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Teledyne Technologies
Incorporated
1049 Camino Dos Rios
Thousand Oaks, CA 91360
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March 8,
2007
Dear
Stockholder:
We are pleased to invite you to attend the 2007 Annual Meeting
of Stockholders of Teledyne Technologies Incorporated. The
meeting will be held on Wednesday, April 25, 2007,
beginning at 9:00 a.m. (Pacific Time), at the
Companys offices at 1049 Camino Dos Rios, Thousand Oaks,
California 91360.
This booklet includes the notice of meeting as well as the
Companys Proxy Statement.
Enclosed with this booklet are the following:
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Proxy or voting instruction card (including instructions for
telephone and Internet voting).
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Proxy or voting instruction card return envelope (postage paid
if mailed in the U.S.).
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A copy of the Companys 2006 Annual Report (which contains
our
Form 10-K)
is also included.
Please read the Proxy Statement and vote your shares as soon as
possible. We encourage you to take advantage of voting by
telephone or Internet as explained on the enclosed proxy or
voting instruction card. Or, you may vote by completing, signing
and returning your proxy or voting instruction card in the
enclosed postage-paid envelope. It is important that you vote,
whether you own a few or many shares and whether or not you plan
to attend the meeting.
If you are a stockholder of record and plan to attend the
meeting, please mark the WILL ATTEND box on your
proxy card so that you will be included on our admittance list
for the meeting.
Thank you for your investment in our Company. We look forward to
seeing you at the 2007 Annual Meeting.
Sincerely,
Robert Mehrabian
Chairman, President and
Chief Executive Officer
TELEDYNE
TECHNOLOGIES INCORPORATED
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
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MEETING
DATE:
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April 25, 2007
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TIME:
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9:00 a.m. Pacific Time
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PLACE:
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Teledyne Technologies
Incorporated
1049 Camino Dos Rios
Thousand Oaks, California 91360
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RECORD
DATE:
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March 5, 2007
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AGENDA
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1)
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Election of a class of three directors for a three-year term;
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2)
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Ratification of the appointment of Ernst & Young LLP as
the Companys independent registered public accounting firm
for fiscal 2007; and
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3)
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Transaction of any other business properly brought before the
meeting.
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STOCKHOLDER
LIST
A list of stockholders entitled to vote will be available during
business hours for 10 days prior to the meeting at the
Companys executive offices, 1049 Camino Dos Rios,
Thousand Oaks, California 91360, for examination by any
stockholder for any legally valid purpose.
ADMISSION TO THE
MEETING
Teledynes stockholders or their authorized representatives
by proxy may attend the meeting. If you are a stockholder of
record and you plan to attend the meeting, please mark the
WILL ATTEND box on your proxy card so that you will
be included on our admittance list for the meeting. If your
shares are held through an intermediary, such as a broker or a
bank, you should present proof of your ownership at the meeting.
Proof of ownership could include a proxy from your bank or
broker or a copy of your account statement.
By Order of the Board of Directors,
John T. Kuelbs
Executive Vice President, General Counsel
and Secretary
March 8, 2007
PROXY
STATEMENT
TABLE OF CONTENTS
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Page
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Voting
Procedures
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1
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Board Composition
and Practices
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2
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Corporate
Governance
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3
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Item 1 on
Proxy Card
Election of Directors
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5
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Committees of our
Board of Directors
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9
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Item 2 on
Proxy Card
Ratification of Appointment of Independent Registered Public
Accounting Firm
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13
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Fees Billed by
Independent Registered Public Accounting Firm
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14
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Audit Committee
Pre-Approval Policies
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14
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Audit Committee
Report
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15
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Other
Business
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16
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Stock
Ownership Information
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17
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Section 16(a)
Beneficial Ownership Reporting Compliance
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17
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Five Percent Owners
of Common Stock
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17
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Stock Ownership of
Management
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17
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Executive and
Director Compensation
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20
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Compensation
Discussion and Analysis
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20
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Personnel and
Compensation Committee Report
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30
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Compensation
Committee Interlocks and Insider Participation
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31
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Summary
Compensation Table
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32
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Grants of
Plan-Based Awards
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34
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Outstanding Equity
Awards at Fiscal Year-End
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35
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Option Exercises
and Stock Vested
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36
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Pension
Benefits
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37
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Nonqualified
Deferred Compensation
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38
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Director
Compensation
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39
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Potential Payments
Upon Change in Control
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42
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Certain
Transactions
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47
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Other
Information
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49
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Annual Report on
Form 10-K
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49
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2008 Annual Meeting
and Stockholder Proposals
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49
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Proxy
Solicitation
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49
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Householding of
Proxy Materials
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49
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Electronic Access
to Proxy Materials and Annual Report
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50
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DEFINED
TERMS
In this Proxy Statement, 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.
