NewsRelease                                  

 


TELEDYNE TECHNOLOGIES REPORTS
SECOND QUARTER RESULTS

 

LOS ANGELES – July 25, 2002 – Teledyne Technologies Incorporated (NYSE:TDY)

 

  • Revenues of $188.0 million
  • Earnings per share of $0.19
  • Cash flow from operations of $25.3 million

     

    Teledyne Technologies Incorporated (NYSE:TDY) today reported second quarter 2002 sales of $188.0 million, compared with sales of $184.0 million for the same period in 2001.  Net income for the second quarter of 2002 was $6.2 million ($0.19 per diluted share), compared with a net loss of $10.4 million ($0.33 per diluted share) in the second quarter of 2001. 

     

    During the second quarter of 2001, the company recorded a pretax charge of $26.4 million for asset impairments, restructuring and other charges, inventory write-downs and a pretax charge for discontinued operations.  Net income was $5.5 million ($0.17 per diluted share) for the second quarter of 2001, excluding total pretax charges of $26.4 million ($0.50 per diluted share). 

     

     

    “Our multiple cost reduction efforts continue to generate improved financial performance,” said Robert Mehrabian, chairman, president and chief executive officer.  “Despite the weak commercial economic environment, operating margin in the Electronics and Communications segment, excluding non-cash pension income, improved for the fourth consecutive quarter.  In the second quarter, we achieved record operating margin in our Systems Engineering segment, while receiving multiple contract wins in both our core defense and NASA markets.  Our improved operating performance, coupled with a tax refund and efficient management of working capital, helped the company achieve cash flow from operations of $25.3 million.  While Teledyne is currently benefiting from increased defense spending, we believe that the company is well positioned to achieve significant earnings growth when the commercial markets that we serve rebound.”

     

    “Given the current crisis in investor confidence, I want to emphasize that our management is committed to continuing the highest standards of accurate financial disclosure,” Robert Mehrabian added.

     


    Review of Operations

     

    Electronics and Communications

    The Electronics and Communications segment’s second quarter 2002 sales were $94.2 million, compared with second quarter 2001 sales of $90.1 million.  Second quarter 2002 operating profit was $9.0 million, compared with an operating loss of $11.9 million in the second quarter of 2001.  Second quarter 2001 operating profit would have been $3.7 million excluding pretax charges of $15.6 million related to asset impairments, restructuring and other charges.

     

    Second quarter 2002 sales, compared with the same period of 2001, reflected revenue growth in electronic manufacturing services, electronic instruments and defense electronics products.  The revenue growth in electronic manufacturing services was primarily driven by increased sales from the medical and military markets.  The revenue growth in electronic instruments resulted from the acquisition of Advanced Pollution Instrumentation in the fourth quarter of 2001 and stronger demand for geophysical sensors for the petroleum exploration market.  The second quarter 2002 revenue increase was partially offset by reduced sales of relays used in semiconductor test equipment and communications applications, as well as weakness in the commercial aviation market.  The significant improvement in operating profit, despite a $1.3 million reduction in non-cash pension income, reflected higher sales, reduced workforce and decreased administrative expenses, as well as lower expenses in the company’s optoelectronic and broadband growth initiatives.   

     

     

    Systems Engineering Solutions

    The Systems Engineering Solutions segment’s second quarter 2002 sales were $51.5 million, compared with second quarter 2001 sales of $52.8 million.  Second quarter 2002 operating profit was $5.7 million, compared with an operating loss of $0.5 million in the second quarter of 2001.  Second quarter 2001 operating profit would have been $3.9 million excluding pretax charges of $4.4 million related to asset impairments, restructuring and other charges.

     

    Second quarter 2002 sales, compared with the same period of 2001, reflected growth in core defense programs offset by reduced work for environmental programs, primarily chemical weapons demilitarization.  The improvement in operating profit, despite a $0.2 million reduction in non-cash pension income, primarily reflected the receipt of government award fees based on collective performance achievements. 

