52.1
Interest and debt expense, net 1.81.3 2.0 4.9 6.0
Other income .1 .3
------- -------
EARNINGS0.5 0.2 0.9 0.7
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE 16.1 18.9 37.8 46.8
INCOME TAXES 17.0 16.6
Provision for income taxes 6.8 6.9
------- -------
NET INCOME6.4 7.9 15.0 19.4
-------- -------- -------- --------
Income from continuing operations 9.7 11.0 22.8 27.4
Discontinued operations, net of tax 0.1 0.6 0.3 1.8
-------- -------- -------- --------
Net income $ 10.29.8 $ 9.7
======= =======11.6 $ 23.1 $ 29.2
============================================== ======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE:
Income from continuing operations $ 0.33 $ 0.40 $ 0.83 $ 1.00
Discontinued operations -- 0.02 0.01 0.06
-------- -------- -------- --------
BASIC EARNINGS PER COMMON SHARE $ .380.33 $ .35
======= =======0.42 $ 0.84 $ 1.06
======== ======== ======== ========
Weighted average common shares outstanding 29.1 27.2 27.6 27.5
============================================== ======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations $ 0.32 $ 0.40 $ 0.81 $ 1.00
Discontinued operations -- 0.02 0.01 0.06
-------- -------- -------- --------
DILUTED EARNINGS PER COMMON SHARE $ .380.32 $ .35
===================================================== ======= =======0.42 $ 0.82 $ 1.06
======== ======== ======== ========
Weighted average diluted common shares
outstanding 30.2 27.2 28.3 27.5
============================================== ======== ======== ======== ========
2. Discontinued Operations
In the second quarter of 2000, Teledyne Technologies' Board of Directors
authorized the divestiture of the assets of Teledyne Cast Parts, a
provider of sand and investment castings to the aerospace and defense
industries and was previously reported as part of the Aerospace Engines
and Components segment. Accordingly, the consolidated financial statements
have been restated to reflect Teledyne Cast Parts as a discontinued
operation. The operating assets and liabilities of Teledyne Cast Parts
have been reclassified as net assets of discontinued operations on the
balance sheet and primarily consist of net accounts receivables of $6.7
million, inventory of $3.2 million, net property, plant and equipment of
$6.8 million and liabilities of $4.9 million at October 1, 2000. Net
assets of discontinued operations at January 2, 2000 primarily consist of
net accounts receivables of $8.5 million, inventory of $2.2 million, net
property, plant and equipment of $6.1 million and liabilities of $3.9
million. Sales for Teledyne Cast Parts were $25.3 million and $32.6
million for the first nine months of 2000 and 1999, respectively. The
results of Teledyne Cast Parts were net of income taxes of $0.2 million
and $1.2 million for the first nine months of 2000 and 1999, respectively.
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3. Comprehensive Income
Teledyne TechnologiesTechnologies' comprehensive income is composed primarily of net
income and foreign currency translation adjustments. Teledyne
TechnologiesTechnologies' comprehensive income was $10.0$22.7 million and $11.8$35.8 million for
the first nine months of 2000 and 1999, respectively. Teledyne
Technologies' comprehensive income was $9.8 million and $13.8 million for
the third quarter of 2000 and 1999, respectively.
3.4. Earnings Per Share
Basic and diluted earnings per share were computed based on net earnings.
The weighted average number of common shares outstanding during the period
was used in the calculation of basic earnings per share, and this number
of shares was increased by the dilutive effect of stock options based on
the treasury stock method in the calculation of diluted earnings per
share.
During the third quarter of 2000, Teledyne Technologies issued 4,605,000
shares of Common Stock in a public offering.
The following table sets forth the computations of basic and diluted
earnings per share (amounts in millions, except per share data):
Third Quarter First Quarter
-------------------Nine Months
---------------------- ----------------------
2000 1999 ==================================================== ======= =======2000 1999
-------- -------- -------- --------
BASIC EARNINGS PER SHARE
Net income/earningsIncome from continuing operations
applicable to common stock $ 10.29.7 $ 11.9
======= =======13.2 $ 22.8 $ 34.1
Discontinued operations, net of tax 0.1 0.6 0.3 1.8
-------- -------- -------- --------
Net income applicable to common stock $ 9.8 $ 13.8 $ 23.1 $ 35.9
======== ======== ======== ========
Weighted average common shares outstanding 26.8 27.8
======= =======29.0 27.2 27.6 27.5
======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 0.33 $ 0.48 $ 0.83 $ 1.24
Discontinued operations -- 0.02 0.01 0.06
-------- -------- -------- --------
Basic earningsEarnings per common share $ .380.33 $ .43
======= =======0.50 $ 0.84 $ 1.30
======== ======== ======== ========
DILUTED EARNINGS PER SHARE
EarningsIncome from continuing operations applicable to
common stock $ 10.29.7 $ 11.9
======= =======13.2 $ 22.8 $ 34.1
Discontinued operations, net of tax 0.1 0.6 0.3 1.8
-------- -------- -------- --------
Net income applicable to common stock $ 9.8 $ 13.8 $ 23.1 $ 35.9
======== ======== ======== ========
Weighted average common shares outstanding 26.8 27.829.0 27.2 27.6 27.5
Dilutive effect of exercise of options outstanding .31.2 -- ------- -------
27.1 27.8
======= =======0.7 --
-------- -------- -------- --------
Weighted average diluted common shares outstanding 30.2 27.2 28.3 27.5
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 0.32 $ 0.48 $ 0.81 $ 1.24
Discontinued operations -- 0.02 0.01 0.06
-------- -------- -------- --------
Diluted earnings per common share $ .380.32 $ .430.50 $ 0.82 $ 1.30
==================================================== ======= =============== ======== ======== ========
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4.9
5. Cash and Cash Equivalents
Cash equivalents consist of highly liquid money-market mutual funds and
bank deposits with maturities of three months or less when purchased.