PROXY
STATEMENT
FOR 2007 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement, the accompanying proxy card and the Annual
Report to Stockholders of Teledyne are being mailed on or about
March 21, 2007. The Board of Directors of Teledyne is
soliciting your proxy to vote your shares at the 2007 Annual
Meeting of Stockholders. The Board is soliciting your proxy to
give all stockholders of record the opportunity to vote on
matters that will be presented at the Annual Meeting. This Proxy
Statement provides you with information on these matters to
assist you in voting your shares.
VOTING
PROCEDURES
Who May
Vote
If you were a stockholder at the close of business on
March 5, 2007, you may vote at the Annual Meeting. On that
day, there were 34,849,190 shares of our common stock
outstanding.
Each share is entitled to one vote. In order to vote, you must
either designate a proxy to vote on your behalf or attend the
meeting and vote your shares in person. Our Board of Directors
requests your proxy so that your shares will count toward
determination of the presence of a quorum and your shares can be
voted at the meeting.
Methods of
Voting
All stockholders of record may vote by transmitting their proxy
cards by mail. Stockholders of record can also vote by telephone
or Internet. Stockholders who hold their shares through a bank
or broker can vote by telephone or Internet if their bank or
broker offers those options.
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By Mail.
Stockholders of record may complete,
sign, date and return their proxy cards in the postage-paid
envelope provided. If you sign, date and return your proxy card
without indicating how you want to vote, your proxy will be
voted as recommended by the Board of Directors.
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By Telephone or Internet.
Stockholders of
record may vote by using the toll-free number or Internet
website address listed on the proxy card. Please see your proxy
card for specific instructions.
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Revoking Your
Proxy
You may change your mind and revoke your proxy at any time
before it is voted at the meeting by:
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sending a written notice to the Secretary for receipt prior to
the meeting that you revoke your proxy;
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transmitting a proxy dated later than your prior proxy either by
mail, telephone or Internet; or
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attending the Annual Meeting and voting in person or by proxy
(except for shares held in the employee benefit plan).
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Voting By
Employee Benefit Plan Participants
Participants who hold common stock in the Teledyne Technologies
Incorporated 401(k) Plan may tell the plan trustee how to vote
the shares of common stock allocated to their accounts. You may
either (1) sign and return the voting instruction card
provided by the plan or (2) transmit your instructions by
telephone or Internet. If you do not transmit instructions by
11:59 p.m. (Eastern Time), on April 20, 2007, your
shares will not be voted by the plan trustee, except as
otherwise required by law.
1
Voting
Shares Held By Brokers, Banks and Other Nominees
If you hold your shares in a broker, bank or other nominee
account, you are a beneficial owner of our common
stock. In order to vote your shares, you must give voting
instructions to your bank, broker or other intermediary who is
the nominee holder of your shares. We ask brokers,
banks and other nominee holders to obtain voting instructions
from the beneficial owners of shares that are registered in the
nominees name. Proxies that are transmitted by nominee
holders on behalf of beneficial owners will count toward a
quorum and, except as otherwise provided below, will be voted as
instructed by the nominee holder. Under New York Stock Exchange
rules, if your broker holds your shares in its name, the broker
is permitted to vote your shares on the election of directors
and Item 2, even if it does not receive voting instructions
from you.
Confidential
Voting Policy
We maintain a policy of keeping stockholder votes confidential.
BOARD COMPOSITION
AND PRACTICES
Information and
Meetings
The Board of Directors directs the management of the business
and affairs of the Company as provided in our Amended and
Restated Bylaws and pursuant to the laws of the State of
Delaware. Except for Dr. Robert Mehrabian, our Chairman,
President and Chief Executive Officer, the Board is not involved
in
day-to-day
operations. Members of the Board keep informed about our
business through discussions with the senior management and
other officers and managers of the Company and its subsidiaries,
by reviewing information provided to them, and by participating
in Board and committee meetings.
We encourage, but do not require, that all our directors attend
all meetings of the Board of Directors, all committee meetings
on which the directors serve and the annual stockholders
meeting. In 2006, the Board of Directors held eight meetings and
acted two times by unanimous written consent. During 2006, all
directors attended at least 75% of the aggregate number of
meetings of the Board that were held when they were members and
at least 75% of the aggregate number of meetings of the Board
committees of which they were members. All of the then serving
current directors attended the 2006 Annual Meeting of
Stockholders.
Number of
Directors
The Board of Directors determines the number of directors, which
under our Amended and Restated By-laws must consist of not less
than four members and not more than 10 members. The Board
has currently fixed the number at 10 members, which number
was so fixed in connection with the appointment of
Roxanne S. Austin to our Board on October 9, 2006.
Director
Terms
The directors are divided into three classes and the directors
in each class serve for a three-year term. The term of one class
of directors expires each year at the Annual Meeting of
Stockholders. The Board may fill a vacancy by electing a new
director to the same class as the director being replaced. The
Board may also create a new director position in any class and
elect a director to hold the newly created position until the
term of the class expires.
