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, 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, 2000
-------------------------------------- -----------------------------
Common Stock, $.01 par value per share 26,800,740 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, 2000 and January 2, 2000 2
Consolidated Condensed Statements of Income --
Three months ended April 2, 2000 and April 4, 1999 3
Consolidated Condensed Statements of Cash Flows --
Three months ended April 2, 2000 and April 4, 1999 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II OTHER INFORMATION 13
Item 6. Exhibits and Reports on Form 8-K 13
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TELEDYNE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
APRIL 2, 2000 and JANUARY 2, 2000
(Amounts in millions, except per share data)
April 2, January 2,
2000 2000
================================================================ ========== ==========
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4.6 $ 7.1
Receivables, net 127.2 117.6
Inventories, net 54.4 53.7
Deferred income taxes, net 24.0 21.7
Prepaid expenses, note receivable and other 3.7 4.5
-------- --------
TOTAL CURRENT ASSETS 213.9 204.6
Property, plant and equipment, at cost, net of accumulated
depreciation and amortization of $132.6
at April 2, 2000 and $132.3 at January 2, 2000 62.2 62.1
Deferred income taxes, net 25.9 25.6
Cost in excess of net assets acquired, net 8.0 8.2
Other assets 18.0 16.9
-------- --------
TOTAL ASSETS $ 328.0 $ 317.4
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 50.3 $ 46.9
Accrued liabilities 56.4 48.6
Income taxes payable 8.5 3.8
-------- --------
TOTAL CURRENT LIABILITIES 115.2 99.3
Long-term debt 83.5 97.0
Net unrecognized actuarial gains on pension obligation 12.4 14.7
Accrued postretirement benefits 33.3 33.6
Other 28.3 28.3
-------- --------
TOTAL LIABILITIES 272.7 272.9
STOCKHOLDERS' EQUITY
Common stock, at par value; outstanding shares 26,760,691 at .3 .3
April 2, 2000 and 26,687,002 at January 2, 2000
Additional paid-in capital 38.7 37.9
Retained earnings 15.8 5.6
Accumulated other comprehensive income .5 .7
-------- --------
TOTAL STOCKHOLDERS' EQUITY 55.3 44.5
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 328.0 $ 317.4
================================================================ ======== ========
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 MONTHS ENDED APRIL 2, 2000 AND APRIL 4, 1999
(Unaudited - Amounts in millions, except per-share amounts)
First Quarter
-------------------
2000 1999
================================================================== ======= =======
SALES $ 203.5 $ 202.0
COSTS AND EXPENSES
Cost of sales 147.9 151.5
Selling, general and administrative expenses 36.9 30.5
------- -------
184.8 182.0
------- -------
OPERATING PROFIT 18.7 20.0
Interest and debt expense, net 1.8 --
Other income .1 .3
------- -------
EARNINGS BEFORE INCOME TAXES 17.0 20.3
Provision for income taxes 6.8 8.4
------- -------
NET INCOME $ 10.2 $ 11.9
======= =======
BASIC EARNINGS PER COMMON SHARE $ .38 $ .43
======= =======
DILUTED EARNINGS PER COMMON SHARE $ .38 $ .43
======= =======
Weighted Average Common Shares Outstanding 27.1 27.8
================================================================== ======= =======
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 THREE MONTHS ENDED APRIL 2, 2000 AND APRIL 4, 1999
(Unaudited - Amounts in millions)
First Quarter
-------------------
2000 1999
========================================================================= ======= =======
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 10.2 $ 11.9
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of assets 4.3 3.1
Deferred income taxes (2.6) (1.8)
Changes in operating assets and liabilities:
Increase in accounts receivables (9.6) (22.2)
(Increase) decrease in inventories (.8) .7
Increase in accounts payable 3.3 8.5
Increase in accrued liabilities 7.9 4.8
Increase in current income taxes payable 4.7 --
Decrease in other long-term liabilities -- (1.7)
Increase (decrease) in net unrecognized actuarial gains on (2.3) --
pension obligation
Decrease in accrued postretirement benefits (.3) .1
Other operating, net (.7) (1.3)
------- -------
Net cash provided used by operating activities 14.1 2.1
------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (3.6) (3.2)
Disposals of property, plant and equipment .1 --
Other investing, net (.3) --
------- -------
Net cash used by investing activities (3.8) (3.2)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Net payment on revolving credit agreement (13.5) --
Proceeds from issuance of common stock .7 --
Net advances with Allegheny Technologies Incorporated -- 1.1
------- -------
Net cash provided (used) by financing activities (12.8) 1.1
------- -------
Decrease in cash and cash equivalents (2.5) --
