LOS ANGELES,
California -- January 27, 2005 -- Teledyne Technologies Incorporated
(NYSE:TDY):
Revenues of
$288.1 million increased 29.5% compared to last year
Earnings per
share of $0.39 increased 62.5% compared to last year
Full year revenues
increased 20.9% to over $1 billion
Full year earnings
per share increased 36.3% to $1.24
Teledyne
Technologies today reported fourth quarter 2004 sales of $288.1 million,
compared with sales of $222.4 million for the same period in 2003. Net
income for the fourth quarter of 2004 was $13.4 million ($0.39 per diluted
share), compared with net income of $7.8 million ($0.24 per diluted share)
in the fourth quarter of 2003. Net income for the fourth quarter of 2004
included pretax pension expense of $2.1 million ($1.6 million after recovery
from certain government contracts), compared with pretax pension expense
of $1.8 million for the same period of 2003.
"2004
was a transformational year for Teledyne, one in which we made exceptional
progress towards our goal of high quality revenue and earnings growth,
both organically and through acquisitions. We closed five acquisitions
in the Electronics and Communication segment. Revenues increased to just
over $1.0 billion, while earnings per share increased to $1.24,"
said Robert Mehrabian, chairman, president and chief executive officer.
"Total operating margin improved, and cash from operations was a
record $84.9 million. Despite spending approximately $177 million for
acquisitions, we ended 2004 with only $66.2 million in net debt. Our balance
sheet remains strong, providing flexibility for investments in organic
growth and future acquisitions in our strategic businesses."
Fourth Quarter Earnings Summary
Millions of Dollars Earnings per Diluted Share
------------------- --------------------------
Fourth Fourth Fourth Fourth
Quarter Quarter Quarter Quarter Variance
2004 2003 2004 2003 %
========= ======== ======== ======== ========
Net income excluding
net pension expense $ 14.4 $ 8.9 $ 0.42 $ 0.27 55.6%
Net after-tax
pension expense after
recovery from certain
government contracts (1.0) (1.1) (0.03) (0.03)
---------- -------- --------- -------- --------
Net income $ 13.4 $ 7.8 $ 0.39 $ 0.24 62.5%
==================== ========== ======== ========= ======== ========
Full Year 2004
Sales
for 2004 were $1,016.6 million, compared with $840.7 million for 2003.
Net income for 2004 was $41.7 million ($1.24 per diluted share), compared
with $29.7 million ($0.91 per diluted share) for 2003. Net income for
2004 included pretax pension expense of $8.7 million ($8.2 million after
recovery from certain government contracts), compared with pretax pension
expense of $6.9 million in 2003. Net income for 2003 included a $2.4 million
one-time income tax benefit, resulting from the reversal of an income
tax contingency reserve in the third quarter.
Review
of Operations
Electronics and Communications
The
Electronics and Communications segment's fourth quarter 2004 sales were
$161.8 million, compared with fourth quarter 2003 sales of $117.9 million.
Fourth quarter 2004 operating profit was $16.7 million, compared with
operating profit of $8.4 million in the fourth quarter of 2003.
Fourth
quarter 2004 sales, compared with the same period of 2003, reflected revenue
growth in defense electronic products, electronic instruments, telecommunication
subsystems, relay products and electronic manufacturing services. 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, the acquisition of assets of Filtronic Solid State on December
31, 2003, and the acquisition of the defense electronics business of Celeritek,
Inc. on October 22, 2004. 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 energy exploration market and increased sales of other
instrument products. The increase in revenue from acquisitions for the
fourth quarter of 2004, compared with the same period in 2003, was $39.0
million. Segment operating profit was favorably impacted by acquisitions
and organic sales growth and by lower pension expense. Pension expense
was $1.0 million in the fourth quarter of 2004 compared with pension expense
of $1.4 million in the fourth quarter of 2003.