2
Directors
Retirement Policy
On June 1, 2000, we adopted a retirement policy for
directors. This policy, as amended, generally requires directors
to retire at the Annual Meeting following their
75th birthday. This policy also requires a director to
offer to tender his or her resignation if such director has a
change in professional status.
Executive
Sessions and Lead Director
Our non-management directors meet in executive session without
management on a regularly scheduled basis. Committee chairs
rotate as presiding director in such sessions. The Board has
formally designated Frank V. Cahouet, one of our independent
directors, to serve as the lead director under circumstances
when the Chairman, President and Chief Executive Officer is
unable to perform the duties of that office.
CORPORATE
GOVERNANCE
Director
Independence
In April 2006, our Nominating and Governance Committee assessed,
and our Board of Directors determined, the independence of each
director in accordance with the then existing rules of the New
York Stock Exchange and the Securities and Exchange Commission.
In order to comply with such items, our Nominating and
Governance Committee considered various relationship categories
including: whether the director is an employee, amount of stock
ownership and commercial, industrial, banking, consulting,
legal, accounting or auditing, charitable and familial
relationships, as well as a range of individual circumstances.
Our Nominating and Governance Committee and the Board also
considered our relationship and the relationship of the director
to ATI, from which we were spun-off in November 1999. See
Certain Transactions at page 47. The Board did
consider that certain directors consider themselves to be social
friends. As a result, the Nominating and Governance Committee,
followed by the Board, determined that each member of our Board
of Directors did not have any material relationships with us and
was thus independent, with the exception of Dr. Mehrabian,
our Chairman, President and Chief Executive Officer. Our
Nominating and Governance Committee and our Board considered the
same items when it appointed Wesley W. von Schack to the Board
on July 25, 2006 and when it appointed Roxanne S. Austin to
the Board on October 9, 2006. Our Nominating and Governance
Committee, after reviewing updated information in January 2007,
reported to our Board that it continues to determine that nine
of our ten current directors are independent directors. The
independent directors by name are: Roxanne S. Austin, Robert P.
Bozzone, Frank V. Cahouet, Charles Crocker, Kenneth C. Dahlberg,
Simon M. Lorne, Paul D. Miller, Michael T. Smith and Wesley W.
von Schack. Charles J. Queenan, Jr. was an independent director
prior to his retirement at our 2006 Annual Meeting.
The Nominating and Governance Committee, followed by the Board,
also determined that each member of our Personnel and
Compensation Committee is an outside director within
the meaning of Rule 162(m) of the Internal Revenue Code and
are non-management directors within the meaning of
Rule 16b-3
under the Securities Exchange Act of 1934.
All of the Boards standing committees consist only of
independent directors.
Corporate
Governance and Ethics Guidelines
At the time we became a public company in 1999, our Board of
Directors adopted many best practices in the area of
corporate governance, including separate standing committees of
the Board for each of audit, nominating and governance and
executive compensation matters, charters for each of the
committees, and corporate ethics and compliance guidelines. Our
ethics and compliance guidelines for employees are contained in
the Corporate Objectives and Guidelines for Employee Conduct.
These guidelines apply to all our
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employees, including our principal executive, financial and
accounting officers. Our employees receive periodic ethics
training and
follow-up
questionnaires are distributed annually to various personnel in
an effort to confirm compliance with these guidelines. It is our
policy not to waive compliance with these guidelines. We also
have a specialized code of ethics for financial executives that
supplements the employee guidelines. In addition, we have ethics
and compliance guidelines for our service providers.
Our Board of Directors has adopted Corporate Governance
Guidelines. These Corporate Governance Guidelines were initially
developed by our Nominating and Governance Committee and are
reviewed at least annually by such Committee. These Corporate
Governance Guidelines incorporate practices and policies under
which our Board has operated since its inception, in addition to
many of the requirements of the Sarbanes-Oxley Act of 2002 and
the New York Stock Exchange. Some of the principal subjects
covered by the Corporate Governance Guidelines include:
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Director qualification standards.
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Director responsibilities.
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Director access to management and independent advisors.
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Director compensation.
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Director orientation and continuing education.
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Management succession.
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Annual performance evaluation of the Board and Committees.
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Copies of our Corporate Governance Guidelines, our Corporate
Objectives and Guidelines for Employee Conduct, our codes of
ethics for financial executives and service providers and our
committee charters are available on our website at
www.teledyne.com. If at any time you would like to receive a
paper copy,
free-of-charge,
please write to John T. Kuelbs, Executive Vice President,
General Counsel and Secretary, Teledyne Technologies
Incorporated, 1049 Camino Dos Rios, Thousand Oaks, California
91360.
