Teledyne
Technologies Reports Third Quarter Results
CONTACT:
Investors:
Jason VanWees
(310) 893-1642
Media:
Robyn Choi
(310) 893-1640
LOS
ANGELES, California -- October 28, 2004 -- Teledyne Technologies:
Revenues of $270.0
million increased 25.2% compared to last year
Earnings per
share of $0.37 increased 23.3% compared to last year
Raising 2004
earnings per share outlook
Acquired defense
electronics assets of Celeritek, Inc.
Teledyne Technologies
today reported third quarter 2004 sales of $270.0 million, compared with
sales of $215.7 million for the same period in 2003. Net income for the
third quarter of 2004 was $12.5 million ($0.37 per diluted share), compared
with net income of $9.9 million ($0.30 per diluted share) in the third
quarter of 2003. Net income for the third quarter of 2003 was $7.5 million
excluding a $2.4 million income tax benefit that resulted from the reversal
of an income tax contingency reserve. Net income for the third 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 another
outstanding quarter for Teledyne," said Robert Mehrabian, chairman,
president and chief executive officer. "The significant increase
in sales resulted from several complementary acquisitions and double-digit
organic growth. Earnings per share increased over the prior year period
for the eleventh consecutive quarter, driven by strong margins in our
Electronics and Communications and Systems Engineering Solutions business
segments, as well as a payment from Honda Motor Co., Ltd. related to the
piston engine business. In addition, on October 22, we closed the acquisition
of the defense electronics business of Celeritek, Inc. - our fifth acquisition
in 2004. During the quarter, we generated free cash flow of $26.4 million,
and given our strong balance sheet and cash flow, we intend to pursue
additional acquisitions in our strategic businesses."
Third Quarter Earnings Millions of Dollars per Diluted Share
Summary Dollars
----------------- -------------------------
Third Third Third Third
Quarter Quarter Quarter Quarter Variance
2004 2003 2004 2003 %
========================= ======== ======== ======== ======== ========
Net income (excluding net
pension expense and
income tax benefit) $ 13.8 $ 8.5 $ 0.41 $ 0.26 57.7%
Income tax benefit -- 2.4 -- 0.07
Net after-tax pension
expense (1.3) (1.0) (0.04) (0.03)
-------- -------- -------- -------- --------
Net income $ 12.5 $ 9.9 $ 0.37 $ 0.30 23.3%
========================= ======== ======== ======== ======== ========
Review of Operations
Electronics and
Communications
The Electronics
and Communications segment's third quarter 2004 sales were $155.1 million,
compared with third quarter 2003 sales of $115.8 million. Third quarter
2004 operating profit was $15.5 million, compared with operating profit
of $9.7 million in the third quarter of 2003.
Third quarter 2004
sales, compared with the same period of 2003, reflected revenue growth
in defense electronic products, electronic instruments, telecommunication
subsystems and relay 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 sales of traveling wave tubes, the acquisition
of Reynolds Industries, Incorporated on July 2, 2004, and the acquisition
of assets of Filtronic Solid State on December 31, 2003. Electronic instruments
revenue was favorably impacted by the acquisition of Isco, Inc. on June
18, 2004, the acquisition of Leeman Labs' assets on February 27, 2004,
increased demand for geophysical sensors for the petroleum exploration
market and increased sales of other instrument products. The increase
in revenue from acquisitions for the third quarter of 2004, compared with
the same period in 2003, was $32.4 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 third quarter of 2004 compared with pension expense of $1.2 million
in the third quarter of 2003.
Systems Engineering
Solutions
The Systems Engineering
Solutions segment's third quarter 2004 sales were $65.2 million, compared
with third quarter 2003 sales of $53.2 million. Third quarter 2004 operating
profit was $7.7 million, compared with operating profit of $6.0 million
in the third quarter of 2003.
Third quarter 2004
sales, compared with the same period of 2003, reflected revenue growth
in core defense and environmental programs. The higher operating profit
in the third quarter of 2004, compared with the same period of 2003, was
primarily the result of increased sales and improved margins on various
time and material contracts. Segment operating profit in the third quarter
of 2004 included no pension expense compared to $0.1 million of pension
expense for the third quarter of 2003. Operating margin is expected to
be lower in the fourth quarter of 2004, compared with the first nine months
of 2004, due to contract mix and higher bid and proposal expenses.
Aerospace Engines
and Components
The Aerospace Engines
and Components segment's third quarter 2004 sales were $44.3 million,
compared with third quarter 2003 sales of $43.0 million. The third quarter
2004 operating profit and other segment income was $2.9 million, compared
with operating loss of $0.4 million in the third quarter of 2003.
Third 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 Harpoon cruise missile engines.
