UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 30, 2007
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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Commission file
number: 1-15295
Teledyne Technologies
Incorporated
(Exact name of
registrant as specified in its charter)
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Delaware
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25-1843385
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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1049 Camino Dos Rios
Thousand Oaks, California
91360-2362
(Address of principal executive
offices) (Zip Code)
Registrants telephone number, including area code:
(805) 373-4545
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $.01 per share
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New York Stock Exchange
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Preferred Share Purchase Rights
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
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No
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
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No
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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
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No
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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 registrants 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.
þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
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Smaller
reporting
company
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
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No
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The aggregate market value of the registrants Common Stock
held by non-affiliates was $1,529.6 million, based on the
closing price of a share of Common Stock on June 29, 2007
($45.95), which is the last business day of the
registrants most recently completed fiscal second quarter.
Shares of Common Stock known by the registrant to be
beneficially owned as of February 20, 2008 by the
registrants directors and the registrants 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.
At February 26, 2008, there were 35,316,766 shares of the
registrants Common Stock issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Selected portions of the registrants proxy statement for
its 2008 Annual Meeting of Stockholders (the 2008 Proxy
Statement) are incorporated by reference in Part III
of this Report. Information required by paragraphs (d)(1)-(3)
and (e)(5) of Item 407 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 Item 407 of
Regulation S-K.
Explanatory
Notes
In this Annual Report on
Form 10-K,
Teledyne Technologies Incorporated is sometimes referred to as
the Company or Teledyne. 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.
For a discussion of risk factors and uncertainties associated
with Teledyne and any forward looking statements made by us, see
the discussion beginning at page 14 of this Annual Report
on Form
10-K.
PART I
Who We
Are
Teledyne Technologies Incorporated is a leading provider of
sophisticated electronic components and subsystems,
instrumentation and communications products, including defense
electronics, monitoring and control instrumentation for marine,
environmental and industrial applications, harsh environment
interconnect products, data acquisition and communications
equipment for air transport and business aircraft, and
components and subsystems for wireless and satellite
communications. We also provide engineered systems and
information technology services for defense, space and
environmental applications, manufacture general aviation engines
and components, and supply energy generation, energy storage and
small propulsion products.
We serve niche market segments where performance, precision and
reliability are critical. Our customers include government
agencies, aerospace prime contractors, energy exploration and
production companies, major industrial companies, and airlines
and general aviation companies.
Total sales in 2007 were $1,622.3 million, compared with
$1,433.2 million and $1,206.5 million in 2006 and
2005, respectively. Our aggregate segment operating profit and
other segment income were $194.9 million,
$155.3 million and $126.6 million in 2007, 2006 and
2005, respectively. Approximately 59% of our total sales in 2007
were to commercial customers and the balance was to the
U.S. Government, as a prime contractor or subcontractor.
Approximately 42% of these U.S. Government sales were
attributable to fixed price-type contracts and the balance to
cost plus fee-type contracts. Sales to international customers
accounted for approximately 22% of total sales in 2007.
We have realigned Teledyne Energy Systems, Inc., Teledyne
Turbine Engines and Teledyne Battery Products in a new segment
called Energy and Power Systems. This segment will provide
Teledynes customers with a focal point for the specialized
energy generation, energy storage and small propulsion products
that Teledyne manufactures, primarily for high-reliability
aerospace and defense applications. Product lines in this
segment include hydrogen generators, fuel cells, thermoelectric
generators, batteries and small turbine engines. In addition to
these changes, the Systems Engineering Solutions segment has
been renamed Engineered Systems to better describe its programs.
The full year 2007 information reflects this new reporting
structure. Historical financial data for 2006 and 2005 also
reflects the new segment presentation to enhance comparability
between periods. This segment realignment had no effect on our
financial position, results of operations or cash flow for the
periods presented and also did not affect the results of the
Electronics and Communications or Engineered Systems segments.
Our four business segments and their respective contributions to
our total sales in 2007, 2006 and 2005 are summarized in the
following table:
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Percentage of Sales
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Segment
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2007
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2006
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2005
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Electronics and Communications
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66
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%
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63
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%
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60
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Engineered Systems
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19
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%
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20
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%
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22
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%
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Aerospace Engines and Components
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11
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%
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12
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%
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12
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Energy and Power Systems
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4
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5
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%
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6
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100
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%
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100
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100
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We are a Delaware corporation that was spun off from ATI as an
independent company on November 29, 1999. Our principal
executive offices are located at 1049 Camino Dos Rios, Thousand
Oaks, California
91360-2362.
Our telephone number is
(805) 373-4545.