Sarbanes-Oxley
Disclosure Committee
In September 2002, we formally constituted the Sarbanes-Oxley
Disclosure Committee. Current members include: John T. Kuelbs,
Executive Vice President, General Counsel and Secretary; Dale A.
Schnittjer, Senior Vice President and Chief Financial Officer;
Susan L. Main, Vice President and Controller; Ivars R. Blukis,
Chief Business Risk Assurance Officer; Robyn E. McGowan, Vice
President, Administration and Human Resources and Assistant
Secretary; Melanie S. Cibik, Vice President, Associate General
Counsel and Assistant Secretary; Shelley D. Green, Treasurer;
Brian A. Levan, Director of External Financial Reporting and
Assistant Controller; and Jason VanWees, Vice President,
Corporate Development and Investor Relations. Among its tasks,
the Disclosure Committee discusses and reviews disclosure issues
to help us fulfill our disclosure obligations on a timely basis
in accordance with SEC rules and regulations and is intended to
be used as an additional resource for employees to raise
questions regarding accounting, auditing, internal controls and
disclosure matters.
Since we became a public company in 1999, we have had a
confidential Corporate Ethics/Help Line, where questions or
concerns about us can be raised confidentially and anonymously.
The Corporate Ethics/Help line is available to all of our
employees, as well as concerned individuals outside the company.
The toll-free help line number is 1-877-666-6968.
The receipt of concerns about our accounting, internal controls
and auditing matters will be reported to the Audit Committee.
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Communications
with the Board
Our Corporate Governance Guidelines provide that any interested
parties desiring to communicate with our non-management
directors, including our lead director, may contact them through
our Secretary, John T. Kuelbs, whose address is: Teledyne
Technologies Incorporated, 1049 Camino Dos Rios, Thousand Oaks,
California 91360.
ITEM 1 ON
PROXY CARD ELECTION OF DIRECTORS
The Board of Directors has nominated for election this year the
class of three incumbent directors whose terms expire at the
2007 Annual Meeting.
The three-year term of the class of directors nominated and
elected this year will expire at the 2010 Annual Meeting.
The three individuals who receive the highest number of votes
cast will be elected. Broker non-votes, if any, are included in
determining the presence of a quorum at the Annual Meeting, but
are not counted as votes cast.
If you sign and return your proxy card, the individuals named as
proxies in the card will vote your shares for the election of
the three named nominees, unless you provide other instructions.
You may withhold authority for the proxies to vote your shares
on any or all of the nominees by following the instructions on
your proxy card. If a nominee becomes unable to serve, the
proxies will vote for a Board-designated substitute or the Board
may reduce the number of directors. The Board has no reason to
believe that any nominee will be unable to serve.
Background information about the nominees and continuing
directors follows.
5
Nominees
For Terms Expiring at 2010 Annual Meeting
(Class II)
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Charles Crocker
Chairman, Crocker Capital and
Retired Chairman and Chief
Executive Officer of
BEI Technologies, Inc.
Director since 2001
Age: 68
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Charles Crocker was the Chief
Executive Officer of the Custom Sensors Division of Schneider
Electronics. Mr. Crocker was the Chairman and Chief
Executive Officer of BEI Technologies, Inc., a diversified
technology company, from March 2000 until October 5, 2005,
when it was acquired by Schneider Electronics. Mr. Crocker
served as Chairman, President and Chief Executive Officer of BEI
Electronics from October 1995 to September 1997, at which time
he became Chairman, President and Chief Executive Officer of BEI
Technologies, Inc. Mr. Crocker currently serves as the
Chairman of Crocker Capital, a private investment company, and
as a director of Franklin Resources, Inc. and its subsidiary,
Fiduciary Trust International. Mr. Crocker is the Chair of
our Personnel and Compensation Committee and a member of our
Nominating and Governance Committee.
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Robert Mehrabian
Chairman, President and Chief
Executive Officer of the Company
Director since 1999
Age: 65
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Robert Mehrabian is the Chairman,
President and Chief Executive Officer of Teledyne Technologies
Incorporated. He has been the President and Chief Executive
Officer of Teledyne since its formation in 1999. He became
Chairman of the Board on December 14, 2000. Prior to the
spin- off of the Company by ATI in November 1999,
Dr. Mehrabian was the President and Chief Executive Officer
of ATIs Aerospace and Electronics segment since July 1999
and had served ATI in various senior executive capacities since
July 1997. Before joining ATI, Dr. Mehrabian served as
President of Carnegie Mellon University. He is also a director
of Mellon Financial Corporation and PPG Industries, Inc.
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Michael T. Smith
Retired Chairman of the Board
and Chief Executive Officer of
Hughes Electronics Corporation
Director since 2001
Age: 63
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Michael T. Smith is the retired
Chairman of the Board and Chief Executive Officer of Hughes
Electronics Corporation. He had been elected to those positions
in October 1997. Mr. Smith is also a director of Alliant
Techsystems Inc., Ingram Micro Corporation, a technology sales,
marketing and logistics company, and FLIR Systems, Inc., which
produces infrared cameras, thermal imaging software and
temperature measurement devices. Mr. Smith is the chair of
our Nominating and Governance Committee and is a member of our
Personnel and Compensation Committee.
