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<SEC-DOCUMENT>0000950148-01-500060.txt : 20010228
<SEC-HEADER>0000950148-01-500060.hdr.sgml : 20010228
ACCESSION NUMBER: 0000950148-01-500060
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010226
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TELEDYNE TECHNOLOGIES INC
CENTRAL INDEX KEY: 0001094285
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711]
IRS NUMBER: 251843385
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-15295
FILM NUMBER: 1554448
BUSINESS ADDRESS:
STREET 1: 2049 CENTURY PARK E
CITY: LOS ANGELES
STATE: CA
ZIP: 90067-3101
BUSINESS PHONE: 3102773311
MAIL ADDRESS:
STREET 1: 1000 SIX PPG PLACE
CITY: PITTSBURGH
STATE: PA
ZIP: 15222-5479
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>v69886e10-k405.txt
<DESCRIPTION>FORM 10-K405
<TEXT>
<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
------------------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
TELEDYNE TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 25-1843385
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
2049 Century Park East, Suite 1500
Los Angeles, California 90067-3101
(Address of principal executive office and Zip Code)
Registrant's telephone number, including area code: (310) 277-3311
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock, par value $.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
At February 23, 2001, the number of outstanding shares of Common Stock of
the registrant was 31,647,053. At February 23, 2001, the aggregate market value
of the registrant's Common Stock held by non-affiliates of the registrant was
approximately $439.2 million, based on the closing price of $14.30 per share as
reported on the New York Stock Exchange on that date. Shares of Common Stock
known by the registrant to be beneficially owned by directors and executive
officers subject to Section 16 of the Securities Exchange Act of 1934 are not
included in the computation. The registrant, however, has made no determination
that such persons are "affiliates" within the meaning of Rule 12b-2 under the
Securities Exchange Act of 1934.
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the registrant's proxy statement for its 2001 Annual
Meeting of Stockholders (the "2001 Proxy Statement") are incorporated by
reference in Part III of this Report. Information required by paragraphs (a) and
(b) of Item 306 of Regulations S-K and by paragraphs (k) and (l) of Item 402 of
Regulation S-K is not incorporated by reference in this Form 10-K or in any
other filing of the registrant. Such information shall not be deemed "soliciting
material" or to be filed with the Commission as permitted by paragraph (c) of
Item 306 and Instruction (9) to Item 402 of Regulation S-K.
- --------------------------------------------------------------------------------
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 20
Item 3. Legal Proceedings........................................... 21
Item 4. Submission of Matters to a Vote of Security Holders......... 21
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters..................................................... 22
Item 6. Selected Financial Data..................................... 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 24
Item 7A. Quantitative and Qualitative Disclosure About Market Risk... 33
Item 8. Financial Statements and Supplementary Data................. 33
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 33
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 34
Item 11. Executive Compensation...................................... 34
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 34
Item 13. Certain Relationships and Related Transactions.............. 34
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 34
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION................. F-1
SIGNATURES
EXHIBIT INDEX
</TABLE>
DEFINED TERMS
In this Annual Report on Form 10-K, Teledyne Technologies Incorporated is
sometimes referred to as the "Company", "Teledyne Technologies" or "TDY".
References to ATI mean Allegheny Technologies Incorporated, formerly known as
Allegheny Teledyne Incorporated, the company from which we were spun-off on
November 29, 1999.
i
<PAGE> 3
PART I
ITEM 1. BUSINESS.
WHO WE ARE
Teledyne Technologies Incorporated is a leading provider of sophisticated
electronic and communications products, including components and subsystems for
wireless and satellite systems, and data acquisition and communications
equipment for airlines and business aircraft. We also provide systems
engineering solutions and information technology services for space, defense and
industrial applications, and manufacture general aviation and missile engines
and components, as well as on-site power generation systems.
We serve niche market segments where performance, precision and reliability
are critical. Our customers include major communications and other commercial
companies, government agencies, aerospace prime contractors and general aviation
companies. We have developed strong core competencies in engineering, software
development and manufacturing that we can leverage both to sustain and grow our
current niche businesses, and to become an innovator in related higher-growth
markets.
We plan to capitalize on our existing technology and experience to increase
participation in commercial communications markets. For example, we are
leveraging our experience in manufacturing fiber optic transmitters and
receivers for aerospace customers to enable us to manufacture similar products
for commercial customers in wireless and fiber optic communications markets.
Total sales in 2000 were $795.1 million, compared to $761.4 million and
$733.0 million in 1999 and 1998, respectively. Our segment operating profits
were $72.4 million, $87.6 million and $85.3 million in 2000, 1999 and 1998,
respectively. Approximately 56% of our total sales in 2000 were to commercial
customers and the balance was to the U.S. Government. Approximately 56% of these
U.S. Government sales were attributable to fixed price-type contracts and the
balance to cost plus fee-type contracts. International sales accounted for
approximately 17% of total sales in 2000.
Our three business segments, their respective operating companies, and
their contribution to our sales in 2000, 1999 and 1998 are summarized in the
following table:
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
--------------------
SEGMENT OPERATING BUSINESSES 2000 1999 1998
- ------------------------------------ ------------------------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Electronics and Communications Teledyne Electronic Technologies 45% 45% 47%
Systems Engineering Solutions Teledyne Brown Engineering, Inc. 30% 30% 30%
Aerospace Engines and Components Teledyne Continental Motors 25% 25% 23%
</TABLE>
In the fourth quarter of 2000, Teledyne Technologies completed the sale of
its sand and investment castings businesses, which had been part of the
Aerospace Engines and Components segment. Financial information in this report
has been restated to reflect Teledyne Cast Parts as a discontinued operation.
Teledyne Technologies was organized as a Delaware corporation on August 23,
1999. Teledyne Technologies is comprised of certain businesses of the former
Aerospace and Electronics segment of Allegheny Teledyne Incorporated, now known
as Allegheny Technologies Incorporated. On November 29, 1999, we were spun-off
from ATI after a strategic review concluded that our businesses would be able to
grow faster and be a stronger competitor as a separate company. Our origin dates
back to Teledyne, Inc. founded in 1960 by Dr. Henry Singleton.
Our principal executive offices are located at 2049 Century Park East,
Suite 1500, Los Angeles, California 90067-3101. Our telephone number is (310)
277-3311.
STRATEGY
Our strategy is to focus on markets for communication products, while we
continue to expand our profitable niche market businesses. We plan to
continually evaluate our product lines to ensure that they
<PAGE> 4
are aligned with our strategy. These actions will help us to redirect capital
and management focus to opportunities that will best utilize our engineering
resources and technical expertise. Specific elements of our strategy include:
Capitalize on Our Existing Technology and Experience to Penetrate
Communications Markets. We believe that certain broadband communications
markets, especially wireless and satellite communications equipment and fiber
optic communications components, offer a number of attractive opportunities to
leverage our current technologies and capabilities. Our experience in
manufacturing fiber optic modules for aerospace applications and high frequency
microwave products places us in a strong position to manufacture similar
components for the commercial communications market. We have formed the Teledyne
OptoElectronics business unit to pursue these opportunities. We have also
increased our focus on wireless and satellite communication applications and are
expanding our product lines with new power amplifiers, integrated microwave
modules and high frequency relays.
Enhance High Volume Manufacturing Capability. We intend to increase our
automated manufacturing capability to both lower the manufacturing cost of our
existing products and enable us to meet the high volume needs of commercial
customers in the expanding communications markets. For example, we have been
adding state-of-the-art-automated equipment for high volume manufacturing of
components for fiber optic systems at our microelectronics facility. We have
expanded our foreign manufacturing operations in Mexico and may expand further
our foreign manufacturing operations in Mexico and Scotland, when appropriate,
in order to lower our costs or to access an available workforce. In addition, we
now offer manufacturing services to fiber optic component and equipment OEMs who
need high volume manufacturing of their own products either because of capacity
constraints or lack of manufacturing and design expertise.
Expand Strategic Alliances. We intend to establish relationships with
companies where our combined technological, operational, marketing and financial
resources can accelerate the introduction of new technologies and the
penetration of new markets. Examples of alliances include a strategic license
agreement with Humboldt State University to produce fuel cell systems based on
proton membrane technology developed at the University, a joint venture that is
developing alternative technologies to incineration for the destruction of
chemical weapons, an alliance with Pratt and Whitney to pursue marketing
programs to lead to the development of new applications for small turbine
engines, and an alliance with Microcosm Technologies for the manufacturing of
Microelectromechanical Systems (MEMS).
Leverage Niche Market Leadership. We have developed strong, proprietary
technical capabilities that have enabled us to achieve leading market positions
in many of our niche markets, including those for high frequency
electromechanical relays, high frequency microwave power amplifiers, data
acquisition avionics, piston engines for general aviation, small turbine engines
and medical microelectronics. We intend to leverage our leadership position in
several niche markets to accelerate the introduction of new products and to
increase our value-added service offerings. For example, we are extending our
position in data acquisition avionics by introducing new data acquisition
products specifically designed for the business and commuter aircraft market.
OUR BUSINESS SEGMENTS
ELECTRONICS AND COMMUNICATIONS
Our Electronics and Communications segment, through Teledyne Electronic
Technologies, provides a wide range of electronic systems, components and
services that are focused primarily on advanced communications and data
acquisition applications, but also encompass precision electronic components and
subsystems that are used in medical, commercial, military and industrial
instrumentation applications.
2
<PAGE> 5
Communications Products
Our innovative communications technologies include data acquisition and
communication systems for commercial aviation, microwave power amplifiers for
wireless and satellite systems, lightweight microwave filters and high-frequency
relays. We are seeking to leverage our experience building sophisticated fiber
optic transmitters and receivers for military and space applications to support
the growing market for commercial fiber optic communication products.
We have enhanced our leading position in air-to-ground telephony for
business aircraft with new data transmission capabilities and are extending our
airline data management technology by developing a system that automates the
transfer of information from aircraft to the airline via the Internet.
Data Acquisition and Communication Products. Our aircraft information
management solutions are designed to increase the safety and efficiency of
airline transportation. With over 200 commercial airline customers, we are a
leading supplier of digital flight data acquisition systems for the commercial
airline industry. We have provided these systems for our airline customers for
over one-half of Boeing aircraft currently in production. We also provide our
systems to certain aircraft customers of Airbus Industries' partner,
Daimler-Chrysler Aerospace-Airbus. These systems acquire both data for use by
the aircraft's flight data recorder, and record additional data for the
airline's use, such as performance and engine condition monitoring.
Our newest digital flight data acquisition units have some of the most
advanced features in the industry. These systems conform to the required
expansion of data recording capabilities, which were mandated by the FAA in
1997. At that time, the FAA increased the number of mandatory parameters to be
monitored from the 17 then required to 88 by the year 2002.
Our new Wireless Ground Link product automates the transfer of in-flight
data recorded by our data acquisition systems to an airline's operations center.
Transmission of the data can occur anytime an aircraft is on the ground
utilizing existing digital wireless infrastructure. The raw data is then
forwarded to the airline through the Internet, where our Flight Data Replay and
Analysis System can process them into useful formats. Such data can then be used
by the airline to schedule maintenance services and implement safety procedures.
The market for data acquisition systems aboard business and commuter
aircraft is growing rapidly as these aircraft have begun to mirror air transport
aircraft in data gathering and aircraft monitoring. We are one of the largest
suppliers of air-to-ground telephony, facsimile and data transmission products
to the business and commuter aircraft market.
Wireless and Satellite Communication Components. Our communication
components and subsystems are used in satellite earth terminals, communication
satellites, and base stations for Personal Communication Services (PCS) and
wireless loops.
We supply power amplifiers used in the L, C and Ku band satellite uplink
transmitters. These products encompass both solid state monolithic microwave
integrated circuits (MMICs) and high power helix traveling wave tubes.
Applications include Very Small Aperture Terminals (VSATs) used for credit card
verification, corporate networking and mobile news gathering.
A new and rapidly growing application for our MMIC transmitters is in the
terminals for satellite-based Internet access systems that will be sold to
consumers and businesses. Another new MMIC application is for broadband
point-to-multipoint systems, operating in the Unlicensed National Information
Infrastructure band, which are being deployed to provide wireless Internet
access.
Our Teledyne Relays miniature electromechanical relays are used where
maintenance of signal fidelity is essential. Wireless applications include
cellular base stations and tower mounted amplifiers, and our relays are used in
many satellites. Other communications applications include Internet switches and
routers, and fiber optic systems.
3
<PAGE> 6
Fiber Optic Communication Components. We have manufactured fiber optic
transmitters and receivers for aerospace applications for over 10 years. In late
1999, Harris Corporation awarded us the contract to manufacture rugged fiber
optic transmitters and receivers for the new F-22 fighter program. Approximately
50 transmit and receive modules are used on each aircraft to route data to and
from avionics equipment and the aircraft's central processor. Our fiber optic
transmitter and receiver modules are also used for video distribution on the
International Space Station.
While these devices typically have sophisticated designs, the production
volumes for aerospace applications are much lower than those required for
commercial communications products. We have, therefore, been expanding our
manufacturing capacity for fiber optic communication products by dedicating
additional clean room facilities to optical component manufacturing and are
continuing to add automatic and semiautomatic assembly equipment to the
production line.
Our newly formed Teledyne OptoElectronics business unit offers innovative
one-stop packaging solutions for high data rate, broadband fiber optic
applications. Our services include high-volume turnkey manufacturing of
optoelectronic components such as laser transmitters and receivers, as well as
production of subassemblies such as connectorized fibers and thick/thin film
substrates. We have recently added new precision alignment and laser weld
equipment, and also automatic test equipment suitable for data rates of over 10
gigabits per second. We have increased our staff of skilled engineers to assist
our customers with tooling and automation for high rate production, and are
applying our experience with high-speed electronics to support our customers'
next-generation designs.
Electronic Manufacturing Services. We serve the market for low volume, high
mix manufacturing through facilities in Tennessee, Mexico and Scotland. Examples
of the types of products that we manufacture include sophisticated military
electronics equipment, key subsystems in medical equipment such as Magnetic
Resonance Imaging (MRI) systems, and subsystems for wireless and high data rate
communication equipment.
We also supply patented rigid-flex printed circuit boards that combine
rigid circuit boards and flexible printed circuits in a single continuous unit,
reducing the size of electronic equipment by permitting tighter packaging
density and improving reliability by minimizing interconnections. We have added
quick-turn manufacturing capability to provide our customers with prototypes in
much less time than previously required.
Other Electronic Products
Instruments and Capital Equipment. We produce gas analyzers and vacuum
instrumentation for semiconductor manufacturing and other industrial processes.
We have expanded our line of capital equipment for printed circuit board
manufacturing with an innovative horizontal copper plating system designed to
plate panels in less time than conventional systems.
Defense and Aerospace Electronics. We are a leading supplier of high power
traveling wave tubes for electronic warfare systems, radar systems, and military
satellite communications systems for both domestic and international
applications. Our hybrid microcircuits are used in applications such as military
(including F-18 and F-22 aircraft and the M1A2 tank), aerospace, medical and
instrumentation systems. We also manufacture military and space-qualified
relays, electronic sequencing devices for military ejection seats, and runway
visual range detectors used in airport operations.
Medical Electronics. We have applied our micro-chip modules (MCM)
technology to the manufacture of life sustaining and life enhancing implantable
medical devices, including cardiac pacemakers and defibrillators, neural
stimulators and cochlear implant hearing aids. Newer products include biological
signal sensors and ambulatory digital recorders for the diagnosis and monitoring
of epilepsy and sleep disorders.
High-Density Connectors. We supply custom, low profile, surface mount
connectors for applications in computer disk drives and consumer medical
electronic devices, and are targeting their use in high-volume applications such
as personal computers and workstations.
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<PAGE> 7
SYSTEMS ENGINEERING SOLUTIONS
Teledyne Brown Engineering, Inc. applies the skills of its extensive staff
of engineers and scientists to solve the increasingly complex problems of our
governmental defense, aerospace and commercial customers. We also manufacture
small electrical power generators and hydrogen supply systems to support the
emerging market for distributed electrical power.
Aerospace Solutions
We provide a broad range of highly sophisticated engineering solutions and
services to U.S. space programs. As the payload integration contractor for
NASA's Marshall Space Flight Center, we have had major responsibilities in the
numerous scientific missions of the Space Shuttle. This work has ranged from
experiment planning, through designing and fabricating interface hardware, to
manning the mission control center during flight operations.
The centerpiece of our current space activities is the International Space
Station. We are involved in both space-borne and ground-support hardware
development and we participate in mission planning and operations.
Defense Solutions
For over 45 years, we have played a key role in the development of U.S.
defense systems. In ballistic missile defense programs, we have provided
solutions in systems engineering, integration, and testing; real-time
distributed testing and training; radar and optical systems design; command
center development; and intelligence studies and threat analysis. We provide
battle simulation software as part of our role for the U.S. Ballistic Missile
Defense Organization's National Missile Defense program.
We also provide an array of engineering solutions related to combat systems
technologies, including research and development test support, operational test
and evaluation, systems survivability analysis, and body armor development.
Information Services
Our software products, most of which are certified to ISO 9001, are used
for highly diverse applications, such as high-fidelity simulations, multi-media
training, Internet website development, distributed real-time testing, and
command and control centers.
We have developed hundreds of simulation programs, including the Extended
Air Defense Simulation, which is used by friendly governments worldwide and was
combat-proven during Operation Desert Storm and more recent operations. We have
recently upgraded the U.S. Army's land-combat model to include amphibious and
tactical air operations.
We are recognized as a leader in the development of real-time, vehicle- and
weapons-integrated simulations for systems testing and training. Our Systems
Exerciser is a simulation tool used to verify the inter-operational
compatibility of geographically separated, complex defense systems. The Systems
Exerciser "drives" actual weapons systems with a simulated environment including
threats, weather, and terrain, creating a robust virtual world in which real
systems can operate and interact.
We have been continuously involved in weapons signature management
development efforts since 1989, with over 47 successful programs, of which 37
were sole source contracts. We are particularly well known for systems that
limit the detection of soldiers on the battlefield by radar or infrared sensors,
as to which we hold several issued and pending patents. The Optical Signatures
Code, which we developed and maintain, is the recognized standard in missile
defense. We also developed the world's largest on-line database for optical
signatures.
In 2000, we formed the Embedded Learning Applications Solutions business
unit to leverage our information technology and professional services experience
to expand further into commercial markets. Through this unit, we expect to
provide e-learning and other knowledge based applications in areas such as
5
<PAGE> 8
product training, maintenance and customer support initially to the finance,
automotive and health-care industries.
Environmental Solutions
We utilize our systems engineering solutions to assist the U.S. Government
in complying with terms of the Chemical Weapons Convention Treaty. This Treaty
requires the United States to destroy all chemical weapons and material by 2007.
As a 50% participant in a joint venture, we are developing alternative
technologies to incineration for the destruction of stockpile chemical
munitions. As the prime contractor for the U.S. Army's Non-Stockpile Chemical
Materiel Demilitarization program, we are designing, fabricating, integrating,
and testing equipment to safely destroy small caches of chemical munitions and
materiel located in over 30 states.
We also support the United States government's efforts to clean up nuclear
weapon production complexes, and to safely store nuclear waste. A key need, both
for temporary and permanent storage of these nuclear wastes, is the availability
of a reliable containment method, or canisters for waste containment. We have
targeted our efforts within this market on the production of containers and
equipment to support the nation's efforts to clean up hazardous waste. In 2000,
the Air Force selected us to establish and operate a highly specified analysis
laboratory for performing nuclear forensic analysis of gas samples.
Energy Systems
We currently provide on-site electrical power generators and services to
the U.S. Government and several commercial customers. Current products include
our 2.5kW Minotaur(TM) engine-generator system, which is powered by natural gas
and designed for long-term, continuous, low-maintenance prime power generation
and the Telan(R) thermoelectric generator series for prime power generation in
the range of three to 500 watts. Product development efforts are also focused on
designing fuel cells in the 10-watt to 5.0kW range. In 2000, we entered into a
strategic license agreement with Humboldt State University to use this
technology to produce fuel cell systems based on proton exchange membrane
technology developed at the University.
We also manufacture and sell a broad line of hydrogen generation systems.
Using electrolysis of water, our current line of generators meet a wide range of
customer needs for on-site production of high-purity gas. Products include
Altus(R) and Titan(TM) gas generation systems used for high purity hydrogen and
oxygen supply in the range of 2,000 standard liters per minute. Our product
development efforts in hydrogen generation are also focused on proton membrane
technology systems which convert hydrocarbon fuels, such as natural gas, propane
or methanol, into a hydrogen-rich stream for direct use in fuel cells.
AEROSPACE ENGINES AND COMPONENTS
Our Aerospace Engines and Components segment, through Teledyne Continental
Motors, focuses on the design, development and manufacture of piston engines,
turbine engines, electronic engine controls and batteries.
Piston Engines
We design, develop and manufacture piston engines and ignition systems for
major general aviation airframe manufacturers and provide spare parts and engine
rebuilding services. We are one of two primary worldwide original equipment
producers of piston engines and after-market service providers for the general
aviation marketplace.
Our product lines include engines powering the Raytheon Beech Bonanza and
Baron aircraft, the Mooney Aircraft line of advanced single engine aircraft, and
the popular New Piper Seneca V twin-engine aircraft. In addition to these
long-standing products, our engines will power four new high-speed composite
6
<PAGE> 9
aircraft currently entering production. These are the Cirrus SR-20, Lancair
Columbia, Diamond Katana C1, and the Extra 400.
In addition to the sales of new aircraft engines to aircraft producers, we
also actively support the aircraft engine aftermarket. Piston aircraft engines
are produced with a finite utilization life generally expressed as time between
overhaul. Our after-market support includes the building and rebuilding of
nearly 3,000 of these units annually with our Gold Medallion(R)Rebuilt Engine.
We provide a full complement of spare parts such as cylinders, crankcases, fuel
systems, crankshafts, camshafts and ignition products. In addition, our Gill(R)
line of lead acid batteries is widely recognized as the premier power source for
general aviation.
We have developed the first full authority digital electronic controls for
piston aircraft engines. These controls, known as PowerLink(TM) FADEC (Full
Authority Digital Electronic Control), are designed to automate many functions
that currently require manual control, such as fuel flow and power management.
This system also saves fuel as a result of improved engine management. After a
series of additional endurance tests on our Power-Link(TM) FADEC, on December 1,
2000, the FAA awarded a new type certificate for our four-cylinder Continental
10F240-B engine. We are also continuing the development of other FADEC-equipped
engines targeted at the most popular models of four and six cylinder piston
aircraft engines in use through the world. We believe that these control systems
will become standard equipment on new aircraft and will be retrofitted on
higher-end, piston engine general aviation aircraft.
Through Teledyne Mattituck Services, Inc., located in Long Island, New
York, we serve as an aftermarket supplier and piston engine overhauler to the
general aviation marketplace. We continue to believe that these service
capabilities will leverage our investments in manufacturing excellence and the
development of digital electronic controls for piston aircraft engines.
Turbine Engines
We design, develop and manufacture small turbine engines for missiles and
unmanned aerial vehicles. We also produce engines that power military trainer
aircraft.
Our J402 engine powers the HARPOON missile system. Derivatives of this
engine power the Standoff Land Attack Missile and the Standoff Land Attack
Missile Expanded Response. A derivative of the J402 engine has been selected by
Lockheed Martin Corporation to power the Joint Air-to-Surface Standoff Missile
(JASSM) that is scheduled to start production in 2002. We are the sole source
provider for engines for the JASSM system. The JASSM production requirement is
currently estimated at 3,700 units.
Another of our engines provides the turbine power for the Improved Tactical
Air Launched Decoy being built for the U.S. Navy. This system enhances combat
aircraft survivability by both serving as a decoy and identifying enemy radar
sources. This low-cost turbine engine is the first of a family of lower-thrust
engines to enter production.