Strategy
Our strategy continues to emphasize growth in our core markets
of instrumentation, defense electronics and government
engineered systems. We intend to strengthen and expand our core
businesses with targeted acquisitions. We intend to aggressively
pursue operational excellence to continually improve our margins
and
1
earnings. At Teledyne, operational excellence includes the rapid
integration of the businesses we acquire. Over time, our goal is
to create a set of businesses that are truly superior in their
niches. We intend to continue to evaluate our product lines to
ensure that they are aligned with our strategy.
Our
Recent Acquisitions
During 2007 and subsequently, we engaged in a number of
acquisitions intended to expand and strengthen our product and
service offerings in our core instrumentation and defense
markets.
Fiscal 2007
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On March 30, 2007, Teledyne Instruments, Inc. acquired
assets of D.G. OBrien, Inc. (DGO). DGO,
headquartered in Seabrook, New Hampshire, manufactures highly
reliable electrical and fiber-optic interconnect systems,
primarily for subsea military and offshore oil and gas
applications.
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On June 20, 2007, Teledyne Cougar, Inc. acquired Tindall
Technologies, Inc. (Tindall), a designer and
supplier of microwave subsystems for defense applications, and
consolidated Tindalls Pleasanton, California operations
with its operations in Sunnyvale, California.
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Fiscal 2008
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On December 31, 2007, Teledyne Instruments, Inc. acquired
assets of Impulse Enterprise. Impulse, headquartered in
San Diego, California, manufactures underwater electrical
interconnection systems for harsh environments.
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On December 31, 2007, Teledyne Reynolds, Inc. acquired
Storm Products Co. Primarily from its Dallas, Texas facility,
Storm supplies custom, high-reliability bulk wire and cable
assemblies to a number of markets, including energy exploration,
environmental monitoring and industrial equipment. From its
Woodridge, Illinois facility, Storm provides coax microwave
cable and interconnect products primarily to defense customers
for radar, electronic warfare and communications applications.
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On January 31, 2008, Teledyne Limited acquired S G Brown
Limited and its wholly-owned subsidiary TSS (International)
Limited. TSS International, headquartered in Watford, United
Kingdom, designs and manufactures inertial sensing, gyrocompass
navigation and subsea pipe and cable detection of offshore
energy, oceanographic and military marine markets.
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On February 1, 2008, Teledyne Scientific &
Imaging, LLC, acquired assets of Judson Technologies, LLC.
Headquartered in Montgomeryville, Pennsylvania, Judson designs
and manufactures high performance infrared detectors and
accessory products for military, space, industrial and
scientific applications.
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Teledyne spent $42.7 million, net of cash acquired, on
these acquisitions in our fiscal 2007. For those acquisitions
subsequently completed in our fiscal 2008, we spent
$167.4 million, net of cash acquired. All of the
acquisitions are part of the Electronics and Communications
segment. The results of all of our acquisitions are included in
our consolidated financial statements since the respective
acquisition dates of the acquired businesses.
Available
Information
Our Annual Report on
Form 10-K,
our Quarterly Reports on
Form 10-Q,
any Current Reports on
Form 8-K,
and any amendments to these reports, are available on our
website as soon as reasonably practicable after we
electronically file such materials with, or furnish them to, the
SEC. In addition, our Corporate Governance Guidelines, our
Corporate Objectives and Guidelines for Employee Conduct, our
codes of ethics for financial executives, directors and service
providers and the charters of the standing committees of our
Board of Directors are available on our website. Our website
address is
www.teledyne.com.
You will be responsible for any costs normally associated with
electronic access, such as usage and telephone charges.
Alternatively, if you would like a paper copy of any such
Securities and Exchange Commission (SEC) report
(without exhibits) or document, please write to John T. Kuelbs,
Executive Vice
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President, General Counsel and Secretary, Teledyne Technologies
Incorporated, 1049 Camino Dos Rios, Thousand Oaks, California
91360-2362,
and a copy of such requested document will be provided to you,
free-of-charge.
In April 2007, we submitted to the New York Stock Exchange the
CEO certification required by Section 303A.12(a) of the New
York Stock Exchange Listed Company Manual. The certification was
not qualified in any respect. Additionally, we filed with the
SEC as exhibits to this
Form 10-K
the CEO and CFO certifications required under Section 302
of the Sarbanes-Oxley Act of 2002.
Our
Business Segments
As previously reported in our press release reporting our fourth
quarter 2007 financial results, we realigned our business
segments. Our businesses are divided and managed as four
segments; namely, Electronics and Communications, Engineered
Systems, Aerospace Engines and Components and Energy and Power
Systems. The financial information in this Annual Report on
Form 10-K
reflects this new reporting structure. Financial information
about our business segments can be found in Note 13 to our
consolidated financial statements appearing elsewhere in this
Annual Report on
Form 10-K.