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The Board of
Directors Recommends
a Vote for the Election of the Nominees
6
Continuing
Directors Terms Expire at 2008 Annual Meeting
(Class III)
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Roxanne S. Austin
Former President and Chief Operating
Officer of DIRECTV, Inc
Director since 2006
Age: 46
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Roxanne S. Austin served as
President and Chief Operating Officer of DIRECTV, Inc. from June
2001 to December 2003. She also served as Executive Vice
President of Hughes Electronics Corporation and as a member of
its executive committee until December 2003. From 1997 to June
2001, Ms. Austin was the Corporate Senior Vice President
and Chief Financial Officer of Hughes Electronics Corporation.
Prior thereto, she held various senior financial positions with
Hughes Electronics Corporation. Prior to joining Hughes in 1993,
Ms. Austin was a partner at the accounting firm
Deloitte & Touche. Ms. Austin is also a director
of Target Corporation and Abbott Laboratories. She serves on the
Board of Trustees of the California Science Center.
Ms. Austin is a member of our Audit Committee and our
Nominating and Governance Committee.
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Robert P. Bozzone
Former Chairman of Allegheny
Technologies Incorporated
Director since 1999
Age: 73
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Robert P. Bozzone was Chairman of
ATI until May 6, 2004. From December 2000 through June
2001, he was Chairman, President and Chief Executive Officer of
ATI. Mr. Bozzone had been Vice Chairman of the Board of ATI
since August 1996. He had served as Vice Chairman of Allegheny
Ludlum Corporation, a subsidiary of ATI, since August 1994 and
previously was President and Chief Executive Officer of
Allegheny Ludlum. He is also a director of ATI and DQE, Inc.,
whose principal subsidiary is Duquesne Light Company.
Mr. Bozzone is a member of our Audit Committee and our
Personnel and Compensation Committee.
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Frank V. Cahouet
Retired Chairman and Chief
Executive Officer of Mellon
Financial Corporation
Director since 1999
Age: 74
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Frank V. Cahouet served as the
Chairman, President and Chief Executive Officer of Mellon
Financial Corporation, a bank holding company, and Mellon Bank,
N.A., prior to his retirement on December 31, 1998. He is
also a director of Korn Ferry International, a provider of
recruiting services and Saint-Gobain Corporation, a manufacturer
of glass, ceramics, plastics and cast iron. Mr. Cahouet is
Chair of our Audit Committee and a member of our Nominating and
Governance Committee.
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Kenneth C. Dahlberg
Chairman, Chief Executive Officer
and President of
Science Applications
International Corporation
Director since 2006
Age: 62
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Kenneth C. Dahlberg is the
Chairman, Chief Executive Officer and President of Science
Applications International Corporation (SAIC), a research and
engineering firm specializing in information systems and
technology. Prior to joining SAIC, Mr. Dahlberg served as
executive vice president of General Dynamics where he was
responsible for its Information Systems and Technology Group.
Mr. Dahlberg is a member of our Personnel and Compensation
Committee and our Audit Committee.
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7
Continuing
Directors Terms Expire at 2009 Annual Meeting
(Class I)
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Simon M. Lorne
Vice Chairman and Chief Legal Officer
of Millennium Partners L.P.
Director since 2004
Age: 61
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Simon M. Lorne is the Vice
Chairman and Chief Legal Officer of Millennium Partners L.P., a
hedge fund. From March 1999 to March 2004, prior to the time he
became a Director, Mr. Lorne was a partner with Munger
Tolles & Olson, LLP, a law firm whose services Teledyne
has used from time to time. Mr. Lorne has also previously
served as a Managing Director, with responsibility for Legal
Compliance and Internal Audit, of Citigroup/Salomon Brothers and
as the General Counsel at the Securities and Exchange Commission
in Washington D.C. Mr. Lorne is a director of Opsware,
Inc., a provider of data center automation software, and
currently serves as co-director of Stanford Law Schools
Directors College. Mr. Lorne is a member of our Audit
Committee and our Nominating and Governance Committee.
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Paul D. Miller
Retired Chairman of the Board
of Alliant Techsystems, Inc.
Director since 2001
Age: 65
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Paul D. Miller was the Chairman of
the Board of ATK (Alliant Techsystems, Inc.), an advanced weapon
and space systems company, until April 1, 2005. From
January 1999 until October 2003, he had also been Chief
Executive Officer of ATK. Prior to retirement from the
U.S. Navy in 1994, Admiral Miller served as
Commander-in-Chief,
U.S. Atlantic Command and NATO Supreme Allied
Commander Atlantic. He is also a director of
Donaldson Company, Inc., a filtration solutions company.