Systems
Engineering Solutions
The
Systems Engineering Solutions segment's fourth quarter 2004 sales were
$64.8 million, compared with fourth quarter 2003 sales of $52.3 million.
Fourth quarter 2004 operating profit was $6.2 million, compared with operating
profit of $3.4 million in the fourth quarter of 2003.
Fourth
quarter 2004 sales, compared with the same period of 2003, reflected revenue
growth in core defense, aerospace and environmental programs. The higher
operating profit in the fourth quarter of 2004, compared with the same
period of 2003, was primarily the result of increased sales and the finalization
of an award fee for the Ground-based Midcourse Defense contract, partially
offset by sales mix and rate differences. Operating profit in the fourth
quarter of 2003 was unfavorably impacted by the recognition of a $1.0
million loss on an office sublease agreement. Segment operating profit
in the fourth quarter of 2004 included $0.7 million of pension expense,
of which $0.5 million was recovered from certain government contracts,
compared with no pension expense for the fourth quarter of 2003.
Aerospace
Engines and Components
The
Aerospace Engines and Components segment's fourth quarter 2004 sales were
$53.3 million, compared with fourth quarter 2003 sales of $47.0 million.
The fourth quarter 2004 operating profit was $4.8 million, compared with
operating profit of $5.2 million in the fourth quarter of 2003.
Fourth
quarter 2004 sales, compared with the same period of 2003, reflected revenue
growth in OEM piston engines and turbine engine sales. Sales from turbine
engines were higher primarily due to increased spare parts sales, partially
offset by reduced Improved Tactical Air-Launched Decoy (ITALD) engine
sales. Segment operating profit for the fourth quarter of 2004, compared
with the same period of 2003, included a $1.0 million charge for environmental
matters partially offset by a $0.6 million insurance reimbursement for
previously incurred legal expenses. Segment operating profit included
pension expense of $0.3 million in both the fourth quarter of 2004 and
the fourth quarter of 2003.
Energy
Systems
The
Energy Systems segment's fourth quarter 2004 sales were $8.2 million,
compared with fourth quarter 2003 sales of $5.2 million. Fourth quarter
2004 operating profit was $0.7 million, compared with break-even results
in the fourth quarter of 2003.
The
increase in fourth 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.
Additional
Financial Information
Cash Flow
Fourth
quarter 2004 cash provided by operating activities was $28.0 million,
compared with cash provided by operating activities of $18.2 million for
the fourth quarter of 2003. The increase in cash provided by operating
activities in 2004, compared with 2003, is due to improved net income
and operating cash flow from acquisitions. Free cash flow (cash from operating
activities less capital expenditures) was $19.2 million for the fourth
quarter of 2004, compared with free cash flow of $10.7 million for the
same period of 2003. Total year 2004 free cash flow was $66.2 million,
compared with free cash flow of $36.5 million for the same period of 2003.
The higher free cash flow for total year 2004, compared with 2003, was
primarily due to improved net income and lower aircraft product liability
settlement payments, as well as operating cash flow from acquisitions.
In the fourth quarter of 2004, Teledyne Technologies completed the acquisition
of the defense electronics business of Celeritek, Inc. for total consideration
of $32.7 million, which is net of a purchase price reduction. The acquisition
was funded primarily with borrowings under the company's $280.0 million
revolving credit facility. At January 2, 2005, total debt was $77.6 million,
which includes $70.0 million drawn against the credit facility, as well
as other debt and capital lease obligations. Cash and cash equivalents
were $11.4 million at January 2, 2005. Capital expenditures for the fourth
quarter of 2004 were $8.8 million, compared with $7.5 million for the
fourth quarter of 2003. Depreciation and amortization expense was $6.4
million for the fourth quarter of 2004 and $6.0 million for the fourth
quarter of 2003. Depreciation and amortization expense was $24.8 million
for full year 2004 and $23.1 million for full year 2003.