Electronics
and Communications
Our Electronics and Communications segment provides a wide range
of specialized electronic systems, instrumentation, components
and services that address niche market applications in defense,
marine, environmental, industrial, commercial aerospace,
communications and scientific markets.
Defense Electronics, Products and Services
Traveling Wave Tubes.
Our helix traveling wave
tubes are used to provide broadband power amplification of
microwave signals. Military applications include radar,
electronic warfare and satellite communication. Commercial
applications for traveling wave tubes include electromagnetic
compatibility test equipment and satellite communication
terminals for mobile newsgathering.
Microwave Components and Subsystems.
We
design, develop, and manufacture RF and microwave components and
subassemblies used in aerospace and defense applications,
including electronic warfare and radar. With the 2005
acquisition of Cougar Components Corporation
(Cougar), our products include cascadable
amplifiers, voltage-controlled oscillators and microwave mixers.
The 2006 acquisition of assets of KW Microwave added RF filters,
multiplexers and diplexers. The 2007 acquisition of Tindall
Technologies, Inc. added high performance Instantaneous
Frequency Measurement (IFM)-based systems and subsystems,
including integrated frequency locked sources and set-on
receiver jammers used for the U.S. Navy and Air Force
training.
High Voltage Connectors and
Subassemblies.
Through Teledyne Reynolds, Inc.,
we supply specialized high voltage connectors and subassemblies
for defense, aerospace and industrial applications. With the
2008 acquisition of Storm Products Co., we provide coax
microwave cable and interconnects primarily to defense customers
for radar, electronic warfare and communications applications.
We also produce pilot helmet mounted display components and
subsystems for the Joint Helmet Mounted Cueing System used in
the F-15, F-16 and F-18 aircrafts. This system is designed to
give military pilots the ability to designate a target just by
looking at it.
Microelectronic Modules.
We develop and
manufacture custom microelectronic modules that provide both
high reliability and extremely dense packaging for military
applications. We also develop custom tamper-resistant
microcircuits designed to provide enhanced security in military
communication.
Imaging Sensors.
Through Teledyne Imaging
Sensors, we design and produce advanced focal plane arrays,
sensors, and subsystems covering a broad spectrum of light from
below 0.3 micron ultra-violet to 18 micron long-wave infrared.
We provide large focal plane array sensors for both military and
space-science markets. We have been developing manufacturing
processes to support production of third generation dual band
infrared imagers designed to allow members of the armed forces
to identify threats on the battlefield
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before the enemy can detect their presence. With the 2008
acquisition of assets of Judson Technologies, LLC, we provide a
wider range of visible and infrared detectors, integrated
subsystems and camera products, produce dewar and coolers
assemblies and have additional detector packaging capabilities.
Teledyne Imaging Sensors also designs and manufactures advanced
military laser protection eyewear.
Sequencers.
Teledyne Electronic Safety
Products continues to provide microprocessor-controlled aircraft
ejection seat sequencers and related support elements to
military aircraft programs, including the
F/A-18E/F
and
F/A-22
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Since 2006, under a five-year contract, we have produced the
Digital Recovery Sequencer to support the F-15, F-16, F-22,
F-117,
A-10,
B-1 and B-2 aircrafts. We also have developed a new sequencer in
support of the F-35 Joint Strike Fighter program for which low
rate initial production began in 2007.
Relays and Switches.
Teledyne Relays supplies
electromechanical relays, solid-state power relays and coaxial
switching devices to military and aerospace markets.
Research and Development Services.
Through
Teledyne Scientific Company, we provide research and engineering
services primarily in the areas of electronics, optics,
information sciences and materials technology. Our scientific
team delivers research and development services and specialty
products to military, aerospace and industrial customers. We
strive to maintain close relationships and collaborations with
researchers at universities and national laboratories to stay at
the forefront of cutting-edge technologies. We also license
various technologies to third parties.
Electronic Manufacturing Services.
We serve
the market for high-mix, low-volume manufacturing of
sophisticated military electronics equipment principally from
our facility in Tennessee.
Teledyne Instruments
During 2001, we formed Teledyne Instruments, a group of business
units drawn from our Electronics and Communications segment and
our then called Systems Engineering Solutions segment, to focus
on industrial monitoring and process control applications. Since
then and through acquisitions, we have grown two additional
instrumentation platforms, marine and environmental.
Marine Instrumentation.