Cash and cash equivalents--beginning of period 7.1 --
------- -------
Cash and cash equivalents--end of period $ 4.6 $ --
========================================================================= ======= =======
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, 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, 2000,
and the consolidated results of operations and cash flows for the quarterly
period then ended. The results of operations and cash flows for the period
ended April 2, 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 period
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 period 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 period 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 first quarter of 1999, compared with the actual results
for the first quarter of 2000 (amounts in millions, except per share data):
First Quarter
-------------------
2000 1999
===================================================== ======= =======
SALES $ 203.5 $ 202.0
COSTS AND EXPENSES
Cost of sales 147.9 151.5
Selling, general and administrative expenses 36.9 32.2
------- -------
184.8 183.7
------- -------
OPERATING PROFIT 18.7 18.3
Interest and debt expense, net 1.8 2.0
Other income .1 .3
------- -------
EARNINGS BEFORE INCOME TAXES 17.0 16.6
Provision for income taxes 6.8 6.9
------- -------
NET INCOME $ 10.2 $ 9.7
======= =======
BASIC EARNINGS PER COMMON SHARE $ .38 $ .35
======= =======
DILUTED EARNINGS PER COMMON SHARE $ .38 $ .35
===================================================== ======= =======
2. Comprehensive Income
Teledyne Technologies comprehensive income is composed primarily of net
income and foreign currency translation adjustments. Teledyne Technologies
comprehensive income was $10.0 million and $11.8 million for the first
quarter of 2000 and 1999, respectively.
3. 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.
The following table sets forth the computations of basic and diluted
earnings per share (amounts in millions, except per share data):
First Quarter
-------------------
2000 1999
==================================================== ======= =======
BASIC EARNINGS PER SHARE
Net income/earnings applicable to common stock $ 10.2 $ 11.9
======= =======
Weighted average common shares outstanding 26.8 27.8
======= =======
Basic earnings per common share $ .38 $ .43
======= =======
DILUTED EARNINGS PER SHARE
Earnings applicable to common stock $ 10.2 $ 11.9
======= =======
Weighted average common shares outstanding 26.8 27.8
Dilutive effect of exercise of options outstanding .3 --
------- -------
27.1 27.8
======= =======
Diluted earnings per common share $ .38 $ .43
==================================================== ======= =======
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4. 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. Cash
equivalents totaled $1.3 million and $5.5 million at April 2, 2000 and
January 2, 2000, respectively.
5. 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):
Balance at April 2, 2000 January 2, 2000
========================= ============= ===============
Raw materials and $ 26.4 $ 24.2
supplies
Work in process 65.4 62.5
Finished goods 8.2 9.1
------- -------
100.0 95.8
Progress payments (8.9) (5.3)
LIFO reserve (36.7) (36.8)
------- -------
Total inventories, net $ 54.4 $ 53.7
======= =======
6. 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 17 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, 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 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.
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At April 2, 2000, the Company's reserves for environmental remediation
obligations totaled approximately $1.5 million, of which approximately $1.2
million 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,
although 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 the resolution in any reporting
period of one or more of these matters 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-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. Pursuant to the Separation and Distribution Agreement, Teledyne
Technologies agreed with ATI to undertake such a public offering. Subject
to market conditions and other factors, the Company may not be able to
complete a public offering of such size in the required time period.
Teledyne Technologies' management and financial advisors continue to review
this public offering requirement.
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.
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
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adverse effect on the Company's financial condition or liquidity, although
the resolution in any reporting period of one or more of these matters
could have a material adverse effect on the Company's results of operations
for that period.