Free Cash Flow(a)
Fourth Fourth Total Total
(in millions, brackets Quarter Quarter Year Year
indicate use of funds) 2004 2003 2004 2003
======================= ======== ======== ======= =======
Cash provided by operating
activities $ 28.0 $ 18.2 $ 84.9 $ 56.7
Capital expenditures (8.8) (7.5) (18.7) (20.2)
-------- -------- ------- -------
Free cash flow $ 19.2 $ 10.7 $ 66.2 $ 36.5
============== ======== ======== ======= =======
(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 fourth quarter of 2004 was $2.1 million ($1.6 million
after recovery from certain government contracts), compared with pension
expense of $1.8 million for the same period of 2003. 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.
Income
Taxes
The
effective tax rate for the fourth quarter of 2004 was 36.6% compared with
an effective tax rate of 38.1% for the fourth quarter of 2003. The total
year 2004 effective tax rate was 38.7% compared with an effective tax
rate of 33.3% for total year 2003. Total year 2003 included an income
tax benefit of $2.4 million due to the reversal of an income tax contingency
reserve that was determined to be no longer needed during the third quarter
of 2003. Certain tax liabilities are now classified as other long-term
liabilities at year-end 2004. The balance sheet for 2003 reflects the
same classification.
Other
Other
income for total year 2004 included the third quarter 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 fourth quarter of 2004, compared with the fourth quarter of 2003,
was significantly impacted by internal and external costs related to Sarbanes-Oxley
Act Section 404 compliance and auditing efforts and higher compensation
expense.
Outlook
Based
on its current outlook, the company's management believes that first quarter
2005 earnings per share will be in the range of approximately $0.30 to
$0.33. The full year 2005 earnings per share outlook is expected to be
in the range of approximately $1.30 to $1.40. The company's estimated
effective income tax rate for 2005 is 39.6%.
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 acquisitions completed in 2004. Organic sales growth
of electronic instruments is expected to be offset by a substantial reduction
in sales of geophysical sensors for the energy exploration market.
The
full year 2005 earnings outlook includes approximately $6.0 million or
$0.11 per share in pension expense after recovery of allowable pension
costs from our government contracts. Full year 2004 earnings included
$8.7 million or $0.16 per share in gross pension expense, or $8.2 million
or $0.15 per share in net pension expense after recovery of allowable
pension costs from our 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.
Beginning
with the third quarter of 2005, the company plans to recognize compensation
expense in accordance with Financial Accounting Standards Board Statement
No. 123 (revised 2004), "Share-Based Payment." The adoption
of this standard for the expensing of stock options is expected to reduce
earnings per share by approximately $0.05 in the second half of 2005.
EARNINGS PER SHARE SUMMARY
(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) $ 1.46 $ 1.56 $ 1.39 $ 0.97
Net pension expense after
recovery from certain government
contracts (0.11) (0.11) (0.15) (0.13)
------- ------- ------- --------
Earnings per share (excluding income
tax benefit and stock option
expense) 1.35 1.45 1.24 0.84
Income tax benefit -- -- -- 0.07
Stock option expense (0.05) (0.05) -- --
------- ------- ------- --------
Earnings per share $ 1.30 $ 1.40 $ 1.24 $ 0.91
================== ======= ======= ======= ========
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 recent acquisitions
of the defense electronics business 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' fourth quarter earnings conference call
will be held at 11:00 a.m. (Eastern) on Thursday, January 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
Thursday, January 27, 2005.
TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND FISCAL YEARS ENDED
JANUARY 2, 2005 AND DECEMBER 28, 2003
(Unaudited - In millions, except per share amounts)
Fourth Fourth Total Total
Quarter Quarter Year Year
2004 2003 2004 2003
======== ======== ========= ========
Net sales $ 288.1 $ 222.4 $1,016.6 $840.7
Costs and expenses:
Costs of sales 205.1 168.5 746.3 636.7
Selling, general and
administrative expenses 60.9 40.6 203.4 157.0
-------- -------- --------- -------
Income before other income
(expense) and taxes 22.1 13.3 66.9 47.0
Other income (expense)(a) -- (0.3) 3.0 (1.6)
Interest expense, net 0.9 0.3 1.9 0.8
-------- -------- --------- --------
Income before income taxes 21.2 12.7 68.0 44.6
Provision for income
taxes(b) 7.8 4.9 26.3 14.9
-------- -------- --------- --------
Net income $ 13.4 $ 7.8 $ 41.7 $ 29.7
======== ======== ========= ========
Diluted earnings per common
share $ 0.39 $ 0.24 $ 1.24 $ 0.91
======== ======== ========= ========
Weighted average diluted
common shares outstanding 34.1 32.9 33.7 32.7
================================= ======== ======== ========= ========
(a) Total year 2004 includes the third quarter receipt of $2.5 million
pursuant to an agreement with Honda Motor Co., Ltd. related to the
piston engine business.
(b) Total year 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 MONTHS AND FISCAL YEAR ENDED
JANUARY 2, 2005 AND DECEMBER 28, 2003
(Unaudited - In millions)
Fourth Fourth Total Total
Quarter Quarter Year Year
2004 2003 2004 2003
======== ======== ========= ========
Net sales:
Electronics and
Communications $ 161.8 $ 117.9 $ 567.9 $446.9
Systems Engineering
Solutions 64.8 52.3 242.2 212.5
Aerospace Engines and
Components 53.3 47.0 181.8 165.5
Energy Systems 8.2 5.2 24.7 15.8
-------- -------- --------- --------
Total net sales $ 288.1 $ 222.4 $1,016.6 $840.7
======== ======== ========= ========
Operating profit (loss) and
other segment income:
Electronics and
Communications $ 16.7 $ 8.4 $ 54.4 $ 33.0
Systems Engineering
Solutions 6.2 3.4 27.1 23.2
Aerospace Engines and
Components(a) 4.8 5.2 6.1 6.4
Energy Systems 0.7 -- 1.6 (0.7)
-------- -------- --------- --------
Segment operating profit and
other segment income $ 28.4 $ 17.0 $ 89.2 $ 61.9
Corporate expense (6.3) (3.7) (19.8) (14.9)
Other income (expense) -- (0.3) 0.5 (1.6)
Interest expense, net 0.9 0.3 1.9 0.8
-------- -------- --------- -------
Income before income taxes(b) 21.2 12.7 68.0 44.6
Provision for income taxes 7.8 4.9 26.3 14.9
-------- -------- --------- --------
Net income $ 13.4 $ 7.8 $ 41.7 $ 29.7
================================= ======== ======== ========= ========
(a) Total year 2004 segment operating profit includes the third
quarter 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) Total year 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
JANUARY 2, 2005 AND DECEMBER 28, 2003
(Current period unaudited - In millions)
January 2, December 28,
2005 2003
========= ===========
ASSETS
Cash and cash equivalents $ 11.4 $ 37.8
Accounts receivable, net 141.7 121.3
Inventories, net 97.7 63.6
Deferred income taxes, net 26.8 22.7
Prepaid expenses and other assets 9.3 7.1
--------- -----------
Total current assets 286.9 252.5
Property, plant and equipment, net 90.8 76.0
Deferred income taxes, net 28.3 19.7
Goodwill and acquired intangible assets, net 192.0 61.6
Other assets, net 33.6 23.8
--------- -----------
Total assets $ 631.6 $ 433.6
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 62.3 $ 48.1
Accrued liabilities 97.0 74.9
Current portion of long-term debt and capital
leases 3.2 --
--------- -----------
Total current liabilities 162.5 123.0
Long-term debt 70.6 --
Long-term capital leases 3.8 --
Other long-term liabilities 132.6 89.6
--------- -----------
Total liabilities 369.5 212.6
Total stockholders' equity 262.1 221.0
--------- -----------
Total liabilities and stockholders' equity $ 631.6 $ 433.6
============================================== ========= ===========
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