Historically, through
Teledyne Geophysical Instruments, we have manufactured
geophysical streamer cables, hydrophones and specialty products
used in offshore hydrocarbon exploration to locate oil and gas
reserves beneath the ocean floor. We continue to adapt this
technology for the military market, where these products can be
used to detect submarines, surface ships and torpedoes.
Through various acquisitions over the last several years, we
have greatly expanded our underwater acoustic and marine
instrumentation capabilities. Teledyne RD Instruments,
Inc.s acoustic Doppler current profilers perform precise
measurement of currents at varying depths in oceans and rivers,
and its Doppler Velocity Logs are used for navigation of
civilian and military surface ships and unmanned underwater
vehicles and by U.S. Navy divers. Teledyne Benthos, Inc.
manufactures oceanographic products used by the U.S. Navy,
energy exploration, oceanographic research and port and harbor
security services. Its products include acoustic modems for
networked underwater communication, a three-dimensional sidescan
sonar system and remotely operated underwater vehicles. Recently
acquired Teledyne TSS Limited (formerly known as TSS
(International) Limited) designs and manufactures inertial
sensing, gyrocompass navigation and subsea pipe and cable
detection systems for offshore energy, oceanographic and
military marine markets. Teledyne TSS inertial sensing and
navigation systems, which contain mechanical gyros and solid
state sensors, provide detailed positioning parameters for
marine applications. Such systems increase the accuracy of
hydrographic surveys by correcting for a marine vessels
motion. These products also provide critical data for dynamic
positioning systems used by floating offshore drilling rigs that
need to maintain a constant position in challenging marine
environments. Teledyne TSS electromagnetic detection
systems are fitted to remotely operated vehicles and used for
detection and maintenance of subsea telecommunications cables,
power cables and offshore pipelines.
As a result of acquisitions, we also provide a broader range of
end-to-end undersea interconnect solutions to the offshore oil
and gas, defense, oceanographic and telecom markets.
Majority-owned Ocean Design, Inc. or ODI manufactures subsea,
wet-mateable electrical and fiber-optic interconnect systems
used in offshore oil and gas production, oceanographic research
and military applications. Teledyne D.G. OBrien
manufactures
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glass-to-metal sealed subsea cable and connectors systems,
primarily for subsea military and offshore oil and gas
exploration. Recently acquired Teledyne Impulse manufactures
waterproof neoprene and glass reinforced epoxy connectors that
complement Teledyne D.G. OBriens interconnect
systems, which are typically installed before being submerged in
the ocean, and also complement ODIs lines of wet-mateable
interconnect systems. With the 2008 acquisition of Storm
Products Co., we also provide custom, high-reliability bulk wire
and cable assemblies to a number of marine, environmental and
industrial markets. In addition, we manufacture custom surface
mount connectors for applications in computer disk drives and
consumer medical electronic devices.
Environmental Instrumentation.
As a result of
our acquisitions, we offer a wide range of products for
environmental monitoring. Teledyne Advanced Pollution
Instrumentation, Inc. manufactures a broad line of
instrumentation for monitoring low levels of gases such as
sulfur dioxide, carbon monoxide, nitrogen oxides and ozone in
order to measure the quality of the air we breathe. Teledyne
Monitor Labs, Inc. supplies environmental monitoring systems for
the detection, measurement and reporting of air pollutants from
industrial stack emissions. Teledyne Tekmar Company manufactures
laboratory instrumentation that automates the preparation and
concentration for the analysis of trace levels of volatile
organic compounds by a gas chromatograph. The company also
provides laboratory instrumentation for the detection of total
organic carbon and total nitrogen in water and wastewater
samples. Through Teledyne Leeman Labs, we provide inductively
coupled plasma laboratory spectrometers, atomic absorption
spectrometers, mercury analyzers and calibration standards. The
advanced elemental analysis products are used by environmental
and quality control laboratories to detect trace levels of
inorganic contaminants in water and other environmental samples.
Teledyne Isco, Inc. (Teledyne Isco) produces water
quality monitoring products such as wastewater samplers and open
channel flow meters. A variety of measurement technologies is
offered to meet various flow applications found in pump
stations, flumes, weirs and industrial and municipal sewer
systems and storm drains. Teledyne Isco also manufactures
chromatography instruments and accessories for purification of
organic compounds. Its liquid chromatography customers include
pharmaceutical laboratories involved in drug discovery and
development. Additionally, Teledyne Isco manufactures
high-precision, high-pressure syringe pumps for metering various
applications from liquefied gasses to tar with flow rates from
sub-micro liter to 400 ml per minute and pressures up to 20,000
psi.
