Teledyne
Technologies Reports Second Quarter Results
CONTACT:
Investors:
Jason VanWees
(310) 893-1642
Media:
Robyn Choi
(310) 893-1640
LOS
ANGELES, California -- July 29, 2004
-- Teledyne Technologies Incorporated (NYSE:TDY):
Revenues of $238.9
million increased 16.3% compared to last year
Earnings per share
of $0.30 increased 50.0% compared to last year
Significantly
raising 2004 earnings per share outlook
Teledyne Technologies
today reported second quarter 2004 sales of $238.9 million, compared with
sales of $205.4 million for the same period in 2003. Net income for the
second quarter of 2004 was $9.9 million ($0.30 per diluted share), compared
with net income of $6.5 million ($0.20 per diluted share) in the second
quarter of 2003. Net income for the second quarter of 2004 included pretax
pension expense of $2.2 million, compared with pretax pension expense
of $1.7 million for the same period of 2003.
"This was an
outstanding quarter for Teledyne," said Robert Mehrabian, chairman,
president and chief executive officer. "The substantial increase
in sales was driven almost equally by acquisitions and organic growth.
Earnings per share increased 50%, primarily as a result of significantly
improved operating margin in our Electronics and Communications segment.
We recently completed the acquisitions of Isco, Inc. and Reynolds Industries,
Incorporated, and funded the acquisitions under our new $280 million credit
facility. In addition, on July 8, we announced the pending acquisition
of the defense electronics business of Celeritek, Inc. Given our strong
performance to date, and the anticipated benefits of our recently completed
acquisitions, we are raising our full year 2004 earnings outlook by almost
20 percent."
Second Quarter
Earnings Summary
Millions Dollars
of Dollars per Diluted Share
----------------- -------------------------
Second Second Second Second
Quarter Quarter Quarter Quarter Variance
2004 2003 2004 2003 %
========================== ========= ======= ======= ======== ========
Net income (excluding net
pension expense) $11.2 $7.5 $0.34 $0.23 47.8%
Net after-tax pension
expense (1.3) (1.0) (0.04) (0.03)
--------- ------- ------- -------- --------
Net income $9.9 $6.5 $0.30 $0.20 50.0%
========================== ========= ======= ======= ======== ========
Review
of Operations
Electronics and
Communications
The Electronics and
Communications segment's second quarter 2004 sales were $134.6 million,
compared with second quarter 2003 sales of $109.6 million. Second quarter
2004 operating profit was $14.2 million, compared with operating profit
of $7.6 million in the second quarter of 2003.
Second quarter 2004
sales, compared with the same period of 2003, reflected revenue growth
in defense electronic products, avionics products, electronic instruments,
relay products and commercial lighting products. This growth was partially
offset by lower sales from electronic manufacturing services, primarily
driven by lower government and medical sales. The revenue growth in defense
electronic products was driven by ejection seat sequencers and the acquisition
of assets of Filtronic Solid State on December 31, 2003. Revenue growth
in avionics products resulted from the acquisition of the Aviation Information
Solutions businesses on June 27, 2003 and strong sales of the Wireless
GroundLink data acquisition systems. Electronic instruments revenue was
favorably impacted by the acquisition of Tekmar-Dohrmann on May 16, 2003
and Leeman Labs' assets on February 27, 2004, increased demand for geophysical
sensors for the petroleum exploration market and increased demand for
other instrument products. Revenue growth also included the impact of
the acquisition of Isco, Inc. on June 18, 2004. Sales and profitability
of commercial lighting products were favorably impacted by $0.8 million
due to the non-exclusive licensing of intellectual property and patents.
The increase in revenue from acquisitions for the second quarter of 2004,
compared with the same period in 2003, was $16.8 million. Segment operating
profit was favorably impacted by acquisitions and organic sales growth
partially offset by an increase in pension expense. Pension expense was
$1.7 million in the second quarter of 2004 compared with pension expense
of $1.2 million in the second quarter of 2003.
Systems Engineering
Solutions
The Systems Engineering
Solutions segment's second quarter 2004 sales were $57.6 million, compared
with second quarter 2003 sales of $54.6 million. Second quarter 2004 operating
profit was $7.1 million, compared with operating profit of $8.1 million
in the second quarter of 2003.