Segment operating profit for the third quarter of 2004, compared with
the operating loss for the third quarter of 2003, reflected favorable
revenue growth and lower expenses. In addition, segment operating profit
and other segment income included the receipt of $2.5 million pursuant
to an agreement with Honda Motor Co., Ltd. related to the piston engine
business. While the terms of the piston engine agreement are confidential,
the company anticipates receiving $5.0 million in 2005 and $2.5 million
in 2006 under the agreement. Hurricane Ivan affected third quarter sales
and operating profit in the aircraft piston engine business, whose primary
facility is located in Mobile, Alabama. While the Mobile facility experienced
downtime, production inefficiencies, water and roof damage, it sustained
no significant damage. Segment operating profit was unfavorably impacted
by pension expense of $0.4 million in the third quarter of 2004 compared
with pension expense of $0.4 million in the third quarter of 2003.
Energy Systems
The Energy Systems
segment's third quarter 2004 sales were $5.4 million, compared with third
quarter 2003 sales of $3.7 million. Third quarter 2004 operating profit
was $0.4 million, compared with break-even results in the third quarter
of 2003.
The increase in third
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. Segment operating profit
was unfavorably impacted by pension expense of $0.1 million in the third
quarter of 2004 compared with no pension expense in the third quarter
of 2003.
Additional Financial
Information
Cash Flow
Third quarter 2004
cash provided by operating activities was $30.3 million, compared with
cash provided by operating activities of $26.8 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 $26.4 million for the third quarter of
2004, compared with free cash flow of $20.7 million for the same period
of 2003. In the third quarter of 2004, Teledyne Technologies completed
the acquisition of Reynolds Industries, Incorporated for total consideration
of $45.1 million (including capital lease obligations assumed and net
of cash acquired). Of this amount, approximately $3.7 million is expected
to be paid in the fourth quarter of 2004. The acquisition was funded using
available cash as well as borrowings under the company's $280.0 million
revolving credit facility. At September 26, 2004, total debt including
$3.9 million in capital lease obligations was $66.8 million, which includes
$60.0 million drawn against the credit facility as well as debt and capital
lease obligations assumed in the acquisition of Isco, Inc. and Reynolds
Industries, Incorporated. On October 22, 2004, Teledyne completed the
acquisition of the defense electronics assets of Celeritek, Inc. for $33.0
million. The acquisition was funded primarily with borrowings under the
credit facility. Cash and cash equivalents were $15.7 million at September
26, 2004. Capital expenditures for the third quarter of 2004 were $3.9
million, compared with $6.1 million for the third quarter of 2003. Depreciation
and amortization expense was $7.0 million for the third quarter of 2004
and $5.9 million for the third quarter of 2003.
Free Cash Flow (a) Third Third
Quarter Quarter
(in millions, brackets indicate use of funds) 2004 2003
=============================================== ======== ========
Cash provided by operating activities $ 30.3 $ 26.8
Capital expenditures (3.9) (6.1)
-------------------
Free cash flow $ 26.4 $ 20.7
=============================================== ======== ==========
(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 third quarter of 2004 was $2.2 million, compared with pension expense
of $1.7 million for the same period of 2003.
Other
The third quarter
of 2003 included an income tax benefit of $2.4 million due to the reversal
of an income tax contingency reserve which was determined to be no longer
needed during the third quarter of 2003. Other income for the third quarter
of 2004 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.
Outlook
Based on its current
outlook, the company's management believes that fourth quarter 2004 earnings
per share will be in the range of approximately $0.27 to $0.30. The full
year 2004 earnings per share outlook is expected to be in the range of
approximately $1.12 to $1.15, an increase from prior guidance of $1.00
to $1.05.
The company's 2004
outlook reflects anticipated revenue growth in the company's defense electronics
and instrumentation businesses, primarily due to the acquisitions completed
during fiscal 2004. 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 fourth quarter of 2004, compared with the first nine months
of 2004, due to contract mix and higher bid and proposal expenses.
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 Year 2003 2002
Outlook Results Results
--------------- -------- --------
Low High Actual Actual
=============================================== ===== ======= ========
Earnings per share (excluding net
pension income (expense) and income
tax benefit) $ 1.28 $ 1.31 $ 0.97 $ 0.73
Net pension income (expense) (0.16) (0.16) (0.13) 0.04
------- ------- ------- --------
Earnings per share (excluding income
tax benefit) 1.12 1.15 0.84 0.77
Income tax benefit -- -- 0.07 --
------- ------- ------- --------
Earnings per share $ 1.12 $ 1.15 $ 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 the defense electronics
assets of Celeritek, Inc., Reynolds Industries, Incorporated and Isco,
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 Quarterly
Reports on Form 10-Q. The company assumes no duty to update forward-looking
statements.
A live webcast of
Teledyne Technologies' third quarter earnings conference call will be
held at 11:00 a.m. (Eastern) on Thursday, October 28, 2004. 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, October 28, 2004.