Industrial Process Instrumentation.
A group of
Teledyne businesses serve the process control and monitoring
needs of industrial plants with instruments that include gas
analyzers, vacuum and flow measurement devices, package
integrity inspection systems and torque measurement sensors.
Teledyne Analytical Instruments was a pioneer in the development
of precision oxygen analyzers. We now manufacture a wide range
of process gas and liquid analysis products for measurement of
oxygen, combustibles, oil in water, moisture, sulfides, pH and
many other parameters. We also manufacture custom analyzers
systems that provide turn-key solutions to complex process
monitoring
and/or
control applications found in petrochemical and refinery
facilities.
Teledyne Hastings Instruments manufactures a broad line of
instruments for precise measurement and control of vacuum and
gas flows. Our instruments are used in varied applications such
as semiconductor manufacturing, refrigeration, metallurgy and
food processing.
Under the
Taptone
®
brand, we provide quality control systems to the food, beverage
and pharmaceutical industries that inspect plastic, glass and
metal containers for various types of defects and
non-conformities.
We manufacture torque sensors and automatic data acquisition
systems that are used to instrument critical devices under
regulatory oversight, such as the requirement to test
periodically the torque, thrust and force of motor-operated
valves used in nuclear power plants.
Other Commercial Electronics
Aircraft Information Management.
Our aircraft
information management solutions are designed to increase the
reliability and efficiency of airline transportation. Through
Teledyne Controls, we are a leading supplier of digital flight
data acquisition and flight safety systems to the civil aviation
market. These systems acquire data for use by the
aircrafts flight data recorder as well as record
additional data for the airlines
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operation, such as aircraft and engine condition monitoring. We
also provide the means to transfer this data, using
Teledynes patented wireless technology, from the aircraft
to the airline operation center. This product is currently in
operational use by over 40 commercial airlines all over the
world. Additionally, we provide flight data monitoring services
to analyze the acquired data and to drive our flight data
visualization and animation products. Our data acquisition
systems are certified on the Airbus A320 and A330/340, Boeing
737-NG and
747-400,
and
Embraer EMB170/190 aircraft. We were also selected as a supplier
of the data acquisition system for the new Boeing
747-8
and
Sukhoi RRJ regional jet. In addition, our Aviation Information
Solutions (AIS) business designs and manufactures
aerospace Electronic Flight Bag equipment, networking products,
and flight deck and cabin displays.
Microelectronic Modules.
In addition to
military microelectronic modules, we develop and manufacture
custom microelectronic modules that provide both high
reliability and extremely dense packaging for implantable
medical devices, such as pacemakers and defibrillators, and
commercial communication products.
Relays and Switches.
In addition to military
and aerospace markets, Teledyne Relays supplies
electromechanical relays, solid-state power relays and coaxial
switching devices to industrial and commercial markets.
Applications include microwave and wireless communication
infrastructure, RF and general broadband test equipment, test
equipment used in semiconductor manufacturing, and industrial
and commercial machinery and control equipment.
Wireless Transceivers and Amplifiers.
Our line
of integrated transceiver modules provides high data rate
point-to-point connectivity in cellular telephone
infrastructure. We also supply microwave devices used in
satellite uplink applications.
Electronics Equipment and Printed Circuit Card
Assembly.
We serve the market for high-mix,
low-volume manufacturing of electronic products.
Engineered
Systems
Our Engineered Systems segment, principally through Teledyne
Brown Engineering, Inc., applies the skills of its extensive
staff of engineers and scientists to provide innovative systems
engineering and integration, advanced technology application,
software development, and manufacturing solutions to space,
military, environmental, and air and missile defense
requirements.
Defense
Teledyne Brown Engineering is a well-recognized full-service
missile defense contractor with over 50 years of experience
in air and missile defense and related systems integration. Our
diverse customer base in this field includes the U.S. Army
Aviation and Missile Command (AMCOM), the
U.S. Armys Space and Missile Defense Command
(SMDC), the Missile Defense Agency (MDA)
and Defense Department major prime contractors.
We play significant roles in diverse missile defense areas,
which include targets and countermeasures, systems engineering,
modeling and simulation, test and evaluation, and complex real
time
hardware-in-the-loop
integration. Our engineering and technological capabilities
include requirements definition, systems design, development,
integration and testing, with specialization in real-time
distributed systems.
