NewsRelease
TELEDYNE TECHNOLOGIES REPORTS
SECOND QUARTER RESULTS
LOS ANGELES – July 25, 2002
– Teledyne Technologies Incorporated (NYSE:TDY)
Teledyne Technologies
Incorporated (NYSE:TDY) today reported second quarter 2002 sales of $188.0
million, compared with sales of $184.0 million for the same period in
2001. Net income for the second quarter
of 2002 was $6.2 million ($0.19 per diluted share), compared with a net loss of
$10.4 million ($0.33 per diluted share) in the second quarter of 2001.
During the second quarter of
2001, the company recorded a pretax charge of $26.4 million for asset impairments,
restructuring and other charges, inventory write-downs and a pretax charge for
discontinued operations. Net income was
$5.5 million ($0.17 per diluted share) for the second quarter of 2001,
excluding total pretax charges of $26.4 million ($0.50 per diluted share).
“Our multiple cost reduction efforts continue to generate improved financial performance,” said Robert Mehrabian, chairman, president and chief executive officer. “Despite the weak commercial economic environment, operating margin in the Electronics and Communications segment, excluding non-cash pension income, improved for the fourth consecutive quarter. In the second quarter, we achieved record operating margin in our Systems Engineering segment, while receiving multiple contract wins in both our core defense and NASA markets. Our improved operating performance, coupled with a tax refund and efficient management of working capital, helped the company achieve cash flow from operations of $25.3 million. While Teledyne is currently benefiting from increased defense spending, we believe that the company is well positioned to achieve significant earnings growth when the commercial markets that we serve rebound.”
“Given the current crisis in investor confidence, I want to emphasize that our management is committed to continuing the highest standards of accurate financial disclosure,” Robert Mehrabian added.
Review of Operations
Electronics and Communications
The Electronics and
Communications segment’s second quarter 2002 sales were $94.2 million, compared
with second quarter 2001 sales of $90.1 million. Second quarter 2002 operating profit was $9.0 million, compared
with an operating loss of $11.9 million in the second quarter of 2001. Second quarter 2001 operating profit would
have been $3.7 million excluding pretax charges of $15.6 million related to
asset impairments, restructuring and other charges.
Second quarter 2002 sales,
compared with the same period of 2001, reflected revenue growth in electronic
manufacturing services, electronic instruments and defense electronics
products. The revenue growth in
electronic manufacturing services was primarily driven by increased sales from
the medical and military markets. The
revenue growth in electronic instruments resulted from the acquisition of
Advanced Pollution Instrumentation in the fourth quarter of 2001 and stronger
demand for geophysical sensors for the petroleum exploration market. The second quarter 2002 revenue increase was
partially offset by reduced sales of relays used in semiconductor test
equipment and communications applications, as well as weakness in the
commercial aviation market. The
significant improvement in operating profit, despite a $1.3 million reduction
in non-cash pension income, reflected higher sales, reduced workforce and
decreased administrative expenses, as well as lower expenses in the company’s
optoelectronic and broadband growth initiatives.
Systems Engineering Solutions
The Systems Engineering
Solutions segment’s second quarter 2002 sales were $51.5 million, compared with
second quarter 2001 sales of $52.8 million.
Second quarter 2002 operating profit was $5.7 million, compared with an
operating loss of $0.5 million in the second quarter of 2001. Second quarter 2001 operating profit would
have been $3.9 million excluding pretax charges of $4.4 million related to
asset impairments, restructuring and other charges.
Second quarter 2002 sales,
compared with the same period of 2001, reflected growth in core defense
programs offset by reduced work for environmental programs, primarily chemical
weapons demilitarization. The
improvement in operating profit, despite a $0.2 million reduction in non-cash
pension income, primarily reflected the receipt of government award fees based
on collective performance achievements.
Aerospace Engines and Components
The Aerospace Engines and
Components segment’s second quarter 2002 sales were $39.0 million, compared
with second quarter 2001 sales of $38.4 million. Second quarter 2002 operating profit was $0.1 million, compared
with second quarter 2001 operating profit of $3.7 million, including a pretax
restructuring charge for employee termination costs of $0.3 million, in the
second quarter of 2001. Excluding this
charge, second quarter 2001 operating profit would have been $4.0 million.