Second quarter 2004
sales, compared with the same period of 2003, reflected revenue growth
in core defense and environmental programs. The lower operating profit
in the second quarter of 2004, compared with the same period of 2003,
was primarily the result of the receipt in 2003 of $2.1 million for final
award fee, related to years prior to 2003, on the Ground-based Midcourse
Defense contract. This unfavorable operating profit impact was partially
offset by profit on higher sales and improved margins on various fixed
price and time and material contracts. Segment operating profit in the
second quarter included no pension expense compared to $0.1 million of
pension expense for the second quarter of 2003. Operating margin is expected
to be lower in the remainder of 2004, compared with the first half of
2004, due to contract mix and higher bid and proposal expenses.
Aerospace Engines
and Components
The Aerospace Engines
and Components segment's second quarter 2004 sales were $41.3 million,
compared with second quarter 2003 sales of $37.7 million. The second quarter
2004 operating loss was $0.9 million, compared with operating profit of
$1.1 million in the second quarter of 2003.
Second quarter 2004
sales, compared with the same period of 2003, reflected revenue growth
in OEM piston engines, aftermarket piston engines and parts sales, partially
offset by lower turbine engine sales. Sales from turbine engines were
lower primarily due to reduced revenue from Joint Air-to-Surface Standoff
Missile (JASSM) engines. The segment operating loss for the second quarter
of 2004, compared with the operating profit for the second quarter of
2003, reflected an increase in aircraft product liability insurance costs
and a $0.7 million charge for environmental matters, partially offset
by revenue growth. The company's previous aircraft product liability policy
expired in May 2004. The company's new aircraft product liability policies,
which became effective June 1, 2004, and will expire in May 2005, are
expected to reduce marginally aircraft liability expense. Based on recent
favorable claims experience and changes to the claims management process,
the company lowered its insurance premium and increased its annual self-insurance
retention to $25 million from $15 million. Segment operating loss was
unfavorably impacted by pension expense of $0.4 million in the second
quarter of 2004 compared with pension expense of $0.3 million in the second
quarter of 2003.
Energy Systems
The Energy Systems
segment's second quarter 2004 sales were $5.4 million, compared with second
quarter 2003 sales of $3.5 million. Second quarter 2004 operating profit
was $0.2 million, compared with an operating loss of $0.2 million in the
second quarter of 2003.
The increase in second
quarter 2004 sales resulted from multi-year government contracts which
were awarded, in 2003, for fuel cell and thermoelectric power generator
work. Operating profit was favorably impacted by the growth in sales and
a reduction in research and development costs.
Additional Financial
Information
Cash Flow
Second quarter 2004
cash provided by operating activities was $18.4 million, compared with
cash provided by operating activities of $13.5 million for the same period
of 2003. The increase in cash provided by operating activities in 2004,
compared with 2003, is due to improved net income and lower aircraft product
liability settlement payments. Free cash flow (cash from operating activities
less capital expenditures) was $15.7 million for the second quarter of
2004, compared with free cash flow of $9.8 million for the same period
of 2003. In the second quarter of 2004, Teledyne Technologies completed
the acquisition of Isco, Inc. for a total consideration of $79.4 million
(including assumed debt, net of cash and marketable securities acquired).
Of this amount, $1.4 million was unpaid at the end of the second quarter.
The acquisition was funded using available cash as well as debt. At June
27, 2004, total debt was $62.9 million, which includes $60.0 million drawn
against the new $280 million credit facility and $2.9 million of debt
assumed in the acquisition of Isco, Inc. Cash and cash equivalents were
$24.1 million at June 27, 2004. Available borrowings under the credit
facility were $220.0 million at June 27, 2004. Capital expenditures for
the second quarter of 2004 were $2.7 million, compared with $3.7 million
for the second quarter of 2003. Depreciation and amortization expense
was $5.8 million for the second quarter of 2004 and $5.6 million for the
second quarter of 2003.
Free Cash Flow (a) Second Second
Quarter Quarter
(in millions, brackets indicate use of funds) 2004 2003
================================================ ========== ==========
Cash provided by operating activities $18.4 $13.5
Capital expenditures (2.7) (3.7)
---------- ----------
Free cash flow $15.7 $9.8
================================================ ========== ==========
(a) The company defines free cash flow as cash provided by operating
activities (a measure prescribed by generally accepted accounting
principles) less capital expenditures.
