Teledyne Technologies
today reported first quarter 2005 sales of $297.5 million, compared
with sales of $219.6 million for the same period in 2004. Net income
for the first quarter of 2005 was $15.8 million ($0.46 per diluted share),
compared with net income of $5.9 million ($0.18 per diluted share) in
the first quarter of 2004.
"This was
an outstanding quarter for Teledyne. We established records for sales
and net income; furthermore, organic revenue growth was 19.4 percent,"
said Robert Mehrabian, chairman, president and chief executive officer.
"Earnings per share increased 155.6 percent due to broad-based
market strength and strong execution, including the successful integration
of our acquisitions. Operating margins for the overall company and our
Electronics and Communications segment were also near record levels.
We are pleased that our strategy of combining organic revenue growth
with acquisitions, while diligently pursuing operational excellence
initiatives, continued to generate high-quality revenue and earnings
growth."
Review of Operations
Electronics
and Communications
The Electronics
and Communications segment's first quarter 2005 sales were $173.5 million,
compared with first quarter 2004 sales of $116.4 million. First quarter
2005 operating profit was $20.1 million, compared with operating profit
of $8.0 million in the first quarter of 2004.
First quarter 2005
sales, compared with the same period of 2004, reflected revenue growth
in defense electronic products, electronic instruments, avionics products,
electronic manufacturing services, relay products and telecommunication
subsystems. The revenue growth in defense electronic products was driven
by sales of traveling wave tubes, the acquisition of Reynolds Industries,
Incorporated in July 2004 and the acquisition of the defense electronics
business of Celeritek, Inc. in October 2004. Electronic instruments
revenue was favorably impacted by the acquisition of Isco, Inc. in June
2004, the acquisition of Leeman Labs' assets in February 2004, increased
demand for geophysical sensors for the energy exploration market and
increased sales of other instrument products. Electronic manufacturing
services had increases in government and commercial sales while revenue
growth in relay products was driven by wireless infrastructure and networking
equipment as well as test and measurement equipment. The increase in
revenue from acquisitions for the first quarter of 2005, compared with
the same period of 2004, was $35.5 million. Segment operating profit
was favorably impacted by acquisitions, organic sales growth and by
lower pension expense. Pension expense, in accordance with the pension
accounting requirements of SFAS No. 87 was $1.1 million in the first
quarter of 2005, compared with $1.6 million in the first quarter of
2004. Pension expense allocated to contracts pursuant to U.S. Government
Cost Accounting Standards (CAS) was $0.4 million in the first quarter
of 2005, compared with no allocation in the first quarter of 2004.
Systems Engineering
Solutions
The Systems Engineering
Solutions segment's first quarter 2005 sales were $70.5 million, compared
with first quarter 2004 sales of $54.6 million. First quarter 2005 operating
profit was $7.5 million, compared with operating profit of $6.1 million
in the first quarter of 2004.
First quarter 2005
sales, compared with the same period of 2004, reflected revenue growth
in core defense, environmental and aerospace programs. The higher operating
profit in the first quarter of 2005, compared with the same period of
2004, was primarily the result of increased sales, partially offset
by sales mix and rate differences and increased subcontract work in
our systems engineering and technical assistance (SETA) contracts which
carry lower profit margins. Segment operating profit included pension
expense, under SFAS No. 87, of $1.7 million in the first quarter of
2005, compared with $0.1 million in the first quarter of 2004. Pension
expense allocated to contracts pursuant to CAS was $1.9 million in the
first quarter of 2005, compared with no allocation in the first quarter
of 2004.
Aerospace Engines
and Components
The Aerospace Engines
and Components segment's first quarter 2005 sales were $46.4 million,
compared with first quarter 2004 sales of $42.9 million. The first quarter
2005 operating profit was $3.3 million, compared with an operating loss
of $0.7 million in the first quarter of 2004.
First quarter 2005
sales, compared with the same period of 2004, reflected revenue growth
in OEM and aftermarket piston engines. Sales from turbine engines were
lower primarily due to reduced Improved Tactical Air-Launched Decoy
(ITALD) engine sales, partially offset by higher Harpoon and Joint Air-to-Surface
Standoff Missile (JASSM) sales. Segment operating profit for the first
quarter of 2005, compared with the same period of 2004, included the
receipt of $2.5 million pursuant to an agreement with Honda Motor Co.,
Ltd. related to the piston engine business. Additionally, operating
profit was favorably impacted by higher sales, partially offset by higher
warranty expense. Segment operating profit included pension expense,
under SFAS No. 87 of $0.2 million in the first quarter of 2005, compared
with $0.4 million for the first quarter of 2004.