     

     

    Aerospace Engines and Components

    The Aerospace Engines and Components segment’s second quarter 2002 sales were $39.0 million, compared with second quarter 2001 sales of $38.4 million.  Second quarter 2002 operating profit was $0.1 million, compared with second quarter 2001 operating profit of $3.7 million, including a pretax restructuring charge for employee termination costs of $0.3 million, in the second quarter of 2001.  Excluding this charge, second quarter 2001 operating profit would have been $4.0 million.


     

    Second quarter 2002 sales, compared with the same period of 2001, reflected revenue growth in OEM piston engines, partially offset by reduced sales of aftermarket products and services.  Operating profit in the piston engine business was negatively impacted by net charges totaling $2.1 million related to higher aircraft product liability reserves, increased insurance premiums and crankshaft litigation costs (net of settlement awards).  Sales in the turbine engine business were negatively impacted by reduced development phase work, offset by higher revenues of spare parts for Air Force training aircraft.  In addition, segment operating profit was negatively impacted by a $0.3 million reduction in non-cash pension income.  

     

     

    Energy Systems

    The Energy Systems segment’s second quarter 2002 sales were $3.3 million, compared with second quarter 2001 sales of $2.7 million.  The second quarter 2002 operating loss was $0.9 million, compared with an operating loss of $5.8 million in the second quarter of 2001.  Second quarter 2001 operating loss would have been $0.2 million, excluding pretax charges of $5.6 million related to asset impairments, restructuring and other charges. 

     

    Second quarter 2002 sales, compared with the same period of 2001, reflected growth in hydrogen generator and government program sales.  The second quarter 2002 operating loss reflected additional research and development expenses for fuel cell programs, higher general and administrative expense and program cost adjustments. 

     

    Second Quarter 2001 Charge

    During the second quarter of 2001, the company recorded a pretax charge of $26.4 million related to exiting non-core, underperforming product lines, workforce reductions and manufacturing consolidations, inventory write-downs and the formation of Teledyne Energy Systems, Inc.  While the total projected charges remained at $26.4 million at both December 30, 2001 and June 30, 2002, there were some changes in income statement classification as follows.   At December 20, 2001 the estimated charge included $7.5 million for asset impairments, $8.8 million for restructuring and other charges, $9.8 million for inventory write-downs and a $0.3 million pretax charge for discontinued operations.    

     

    Based on actual spending and current projections, the $26.4 million pretax charge consists of $7.5 million for asset impairments, $8.2 million for restructuring and other charges, $10.4 million for inventory write-downs and $0.3 million for discontinued operations.   

     

    Additional Financial Information

     

    Second quarter 2002 earnings before interest, taxes, depreciation and amortization (EBITDA) were $16.2 million, compared with EBITDA of $15.1 million for the same period of 2001, excluding restructuring, asset impairments, and other charges.  Non-cash pension income for the second quarter of 2002 was $0.6 million, compared with non-cash pension income of $2.5 million for the same period of 2001.  Depreciation and amortization expense for the second quarter of 2002 was $5.7 million, compared with $5.1 million for the same period of 2001.  Second quarter and full year 2001 depreciation and amortization included goodwill amortization of $0.2 million and $0.6 million, respectively.  In accordance with SFAS 142, goodwill is no longer subject to


    amortization in 2002.  Second quarter 2002 cash from operating activities was $25.3 million, compared with a cash usage of $4.1 million for the same period in 2001.  Free cash flow (cash from operating activities less capital expenditures) was $21.8 million for the second quarter of 2002, compared with a cash usage of $12.0 million for the same period of 2001.  The second quarter of 2002 included the receipt of a $5.7 million planned income tax refund.  Capital expenditures for the first six months of 2002 were $7.0 million, compared with $17.3 million for the first six months of 2001.  The first six months of 2001 included $7.4 million of capital expenditures that were committed in 2000.