7. 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. Industry Segments
The following table presents Teledyne Technologies' interim industry
segment disclosures (amounts in millions):
First Quarter
--------------------
2000 1999
================================================ ======= =======
SALES:
Electronics and Communications $ 85.7 $ 83.2
Systems Engineering Solutions 57.2 59.6
Aerospace Engines and Components 60.6 59.2
------- -------
TOTAL SALES $ 203.5 $ 202.0
======= =======
OPERATING PROFIT:
Electronics and Communications $ 9.5 $ 8.5
Systems Engineering Solutions 5.6 4.9
Aerospace Engines and Components 7.5 8.7
------- -------
SEGMENT OPERATING PROFIT $ 22.6 $ 22.1
Corporate expense including interest (5.7) (2.1)
Other income .1 .3
------- -------
INCOME BEFORE TAXES $ 17.0 $ 20.3
================================================ ======= =======
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Teledyne Technologies' first quarter 2000 sales were $203.5 million, compared
with sales of $202.0 million for the same period in 1999. Net income was $10.2
million ($0.38 per diluted share) for the first quarter, compared with pro forma
net income of $9.7 million ($0.35 per diluted share) for the first quarter of
1999.
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 million ($0.43 per diluted share) for the first quarter
of 1999.
The increase in sales reflected higher sales in both the Electronics and
Communications and Aerospace Engines and Components segments, partially offset
by lower sales in the Systems Engineering Solutions segment.
The increase 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 offset by lower earnings in the Aerospace Engines and Components
segment. Net pension income for the first quarter of 2000 was $2.2 million,
compared with net pension income of $1.6 million for the first quarter of 1999.
First quarter earnings before interest, taxes, depreciation and amortization
(EBITDA) for 2000 were $23.1 million, compared with pro forma EBITDA of $21.7
million for the first quarter of 1999.
On a historical basis, while gross margins were higher in the first quarter of
2000, compared with the first quarter of 1999, net income decreased due to
interest expense on the debt assumed as part of the spin-off, higher research
and development spending and higher administrative expense compared with the
allocation from ATI which was based on sales. The higher gross margins reflected
a change in product mix in the Electronics and Communications and the Aerospace
Engines and Components segments. The Company's effective tax rate for the first
quarter of 2000 was 40 percent and was 41.3 percent for the first quarter of
1999.
REVIEW OF OPERATIONS:
The following table sets forth the sales and operating profit for each segment:
First Quarter
-------------------
2000 1999
============================================= ======= =======
SALES:
Electronics and Communications $ 85.7 $ 83.2
Systems Engineering Solutions 57.2 59.6
Aerospace Engines and Components 60.6 59.2
------- -------
TOTAL SALES $ 203.5 $ 202.0
======= =======
OPERATING PROFIT:
Electronics and Communications $ 9.5 $ 8.5
Systems Engineering Solutions 5.6 4.9
Aerospace Engines and Components 7.5 8.7
------- -------
TOTAL SEGMENT OPERATING PROFIT $ 22.6 $ 22.1
============================================= ======= =======
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ELECTRONICS AND COMMUNICATIONS
The Electronics and Communications segment first quarter sales were $85.7
million, up 3.0 percent from 1999 first quarter sales of $83.2 million. First
quarter operating profit rose 11.8 percent to $9.5 million, from $8.5 million in
the first quarter of 1999.
First quarter sales, compared with the same period in 1999, grew significantly
in electronic manufacturing services, relay products, business and commuter
aircraft communications equipment and microwave products. Sales from electronic
manufacturing services and microwave products grew as a result of new orders
from both military and commercial customers. Relay products sales grew due to
increased demand from the communications and semiconductor test equipment
markets. Sales of medical and military microelectronics were down from the same
period last year. Increased profitability resulted from a favorable product mix,
and operational improvements, partially offset by higher research and
development spending.
SYSTEMS ENGINEERING SOLUTIONS
The Systems Engineering Solutions segment first quarter sales were $57.2
million, down 4.0 percent from 1999 first quarter sales of $59.6 million.
Operating profit for the first quarter improved 14.3 percent to $5.6 million,
from $4.9 million in the same period last year.