Mr. Miller is a member of our Audit Committee and our
Nominating and Governance Committee.
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Wesley W. von Schack
Chairman, President and
Chief Executive Officer
of Energy East Corporation
Director since 2006
Age: 62
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Wesley W. von Schack is the
Chairman, President and Chief Executive Officer of Energy East
Corporation, a diversified energy services company. He currently
serves as Lead Director of Mellon Financial Corporation and is
chairman of its Corporate Governance and Nominating Committee,
and is chairman of AEGIS Insurance Company. He is a member of
our Nominating and Governance Committee and our Personnel and
Compensation Committee.
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8
COMMITTEES OF OUR
BOARD OF DIRECTORS
Our Board of Directors has established an Audit Committee, a
Nominating and Governance Committee and a Personnel and
Compensation Committee. From time to time, our Board of
Directors may establish other committees. Each of the Audit
Committee, Nominating and Governance Committee and Personnel and
Compensation Committee has a written charter that can be
accessed on our website at www.teledyne.com.
Audit
Committee
The members of the Audit Committee are:
Frank V. Cahouet, Chair
Roxanne S. Austin
Robert P. Bozzone
Kenneth C. Dahlberg
Simon M. Lorne
Paul D. Miller
The Audit Committee held seven meetings in 2006. Charles J.
Queenan, Jr., was a member of the Audit Committee prior to
his retirement from our Board of Directors at the 2006 Annual
Meeting.
The primary purpose of the Audit Committee is to assist the
Boards oversight of the integrity of our financial
statements, our compliance with legal and regulatory
requirements, the qualification and the independence of our
independent auditor, and the performance of our internal audit
function and independent auditor. As provided in its charter,
the Audit Committee is directly responsible for the appointment,
retention, compensation, oversight, evaluation and termination
of our independent auditor (including resolving disagreements
between management and the independent auditor regarding
financial reporting). The Audit Committee has been designated as
the qualified legal compliance committee. In
carrying out its responsibilities, the Audit Committee
undertakes to do many things, including:
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Retain and approve the terms of the engagement and fees to be
paid to the independent auditor.
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Evaluate the performance of the independent auditor.
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Receive written periodic reports from the independent auditor
delineating all relationships between the independent auditor
and us.
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Review with the independent auditor any problems or difficulties
the independent auditor may have encountered and any management
letter provided by the independent auditor and our response to
that letter.
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Review our annual audited financial statements and the report
thereon and quarterly unaudited financial statements with the
independent auditor and management prior to publication of such
statements.
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Discuss with management the earnings press releases (including
the type of information and presentation of information).
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Review major issues regarding accounting principles and
financial statement presentations and judgments made in
connection with the preparation of our financial statements.
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Meet periodically with management to review our financial risk
exposures and the steps management has taken to monitor and
control such exposures.
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Review with our General Counsel legal matters that may have a
material impact on the financial statements, our compliance
policies and any material reports or inquiries received from
regulators or governmental agencies.
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9
While reviewed annually, the charter of the Audit Committee was
last amended and restated on December 13, 2006. The Audit
Committee charter provides that our senior internal auditing
executive reports directly and separately to the Chair of the
Audit Committee and Chief Executive Officer. As required by the
charter, our Audit Committee also has established procedures for
the receipt, retention and treatment of complaints regarding
accounting, internal controls and auditing matters. See
Corporate Governance Sarbanes-Oxley Disclosure
Committee at page 4.
The Audit Committee meets the size, independence and experience
requirements of the New York Stock Exchange, including the
enhanced independence requirements for Audit Committee members
under Exchange Act
Rule 10A-3.
The Board of Directors has determined that Frank V. Cahouet is
an audit committee financial expert within the
meaning of the SEC regulations and all of the members are
independent under the New York Stock Exchange
listing standards. Our Corporate Governance Guidelines provides
that no director may serve as a member of the Audit Committee if
such director serves on the audit committees of more than two
other public companies unless the Board determines that such
simultaneous service would not impair the ability of such
director to effectively serve on the Audit Committee. Any such
determination must be disclosed in the annual proxy statement.
Besides our Audit Committee, Ms. Austin simultaneously
serves on the audit committee of two other public companies and
each of Mr. Lorne, Mr. Cahouet, Mr. Crocker,
Admiral Miller and Mr. von Schack simultaneously serves on
the audit committee of one other public company.
The report of the Audit Committee is included under
Item 2 on Proxy Card Ratification of
Appointment of Independent Registered Public Accounting
Firm at page 13.
Nominating and
Governance Committee
The members of the Nominating and Governance Committee are:
Michael T. Smith, Chair
Roxanne S. Austin
Frank V. Cahouet
Charles Crocker
Simon M. Lorne
Paul D. Miller
Wesley W. von Schack
The Nominating and Governance Committee held four meetings in
2006.