Energy Systems
The Energy Systems
segment's first quarter 2005 sales were $7.1 million, compared with
first quarter 2004 sales of $5.7 million. First quarter 2005 operating
profit was $0.5 million, compared with $0.3 million for the first quarter
of 2004.
The increase in
first quarter 2005 sales resulted from the timing of multi-year government
contracts which were awarded in 2003 for fuel cell and thermoelectric
power generator work. Operating profit was favorably impacted by higher
sales. Segment operating profit included pension expense, under SFAS
No. 87 of $0.1 million in the first quarter of 2005, compared with no
pension expense for the first quarter of 2004. Pension expense allocated
to contracts pursuant to CAS was $0.1 million in the first quarter of
2005, compared with no allocation in the first quarter of 2004.
Additional
Financial Information
Cash Flow
First quarter 2005
cash provided by operating activities was $2.0 million, compared with
cash provided by operating activities of $8.2 million for the first
quarter of 2004. The lower cash provided by operating activities in
2005, compared with 2004, is due to increased accounts receivable resulting
from higher sales and greater inventory balances due to anticipated
sales in the second quarter of 2005, a $1.7 million pension contribution
and higher compensation payments made in the first quarter of 2005,
partially offset by greater net income. Free cash flow (cash from operating
activities less capital expenditures) was a negative $1.3 million for
the first quarter of 2005, compared with positive free cash flow of
$4.9 million for the same period of 2004. At April 3, 2005, total debt
was $70.2 million, which includes $66.3 million drawn against the credit
facility, as well as other debt and capital lease obligations. Cash
and cash equivalents were $12.2 million at April 3, 2005. Capital expenditures
for the first quarter of 2005 were $3.3 million, compared with $3.3
million for the first quarter of 2004. Depreciation and amortization
expense was $6.1 million for the first quarter of 2005 and $5.6 million
for the first quarter of 2004. The first quarter of 2005 reflected the
receipt of $5.2 million from the sale of the assets of STIP-Isco, a
Germany-based subsidiary. This business was acquired as part of the
Isco acquisition made last year. In accordance with purchase accounting,
no gain was recorded on the sale, goodwill was adjusted accordingly.
The first quarter of 2005 also reflected $4.3 million in proceeds from
the exercise of stock options.
Free Cash Flow (a) First First
Quarter Quarter
(in millions, brackets indicate use of funds) 2005 2004
================================================== ======== ========
Cash provided by operating activities $ 2.0 $ 8.2
Capital expenditures (3.3) (3.3)
-------- --------
Free cash flow $ (1.3) $ 4.9
================================================== ======== ========
(a) The company defines free cash flow as cash provided by
operating activities (a measure prescribed by generally
accepted accounting principles) less capital expenditures.
Free cash flow provides supplemental information to assist
management and certain investors in analyzing the company's
ability to generate cash flow.
Pension
Pension expense
for the first quarter of 2005 was $3.2 million, compared with pension
expense of $2.2 million for the same period of 2004 in accordance with
the pension accounting requirements of SFAS No. 87. Pension expense
allocated to contracts pursuant to CAS was $2.4 million in the first
quarter of 2005, compared with no allocation in the first quarter of
2004. Under one of its spin-off agreements, after November 29, 2004,
the company is able to charge pension costs to the U.S. Government under
certain government contracts. Pension expense determined under CAS can
generally be recovered through the pricing of products and services
to the U.S. Government.
Income Taxes
The effective tax
rate for the first quarter of 2005 was 37.5% compared with an effective
tax rate of 39.6% for the first quarter of 2004.
Other
Other income for
the first quarter of 2005 included the receipt of $2.5 million pursuant
to an agreement with Honda Motor Co., Ltd. which is included as part
of the Aerospace Engines and Components segment operating profit and
other segment income for segment reporting purposes. Corporate expense
for the first quarter of 2005, compared with the first quarter of 2004,
was impacted by higher compensation expense and greater professional
fees expense which includes increased costs related to Sarbanes-Oxley
Act Section 404 compliance and auditing efforts. Interest expense, net
of interest income, was $0.8 million in the first quarter of 2005, compared
with $0.1 million for the first quarter of 2004 and reflected higher
average outstanding debt levels.
Outlook
Based on its current
outlook, the company's management believes that second quarter 2005
earnings per share will be in the range of approximately $0.37 to $0.40.