There were no cash equivalents at October 1, 2000. Cash equivalents
totaled $1.3 million and $5.5 million at April 2, 2000 and
January 2, 2000, respectively.
5.2000.
6. Inventories
Inventories are primarily valued under the LIFO method. The valuation of
LIFO inventory for interim periods is based on management's estimates of
year-end inventory levels and costs. Inventories consist of the following
(amounts in millions):
October 1, January 2,
Balance at April 2, 2000 January 2, 2000
========================= ============= ===================================== ========== ==========
Raw materials and
supplies $ 26.427.3 $ 24.2
supplies23.6
Work in process 65.4 62.565.9 59.4
Finished goods 8.210.5 9.1
------- -------
100.0 95.8103.7 92.1
Progress payments (8.9)(6.3) (5.3)
LIFO reserve (36.7) (36.8)
------- -------(35.1) (35.4)
======= =======
Total inventories, net $ 54.462.3 $ 53.751.4
======= =======
6.7. Supplemental Balance Sheet Information
Accrued liabilities included salaries and wages of $31.2 million and $23.9
million at October 1, 2000 and January 2, 2000, respectively. Other
long-term liabilities included reserves for self-insurance, the long-term
portion of product recall and environmental reserves.
8. Lawsuits, Claims, Commitments, Contingencies and Related Matters
The Company is subject to federal, state and local environmental laws and
regulations which require that it investigate and remediate the effects of
the release or disposal of materials at sites associated with past and
present operations, including sites at which the Company has been
identified as a potentially responsible party under the federal Superfund
laws and comparable state laws. The Company has been identified as a
potentially responsible party at approximately 1716 such sites, excluding
those at which the Company believes it has no future liability.
In accordance with the Company's accounting policy disclosed in Note 2 to
the consolidated financial statements in the 1999 Form 10-K, environmental
liabilities are recorded when the Company's liability is probable and the
costs are reasonably estimable. In many cases, however, investigations are
not yet at a stage where the Company has been able to determine whether it
is liable or, if liability is probable, to reasonably estimate the loss or
range of loss, or certain components thereof. Estimates of the Company's
liability are further subject to uncertainties regarding the nature and
extent of site contamination, the range of remediation alternatives
available, evolving remediation standards, imprecise engineering
evaluations and estimates of appropriate cleanup technology, methodology
and cost, the extent of corrective actions that may be required, and the
number and financial condition of other potentially responsible parties,
as well as the extent of their responsibility for the remediation.
Accordingly, as investigation and remediation of these sites proceeds,proceed, it
is likely that adjustments in the Company's accruals will be necessary to
reflect new information. The amounts of any such adjustments could have a
material adverse effect on the Company's results of operations in a given
period, but the amounts, and the possible range of loss in excess of the
amounts accrued, are not reasonably estimable. Based on currently
available information, however, management does not believe that future
environmental costs in excess of those accrued with respect to sites with
which the Company has been
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identified are likely to have a material adverse effect on the Company's
financial condition or liquidity. However, there can be no assurance that
additional future developments, administrative actions or liabilities
relating to environmental matters will not have a material adverse effect
on the Company's financial condition or results of operations.
7
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At April 2,October 1, 2000, the Company's reserves for environmental remediation
obligations totaled approximately $1.5 million,$859 thousand, of which approximately
$1.2
million$477 thousand were included in other current liabilities. The Company is
evaluating whether it may be able to recover a portion of future costs for
environmental liabilities from its insurance carriers and from third
parties other than participating potentially responsible parties.
The timing of expenditures depends on a number of factors that vary by
site, including the nature and extent of contamination, the number of
potentially responsible parties, the timing of regulatory approvals, the
complexity of the investigation and remediation, and the standards for
remediation. The Company expects that it will expend present accruals over
many years, and will complete remediation of all sites with which it has
been identified in up to 30 years.
Various claims (whether based on U.S. Government or Company audits and
investigations or otherwise) have been or may be asserted against the
Company related to its U.S. Government contract work, including claims
based on business practices and cost classifications and actions under the
False Claims Act. Although such claims are generally resolved by detailed
fact-finding and negotiation, on those occasions when they are not so
resolved, civil or criminal legal or administrative proceedings may ensue.
