Add
TDY to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| TDY > SEC Filings for TDY > Form 10-K on 26-Feb-2009 | All Recent SEC Filings |
26-Feb-2009
Annual Report
Teledyne Technologies Incorporated is a leading provider of sophisticated electronic components and subsystems, instrumentation and communications products, including defense electronics, monitoring and control instrumentation for marine, environmental and industrial applications, harsh environment interconnect products, data acquisition and communications equipment for air transport and business aircraft, and components and subsystems for wireless and satellite communications. We also provide engineered systems and information technology services for defense, space and environmental applications, manufacture general aviation engines and components, and supply energy generation, energy storage and small propulsion products.
We serve niche market segments where performance, precision and reliability are critical. Our customers include government agencies, aerospace prime contractors, energy exploration and production companies, major industrial companies, and airlines and general aviation companies.
Strategy
Our strategy continues to emphasize growth in our core markets of instrumentation, defense electronics and government engineered systems. Our core markets are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions. We aggressively pursue operational excellence to continually improve our margins and earnings. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Over time, our goal is to create a set of businesses that are truly superior in their niches. We intend to continue to evaluate our product lines to ensure that they are aligned with our strategy.
Recent Acquisitions
The table below summarizes the acquisitions we made during fiscal years 2008,
2007 and 2006. See also Note 3 to our Consolidated Financial Statements for
additional information about these acquisitions.
Pre-acquisition Transaction Purchase
Name and Description(1) Date Acquired Primary Location Sales Volume Type Price (2)(6)
(In millions)
2008
Impulse Enterprise ("Impulse") December 31, 2007 San Diego, CA $16.8 million Asset $ 35.0
Manufactures underwater electrical for its
interconnection systems for harsh environments. fiscal year
ended
December 31,
2006
Storm Products Co. ("Storm") December 31, 2007 Dallas, TX $45.7 million Stock 47.7
Supplies custom, high-reliability bulk wire and Woodridge, IL for its
cable assemblies to a number of markets, fiscal year
including energy exploration, environmental ended
monitoring and industrial equipment. Also March 31, 2007
provides coax microwave cable and interconnect
products primarily to defense customers for
radar, electronic warfare and communications
applications.
SG Brown Limited and its wholly owned January 31, 2008 Watford, United £12.0 million Stock 54.8
subsidiary TSS (International) Limited Kingdom for its
(together "TSS") fiscal year
Designs and manufactures inertial sensing, ended
gyrocompass navigation and subsea pipe and March 31, 2007
cable detection systems for offshore energy,
oceanographic and military marine markets.
Judson Technologies, LLC ("Judson") February 1, 2008 Montgomeryville, $13.8 million Asset 27.0
Supplies custom, high-reliability bulk wire and PA for its
cable assemblies to a number of markets, fiscal year
including energy exploration, environmental ended
monitoring and industrial equipment. Also December 31,
provides coax microwave cable and interconnect 2006
products primarily to defense customers for
radar, electronic warfare and communications
applications.
Webb Research Corp. ("Webb") July 7, 2008 East Falmouth, $12.2 million Asset 24.3
Manufactures autonomous underwater gliding MA for its
vehicles and autonomous profiling drifters and fiscal year
floats. ended
December 31,
2007
Defense Electronics business of Filtronic PLC August 15, 2008 Shipley, United £14.5 million Stock 24.1
("Filtronic") Kingdom for its
Provides customized microwave subassemblies and fiscal year
integrated subsystems to the global defense ended
industry. May 31, 2008
Cormon Limited and Cormon Technology Limited October 16, 2008 Lancing, United £6.8 million Stock 20.9 (3)
(together "Cormon") Kingdom for its
Designs and manufactures subsea and surface fiscal year
sand and corrosion sensors, as well as flow ended
integrity monitoring systems, used in oil and March 31, 2008
gas production systems.