During 2007, we continued our long-standing support of several
air and missile defense programs, including the Ground-based
Midcourse Defense (GMD) Program, Missile Defense
Systems Exerciser, the Extended Air Defense Simulation
(EADSIM) and, as part of the Lockheed Martin team,
the Targets and Countermeasures Program. These programs involve
the test and evaluation of ballistic missile defense system
performance on a large number of major programs, including the
Airborne Laser, the Kinetic Energy Interceptor, the Ground-based
Midcourse Defense, Aegis Ballistic Missile Defense, the Patriot
Advanced Capability 3, and the Terminal High Altitude Area
Defense (THAAD). Additionally, we continue to work
on an enhanced test program to develop an integrated test lab
for the GMD system.
6
In addition to our missile defense activities, we are supporting
several U.S. Army programs. Supported programs include the
Armys Future Combat System Multifunctional
Utility/Logistics and Equipment (MULE) program and
Patriot Missile validation and verification for the Lower
Tier Project Office. Tasking spans complex hardware
integration and software testing, from design through
verification and validation.
Aerospace
We have been active in U.S. space programs for almost
50 years and continue to be a significant contributor to
NASA programs.
We have played a key role in the International Space Station
(ISS), and have had various roles in the Space
Shuttle program. We supply
24-hour-per-day
service for the payload operation cadre for the ISS Payload
Operations and Integration Center, located at NASAs
Marshall Space Flight Center. As a subcontractor to Lockheed
Martin, we also work on the ISS Cargo Mission Contract at the
Johnson Space Center. This six-year contract, which began in
January 2004, involves providing services related to planning,
preparation and execution of cargo missions to the ISS.
We are the prime contractor on the Marshall Space Flight Center
Systems Development and Operations Support Contract, which
provides engineering services and hardware development support
for a variety of space activities. We have been the prime
contractor for the Propellants, Pressurants and Calibration
Services Contract at Marshall Space Flight Center since 1971.
Under that contract we furnish management, personnel, equipment
and materials to operate and maintain the propellant and
pressurant generating systems, storage and distribution systems,
as well as management and operation of the calibration
facilities at the Marshall Space Flight Center. We also have a
prime Blanket Purchase Agreement with the Marshall Space Flight
Center for specialized engineering and program support. We
perform engineering and software services under this contract
for NASAs new Ares launch vehicle upper stage.
Chemical, Biological, Radiological and Nuclear (CBRN)
Systems
We support the U.S. Governments efforts to clean up
dangerous materials and waste. Since 1996, we have supported the
U.S. Armys Non-Stockpile Chemical Materiel Program.
We also have begun to apply sophisticated computer aided
engineering, design, modeling and manufacturing skills to
support the U.S. Armys Edgewood Chemical and
Biological Center.
In November 2007, we were awarded a contract from the Department
of Defense to develop and test the Joint Material
Decontamination System (JMDS) for U.S. military forces. The
JMDS will be designed to remove toxic contamination as a result
of nuclear, biological and chemical weapons from sensitive
electronic equipment, command posts, aircraft and avionics, and
other applications where water and harsh decontamination
materials could damage or destroy items being decontaminated.
We operate a Department of Energy-certified radiological
analysis services laboratory in Knoxville, Tennessee. This
laboratory has received certification from the National
Environmental Laboratory Accreditation Program in
12 states, including Utah where the largest commercial
radiological waste disposal site resides. With its Nuclear
Utilities Procurement Issues Committee certification, the
laboratory also serves one-third of the nuclear power plants in
United States.
Additionally, we produce canisters for the processing,
stabilization and storage of nuclear-waste products. Expanding
on our core nuclear quality-related manufacturing, in February
2008, Fluor Enterprises, Inc., acting as an agent for USEC Inc.,
awarded us a contract to manufacture and deliver an initial
complement of gas centrifuge service modules to support fuel
production for commercial nuclear power plants.
Teledyne
Solutions, Inc.
Through Teledyne Solutions, Inc., we are a primary Missile
Defense systems engineering contractor. Teledyne Solutions is a
principal prime contractor for the Systems Engineering and
Technical Assistance Contract in support of the U.S. Army
Space and Missile Defense Command. We also provide engineering
and services support to other major Department of Defense
customers including the Missile Defense Agency, the
7
Program Executive Office for Missiles and Space, the Defense
Threat Reduction Agency, and the U.S. Army Aviation and
Missile Command.
Teledyne
CollaborX, Inc.
With the 2006 acquisition of CollaborX, we extended our
capabilities to include full system acquisition lifecycle
support from concept development to sustainment. CollaborX
provides engineering services to the U.S. Air Force,
U.S. Army, Office of Secretary of Defense, Missile Defense
Agency and select military combatant commands such as the
U.S. Joint Forces Command, U.S. Strategic Command, and
U.S. Northern Command. CollaborX provides the Air Force
with operational and systems expertise in the development, test,
integration, and fielding of new Command and Control and
Intelligence, Surveillance and Reconnaissance capabilities for
major Air Force weapons systems. CollaborXs services
complement TBEs support to the Army and NASA.