Depending on the circumstances and the outcome, such proceedings could
result in fines, penalties, compensatory and treble damages or the
cancellation or suspension of payments under one or more U.S. Government
contracts. Under government regulations, a company, or one or more of its
operating divisions or units, can also be suspended or debarred from
government contracts based on the results of investigations. However,
althoughWhile the
outcome of these matters cannot be predicted with certainty, management
does not believe there is any audit, review or investigation currently
pending against the Company, of which management is aware, that is likely
to result in suspension or debarment of the Company, or that is otherwise
likely to have a material adverse effect on the Company's financial
condition or liquidity, although theliquidity. The resolution in any reporting period of one or
more of these matters, however, could have a material adverse effect on
the Company's results of operations for that period.
The Company learns from time to time that it has been named as a defendant
in civil actions filed under seal pursuant to the False Claims Act.
Generally, since such cases are under seal, the Company does not in all
cases possess sufficient information to determine whether the Company
could sustain a material loss in connection with such cases, or to
reasonably estimate the amount of any loss attributable to such cases.
In connection with the spin-off, ATI received a tax ruling from the
Internal Revenue Service stating, in principle, that the spin-off will be
tax-freetax free to ATI and ATI's stockholders. The continuing validity of the IRS
tax ruling is subject to the completion of a public offering of Teledyne
Technologies' Common Stock by November 29, 2000 and use of the anticipated
gross proceeds of approximately $125 million (less associated costs)
for research and development and related capital projects, for the further
development of manufacturing capabilities and for acquisitions and/or
joint ventures. PursuantThe Internal Revenue Service agreed to a modification of
the Separation and Distribution Agreement,tax ruling issued in connection with the spin-off of Teledyne
Technologies agreed with ATI to undertake such a public offering. Subject
to market conditions and other factors, the Company may not be ablefrom ATI. The revised ruling required Teledyne Technologies
to complete a smaller public offering of such size15 to 18 percent of its
outstanding Common Stock. In the third quarter 2000, Teledyne Technologies
issued 4,605,000 shares of its Common Stock in the required time period.
Teledyne Technologies' management and financial advisors continue to review
thisa public offering requirement.for net
proceeds of approximately $84.0 million to fulfill a material requirement
of the ruling.
The Tax Sharing and Indemnification Agreement between ATI and Teledyne
Technologies provides that the Company will indemnify ATI and its agents
and representatives for taxes imposed on, and other amounts paid by, them
or ATI stockholders if the Company takes actions or fails to take actions
(such as completing the public offering) that result in the spin-off not
qualifying as a tax-free distribution. If the Company were required to so
indemnify ATI, such an obligation could have a material adverse effect on
its financial condition, results of operations and cash flow and the
amount the Company could be required to pay could exceed its net worth by
a substantial amount.
9
11
A number of other lawsuits, claims and proceedings have been or may be
asserted against the Company relating to the conduct of its business,
including those pertaining to product liability, patent infringement,
commercial, employment and employee benefits. While the outcome of
litigation cannot be predicted with certainty, and some of these lawsuits,
claims or proceedings may be determined adversely to the Company,
management does not believe that the disposition of any such pending
matters is likely to have a material 8
10
adverse effect on the Company's
financial condition or liquidity, although
theliquidity. The resolution in any reporting period
of one or more of these matters, however, could have a material adverse
effect on the Company's results of operations for that period.
7.9. Income Taxes
The provision for taxes based on income for the 2000 and 1999 interim
periods was computed in accordance with Interpretation No. 18 of APB
Opinion No. 28 on reporting taxes for interim periods and was based on
projections of total year pretax income.
8.income in accordance with Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
109--"Accounting for Income Taxes."
10. Industry Segments
The following table presents Teledyne Technologies' interim industry
segment disclosures (amounts in millions):
Third Quarter First Quarter
--------------------Nine Months
--------------------- ---------------------
2000 1999 ================================================2000 1999
=========================================== ======= ======= ======= =======
SALES:
Electronics and Communications $ 85.792.8 $ 83.288.2 $ 269.9 $ 258.7
Systems Engineering Solutions 57.2 59.660.1 54.1 178.3 166.5
Aerospace Engines and Components 60.6 59.2Components(a) 48.2 52.7 150.6 145.2
------- ------- ------- -------
TOTAL SALES $ 203.5201.1 $ 202.0195.0 $ 598.8 $ 570.4
======= ======= ======= =======
OPERATING PROFIT:
Electronics and Communications $ 9.59.2 $ 8.512.1 $ 29.6 $ 31.3
Systems Engineering Solutions 5.6 4.9 3.9 15.3 13.3
Aerospace Engines and Components 7.5Components(a,b) 6.7 8.2 8.7 18.7
------- ------- ------- -------
SEGMENT OPERATING PROFIT $ 22.6 $ 22.120.8 24.2 53.6 63.3
Corporate expense including interest (5.7) (2.1)(3.9) (2.0) (11.8) (6.0)
Interest and debt expense, net (1.3) -- (4.9) --
Other income .1 .30.5 0.2 0.9 0.7
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 16.1 22.4 37.8 58.0
Provision for income taxes 6.4 9.2 15.0 23.9
------- ------- ------- -------
Income from continuing operations 9.7 13.2 22.8 34.1
Discontinued operations, net of tax 0.1 0.6 0.3 1.8
------- ------- ------- -------
NET INCOME $ 17.09.8 $ 20.3
================================================13.8 $ 23.1 $ 35.9
=========================================== ======= ======= ======= =======
9(a) Restated to reflect Teledyne Cast Parts as a discontinued operation.