Pension
Pension expense for
the second quarter of 2004 was $2.2 million, compared with pension expense
of $1.7 million for the same period of 2003.
Other
Other expense in the
second quarter of 2003 included a $2.0 million write off of the company's
remaining minority investment in a private company engaged in manufacturing
and development of micro optics and microelectromechanical devices.
Outlook
Based on its current
outlook, the company's management believes that third quarter 2004 earnings
per share will be in the range of approximately $0.26 to $0.28. The full
year 2004 earnings per share outlook is expected to be in the range of
approximately $1.00 to $1.05, an increase from prior guidance of $0.84
to $0.88.
The company's 2004
outlook reflects anticipated revenue growth in the company's defense electronics
and instrumentation businesses, primarily due to a number of acquisitions
completed over the last several months. The company's outlook also includes
an expected recovery in some of the company's short cycle electronics
markets. Operating margin in the company's Systems Engineering Solutions
segment is expected to be lower in the remainder of 2004, compared with
the first half of 2004, due to contract mix and higher bid and proposal
expenses. The company's previous aircraft product liability policy expired
in May 2004. The company's new aircraft product liability policies, which
became effective June 1, 2004, and will expire in May 2005, are expected
to reduce marginally aircraft liability expense. Based on recent favorable
claims experience and changes to the claims management process, the company
lowered its insurance premium and increased its annual self-insurance
retention to $25 million from $15 million.
Full year 2003 earnings
included $6.9 million or $0.13 per share in pension expense. The company
currently expects approximately $8.7 million or $0.16 per share of pension
expense in 2004. The increase in pension expense reflects, in part, a
reduction in the discount rate assumption for the company's defined benefit
plan. The company's assumed discount rate is 6.5% in 2004, compared with
7.0% in 2003. As of January 1, 2004, new hires participate in an enhanced
defined contribution plan as opposed to the company's existing defined
benefit plan. Currently, Teledyne Technologies anticipates making an after-tax
cash contribution of approximately $3.0 million to its pension plan in
2004. Also, under one of its spin-off agreements, after November 29, 2004,
the company will be able to charge pension costs to the U.S. Government
under various government contracts.
EARNINGS PER SHARE SUMMARY
(Diluted earnings per common share)
2004 Full 2003 2002
Year Outlook Results Results
--------------- ---------------
Low High Actual Actual
====================================== ======= ======= ======= =======
Earnings per share (excluding net
pension income (expense) and income
tax benefit) $ 1.16 $1.21 $ 0.97 $0.73
Net pension income (expense) (0.16) (0.16) (0.13) 0.04
------- ------- ------- -------
Earnings per share (excluding income
tax benefit) 1.00 1.05 0.84 0.77
Income tax benefit -- -- 0.07 --
------- ------- ------- -------
Earnings per share $ 1.00 $1.05 $ 0.91 $0.77
====================================== ======= ======= ======= =======
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,
capital expenditures, pension matters and strategic plans. Actual results
could differ materially from these forward-looking statements. Many factors,
including changes in demand for products sold to the semiconductor, communications
and commercial aviation 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. Reinstatement
of 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 recent acquisitions of Reynolds Industries,
Incorporated, Isco, Inc. and certain assets of Leeman Labs, Inc., 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 2003 Annual Report on Form 10-K and Form 10-Q.
The company assumes no duty to update forward-looking statements.
Additional Information
About the Anticipated Acquisition of Assets of Celeritek, Inc.
This press release
does not constitute an offer to purchase shares of Celeritek, Inc. or
a solicitation or recommendation statement under the rules and regulations
of the SEC. Celeritek publicly filed a Form 8-K with the SEC containing
the terms of the definitive asset purchase agreement, the definitive supply
agreement and the voting support agreement, and filed a proxy statement
in connection with the proposed transaction. Teledyne also publicly filed
a Form 8-K with the SEC. Investors and security holders of Celeritek are
urged to read the proxy statement and other relevant materials because
they contain important information about Teledyne, Celeritek and the proposed
transaction. Investors and security holders may obtain a free copy of
these materials and other documents filed with the Securities and Exchange
Commission at the SEC's web site at www.sec.gov.