     

     

    Outlook

     

    Teledyne Technologies maintains a balanced portfolio of approximately 45% government and 55% commercial businesses.  In its government and defense businesses as a whole, the company expects modest revenue growth in the second half of 2002 compared to the first half of 2002 and the second half of 2001, primarily driven by demand for defense electronics products and systems engineering services.  Given the current state of the commercial aviation market, Teledyne expects sales of avionics equipment to be flat in the second half of 2002 relative to the first half of 2002, but decline compared to the second half of 2001.  However, the company expects revenue growth in its commercial instrumentation businesses to offset the sales decline in avionics.

     

    Orders and sales for several of the company’s short cycle electronics product lines, which include relays sold to the semiconductor and communications markets, were flat in the second quarter of 2002 compared to the first quarter of 2002.  Teledyne Technologies currently expects orders and revenues in these businesses to be flat in the second half of 2002, relative to first half of 2002. 

     

    Given the current state of the economy, rising pilot insurance costs, and the company’s dependence on aftermarket aviation sales, the company expects 2002 sales for the Aerospace Engines and Components segment to be flat relative to 2001.  However, the company anticipates that operating profit in its Aerospace Engines and Components segment will improve slightly in the second half of 2002, compared to the first half of 2002, due to reduced legal expenses following the conclusion of the crankshaft litigation, partially offset by increased insurance premiums.  In addition, the company continues to explore strategic alternatives for the product lines in this segment, including a possible divestiture of one or more product lines.

     

    Full year 2001 earnings included $9.5 million or $0.18 per share in non-cash pension income.  The company currently expects approximately $2.3 million or $0.04 per share of non-cash pension income in 2002.  The reduction in non-cash pension income reflected the completion of income associated with FAS 87 transition asset amortization as well as the decline in the value of the company’s pension assets during 2000 and 2001.  The company continues to anticipate approximately $10 million of cost savings in 2002 relative to 2001, which should offset the reduction in non-cash pension income.

     

    Based on its current outlook, the company estimates that third quarter and full year 2002 earnings per share will be in the range of approximately $0.18 to $0.20 and $0.70 to $0.78, respectively, including approximately $0.04 per share of non-cash pension income for the full year 2002.  Full year 2001 earnings per share from continuing operations of $0.69 (excluding asset impairment, restructuring and other charges) would have been $0.51 per share, excluding $0.18 per share in non-cash pension income.

     

    Given the further decline in the value of the company’s pension assets during 2002, non-cash pension expense in 2003 is projected to be $5.5 million, compared with non-cash pension income of $2.3 million in 2002.  As of June 30, 2002, Teledyne Technologies did not anticipate making a cash contribution to the pension plan until the first quarter of 2004.  The present volatile and declining market may accelerate this contribution. 

     

    Although earnings visibility into 2003 is limited, the company believes that earnings per share, excluding pension expense, will grow given continued demand for defense electronics and government engineering services coupled with a modest return in some of the company’s short cycle electronics product lines.

     

    Based on its current outlook, the company estimates that full year 2003 earnings per share will be in the range of approximately $0.70 to $0.85, respectively, including approximately $0.10 per share of non-cash pension expense.

     

    EARNINGS PER SHARE SUMMARY

    (Diluted earnings per common share from continuing operations)

     

     

    2003 Full Year Outlook

     

    2002 Full Year Outlook

     

    2001 Results

     

     

     

     

    Low

     

     

    High

     

     

    Low

     

     

    High

     

     

    Actual

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Earnings per share (excluding net pension income (expense) and asset impairment, restructuring and other charges)

     



     

    $



     

    0.80





     

    $



     

    0.95





     

    $



     

    0.66

     



     

    $



     

    0.74

     



     

    $



     

    0.51

     

     

    Net pension income (expense)

     

     

    (0.10

    )

     

    (0.10

    )

     

    0.04

     

     

    0.04

     

     