(b) The first nine months of 2000 and 1999 include pretax charges of $12
million and $3 million in the second quarters of 2000 and 1999,
respectively, for product recall reserves.
10
1112
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Teledyne Technologies' firstsales from continuing operations for the third quarter of
2000 sales were $203.5$201.1 million, compared with sales from continuing operations of
$202.0$195.0 million for the same period in 1999. Net income from continuing
operations was $10.2$9.7 million ($0.380.32 per diluted share) for the third quarter of
2000, compared with pro forma net income from continuing operations of $11.0
million ($0.40 per diluted share) for the same period of 1999. Sales from
continuing operations for the first nine months of 2000 were $598.8 million,
compared with sales from continuing operations of $570.4 million for the same
period in 1999. Net income from continuing operations was $22.8 million ($0.81
per diluted share) for the first quarter,nine months of 2000, compared with pro forma
net income from continuing operations of $9.7$27.4 million ($0.351.00 per diluted share)
for the same period of 1999.
The first nine months of 2000 and 1999 included second quarter pretax charges of
$12 million and $3 million, respectively, for piston engine product recall
reserves. Excluding these reserves, net income from continuing operations was
$30.0 million ($1.06 per diluted share) for the first nine months of 2000,
compared with pro forma net income from continuing operations of $29.2 million
($1.06 per diluted share) for the same period of 1999. For the third quarter of
1999.2000 and pro forma 1999, net income including discontinued operations was $9.8
million ($0.32 per diluted share) and $11.6 million ($0.42 per diluted share),
respectively. For the first nine months of 2000 and pro forma 1999, net income
including discontinued operations was $23.1 million ($0.82 per diluted share)
and $29.2 million ($1.06 per diluted share), respectively.
In the second quarter of 2000, Teledyne Technologies' Board of Directors
authorized the sale of the assets of Teledyne Cast Parts, which provides sand
and investment castings to the aerospace and defense industries and was
previously reported as part of the Aerospace Engines and Components segment.
Accordingly, the consolidated financial statements have been restated to reflect
Teledyne Cast Parts as a discontinued operation. No loss on disposal is
anticipated.
Teledyne Technologies was spun off from Allegheny Teledyne Incorporated, now
known as Allegheny Technologies Incorporated (ATI), effective November 29, 1999.
Pro forma adjustments in 1999 reflect the estimated expense impacts (primarily
interest expense and corporate expenses) that would have been incurred had
Teledyne Technologies operated as a separate company and as capitalized at the
time of the spin-off for the 1999 period presented. Net income, before pro forma
adjustments, was $11.9$13.8 million ($0.430.50 per diluted share) for the third quarter
of 1999 and $35.9 million ($1.30 per diluted share) for the first quarternine months of
1999.
The increase in sales for the 2000 year-to-date period, compared with the same
1999 period, reflected higher sales in each operating segment. The increase in
sales for the 2000 third quarter, compared with the same 1999 period, reflected
higher sales in both the Electronics and Communications segment and Aerospace Engines and Components segments, partially offset
by lower sales in the Systems
Engineering Solutions segment.
The increasesegment offset, in earnings in the first quarter of 2000, compared with the first
quarter of 1999 pro forma earnings reflected higher operating profit in both the
Electronics and Communications and Systems Engineering Solutions segments,
partially offsetpart, by lower earningssales in the Aerospace
Engines and Components segment.
Net pension income for the first quarternine months of 2000 was $2.2$6.7 million, compared
with net pension income of $1.6$4.9 million for the firstsame period of 1999. Net pension
income for the third quarter of 2000 was $2.3 million, compared with net pension
income of $1.7 million for the same period of 1999. First quarterPension income is expected
to remain relatively constant in 2001 but is expected to be lower in subsequent
years primarily due to the completion of income amortization associated with the
transition assets recorded pursuant to Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 87 - "Employers'
Accounting for Pensions".
Prior to the product recall reserves, earnings from continuing operations before
interest, taxes, depreciation and amortization (EBITDA) for the first nine
months of 2000 were $23.1$66.3 million, compared with pro forma EBITDA of $21.7$69.6
million for the first quartersame period of 1999.
OnGross profit from continuing operations, on a historical basis while gross margins were higherwas lower in the
firstthird quarter of 2000, compared with the firstsame period in 1999, net income was
also lower due to interest expense on the debt assumed as part of the spin-off
and higher administrative expense compared with the allocation from ATI which
was based on sales. The lower gross profit for the third quarter of 2000,
compared with the same period of 1999, was attributable to changes in product
mix within the operating segments and start up costs for optoelectronics and
broadband wireless initiatives, partially offset by higher sales. Gross profit
from continuing operations, on a historical basis was higher in the first nine
months of 2000, compared with the same period in 1999, while net income
decreased due to higher product
11
13
recall reserves, interest expense on the debt assumed as part of the spin-off,
higher research and development spending and higher administrative expense
compared with the 1999 allocation from ATI which was based on sales.ATI. The higher gross margins reflected
a changeprofit for the
first nine months of 2000, compared with the same period of 1999, was
attributable to changes in product mix inwithin the Electronicsoperating segments and Communicationshigher
sales, partially offset by start up costs for optoelectronics and the Aerospace
Engines and Components segments.broadband
wireless initiatives. The Company's effective tax rate for the first quarternine months
of 2000 was 4039.7 percent and was 41.341.2 percent for the first quartersame period of 1999.