We are the sole source for major spare parts for the engine for the T-37
aircraft, the primary jet trainer for the U.S. Air Force. This engine has been
in service for over 40 years and will continue to power the T-37 well into this
decade.
In 2000, we signed a Memorandum of Agreement with Pratt & Whitney's Small
Military Engines unit to pursue teaming in areas of development, manufacturing,
and technical product support of small military engine products and services.
This product line would include Unmanned Air Vehicle engines producing up to
16,000 pounds of thrust, which would be provided to the U.S. Government.
CUSTOMERS
We have hundreds of customers in the communications, electronics, aerospace
and defense industries. No commercial customer accounted for more than 10% of
our total sales during 2000, 1999 or 1998.
7
<PAGE> 10
Approximately 44%, 44% and 40% of our total sales for 2000, 1999 and 1998
were derived from contracts with agencies of, and prime contractors to, the U.S.
Government. Our principal U.S. Government customer is the U.S. Department of
Defense. In 2000, our largest program with the U.S. Government, The Boeing
Company -- Lead Systems Integrator contract, represented 6.6% of total sales. In
both 1999 and 1998, our largest program with the U.S. Government was the Systems
Engineering and Technical Assistance contract with the Space and Missiles
Defense Command, which represented 6.2% and 7.7%, respectively, of total sales.
Set forth below are sales by our segments to agencies and prime contractors to
the U.S. Government for the periods presented:
U.S. GOVERNMENT SALES
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Electronics and Communications........................... $ 97.5 $101.1 $102.4
Systems Engineering Solutions............................ 198.4 185.4 159.2
Aerospace Engines and Components......................... 51.4 47.5 33.3
------ ------ ------
Total.......................................... $347.3 $334.0 $294.9
====== ====== ======
</TABLE>
Our backlog of confirmed orders was approximately $339.2 million at
December 31, 2000, $348.0 million at January 2, 2000 and $363.7 million at
January 3, 1999.
SALES AND MARKETING
Our sales and marketing approach varies by segment and by products within
our segments. A shared fundamental tenet is the commitment to work closely with
our customers to understand their needs, with an aim to secure preferred
supplier and longer-term relationships.
Our business segments use a combination of internal sales forces,
distributors and commissioned sales representatives to market and sell our
products and services. Products are also advertised in appropriate trade
journals and by means of various Internet web sites. To promote our products and
other capabilities, our personnel regularly participate in relevant trade shows
and professional associations. Many of our government contracts are awarded
after a competitive bidding process in which we seek to emphasize our ability to
provide superior products and technical solutions in addition to competitive
pricing.
COMPETITION
We believe that technological capabilities and innovation and the ability
to invest in the development of a new and enhanced products are critical to
obtaining and maintaining leadership in our markets and the industries in which
we compete generally. Although we have certain advantages that we believe help
us compete in our markets effectively, each of our markets is highly
competitive. Our businesses vigorously compete on the basis of quality, product
performance and reliability, technical expertise, price and service. Many of our
competitors have, and potential competitors could have, greater name
recognition, a larger installed base of products, more extensive engineering,
manufacturing, marketing and distribution capabilities and greater financial,
technological and personnel resources than we do.
RESEARCH AND DEVELOPMENT
Our research and development efforts primarily involve engineering and
design relating to improving product lines and developing new products and
technologies in the same or related fields. We spent a total of $247.4 million,
$215.9 million and $175.0 million on research and development for 2000, 1999 and
1998, respectively. Customer-funded research and development, most of which was
attributable to work under contracts with the U.S. Government, represented
approximately 87%, 87% and 86% of total research and development costs for 2000,
1999 and 1998, respectively.
In 2000, approximately 60% of the $31.7 million in Company-funded research
and development costs were incurred in our electronics and communications
businesses. We expect the level of Company-funded
8
<PAGE> 11
research and development to be approximately $43 million in 2001 as we continue
to increase our manufacturing capabilities and product development efforts in
the fiber optic and wireless communications businesses.
INTELLECTUAL PROPERTY
While we own and control various intellectual property rights, including
patents, trade secrets, confidential information, trademarks, trade names, and
copyrights, which, in the aggregate, are of material importance to our business,
our management believes that our business as a whole is not materially depending
upon any one intellectual property or related group of such properties. We own
several hundred active patents and are licensed to use certain patents,
technology and other intellectual property rights owned and controlled by
others. Similarly, other companies are licensed to use certain patents,
technology and other intellectual property rights owned and controlled by us.
Patents, patent applications and license agreements will expire or
terminate over time by operation of law, in accordance with their terms or
otherwise. We do not expect the expiration or termination of these patents,
patent applications and license agreements to have a material adverse effect on
our business, results of operations or financial condition.
In connection with the spin-off, an affiliate of ATI granted us an
exclusive license to use the "Teledyne" name and related logos, symbols and
marks in connection with our operations. The annual fee is $100,000 for this
license and on November 24, 2004, we have an option to purchase all rights and
interests in the Teledyne marks for $412,000.
EMPLOYEES
Out of a total workforce of approximately 5,840, about 1,400 individuals
have engineering, physics, mathematics or computer science degrees. The
International Union of United Automobile, Aerospace and Agricultural Implement
Workers of America represents approximately 73 of our employees under a
collective bargaining agreement that expires on November 24, 2001 and another
approximately 374 of our employees under a collective bargaining agreement that
expires on December 16, 2003. We consider our relations with our employees to be
good.
EXECUTIVE MANAGEMENT
TDY's executive management include:
<TABLE>
<CAPTION>
NAME AND TITLE AGE PRINCIPAL OCCUPATIONS LAST 5 YEARS
-------------- --- ----------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS*:
Robert Mehrabian................ 59 Dr. Mehrabian is the Chairman, President and Chief
Chairman, President and Chief Executive Officer of TDY. He has been the President
Executive Officer; Director and Chief Executive Officer of TDY since its
formation. Dr. Mehrabian became Chairman of the
Board of Directors on December 14, 2000. Prior to
the spin-off, he was the President and Chief
Executive Officer of ATI's Aerospace and
Electronics segment since July 1999 and had served
ATI at various senior executive capacities since
July 1997. Before joining ATI, Dr. Mehrabian served
as President of Carnegie Mellon University. He is a
director of TDY, Mellon Financial Corporation and
PPG Industries, Inc.
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
NAME AND TITLE AGE PRINCIPAL OCCUPATIONS LAST 5 YEARS
-------------- --- ----------------------------------
<S> <C> <C>
Robert J. Naglieri.............. 52 Mr. Naglieri has been Senior Vice President and
Senior Vice President and Chief Financial Officer of TDY since October 3,
Chief Financial Officer 2000. Prior to joining TDY, Mr. Naglieri served as
divisional Chief Financial Officer for the
agricultural business for CNH Global NV, the
company formed by the merger of Case Corporation
and New Holland, NV. Prior to that merger, he was
the Controller for Case Corporation from 1994 until
1999.
John T. Kuelbs.................. 58 Mr. Kuelbs has been the Senior Vice President,
Senior Vice President, General General Counsel and Secretary of TDY since November
Counsel and Secretary 29, 1999, having joined ATI's Aerospace and
Electronics segment in October 1999. Mr. Kuelbs was
Senior Vice President -- Acquisition Policy for
Raytheon Company from November 1998 to September
1999 and Senior Vice President -- Legal of Raytheon
Systems Company from January 1998 to November 1998.
Before Raytheon's acquisition of Hughes Aircraft
Company, Mr. Kuelbs spent 17 years at Hughes
Aircraft Company where he served as Senior Vice
President, General Counsel and Secretary from 1994
to 1998.
Dale A. Schnittjer.............. 56 Mr. Schnittjer has been the Controller of TDY since
Controller November 29, 1999. Mr. Schnittjer also served as
Acting Chief Financial Officer and Treasurer of TDY
from June 1, 2000 to October 3, 2000. From 1998 to
the spin-off, Mr. Schnittjer served as a financial
executive to the Aerospace and Electronics and
Industrial Segments of ATI. Prior to that, he was
Vice President -- Finance of Teledyne Wah Chang
from 1997 to 1998 and Vice President -- Finance of
Teledyne Specialty Equipment from 1995 to 1997. Mr.
Schnittjer has held various financial positions
with several of Teledyne's aerospace and
electronics companies since 1971.
SEGMENT MANAGEMENT:
Marvin H. Fink.................. 64 Mr. Fink has been the President of Teledyne
President, Teledyne Electronic Electronic Technologies since 1993. Mr. Fink has
Technologies held various management positions with several of
Teledyne's aerospace and electronic companies for
over 38 years.
Richard A. Holloway............. 58 Mr. Holloway has been the President of Teledyne
President, Teledyne Brown Brown Engineering since February 1998. Prior
Engineering, Inc. thereto, since 1986, he was Senior Vice President,
Government Division of SCI Systems, Inc., a
provider of manufacturing and design services to
commercial companies, the U.S. military and foreign
governments. Mr. Holloway spent 23 years in various
managerial capacities with The Boeing Company prior
to joining SCI Systems, Inc.
Bryan L. Lewis.................. 51 Mr. Lewis has been the President of Teledyne
President, Teledyne Continental Motors since 1992. From 1990 to 1992,
Continental Motors he was President of the turbine engine operations
of Teledyne, Inc. Mr. Lewis has held various
technical and general management positions during
his 20 years with Teledyne Technologies and its
predecessors.
OTHER OFFICERS:
Robert W. Steenberge............ 53 Mr. Steenberge has been TDY's Chief Technology
Chief Technology Officer Officer since March 2000. Prior to that, he had
been Vice President of Advanced Development at
Teledyne Electronic Technologies since 1991. Since
joining Teledyne in 1976, Mr. Steenberge has held
various management positions with several of its
aerospace and electronics companies.
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
NAME AND TITLE AGE PRINCIPAL OCCUPATIONS LAST 5 YEARS
-------------- --- ----------------------------------
<S> <C> <C>
Melanie S. Cibik................ 41 Miss Cibik has been a Vice President of the Company
Vice President, Associate since December 2000, Associate General Counsel
General Counsel and Assistant since the spin-off, and an Assistant Secretary
Secretary since October 1999. From April 1998 to the
spin-off, Miss Cibik was Counsel -- Corporate and
Securities at ATI. Prior to joining ATI, she was
Senior Counsel at PNC Bank Corp., now known as The
PNC Financial Services Group, Inc., and had
previously been associated with Kirkpatrick &
Lockhart LLP.
Robyn E. Choi................... 36 Ms. Choi has been Vice President of Administration
Vice President of of the Company since December 2000, and served as
Administration and Assistant Director of Administration and an Assistant
Secretary Secretary since the spin-off. Prior to joining
ATI's Aerospace and Electronics segment in August
1999, she was Director of the President's Office
and Secretary of the Corporation at Carnegie Mellon
University.
Shelley D. Green................ 42 Ms. Green has been the Treasurer of TDY since
Treasurer October 2000, and served as Assistant Treasurer
since the spin-off. Prior to joining ATI's
Aerospace and Electronics segment in October 1999,
she spent 16 years at Occidental Petroleum
Corporation serving its treasury operations and
debt administration, having last served as
Assistant Treasurer-Financial Operations.
</TABLE>
- ---------------
* Such officers are subject to the reporting and other requirements of Section
16 of the Securities Exchange Act of 1934, as amended.
Dr. Mehrabian has an Employment Agreement with Teledyne Technologies, which
provides that we will employ him as the President and Chief Executive Officer.
The agreement terminates on December 31, 2001, but will be extended annually
unless either party gives the other written notice prior to October 31 of each
year of such term that it will not be extended. Dr. Mehrabian has a base salary
of $565,000 for 2001. The agreement provides that Dr. Mehrabian is entitled to
participate in TDY's annual incentive bonus plan and other executive
compensation and benefit programs. The agreement provides Dr. Mehrabian with a
non-qualified pension arrangement, under which Teledyne Technologies will pay
him following his retirement, as payments supplemental to any accrued pension
under our qualified pension plan, an amount equal to 50% of his base
compensation as in effect at retirement. The number of years for which such
annual amount shall be paid will be equal to the number of years of his service
to TDY (including service to ATI), but not more than 10 years.
Each of the above-listed executive officers and segment presidents and
seven other current members of management have entered into Change in Control
Severance Agreements with Teledyne Technologies. The agreements have a
three-year, automatically renewing term. Under the agreements, the executive is
entitled to severance benefits if (1) there is a change in control of TDY and
(2) within three months before or 24 months after the change in control, either
we terminate the executive's employment for reasons other than for cause or the
executive terminates the employment for good reason. "Severance benefits"
consist of:
- A cash payment equal to three times (in the case of Messrs. Mehrabian,
Naglieri and Kuelbs and three other executives) or two times (in the case
of Mr. Schnittjer and seven other executives) the sum of (i) the
executive's highest annual base salary within the year preceding the
change in control and (ii) the Annual Incentive Plan ("AIP") bonus target
for the year in which the change in control occurs or the year
immediately preceding the change in control, whichever is higher.
- A cash payment for the current Annual Incentive Plan bonus based on the
fraction of the year worked times the Annual Incentive Plan target
objectives at 120% (with payment of the prior year bonus if not yet
paid).
11
<PAGE> 14
- Payment in cash for unpaid Performance Share Plan awards, assuming
applicable goals are met at 120% of performance.
- Continued equivalent health and welfare (e.g., medical, dental, vision,
life insurance and disability) benefits at our expense for a period of 36
months after termination (with the executive bearing any portion of the
cost the executive bore prior to the change in control); provided,
however, such benefits would be discontinued to the extent the executive
receives similar benefits from a subsequent employer.
- Immediate vesting of all stock options, with options being exercisable
for the full remaining term.
- Removal of restrictions on restricted stock issued by us under any Stock
Acquisition and Retention Program or any replacement plans (i.e. the
Restricted Stock Award Program).
- Full vesting under our pension plans (within legal parameters).
- Up to $25,000 reimbursement for actual professional outplacement
services.
12
<PAGE> 15
RISK FACTORS; CAUTIONARY STATEMENT AS TO FORWARD-LOOKING STATEMENTS
The following text highlights various risks and uncertainties associated
with Teledyne Technologies. These factors could materially affect
"forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995) that we may from time to time make, including
forward-looking statements contained in "Item 1. Business" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" of this Form 10-K and in TDY's 2000 Annual Report to Stockholders.
WE MAY BE UNSUCCESSFUL IN OUR EFFORTS TO INCREASE OUR PARTICIPATION IN
COMMERCIAL COMMUNICATIONS MARKETS.
We plan to use our existing technology and manufacturing capabilities to
increase our participation in commercial communications markets. We may be
unable to execute this strategy successfully. For example, we are investing in
equipment and otherwise expanding our electronic component manufacturing
capacity to enable us to offer fiber optic component manufacturing services to
telecommunications customers. We have limited experience with manufacturing
these types of components, and have no experience manufacturing these types of
components at the high production rates potential customers are likely to
demand.
In addition, commercial telecommunications customers require manufacturers
to meet stringent quality and production standards over a significant period of
time. We may be unable to meet the required standards or otherwise gain
acceptance as a qualified manufacturer of these or other communications
components.
Further, we may be unable to obtain certain components in a timely manner
to meet our customer delivery requirements. Recent shortages of subcomponent
assemblies in optoelectronics have affected our ability to meet delivery needs
of some customers. Alternative sources might be available, but would not
necessarily prevent further delays since use of alternative suppliers would
trigger recertification requirements because of customer specifications.
We may also be unable to manufacture these or other communications
components profitably. In the future, we may face increasing competition for
providing these manufacturing services from lower cost providers. In addition,
customers for these services are seeking to build or acquire internal
manufacturing capacity for communications components, and could in the future
determine not to outsource the manufacture of these components.
Future developments such as any of the above factors could have a material
adverse effect on our business, results of operations or financial condition.
OUR DEPENDENCE ON REVENUE FROM GOVERNMENT CONTRACTS SUBJECTS US TO THE RISK THAT
WE MAY NOT BE SUCCESSFUL IN BIDDING FOR FUTURE CONTRACTS AND THAT GOVERNMENT
FUNDING FOR THESE CONTRACTS MAY BE DELAYED OR CONTINUE TO DECREASE.
We perform work on a number of contracts with the Department of Defense and
other agencies and departments of the U.S. Government. Sales under contracts
with the U.S. Government as a whole, including sales under contracts with the
Department of Defense, as prime or subcontractor, represented approximately 44%
of our total revenue for 2000. Performance under government contracts has
certain inherent risks that could have a material effect on our business,
results of operations and financial condition.
Government contracts are conditioned upon the continuing availability of
Congressional appropriations. Congress typically appropriates funds for a given
program on a fiscal-year basis even though contract performance may take more
than one year. As a result, at the beginning of a major program, a contract is
typically only partially funded, and additional monies are normally committed to
the contract by the procuring agency only as appropriations are made by Congress
for future fiscal years.
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<PAGE> 16
The overall U.S. military budget declined in real dollars from the
mid-1980's through the early 1990's. Although U.S. military budgets have
stabilized during the last several years, future levels of defense spending
cannot be predicted. Delays or further declines in U.S. military expenditures
could adversely affect our business, results of operations and financial
condition, depending upon the programs affected, the timing and size of the
changes and our ability to offset the impact with new business or cost
reductions.
Most of our U.S. Government contracts are subject to termination by the
U.S. Government either at its convenience or upon the default of the contractor.
Termination-for-convenience provisions provide only for the recovery of costs
incurred or committed, settlement expenses, and profit on work completed prior
to termination. Termination-for-default imposes liability on the contractor for
excess costs incurred by the U.S. Government in reprocuring undelivered items
from another source.
We obtain many U.S. Government prime and subcontracts through the process
of competitive bidding. We may not be successful in having our bids accepted. In
addition, contracts may not be profitable.
A number of our U.S. Government prime and subcontracts are fixed price-type
contracts (56% in 2000). Under these types of contracts, we bear the inherent
risk that actual performance cost may exceed the fixed contract price. This is
particularly true where the contract was awarded and the price finalized in
advance of final completion of design. We believe that the U.S. Government is
increasingly requesting proposals for fixed price-type contracts.
We, like other government contractors, are subject to various audits,
reviews and investigations (including private party "whistleblower" lawsuits)
relating to our compliance with federal and state laws. In addition, we have a
compliance program designed to surface issues that may lead to voluntary
disclosures to the U.S. Government. Generally, claims arising out of these U.S.
Government inquiries and voluntary disclosures can be resolved without resorting
to litigation. However, should the business unit or division involved be charged
with wrongdoing, or should the U.S. Government determine that the unit or
division is not a "presently responsible contractor," that unit or division, and
conceivably our company as a whole, could be temporarily suspended or, in the
event of a conviction, could be debarred for up to three years from receiving
new government contracts or government-approved subcontracts. In addition, we
could expend substantial amounts in defending against such charges and in
damages, fines and penalties if such charges are proven or result in negotiated
settlements.
WE MAY BE UNABLE TO SUCCESSFULLY INTRODUCE NEW AND ENHANCED PRODUCTS IN A TIMELY
AND COST-EFFECTIVE MANNER.
Our operating results will depend in part on our ability to introduce new
and enhanced products on a timely basis. Successful product development and
introduction depends on numerous factors, including our ability to anticipate
customer and market requirements, changes in technology and industry standards,
our ability to differentiate our offerings from offerings of our competitors,
and market acceptance.
We may not be able to develop and introduce new or enhanced products in a
timely and cost-effective manner or to develop and introduce products that
satisfy customer requirements. Our new products also may not achieve market
acceptance or correctly anticipate new industry standards and technological
changes.
TECHNOLOGICAL CHANGE COULD CAUSE CERTAIN OF OUR PRODUCTS OR SERVICES TO BECOME
OBSOLETE OR NON-COMPETITIVE.
The markets for a number of our products and services are generally
characterized by rapid technological development, evolving industry standards,
changes in customer requirements and new product introductions and enhancements.
A faster than anticipated change in one or more of the technologies related to
our products or services or in market demand for products or services based on a
particular technology could result in faster than anticipated obsolescence of
certain of our products or services and
14
<PAGE> 17
could have a material adverse effect on our business, results of operation and
financial condition. Currently accepted industry standards are also subject to
change, which may contribute to the obsolescence of our products or services.
WE MAY NOT HAVE SUFFICIENT RESOURCES TO FUND ALL FUTURE RESEARCH AND DEVELOPMENT
AND CAPITAL EXPENDITURES OR POSSIBLE ACQUISITIONS.
In order to remain competitive, we must make substantial investments in
research and development to develop new and enhanced products and continuously
upgrade our process technology and manufacturing capabilities.
Although we believe that anticipated cash flows from operations and
available borrowings under our $200 million credit facility will be sufficient
to satisfy our anticipated working capital, research and development and capital
investment needs, we may be unable to fund all of these needs or possible
acquisitions. While we successfully completed our required public offering in
the third quarter of 2000, raising net proceeds of approximately $84.0 million,
which were temporarily used to pay down our debt, our ability to raise
additional capital will depend on a variety of factors, some of which will not
be within our control, including investor perceptions of us, our businesses and
the industries in which we operate, and general economic and market conditions.
We may be unable to successfully raise additional capital, if needed. Failure to
successfully raise needed capital on a timely or cost-effective basis could have
a material adverse effect on our business, results of operations and financial
condition.
PRODUCT LIABILITY CLAIMS OR RECALLS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
REPUTATION, BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
As a manufacturer and distributor of various products, our results of
operations are susceptible to adverse publicity regarding the quality or safety
of our products. In part, product liability claims challenging the safety of our
products may result in a decline in sales for a particular product, which could
adversely affect our results of operations. This could be true even if the
claims themselves are proven to not be truthful or settled for immaterial
amounts.
While we have general liability and other insurance policies concerning
product liabilities, we have self-insured retentions or deductibles under such
policies with respect to a portion of these liabilities. For example, our annual
self-insured retention for general aviation aircraft liabilities incurred in
connection with products manufactured by Teledyne Continental Motors is $10
million.
Product recalls and field service actions could also have a material
adverse effect on our business, results of operations and financial condition.
For example, Teledyne Continental Motors has been engaged in a product recall of
piston engine crankshafts whereby the Company took a $12 million pretax charge
in the fiscal 2000 second quarter. In the second quarter of 1999, Teledyne
Continental Motors had an unrelated recall of piston engines for which the
Company took a $3 million pretax charge. Product recalls have the potential for
tarnishing a company's reputation and could have a material adverse effect on
the sales of our products.
We cannot assure that we will not have additional product liability claims
or that we will not recall any additional products.
INCREASING COMPETITION COULD REDUCE THE DEMAND FOR OUR PRODUCTS AND SERVICES.
Although we have certain advantages that we believe help us compete in our
markets, each of our markets is highly competitive. Many of our competitors
have, and potential competitors could have, greater name recognition, a larger
installed base of products, more extensive engineering, manufacturing, marketing
and distribution capabilities and greater financial, technological and personnel
resources than we do. New or existing competitors may also develop new
technologies that could adversely affect the demand for our products and
services. Industry consolidation trends, particularly among aerospace and
defense
15
<PAGE> 18
contractors, could adversely affect demand for our products and services if
prime contractors seek to control more aspects of vertically integrated
projects.
WE SELL PRODUCTS AND SERVICES TO CUSTOMERS IN INDUSTRIES THAT ARE CYCLICAL AND
SENSITIVE TO CHANGES IN GENERAL ECONOMIC ACTIVITY.
We derive significant revenues from the commercial aerospace industry.
Domestic and international commercial aerospace markets are cyclical in nature.
Historic demand for new commercial aircraft has been related to the stability
and health of domestic and international economies. Delays or changes in
aircraft and component orders could impact the future demand for our products
and have a material adverse effect on our business, results of operations and
financial condition.
In addition, we sell products and services to customers in industries that
are sensitive to the level of general economic activity and in mature industries
that are sensitive to capacity. Adverse economic conditions affecting these
industries may reduce demand for our products and services, which may reduce our
profits, or our production levels, or both.