    0.18

     

     

    Earnings per share (excluding asset impairment, restructuring and other charges)

     

     



    0.70



     



    0.85



     



    0.70

     

     



    0.78

     

     



    0.69

     

     

    Asset impairment, restructuring and other charges

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (0.48

     

    )

     

    Earnings per share

     

    $

    0.70

     

    $

    0.85

     

    $

    0.70

     

    $

    0.78

     

    $

    0.21

     

     

     

     

    Forward-Looking Statements Cautionary Notice

    This press release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, relating to earnings, cost-savings, growth opportunities, capital expenditures, pension contributions and strategic plans.  Actual results could differ materially from these forward-looking statements.  Many factors, including changes in demand for products sold to the semiconductor and communications markets, timely development of acceptable and competitive fuel cell products and systems, funding, continuation and award of government programs, and economic and political conditions, could change the anticipated results. 

     

    While Teledyne Technologies’ growth strategy includes possible acquisitions, the company cannot provide any assurance as to when, if or on what terms any acquisitions will be made.   Acquisitions involve various inherent risks, such as, among others, the company’s ability to integrate acquired businesses and to achieve identified financial and operating synergies.  Also, the company may not be able to sell or exit timely or on acceptable terms its remaining non-core or under-performing product lines, particularly given the current economic environment.


     

    Additional information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements is contained in Teledyne Technologies’ periodic filings with the Securities and Exchange Commission, including its 2001 Annual Report on Form 10-K and Forms 10-Q.

     

    Teledyne Technologies is a leading provider of sophisticated electronic components, instruments and communication products, systems engineering solutions, aerospace engines and components and on-site gas and power generation systems.  Teledyne Technologies has operations in the United States, the United Kingdom and Mexico.  For more information, visit Teledyne Technologies’ website at www.teledyne.com.

     

    A live webcast of Teledyne Technologies’ second quarter earnings conference call will be held at 11:00 a.m. (Eastern) on Thursday, July 25.  To access the call, go to www.companyboardroom.com or www.teledyne.com approximately ten minutes before the scheduled start time.  A replay will also be available for one month at these same sites starting at 1:00 p.m. (Eastern) on Thursday, July 25.

     

     

    Investor Contact:

     

     

    Media Contact:

    Jason VanWees
    (310) 893-1642

    Robyn Choi

    (310) 893-1640

     

    ###


  • TELEDYNE TECHNOLOGIES INCORPORATED

    CONSOLIDATED STATEMENTS OF OPERATIONS

    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002

    AND FOR THE THREE AND SIX MONTHS ENDED JULY 1, 2001

    (Unaudited - In millions, except per share amounts)

     

     

     

    Second

     

     

    Second

     

     

    Six

     

     

    Six

     

     

     

     

    Quarter

     

     

    Quarter

     

     

    Months

     

     

    Months

     

     

     

     

    2002(a)

     

     

    2001(b)

     

     

    2002(a)

     

     

    2001(b)

     

            Net sales

     

    $

    188.0

     

    $

    184.0

     

    $

    371.3

     

    $

    373.7

     

            Costs and expenses:

     

     

     

     

     

     

     

     

     

     

     

     

     

                 Costs of sales

     

     

    141.7

     

     

    147.9

     

     

    280.7

     

     

    294.2

     

                 Selling, general and administrative expenses

     

     

    36.6

     

     

    37.9

     

     

    72.3

     

     

    73.2

     

                 Asset impairment charge

     

     

     

     

    7.4

     

     

     

     

    7.4

     

                 Restructuring and other charges

     

     

    (0.6

    )

     

    8.7

     

     

    (0.6

    )

     

    8.7

     

            Income (loss) before other income and expense and taxes

     

     

    10.3

     

     

    (17.9

    )

     

    18.9

     

     

    (9.8

    )

                 Other income

     

     

    0.2

     

     

    1.8

     

     

    0.4

     

     

    1.9

     