REVIEW OF OPERATIONS:
The following table sets forth the sales and operating profit for each segment:segment
(amounts in millions):
Third Quarter First Quarter
-------------------Nine Months
-------------------- --------------------
2000 1999 2000 1999
============================================= ======= ======= ======= =======
SALES:
Electronics and Communications $ 85.792.8 $ 83.288.2 $ 269.9 $ 258.7
Systems Engineering Solutions 57.2 59.660.1 54.1 178.3 166.5
Aerospace Engines and Components 60.6 59.2Components(a) 48.2 52.7 150.6 145.2
------- ------- ------- -------
TOTAL SALES $ 203.5201.1 $ 202.0195.0 $ 598.8 $ 570.4
======= ======= ======= =======
OPERATING PROFIT:
Electronics and Communications $ 9.59.2 $ 8.512.1 $ 29.6 $ 31.3
Systems Engineering Solutions 5.6 4.9 3.9 15.3 13.3
Aerospace Engines and Components 7.5Components(a,b) 6.7 8.2 8.7 18.7
------- ------- ------- -------
TOTAL SEGMENT OPERATING PROFIT $ 22.620.8 $ 22.124.2 $ 53.6 $ 63.3
============================================= ======= ======= ======= =======
10
12(a) Restated to reflect Teledyne Cast Parts as a discontinued operation.
(b) Includes pretax charges of $12 million and $3 million in the second
quarters of 2000 and 1999, respectively, for product recall reserves.
ELECTRONICS AND COMMUNICATIONS
The Electronics and Communications segment firstthird quarter 2000 sales were $85.7$92.8
million, up 3.05.2 percent from 1999 firstthird quarter sales of $83.2$88.2 million. FirstThird
quarter 2000 operating profit rose 11.8 percent to $9.5was $9.2 million, from $8.5compared with $12.1 million in
the firstthird quarter of 1999. FirstSales for the first nine months of 2000 were $269.9
million, up 4.3 percent from $258.7 million for the same period of 1999.
Operating profit for the first nine months of 2000 was $29.6 million, compared
with $31.3 million for the same period of 1999.
For the third quarter sales,and first nine months of 2000, compared with the same
period inperiods of 1999, sales grew significantly in electronic manufacturing services, relay
products, business and commuter aircraft communications equipment and microwave products.wireless.
Sales from electronic manufacturing services and microwavewireless products grew as a
result of new orders from both military and commercial customers. Relay products
reported improved sales grew due to
increasedbased on demand from the communications and
semiconductor test equipment markets. Sales of medical and military
microelectronics were down from the same periodperiods last year. Increased profitability resulted from a favorable product mix,Segment operating
profit decreased due to increased spending in optoelectronics and operational improvements, partially offset by higher researchbroadband
wireless initiatives and development spending.reduced margins on electronic manufacturing services.
Approximately, $3.1 million and $4.8 million was spent on optoelectronics and
broadband wireless initiatives for the third quarter and first nine months of
2000, respectively. Sales and operating profit in the third quarter of 1999
reflected non-recurring licensing revenue of $3.3 million.
SYSTEMS ENGINEERING SOLUTIONS
The Systems Engineering Solutions segment firstthird quarter sales were $57.2$60.1
million, down 4.0up 11.1 percent from 1999 firstthird quarter sales of $59.6$54.1 million.
Operating profit for the firstthird quarter improved 14.325.6 percent to $5.6$4.9 million,
from $4.9$3.9 million in the same period last year. FirstSales for the first nine months
of 2000 were $178.3 million, up 7.1
12
14
percent from $166.5 million for the same period of 1999. Operating profit for
the first nine months of 2000 rose 15.0 percent to $15.3 million, from $13.3
million for the same period of 1999.
The results for the third quarter performance reflectedand first nine months of 2000, compared with
the same periods in 1999, reflect strong sales growth and profitability
improvements in environmental programs
as well as systems engineering and integration, information technology,
space programs,integration. The results for the first nine
months of 2000, compared with the same period in 1999, also reflected higher
sales in energy systems and environmental programs. Theinformation technology. Sales for the first quarter
comparisonsnine
months of 2000 were negatively impacted by the significant decline in sales oforders for
our marine products for the petroleum exploration market, which has been very
weak since the second quarter of 1999. Operating results for the third quarter
and first nine months of 2000, compared with the same periods in 1999, reflected
increased revenue, partially offset by mix differences and award fee differences
in systems engineering and integration. Operating results for the first nine
months of 2000, compared with the same period in 1999, also reflected lower
marine product results due to reduced sales. Lower general and administrative
expenses reflectingreflect a first quarter 2000 benefit of $1.4 million of income related to
chemical weapon demilitarization reserves no longer needed due to additional
program funding, werewhich was partially offset by lower gross profit due to a
writedown of approximately $0.9 million in the Company's process control
software business.