WE ARE SUBJECT TO THE RISKS ASSOCIATED WITH INTERNATIONAL SALES.
During 2000, international sales accounted for approximately 17% of our
total revenues. We anticipate that future international sales will continue to
account for a significant percentage of our revenues. Risks associated with
these sales include:
- political and economic instability;
- export controls;
- changes in legal and regulatory requirements;
- U.S. and foreign government policy changes affecting the markets for our
products;
- changes in tax laws and tariffs;
- convertibility and transferability of international currencies; and
- exchange rate fluctuations (which may affect sales to international
customers and the value of and profits earned on international sales when
converted into dollars).
Any of these factors could have a material adverse effect on our business,
results of operations and financial condition. In prior years, weak conditions
in Asian economies have affected our results of operations adversely.
COMPLIANCE WITH INCREASING ENVIRONMENTAL REGULATIONS AND THE EFFECTS OF
POTENTIAL ENVIRONMENTAL LIABILITIES COULD HAVE A MATERIAL ADVERSE FINANCIAL
EFFECT ON US.
We, like other industry participants, are subject to various federal,
state, local and international environmental laws and regulations. We may be
subject to increasingly stringent environmental standards in the future. Future
developments, administrative actions or liabilities relating to environmental
matters could have a material adverse effect on our business, results of
operations or financial condition.
Some of our businesses work with highly dangerous substances that require
heightened standards of care. For example, as the prime contractor for the U.S.
Army's Non-Stockpile Chemical Materiel Demilitarization program, we are
responsible for the destruction of small caches of chemical munitions and
materiel located in over 30 states. The destruction of chemical weapons is an
inherently dangerous activity. Except for a contained fire during a
demonstration testing of a process designed to access rockets, we have not
experienced any accidents or other adverse consequences as a result of our
participation in weapon destruction programs. We cannot, however, assure that we
will not experience any problems in the future. Although the federal government
provides certain indemnities to contractors in these programs, these
16
<PAGE> 19
indemnities may be insufficient to offset liabilities that we may incur in
connection with our participation in these programs.
For additional discussion of environmental matters, see the discussion
under the caption "Other Matters -- Environmental" of "Item 7. Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
Notes 2 and 14 to Notes to Consolidated Financial Statements.
HAVING LIMITED OPERATING HISTORY AS AN INDEPENDENT COMPANY MAKES IT DIFFICULT TO
PREDICT OUR PROFITABILITY AS A STAND-ALONE COMPANY.
We have a limited operating history as an independent company. Prior to the
spin-off, our businesses relied on ATI for various financial, managerial and
administrative services and benefited from the earnings, financial resources,
assets and cash flows of ATI's other businesses.
We expect costs and expenses associated with the management of a public
company to be greater than the amount reflected in our historical financial
statements. We also will incur interest expense and be subject to the other
requirements associated with our credit facility. While we had been profitable
as part of ATI, there can be no assurance that, as a stand-alone company, our
future profits will be comparable to historical operating results before the
spin-off.
In 2000, we dedicated managerial and other resources at the corporate level
to establish the infrastructure and systems necessary for us to operate as an
independent public company. While we believe that we have sufficient management
resources, we cannot assure you that this will be the case or that we will
successfully implement our operating and growth initiatives. Failure to
implement these initiatives successfully could have a material adverse effect on
our business, results of operations and financial condition.
OUR INABILITY TO ATTRACT AND RETAIN KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR FUTURE SUCCESS.
Our future success depends to a significant extent upon the continued
service of our executive officers and other key management and technical
personnel and on our ability to continue to attract, retain and motivate
qualified personnel. Recruiting and retaining skilled technical personnel is
highly competitive. The loss of the services of one or more of our key employees
or our failure to attract, retain and motivate qualified personnel could have a
material adverse effect on our business, financial condition and results of
operations.
ACQUISITIONS INVOLVE INHERENT RISKS THAT MAY ADVERSELY AFFECT OUR OPERATING
RESULTS AND FINANCIAL CONDITION.
Our growth strategy includes possible acquisitions. Acquisitions involve
various inherent risks, such as:
- our ability to assess accurately the value, strengths, weaknesses,
contingent and other liabilities and potential profitability of
acquisition candidates;
- the potential loss of key personnel of an acquired business;
- our ability to integrate acquired businesses and to achieve identified
financial and operating synergies anticipated to result from an
acquisition; and
- unanticipated changes in business and economic conditions affecting an
acquired business.
WE MAY NOT BE ABLE TO SELL, OR EXIT ON ACCEPTABLE TERMS, PRODUCT LINES THAT WE
DETERMINE NO LONGER MEET WITH OUR GROWTH STRATEGY.
Consistent with our growth strategy to focus on markets for commercial
communications products and expand our profitable niche businesses, we plan to
continually evaluate our product lines to ensure that they are aligned with our
strategy. As a result of this continual evaluation and as previously announced,
we
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<PAGE> 20
plan to exit the marine products and process control software business of our
Systems Engineering Solutions segment. Until these product lines are divested,
the continued weakness in these unrelated product lines is expected to
unfavorably impact the profitability of the Systems Engineering Solutions
segment. Our ability to dispose of these product lines and any others that may
no longer be aligned with our strategy will depend on many factors, including
the terms and conditions of any asset purchase and sale agreement, as well as
industry, business and economic conditions. We cannot provide any assurance as
to when, if or on what terms any product lines will be sold. Also, we cannot
provide any assurance as to the availability, timing, terms or conditions of
alternative courses of action if any sale of any unrelated product line cannot
be consummated.
FAILURE OF REPRESENTATIONS AND ASSUMPTIONS UNDERLYING THE IRS TAX RULING COULD
CAUSE THE SPIN-OFF NOT TO BE TAX-FREE TO ATI OR TO ATI'S STOCKHOLDERS AND MAY
REQUIRE US TO INDEMNIFY ATI.
While the tax ruling relating to the qualification of the spin-off as a
tax-free distribution within the meaning of Section 355 of the Internal Revenue
Code generally is binding on the IRS, the continuing validity of the tax ruling
is subject to certain factual representations and assumptions. While we
successfully and timely completed our required public offering in the third
quarter of 2000 in accordance with the ruling, as revised, we must continue to
satisfy other requirements, including using the approximately $84.0 million in
net proceeds of our public offering for research and development and related
capital projects, for the further development of our manufacturing capabilities
and for acquisitions and/or joint ventures. See "Item 5. Market for Registrant's
Common Equity and Related Stockholder Matters -- Use of Proceeds from Completed
Public Offering".
If the spin-off were not to qualify as a tax-free distribution within the
meaning of Section 355 of the Code, ATI would recognize taxable gain generally
equal to the amount by which the fair market value of the TDY Common Stock
distributed to ATI's stockholders exceeded the tax basis in our assets. In
addition, the distribution of our Common Stock to each ATI stockholder would
generally be treated as taxable in an amount equal to the fair market value of
the TDY Common Stock such stockholder receives.
If the spin-off qualified as a distribution under Section 355 of the Code
but failed to be tax-free to ATI because of certain post-spin-off circumstances
(such as an acquisition of Teledyne Technologies) ATI would recognize taxable
gain as described above, but the distribution of our Common Stock in the
spin-off would generally be tax-free to each ATI stockholder.
The Tax Sharing and Indemnification Agreement between ATI and TDY provides
that we will be responsible for any taxes imposed on, or other amounts paid by,
ATI, its agents and representatives and its stockholders as a result of the
failure of the spin-off to qualify as a tax-free distribution within the meaning
of Section 355 of the Code if the failure or disqualification is caused by
certain post-spin-off actions by or with respect to us (including our
subsidiaries) or our stockholders. For example, the acquisition of Teledyne
Technologies by a third party during the two-year period following the spin-off
could cause such a failure or disqualification. If any of the taxes or other
amounts described above were to become payable by us, the payment could have a
material adverse effect on our financial condition, results of operations and
cash flow and could exceed our net worth by a substantial amount.
PROVISIONS OF OUR GOVERNING DOCUMENTS, APPLICABLE LAW, THE TAX SHARING AND
INDEMNIFICATION AGREEMENT WITH ATI AND OUR CHANGE IN CONTROL SEVERANCE
AGREEMENTS COULD MAKE AN ACQUISITION OF TELEDYNE TECHNOLOGIES MORE DIFFICULT.
Our Restated Certificate of Incorporation, Amended and Restated Bylaws and
Rights Agreement, and the General Corporation Law of the State of Delaware
contain several provisions that could make the acquisition of control of
Teledyne Technologies in a transaction not approved by our board of directors
more difficult. Certain tax aspects of the spin-off could also discourage an
acquisition of control of Teledyne Technologies for some period of time. For
example, the acquisition of Teledyne Technologies by a third party during the
two-year period following the spin-off could result in the spin-off not
qualifying as
18
<PAGE> 21
a tax-free distribution within the meaning of Section 355 of the Internal
Revenue Code and trigger indemnification obligations of Teledyne Technologies
under the Tax Sharing and Indemnification Agreement. We have entered into Change
in Control Severance Agreements with 14 members of our management, which could
have an anti-takeover effect.
THE MARKET PRICE OF OUR COMMON STOCK HAS FLUCTUATED SIGNIFICANTLY SINCE OUR
SPIN-OFF FROM ATI, AND COULD CONTINUE TO DO SO.
Since the spin-off on November 29, 1999, the market price of our Common
Stock has ranged from a low of $7 13/16 to a high of $30 9/16 per share. At
February 23, 2001, our closing stock price was $14.30 per share. Fluctuations in
our stock price could continue. Among the factors that could affect our stock
price are:
- quarterly variations in our operating results;
- strategic actions by us or our competitors, such as acquisitions;
- adverse business developments, such as the engine recall by Teledyne
Continental Motors in 2000;
- general market conditions; and
- general economic factors unrelated to our performance.
The stock markets in general, and the markets for high technology companies
in particular, have experienced a high degree of volatility not necessarily
related to the operating performance of particular companies. We cannot provide
assurances as to our stock price.
19
<PAGE> 22
ITEM 2. PROPERTIES.
Our principal facilities as of December 31, 2000 are listed below. Although
the facilities vary in terms of age and condition, our management believes that
these facilities have generally been well maintained and are adequate for
current operations.
<TABLE>
<CAPTION>
FACILITY LOCATION PRINCIPAL USE OWNED/LEASED
- ------------------------------ --------------------------------------------- ------------
<S> <C> <C>
ELECTRONICS AND COMMUNICATIONS SEGMENT
TELEDYNE ELECTRONIC
TECHNOLOGIES
Los Angeles, California..... Development and production of electronic Owned and
components and subsystems. Leased
Los Angeles, California..... Production of digital data acquisition Leased
systems for monitoring commercial aircraft
and engines.
Lewisburg, Tennessee........ Development and production of electronic Owned
components and subsystems.
Mountain View, California... Production of ferrite components, switching Owned
devices, filters and monolithic microwave
integrated circuits.
Hawthorne, California....... Production of electronic components. Owned
Rancho Cordova, Development of production of traveling wave Owned and
California............... tubes and power supplies for use in Leased
commercial markets.
SYSTEMS ENGINEERING SOLUTIONS SEGMENT
TELEDYNE BROWN ENGINEERING,
INC.
Huntsville, Alabama......... Provision of engineered services and Owned and
products, including systems engineering, Leased
optical engineering, software and hardware
engineering, and instrumentation technology.
Hunt Valley, Maryland....... Manufacturing, assembling and maintenance of Leased
power generating systems.
Knoxville, Tennessee........ Laboratories and offices in support of Leased
environmental services.
Washington, DC.............. Defense program offices supporting Leased
governmental customers.
AEROSPACE ENGINES AND COMPONENTS SEGMENT
TELEDYNE CONTINENTAL MOTORS
Mobile, Alabama............. Design, development and production of new and Leased
rebuilt piston engines, ignition systems and
spare parts for the general aviation market.
Redlands, California........ Manufacturing of batteries for the general Owned
aviation market.
Toledo, Ohio................ Design, development and production of small Leased
turbine engines for aerospace and military
markets.
</TABLE>
We also own or lease facilities elsewhere in the United States and in
countries outside the United States, including Tijuana, Mexico, Gloucester,
England and Cumbernauld, Scotland. Our executive offices are currently located
at 2049 Century Park East, Suite 1500, Los Angeles, California 90067-3101 and
are subleased from a subsidiary of ATI.
20
<PAGE> 23
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we become involved in various lawsuits, claims and
proceedings related to the conduct of our business. While we cannot predict the
outcome of any lawsuits, claims or proceedings, our management does not believe
that the disposition of any pending matters is likely to have a material adverse
effect on our financial condition or liquidity. The resolution in any reporting
period of one or more of these matters, however, could have a material adverse
effect on our results of operations for that period,
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of TDY's stockholders during the fourth
quarter of 2000.
21
<PAGE> 24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our Common Stock is listed on the New York Stock Exchange and traded under
the symbol "TDY." The following table sets forth, for the periods indicated, the
high and low sale prices for the Common Stock as reported by the New York Stock
Exchange.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1999
4th Quarter (from November 29, 1999)........................ $10 1/2 $ 7 13/16
2000
1st Quarter................................................. $28 1/2 $ 8 3/8
2nd Quarter................................................. $20 $10 3/4
3rd Quarter................................................. $30 9/16 $14 11/16
4th Quarter................................................. $29 1/16 $17
2001
1st Quarter (through February 23, 2001)..................... $20.85 $14.00
</TABLE>
On February 23, 2001, the closing sale price of our Common Stock as
reported by the New York Stock Exchange was $14.30 per share. As of December 31,
2000, there were approximately 8,300 holders of record of the Common Stock.
We currently intend to retain any future earnings to fund the development
and growth of our business. Therefore, we do not anticipate paying any cash
dividends in the foreseeable future. Provisions of our credit agreement limit
our ability to pay dividends to amounts exceeding 25% of cumulative net income
subsequent to the effective date of the credit agreement. As of December 31,
2000, approximately $9.5 million was available for the payment of dividends
under these provisions.
USE OF PROCEEDS FROM COMPLETED PUBLIC OFFERING
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 were
$646,600 at December 31, 2000. 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 in accordance with the
modified IRS tax ruling received by ATI in connection the spin-off. Consistent
with the IRS tax ruling, we have spent: $56.5 million for product development
and enhancements and process improvements, $33.0 million for capital and
facility improvements, $0.7 million for further development of manufacturing
capabilities and $2.6 million for acquisitions and/or joint ventures.
Approximately $18.7 million of these amounts have been directed toward our
broadband communications initiatives relating to optoelectronic components and
wireless subsystems. These spending levels have exceeded our average annual
historical expenditures of $47.7 million for these types of uses. The increased
spending of $45.1 million was funded from the net proceeds of the offering.
Considering this, $38.9 million of the net proceeds remain to be used.
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.
22
<PAGE> 25
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents our summary consolidated financial data.
Effective November 29, 1999, Teledyne Technologies was spun off from ATI. Our
fiscal year is determined based on a 53/52-week convention and ends on or about
December 31. The historical financial information is not necessarily indicative
of the results of operations or financial position that would have occurred if
we had been a separate, independent company during the periods presented, nor is
it indicative of future performance. This historical financial information does
not include pro forma adjustments that reflect estimates of the expenses that we
would have incurred had we been operated as an independent company and as
capitalized at the time of its spin-off from ATI for each period presented. In
December 2000, we sold the assets of Teledyne Cast Parts, our sand and
investments casting business. Accordingly, our consolidated financial statements
have been restated to reflect Teledyne Cast Parts as a discontinued operation.
The historical financial information should be read in conjunction with the
discussion under "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
TELEDYNE TECHNOLOGIES INCORPORATED
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS
----------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales......................................... $795.1 $761.4 $733.0 $707.4 $686.1
Net income from continuing operations......... $ 31.9 $ 47.2 $ 46.4 $ 37.3 $ 38.9
Net income.................................... $ 32.3 $ 49.0 $ 48.7 $ 41.6 $ 40.7
Working capital............................... $107.6 $ 98.5 $ 72.6 $ 78.2 $ 95.6
Total assets.................................. $350.9 $313.4 $246.4 $250.6 $250.9
Long-term debt, net........................... $ -- $ 97.0 $ -- $ -- $ --
Stockholders' equity.......................... $163.1 $ 44.5 $106.4 $109.4 $128.0
Basic earnings per common share -- continuing
operations(a)............................... $ 1.12 $ 1.73 $ 1.65 $ 1.33 $ 1.42
Diluted earnings per common
share -- continuing operations(a)........... $ 1.08 $ 1.73 $ 1.65 $ 1.33 $ 1.42
Basic earnings per common share(a)............ $ 1.13 $ 1.79 $ 1.73 $ 1.48 $ 1.49
Diluted earnings per common share(a).......... $ 1.09 $ 1.79 $ 1.73 $ 1.48 $ 1.49
</TABLE>
- ---------------
(a) Prior to the spin-off, the average outstanding shares used to compute
earnings per share were based on a distribution ratio of one share of
Teledyne Technologies Common Stock for every seven shares of ATI Common
Stock. The treasury method is used to calculate diluted earnings per share.
23
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
We are a leading provider of sophisticated electronic and communications
products, including components and subsystems for wireless and satellite
systems, and data acquisition and communication equipment for airlines and
business aircraft. We also provide systems engineering solutions and information
technology services for space, defense and industrial applications, and
manufacture general aviation and missile engines and components, as well as
on-site power generation equipment. Effective November 29, 1999, we were spun
off from ATI.
Our strategy is to focus on markets for commercial communications products,
while we continue to expand our profitable niche market businesses. For example,
we are leveraging our experience in manufacturing sophisticated fiber optic
transmitters and receivers for aerospace customers to enable us to manufacture
similar products for commercial customers in wireless and fiber optic
communications markets. We plan to continually evaluate our product lines to
ensure that they are aligned with our strategy. These actions will help us to
redirect capital and management focus to opportunities that will best utilize
our engineering resources and technical expertise. Consistent with this
strategy, we sold the assets of Teledyne Cast Parts, our sand and investments
casting business, in December 2000. Accordingly, our consolidated financial
statements have been restated to reflect Teledyne Cast Parts as a discontinued
operation.
Our fiscal year is determined based on a 53/52-week convention and ends on
or about December 31. The following is our financial information for 2000 and
pro forma financial information for 1999 and 1998 (in millions, except per-share
amounts):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
SALES....................................................... $ 795.1 $ 761.4 $ 733.0
COSTS AND EXPENSES
Cost of sales............................................. 579.6 552.1 532.1
Selling, general and administrative expenses.............. 158.4 136.8 130.6
------- ------- -------
738.0 688.9 662.7
------- ------- -------
OPERATING PROFIT............................................ 57.1 72.5 70.3
Interest and debt expense, net............................ 5.3 8.1 8.0
Other income.............................................. 1.1 1.0 1.6
------- ------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX......... 52.9 65.4 63.9
Provision for income taxes................................ 21.0 26.3 26.4
------- ------- -------
INCOME FROM CONTINUING OPERATIONS........................... 31.9 39.1 37.5
Discontinued operations..................................... 0.4 1.8 2.3
------- ------- -------
NET INCOME.................................................. $ 32.3 $ 40.9 $ 39.8
======= ======= =======
BASIC EARNINGS PER COMMON SHARE:
Continuing operations....................................... $ 1.12 $ 1.44 $ 1.33
Discontinued operations..................................... 0.01 0.06 0.08
------- ------- -------
BASIC EARNINGS PER COMMON SHARE............................. $ 1.13 $ 1.50 $ 1.41
======= ======= =======
DILUTED EARNINGS PER COMMON SHARE:
Continuing operations....................................... $ 1.08 $ 1.44 $ 1.33
Discontinued operations..................................... 0.01 0.06 0.08
------- ------- -------
DILUTED EARNINGS PER COMMON SHARE........................... $ 1.09 $ 1.50 $ 1.41
======= ======= =======
</TABLE>
The pro forma financial information for 1999 and 1998 has been presented
for informational purposes only and may not reflect the results of operations
that would have occurred had we operated as a separate, independent company for
the periods 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 we been operated as a separate company as of
the beginning of each year and as capitalized at the time of the spin-off for
24
<PAGE> 27
each period presented. As part of the spin-off, we assumed $100 million in
long-term debt incurred by ATI. Pro forma income includes pro forma interest
expense on this 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.
We operate in three business segments: Electronics and Communications;
Systems Engineering Solutions; and Aerospace Engines and Components. The
segments' respective contributions to total sales from continuing operations for
2000, 1999 and 1998 are summarized in the following table:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Electronics and Communications.............................. 45% 45% 47%
Systems Engineering Solutions............................... 30 30 30
Aerospace Engines and Components............................ 25 25 23
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
RESULTS OF OPERATIONS
Teledyne Technologies reported 2000 sales from continuing operations of
$795.1 million, compared with net sales from continuing operations of $761.4
million for 1999 and $733.0 million for 1998. Net income from continuing
operations was $31.9 million ($1.08 per diluted share) for 2000, compared with
pro forma net income from continuing operations of $39.1 million ($1.44 per
diluted share) for 1999 and pro forma net income from continuing operations of
$37.5 million ($1.33 per diluted share) for 1998. Net income including
discontinued operations was $32.3 million ($1.09 per diluted share) for 2000,
compared with pro forma net income including discontinued operations of $40.9
million ($1.50 per diluted share) for 1999 and pro forma net income including
discontinued operations of $39.8 million ($1.41 per diluted share) for 1998.
The 2000 and 1999 results include pretax charges of $12.0 million and $3.0
million, respectively, for product recall reserves in the Aerospace Engines and
Components segment. The 2000 results also include $2.2 million of pretax charges
for receivables and cost adjustments in selected product lines in the Systems
Engineering Solutions segment.
International sales represented approximately 17%, 18% and 22% of total
sales for 2000, 1999 and 1998, respectively. Sales under contracts with the U.S.
Government, which included contracts with the Department of Defense, were
approximately 44%, 44% and 40% of total sales for 2000, 1999 and 1998,
respectively.
In 2000, segment operating profit was $72.4 million, compared with $87.6
million in 1999 and $85.3 million in 1998 and reflect the pretax charges noted
above. Included in operating profit was pension income of $9.0 million in 2000,
$6.6 million in 1999 and $1.7 million in 1998. Pension 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".
Net income, before pro forma adjustments, was $49.0 million ($1.79 per
diluted share) in 1999 and $48.7 million ($1.73 per diluted share) in 1998. The
historical financial statements reflect allocations representing corporate
expense from ATI of $7.3 million and $7.8 million for 1999 and 1998,
respectively. These allocations were based on sales. The historical financial
statements for 1999 also include one month of actual corporate expenses incurred
by the Company after the spin-off and one month of interest costs on long-term
debt.
Cost of sales as a percentage of sales reflected increased depreciation and
the $2.2 million of pretax charges in 2000, as well as optoelectronics
development costs, partially offset by higher pension income compared with 1999.
Cost of sales increased from 1998 to 1999 in line with sales. Selling, general
and administrative expenses increased in 2000, compared with 1999, reflecting
higher corporate administrative
25
<PAGE> 28
expenses, compared with the historical allocation from ATI, and higher research
and development costs for the Electronics and Communications segment as well as
the impact of the product recall charges described above. Selling, general and
administrative expenses increased from 1998 to 1999 due to higher research and
development costs. Interest expense on debt was $5.4 million in 2000, compared
with less than $1 million in 1999 and zero in 1998. The 2000 and 1999 amounts
reflected interest on the debt assumed as part of the spin-off on November 29,
1999.
SEGMENTS
The following discussion of our three segments should be read in
conjunction with Note 13 to Notes to Consolidated Financial Statements.