The full year 2005 earnings per share outlook is expected to be in the
range of approximately $1.50 to $1.55. The company's estimated effective
income tax rate for 2005 is 37.5%.
The company's 2005
outlook reflects anticipated sales growth in defense electronics and
instrumentation businesses, primarily due to the full-year effect of
the company's 2004 acquisitions. Organic sales growth of electronic
instruments is expected to be offset by a reduction in sales of geophysical
sensors for the energy exploration market. The company's management
also expects revenue in its Systems Engineering segment to have peaked
in the first quarter of 2005, due in part to favorable timing on certain
chemical weapons demilitarization programs and the company's systems
engineering and technical assistance contract with the U.S. Army. In
addition, revenues in the company's Energy Systems segment and its military
turbine engine business are expected to be lower in the second half
of 2005 compared with the second half of 2004.
The full year 2005
earnings outlook includes approximately $12.7 million ($0.23 per share)
in pension expense under SFAS No. 87, or $3.4 million ($0.06 per share)
in net pension expense after recovery of allowable pension costs from
our CAS covered government contracts. Full year 2004 earnings included
$8.7 million ($0.16 per share) in pension expense under SFAS No. 87,
or $8.2 million ($0.15 per share) in net pension expense after recovery
of allowable pension costs from our CAS covered government contracts.
The decrease in pension expense reflects, in part, the ability to recover
pension cost from the government in 2005, partially offset by increased
pension liability due to a reduction in the discount rate assumption
for the company's defined benefit plan. The company's assumed discount
rate is 6.25% in 2005, compared with 6.5% in 2004.
In December 2004,
the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 123R, "Share
Based Payment" ("SFAS No. 123R") that will require compensation
costs related to share-based payment transactions to be recognized in
the financial statements. SFAS No. 123R must be adopted in the first
quarter of 2006, however, early adoption is allowed. If the company
elects to adopt SFAS No. 123R in the third quarter of 2005, the impact
is expected to reduce earnings per share by approximately $0.05 in the
second half of 2005.
EARNINGS PER SHARE SUMMARY (a)
(Diluted earnings per common share from continuing operations)
2005 Full Year 2004 2003
Outlook Results Results
-------------- -------- --------
Low High Actual Actual
==================================== ======= ======= ======= ========
Earnings per share (excluding net
pension expense, income tax benefit
and stock option expense) $ 1.61 $ 1.66 $ 1.39 $ 0.97
Pension expense - SFAS No. 87 (0.23) (0.23) (0.16) (0.13)
Pension expense - CAS 0.17 0.17 0.01 --
------- ------- ------- --------
Earnings per share (excluding income
tax benefit and stock option
expense) 1.55 1.60 1.24 0.84
Income tax benefit -- -- -- 0.07
Stock option expense (0.05) (0.05) -- --
------- ------- ------- --------
Earnings per share - GAAP $ 1.50 $ 1.55 $ 1.24 $ 0.91
============================================ ======= ======= ========
(a) Certain non-GAAP measures have been provided to facilitate
comparisons with prior years.
Forward-Looking
Statements Cautionary Notice
This press release
contains forward-looking statements, as defined in the Private Securities
Litigation Reform Act of 1995, relating to earnings, growth opportunities,
pension matters, stock option expense and strategic plans. All statements
made in this press release that are not historical in nature should
be considered forward-looking. Actual results could differ materially
from these forward-looking statements. Many factors, including changes
in demand for products sold to the semiconductor, communications, commercial
aviation and energy exploration markets, funding, continuation and award
of government programs, changes in insurance expense, customers' acceptance
of piston engine price increases, continued liquidity of our customers
(including commercial airline customers) and economic and political
conditions, could change the anticipated results. In addition, stock
market fluctuations affect the value of the company's pension assets.
Global responses
to terrorism and other perceived threats increase uncertainties associated
with forward-looking statements about our businesses. Various responses
to terrorism and perceived threats could realign government programs,
and affect the composition, funding or timing of our programs. Flight
restrictions would negatively impact the market for general aviation
aircraft piston engines and components.
The company continues
to take action to assure compliance with the internal controls, disclosure
controls and other requirements of the Sarbanes-Oxley Act of 2002. While
the company believes its control systems are effective, there are inherent
limitations in all control systems, and misstatements due to error or
fraud may occur and not be detected.