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTH PERIODS ENDED
SEPTEMBER 26, 2004 AND SEPTEMBER 28, 2003
(Unaudited - In millions, except per share amounts)
Third Third Nine Nine
Quarter Quarter Months Months
2004 2003 2004 2003
=================================== ======== ======== ======= ========
Net sales $ 270.0 $ 215.7 $728.5 $618.3
Costs and expenses:
Costs of sales 194.6 163.1 541.2 468.2
Selling, general and
administrative expenses 56.9 40.7 142.5 116.4
-------- -------- ------- -------
Income before other income
(expense) and taxes 18.5 11.9 44.8 33.7
Other income (expense)(a) 2.7 0.5 3.0 (1.3)
Interest expense, net 0.6 0.2 1.0 0.5
-------- -------- ------- --------
Income before income taxes 20.6 12.2 46.8 31.9
Provision for income taxes(b) 8.1 2.3 18.5 10.0
-------- -------- ------- --------
Net income $ 12.5 $ 9.9 $ 28.3 $ 21.9
======== ======== ======= ========
Diluted earnings per common
share $ 0.37 $ 0.30 $ 0.85 $ 0.67
======== ======== ======= ========
Weighted average diluted
common shares outstanding 33.6 32.7 33.4 32.6
=================================== ======== ======== ======= ========
(a) The third quarter and first nine months of 2004 includes the
receipt of $2.5 million pursuant to an agreement with Honda Motor
Co., Ltd. related to the piston engine business.
(b) The third quarter and first nine months of 2003 provision for
taxes includes a $2.4 million income tax benefit from the reversal
of an income tax contingency reserve which was determined to be no
longer needed during the third quarter of 2003.
TELEDYNE TECHNOLOGIES INCORPORATED
SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT
FOR THE THREE AND NINE MONTH PERIODS ENDED
SEPTEMBER 26, 2004 AND SEPTEMBER 28, 2003
(Unaudited - In millions)
Third Third Nine Nine
Quarter Quarter Months Months
2004 2003 2004 2003
=================================== ======== ======== ======= ========
Net sales:
Electronics and Communications $ 155.1 $ 115.8 $ 406.1 $ 329.0
Systems Engineering Solutions 65.2 53.2 177.4 160.2
Aerospace Engines and
Components 44.3 43.0 128.5 118.5
Energy Systems 5.4 3.7 16.5 10.6
-------- -------- ------- --------
Total net sales $ 270.0 $ 215.7 $ 728.5 $ 618.3
======== ======== ======= ========
Operating profit (loss) and other
segment income:
Electronics and Communications $ 15.5 $ 9.7 $ 37.7 $ 24.6
Systems Engineering Solutions 7.7 6.0 20.9 19.8
Aerospace Engines and
Components(a) 2.9 (0.4) 1.3 1.2
Energy Systems 0.4 -- 0.9 (0.7)
-------- -------- ------- --------
Segment operating profit and
other segment income $ 26.5 $ 15.3 $ 60.8 $ 44.9
Corporate expense (5.5) (3.4) (13.5) (11.2)
Other income (expense) 0.2 0.5 0.5 (1.3)
Interest expense, net 0.6 0.2 1.0 0.5
-------- -------- ------- -------
Income before income taxes(b) 20.6 12.2 46.8 31.9
Provision for income taxes 8.1 2.3 18.5 10.0
-------- -------- ------- --------
Net income $ 12.5 $ 9.9 $ 28.3 $ 21.9
=================================== ======== ======== ======= ========
(a) The third quarter and first nine months of 2004 segment operating
profit 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 on the prior page.
(b) The third quarter and first nine months of 2003 provision for
taxes includes a $2.4 million income tax benefit from the reversal
of an income tax contingency reserve which was determined to be no
longer needed during the third quarter of 2003.
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
SEPTEMBER 26, 2004 AND DECEMBER 28, 2003
(Current period unaudited - In millions of dollars)
September December
26, 28,
2004 2003
================================================= ========== =========
ASSETS
Cash and cash equivalents $ 15.7 $ 37.8
Accounts receivable, net 149.2 121.3
Inventories, net 87.9 63.6
Deferred income taxes, net 24.9 22.7
Prepaid expenses and other assets 6.9 7.1
---------- ---------
Total current assets 284.6 252.5
Property, plant and equipment, net 87.5 76.0
Deferred income taxes, net 7.6 14.2
Goodwill, net 137.4 56.2
Other assets, net 62.4 29.2
---------- ---------
Total assets $ 579.5 $ 428.1
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 63.0 $ 48.1
Accrued liabilities 92.7 74.9
Current portion of long-term debt and capital
leases 2.9 --
---------- ---------
Total current liabilities 158.6 123.0
Long-term debt 60.1 --
Long-term capital leases 3.8 --
Other long-term liabilities 102.1 84.1
---------- ---------
Total liabilities 324.6 207.1
Total stockholders' equity 254.9 221.0
---------- ---------
Total liabilities and stockholders' equity $ 579.5 $ 428.1
================================================= ========== =========
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