ELECTRONICS AND COMMUNICATIONS
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
(IN MILLIONS, EXCEPT AS INDICATED)
<S> <C> <C> <C>
Sales.................................................... $360.5 $340.7 $342.1
Operating profit......................................... $ 38.7 $ 42.6 $ 42.6
Operating profit % of sales.............................. 10.7% 12.5% 12.5%
International sales % of sales........................... 19.7% 17.3% 22.2%
Governmental sales % of sales............................ 27.0% 29.6% 29.9%
Capital expenditures..................................... $ 21.4 $ 13.5 $ 10.3
</TABLE>
Our Electronics and Communications segment, through Teledyne Electronic
Technologies, applies proprietary technology, advanced software and hardware
design skills and manufacturing capabilities in data acquisition and
communications, precision electronic devices and electronic manufacturing.
2000 Compared with 1999
Our Electronics and Communications segment sales were $360.5 million in
2000, an increase of 5.8% from 1999 sales of $340.7 million. Operating profit
was $38.7 million in 2000, compared with $42.6 million in 1999.
Sales in 2000, compared with 1999, grew in electronic manufacturing
services, relay products, business and commuter aircraft communications
equipment and wireless products. Sales from electronic manufacturing services
and wireless products grew as a result of new orders from military and
commercial customers. Relay products reported improved sales based on demand
from the communications and semiconductor test equipment markets. Sales of
medical and military microelectronics were down from the same period last year.
Segment operating profit decreased due to increased spending in optoelectronics
and broadband wireless initiatives and reduced margins on electronic
manufacturing services. Approximately 9.3 million was spent on optoelectronics
and broadband wireless initiatives beginning in the second quarter of 2000.
Sales and operating profit in 1999 reflected non-recurring licensing revenue of
$3.3 million.
1999 Compared with 1998
Our Electronics and Communications segment sales were $340.7 million in
1999, down slightly from 1998 sales of $342.1 million. Operating profit was
$42.6 million, the same as 1998.
26
<PAGE> 29
Improved revenue growth and operating profit margins in the second half of
1999 allowed the segment to recover from a weak first half. For the year, sales
of data acquisition and communications products increased by 3%, led by strong
sales growth in communications equipment for business and commuter aircraft.
Precision electronic device sales declined by 6% as strong sales increases in
medical devices were offset by declines in other lines, particularly military
microelectronics. Electronic manufacturing sales grew modestly. Operating
profit, which was unchanged from 1998, reflected the sales impacts and included
the licensing of certain intellectual property.
SYSTEMS ENGINEERING SOLUTIONS
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
(IN MILLIONS, EXCEPT AS INDICATED)
<S> <C> <C> <C>
Sales.................................................... $234.8 $226.5 $223.2
Operating profit......................................... $ 17.9 $ 20.2 $ 20.5
Operating profit % of sales.............................. 7.6% 8.9% 9.2%
International sales % of sales........................... 5.8% 13.3% 21.8%
Governmental sales % of sales............................ 86.8% 81.9% 71.3%
Capital expenditures..................................... $ 3.7 $ 2.0 $ 2.6
</TABLE>
Our Systems Engineering Solutions segment, through Teledyne Brown
Engineering, offers a wide range of engineering solutions and information
services to government defense, aerospace and commercial customers.
2000 Compared with 1999
Sales for our Systems Engineering Solutions segment in 2000 were $234.8
million, up 4% from 1999 sales of $226.5 million. For 2000, operating profit was
$17.9 million, down from $20.2 million for 1999.
The 2000 results, compared with 1999, reflect strong sales growth in
systems engineering and integration as well as environmental programs. Sales for
2000 were negatively impacted by the significant decline in orders for our
marine products for the petroleum exploration market, which has been very weak
since the second quarter of 1999. Operating results for 2000, compared with
1999, were negatively impacted by a $2.2 million receivables and cost
adjustment, mix, award fee differences in systems engineering and integration
and lower marine product results due to reduced sales. These negative impacts
were partially offset by increased revenue and a gain of approximately $1.4
million in the Company's chemical weapons demilitarization business related to
additional program funding, offset by a write down of approximately $0.9 million
in the our process control software business.
1999 Compared with 1998
Sales for our Systems Engineering Solutions segment in 1999 were $226.5
million, up slightly from 1998 sales of $223.2 million. For 1999, operating
income was $20.2 million, down from $20.5 million for 1998.
27
<PAGE> 30
The aerospace, defense and environmental businesses all reported sales
increases in double digits, with environmental growing by 24% relative to 1998.
This strong performance was offset by a decline of $20.9 million in marine
products sales due to industry conditions affecting petroleum exploration
activity. While operating profit was down slightly overall, significant
increases in the rest of the business unit nearly offset a decline of
approximately $4 million in marine products.
AEROSPACE ENGINES AND COMPONENTS
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
(IN MILLIONS, EXCEPT AS INDICATED)
<S> <C> <C> <C>
Sales.................................................... $199.8 $194.2 $167.7
Operating profit ........................................ $ 15.8 $ 24.8 $ 22.2
Operating profit % of sales.............................. 7.9% 12.8% 13.2%
International sales % of sales........................... 25.3% 24.6% 23.6%
Governmental sales % of sales............................ 25.7% 24.5% 19.9%
Capital expenditures..................................... $ 5.6 $ 12.8 $ 3.8
</TABLE>
Our Aerospace Engines and Components segment, through Teledyne Continental
Motors, focuses on the design, development and manufacture of piston engines,
turbine engines, electronic engine controls and batteries.
The results of our Aerospace Engines and Components segment have been
restated to reflect Teledyne Cast Parts as a discontinued operation.
2000 Compared with 1999
Our Aerospace Engines and Components segment's sales were $199.8 million in
2000, compared with sales of $194.2 million in 1999. For 2000, operating profit
was $15.8 million compared with $24.8 million for 1999. Excluding piston engine
product recall reserves taken in the second quarters of 2000 and 1999, operating
profit was $27.8 million in both 2000 and 1999.
Increased sales for piston engines for 2000, compared with 1999, reflected
aftermarket new engine sales and overhaul services. Sales for piston engines
were negatively impacted from the operational disruption associated with the
piston engine recall program and lower sales of spare parts. Teledyne
Technologies recorded pretax charges of $12 million and $3 million, in the
second quarters of 2000 and 1999, respectively, for estimated costs associated
with piston engine recall programs. Sales and operating profit in 2000, compared
with 1999, in the turbine engine business were lower due to reduced sales from
development phase work on new turbine engine programs and lower sales of new J69
turbine engines, which were $558 thousand for 2000, compared with $5.9 million
in 1999. These reduced sales and operating profit were partially offset by
increased sales of J69 spare parts.
1999 Compared with 1998
Our Aerospace Engines and Components segment's 1999 sales were $194.2
million, which represented an increase of 15.8% from 1998 sales of $167.7
million. For the year, 1999 operating profit rose 11.7% to $24.8 million
compared with $22.2 million for 1998.
Engine related sales grew by over 15% in 1999, led by revenue increases of
over 50% in turbine engines relative to 1998. Strong profit improvement in
turbines was partially offset by a $3 million charge taken in the second quarter
for a piston engine product recall.
28
<PAGE> 31
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements are to fund working capital needs,
capital expenditures and any 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 2001.
In 2000, cash provided from continuing operations was $36.5 million,
compared with $45.9 million in 1999 and $60.7 million in 1998. The decrease in
cash provided from operations in 2000, compared with 1999, primarily reflected
lower net income from continuing operations in 2000. The lower net income from
continuing operations, and resulting lower cash from operations, reflected the
costs associated with the product recall as well as development spending on
optoelectronics and broadband wireless initiatives. The impact of the change in
deferred taxes offset the impact of changes in operating assets and liabilities.
The decrease in cash provided from operations in 1999, compared with 1998,
reflected an increase in accounts receivables in 1999, compared with 1998, while
in 1998 accounts receivable decreased from the prior year. The impact of the
increase in accounts receivable in 1999 was partially offset by higher accounts
payable and income taxes payable compared with the prior year.
Working capital increased to $107.6 million at year end 2000, compared with
$98.5 million at year end 1999. The increase in working capital was primarily
due to the increase in accounts receivable and inventories, partially offset by
higher accounts payable and accrued liabilities.
Net cash used in investing activities was primarily for capital
expenditures as presented below:
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
2000 1999 1998
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Electronics and Communications.............................. $21.4 $13.5 $10.3
Systems Engineering Solutions............................... 3.7 2.0 2.6
Aerospace Engines and Components............................ 5.6 12.8 3.8
----- ----- -----
$30.7 $28.3 $16.7
===== ===== =====
</TABLE>
During 2001, we plan to invest approximately $40 million in capital
spending, of which the majority will be spent in the Electronics and
Communications segment. Commitments at December 31, 2000 for capital
expenditures were approximately $7.4 million. The increase in property plant and
equipment primarily reflected capital spending offset in part by depreciation
and amortization. Investing activity in 2000 also reflected the proceeds from
the sale of the assets of our sand and investment castings business and payments
for licensing fees and certain investments.
Cash used in financing activities for 2000 reflected the payment of
long-term debt and the net proceeds from the public offering of 4,605,000 shares
of our Common Stock as well as proceeds from the exercise of stock options. Cash
used in financing activities for 1999 primarily reflected net transactions with
ATI as well as net payments on long-term debt. Cash used in financing activities
for 1998 only reflected net transactions with ATI.
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 our assumption of
the facility. Teledyne Technologies assumed the repayment obligation for the
amount drawn by ATI. At December 31, 2000 we had no long-term debt outstanding.
At January 2, 2000 we had $97 million outstanding under the facility at an
interest rate of 7.63%. Excluding interest and fees, no payments are due under
the credit facility until the facility terminates. The estimated fair value of
our long-term debt at year end 1999 was $97 million.
At year end 2000, Teledyne Technologies had $200 million of committed
credit under the credit facility which is utilized, as needed, for daily
operating and other purposes. Borrowings under the credit facility bear interest
at variable rates based on the prevailing prime or Eurodollar rates (or, in
certain circumstances, the prevailing federal funds rate) and these rates will
depend, in part, on the ratio of
29
<PAGE> 32
consolidated total indebtedness to consolidated total capitalization from time
to time. The credit facility requires the Company to comply with various
financial covenants and restrictions, including covenants and restrictions
relating to indebtedness, liens, investments, dividend payments, consolidated
net worth, interest coverage and the relationship of total consolidated
indebtedness to earnings before interest, taxes and depreciation and
amortization. The credit agreement prohibits the declaration of dividends or
making other specified distributions in amounts exceeding 25% of cumulative net
income after the effective date of the credit agreement ($9.5 million at
December 31, 2000). As a result of the completion of the underwritten public
offering, the lenders under the credit agreement released the stock of the
Company's wholly-owned subsidiary, Teledyne Brown Engineering, Inc., which had
been pledged as collateral to secure the obligations under the credit agreement.
In connection with the spin-off, a new defined benefit pension plan was
established and Teledyne Technologies assumed the existing pension obligations
for all of the employees, both active and inactive, at the operations which
perform government contract work and for active employees at operations which do
not perform government contract work. ATI transferred pension assets to fund the
new defined benefit pension plan, which at the time of the transfer had assets
in excess of liabilities.
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. In July 2000, the Internal Revenue Service agreed
to a modification of the tax ruling issued in connection with the spin-off of
Teledyne Technologies from ATI. The revised ruling required Teledyne
Technologies to complete a smaller public offering of its outstanding Common
Stock. In the third quarter of 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.
The continuing validity of the IRS tax ruling is subject to the use of the
proceeds from the public offering for research and development and related
capital projects, for the further development of manufacturing capabilities and
for acquisitions and/or joint ventures. The Tax Sharing and Indemnification
Agreement between ATI and Teledyne Technologies provides that Teledyne
Technologies will indemnify ATI and its agents or representatives for taxes
imposed on, and other amounts paid by, them or ATI's stockholders if Teledyne
Technologies takes actions or fails to take actions that result in the spin-off
not qualifying as a tax-free distribution. If any of the taxes or other amounts
described above were to become payable by Teledyne Technologies, the payment
could have a material adverse effect on our financial condition, results of
operations and cash flow and could exceed Teledyne Technologies' net worth by a
substantial amount.
OTHER MATTERS
Taxes. The effective income tax rate was 39.7%, 40.2% and 41.3% in 2000,
1999 and 1998, respectively. Based on our history of operating earnings,
expectations of future operating earnings and potential tax planning strategies,
it is more likely than not that the deferred income tax assets at December 31,
2000 will be realized.
Costs and Pricing. Inflationary trends in recent years have been moderate.
We primarily use the last-in, first-out method of inventory accounting that
reflects current costs in the costs of products sold. These costs, the
increasing costs of equipment and other costs are considered in establishing
sales pricing polices. The Company emphasizes cost containment in all aspects of
its business.
Hedging Activities; Market Risk Disclosures. Teledyne Technologies
generally does not actively engage in derivative financial instruments such as
futures contracts, options and swaps, forward exchange contracts or interest
rate swaps and futures. While we believe that adequate controls are in place to
monitor any hedging activities in which we may engage, many factors, including
those beyond our control such as changes in domestic and foreign political and
economic conditions, could adversely affect these activities. At December 31,
2000 and January 2, 2000, there were no hedging contracts outstanding.
Our primary exposure to market risk relates to changes in interest rates
and foreign currency exchange rates. We periodically evaluate these risks and
have taken measures to mitigate these risks. We own assets and operate
facilities in countries that have been politically stable. Also, our foreign
risk
30
<PAGE> 33
management objectives are geared towards stabilizing cash flow from the effects
of foreign currency fluctuations. All of the Company's long-term debt has been
based on a fluctuating market interest rate and, consequently, the fair value
should not be affected materially by changes in market interest rates. Overall,
we believe that our exposure to interest rate risk and foreign currency exchange
rate changes is not material to our financial condition or results of
operations.
Environmental. Teledyne Technologies is subject to various federal, state,
local and international environmental laws and regulations which require that we
investigate and remediate the effects of the release or disposal of materials at
sites associated with past and present operations. This includes sites at which
Teledyne Technologies has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act,
commonly known as Superfund, and comparable state laws. We are currently
involved in the investigation and remediation of a number of sites. Reserves for
environmental investigation and remediation totaled approximately $2.3 million
at December 31, 2000. As investigation and remediation of these sites proceed
and new information is received, the Company expects that accruals will be
adjusted to reflect new information. Based on current information, we do not
believe that future environmental costs, in excess of those already accrued,
will materially and adversely affect our financial condition or liquidity.
However, resolution of one or more of these environmental matters or future
accrual adjustments in any one reporting period could have a material adverse
effect on our results of operations for that period.
With respect to proceedings brought under the federal Superfund laws, or
similar state statutes, the Company has been identified as a potentially
responsible party at approximately 15 such sites, excluding those sites at which
Teledyne Technologies believes it has no future liability. Our involvement is
very limited or de minimis at approximately nine of these sites, and the
potential loss exposure with respect to any of the remaining six sites is not
considered to be material.
For additional discussion of environmental matters, see Notes 2 and 14 to
Notes to Consolidated Financial Statements.
Government Contracts. Teledyne Technologies performs work on a number of
contracts with the Department of Defense and other agencies and departments of
the U.S. Government. Sales under contracts with the U.S. Government, which
included contracts with the Department of Defense, were approximately 44% of
total sales in both 2000 and 1999 and 40% of total sales in 1998. For a
breakdown of sales to the U.S. Government by segment, see Note 14 to the Notes
to Consolidated Financial Statements. Defense sales represented approximately
31%, 30% and 27% of total sales for 2000, 1999 and 1998, respectively.
Performance under government contracts has certain inherent risks that could
have a material adverse effect on the Company's business, results of operations
and financial condition. Government contracts are conditioned upon the
continuing availability of Congressional appropriations, which usually occurs on
a fiscal year basis even though contract performance may take more than one
year. The overall U.S. military budget declined in real dollars from the
mid-1980s through the early 1990s. Although U.S. military budgets have
stabilized in the last several years, future levels of defense spending cannot
be predicted. Delays or further declines in U.S. military expenditures could
adversely affect our business, results of operations and financial condition,
depending on the programs affected, the timing and size of the changes and our
ability to offset the impact with new business or cost reductions.
For information on accounts receivable from the U.S. Government, see Note 5
to Notes to Consolidated Financial Statements.
31
<PAGE> 34
OUTLOOK
We now see the overall weakness in the economy affecting our revenue and
profit performance. Based on the current level of orders for aftermarket piston
engines and high-margin piston engine spare parts, coupled with the previously
announced events in the turbine engine market, we forecast a significant decline
in sales and profits for the Aerospace Engines and Components segment. In
addition, we are now expecting an even greater decline in operating profit for
our Electronics and Communications segment due to further weakness in demand for
certain commercial electronics products, especially relays used in semiconductor
test equipment. However, our outlook for the majority of our other electronics
and communications businesses remains unchanged. We remain optimistic about the
prospects for our strategic growth businesses, especially optoelectronics. The
size of the optoelectronics market, the market's growth rate and our success to
date continue to support our investments in this area. Expenditures in this area
are expected to continue and will negatively impact operating profit for the
Electronics and Communications segment, especially during the first half of
2001. The outlook for our core Systems Engineering Solutions businesses, which
primarily serve defense customers, remains unchanged.
We currently forecast year-over-year revenue growth in 2001 of between 5%
and 10% for our Electronics and Communications segment, revenue growth of
between 3% and 5% for our Systems Engineering Solutions segment, and a
year-over-year revenue decline of 10% to 18% for our Aerospace Engines and
Components segment.
Based on current market conditions, we now estimate that first quarter and
full year 2001 earnings per share will be approximately $0.15 and $0.95,
respectively.
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND OTHER FORWARD-LOOKING DATA
The Annual Report on Form 10-K, including this Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995, relating to our outlook, growth opportunities and strategic
plans. Actual results could differ materially from these forward-looking
statements. Many factors, including the extent and timing of acceptance of fiber
optic and other products by customers (including service providers), continued
outsourced manufacturing of optoelectronics product by customers, funding and
continuation of government programs and the outcome of the crankshaft
investigation, as well as market, political and economic conditions, 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 on page 13 of this Form 10-K under the
caption "Risk Factors; Cautionary Statements as to Forward-Looking Statements".
Forward-looking statements are generally accompanied by words such as
"estimate", "forecast", "project", "predict", "believe" or "expect", that convey
the uncertainty of future events or outcomes. Teledyne Technologies assumes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information or otherwise.
ACCOUNTING PRONOUNCEMENTS
SAB No. 101. 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.
SFAS Nos. 138, 137 and 133. 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
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 --
32
<PAGE> 35
"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 instruments and
hedging activities. Teledyne Technologies must implement SFAS No. 133 by the
first quarter of 2001 and does not expect that its implementation will have a
material impact on the financial statements.
REPORT OF MANAGEMENT
The management of Teledyne Technologies is responsible for the integrity of
the financial data reported by Teledyne Technologies. Fulfilling this
responsibility requires the preparation and presentation of consolidated
financial statements in accordance with generally accepted accounting
principles. Management uses internal accounting controls, corporate-wide
policies and procedures and judgment so that such statements reflect fairly the
consolidated financial position, results of operations and cash flows of
Teledyne Technologies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The information required by this item is included in this Report at page 30
under the caption "Other Matters -- Hedging Activities; Market Risk Disclosures"
of "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is included in this Report at pages
F-1 through F-26. See the "Index to Financial Statements and Related
Information" at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
33
<PAGE> 36
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
In addition to the information set forth under the caption "Executive
Management" in Part I of this Report, the information concerning the directors
of Teledyne Technologies required by this item is set forth in the 2001 Proxy
Statement under the caption "Item 1 on Proxy Card -- Election of Directors" and
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is set forth in the 2001 Proxy
Statement under the captions "Directors Compensation", "Executive Compensation"
and "Compensation Committee Interlocks and Insider Participation" and is
incorporated herein by reference. TDY does not incorporate by reference in this
Form 10-K either the "Report on Executive Compensation" or the "Cumulative Total
Stockholder Return" section of the 2001 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is set forth in the 2001 Proxy
Statement under the caption "Stock Ownership Information" and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is set forth in the 2001 Proxy
Statement under the caption "Certain Transactions" and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Exhibits and Financial Statement Schedules:
(1) Financial Statements
See the "Index to Financial Statements and Related Information" at
page F-1 of this Report, which is incorporated herein by reference.
(2) Financial Statement Schedules
See Schedule II captioned "Valuation and Qualifying Accounts" at page
F-25 of this Report, which is incorporated herein by reference.
(3) Exhibits
A list of exhibits filed with this Form 10-K or incorporated by
reference is found in the Exhibit Index immediately following the signature
page of this Report and incorporated herein by reference.
(4) Reports on Form 8-K filed in the fourth quarter of 2000:
None.