First quarter performance reflected strong sales growth and profitability
improvements in systems engineering and integration, information technology,
space programs, energy systems and environmental programs. The first quarter
comparisons were negatively impacted by the significant decline in sales of
marine products for the petroleum exploration market, which has been very weak
since the second quarter of 1999. Lower general and administrative expenses
reflecting $1.4 million of income related to chemical weapon demilitarization
reserves no longer needed due to additional program funding, were 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 first quarter sales were $60.6
million, up 2.4 percent from $59.2 million in 1999 first quarter. Operating
profit declined by 13.8 percent to $7.5 million, from $8.7 million in the first
quarter of 1999. Improved gross profit reflects favorable product mix which was
offset by higher general and administrative expenses resulting from increased
research and development spending and selling expense.
Sales and operating profit of piston engines for general aviation aircraft grew
significantly, driven by strong sales of new engines to both OEMs and the
aftermarket. The Company is currently investigating a supplier related
crankshaft issue. Field testing is underway. At this point, 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.
Sales and operating profit in the turbine engine business were down slightly due
to reduced revenue from development phase work on new turbine engine programs.
Sales 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 supply turbine engines for the Joint Air-to-Surface
Standoff Missile (JASSM) program.
Sales and operating profit from aerospace castings declined from the prior year
due to market conditions, operational inefficiencies and a shift in product mix.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Teledyne Technologies net cash provided by operating activities from continuing
operations was $14.1 million for the first quarter of 2000, compared with $2.1
million for the same period of 1999. The $12.0 million increase 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
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increased by $9.6 million in 2000 from year end 1999, while in the first quarter
of 1999 accounts receivable increased $22.2 million from the prior year end.
Working capital decreased to $98.7 million at the end of the first quarter of
2000, compared with $105.3 million at the end of the first quarter 1999. The
decrease in working capital was primarily due to the higher income taxes
payable, accrued liabilities and accounts payable, offset in part by higher
accounts receivables.
The higher balance in accounts receivable reflected additional sales in the
later part of the first quarter of 2000 relative to the fourth quarter of 1999.
The higher balance in accounts payable and accrued liabilities reflected
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 Technologies net cash used by investing activities was primarily for
capital expenditures and was $3.8 million for the first quarter of 2000,
compared with net cash used of $3.2 million for the same quarter of 1999.
Financing activities used net cash of $12.8 million in the first quarter of
2000, compared with cash provided of $1.1 million for the same quarter of 1999.
The 2000 amount primarily reflected net payments of $13.5 million for the
revolving credit agreement.
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. At April 2, 2000 Teledyne Technologies had $83.5
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 million at April 2, 2000, compared with $103 million at year
end 1999.
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-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. Pursuant to the Separation and
Distribution Agreement, Teledyne Technologies agreed with ATI to undertake such
a public offering. Subject to market conditions and other factors, the Company
may not be able to complete a public offering of such size in the required time
period. Teledyne Technologies' management and financial advisors continue to
review this public offering requirement.
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, growth opportunities, capital investments 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, and funding and
continuation of government programs, as well as the outcome of the crankshaft
investigation, could change the anticipated results. 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".
The Company assumes no duty to update forward-looking statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes in the information provided under Item 7A,
Quantitative and Qualitative Disclosure About Market Risk" included in Teledyne
Technologies' 1999 Annual Report on Form 10-K. At April 2, 2000, there were no
hedging contracts outstanding.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial data schedule for the quarter ended April 2,
2000 (included only in the copy of this report filed
electronically with the Securities and Exchange
Commission)
(b) Reports on Form 8-K
Teledyne Technologies filed no Reports on Form 8-K filed during
the quarter ended April 2, 2000.
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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, 2000 By: /s/ Stefan C. Riesenfeld
-----------------------------------------------
Stefan C. Riesenfeld, Executive Vice President,
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
EXHIBIT No. Description
- ----------- -----------
27* Financial data schedule for the quarterly period ended
April 2, 2000 (included only in the copy of this report filed
electronically with the Securities and Exchange Commission)
* Filed herewith