AEROSPACE ENGINES AND COMPONENTS
The Aerospace Engines and Components segment firstthird quarter sales were $60.6$48.2
million, up 2.4 percent from $59.2compared with $52.7 million in the 1999 firstthird quarter. Operating profit
declined by 13.8 percent to $7.5was $6.7 million from $8.7for the third quarter 2000, compared with operating profit of
$8.2 million in the first
quartersame period of 1999.
Improved grossSales for the first nine months of 2000 were $150.6 million, up 3.7 percent from
$145.2 million in the same period of 1999. Excluding piston engine product
recall reserves taken in the second quarters of 2000 and 1999, operating profit
reflects favorable product mix whichfor the first nine months of 2000 was offset by higher general and administrative expenses resulting from increased
research and development spending and selling expense.
Sales and$20.7 million, compared with operating
profit of $21.7 million for the same period of 1999. Including product recall
reserves, operating profit was $8.7 million for the first nine months of 2000,
compared with operating profit of $18.7 million in the same period of 1999.
Increased sales for piston engines for general aviation aircraft grew
significantly,the first nine months of 2000 were driven
by strongaftermarket new engine sales and overhaul services. In the third quarter of
2000, compared with the same period of 1999, sales decreased for piston engines
reflecting lower sales of rebuilt engines, partially resulting from operational
disruption associated with the piston engine recall program and lower sales of
spare parts, partially offset by improvements in aftermarket new engines to both OEMsengine sales
and overhaul services. For the aftermarket. The Company is currently investigating a supplier related
crankshaft issue. Field testing is underway. At this point,third quarter and first nine months of 2000,
compared with the Company cannot
predict its impact on 2000 earnings. The Company continues to evaluate this
matter and is reviewing its options with regard to legal action against its
suppliers to potentially recover associated costs.
Salessame periods in 1999, sales and operating profit in the
turbine engine business were down slightlylower due to reduced revenuesales from development phase
work on new turbine engine programs. SalesIn the third quarter of engines for the Harpoon missile and its derivatives continue to be
strong, and during the quarter, the company reached an agreement with Lockheed
Martin Corporation to supply1999, sales of new
J69 turbine engines totaled $3.2 million, whereas no J69 turbine engine sales
were made in the third quarter of 2000.
Teledyne Technologies recorded a $12 million pre-tax charge in the second
quarter of 2000 for estimated costs associated with its piston engine recall
program. The Company continues to review its options with regard to cost
recovery and to pursue legal action against certain suppliers.
The results of the Joint Air-to-Surface
Standoff Missile (JASSM) program.
SalesAerospace Engines and operating profit from aerospace castings declined from the prior year
dueComponents segment have been restated
to market conditions, operational inefficiencies andreflect Teledyne Cast Parts as a shift in product mix.discontinued operation.
13
15
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Teledyne TechnologiesTechnologies' net cash provided by operating activities from continuing
operations was $14.1$16.5 million for the first quarternine months of 2000, compared with
$2.1$29.8 million for the same period of 1999. The $12.0$13.2 million increasedecrease in cash
provided from operations in 2000, compared with 1999, reflected a lower increase in
accounts receivables in the first quarter of 2000, compared to the first quarter
of 1999. In the first quarter of 2000 accounts receivable
11
13
increased by $9.6 million in 2000change from
an income tax payable position at year end 1999 while into an income tax receivable
position at the firstend of the third quarter of 2000. The payable position at year
end 1999, accounts receivable increased $22.2 millionresulted from income taxes payable on income earned after the prior year end.spin-off
for which no estimated payments were required in 1999.
Working capital decreased to $98.7was $112.1 million at the end of the first quarternine months of 2000,
compared with $105.3$98.5 million at the end of the first quarter 1999. The decreasehigher balances in working capital was primarily due to the higher income taxes
payable, accrued liabilitiesaccounts
receivable, inventory and accounts payable offset in part bywere due to higher
accounts receivables.
The higher balance in accounts receivable reflected additional sales in the later
part of the firstthird quarter of 2000 relative to the latter part of the fourth
quarter of 1999. The higher balance in accounts payable and accrued liabilities reflectedreflect the current
portion of the product recall reserve and increases in advances from customers,
as well as insurance and payroll accruals.
Income taxes payable increased as Teledyne Technologies is now responsible for
current taxes due whereas up to the spin-off date ATI was responsible for any
tax payments incurred to the date of the spin-off.
Teledyne TechnologiesTechnologies' net cash used by investing activities for continuing
operations was primarily for
capital expenditures and was $3.8$17.7 million for the first quarternine months of 2000 compared with
net cash used of $3.2$13.6 million for the same quarterperiod of 1999 and was primarily used for capital
expenditures. Capital expenditures were $17.2 million for the first nine months
of 2000, compared with $13.9 million for the same period of 1999. Teledyne
Technologies currently anticipates capital spending to be approximately $35
million for 2000.