34
<PAGE> 37
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Report of Independent Auditors............................ F-2
Consolidated Statements of Income......................... F-3
Consolidated Balance Sheets............................... F-4
Consolidated Statements of Stockholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts.......... F-26
</TABLE>
F-1
<PAGE> 38
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Teledyne Technologies Incorporated:
We have audited the accompanying consolidated balance sheets of Teledyne
Technologies Incorporated as of December 31, 2000 and January 2, 2000, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three fiscal years in the period ended December 31, 2000. Our
audits also included the financial statement schedule listed in the index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Teledyne
Technologies Incorporated at December 31, 2000 and January 2, 2000, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
LOGO
ERNST & YOUNG LLP
Los Angeles, California
January 23, 2001
F-2
<PAGE> 39
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
SALES....................................................... $795.1 $761.4 $733.0
COSTS AND EXPENSES
Cost of sales............................................. 579.6 552.1 532.1
Selling, general and administrative expenses.............. 158.4 130.5 123.4
------ ------ ------
738.0 682.6 655.5
------ ------ ------
OPERATING PROFIT............................................ 57.1 78.8 77.5
Interest and debt expense, net............................ 5.3 0.8 --
Other income.............................................. 1.1 1.0 1.6
------ ------ ------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES....... 52.9 79.0 79.1
Provision for income taxes.................................. 21.0 31.8 32.7
------ ------ ------
Income from continuing operations........................... 31.9 47.2 46.4
Discontinued operations, net of tax......................... 0.4 1.8 2.3
------ ------ ------
NET INCOME.................................................. $ 32.3 $ 49.0 $ 48.7
====== ====== ======
BASIC EARNINGS PER COMMON SHARE:
Continuing operations....................................... $ 1.12 $ 1.73 $ 1.65
Discontinued operations..................................... 0.01 0.06 0.08
------ ------ ------
BASIC EARNINGS PER COMMON SHARE............................. $ 1.13 $ 1.79 $ 1.73
====== ====== ======
DILUTED EARNINGS PER COMMON SHARE:
Continuing operations....................................... $ 1.08 $ 1.73 $ 1.65
Discontinued operations..................................... 0.01 0.06 0.08
------ ------ ------
DILUTED EARNINGS PER COMMON SHARE........................... $ 1.09 $ 1.79 $ 1.73
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 40
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 14.9 $ 7.1
Accounts receivables, net................................. 118.5 109.1
Inventories, net.......................................... 65.2 51.4
Deferred income taxes, net................................ 16.9 21.7
Prepaid expenses and other current assets................. 7.3 4.5
------ ------
TOTAL CURRENT ASSETS.............................. 222.8 193.8
Property, plant and equipment, net........................ 74.0 56.0
Deferred income taxes, net................................ 27.0 25.6
Cost in excess of net assets acquired, net................ 7.6 8.2
Other assets, net......................................... 19.5 16.9
Net assets of discontinued operations..................... -- 12.9
------ ------
TOTAL ASSETS................................................ $350.9 $313.4
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.......................................... $ 58.7 $ 44.2
Accrued liabilities....................................... 56.5 47.3
Income taxes payable...................................... -- 3.8
------ ------
TOTAL CURRENT LIABILITIES......................... 115.2 95.3
Long-term debt............................................ -- 97.0
Accrued pension obligation................................ 5.2 14.7
Accrued postretirement benefits........................... 31.2 33.6
Other long-term liabilities............................... 36.2 28.3
------ ------
TOTAL LIABILITIES................................. 187.8 268.9
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; outstanding
shares -- none......................................... -- --
Common stock, $0.01 par value issued in 1999; authorized
125 million shares; Outstanding shares:
2000 -- 31,586,735 and 1999 -- 26,687,002.............. 0.3 0.3
Additional paid-in capital................................ 124.8 37.9
Retained earnings......................................... 37.9 5.6
Accumulated other comprehensive income.................... 0.1 0.7
------ ------
TOTAL STOCKHOLDERS' EQUITY.................................. 163.1 44.5
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $350.9 $313.4
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 41
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED
ADVANCES ADDITIONAL OTHER TOTAL
(TO) FROM COMMON PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS'
ATI STOCK CAPITAL EARNINGS INCOME EQUITY
--------- ------ ---------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 28, 1997............. $107.5 $ -- $ -- $ -- $ 1.9 $109.4
Net income........................... 48.7 -- -- -- -- 48.7
Other comprehensive income, net of
tax:
Foreign currency translation
losses........................... -- -- -- -- (0.2) (0.2)
------ ------ ------ ----- ----- ------
Comprehensive income................. 48.7 -- -- -- (0.2) 48.5
Net transactions with ATI............ (51.5) -- -- -- -- (51.5)
------ ------ ------ ----- ----- ------
BALANCE, JANUARY 3, 1999............... $104.7 $ -- $ -- $ -- $ 1.7 $106.4
Net income........................... 43.4 -- -- -- -- 43.4
Other comprehensive income, net of
tax:
Foreign currency translation
losses........................... -- -- -- -- (0.1) (0.1)
------ ------ ------ ----- ----- ------
Comprehensive income................. 43.4 -- -- -- (0.1) 43.3
Net transactions with ATI............ (47.5) -- -- -- -- (47.5)
------ ------ ------ ----- ----- ------
BALANCE PRIOR TO SPIN-OFF, NOVEMBER 29,
1999................................. $100.6 $ -- $ -- $ -- $ 1.6 $102.2
Spin-off capitalization
transactions....................... (100.6) 0.3 37.9 -- (0.9) (63.3)
------ ------ ------ ----- ----- ------
BALANCE AFTER SPIN-OFF................. $ -- $ 0.3 $ 37.9 $ -- $ 0.7 $ 38.9
Net income/comprehensive income...... -- -- -- 5.6 -- 5.6
------ ------ ------ ----- ----- ------
BALANCE, JANUARY 2, 2000............... $ -- $ 0.3 $ 37.9 $ 5.6 $ 0.7 $ 44.5
Net income........................... -- -- -- 32.3 -- 32.3
Other comprehensive income, net of
tax:
Foreign currency translation
losses........................... -- -- -- -- (0.6) (0.6)
------ ------ ------ ----- ----- ------
Comprehensive income................. -- -- -- 32.3 (0.6) 31.7
Exercise of stock options and other,
net................................ -- -- 2.2 -- -- 2.2
Tax benefit from exercise of stock
options............................ -- -- 0.7 -- -- 0.7
Issuance of common stock............. -- -- 84.0 -- -- 84.0
------ ------ ------ ----- ----- ------
BALANCE, DECEMBER 31, 2000............. $ -- $ 0.3 $124.8 $37.9 $ 0.1 $163.1
====== ====== ====== ===== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 42
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations..................... $ 31.9 $ 47.2 $ 46.4
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of assets................ 14.8 11.3 10.6
Deferred income taxes.................................. 3.4 (1.4) (0.4)
Gains on sale of property, plant and equipment......... (0.1) (0.1) (0.4)
Changes in operating assets and liabilities:
Decrease(increase) in accounts receivables............. (9.4) (12.6) 15.6
Increase in inventories................................ (13.8) (1.8) (7.8)
Increase in prepaid expenses and other assets.......... (1.6) (2.8) --
Increase in accounts payable........................... 14.5 4.3 0.4
Increase(decrease) in accrued liabilities.............. 9.1 (0.8) (4.8)
Increase (decrease) in current income taxes receivable,
net.................................................. (4.3) 3.8 --
Increase in other long-term liabilities................ 4.3 -- 2.9
Increase (decrease) in accrued post retirement
benefits............................................. (2.4) 0.6 0.2
Decrease in accrued pension obligation................. (9.5) -- --
Other operating, net...................................... (0.4) (1.8) (2.0)
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 36.5 45.9 60.7
Net cash from discontinued operations.................. 1.5 1.5 6.4
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 38.0 47.4 67.1
------ ------ ------
INVESTING ACTIVITIES
Purchases of property, plant and equipment................ (30.7) (28.3) (16.7)
Proceeds from sale of business, net....................... 17.0 -- --
Disposals of property, plant and equipment................ 0.1 0.1 0.7
Other investing, net...................................... (4.3) (0.7) 1.7
------ ------ ------
Net cash used by investing activities.................. (17.9) (28.9) (14.3)
Net cash used by discontinued operations............... (1.5) (3.2) (1.3)
------ ------ ------
NET CASH USED BY INVESTING ACTIVITIES.................. (19.4) (32.1) (15.6)
------ ------ ------
FINANCING ACTIVITIES
Net payments on long-term debt............................ (97.0) (3.0) --
Net proceeds from common stock offering................... 84.0 -- --
Proceeds from exercise of stock options and other, net.... 2.2 -- --
Net advances/spin-off capitalization with ATI............. -- (5.2) (51.5)
------ ------ ------
NET CASH USED BY FINANCING ACTIVITIES.................. (10.8) (8.2) (51.5)
------ ------ ------
INCREASE IN CASH AND CASH EQUIVALENTS....................... 7.8 7.1 --
Cash and cash equivalents -- beginning of year.............. 7.1 -- --
------ ------ ------
CASH AND CASH EQUIVALENTS -- END OF YEAR.................... $ 14.9 $ 7.1 $ --
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 43
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ALLEGHENY TELEDYNE INCORPORATED'S SPIN-OFF OF TELEDYNE TECHNOLOGIES
INCORPORATED
- --------------------------------------------------------------------------------
Effective November 29, 1999, (the Distribution Date), Teledyne Technologies
Incorporated (Teledyne Technologies or the Company), 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 spin-off has been
treated as a tax-free distribution for federal income tax purposes. The spin-off
included the transfer of certain of the businesses of ATI's Aerospace and
Electronics segment to the new corporation, immediately prior to the
distribution date. ATI no longer has a financial investment in Teledyne
Technologies.
Teledyne Technologies consists of the operations of the Teledyne Electronic
Technologies division with operations in the United States, United Kingdom and
Mexico; the Teledyne Brown Engineering division with operations in the United
States and United Kingdom; and the Teledyne Continental Motors division with
operations in the United States. Prior to the spin-off, these operations were
divisions of wholly-owned subsidiaries of ATI.
A $200 million five-year revolving credit agreement 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. In addition, prior to and in connection with the spin-off, Teledyne
Technologies and ATI entered into agreements providing for the separation of the
companies and governing various relationships for separating employee benefits
and tax obligations, indemnification and transition services.
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 periods 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 periods following the
spin-off.
In December 2000, Teledyne Technologies sold the assets of Teledyne Cast
Parts, its sand and investment castings business previously reported as part of
the Aerospace Engines and Components segment. Accordingly, the Company's
consolidated financial statements have been restated to reflect Teledyne Cast
Parts as a discontinued operation.
The following unaudited pro forma financial information for 1999 and 1998
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 periods 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 each year and as capitalized at the
time of the spin-off for each period presented. 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. The following is Teledyne
F-7
<PAGE> 44
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Technologies' financial information for 2000 and its unaudited pro forma
financial information for the 1999 and 1998 fiscal years (in millions, except
per-share amounts):
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
SALES....................................................... $795.1 $761.4 $733.0
COSTS AND EXPENSES
Cost of sales............................................. 579.6 552.1 532.1
Selling, general and administrative expenses.............. 158.4 136.8 130.6
------ ------ ------
738.0 688.9 662.7
------ ------ ------
OPERATING PROFIT............................................ 57.1 72.5 70.3
Interest and debt expense, net............................ 5.3 8.1 8.0
Other income.............................................. 1.1 1.0 1.6
------ ------ ------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES....... 52.9 65.4 63.9
Provision for income taxes.................................. 21.0 26.3 26.4
------ ------ ------
INCOME FROM CONTINUING OPERATIONS........................... 31.9 39.1 37.5
Discontinued operations..................................... 0.4 1.8 2.3
------ ------ ------
NET INCOME.................................................. $ 32.3 $ 40.9 $ 39.8
====== ====== ======
BASIC EARNINGS PER COMMON SHARE:
Continuing operations....................................... $ 1.12 $ 1.44 $ 1.33
Discontinued operations..................................... 0.01 0.06 0.08
------ ------ ------
BASIC EARNINGS PER COMMON SHARE............................. $ 1.13 $ 1.50 $ 1.41
====== ====== ======
DILUTED EARNINGS PER COMMON SHARE:
Continuing operations....................................... $ 1.08 $ 1.44 $ 1.33
Discontinued operations..................................... 0.01 0.06 0.08
------ ------ ------
DILUTED EARNINGS PER COMMON SHARE........................... $ 1.09 $ 1.50 $ 1.41
====== ====== ======
</TABLE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION
- --------------------------------------------------------------------------------
Principles of Consolidation
The consolidated financial statements of Teledyne Technologies include the
accounts of the businesses as described in Note 1. Significant intercompany
accounts and transactions have been eliminated. Certain financial statements,
notes and supplementary data for prior years have been changed to conform to the
2000 presentation.
Fiscal Year
The Company is on a 53/52-week fiscal year convention. Fiscal years 2000
and 1999 were 52-week years and ended on December 31, 2000 and January 2, 2000,
respectively and fiscal year 1998 was a 53-week year and ended on January 3,
1999. References to the years 2000, 1999 and 1998 are intended to refer to the
respective fiscal year unless otherwise noted.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and related disclosures. Actual results
could differ from those estimates. Management believes that the estimates are
reasonable.
F-8
<PAGE> 45
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Revenue Recognition
Commercial sales and revenue from U.S. Government fixed-price type
contracts generally are recorded as shipments are made or as services are
rendered. Occasionally, for certain fixed-price type contracts that require
substantial performance over a long time period (one or more years) before
shipments begin, sales may be recorded based upon attainment of scheduled
performance milestones which could be time, event or expense driven. In these
few instances, invoices are submitted to the customer under a contractual
agreement and payments are made by the customer. Sales under cost-reimbursement
contracts are recorded as costs are incurred and fees are earned.
Since certain contracts extend over a long period of time, all revisions in
cost and funding estimates during the progress of work have the effect of
adjusting the current period earnings on a cumulative catch-up basis. If the
current contract estimate indicates a loss, provision is made for the total
anticipated loss.
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.
Research and Development
Company-funded research and development costs are expensed as incurred and
were $31.7 million in 2000, $27.8 million in 1999 and $24.8 million in 1998, and
include bid and proposal costs. Costs related to customer-funded research and
development contracts were $215.7 million in 2000, $188.1 million in 1999 and
$150.2 million in 1998 and are charged to costs and expenses as the related
sales are recorded. A portion of the costs incurred for Company-funded research
and development is recoverable through overhead cost allowances on government
contracts.
Income Taxes
Provision for income taxes includes deferred taxes resulting from temporary
differences in income for financial and tax purposes using the liability method.
Such temporary differences result primarily from differences in the carrying
value of assets and liabilities.
Net Income Per Common Share
Prior to the spin-off, the number of shares outstanding were based on a
distribution ratio of one share of Teledyne Technologies' Common Stock for every
seven shares of ATI Common Stock. The average number of shares of Teledyne
Technologies' Common Stock used in the computation of basic net income per
common share were 28,589,597, 27,303,421 and 28,107,241 for the fiscal years
ended December 31, 2000, January 2, 2000, January 3, 1999, respectively. The
Company uses the treasury method to calculate diluted earnings per share. The
average number of shares of Teledyne Technologies' Common Stock used in the
computation of diluted net income per common share were 29,477,594, 27,334,737
and 28,133,879 for the fiscal years ended December 31, 2000, January 2, 2000 and
January 3, 1999, respectively. A distribution ratio of 1.527 shares of Teledyne
Technologies Common Stock for every one share of ATI Common Stock was used to
adjust stock options converted at the spin-off date.
Accounts Receivable
Receivables are presented net of a reserve for doubtful accounts of $2.0
million at December 31, 2000 and $3.3 million at January 2, 2000. Expense
recorded for the reserve for doubtful accounts was $90 thousand, $551 thousand
and $1.4 million for 2000, 1999, and 1998, respectively. In 2000, the Company
F-9
<PAGE> 46
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
collected $1.3 million for a receivable that was reserved for at January 2,
2000. The Company markets its products and services principally throughout the
United States, Europe, Japan and Canada to commercial customers and agencies of,
and prime contractors to, the U.S. Government. Trade credit is extended based
upon evaluations of each customer's ability to perform its obligations, which
are updated periodically.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid money-market mutual funds and
bank deposits with initial maturities of three months or less. Cash equivalents
totaled approximately $11.6 million and $5.5 million at December 31, 2000 and
January 2, 2000, respectively.
Inventories
Inventories are stated at the lower of cost (last-in, first-out; first-in,
first-out; and average cost methods) or market, less progress payments. Costs
include direct material, direct labor, applicable manufacturing and engineering
overhead, and other direct costs.
Property, Plant and Equipment
Property, plant and equipment is capitalized at cost. The method of
depreciation adopted for all property, plant and equipment placed into service
after July 1, 1996 is the straight-line method. For property, plant and
equipment acquired prior to July 1, 1996, depreciation is computed using a
combination of accelerated and straight-line methods. The Company believes the
straight-line method more appropriately reflects its financial results by better
allocating costs of new property over the useful lives of these assets.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired related to businesses purchased prior
to November 1970 is not being amortized. Cost in excess of net assets acquired
related to businesses purchased after November 1970 is being amortized on a
straight-line basis over periods not exceeding 15 years. Goodwill amortization
expense was $783 thousand, $672 thousand and $582 thousand in 2000, 1999 and
1998, respectively.
Other Long-Lived Assets
The carrying value of long-lived assets is periodically evaluated in
relation to the operating performance and future undiscounted cash flows of the
underlying businesses. Adjustments are made if the sum of expected future net
cash flows is less than book value.
Environmental
Costs that mitigate or prevent future environmental contamination or extend
the life, increase the capacity or improve the safety or efficiency of property
utilized in current operations are capitalized. Other costs that relate to
current operations or an existing condition caused by past operations are
expensed. Environmental liabilities are recorded when the Company's liability is
probable and the costs are reasonably estimable, but generally not later than
the completion of the feasibility study or the Company's recommendation of a
remedy or commitment to an appropriate plan of action. The accruals are reviewed
periodically and, as investigations and remediations proceed, adjustments are
made as necessary. Accruals for losses from environmental remediation
obligations do not consider the effects of inflation, and anticipated
expenditures are not discounted to their present value. The accruals are not
reduced by possible recoveries from insurance carriers or other third parties,
but do reflect anticipated allocations among potentially responsible parties at
federal Superfund sites or similar state-managed sites and an assessment
F-10
<PAGE> 47
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of the likelihood that such parties will fulfill their obligations at such
sites. The measurement of environmental liabilities by the Company is based on
currently available facts, present laws and regulations, and current technology.
Such estimates take into consideration the Company's prior experience in site
investigation and remediation, the data concerning cleanup costs available from
other companies and regulatory authorities, and the professional judgment of the
Company's environmental experts in consultation with outside environmental
specialists, when necessary.
Foreign Currency Translation
The Company's foreign entities' accounts are measured using local currency
as the functional currency. Assets and liabilities are translated at the
exchange rate in effect at year end. Revenues and expenses are translated at the
rates of exchange prevailing during the year. Unrealized translation gains and
losses arising from differences in exchange rates from period to period are
included as a component of accumulated other comprehensive income in
stockholders' equity.
Accounting Pronouncements
SAB No. 101 -- As noted above, the Company has reviewed the revenue
recognition requirements of SAB No. 101 and has determined that it is in
compliance with SAB No. 101.
SFAS Nos. 138, 137 and 133 -- In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (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
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 instruments and
hedging activities. Teledyne Technologies must implement SFAS No. 133 by the
first quarter of 2001 and does not expect that its implementation will have a
material impact on the financial statements.
SFAS No. 132 -- Effective January 1, 1998, Teledyne Technologies adopted
the provisions of SFAS No. 132 -- "Employers' Disclosures about Pensions and
Other Postretirement Benefits." This statement standardized the disclosure
requirements for pensions and other postretirement benefits and amends SFAS No.
87 -- "Employers' Accounting for Pensions," SFAS No. 88 -- "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans"
and SFAS No. 106 -- "Employers' Accounting for Postretirement Benefits Other
Than Pensions." The provisions of SFAS No. 132 are disclosure oriented and do
not change the measurement or recognition of the plans. Accordingly, the
implementation of SFAS No. 132 did not have an impact on Teledyne Technologies'
consolidated financial position or results of operations.
SFAS No. 131 -- Effective January 1, 1998, Teledyne Technologies adopted
the provisions of SFAS No. 131 -- "Disclosures about Segments of an Enterprise
and Related Information." This statement establishes standards for reporting and
display of information about operating segments. It supersedes or amends several
FASB statements, most notably, SFAS No. 14 -- "Financial Reporting for Segments
of a Business Enterprise." The implementation of SFAS No. 131 did not have an
impact on Teledyne Technologies' consolidated financial position or results of
operations.
F-11
<PAGE> 48
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SFAS No. 130 -- Effective January 1, 1998, Teledyne Technologies adopted
the provisions of SFAS No. 130 -- "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
The implementation of SFAS No. 130 did not have an impact on Teledyne
Technologies' results of operations. Teledyne Technologies' comprehensive income
is primarily composed of net income and foreign currency translation
adjustments. Teledyne Technologies' comprehensive income was $31.7 million,
$48.9 million and $48.5 million for the years 2000, 1999 and 1998, respectively.
Hedging Activities
Teledyne Technologies generally does not actively engage in derivative
financial instruments such as futures contracts, options and swaps, forward
exchange contracts or interest rate swaps and futures. Teledyne Technologies
believes that adequate controls are in place to monitor any hedging activities.
At December 31, 2000 and January 2, 2000 , there were no hedging contracts
outstanding.
Supplemental Cash Flow Information
Cash payments for federal, foreign and state income taxes were $22.1
million for 2000. Until the spin-off date, ATI was responsible for cash payments
for federal, foreign and state income taxes. No tax payments were made by
Teledyne Technologies from the date of the spin-off through year end 1999.
Interest paid by Teledyne Technologies in 2000 totaled approximately $5.3
million. Interest paid by Teledyne Technologies from the date of the spin-off to
year end 1999 totaled approximately $565 thousand.
NOTE 3. DISCONTINUED OPERATION
- --------------------------------------------------------------------------------
In 2000, Teledyne Technologies sold the assets of Teledyne Cast Parts, a
provider of sand and investment castings to the aerospace and defense industries
which was previously reported as part of the Aerospace Engines and Components
segment for a net after-tax gain of $657 thousand. Initial net proceeds from the
sale in 2000 were $17.0 million. In 2001, Teledyne Technologies expects to make
certain payments, including working capital adjustments, currently estimated at
approximately $700 thousand. 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 for 1999 and
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 $31.8 million, $42.0 million
and $47.4 million for 2000, 1999 and 1998, respectively. The income from
discontinued operations for 2000, includes the after-tax gain on the sale and an
after-tax net operating loss of $221 thousand. The operating results of Teledyne
Cast Parts were net of an income tax benefit of $146 thousand in 2000 and were
net of income taxes of $1.2 million and $1.5 million for 1999 and 1998,
respectively.
NOTE 4. FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
Teledyne Technologies values financial instruments as required by SFAS No.
107 -- "Disclosures about Fair Value of Financial Instruments." The carrying
amounts of cash and cash equivalents approximate fair value because of the short
maturity of those instruments. Teledyne Technologies estimates the fair value of
its long-term debt based on the quoted market prices for debt of similar rating
and similar maturity. Teledyne Technologies had no long-term debt outstanding at
December 31, 2000. The estimated fair value of Teledyne Technologies' long-term
debt at January 2, 2000 approximated the carrying value of $97 million.
F-12
<PAGE> 49
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The carrying value of other on-balance sheet financial instruments
approximates fair value, and the cost, if any, to terminate off-balance sheet
financial instruments is not significant.
NOTE 5. ACCOUNTS RECEIVABLE
- --------------------------------------------------------------------------------
Accounts receivable are summarized as follows (in millions):
<TABLE>
<CAPTION>
BALANCE AT YEAR END
--------------------
2000 1999
-------- --------
<S> <C> <C>
U.S. Government and prime contractors contract receivables:
Billed receivables....................................... $ 23.2 $ 27.1
Unbilled receivables..................................... 24.5 20.4
Other receivables, primarily commercial.................... 72.8 64.9
------ ------
120.5 112.4
Reserve for doubtful accounts.............................. (2.0) (3.3)
------ ------
Total accounts receivable, net............................. $118.5 $109.1
====== ======
</TABLE>
The billed contract receivables from the U.S. Government and prime
contractors contain $9.3 million and $9.8 million at December 31, 2000 and
January 2, 2000, respectively, due to long-term contracts. The unbilled contract
receivables from the U.S. Government and prime contractors contain $18.3 million
and $10.5 million at December 31, 2000 and January 2, 2000, respectively, due to
long-term contracts.
Unbilled contract receivables represent accumulated costs and profits
earned but not yet billed to customers. The Company believes that substantially
all such amounts will be billed and collected within one year.
NOTE 6. INVENTORIES
- --------------------------------------------------------------------------------
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
BALANCE AT YEAR END
--------------------
2000 1999
-------- --------
<S> <C> <C>
Raw materials and supplies................................. $ 29.6 $ 23.6
Work in process............................................ 59.4 59.4
Finished goods............................................. 12.1 9.1
------ ------
Total inventories at current cost.......................... 101.1 92.1
LIFO reserve............................................... (31.9) (35.4)
Progress payments.......................................... (4.0) (5.3)
------ ------
Total inventories, net..................................... $ 65.2 $ 51.4
====== ======
</TABLE>
Inventories, before progress payments, determined on the last-in, first-out
method were $61.1 million at December 31, 2000 and $53.7 million at January 2,
2000. The remainder of the inventory was determined using the first-in,
first-out and average cost methods. These inventory values do not differ
materially from current cost.
During 2000, 1999 and 1998, inventory usage resulted in liquidations of
last-in, first-out inventory quantities. These inventories were carried at the
lower costs prevailing in prior years as compared with the cost of current
purchases. The effect of these last-in, first-out liquidations was to increase
net income by $2.1 million in 2000, $2.2 million in 1999 and $264 thousand in
1998.
F-13
<PAGE> 50
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Total inventories at current cost were net of $12.0 million and $6.1
million at December 31, 2000 and January 2, 2000, respectively, which were
related to reserves for obsolete inventory.
Inventories, before progress payments, related to long-term contracts were
$4.1 million and $8.8 million at December 31, 2000 and January 2, 2000,
respectively. Progress payments related to long-term contracts were $3.4 million
and $1.9 million at December 31, 2000 and January 2, 2000, respectively.
Under the contractual arrangements by which progress payments are received,
the customer has a security interest in the inventories associated with specific
contracts.
NOTE 7. SUPPLEMENTAL BALANCE SHEET INFORMATION
- --------------------------------------------------------------------------------
Property, plant and equipment were as follows (in millions):
<TABLE>
<CAPTION>
BALANCE AT YEAR END
--------------------
2000 1999
-------- --------
<S> <C> <C>
Land..................................................... $ 4.9 $ 4.9
Buildings................................................ 32.1 31.9
Equipment................................................ 148.8 135.9
------- -------
185.8 172.7
Accumulated depreciation and amortization................ (111.8) (116.7)
------- -------
Total property, plant and equipment, net................. $ 74.0 $ 56.0
======= =======
</TABLE>
Accrued liabilities included salaries and wages of $27.4 million and $23.9
million at December 31, 2000 and January 2, 2000, respectively. Other long-term
liabilities included reserves for self-insurance, deferred compensation
liabilities and the long-term portion of product recall reserves.