                 Interest expense, net

     

     

    0.2

     

     

    0.8

     

     

    0.5

     

     

    1.1

     

            Income (loss) before taxes

     

     

    10.3

     

     

    (16.9

    )

     

    18.8

     

     

    (9.0

    )

                 Provision (benefit) for taxes

     

     

    4.1

     

     

    (6.7

    )

     

    7.5

     

     

    (3.6

    )

            Income (loss) from continuing operations

     

     

    6.2

     

     

    (10.2

    )

     

    11.3

     

     

    (5.4

    )

                    Discontinued operations, net

     

     

     

     

    (0.2

    )

     

     

     

    (0.2

    )

            Net income (loss)

     

    $

    6.2

     

    $

    (10.4

    )

    $

    11.3

     

    $

    (5.6

    )

    Diluted earnings (loss) per common share(c):

     

     

     

     

     

     

     

     

     

     

     

     

     

            Income (loss) from continuing operations

     

    $

    0.19

     

    $

    (0.32

    )

    $

    0.35

     

    $

    (0.17

    )

            Discontinued operations, net

     

     

     

     

    (0.01

    )

     

     

     

    (0.01

    )

    Diluted earnings (loss) per common share

     

    $

    0.19

     

    $

    (0.33

    )

    $

    0.35

     

    $

    (0.18

    )

    Weighted average basic common shares outstanding

     

     

    32.0

     

     

    31.6

     

     

    32.0

     

     

    31.6

     

    Weighted average diluted common shares outstanding

     

     

    32.9

     

     

    31.6

     

     

    32.7

     

     

    31.6

     

    EBITDA-continuing operations(d)

     

    $

    16.2

     

    $

    15.1

     

    $

    30.1

     

    $

    28.7

     

    (a)      The second quarter and first six months of 2002 reflect the revised income statement classification of the second quarter 2001 pretax charges of $26.4 million for asset impairments and restructuring and other charges.  The resulting classification  increased cost of sales by $0.6 million and decreased restructuring and other charges by $0.6 million but had no impact on income before taxes in 2002. 

    (b)      The second quarter and first six months of 2001 results include pretax charges of $26.4 million for asset impairments and restructuring and other charges, of which, a pretax charge of $0.3 million is included in discontinued operations. 

    (c)      For the second quarter and first six months of 2001, fully diluted earnings per share were calculated excluding the effect of employee stock options because the impact was antidilutive as a result of the company’s loss for the respective periods.

    (d)    The second quarter and first six months of 2001 results exclude pretax charges of $26.1 million for asset impairments and restructuring and other charges. 


     

    TELEDYNE TECHNOLOGIES INCORPORATED

    SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT

    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002

    AND FOR THE THREE AND SIX MONTHS ENDED JULY 1, 2001

    (Unaudited - In millions)

     

     

     

    Second

     

     

    Second

     

     

    Six

     

     

    Six

     

     

     

     

    Quarter

     

     

    Quarter

     

     

    Months

     

     

    Months

     

     

     

     

    2002

     

     

    2001(a)

     

     

    2002

     

     

    2001(a)

     

            Net Sales:

     

     

     

     

     

     

     

     

     

     

     

     

     

            Electronics and Communications

     

    $

    94.2

     

    $

    90.1

     

    $

    184.7

     

    $

    181.9

     

            Systems Engineering Solutions

     

     

    51.5

     

     

    52.8

     

     

    98.4

     

     

    108.0

     

            Aerospace Engines and Components

     

     

    39.0

     

     

    38.4

     

     

    80.9

     

     

    77.2

     

            Energy Systems

     

     

    3.3

     

     

    2.7

     

     

    7.3

     

     

    6.6

     

                 Total Net Sales

     

    $

    188.0

     

    $

    184.0

     

    $

    371.3

     

    $

    373.7

     

           

     

     

     

     

     

     

     

     

     

     

     

     

     