The Nominating and Governance Committee undertakes to:
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Identify individuals qualified to become members of the Board of
Directors and to make recommendations to the Board of Directors
with respect to candidates for nomination for election at the
next annual meeting of stockholders or at such other times when
candidates surface and, in connection therewith, consider
suggestions submitted by our stockholders.
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Develop and recommend to the Board of Directors corporate
governance guidelines.
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Determine and make recommendations to the Board of Directors
with respect to the criteria to be used for selecting new
members of the Board of Directors.
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Oversee the annual process of evaluation of the performance of
our Board of Directors and committees.
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Make recommendations to the Board of Directors concerning the
membership of committees of the Board and the chairpersons of
the respective committees.
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Make recommendations to the Board of Directors with respect to
the remuneration paid and benefits provided to members of the
Board in connection with their service on the Board or on its
committees.
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Administer our formal compensation programs for directors,
including the Non-Employee Director Stock Compensation Plan.
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Make recommendations to the Board of Directors concerning the
composition, organization and operations of the Board of
Directors and its committees, including the orientation of new
members and the flow of information.
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Evaluate Board and committee tenure policies as well as policies
covering the retirement or resignation of incumbent directors.
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While reviewed annually, the charter of the Nominating and
Governance Committee was last amended and restated on
December 13, 2006. The members of the Nominating and
Governance Committee are independent under the New
York Stock Exchange listing standards.
The Nominating and Governance Committee will consider
stockholder recommendations for nominees for director. Any
stockholders interested in suggesting a nominee should follow
the procedures outlined in Other Information
2008 Annual Meeting and Stockholder Proposals at
page 49.
The Nominating and Governance Committee utilizes a variety of
methods for identifying and evaluating all nominees for
directors. The Committee periodically assesses the appropriate
size of the Board and whether vacancies on the Board are
expected due to retirement, change in professional status or
otherwise. Candidates may come to the attention of the Committee
through current Board members, members of our management,
stockholders and other persons. The Committee to date has not
engaged a professional search firm. Candidates are evaluated at
meetings of the Committee and may be considered at any point
during the year. As stated in the Corporate Governance
Guidelines, nominees for director are to be selected on the
basis of, among other criteria, experience, knowledge, skills,
expertise, integrity, diversity, ability to make analytical
inquiries, understanding of or familiarity with our business
products or markets or similar business products or markets, and
willingness to devote adequate time and effort to Board
responsibilities. The Committee may establish additional
criteria and is responsible for assessing the appropriate
balance of criteria required of Board members. The Committee
considered these criteria when it recommended the appointment of
Mr. von Schack to our Board of Directors in July 2006 and
Ms. Austin to our Board of Directors in October 2006.
Personnel and
Compensation Committee
The members of the Personnel and Compensation Committee are:
Charles Crocker., Chair
Robert P. Bozzone
Kenneth C. Dahlberg
Michael T. Smith
Wesley W. von Schack
The Personnel and Compensation Committee held three meetings in
2006. Charles J. Queenan, Jr., was a member of the
Personnel and Compensation Committee prior to his retirement
from our Board of Directors at the 2006 Annual Meeting.
The Personnel and Compensation Committees principal
authority and responsibilities include:
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Making recommendations to the Board of Directors concerning
executive management organization matters generally.
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In the area of compensation and benefits, making recommendations
to the Board of Directors concerning employees who are also
directors, consulting with the Chief Executive Officer on
matters relating to other executive officers, and making
recommendations to the Board of Directors concerning policies
and procedures relating to executive officers; provided,
however, that the Committee shall have full decision-making
powers with respect to compensation for executive officers to
the extent such compensation is intended to be performance-based
compensation within the meaning of Section 162(m) of the
Internal Revenue Code.
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Making recommendations to the Board of Directors regarding all
contracts with any officer for remuneration and benefits
(whether in the form of a pension, deferred compensation or
otherwise) after termination of regular employment of such
officer.
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Making recommendations to the Board of Directors concerning
policy matters relating to employee benefits and employee
benefit plans, including incentive compensation plans and equity
based plans.
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Overseeing our formal incentive compensation programs, including
equity-based plans.
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Serving as Named Fiduciary under the Employee
Retirement Income Security Act of 1974, as amended
(ERISA), of all employee benefit plans,
as defined in Section 3(3) of ERISA, maintained by us with
respect to both plan administration and control and management
of plan assets.
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While reviewed annually, the charter of the Personnel and
Compensation Committee was last amended and restated on
December 13, 2006. The members of the Personnel and
Compensation Committee are independent under the New
York Stock Exchange listing standards.