Aerospace
Engines and Components
Our Aerospace Engines and Components segment focuses on the
design, development and manufacture of piston engines,
aftermarket support and electronic engine controls.
Piston
Engines
Principally through Teledyne Continental Motors, Inc., we
design, develop and manufacture piston engines, ignition
systems, and aftermarket engines and spare parts for general
aviation airframe manufacturers and the aftermarket. We are one
of two primary worldwide original equipment producers of piston
aircraft engines for the general aviation marketplace.
Our current OEM product lines include engines for the Cirrus
SR-20 and SR-22, the Diamond DA20, Cessna 350 and 400 series
(formerly built by Columbia Aircraft Company), the Liberty XL2,
the Beech Bonanza and Baron aircraft, Mooney Ovation and Acclaim
lines, and the Piper Seneca V twin-engine aircraft.
During 2007, Cessna Aircraft Company selected our O-200D
air-cooled engine for its highly anticipated Light Sport
Aircraft, the Skycatcher.
Aftermarket
Support
In addition to the sales of OEM engines, we actively support the
replacement aircraft engine aftermarket. Piston aircraft engines
have a FAA authorized time between overhauls. Our aftermarket
support includes building and rebuilding of complete engines, as
well as providing a full complement of spare parts such as
cylinders, crankcases, fuel systems, crankshafts, camshafts and
ignition products. Also, through Teledyne Mattituck Services,
Inc., located in Long Island, New York, and our Fairhope,
Alabama service center, we serve as an aftermarket supplier of
overhauled piston engines and engine installations to the
general aviation marketplace for both Teledyne Continental
Motors and Textron Lycoming aircraft engines.
Electronic
Engine Controls
Through Aerosance, Inc., we developed the first production full
authority digital electronic controls (FADEC) for piston
aircraft engines. These controls, known as
PowerLink
tm
FADEC, 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 and facilitates electronic-centered maintenance of
our engines. We have shipped our 100th production engine to
Liberty Aircraft with FADEC and are certifying FADEC-equipped
engines targeted at the most popular OEM and aftermarket models
of four and six cylinder piston aircraft engines of the general
aviation fleet. We continue to believe that these control
systems will become standard equipment on new aircraft and will
be retrofitted on higher-end piston engine general aviation
aircraft.
Energy
and Power Systems
Our Energy and Power Systems segment designs and manufactures
hydrogen gas generators, thermoelectric and fuel cell-based
power sources, batteries and small turbine engines.
8
Teledyne
Energy Systems, Inc.
Teledyne Energy Systems, Inc., a majority owned subsidiary of
Teledyne, was formed in 2001 by combining Teledyne Brown
Engineerings then existing Energy Systems business unit
with assets and intellectual properties of then Florida-based
Energy Partners, Inc.
Through Teledyne Energy Systems, Inc., we manufacture
hydrogen/oxygen gas generators that utilize the principle of
electrolysis to convert water into high purity hydrogen gas at
useable pressures. Our Teledyne
Titan
tm
gas generators are used worldwide in electrical power generation
plants, semiconductor manufacturing, optical fiber production,
chemical processing, specialty metals, float glass and other
industrial processes. Our historic sales of hydrogen generators
have been largely to developing countries.
For over 50 years, we have supplied high reliability energy
conversion devices and gas generation products based on
thermoelectric and electrochemical processes. We provided the
thermoelectric power systems for the Pioneer 10 and 11
deep-space missions to Jupiter and Saturn and for the Viking 1
and Viking 2 Mars Landers. In 2006, in partnership with
Boeing and under a ten-year $57 million contract signed in
2003 with the U.S. Department of Energy, we completed all
of the testing of the Multi-Mission Radioisotope Thermoelectric
Generator capable of supporting planetary landing and deep space
probe missions. As a result of the successful test phase, in
2007, we began production of this generator for potential use to
power the Mars Science Laboratory scheduled to launch in 2009.
We recently began to explore the market potential for a liquid
fuel thermoelectric generator.
In conjunction with its thermoelectric power systems for space,
we also have ongoing development and prototyping work with NASA
on PEM fuel cell stacks and systems. These systems are being
developed in support of potential manned and robotic missions to
the moon and Mars.
We have a line of fuel cell test stations designed to provide a
completely integrated system for fuel cell testing for the PEM
fuel cell development market. Our Medusa line of fuel cell test
systems provides high quality, simple to use automated test
stations for fuel cell and fuel cell stack testing up to 12
kilowatts.