Second quarter 2002 sales,
compared with the same period of 2001, reflected revenue growth in OEM piston
engines, partially offset by reduced sales of aftermarket products and
services. Operating profit in the piston
engine business was negatively impacted by net charges totaling $2.1 million
related to higher aircraft product liability reserves, increased insurance
premiums and crankshaft litigation costs (net of settlement awards). Sales in the turbine engine business were
negatively impacted by reduced development phase work, offset by higher
revenues of spare parts for Air Force training aircraft. In addition, segment operating profit was
negatively impacted by a $0.3 million reduction in non-cash pension income.
Energy Systems
The Energy Systems segment’s
second quarter 2002 sales were $3.3 million, compared with second quarter 2001
sales of $2.7 million. The second
quarter 2002 operating loss was $0.9 million, compared with an operating loss
of $5.8 million in the second quarter of 2001.
Second quarter 2001 operating loss would have been $0.2 million,
excluding pretax charges of $5.6 million related to asset impairments,
restructuring and other charges.
Second quarter 2002 sales,
compared with the same period of 2001, reflected growth in hydrogen generator
and government program sales. The
second quarter 2002 operating loss reflected additional research and
development expenses for fuel cell programs, higher general and administrative
expense and program cost adjustments.
Second Quarter 2001 Charge
During the second quarter of
2001, the company recorded a pretax charge of $26.4 million related to exiting
non-core, underperforming product lines, workforce reductions and manufacturing
consolidations, inventory write-downs and the formation of Teledyne Energy
Systems, Inc. While the total projected
charges remained at $26.4 million at both December 30, 2001 and June 30, 2002,
there were some changes in income statement classification as follows. At December 20, 2001 the estimated charge
included $7.5 million for asset impairments, $8.8 million for restructuring and
other charges, $9.8 million for inventory write-downs and a $0.3 million pretax
charge for discontinued operations.
Based on actual spending and current projections,
the $26.4 million pretax charge consists of $7.5 million for asset impairments,
$8.2 million for restructuring and other charges, $10.4 million for inventory
write-downs and $0.3 million for discontinued operations.
Additional Financial Information
Second
quarter 2002
earnings before interest, taxes, depreciation and amortization (EBITDA) were
$16.2 million, compared with EBITDA of $15.1 million for the same period of
2001, excluding restructuring, asset impairments, and other charges. Non-cash pension income for the second
quarter of 2002 was $0.6 million, compared with non-cash pension income of $2.5
million for the same period of 2001. Depreciation
and amortization expense for the second quarter of 2002 was $5.7 million,
compared with $5.1 million for the same period of 2001. Second quarter and full year 2001
depreciation and amortization included goodwill amortization of $0.2 million
and $0.6 million, respectively. In
accordance with SFAS 142, goodwill is no longer subject to
amortization in 2002. Second quarter 2002 cash from operating
activities was $25.3 million, compared with a cash usage of $4.1 million for
the same period in 2001. Free cash flow
(cash from operating activities less capital expenditures) was $21.8 million
for the second quarter of 2002, compared with a cash usage of $12.0 million for
the same period of 2001. The second
quarter of 2002 included the receipt of a $5.7 million planned income tax
refund. Capital expenditures for the
first six months of 2002 were $7.0 million, compared with $17.3 million for the
first six months of 2001. The first six
months of 2001 included $7.4 million of capital expenditures that were
committed in 2000.
Outlook
Teledyne Technologies
maintains a balanced portfolio of approximately 45% government and 55%
commercial businesses. In its
government and defense businesses as a whole, the company expects modest
revenue growth in the second half of 2002 compared to the first half of 2002
and the second half of 2001, primarily driven by demand for defense electronics
products and systems engineering services.
Given the current state of the commercial aviation market, Teledyne
expects sales of avionics equipment to be flat in the second half of 2002
relative to the first half of 2002, but decline compared to the second half of
2001. However, the company expects
revenue growth in its commercial instrumentation businesses to offset the sales
decline in avionics.
Orders and sales for several
of the company’s short cycle electronics product lines, which include relays
sold to the semiconductor and communications markets, were flat in the second
quarter of 2002 compared to the first quarter of 2002. Teledyne Technologies currently expects
orders and revenues in these businesses to be flat in the second half of 2002,
relative to first half of 2002.