Our Chief Executive Officer works with the Personnel and
Compensation Committee Chair, our Vice President of
Administration and Human Resources and the Office of the
Corporate Secretary in establishing the agenda for the Committee
and makes compensation recommendations for the named executives
(other than himself). The Personnel and Compensation Committee
generally meets in executive session at each meeting. The
Personnel and Compensation Committees Chairman reports the
committees recommendations on executive compensation to
the Board. The Personnel and Compensation Committee has the
authority under its charter to obtain advice and assistance from
internal or external legal, accounting or other advisors. The
Personnel and Compensation Committee may form and delegate
authority to subcommittees as it deems appropriate and may
delegate its responsibility to control and manage the plan
assets of our employee benefit plans. In addition, under the
terms of our stock incentive plans, the Personnel and
Compensation Committee may delegate its powers and authority
under the stock incentive plan as it deems appropriate to a
subcommittee
and/or
designated officers and, as discussed below under
Compensation Discussion and Analysis, the Personnel
and Compensation Committee has made a limited delegation of
authority to grant stock options to our Chief Executive Officer
pursuant to this authority. The Personnel and Compensation
Committee has the sole authority and resources to retain and
terminate any compensation consultant to be used to assist in
the evaluation of Chief Executive Officer or other executive
compensation and has sole authority to approve the
consultants fees and other retention terms. As discussed
below under Compensation Discussion and Analysis,
the Committee has retained Hewitt Associates LLC and Watson
Wyatt Company to assist the Committee in fulfilling its
responsibilities in 2006.
The 2006 Report of the Personnel and Compensation Committee is
included under Executive and Director Compensation
at page 31.
12
ITEM 2 ON
PROXY CARD
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as
our independent registered public accounting firm for fiscal
2007. Ernst & Young LLP has served as our independent
registered public accounting firm since the November 29,
1999 spin-off. The firm had also served as the independent
registered public accounting firm for ATI and its predecessors
since 1980. The Audit Committee believes that Ernst &
Young LLP is knowledgeable about our operations and accounting
practices and is well qualified to act in the capacity of
independent registered public accounting firm.
Although the appointment of an independent registered public
accounting firm is not required to be approved by the
stockholders, the Audit Committee and the Board of Directors
believe that stockholders should participate in such selection
through ratification. The proposal to ratify the Audit
Committees appointment of Ernst & Young will be
approved by the stockholders if it receives the affirmative vote
of a majority of the shares present in person or represented by
proxy at the meeting and entitled to vote on the proposal. If
you sign and return your proxy card, your shares will be voted
(unless you indicate to the contrary) to ratify the selection of
Ernst & Young LLP as our independent registered public
accounting firm for 2007. If you specifically abstain from
voting on the proposal, your shares will, in effect, be voted
against the proposal. Broker non-votes, if any, are included in
determining the presence of a quorum at the Annual Meeting, but
will not be counted as being entitled to vote on the proposal
and will not affect the outcome of the vote. If the stockholders
do not ratify the selection of Ernst & Young LLP, the
Audit Committee will reconsider the appointment of an
independent registered public accounting firm. It is expected
that representatives of Ernst & Young LLP will be
present at the meeting and will have an opportunity to make a
statement and respond to appropriate questions.
The Board of
Directors Recommends
a Vote for Ratification of the Appointment
of the Independent Registered Public Accounting Firm.
13
Fees Billed by
Independent Registered Public Accounting Firm
The following table sets forth fees billed by Ernst &
Young LLP for professional services rendered for 2006 and 2005
(in thousands).
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2006
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2005
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Audit Fees(1)
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$
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1,529.0
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$
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1,361.9
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Sarbanes-Oxley Act
Section 404 Fees
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1,054.2
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928.7
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Statutory audits (Bermuda and
United Kingdom subsidiaries)
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68.4
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87.0
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SEC registration
Form S-8
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7.9
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Total Audit Fees
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2,651.6
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2,385.5
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Audit-Related Fees
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Employee Benefit Plan Financial
Statement Audits
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75.5
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102.1
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Environmental Financial Assurances
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10.8
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8.3
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Total Audit-Related Fees
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86.3
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110.4
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Tax Fees(2)
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47.2
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20.0
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All Other Fees(3)
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1.5
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1.7
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Total
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$
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2,786.6
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$
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2,517.6
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Total Audit and Audit-Related Fees
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$
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2,737.9
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$
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2,495.9
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(1)
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Aggregate fees billed for
professional services rendered for the audit of our annual
financial statements and for the reviews of financial statements
included in our quarterly reports on
Form 10-Q
and accounting consultations on matters reflected in the
financial statements.
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(2)
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In 2006, tax fees primarily
related to advisory services for our subsidiaries in the United
Kingdom. In 2005, tax fees related to the preparation of a LIFO
study related to the integration of acquired businesses.
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(3)
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All other fees in 2006 and 2005
related to our access to Ernst & Youngs online
accounting reference library.
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Audit Committee
Pre-Approval Policies
In October 2002, our Audit Committee adopted guidelines relating