NOTE 8. STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Common Stock
In connection with the spin-off, 26,687,002 shares of Teledyne
Technologies' Common Stock were issued and were outstanding at year end 1999.
This amount includes 943 shares issued under the Non-Employee Director Stock
Compensation Plan.
In 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. At December 31, 2000, Teledyne Technologies had 31,586,735 shares of
its Common Stock outstanding. Approximately 295,000 shares were issued under
certain compensation plans including the exercise of stock options during 2000.
Preferred Stock
Authorized preferred stock may be issued with designations, powers and
preferences designated by the Board of Directors. At December 31, 2000, there
were no shares of preferred stock issued.
Stockholder Rights Plan
On November 12, 1999, the Company's Board of Directors unanimously adopted
a stockholder rights plan under which preferred share purchase rights were
distributed as a dividend on each share of Teledyne Technologies' Common Stock
distributed to ATI's stockholders in connection with the spin-off and each share
to become outstanding between the effective date of the spin-off and the
earliest of the distribution date, redemption date and final expiration date.
The rights will be exercisable only if a person or group acquires 15% or more of
the Company's Common Stock or announces a tender offer, the consummation of
F-14
<PAGE> 51
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
which would result in ownership by a person or group of 15% or more of the
Common Stock. Each right will entitle stockholders to then buy one-hundredth of
a share of a new series of junior participating preferred stock at an exercise
price of $60. There are 1,250,000 shares of Series A Junior Participating
Preferred Stock authorized for issuance under the plan. The record date for the
distribution was the close of business of November 22, 1999. The rights will
expire on November 12, 2009, subject to earlier redemption or exchange by
Teledyne Technologies as described in the plan. The rights distribution was not
taxable to stockholders.
Stock Incentive Plan
ATI sponsored an incentive plan that provided for ATI stock option awards
to officers and key employees. Teledyne Technologies had officers and key
employees that have participated in this plan prior to the spin-off. In
connection with the spin-off, outstanding stock options held by Teledyne
Technologies' employees were converted into options to purchase Teledyne
Technologies' Common Stock. The number of shares and the exercise price of each
ATI option that was converted to a Teledyne Technologies' option was converted
based upon a formula designed to preserve the inherent economic value, vesting
and term provisions of such ATI options as of the Distribution Date. The
exchange ratio and fair market value of the Teledyne Technologies' Common Stock,
upon active trading, also impacted the number of options issued to Teledyne
Technologies' employees.
Teledyne Technologies has established its own long-term incentive plan
which provides its Board of Directors the flexibility to grant restricted stock,
incentive stock options, stock appreciation rights and non-qualified stock
options to officers and employees of Teledyne Technologies.
The following disclosures are based on stock options held by Teledyne
Technologies' employees and include the stock options that have been converted
from ATI options to Teledyne Technologies' options as noted above. Teledyne
Technologies accounts for its stock option plans in accordance with APB Opinion
25 -- "Accounting for Stock Issued to Employees," (APB 25) and related
Interpretations. Under APB 25, no compensation expense is recognized because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock at the date of the grant.
If compensation cost for these options had been determined using the
fair-value method prescribed by FASB Statement No. 123, "Accounting for
Stock-based Compensation" (SFAS No. 123), net income would have been $29.4
million, $47.4 million and $48.0 million for 2000, 1999 and 1998, respectively.
Basic earnings per share, if determined under SFAS No. 123, would have been
$1.03 for 2000, $1.74 for 1999 and $1.71 for 1998. Diluted earnings per share,
if determined under SFAS No. 123, would have been $1.00 for 2000, $1.74 for 1999
and $1.71 for 1998. The method of accounting under SFAS No. 123 has not been
applied to options granted prior to January 1995; therefore, the resulting pro
forma compensation expense may not be representative of that to be expected in
future years. Under SFAS No. 123, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions:
<TABLE>
<CAPTION>
FOR THE YEAR
-----------------------
2000 1999 1998
----- ----- -----
<S> <C> <C> <C>
Expected dividend yield..................................... -- -- 2.8%
Expected volatility......................................... 93.3% 40.1% 31.0%
Risk-free interest rate..................................... 5.5% 5.5% 5.0%
Expected lives.............................................. 8.0 8.0 8.0
Weighted-average fair value of options granted during the
year...................................................... $9.87 $4.91 $7.25
</TABLE>
F-15
<PAGE> 52
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock option transactions, including transactions in ATI Common Stock under
ATI's incentive plan for Teledyne Technologies' employees that have been
converted to Teledyne Technologies as noted above, are summarized as follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance......... 2,123,297 $11.84 1,757,392 $12.36 643,985 $ 7.66
Granted or issued......... 699,500 $11.59 487,500 $ 8.93 1,125,620 $14.99
Exercised................. (188,346) $10.76 (91,329) $ 5.76 (12,213) $ 6.64
Canceled or expired....... (205,139) $10.74 (30,266) $13.42 -- $ --
--------- ------ --------- ------ --------- ------
Ending balance............ 2,429,312 $11.94 2,123,297 $11.84 1,757,392 $12.36
========= ====== ========= ====== ========= ======
Options exercisable at
year-end................ 1,187,213 $11.88 856,087 $10.93 495.891 $ 7.27
========= ====== ========= ====== ========= ======
</TABLE>
For options outstanding at year end 2000, the exercise prices were between
$5.57 and $28.69 and the weighted-average remaining contractual life was
approximately eight years. For options exercisable at year end 2000 the exercise
prices were between $5.57 and $17.60.
Non-Employee Director Stock Compensation Plan
Teledyne Technologies also sponsors a stock option plan for non-employee
directors. During 2000, options for 20,629 shares were issued and outstanding
under the plan with exercise prices between $6.61 and $14.75 and a
weighted-average exercise price of $12.63. At year end 1999, options for 15,073
shares were issued and outstanding under the plan with exercise prices between
$6.62 and $9.94 and a weighted-average exercise price of $9.70. All of the
options issued in 1999 are exercisable and the options issued in 2000 will
become exercisable in 2001.
NOTE 9. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The accompanying financial statements include transactions with ATI for the
1999 year-to-date period ended November 29, 1999 and the 1998 fiscal year (in
millions):
<TABLE>
<CAPTION>
1999(A) 1998
------- -------
<S> <C> <C>
Net advances from ATI, beginning of the year.............. $104.7 $ 107.5
Net cash transactions with ATI:
Current provision for income taxes................... 26.5 34.7
Insurance expense.................................... 15.9 17.2
Pension expense (income)............................. (5.8) (1.7)
Corporate general and administrative expense......... 7.3 7.8
Other net cash to ATI(b)............................. (91.4) (109.5)
------ -------
Net cash transactions with ATI............................ (47.5) (51.5)
Net income................................................ 43.4 48.7
------ -------
Net advances from ATI, end of period...................... $100.6 $ 104.7
====== =======
</TABLE>
- ---------------
(a) For the 1999 year-to-date period ended November 29, 1999.
(b) The 1999 amount includes $100 million in long term debt incurred by ATI and
assumed by Teledyne Technologies at the date of the spin-off.
F-16
<PAGE> 53
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Until the spin-off date, Teledyne Technologies participated in ATI's
centralized cash management system. Cash receipts in excess of cash requirements
were transferred to ATI. These transactions with ATI were non-interest bearing
and the net advances fluctuated on a daily basis.
Corporate general and administrative expenses represent allocations for
expenses incurred by ATI on the Company's behalf including costs for finance,
legal, tax and human resources functions. Amounts above were allocated based on
net sales, which management believes to be reasonable. Teledyne Technologies
participated in the defined benefit pension plan sponsored by ATI through the
date of the spin-off. The expense for the plan was allocated to Teledyne
Technologies based upon actuarially-determined amounts for the pension
obligation and assets ultimately transferred from ATI to Teledyne Technologies
at the time of the spin-off. Teledyne Technologies also participated in
casualty, medical and life insurance programs sponsored by ATI. Insurance
expense was allocated to Teledyne Technologies based upon actual losses incurred
plus a share of pooled catastrophic losses under the ATI self-insurance program.
In the opinion of management, the allocations of these expenses were reasonable.
In addition, prior to and in connection with the spin-off, Teledyne
Technologies and ATI entered into agreements providing for the separation of the
companies and governing various relationships for separating employee benefits
and tax obligations, indemnification and transition services.
Net sales include $1.4 million and $1.1 million of sales to other ATI
subsidiaries for the eleven month period ended November 29, 1999 and the fiscal
year ended January 3, 1999, respectively.
NOTE 10. LONG-TERM DEBT
- --------------------------------------------------------------------------------
At December 31, 2000, Teledyne Technologies had no long-term debt
outstanding. Long-term debt at January 2, 2000, was $97 million in the form of
bank borrowings under a $200 million long-term, revolving credit agreement.
Borrowings under the agreement are on a revolving basis under commitments
available until November 2004. The Company had $200 million available under its
credit facility at December 31, 2000.
Borrowings under the revolving credit facility bear interest, at Teledyne
Technologies option, at a rate based on either a defined base rate or the London
Interbank Offered Rate (LIBOR), plus applicable margins. At January 2, 2000, the
interest rate payable on the outstanding debt was 7.63%. The agreement also
provides for facility fees which will vary between .35% and .20% of the unused
credit line, depending on Teledyne Technologies' capitalization ratio as
calculated from time to time. Interest expense incurred on long-term debt and
facility fees was $5.4 million in 2000 and $796 thousand in 1999 from the date
of the spin-off.
The financial covenants of the revolving credit agreement require the
Company to maintain specified minimum consolidated net worth and ratios of
consolidated debt and interest expense to certain measures of income. Under the
most restrictive of these covenants, approximately $9.5 million ($1.4 million at
January 2, 2000) of stockholders' equity was available for dividends as of
December 31, 2000.
NOTE 11. INCOME TAXES
- --------------------------------------------------------------------------------
Until the effective date of the spin-off, Teledyne Technologies was
included in the consolidated federal and certain state income tax returns of
ATI. ATI is responsible for paying the taxes related to such returns including
any subsequent adjustment resulting from the redetermination of such tax
liability by the applicable taxing authorities. Provision for income taxes for
1999 and 1998 was calculated as if Teledyne
F-17
<PAGE> 54
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Technologies had filed separate income tax returns for those years. Provision
for income taxes from continuing operations was as follows (in millions):
<TABLE>
<CAPTION>
2000 1999 1998
----- ----- -----
<S> <C> <C> <C>
Current
Federal................................................... $13.0 $26.7 $27.7
State..................................................... 4.3 6.2 4.9
Foreign................................................... 0.3 0.3 0.5
----- ----- -----
17.6 33.2 33.1
----- ----- -----
Deferred
Federal................................................... 5.0 (1.3) (0.4)
State..................................................... (1.6) (0.1) --
----- ----- -----
3.4 (1.4) (0.4)
----- ----- -----
Provision for income taxes.................................. $21.0 $31.8 $32.7
===== ===== =====
</TABLE>
Income before income taxes included income from domestic operations of
$52.4 million for 2000, $78.1 million for 1999 and $77.9 million for 1998. The
following is a reconciliation of the statutory federal income tax rate to the
actual effective income tax rate:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory tax rate............................. 35.0% 35.0% 35.0%
State and local taxes, net of federal benefit............... 5.2 5.2 4.5
Other....................................................... (0.5) -- 1.8
---- ---- ----
Effective income tax rate................................... 39.7% 40.2% 41.3%
==== ==== ====
</TABLE>
Deferred income taxes result from temporary differences in the recognition
of income and expense for financial and income tax reporting purposes, and
differences between the fair value of assets acquired in business combinations
accounted for as purchases for financial reporting purposes and their
corresponding tax bases. Deferred income taxes represent future tax benefits or
costs to be recognized when those temporary differences reverse. No valuation
allowance has been recorded for 2000 or 1999. The categories of assets and
liabilities that have resulted in differences in the timing of the recognition
of income and expense were as follows (in millions):
<TABLE>
<CAPTION>
2000 1999
----- -----
<S> <C> <C>
Deferred income tax assets:
Postretirement benefits other than pensions............... $12.1 $12.6
Reserves.................................................. 17.3 16.1
Deferred compensation and other benefit plans............. 6.1 9.8
Inventory valuation....................................... 8.5 6.6
Accrued vacation.......................................... 3.5 5.0
Other items............................................... 1.6 --
----- -----
Total deferred income tax assets............................ 49.1 50.1
Deferred income tax liabilities:
Property, plant and equipment differences................. 3.3 2.8
Other items............................................... 1.9 --
----- -----
Total deferred income tax liabilities....................... 5.2 2.8
----- -----
Net deferred income tax asset............................... $43.9 $47.3
===== =====
</TABLE>
F-18
<PAGE> 55
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. PENSION PLANS AND POSTRETIREMENT BENEFITS
- --------------------------------------------------------------------------------
Prior to the spin-off, certain Teledyne Technologies' employees
participated in the noncontributory defined benefit plan sponsored by ATI.
Benefits under the defined benefit plan are generally based on years of service
and/or final average pay. ATI funded the pension plan in accordance with the
requirements of the Employee Retirement Income Security Act of 1974, as amended,
and the Internal Revenue Code.
Net periodic pension income allocated to Teledyne Technologies was $9.0
million, $6.6 million and $1.7 million in 2000, 1999 and 1998, respectively.
As of the spin-off date, Teledyne Technologies assumed the existing defined
benefit plan obligations for all of Teledyne Technologies' employees, both
active and inactive, at its companies that perform government contract work and
for Teledyne Technologies' active employees at its companies that do not perform
government contract work. ATI transferred pension assets to fund the new
Teledyne Technologies' defined benefit pension plan, which at the time of the
transfer had assets in excess of liabilities.
Teledyne Technologies also participated in a 401(k) plan that was open to
all full time U.S. employees and was sponsored by ATI. Teledyne Technologies
established its own 401(k) plan effective April 1, 2000. The costs associated
with these plans were $3.1 million, $2.8 million, and $3.1 million, for 2000,
1999 and 1998, respectively.
The Company sponsors several postretirement defined benefit plans covering
certain salaried and hourly employees. The plans provide health care and life
insurance benefits for eligible retirees.
The following table sets forth the components of net period pension benefit
(income) expense for Teledyne Technologies' defined benefit pension plans and
postretirement benefit plans for 2000, 1999 and 1998 (in millions):
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
-------------------------- -----------------------
2000 1999 1998 2000 1999 1998
------ ------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Service cost -- benefits earned during
the period............................ $ 12.9 $ 12.7 $ 12.8 $ 0.1 $ 0.4 $ 0.3
Interest cost on benefit obligation..... 25.1 23.6 22.6 0.9 1.8 1.7
Expected return on plan assets.......... (38.7) (35.9) (32.4) -- -- --
Amortization of net transition asset.... (6.4) (6.4) (6.4) -- -- --
Amortization of prior service cost...... 2.2 2.1 2.1 (0.4) (0.4) (0.4)
Recognized actuarial gain............... (4.1) (2.7) (0.4) (1.7) (0.4) (0.1)
------ ------ ------ ----- ----- -----
Net periodic benefit (income) expense... $ (9.0) $ (6.6) $ (1.7) $(1.1) $ 1.4 $ 1.5
====== ====== ====== ===== ===== =====
</TABLE>
The following table sets forth the reconciliation of the beginning and
ending balances of the benefit obligation of the defined benefit pension and
postretirement benefit plans (in millions):
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
---------------- ---------------
2000 1999 2000 1999
------ ------ ------ -----
<S> <C> <C> <C> <C>
Changes in benefit obligation:
Benefit obligation -- beginning of year.................. $367.0 $344.8 $ 27.1 $25.1
Service cost -- benefits earned during the period...... 12.9 12.7 0.1 0.3
Interest cost on projected benefit obligation.......... 25.1 23.6 0.9 1.8
Actuarial (gain) loss.................................. (24.0) (0.2) (12.3) 0.7
Benefits paid.......................................... (15.0) (13.9) (1.3) (0.8)
------ ------ ------ -----
Benefit obligation -- end of year........................ $366.0 $367.0 $ 14.5 $27.1
====== ====== ====== =====
</TABLE>
F-19
<PAGE> 56
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the reconciliation of the beginning and
ending balances of the fair value of plan assets for Teledyne Technologies'
defined benefit pension plans (in millions):
<TABLE>
<CAPTION>
PENSION BENEFITS
----------------
2000 1999
------ ------
<S> <C> <C>
Changes in plan assets:
Fair value of plan assets -- beginning of year............. $437.7 $403.9
Actual return on plan assets............................. (4.4) 47.5
Employer contribution.................................... 0.1 0.2
Benefits paid............................................ (15.0) (13.9)
------ ------
Fair value of plan assets -- end of year................... $418.4 $437.7
====== ======
</TABLE>
The weighted average discount rate used in determining the benefit
obligations was 7.5% as of December 31, 2000 and 7.0% as of January 2, 2000. The
weighted average rate of increase in future compensation levels used in
determining the benefit obligations was approximately 4.5% in 2000 and 1999. The
expected weighted average long-term rate of return on assets was 9.0% in 2000
and 1999.
The following table sets forth the funded status and amounts recognized in
Teledyne Technologies' consolidated balance sheets for the defined benefit
pension plan and the postretirement benefit plan at year end 2000 and 1999 (in
millions):
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
---------------- ----------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Funded status........................................... $ 52.4 $ 70.7 $(14.5) $(27.1)
Unrecognized net transition obligation (asset).......... (4.7) (11.1) -- --
Unrecognized prior service cost......................... 14.1 15.4 (0.7) (1.1)
Unrecognized net gain................................... (68.1) (89.7) (16.0) (5.4)
------ ------ ------ ------
Net amount recognized................................... $ (6.3) $(14.7) $(31.2) $(33.6)
====== ====== ====== ======
Prepaid benefit cost.................................... $ (6.3) $(10.6) $ -- $ --
Accrued benefit liability............................... -- (5.5) (31.2) (33.6)
Intangible asset........................................ -- 1.4 -- --
------ ------ ------ ------
Net amount recognized................................... $ (6.3) $(14.7) $(31.2) $(33.6)
====== ====== ====== ======
</TABLE>
The annual assumed rate of increase in the per capita cost of covered
benefits (the health care cost trend rate) for health care plans was 10% in 2001
and was assumed to decrease to 5.5% by the year 2008 and remain at that level
thereafter. Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plans. A one percentage point increase
in the assumed health care cost trend rates would result in an increase in the
annual service and interest costs by $44 thousand for 2000 and would result in
an increase in the postretirement benefit obligation by $710 thousand at
December 31, 2000. A one percentage point decrease in the assumed health care
cost trend rates would result in a decrease in the annual service and interest
costs by $39 thousand for 2000 and would result in a decrease in the
postretirement benefit obligation by $673 thousand at December 31, 2000.
NOTE 13. BUSINESS SEGMENTS
- --------------------------------------------------------------------------------
Effective January 1, 1998, Teledyne Technologies adopted the provisions of
SFAS No. 131 -- "Disclosures about Segments of an Enterprise and Related
Information." Teledyne Technologies operates in three business segments:
Electronics and Communications, Systems Engineering Solutions and Aerospace
Engines and Components. The factors for determining the reportable segments were
based on
F-20
<PAGE> 57
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the distinct nature of their operations. They are managed as separate business
units because each requires and is responsible for executing a unique business
strategy. The Electronics and Communications segment, through Teledyne
Electronic Technologies, applies proprietary technology, advanced software and
hardware design skills and manufacturing capabilities in data acquisition and
communications, precision electronic devices and electronic manufacturing. The
Systems Engineering Solutions segment, through Teledyne Brown Engineering,
offers a wide range of engineering solutions and information services to
government defense, aerospace and commercial customers. The Aerospace Engines
and Components segment, through Teledyne Continental Motors, focuses on the
design, development and manufacture of piston engines, turbine engines,
electronic engine controls and batteries.
Identifiable assets are those assets used in the operations of the
segments. Corporate assets primarily consist of cash and cash equivalents,
deferred tax assets, net pension assets and other assets, including the net
assets of discontinued operations in 1999 and 1998.
Information on the Company's business segments was as follows (in
millions):
<TABLE>
<CAPTION>
2000 1999 1998
SALES ------ ------ ------
<S> <C> <C> <C>
Electronics and Communications......................... $360.5 $340.7 $342.1
Systems Engineering Solutions.......................... 234.8 226.5 223.2
Aerospace Engines and Components....................... 199.8 194.2 167.7
------ ------ ------
Total sales.............................................. $795.1 $761.4 $733.0
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT
<S> <C> <C> <C>
Electronics and Communications......................... $ 38.7 $ 42.6 $ 42.6
Systems Engineering Solutions.......................... 17.9 20.2 20.5
Aerospace Engines and Components....................... 15.8 24.8 22.2
------ ------ ------
Segment operating profit............................ 72.4 87.6 85.3
Corporate expense................................... (15.3) (8.8) (7.8)
Interest expense, net............................... (5.3) (0.8) --
Other income........................................ 1.1 1.0 1.6
------ ------ ------
Income before taxes...................................... $ 52.9 $ 79.0 $ 79.1
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION
<S> <C> <C> <C>
Electronics and Communications......................... $ 9.2 $ 6.6 $ 5.7
Systems Engineering Solutions.......................... 2.6 2.5 2.9
Aerospace Engines and Components....................... 3.0 2.2 2.0
------ ------ ------
Total depreciation and amortization...................... $ 14.8 $ 11.3 $ 10.6
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
<S> <C> <C> <C>
Electronics and Communications......................... $ 21.4 $ 13.5 $ 10.3
Systems Engineering Solutions.......................... 3.7 2.0 2.6
Aerospace Engines and Components....................... 5.6 12.8 3.8
------ ------ ------
Total capital expenditures............................... $ 30.7 $ 28.3 $ 16.7
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
<S> <C> <C> <C>
Electronics and Communications......................... $145.9 $109.0 $ 96.2
Systems Engineering Solutions.......................... 67.4 62.2 63.4
Aerospace Engines and Components....................... 63.9 62.0 42.3
Corporate.............................................. 73.7 80.2 44.5
------ ------ ------
Total identifiable assets................................ $350.9 $313.4 $246.4
====== ====== ======
</TABLE>
F-21
<PAGE> 58
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's backlog of confirmed orders was approximately $339.2 million
at December 31, 2000, $348.0 million at January 2, 2000 and $363.7 million at
January 3, 1999.
Information on the Company's sales to the U.S. Government, including direct
sales as a prime contractor and indirect sales as a subcontractor, were as
follows (in millions):
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Electronics and Communications...................... $ 97.5 $101.1 $102.4
Systems Engineering Solutions....................... 198.4 185.4 159.2
Aerospace Engines and Components.................... 51.4 47.5 33.3
------ ------ ------
Total U.S. Government sales.............................. $347.3 $334.0 $294.9
====== ====== ======
</TABLE>
Sales to the U.S. Government included sales to the Department of Defense of
$246.8 million in 2000, $232.1 million in 1999 and $200.1 million in 1998.
Total international sales were $135.2 million in 2000, $136.9 million in
1999 and $164.2 million in 1998. Of these amounts, sales by operations in the
United States to customers in other countries were $119.2 million in 2000,
$119.9 million in 1999 and $150.5 million in 1998. There were no sales to
individual countries outside of the United States in excess of 10% of the
Company's net sales. Sales between business segments, which were not material,
generally were priced at prevailing market prices.