            Operating Profit (Loss):

     

     

     

     

     

     

     

     

     

     

     

     

     

            Electronics and Communications(b)

     

    $

    9.0

     

    $

    3.7

     

    $

    17.3

     

    $

    9.9

     

            Systems Engineering Solutions(c)

     

     

    5.7

     

     

    3.9

     

     

    9.5

     

     

    8.1

     

            Aerospace Engines and Components(d)

     

     

    0.1

     

     

    4.0

     

     

    0.8

     

     

    4.9

     

            Energy Systems(e)

     

     

    (0.9

    )

     

    (0.2

    )

     

    (1.2

    )

     

     

                 Total Operating Profit

     

    $

    13.9

     

    $

    11.4

     

    $

    26.4

     

    $

    22.9

     

    (a)      Previously reported 2001 results were recast to reflect a realignment of the company’s business units, which included a change in the business units reporting structure.  The previously reported 2001 results were also recast to reflect the revised estimates for the second quarter 2001 charge.  The revised amounts are noted below in footnotes (b) through (e).  

    (b)      The second quarter and first six months of 2001 results exclude pretax charges of $15.6 million for asset impairments and restructuring and other charges.

    (c)      The second quarter and first six months of 2001 results exclude pretax charges of $4.4 million for asset impairments and restructuring and other charges. 

    (d)      The second quarter and first six months of 2001 results exclude pretax charges of $0.3 million for employee termination costs. 

    (e)      The second quarter and first six months of 2001 results exclude pretax charges of $5.6 million for asset impairments and restructuring and other charges.


     

    TELEDYNE TECHNOLOGIES INCORPORATED

    BALANCE SHEET AS OF

    JUNE 30, 2002 AND DECEMBER 30, 2001

    (Current period unaudited - In millions)

     

     

     

     

     

     

     

     

     

     

     

     

        June 30,

    December 30,

     

     

     

     

    2002

     

     

    2001

     

     

     

     

     

     

     

     

            ASSETS

     

     

     

     

     

     

     

     

            Cash and cash equivalents

     

    $

    10.1

     

    $

    11.9

     

     

            Accounts receivable, net

     

     

    117.7

     

     

    108.7

     

     

            Inventories, net

     

     

    61.9

     

     

    56.1

     

     

            Deferred income taxes, net

     

     

    18.6

     

     

    18.4

     

     

            Prepaid income taxes, expenses and other assets

     

     

    5.9

     

     

    14.2

     

     

                 Total Current Assets

     

     

    214.2

     

     

    209.3

     

     

     

     

     

     

     

     

     

     

     

            Property, plant and equipment, net

     

     

    77.4

     

     

    80.2

     

     

            Deferred income taxes, net

     

     

    7.4

     

     

    7.9

     

     

            Goodwill, net

     

     

    26.2

     

     

    26.2

     

     

            Other assets, net

     

     

    27.4

     

     

    25.7

     

     

                 Total Assets

     

    $

    352.6

     

    $

    349.3

     

     

     

     

     

     

     

     

     

     

     

            LIABILITIES AND STOCKHOLDERS’ EQUITY

     

     

     

     

     

     

     

     

            Accounts payable

     

    $

    44.1

     

    $

    36.9

     

     

            Accrued liabilities

     

     

    69.2

     

     

    57.1

     

     

                 Total Current Liabilities

     

     

    113.3

     

     

    94.0

     

     

     

     

     

     

     

     

     

     

     

            Long-term debt

     

     

     

     

    30.0

     

     

            Other long-term liabilities

     

     

    53.8

     

     

    52.3

     

     

                 Total Liabilities

     

     

    167.1

     

     

    176.3

     

     

     

     

     

     

     

     

                 Total Stockholders’ Equity

     

     

    185.5

     

     

    173.0

     

     

     

     

     

     

     

     

                  Total Liabilities and Stockholders’ Equity

     

    $

    352.6

     

    $

    349.3