Aviation
Batteries
Our
Gill
®
line of lead acid batteries is widely recognized as the premier
power source for general aviation. We have developed sealed
recombinant batteries for business and light jet applications.
Teledyne Battery Products, in conjunction with Teledyne
Controls, jointly developed an onboard charging and cockpit
display kit that permits existing NiCad battery systems to be
replaced with
Gill
®
sealed lead acid batteries.
Turbine
Engines
We design, develop and manufacture small turbine engines
primarily used in tactical missiles for military markets.
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. Lockheed Martin
Corporation selected a derivative of the J402 engine to power
the Joint Air-to-Surface Standoff Missile (JASSM).
We are the sole source provider of engines for the baseline
JASSM system.
Our J700 engine provides the turbine power for the Improved
Tactical Air Launched Decoy (ITALD) built for the
U.S. Navy. The ITALD system enhances combat aircraft
survivability by both serving as a decoy and identifying enemy
radar sources.
In 2007, we continued to work under a contract related to the
U.S. Armys Future Combat System for the development
of new and derivative turbine engines for unmanned air vehicles,
commonly called UAVs, and other future aircraft. We continue to
work advanced technology for small turbine engines and
components under contract to the U.S. Air Force Research
Laboratory sponsored Versatile Advanced Affordable Turbine
Engine (VAATE) program. Advanced technology engine and component
demonstrators are being developed for the next generation cruise
missile and UAVs.
9
Customers
We have hundreds of customers in the electronics,
communications, aerospace and defense industries. No commercial
customer accounted for more than 10% of our total sales during
2007, 2006 or 2005.
Approximately 41%, 40%, and 42% of our total sales for 2007,
2006 and 2005, respectively, 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. These sales represented 30%,
30% and 32% of our total sales for 2007, 2006 and 2005,
respectively. In 2007, 2006 and 2005, our largest program with
the U.S. Government was the Systems Engineering and
Technical Assistance contract with the Space and Missile Defense
Command, and it represented 4.3%, 4.9% and 5.5% of total sales,
respectively. 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
(In millions)
|
|
|
|
|
Electronics and Communications
|
|
$
|
334.4
|
|
|
$
|
249.1
|
|
|
$
|
198.5
|
|
|
Engineered Systems
|
|
|
298.0
|
|
|
|
278.9
|
|
|
|
260.0
|
|
|
Energy and Power Systems
|
|
|
32.1
|
|
|
|
41.4
|
|
|
|
52.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government sales
|
|
$
|
664.5
|
|
|
$
|
569.4
|
|
|
$
|
510.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our total backlog of confirmed orders was approximately
$707.2 million at December 30, 2007,
$582.4 million at December 31, 2006 and
$521.9 million at January 1, 2006. We expect to
fulfill 98% of such backlog of confirmed orders during 2008.
Sales to international customers accounted for approximately 22%
of total sales in 2007, compared with 21% in 2006 and 18% in
2005. In 2007, we sold products to customers in over 100 foreign
countries. Ninety percent of our sales to foreign customers were
made to customers in 28 foreign countries.
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. As part of on-going
acquisition integration efforts, some of our Teledyne
Instruments companies and other business units have been working
to consolidate or share internal sales and servicing efforts.
Products are also advertised in appropriate trade journals and
by means of various websites. 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.
Through Teledyne Technologies International Corp. and other
subsidiaries, the Company has established offices in foreign
countries to facilitate international sales for various
businesses.
Competition
We believe that technological capabilities and innovation and
the ability to invest in the development of new and enhanced
products are critical to obtaining and maintaining leadership in
our markets and the industries in which we compete. Although we
have certain advantages that we believe help us compete
effectively in our markets, 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
10
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 related to improving product lines and
developing new products and technologies in the same or similar
fields. We spent a total of $355.1 million,
$307.0 million, and $291.5 million on research and
development and bid and proposal costs for 2007, 2006, and 2005,
respectively. Customer-funded research and development, most of
which was attributable to work under contracts with the
U.S. Government, represented approximately 83%, 83%, and
85% of total research and development costs for 2007, 2006, and
2005, respectively.
In 2007, approximately 81.3% of the $59.7 million in
Company-funded research and development and bid and proposal
costs were incurred in our electronics and communications
businesses. We expect the level of Company-funded research and
development and bid and proposal costs to be approximately
$70.0 million in 2008.
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 dependent 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. As part of our acquisition of Scientific
Company in September 2006, we licensed certain intellectual
property of the acquired company to Rockwell Automation and
Rockwell Collins.
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.