NOTE 14. COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
Rental expense, under operating leases, net of sublease income, was $8.4
million in 2000, $9.9 million in 1999 and $10.4 million in 1998. Future minimum
rental commitments under operating leases with non-cancelable terms of more than
one year as of December 31, 2000, were as follows (in millions): $7.6 in 2001,
$4.3 in 2002, $2.3 in 2003, $1.4 in 2004, $1.4 in 2005 and $8.4 thereafter.
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 15 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,
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
F-22
<PAGE> 59
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
environmental matters will not have a material adverse effect on the Company's
financial condition or results of operations.
At December 31, 2000, the Company's reserves for environmental remediation
obligations totaled approximately $2.3 million, of which approximately $497
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 thirty 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. In July 2000, the Internal Revenue Service agreed
to a modification of the tax ruling issued in connection with the spin-off of
Teledyne Technologies from ATI. The revised ruling required Teledyne
Technologies to complete a smaller public offering of its outstanding Common
Stock. In the third quarter of 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.
The continuing validity of the IRS tax ruling is subject to the use of the
proceeds from the public offering for research and development and related
capital projects, for the further development of manufacturing capabilities and
for acquisitions and/or joint ventures.
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 that result
in the spin-off not qualifying as a tax-free distribution. If the Company were
required to so
F-23
<PAGE> 60
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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.
F-24
<PAGE> 61
TELEDYNE TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
The following is Teledyne Technologies' quarterly information (in millions,
except per-share amounts):
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FISCAL YEAR 2000(a)(b)
SALES........................................ $195.4 $202.3 $201.1 $196.3
GROSS PROFIT................................. $ 54.9 $ 55.4 $ 55.7 $ 49.5
NET INCOME FROM CONTINUING OPERATIONS........ $ 10.3 $ 2.8 $ 9.7 $ 9.1
DISCONTINUED OPERATIONS, NET OF TAX.......... (0.1) 0.3 0.1 0.1
------ ------ ------ ------
NET INCOME................................... $ 10.2 $ 3.1 $ 9.8 $ 9.2
====== ====== ====== ======
BASIC EARNINGS PER SHARE:
Continuing operations...................... $ 0.38 $ 0.10 $ 0.33 $ 0.29
Discontinued operations.................... -- 0.01 -- --
------ ------ ------ ------
BASIC EARNINGS PER SHARE..................... $ 0.38 $ 0.11 $ 0.33 $ 0.29
====== ====== ====== ======
DILUTED EARNINGS PER SHARE:
Continuing operations...................... $ 0.38 $ 0.10 $ 0.32 $ 0.28
Discontinued operations.................... -- 0.01 -- --
------ ------ ------ ------
DILUTED EARNINGS PER SHARE................... $ 0.38 $ 0.11 $ 0.32 $ 0.28
====== ====== ====== ======
FISCAL YEAR 1999(a)(b)(c)
Sales........................................ $191.0 $184.4 $195.0 $191.0
Gross profit................................. $ 49.0 $ 48.1 $ 58.3 $ 53.9
Net Income from continuing operations........ $ 11.5 $ 9.4 $ 13.2 $ 13.1
Discontinued operations, net of tax.......... 0.4 0.8 0.6 --
------ ------ ------ ------
Net Income................................... $ 11.9 $ 10.2 $ 13.8 $ 13.1
====== ====== ====== ======
Basic and diluted earnings per share:
Continuing operations...................... $ 0.42 $ 0.34 $ 0.48 $ 0.49
Discontinued operations.................... 0.01 0.03 0.02 --
------ ------ ------ ------
Basic and diluted earnings per share......... $ 0.43 $ 0.37 $ 0.50 $ 0.49
====== ====== ====== ======
</TABLE>
- ---------------
(a) Reflects 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. The fourth
quarter of 2000 included $2.2 million of pretax charges for receivables and
cost adjustments.
(c) Teledyne Technologies spun-off from ATI effective November 29, 1999.
F-25
<PAGE> 62
SCHEDULE II
TELEDYNE TECHNOLOGIES INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2000, JANUARY 2, 2000, AND JANUARY 3,
1999
(IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------------
BALANCE AT CHARGED TO
BEGINNING COSTS AND CHARGED TO BALANCE AT
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS(A) END OF PERIOD
----------- ---------- ---------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
FISCAL 2000
RESERVE FOR DOUBTFUL
ACCOUNTS..................... $3.3 0.1 -- (1.4) $2.0
FISCAL 1999
Reserve for doubtful
accounts..................... $2.8 0.5 -- -- $3.3
FISCAL 1998
Reserve for doubtful
accounts..................... $3.1 1.4 -- (1.7) $2.8
</TABLE>
- ---------------
(a) The 2000 amount primarily represents the collection of an account previously
reserved for and the 1998 amount represents write-offs of doubtful accounts.
F-26
<PAGE> 63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 as of February 26,
2001.
Teledyne Technologies Incorporated
(Registrant)
By: /s/ ROBERT MEHRABIAN
------------------------------------
Robert Mehrabian
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<C> <C> <S>
/s/ ROBERT MEHRABIAN Chairman, President and February 26, 2001
- --------------------------------------------------- Chief Executive Officer
Robert Mehrabian (Principal Executive Officer)
and Director
/s/ ROBERT J. NAGLIERI Senior Vice President and February 26, 2001
- --------------------------------------------------- Chief Financial Officer
Robert J. Naglieri (Principal Financial Officer)
/s/ DALE A. SCHNITTJER Controller February 26, 2001
- --------------------------------------------------- (Principal Accounting Officer)
Dale A. Schnittjer
* Director February 26, 2001
- ---------------------------------------------------
Robert P. Bozzone
* Director February 26, 2001
- ---------------------------------------------------
Paul S. Brentlinger
* Director February 26, 2001
- ---------------------------------------------------
Frank V. Cahouet
* Director February 26, 2001
- ---------------------------------------------------
Diane C. Creel
* Director February 26, 2001
- ---------------------------------------------------
C. Fred Fetterolf
* Director February 26, 2001
- ---------------------------------------------------
Charles J. Queenan, Jr.
* Director February 26, 2001
- ---------------------------------------------------
Michael T. Smith
*By /s/ MELANIE S. CIBIK
----------------------------------------------
Melanie S. Cibik
Pursuant to Power of Attorney
filed as Exhibit 24
</TABLE>
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Separation and Distribution Agreement dated as of November
29, 1999 by and among Allegheny Teledyne Incorporated, TDY
Holdings, LLC, Teledyne Industries, Inc. and Teledyne
Technologies Incorporated (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K
dated as of November 29, 1999 (File No. 1-15295))
3.1 Restated Certificate of Incorporation of Teledyne
Technologies Incorporated (including Certificate of
Designation of Series A Junior Participating Preferred
Stock) (incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended
January 2, 2000 (File No. 1-15295))
3.2 Amended and Restated Bylaws of Teledyne Technologies
Incorporated (incorporated by reference to Exhibit 3.2 to
the Company's Annual Report on Form 10-K for the year ended
January 2, 2000 (File No. 1-15295))
4.1 Rights Agreement dated as of November 29, 1999 between
Teledyne Technologies Incorporated and ChaseMellon
Shareholder Services, L.L.C. (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
dated as of November 29, 1999 (File No. 1-15295))
4.2 Credit Agreement dated as of October 29, 1999 among
Allegheny Teledyne Incorporated, Teledyne Technologies
Incorporated, Bank of America, N.A., as Administrative
Agent, Swing Line Lender and Issuing Lender, and the other
financial institutions party thereto (incorporated by
reference to Exhibit 4.2 to the Company's Annual Report on
Form 10-K for the year ended January 2, 2000 (File No.
1-15295))
4.3 First Amendment to the Credit Agreement dated as of November
10, 1999 (incorporated by reference to Exhibit 4.3 to the
Company's Annual Report on Form 10-K for the year ended
January 2, 2000 (File No. 1-15295))
4.4 Second Amendment to the Credit Agreement dated as of July
28, 2000 (incorporated by reference to Exhibit 4 to the
Company's Form 10-Q for the quarter ended July 2, 2000 (File
No. 1-15295)).
10.1 Tax Sharing and Indemnification Agreement between Allegheny
Teledyne Incorporated and Teledyne Technologies Incorporated
(incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated as of November 29, 1999
(File No. 1-15295))
10.2 Interim Services Agreement between Allegheny Teledyne
Incorporated and Teledyne Technologies Incorporated
(incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K dated as of November 29, 1999
(File No. 1-15295))
10.3 Employee Benefits Agreement between Allegheny Teledyne
Incorporated and Teledyne Technologies Incorporated
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K/A (Amendment No. 1) dated as of
November 29, 1999 (File No. 1-15295))+
10.4 Trademark License Agreement between Allegheny Teledyne
Incorporated and Teledyne Technologies Incorporated
(incorporated by reference to Exhibit 10.4 to the Company's
Current Report on Form 8-K dated as of November 29, 1999
(File No. 1-15295))
10.5 Teledyne Technologies Incorporated 1999 Incentive Plan
(incorporated by reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the year ended January 2,
2000 (File No. 1-15295))+
10.6 Teledyne Technologies Incorporated 1999 Non-Employee
Director Stock Compensation Plan (incorporated by reference
to Exhibit 10.6 to the Company's Annual Report on Form 10-K
for the year ended January 2, 2000 (File No. 1-15295))+
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.7 Amendment No. 1 to Teledyne Technologies Incorporated 1999
Non-Employee Director Stock Compensation Plan*+
10.8 Amendment No. 2 to Teledyne Technologies Incorporated 1999
Non-Employee Director Stock Compensation Plan*+
10.9 Employment Agreement dated as of December 31, 1999 between
Robert Mehrabian and Teledyne Technologies Incorporated
(incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended January 2,
2000 (File No. 1-15295))+
10.10 Form of Change of Control Severance Agreement (incorporated
by reference to Exhibit 10.9 to the Company's Annual Report
on Form 10-K for the year ended January 2, 2000 (File No.
1-15295) and with respect to Robert J. Naglieri incorporated
by reference to Exhibit 10.1 to the Company's Annual Report
on Form 10-Q for the quarter ended October 1, 2000 (File No.
1-5295))+
10.11 Teledyne Technologies Incorporated Executive Deferred
Compensation Plan (incorporated by reference to Exhibit
10.10 to the Company's Annual Report on Form 10-K for the
year ended January 2, 2000 (File No. 1-15295))+
10.12 Amendment No. 1 to Teledyne Technologies Incorporated
Executive Deferred Compensation Plan*+
10.13 Amendment No. 2 to Teledyne Technologies Incorporated
Executive Deferred Compensation Plan*+
10.14 Teledyne Technologies Incorporated Pension
Equalization/Benefit Restoration Plan (incorporated by
reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the year ended January 2, 2000 (File No.
1-15295))+
10.15 Severance Agreement and General Release between Nickolas L.
Blauwiekel and the Company, together with Waiver & Release
under the Age Discrimination in Employment Act*+
21 Significant Subsidiary of Teledyne Technologies
Incorporated*
23 Consent of Ernst & Young LLP*
24 Power of Attorney*
</TABLE>
- ---------------
* Filed herewith.
+ Denotes management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>2
<FILENAME>v69886ex10-7.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>
<PAGE> 1
EXHIBIT 10.7
Definitive Copy
AMENDMENT NO. 1
TO
TELEDYNE TECHNOLOGIES INCORPORATED
1999 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
EFFECTIVE AS OF JANUARY 1, 2001
Preamble: The Board of Directors of Teledyne Technologies Incorporated has
determined that it is in the best interests of the Company to amend the Teledyne
Technologies Incorporated 1999 Non-Employee Director Stock Compensation Plan
(the "Plan") to permit: (1) fees paid by the Company to a Non-Employee Director
for attending meetings of the Board or Committees of the Board to be paid in the
form of cash, Common Stock or Stock Options; and (2) a Non-Employee Director to
elect to defer twenty-five percent (25%), fifty percent (50%) or seventy-five
percent (75%) of his or her Director's Retainer Fee Payment under and in
accordance with the Teledyne Technologies Incorporated Executive Deferred
Compensation Plan, as amended and as the same may be amended from time to time
or any successor plan (the "TDY Deferred Compensation Plan"). Capitalized terms
used and not otherwise defined in this Amendment No. 1 have the meanings
ascribed to such terms in the Plan.
The Plan is hereby amended as follows:
1. A new Section 4.5 is hereby added to the Plan and shall read in its
entirety as follows:
4.5 Meeting Fees
(a) General. A Non-Employee Director may elect to have all fees paid by the
Company to a Non-Employee Director for attending meetings of the Board
or Committees of the Board during a Compensation Year ("Meeting Fees")
either one hundred percent (100%) (i) in cash, (ii) in the form of
Common Stock, or (iii) in the form of Stock Options. If a Non-Employee
Director has not made an election pursuant to Section 4.5(b) below,
Meeting Fees shall be paid in cash.
(b) Notice. A Non-Employee Director may file with the Secretary of the
Company or other designee of the Board prior to commencement of a
Compensation Year written notice making an election to receive any and
all Meeting Fees for a Compensation Year either one hundred percent
(100%) (i) in cash, (ii) in the form of Common Stock, or (iii) in the
form of Stock Options. Notwithstanding the foregoing, in the case of a
new Non-Employee Director, elections to receive Common Stock or Stock
Options must be made within 30 days of the commencement of status as a
Non-Employee Director for the applicable Compensation Year.
(c) Common Stock. Each Non-Employee Director who pursuant to Section 4.5(b)
is to receive Common Stock as all of his or her Meeting Fees with
respect to a Compensation Year shall receive as of each Meeting Date
during such Compensation Year a number of shares of Common Stock equal
to the quotient obtained by dividing (i) the amount of the Meeting Fee
to be paid in Common Stock by (ii) the Fair Market Value of the Common
Stock per share on such Meeting Date. Cash shall be paid in lieu of any
fractional share.
(d) Meeting Fee Stock Options. Meeting Fee Stock Options will be granted on
the Meeting Dates of each Compensation Year. The number of shares of
Common Stock to be subject to a Meeting Fee Stock Option shall be equal
to the nearest number of whole shares determined
<PAGE> 2
by multiplying the Fair Market Value of a share of Common Stock on the
date of grant by 0.3333 and dividing the result into the Meeting Fee
elected to be received as Stock Options by the Non-Employee Director for
the applicable Meeting Date for the Compensation Year. The purchase
price of each share covered by each Meeting Fee Stock Option shall be
equal to the Fair Market Value of a share of Common Stock on the date of
grant of the Meeting Fee Option multiplied by 0.6666. The provisions of
clauses (c), (d), (e) and (f) of Section 4.4 of the Plan regarding
Annual Options and Retainer Fee Options shall apply to Stock Options
paid in respect of Meeting Fees.
(e) Meeting Date Defined. "Meeting Date" means the date on which the meeting
of the Board or the Committee of the Board is held for which a Meeting
Fee is payable.
2. A new Section 4.6 is hereby added to the Plan and shall read in its
entirety as follows:
4.6 Deferral of Director's Retainer Fee Payment
(a) Permitted Deferral of Director's Retainer Fee Payment. Notwithstanding
anything in Article IV or this Plan to the contrary, a Non-Employee
Director may elect to defer payment of, as of a Payment Date for an
applicable Compensation Year, twenty-five percent (25%), fifty percent
(50%) or seventy-five percent (75%) of his or her Director's Retainer
Fee Payment under and in accordance with the TDY Deferred Compensation
Plan. Meeting Fees will not be subject to deferral.
(b) Notice of Deferral. A Non-Employee Director may file with the Secretary
of the Company or other designee of the Board prior to commencement of a
Compensation Year written notice making an election to defer payment of
twenty-five percent (25%), fifty percent (50%) or seventy-five percent
(75%) of his or her Director's Retainer Fee Payment under and in
accordance with the TDY Deferred Compensation Plan. If, for an
applicable Compensation Year, a Non-Employee Director has not made an
election pursuant to Section 4.2 to receive Stock Options or Common
Stock in lieu of at least twenty-five percent (25%) of his or her
Director's Retainer Fee Payment or an election to defer payment of a
permitted percentage of his or her Director's Retainer Fee Payment, then
seventy-five percent (75%) of such Director's Retainer Fee Payment shall
be paid in cash and twenty-five percent (25%) shall be paid in the form
of Common Stock.
(c) TDY Deferred Compensation Plan. Once the notice specified in Section
4.5(b) is timely filed, permitted elected deferrals of a Director's
Retainer Fee Payment shall be subject to the terms and conditions,
including without limitation investment elections and distribution
requirements, of the TDY Deferred Compensation Plan.
3. Effective Date
This Amendment No. 1 is effective beginning with the Compensation Year
commencing January 1, 2001. A notice of an election as to the form of Meeting
Fees payment as provided in Section 4.5 of the Plan for the 2001 Compensation
Year and a notice of an election to defer a Director's Retainer Fee Payment as
provided in Section 4.6 of the Plan for the 2001 Compensation Year may be made
on or after December 1, 2000, but in any event before December 31, 2000.
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>3
<FILENAME>v69886ex10-8.txt
<DESCRIPTION>EXHIBIT 10.8
<TEXT>
<PAGE> 1
EXHIBIT 10.8
AMENDMENT NO. 2
TO
TELEDYNE TECHNOLOGIES INCORPORATED
1999 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
EFFECTIVE DECEMBER 14, 2000
Effective as of December 14, 2000, and with respect to Annual Meetings
of the stockholders of the Company occurring thereafter, the second sentence of
Section 4.4(a) of the Teledyne Technologies Incorporated 1999 Non-Employee
Director Stock Compensation Plan, as amended (the "Plan"), is hereby amended to
read in its entirety as follows:
"An Annual Option covering 4,000 shares of Common Stock will be granted to each
Non-Employee Director automatically at the conclusion of each Company Annual
Meeting."
Capitalized terms used and not otherwise defined in this Amendment No. 2
have the meanings ascribed to such terms in the Plan.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>4
<FILENAME>v69886ex10-12.txt
<DESCRIPTION>EXHIBIT 10.12
<TEXT>
<PAGE> 1
EXHIBIT 10.12
Definitive Copy
AMENDMENT NO. 1
TO
TELEDYNE TECHNOLOGIES INCORPORATED
EXECUTIVE DEFERRED COMPENSATION PLAN
EFFECTIVE AS OF DECEMBER 1, 2001
Preamble: The Personnel and Compensation Committee of the Board of Directors of
Teledyne Technologies Incorporated has determined that it is in the best
interests of the Company to amend the Teledyne Technologies Incorporated
Executive Deferred Compensation Plan (the "Plan") to permit Non-Employee
Directors (as defined below) to defer their Annual Retainer Fees (as defined
below) payable for serving as a director and for serving as the chair of the
Board of Directors or any committee of the Board of Directors to the extent
permitted under the Non-Employee Director Plan (as defined below) and as
provided below. Capitalized terms used and not otherwise defined in this
Amendment No. 1 have the meanings ascribed to such terms in the Plan.
The Plan is hereby amended to add a new Section 11 to the Plan, which reads in
its entirety as follows:
11 NON-EMPLOYEE DIRECTORS.
Effective for Annual Retainer Fees earned or otherwise accruing on or
after January 1, 2001, a Non-Employee Director shall be permitted to defer some
or all of his or her Annual Retainer Fee for the next succeeding calendar year
under this Plan. Except as specifically varied under this Article 11, the
provisions, terms and conditions of the Plan applicable to Eligible Employees
shall apply to Non-Employee Directors.
11.1 Definitions
The following terms shall have the meanings set forth herein:
a. "Annual Retainer Fees" shall mean the cash amount paid
for any calendar year by the Company to a Non-Employee
Directors for serving as a Director and for serving as
the chair of the Board or any committee of the Board as
of a particular payment date, as established by the
Board and in effect from time to time. "Annual Retainer
Fees" shall not include the portion of the Annual
Retainer Fee paid in the form of Common Stock of the
Company under the practices of the Company in effect at
any particular time, fees for attending meetings of the
Board or any committee of the Board, payments of
deferred compensation, gains on stock options or other
forms of compensation to which a Non-Employee Director
may become entitled from time to time.
b. "Board" means the Board of Directors of the Company.
<PAGE> 2
c. "Compensation" as applied to a Non-Employee Director,
shall mean his or her Annual Retainer Fees as defined in
Subsection 11.1(a) above.
d. "Director" means a member of the Board.
e. "Eligible Employee" shall mean an Eligible Employee as
defined in Section 2.10 of the Plan and, after December
1, 2000, a Non-Employee Director.
f. "Non-Employee Director" shall mean a Director who is not
then also an employee of the Company or an affiliate.
g. "Non-Employee Director Plan" shall mean the Teledyne
Technologies Incorporated 1999 Non-Employee Director
Stock Compensation Plan, as amended from time to time or
any successor plan.
h. "Retirement" shall mean, as applied to a Non-Employee
Director, the date upon which a Non-Employee Director
ceases to be a Director.
Except as set forth above, the terms defined in Article 2 of this Plan
shall apply to a Non-Employee Director.
11.2 Terms and Conditions.
On or after December 1, 2000, a Non-Employee Director may elect to defer
some or all of his or her Compensation under the same terms and
conditions and with the same rights, privileges and limitations
(including, but not limited to, status with respect to such deferrals as
an unsecured creditor of the Company) as an Eligible Employee as set
forth in Articles 1 thorough 10 of the Plan. Notwithstanding anything
herein to the contrary, deferrals of Compensation by a Non-Employee
Director under this Plan may be made only if and to the extent permitted
under the Non-Employee Director Plan.
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>5
<FILENAME>v69886ex10-13.txt
<DESCRIPTION>EXHIBIT 10.13
<TEXT>
<PAGE> 1
EXHIBIT 10.13
AMENDMENT NO. 2
TO
TELEDYNE TECHNOLOGIES INCORPORATED
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective as of February 20, 2001
The Teledyne Technologies Incorporated Executive Deferred Compensation
Plan, as amended (the "Plan"), is hereby amended effective as of February 20,
2001:
1. By deleting Section 2.3 of the Plan in its entirety and substituting
therefore the following definition:
"2.3 "Bonus" shall mean (i) the award or awards payable under
the Teledyne Technologies Incorporated management bonus plan (or the
comparable annual incentive plan of a subsidiary, if applicable) and any
predecessor or successor annual program to the management bonus plan or
(ii) an amount paid in cash at commencement of employment in a form
other than base salary or (iii) an amount paid in cash as a spot,
special or unusual bonus."
2. By adding to Section 4.1 of the Plan the following sentence:
"Notwithstanding the foregoing, an Eligible Employee may elect to defer
a Bonus defined in subsection 2.3(ii) or (iii) by written election
delivered to the Director of Human Resources or his or her designee no
later than, for a Bonus defined in subsection 2.3(ii), the thirtieth day
after he or she becomes an Eligible Employee or, for a Bonus defined in
subsection 2.3(iii) the first day on which he or she is considered
eligible for such Bonus."
To record the due adoption of the foregoing amendment, Teledyne
Technologies Incorporated has caused the execution hereof by its duly authorized
officer.
Teledyne Technologies Incorporated
By: /s/ ROBYN E. CHOI
----------------------------------------
Title: Vice President of Administration
-------------------------------------
Date: As of February 20, 2001
--------------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>6
<FILENAME>v69886ex10-15.txt
<DESCRIPTION>EXHIBIT 10.15
<TEXT>
<PAGE> 1
EXHIBIT 10.15
CONFIDENTIAL SEVERANCE AGREEMENT AND GENERAL RELEASE
This Confidential Severance Agreement and General Release ("Agreement") is
entered into between and among Nick Blauwiekel ("Blauwiekel") and Teledyne
Technologies Incorporated ("Company") as of the date of the Blauwiekel's timely
execution of this Agreement ("Effective Date.")
RECITALS
A. Blauwiekel was employed as Vice President of Human Resources for the
Company from March 1, 2000 to February 6, 2001. The Company and
Blauwiekel have determined that it is in their mutual interests to sever
their employment relationship amicably and in confidence, and with that
in mind, Blauwiekel has voluntarily terminated his employment effective
February 6, 2001.