While Teledyne
Technologies' growth strategy includes possible acquisitions, the company
cannot provide any assurance as to when, if or on what terms any acquisitions
will be made. Acquisitions, including our recent acquisitions involve
various inherent risks, such as, among others, our ability to integrate
acquired businesses and to achieve identified financial and operating
synergies.
Additional information
concerning factors that could cause actual results to differ materially
from those projected in the forward-looking statements is contained
in Teledyne Technologies' periodic filings with the Securities and Exchange
Commission, including its 2004 Annual Report on Form 10-K. The company
assumes no duty to update forward-looking statements.
A live webcast
of Teledyne Technologies' first quarter earnings conference call will
be held at 11:00 a.m. (Eastern) on Wednesday, April 27, 2005. To access
the call, go to www.companyboardroom.com
or www.teledyne.com approximately ten minutes before the scheduled
start time. A replay will also be available for one month at these same
sites starting at 12:00 p.m. (Eastern) on Wednesday, April 27, 2005.
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED APRIL 3, 2005 AND MARCH 28, 2004
(Unaudited - In millions, except per share amounts)
First First
Quarter Quarter
2005 2004
=================================================== ======== ========
Net sales $ 297.5 $ 219.6
Costs and expenses:
Costs of sales 214.5 168.3
Selling, general and administrative expenses 59.4 41.7
-------- --------
Income before other income (expense) and taxes 23.6 9.6
Other income(a) 2.5 0.2
Interest expense, net 0.8 0.1
-------- --------
Income before income taxes 25.3 9.7
Provision for income taxes 9.5 3.8
-------- --------
Net income $ 15.8 $ 5.9
======== ========
Diluted earnings per common share $ 0.46 $ 0.18
======== ========
Weighted average diluted common shares
outstanding 34.4 33.1
=================================================== ======== ========
(a) The first quarter 2005 includes the receipt of $2.5 million
pursuant to an agreement with Honda Motor Co., Ltd. related to the
piston engine business.
TELEDYNE TECHNOLOGIES INCORPORATED
SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT
FOR THE THREE MONTHS ENDED APRIL 3, 2005 AND MARCH 28, 2004
(Unaudited - In millions)
First First
Quarter Quarter
2005 2004
=================================================== ======== ========
Net sales:
Electronics and Communications $ 173.5 $ 116.4
Systems Engineering Solutions 70.5 54.6
Aerospace Engines and Components 46.4 42.9
Energy Systems 7.1 5.7
-------- --------
Total net sales $ 297.5 $ 219.6
======== ========
Operating profit (loss) and other segment income:
Electronics and Communications $ 20.1 $ 8.0
Systems Engineering Solutions 7.5 6.1
Aerospace Engines and Components(a) 3.3 (0.7)
Energy Systems 0.5 0.3
-------- --------
Segment operating profit and other segment income $ 31.4 $ 13.7
Corporate expense (5.3) (4.1)
Other income -- 0.2
Interest expense, net 0.8 0.1
-------- --------
Income before income taxes 25.3 9.7
Provision for income taxes 9.5 3.8
-------- --------
Net income $ 15.8 $ 5.9
=================================================== ======== ========
(a) The first quarter 2005 includes the receipt of $2.5 million
pursuant to an agreement with Honda Motor Co., Ltd. related to the
piston engine business. This amount is included as part of other
income on the income statement table above.
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
APRIL 3, 2005 AND JANUARY 2, 2005
(Current period unaudited - In millions)
April January
3, 2,
2005 2005
=================================================== ======== =========
ASSETS
Cash and cash equivalents $ 12.2 $ 11.4
Accounts receivable, net 163.3 141.7
Inventories, net 108.1 97.7
Deferred income taxes, net 26.1 26.8
Prepaid expenses and other assets 9.9 9.3
-------- ---------
Total current assets 319.6 286.9
Property, plant and equipment, net 88.5 90.8
Deferred income taxes, net 30.6 28.3
Goodwill and acquired intangible assets, net 187.2 190.6
Other assets, net 29.1 28.2
-------- ---------
Total assets $ 655.0 $ 624.8
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 67.8 $ 62.3
Accrued liabilities 92.1 97.0
Current portion of long-term debt and capital
leases 0.1 3.2
-------- ---------
Total current liabilities 160.0 162.5
Long-term debt and capital lease obligation 70.1 74.4
Other long-term liabilities 139.6 125.8
-------- ---------
Total liabilities 369.7 362.7
Total stockholders' equity 285.3 262.1
-------- ---------
Total liabilities and stockholders' equity $ 655.0 $ 624.8
=================================================== ======== =========
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