Financing activities used net cash of $12.8$3.5 million in the first quarternine months of
2000, compared with cash providedused of $1.1$15.8 million for the same quarterperiod of 1999. The
2000 amount primarily reflected net payments of $13.5$89.8 million foron Teledyne
Technologies' credit facility. In the revolving credit agreement.third quarter of 2000, Teledyne
Technologies received net proceeds of approximately $84.0 million from the
issuance of 4,605,000 shares of Teledyne Technologies' Common Stock in an
underwritten public offering. The 1999 amount represents net transactions with
ATI to the date of the spin-off.
Teledyne Technologies' principal capital requirements are to fund working
capital needs, capital expenditures and debt service requirements. It is
anticipated that operating cash flow, together with available borrowings under
the credit facility described below, will be sufficient to meet these
requirements in the year 2000. Teledyne Technologies currently expects to spend
approximately $32.5 million on its capital spending program in 2000.
A $200 million five-year revolving credit agreement that terminates in November
2004 was arranged with a syndicate of banks in connection with the spin-off. ATI
drew $100 million under the facility prior to the assumption of the facility by
Teledyne Technologies. Teledyne Technologies assumed the repayment obligation
for the amount drawn by ATI. The Company used the net proceeds from its
underwritten public offering to repay such borrowings pending their use for
purposes in accordance with the tax ruling described below. At April 2,October 1, 2000
Teledyne Technologies had $83.5$7.2 million outstanding under the facility, compared
with $97.0 million at January 2, 2000. Excluding interest and fees, no payments
are due under the credit facility until the facility terminates. Available
borrowing under the credit facility was $116.5$192.8 million at April 2,October 1, 2000,
compared with $103$103.0 million at year end 1999. As a result of the completion of
the underwritten public offering, the lenders under the credit agreement
released the stock of Teledyne Brown Engineering, Inc., which had been pledged
as collateral to secure the obligations under the credit agreement. The credit
agreement continues to require the Company to comply with various financial
covenants and restrictions. It continues to prohibit the declaration of
dividends or making other specified payments in amounts exceeding 25 percent of
cumulative net income after the effective date of the credit agreement (which
was $7.2 million as of October 1, 2000).
In connection with the spin-off, ATI received a tax ruling from the Internal
Revenue Service stating in principle that the spin-off will be tax-freetax free to ATI
and ATI's stockholders. The continuing validity of the IRS tax ruling is subject
to the completion of a public offering of Teledyne Technologies' Common Stock by
November 29, 2000 and use of the anticipated gross proceeds of approximately
$125 million (less associated costs) for research and development and
related capital projects, for the further development of manufacturing
capabilities and for acquisitions and/or joint ventures. PursuantIn July 2000 the
Internal Revenue Service agreed to a modification of the Separation and
Distribution Agreement,tax ruling issued in
connection with the spin-off of Teledyne Technologies agreed with ATI to undertake such
a public offering. Subject to market conditions and other factors, the Company
may not be ablefrom ATI. The revised
ruling required Teledyne Technologies to complete a smaller public offering
of such size15 to 18 percent
14
16
of its outstanding Common Stock. In the third quarter 2000, Teledyne
Technologies issued 4,605,000 shares of its Common Stock in an underwritten
public offering for net proceeds of approximately $84.0 million to fulfill a
material requirement of the ruling.
In June 1998, the FASB issued SFAS No. 133--"Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that an
entity recognize all derivatives in the required time
period.statement of financial position and
measure those instruments at fair value. In 1999, the FASB issued SFAS No.
137--"Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of FASB Statement No. 133--an amendment of FASB Statement No.
133," which defers the effective date of SFAS No. 133 for one year. In June
2000, the FASB issued SFAS No. 138--"Accounting for Certain Derivative
Instruments and Certain Hedging Activities--an amendment of SFAS No. 133," which
amends the accounting and reporting standards of SFAS No. 133 for certain
derivative and hedging activities. Teledyne Technologies' managementTechnologies must implement SFAS No.
133 by the first quarter of 2001 and has not yet made a final determination of
its impact on the financial advisorsstatements. See Item 3, "Quantitative and
Qualitative Disclosures About Market Risk" below.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB No. 101). SAB
No. 101 provides the Commission's views in applying generally accepted
accounting principles to selected revenue recognition issues. The Company has
reviewed the requirements of SAB No. 101 and has determined that it is in
compliance with SAB No. 101.
OUTLOOK
Teledyne Technologies continues to invest in its strategic growth initiatives
focused on broadband communications. The Company had previously announced plans
for additional capital expenditures and product development expenses totaling
approximately $20 million in the latter half of 2000, which would impact
profitability in the third and fourth quarters. For the first nine months of
2000, capital expenditures related to strategic growth initiatives were $3.4
million and operating profit was impacted by $4.8 million of additional
operating expenses. In the fourth quarter of 2000, capital expenditures and
additional operating expenses in these growth initiatives are expected to
increase. Teledyne Technologies currently expects additional similar
expenditures to continue during 2001. These additional expenditures are expected
to review this publicimpact operating profit for the Electronics and Communications segment,
especially during the first half of 2001.