B. To ease Blauwiekel's transition, the Company is providing the enhanced
severance benefits set forth in this Agreement in exchange for which
Blauwiekel is releasing and extinguishing for all time any and all
possible claims and demands of any kind, nature or description, known or
unknown, that he has or might have against the Company and any of its
past or present officers, directors, principals, administrators,
employees, agents, representatives, attorneys or insurers, or any of
their past or present parents, affiliated companies or partnerships, or
their successors.
C. Independent and apart from this Agreement, Blauwiekel has been paid a
severance of one month's salary and all accrued vacation, and he
acknowledges that, except for the sums and benefits provided for in this
Agreement, he has been paid all compensation and other sums owed to him
by the Company, including, but not limited to, vacation, wages, bonuses,
and other incentive compensation. Any further wages, bonuses, or other
compensation claimed to be owed by Blauwiekel were disputed in good
faith and on a reasonable basis by the Company, and have been fully
compromised and paid to Blauwiekel by this Agreement as set forth below.
Blauwiekel is not owed any additional sums or compensation, and the
benefits and sums set forth in this Agreement are over and above any
sums that Blauwiekel would otherwise have been entitled to in connection
with his separation of employment with the Company.
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement, Blauwiekel and Company agree as follows:
SEVERANCE AGREEMENT & GENERAL RELEASE TERMS
1. Resignation. Blauwiekel voluntarily resigned his employment with the
Company, including his service as an officer, effective February 6, 2001
(the "Separation Date"). Blauwiekel acknowledges and agrees that he has
been paid all wages, salary, and vacation earned or accrued up to the
effective date of his resignation.
2. Severance Benefits. After the Effective Date, the Company shall pay to
Blauwiekel the following:
Page 1 of 6
<PAGE> 2
a) Cash Severance. A cash severance of Eighty Seven Thousand and
Five Hundred Dollars ($87,500), payable by check, representing
five months of Blauwiekel's annual salary. From this sum, the
Company shall deduct tax withholdings and any other usual and
customary deductions applicable to the payment of severance.
b) AIP. The Company shall pay by check to Blauwiekel the sum of
Sixty Nine Thousand and Five Hundred and Seven Dollars ($69,507)
reflecting the year 2000 annual incentive payment at target and
on a pro rata basis consistent with Blauwiekel's actual term of
employment. From this sum, the Company shall deduct tax
withholdings and any other usual and customary deductions
applicable to the payment of wages.
c) Health, Life, and Dental. In the event Blauwiekel elects to
continue health, life, and/or dental insurance coverage with the
Company under the Consolidated Omnibus Budget Reconciliation Act
("COBRA"), the Company shall pay the premiums, in the amount of
the usual employer's contribution, for said insurance coverage,
for Blauwiekel, including any of his currently covered
dependents, until August 15, 2001 or until Blauwiekel becomes
eligible to obtain comprehensive health, life, dental insurance
coverage from another employer, whichever occurs first.
d) Outplacement. Company shall retain and pay up to a maximum of
Twenty Five Thousand Dollars ($25,000) for Executive-level
Outplacement Services to be provided to Blauwiekel for a period
of one year commencing on the Effective Date or until Blauwiekel
secures employment, whichever occurs first.
e) Stock Options. Company shall take the steps necessary to
accelerate vesting to the Effective Date of this Agreement those
Six Thousand Six Hundred and Sixty Seven (6,667) options granted
to Blauwiekel and scheduled to vest within the next 60 days.
Vested options must be exercised within thirty days of the
Effective Date.
f) Leased Automobile. In the event that Blauwiekel elects to
purchase his vehicle which is currently-leased from Donlen
Corporation, Company shall pay by check to Blauwiekel an amount
equivalent to one-third (1/3) of either the fair market value or
the book value (whichever is less), as of the Effective Date, of
said vehicle.
Page 2 of 6
<PAGE> 3
3. Indemnification for Tax Obligations. Blauwiekel shall be solely
responsible for the full and timely payment of taxes and/or other such
obligations, if any, incurred as a result of any and all payments
received pursuant to this Agreement except for the severance payments in
paragraphs 2a and 2b, collectively, "Tax Obligations". In the event that
any tax or other governmental authority makes an inquiry of Company
related to Blauwiekel's payment of Tax Obligations, Blauwiekel shall
cooperate with Company by providing it with any information reasonably
required to respond to said inquiries. Blauwiekel shall fully indemnify
and hold Company harmless for and against any and all claims, charges,
complaints, causes of action, losses, costs, fees, liabilities, damages,
penalties or injuries, including, without limitation, reasonable
attorneys' fees, arising out of or related to his failure to satisfy any
Tax Obligations.
4. Satisfaction Of Wage Claims. The parties acknowledge that any claims of
Blauwiekel for benefits, commissions, compensation, payments,
remuneration, salary, vacation and wages were disputed in good faith by
the Company, that any and all claims by Blauwiekel for benefits,
commissions, compensation, payments, remuneration, salary, vacation and
wages have been compromised and resolved by this Agreement, and that
Blauwiekel is not owed any further additional or benefits, commissions,
compensation, payments, remuneration, salary, vacation or wages.
5. General Release. Except as to the provisions and obligations set forth
in this Agreement, Blauwiekel hereby generally releases and forever
discharges the Company, its present and former directors, officers,
employees, agents, attorneys, accountants, consultants, successors,
assigns and affiliates from any and all claims, demands, complaints,
causes of action, losses, liabilities, penalties, costs, attorneys'
fees, expenses, damages, indemnities and obligations of any and every
kind, nature and character in law, equity or otherwise, present, past or
future, suspected or unsuspected, disclosed or undisclosed, of any
nature whatsoever, whether now known or unknown, foreseen or unforeseen,
created by statute, rule, regulation or professional code, that
Blauwiekel ever had, now has or hereinafter can, shall or may have, by
reason of, arising out of or in any way relating to any acts, omissions,
events or circumstances from the beginning of time up to the Effective
Date of this Agreement, including but not limited to Blauwiekel's hiring
or separation from the Company. By way of example only, and not as a
limitation, the matters released under this provision include, without
limitation, all claims related to wages, salaries or other compensation;
payments, benefits and fringe benefits, back pay and front pay; expense
reimbursements for residence relocation; housing and automobile
allowances; expense reimbursements for club/association memberships,
travel and business items and subscriptions; vacation, holiday and sick
pay; life, health, accident, disability and workers' compensation
insurance; and contributions/payments to retirement or pension
participation plans. The matters released under this provision also
extend to rights or claims under California's Fair Employment & Housing
Act (Govt. C Section 12940 et. seq., which prohibits discrimination on
the basis of race, religion, color, sex, age, mental disability,
physical disability, medical condition, marital status, sexual
orientation, and other protected categories), Title VII of the Civil
Rights Act (42 U.S.C. Section 2000e et. seq., which prohibits
discrimination on the basis of race, sex, national origin, color, and
religion), the Americans With Disabilities Act of 1990 (42 U.S.C. 12101
et. seq., which prohibits discrimination against and requires reasonable
accommodation of qualified
Page 3 of 6
<PAGE> 4
disabled workers under certain circumstances), the federal Family
Medical Leave Act (29 U.S.C. Section 2601 et. seq.), California's Family
Rights Act (Govt. C Section 12945.2) (which provides leaves of absences
to employees under certain circumstances), the California Labor Code,
the federal Fair Labor Standards Act (29 U.S.C. Section 201 et. seq.),
the Employee Retirement Income Security Act (29 U.S.C. Section 1001 et.
seq.), and any and all other local, municipal, state and federal
statutes and laws.
6. Waiver of Known/Unknown/Suspected/Unsuspected Claims. Blauwiekel waives
and relinquishes all rights and benefits that might be afforded to him
under Section 1542 of the Civil Code of the State of California, and
does so understanding and acknowledging the significance and consequence
of this waiver. Section 1542 of the Civil Code of the State of
California states as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his
favor at the time of executing the release, which if
known by him must have materially affected his
settlement with the debtor."
Thus, notwithstanding the provisions of Section 1542, and for the
purposes of implementing a full and complete release and discharge of
the Releases, Blauwiekel expressly acknowledges that this Agreement is
intended to include all claims which he does not know or suspect to
exist in his favor at the time of execution, and that the settlement
agreed upon contemplates the extinguishment of any such claims.
7. No Disclosure of Confidential Information. Blauwiekel shall not use or
disclose any confidential information and/or trade secrets of which he
may have obtained knowledge or possession during his employment with
Company, except with Company's prior written consent. Such confidential
information and trade secrets include, but are not limited to, financial
information, and information regarding Company's business goals, plans,
policies, and strategies.
8. No Solicitation of Employee's. Blauwiekel shall not directly or
indirectly induce or solicit, for a period of one year after the
Effective Date, any Company employee to leave his or her employment with
the Company.
9. Return of Property. Immediately after the Effective Date, Blauwiekel
shall take all steps necessary to return any and all of Company's
property. This includes, by way of example only and not as a limitation,
the corporate leased car, computers, telecommunications devices,
personnel or office files, and office keys or keycards.
10. Cooperation in Defending Claims. Blauwiekel shall reasonably cooperate
with Company upon its reasonable requests in connection with any
disputes with or claims by current or former employees against Company
and/or its officers, directors, employees, agents, representatives, or
any other person or entity.
11. Binding Arbitration of Disputes. Any controversy or claim related to or
arising out of this Agreement or its breach or its
validity/enforceability shall be resolved by final and binding
arbitration to take place in Los Angeles, California, in accordance with
the
Page 4 of 6
<PAGE> 5
Employment Dispute Resolution Rules of the American Arbitration
Association. Judgment upon any award rendered by the arbitrator(s) may
be entered by any court of competent jurisdiction. The parties are to
bear their own costs and expenses in connection with such arbitration,
except as specified below.
12. Attorneys' Fees and Costs. If any legal action, arbitration or other
proceeding is brought to enforce any provision of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees and
costs incurred in that action, arbitration or proceeding, in addition to
any other relief to which the party may be entitled under law or equity.
13. Governing Law. This Agreement is entered into in the State of
California, and shall be construed and interpreted in accordance with
the laws of that state, notwithstanding any conflicts or choice of law
provisions or principles to the contrary.
14. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective heirs, personal
representatives, successors and assigns.
15. Complete Agreement; Written Modification Only. This Agreement contains
the entire agreement of the parties and constitutes the complete, final
and exclusive embodiment of their agreement with respect to its subject
matter. This Agreement supersedes any and all prior correspondence,
arrangements, representations and understandings, whether written or
oral, express or implied, with respect to its subject matter. This
Agreement may not be modified except by a writing designated
specifically as an amendment to this Agreement and signed by Blauwiekel
and an officer of the Company.
16. No Waiver. No waiver by a party of a breach of any provision of this
Agreement shall operate as, or be construed to be, a waiver of any
subsequent breach.
17. Headings. Headings used in this Agreement are for convenience of
reference only, and shall not be considered a part of this Agreement or
be construed to affect the interpretation of any of its provisions.
18. Severability. If any provision of this Agreement is deemed or held
invalid or unenforceable in whole or in part for any reason, that
provision shall be deemed severed from the remainder of this Agreement,
and shall in no way affect or impair the validity or enforceability of
any portion or all of this Agreement, which otherwise shall be fully
enforceable and valid to the fullest extent consistent with the
expressed desire of the parties to effectuate a complete extinguishing
of Employee's claims and potential claims against the Company.
19. No Admission. It is expressly understood by the Parties that this
Agreement serves to effectuate an amicable severance of employment, and
that the willingness of the Parties to enter into this Agreement is not,
nor is it to be construed as, an admission of legal liability or
wrongdoing of any kind on the part of any of the Parties. Rather, all of
the Parties expressly deny any legal liability or wrongdoing and intend
by this Agreement only to effectuate an amicable and confidential
severance.
Page 5 of 6
<PAGE> 6
20. Confidentiality. Blauwiekel agrees to keep the existence, terms and
conditions of this Agreement strictly confidential and not to publicize,
communicate, disclose, or reveal in any manner whatsoever, either
directly or indirectly, the terms, or conditions of this Agreement to
any person or entity other than to say that Blauwiekel has resigned his
employment with Company and the severance was an amicable one.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of
which taken together shall constitute one and the same instrument. The
Parties may sign facsimile copies of this Agreement, which shall each be
deemed originals.
2/6/01 /S/ NICK BLAUWIEKEL
- -------------------------- ------------------------------------
Dated Nick Blauwiekel
Teledyne Technologies, Inc.
2/6/01 /S/ JOHN T. KUELBS
- -------------------------- ------------------------------------
Dated By: John T. Kuelbs
Title: Senior Vice President,
General Counsel and
Secretary
Page 6 of 6
<PAGE> 7
EXHIBIT 10.15
CONTINUED
WAIVER & RELEASE OF CLAIMS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT
This Waiver & Release of Claims Under The Age Discrimination In
Employment Act ("ADEA Waiver") is entered into by and between Nick Blauwiekel
("Blauwiekel") and Teledyne Technologies Incorporated ("Company"). This ADEA
Waiver is independent of and apart from any other severance agreement entered
into between the parties.
RECITALS
A. This Waiver & Release is offered to Blauwiekel in connection with the
separation of his employment from Company which was effective February
6, 2001. This Waiver & Release offers Blauwiekel a lump sum payment
separate and apart and over and above any other severance being offered
to him in connection with his employment termination. Blauwiekel is
being offered this separate lump sum for the waiver and release of
age-related claims as provided for and contemplated under the Age
Discrimination in Employment Act of 1967 ("ADEA") (29 U.S.C. Section 621
et. seq.) and comparable laws.
B. This Waiver & Release has been delivered to Blauwiekel on February 5,
2001, and he has been advised that he has 21 days to review, consider,
and accept or reject this document.
RELEASE & WAIVER
1. Payment For ADEA Release & Waiver. In exchange for Blauwiekel's
waiver and release set forth below, the Company shall pay Blauwiekel the sum of
$25,000 by check, due and payable upon expiration of the 7-day revocation period
set forth below so long as Blauwiekel does not revoke his acceptance within that
time. Blauwiekel shall be solely responsible for the full and timely payment of
all taxes incurred as a result of this payment, and agrees to indemnify and hold
Company harmless from any tax liabilities arising out of this payment.
2. ADEA Release. In exchange for the payment set forth below, Blauwiekel
hereby generally releases and forever discharges the Company, its present and
former directors, officers, employees, agents, attorneys, accountants,
consultants, successors, assigns and affiliates from any and all claims,
demands, complaints, causes of action, losses, liabilities, penalties, costs,
attorneys' fees, expenses, damages, indemnities and obligations of any and every
kind, nature and character in law, equity or otherwise, arising out of,
involving, or in any way relating to Blauwiekel's age, including but not limited
to, claims of age discrimination under the Age Discrimination in Employment Act
of 1967 ("ADEA") (29 U.S.C. Section 621 et. seq.).
Page 1 of 4
<PAGE> 8
3. Knowing Waiver. Blauwiekel is over 40 years old and, as such, is
covered by ADEA. He hereby acknowledges his knowing and voluntary intent to
waive all rights and claims he has or might have under the ADEA and any other
federal, state, municipal, or local law involving age-related claims. Blauwiekel
expressly acknowledges and affirms that as a Human Resources executive, he has
special expertise and knowledge about ADEA and that he is making this waiver
with a full understanding of its meaning and effect and for the purpose of
effectuating a complete release of all possible claims against the Company.
Blauwiekel additionally acknowledges the following information:
(a) Blauwiekel has been given twenty-one (21) days to consider this
Release & Waiver before executing it;
(b) Blauwiekel has carefully read and fully understands all of the
provisions of this Release & Waiver;
(c) Blauwiekel is, through this Release & Waiver, releasing the
Company from any and all claims he may have against it;
(d) Blauwiekel voluntarily agrees to all terms in this Release &
Waiver;
(e) Blauwiekel knowingly intends to be bound by this Release &
Waiver;
(f) Blauwiekel was and hereby is again advised to consider the terms
of this Release & Waiver and consult with an attorney of his
choice prior to executing this Release & Waiver;
(g) Blauwiekel has a full seven (7) days after executing this
Release & Waiver to revoke this Release & Waiver and has been
and hereby is advised in writing that this Release & Waiver
shall not become effective or enforceable until the revocation
period has expired. Revocation shall be effective only upon
Blauwiekel's written notice delivered to John Kuelbs, General
Counsel for Teledyne, within that seven day period; and
(h) Blauwiekel understand that rights or claims under the Age
Discrimination in Employment Act of 1967 (29 U.S.C. ss. 621, et
seq.), that may arise after the date this Release & Waiver is
executed are not waived.
4. Arbitration of Disputes. Blauwiekel also agrees that any claims or
disputes arising out of this Release & Waiver, including any issues regarding
its interpretation, scope, or enforceability, shall be submitted to binding
arbitration in Los Angeles in accordance with the Labor/Employment rules of the
American Arbitration Association ("AAA"), which shall be the final and exclusive
remedy for all claims or disputes. Each party to bear their own costs, fees, and
expenses. The arbitration award will be binding and conclusive on the parties
and may be enforced in a court of competent jurisdiction in Los Angeles,
California.
Page 2 of 4
<PAGE> 9
5. Integrated Writing. This sets forth the sole and entire agreement
between the parties regarding the waiver and release of age-related claims, and
there are no other agreements or understandings, whether oral, written, express,
or implied, not set forth in this Release & Waiver. You also acknowledge that
there have been no promises or representations made to you that are not
contained in this document. This Release & Waiver shall not be amended except in
writing designated as an amendment to this Release & Waive and signed by
Blauwiekel and an officer of the Company.
6. Governing Law. This Release & Waiver is entered into in the State of
California, and shall be construed and interpreted in accordance with the laws
of that state, notwithstanding any conflicts or choice of law provisions or
principles to the contrary.
7. Successors and Assigns. This Release & Waiver shall be binding upon
and shall inure to the benefit of the parties and their respective heirs,
personal representatives, successors and assigns.
8. No Waiver. No waiver by a party of a breach of any provision of this
Release & Waiver shall operate as, or be construed to be, a waiver of any
subsequent breach.
9. Headings. Headings used in this Release & Waiver are for convenience
of reference only, and shall not be considered a part of this Release & Waiver
or be construed to affect the interpretation of any of its provisions.
10. Severability. If any provision of this Release & Waiver is deemed or
held invalid or unenforceable in whole or in part for any reason, that provision
shall be deemed severed from the remainder of this Release & Waiver, and shall
in no way affect or impair the validity or enforceability of any portion or all
of this Release & Waiver, which otherwise shall be fully enforceable and valid
to the fullest extent consistent with the expressed desire of the parties to
effectuate a complete extinguishing of Blauwiekel's claims and potential claims
against the Company.
11. No Admission. It is expressly understood by the Parties that this
Release & Waiver serves to effectuate an amicable severance of employment, and
that the willingness of the Parties to enter into this Release & Waiver is not,
nor is it to be construed as, an admission of legal liability or wrongdoing of
any kind on the part of any of the Parties. Rather, all of the Parties expressly
deny any legal liability or wrongdoing and intend by this Release & Waiver only
to effectuate an amicable and confidential severance.
12. Confidentiality. Blauwiekel agrees to keep the existence, terms and
conditions of this Release & Waiver strictly confidential and not to publicize,
communicate, disclose, or reveal in any manner whatsoever, either directly or
indirectly, the terms, or conditions of this Release & Waiver to any person or
entity other than to say that Blauwiekel has resigned his employment with
Company and the severance was an amicable one.
Page 3 of 4
<PAGE> 10
13. Counterparts. This Release & Waiver may be executed in one or more
counterparts, each of which shall constitute an original and all of which taken
together shall constitute one and the same instrument. The Parties may sign
facsimile copies of this Release & Waiver, which shall each be deemed originals.
2/6/01 /S/ NICKOLAS BLAUWIEKEL
- -------------------------- ------------------------------------
Dated Nick Blauwiekel
Teledyne Technologies, Inc.
2/6/01 /S/ JOHN T. KUELBS
- -------------------------- ------------------------------------
Dated Title: Senior Vice President,
General Councel and
Secretary
Page 4 of 4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>v69886ex21.txt
<DESCRIPTION>EXHIBIT 21
<TEXT>
<PAGE> 1
EXHIBIT 21
Significant Subsidiary
of Teledyne Technologies Incorporated
Teledyne Brown Engineering, Inc. (a Delaware corporation)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>v69886ex23.txt
<DESCRIPTION>EXHIBIT 23
<TEXT>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Teledyne Technologies Incorporated ("TDY") of our report dated January 23,
2001, included in the 2000 Annual Report to Stockholders of Teledyne
Technologies Incorporated.
Our audits also included the financial statement schedule of Teledyne
Technologies Incorporated listed in Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-94739) pertaining to the TDY 1999 Incentive Plan, Registration
Statement (Form S-8 No. 333-91781) pertaining to the TDY Executive Deferred
Compensation Plan, Registration Statement (Form S-8 No. 333-91785) pertaining to
Teledyne 401(k) Plan, Registration Statement (Form S-8 No. 333-91787) pertaining
to TDY Stock Purchase Plan, Registration Statement (Form S-8 No. 333-91791)
pertaining to TDY Non-Employee Director Stock Compensation Plan, Registration
Statement (Form S-8 No. 333-46630) pertaining to the TDY 1999 Incentive Plan and
in the Registration Statement (Form S-8 No. 333-33878) pertaining to the TDY
401(k) Plan of our report dated January 23, 2001, with respect to the
consolidated financial statements and schedule of Teledyne Technologies
Incorporated, incorporated hereby by reference.
/s/ Ernst & Young LLP
Los Angeles, California
February 23, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>9
<FILENAME>v69886ex24.txt
<DESCRIPTION>EXHIBIT 24
<TEXT>
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Teledyne Technologies Incorporated - 2000 Annual Report on Form 10-K
The undersigned directors and officers of Teledyne Technologies Incorporated, a
Delaware corporation ("TDY"), do hereby constitute and appoint John T. Kuelbs
and Melanie S. Cibik, or either one of them, our true and lawful attorneys and
agents, to execute, file and deliver the Annual Report on Form 10-K of TDY for
its 2000 fiscal year ("Form 10-K"), in our name and on our behalf in our
capacities as directors and officers of TDY as listed below, and to do any and
all acts or things, in our name and on our behalf in our capacities as directors
and officers of TDY as listed below, which said attorneys and agents, or either
one of them, may deem necessary or advisable to enable TDY to comply with the
Securities Exchange Act of 1934 and any rules, regulations and requirements of
the Securities and Exchange Commission in connection with the Form 10-K
(including without limitation executing, filing and delivering any amendments to
the Form 10-K), and the undersigned do hereby ratify and confirm all that said
attorneys and agents, or either one of them, shall do or cause to be done by
virtue hereof.
Witness the due execution hereof as of February 21, 2001.
/S/ Robert Mehrabian Chairman, President and
- ------------------------------------- Chief Executive Officer
Robert Mehrabian (Principal Executive Officer)
and Director
/S/ Robert J. Naglieri Senior Vice President and
- ------------------------------------- Chief Financial Officer
Robert J. Naglieri (Principal Financial Officer)
/S/ Dale S. Schnittjer Controller
- ------------------------------------- (Principal Accounting Officer)
Dale A. Schnittjer
/S/ Robert P. Bozzone Director
- -------------------------------------
Robert P. Bozzone
/S/ Paul S. Brentlinger Director
- -------------------------------------
Paul S. Brentlinger
/S/ Frank V. Cahouet Director
- -------------------------------------
Frank V. Cahouet
/S/ Diane C. Creel Director
- -------------------------------------
Diane C. Creel
/S/ C. Fred Fetterolf Director
- -------------------------------------
C. Fred Fetterolf
/S/ Charles J. Queenan, Jr. Director
- -------------------------------------
Charles J. Queenan, Jr.
/S/ Michael T. Smith Director
- -------------------------------------
Michael T. Smith
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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