A live webcast of
Teledyne Technologies' second quarter earnings conference call will be
held at 11:00 a.m. (Eastern) on Thursday, July 29. 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 Thursday, July 29.
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 27, 2004 AND JUNE 29, 2003
(Unaudited - In millions, except per share amounts)
Second Second Six Six
Quarter Quarter Months Months
2004 2003 2004 2003
==================================== ======== ======== ======= =======
Net sales $ 238.9 $ 205.4 $458.5 $402.6
Costs and expenses:
Costs of sales 178.3 153.5 346.6 305.1
Selling, general and
administrative expenses 43.9 39.3 85.6 75.7
-------- -------- ------- -------
Income before other income and
expense and taxes 16.7 12.6 26.3 21.8
Other income (expense) 0.1 (1.7) 0.3 (1.8)
Interest expense, net 0.3 0.2 0.4 0.3
-------- -------- ------- -------
Income before income taxes 16.5 10.7 26.2 19.7
Provision for income taxes 6.6 4.2 10.4 7.7
-------- -------- ------- -------
Net income $ 9.9 $ 6.5 $ 15.8 $ 12.0
======== ======== ======= =======
Diluted earnings per common
share $ 0.30 $ 0.20 $ 0.48 $ 0.37
======== ======== ======= =======
Weighted average diluted common
shares outstanding 33.2 32.5 33.2 32.5
==================================== ======== ======== ======= =======
TELEDYNE TECHNOLOGIES INCORPORATED
SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT
FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 27, 2004 AND JUNE 29, 2003
(Unaudited - In millions)
Second Second Six Six
Quarter Quarter Months Months
2004 2003 2004 2003
==================================== ======== ======== ======= =======
Net sales:
Electronics and Communications $ 134.6 $ 109.6 $251.0 $213.2
Systems Engineering Solutions 57.6 54.6 112.2 107.0
Aerospace Engines and
Components 41.3 37.7 84.2 75.5
Energy Systems 5.4 3.5 11.1 6.9
-------- -------- ------- -------
Total net sales $ 238.9 $ 205.4 $458.5 $402.6
======== ======== ======= =======
Operating profit (loss):
Electronics and Communications $ 14.2 $ 7.6 $ 22.2 $ 14.9
Systems Engineering Solutions 7.1 8.1 13.2 13.8
Aerospace Engines and
Components (0.9) 1.1 (1.6) 1.6
Energy Systems 0.2 (0.2) 0.5 (0.7)
-------- -------- ------- -------
Segment operating profit $ 20.6 $ 16.6 $ 34.3 $ 29.6
Corporate expense (3.9) (4.0) (8.0) (7.8)
Other income (expense) 0.1 (1.7) 0.3 (1.8)
Interest expense, net 0.3 0.2 0.4 0.3
-------- -------- ------- -------
Income before income taxes 16.5 10.7 26.2 19.7
Provision for income taxes 6.6 4.2 10.4 7.7
-------- -------- ------- -------
Net income $ 9.9 $ 6.5 $ 15.8 $ 12.0
==================================== ======== ======== ======= =======
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
JUNE 27, 2004 AND DECEMBER 28, 2003
(Current period unaudited - In millions of dollars)
June 27, December 28,
2004 2003
============================================ =========== ===========
ASSETS
Cash and cash equivalents $ 24.1 $ 37.8
Accounts receivable, net 147.3 121.3
Inventories, net 77.2 63.6
Deferred income taxes, net 25.1 22.7
Prepaid expenses and other assets 6.1 7.1
----------- -----------
Total current assets 279.8 252.5
Property, plant and equipment, net 85.2 76.0
Deferred income taxes, net 13.5 14.2
Goodwill, net 116.2 56.2
Other assets, net 45.3 29.2
----------- -----------
Total assets $ 540.0 $ 428.1
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 54.9 $ 48.1
Accrued liabilities 85.8 74.9
Current portion of long-term debt 2.8 --
----------- -----------
Total current liabilities 143.5 123.0
Long-term debt 60.1 --
Other long-term liabilities 97.5 84.1
----------- -----------
Total liabilities 301.1 207.1
Total stockholders' equity 238.9 221.0
----------- -----------
Total liabilities and stockholders'
equity $ 540.0 $ 428.1
============================================ =========== ===========
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