Given the current state of
the economy, rising pilot insurance costs, and the company’s dependence on
aftermarket aviation sales, the company expects 2002 sales for the Aerospace
Engines and Components segment to be flat relative to 2001. However, the company anticipates that
operating profit in its Aerospace Engines and Components segment will improve
slightly in the second half of 2002, compared to the first half of 2002, due to
reduced legal expenses following the conclusion of the crankshaft litigation,
partially offset by increased insurance premiums. In addition, the company continues to explore strategic
alternatives for the product lines in this segment, including a possible
divestiture of one or more product lines.
Full year 2001 earnings
included $9.5 million or $0.18 per share in non-cash pension income. The company currently expects approximately
$2.3 million or $0.04 per share of non-cash pension income in 2002. The reduction in non-cash pension income
reflected the completion of income associated with FAS 87 transition asset
amortization as well as the decline in the value of the company’s pension
assets during 2000 and 2001. The
company continues to anticipate approximately $10 million of cost savings in
2002 relative to 2001, which should offset the reduction in non-cash pension
income.
Based on its current outlook, the company estimates
that third quarter and full year 2002 earnings per share will be in the range
of approximately $0.18 to $0.20 and $0.70 to $0.78, respectively, including
approximately $0.04 per share of non-cash pension income for the full year
2002. Full year 2001 earnings per share
from continuing operations of $0.69 (excluding asset impairment, restructuring
and other charges) would have been $0.51 per share, excluding $0.18 per share
in non-cash pension income.
Given the further decline in the value of the
company’s pension assets during 2002, non-cash pension expense in 2003 is
projected to be $5.5 million, compared with non-cash pension income of $2.3
million in 2002. As of June 30, 2002,
Teledyne Technologies did not anticipate making a cash contribution to the
pension plan until the first quarter of 2004.
The present volatile and declining market may accelerate this
contribution.
Although earnings visibility into 2003 is limited,
the company believes that earnings per share, excluding pension expense, will
grow given continued demand for defense electronics and government engineering
services coupled with a modest return in some of the company’s short cycle
electronics product lines.
Based on its current outlook, the company estimates
that full year 2003 earnings per share will be in the range of approximately
$0.70 to $0.85, respectively, including approximately $0.10 per share of
non-cash pension expense.
EARNINGS PER SHARE SUMMARY
(Diluted earnings per common share from
continuing operations)
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2003 Full Year Outlook |
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2002 Full Year Outlook |
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2001 Results |
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Low |
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High |
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Low |
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|
High |
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|
Actual |
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Earnings per share
(excluding net pension income (expense) and asset impairment, restructuring
and other charges) |
|
$ |
0.80 |
|
$ |
0.95 |
|
$ |
0.66 |
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$ |
0.74 |
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$ |
0.51 |
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Net pension income (expense) |
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(0.10 |
) |
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(0.10 |
) |
|
0.04 |
|
|
0.04 |
|
|
0.18 |
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Earnings per share
(excluding asset impairment, restructuring and other charges) |
|
|
0.70 |
|
|
0.85 |
|
|
0.70 |
|
|
0.78 |
|
|
0.69 |
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Asset impairment, restructuring and other charges |
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— |
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— |
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— |
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— |
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(0.48 |
) |
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Earnings
per share |
|
$ |
0.70 |
|
$ |
0.85 |
|
$ |
0.70 |
|
$ |
0.78 |
|
$ |
0.21 |
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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, cost-savings, growth opportunities, capital expenditures,
pension contributions 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 and communications
markets, timely development of acceptable and competitive fuel cell products
and systems, funding, continuation and award of government programs, and
economic and political conditions, could change the anticipated results.
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 involve various inherent
risks, such as, among others, the company’s ability to integrate acquired
businesses and to achieve identified financial and operating synergies. Also, the company may not be able to sell or
exit timely or on acceptable terms its remaining non-core or under-performing
product lines, particularly given the current economic environment.
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 2001 Annual
Report on Form 10-K and Forms 10-Q.
Teledyne Technologies is a leading provider of
sophisticated electronic components, instruments and communication products,
systems engineering solutions, aerospace engines and components and on-site gas
and power generation systems. Teledyne
Technologies has operations in the United States, the United Kingdom and
Mexico. For more information, visit
Teledyne Technologies’ website at www.teledyne.com.
A live webcast of Teledyne Technologies’ second
quarter earnings conference call will be
held at 11:00 a.m. (Eastern) on Thursday, July 25. 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 1:00 p.m. (Eastern) on Thursday, July 25.
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Investor Contact: Media Contact: |
Jason VanWees Robyn Choi (310) 893-1640 |
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