Additionally, several developments in our Aerospace Engines and Components
segment, including softness in the small turbine engine business due to a
decrease in military spare parts sales, reduced foreign demand for HARPOON
missiles and reduced development phase work on new turbine engine programs
will negatively impact 2001 results. In addition, no new J69 turbine engines
are expected to be sold in the fourth quarter of 2000 versus $2.1 million in
the fourth quarter of 1999.
Based, in part, on the aforementioned outlook, the Company continues to estimate
that 2001 segment operating profit from continuing operations should be 10
percent to 12 percent lower than total reported 1999 segment operating profit of
$90.6 million including discontinued operations. Due to reduced segment
operating profit and dilution resulting from the recent equity offering,
requirement.Teledyne Technologies expect that earnings per share for the next several
quarters may be lower than in prior year periods.
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND FORWARD-LOOKING INFORMATION
From time to time the Company makes, and this report contains, forward-looking
statements, as defined in the Private Securities Litigation Reform Act of 1995,
relating to earnings, sales, operating profit, growth opportunities, capital
investmentsexpenditures and strategic plans. Actual results could differ materially from
these forward-looking statements. Many factors, including the extent and timing
of the required public
offering, market, economic and political conditions, andacceptance of fiber optic products by customers (including service
providers), continued outsourced manufacturing of optoelectronics product by
customers, funding and continuation of government programs as well asand the outcome of
the crankshaft investigation, as well as market, political and economic
conditions, could change the anticipated results. Also, any disposition of
Teledyne Cast Parts will depend on many factors, including the terms and
conditions of any definitive asset sale and purchase agreement, as well as
industry and business conditions. Additional information concerning factors
that could cause actual results to differ materially from those projected in the
forward-looking statements is contained in Teledyne Technologies' 1999 Annual
Report on Form 10-K under the caption "Risk Factors"., as well as under the
caption "Risk Factors" in the Company's registration statement (No. 333-41892)
filed in connection with the completed public offering. The Company assumes no
duty to update forward-looking statements.
1215
1417
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes in the information provided under Item 7A,
Quantitative"Quantitative and Qualitative Disclosure About Market Risk" included in Teledyne
Technologies' 1999 Annual Report on Form 10-K. At April 2,October 1, 2000, there were no
hedging contracts outstanding.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In the third quarter of 2000, Teledyne Technologies received net proceeds
of approximately $84.0 million from an underwritten public offering of
4,605,000 shares of its Common Stock, par value $0.01 per share. On August 22,
2000, the Company sold 4,100,000 shares of Common Stock and on September 15,
2000, 505,000 additional shares were sold pursuant to the exercise by the
underwriters of their over-allotment option. Gross proceeds totaled $89,797,500
(at $19.50 per share). The underwriting discount totaled $5,157,600. Offering
expenses are estimated to be $640,000. No payments were made to directors or
officers of the Company; however, payments were made to Kirkpatrick & Lockhart
LLP, the Company's counsel in connection with the offering and to which Charles
J. Queenan, Jr., a member of the Company's Board of Directors, is Senior
Counsel.
The Company used the net proceeds from the offering to repay borrowings
under its revolving credit facility pending their use for research and
development and related capital projects, for the further development of
manufacturing capabilities and for acquisitions and/or joint ventures in
accordance with the modified IRS tax ruling received by ATI in connection the
spin-off.
The effective date of the Registration Statement for the shares was August
16, 2000 and the Commission file number for the Registration Statement is
333-41892. A total of 4,715,000 shares had been registered under such
Registration Statement. The underwriters were Goldman, Sachs & Co. Banc of
America Securities LLC and A.G. Edwards & Sons, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2710.1 Change of Control Severance Agreement dated October 3,
2000 between the Company and Robert J. Naglieri*
27.1 Financial data schedule for the quarternine month period ended
April 2,October 1, 2000 (included only in the copy of this report
filed electronically with the Securities and Exchange
Commission)
27.2 Restated financial data schedule for the nine month period
ended October 3, 1999 (included only in the copy of this
report filed electronically with the Securities and
Exchange Commission)
* Denotes management contract or compensatory plan
(b) Reports on Form 8-K
Teledyne Technologies filed no Reports on Form 8-K filed during the
quarter ended April 2,October 1, 2000.
1316
1518
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELEDYNE TECHNOLOGIES INCORPORATED
DATE: May 12,November 14, 2000 By: /s/ Stefan C. Riesenfeld
-----------------------------------------------
Stefan C. Riesenfeld, ExecutiveRobert J. Naglieri
---------------------------------------------
Robert J. Naglieri, Senior Vice President and
Chief Financial Officer
and Treasurer
1417
1619
EXHIBIT INDEX
EXHIBIT No. Description
- ----------- -----------
27*10.1* Change of Control Severance Agreement dated October 3, 2000
between the Company and Robert J. Naglieri
27.1* Financial data schedule for the quarterlynine month period ended April 2,October
1, 2000 (included only in the copy of this report filed
electronically with the Securities and Exchange Commission)
27.2* Restated financial data schedule for the nine month period ended
October 3, 1999 (included only in the copy of this report filed
electronically with the Securities and Exchange Commission)
* Filed herewith