Odom Hydrographic Systems, Inc. ("Odom") December 19, 2008 Baton Rouge, LA $10.9 million Stock 7.0 (3)
Designs and manufactures hydrographic survey for its
instrumentation used in port survey, dredging, fiscal year
offshore energy and other applications. ended
September 30,
2008
|
Pre-acquisition Transaction Purchase
Name and Description(1) Date Acquired Primary Location Sales Volume Type Price (2)(6)
(In millions)
Demo Systems LLC ("Demo") December 24, 2008 Moorpark, CA $7.3 million Asset $ 5.3 (3)
Designs and manufactures aircraft data loading for its
equipment, flight line maintenance terminals, fiscal year
and data distribution software used by ended
commercial airlines, the U.S. military and December 31,
aircraft manufacturers. 2007
2007
D.G. O'Brien, Inc. ("DGO") March 30, 2007 Seabrook, NH $26.2 million Asset 37.1
Manufactures highly reliable electrical and for its
fiber-optic interconnect systems, primarily for fiscal year
subsea military and offshore oil and gas ended
applications. September 30,
2006
Tindall Technologies, Inc. ("Tindall") June 30, 2007 Sunnyvale, CA $2.7 million Stock 5.9(4 )
Designs and supplies microwave subsystems for for its
defense applications. fiscal year
ended
December 31,
2006
2006
Benthos, Inc. ("Benthos") January 27, 2006 North Falmouth, $24.0 million Stock 32.2
Manufactures oceanographic products and package MA for its
inspection systems. fiscal year
ended
September 30,
2005
KW Microwave Corporation ("KW") April 28, 2006 Poway, CA $6.7 million Asset 10.3
Manufactures defense microwave components and for its
subsystems. fiscal year
ended
December 31,
2005
Ocean Design, Inc. ("ODI") August 16, 2006 Daytona Beach, $31.6 million A majority of 73.8
Manufactures subsea, wet-mateable electrical and FL for its stock(5)
fiber-optic interconnect systems used in fiscal year
offshore oil and gas production, oceanographic ended
research, and military applications. December 31,
2005
CollaborX, Inc. ("CollaborX") August 16, 2006 Colorado Springs, $13.6 million Stock 14.9
Provides government engineering services CO for its
primarily to the U.S. Air Force and also to fiscal year
select joint military commands, such as the ended
Missile Defense Agency, the United States Joint December 31,
Forces Command and the United States Northern 2005
Command.
Rockwell Scientific Company LLC ("Teledyne September 15, 2006 Thousand Oaks, $114.0 million Stock 158.6
Scientific and Imaging") CA for its
Provides research and development services to fiscal year
the Department of Defense, NASA and major ended
defense and aerospace companies, as well as September 30,
develops and manufactures infrared and visible 2005
light imaging sensors for surveillance
applications.
|
(1) Each of the acquisitions, except for CollaborX, Inc. is part of the Electronics and Communications segment. CollaborX, Inc. is part of the Engineered Systems segment.
(2) The purchase price represents the contractual consideration for the acquired business, net of cash acquired, including adjustments for certain paid acquisition transactions costs.
(3) The final purchase price is subject to adjustment based on the final closing date net working capital of the acquired business.
(4) Includes $0.3 million paid in 2008 as a final purchase price adjustment based on the final closing date net working capital.
(5) The initial majority interest of 51.0% was purchased August 16, 2006 for
$30.0 million. Subsequent purchases, net of cash acquired were as follows:
additional 9.9% of ownership for $4.4 million in 2006, additional 0.9% of
ownership for $0.9 million in 2007 and an additional 24.1% of ownership for
$38.5 million in 2008.
(6) We increased our ownership interest in Aerosance, Inc. to 100% for $0.2 million in 2008. In 2007, we paid $4.5 million of purchase price payments on businesses acquired before 2006. In 2006, we paid $0.8 million for the purchase of assets of a repair facility in Singapore and $0.8 million in purchase price payment on a business acquired before 2006.
Financial Highlights
Our fiscal year is determined based on a 52 or 53-week convention ending on the
Sunday nearest to December 31. The following is our financial information for
2008, 2007 and 2006 (in millions, except per-share amounts):
2008 2007 2006
Sales $ 1,893.0 $ 1,622.3 $ 1,433.2
Costs and Expenses
Cost of sales 1,339.5 1,136.4 1,020.2
Selling, general and administrative expenses 364.6 323.6 287.9
Total costs and expenses 1,704.1 1,460.0 1,308.1
Income before other income and expense and income taxes 188.9 162.3 125.1
Interest and debt expense, net (10.9 ) (12.5 ) (7.4 )
Minority interest (2.3 ) (3.4 ) (1.0 )
Other income, net(a) 0.6 2.9 5.0
Income before income taxes 176.3 149.3 121.7
Provision for income taxes(b) 65.0 50.8 41.4
Net income $ 111.3 $ 98.5 $ 80.3
Basic earnings per common share $ 3.14 $ 2.82 $ 2.34
Diluted earnings per common share $ 3.05 $ 2.72 $ 2.26
|
(a) Fiscal year 2006 include the receipt of $2.5 million, pursuant to an agreement that expired in 2006 with Honda Motor Co., Ltd. related to the piston engine business.
(b) Fiscal year 2008 includes income tax credits of $2.5 million and the reversal of $0.8 million in income tax contingency reserves which were determined to be no longer needed due to the expiration of applicable statutes of limitations. Fiscal year 2007 includes income tax credits of $4.4 million and also reflects the reversal of $1.1 million in income tax contingency reserves which were determined to be no longer needed due to the completion of state tax audits and the expiration of applicable statutes of limitations. Fiscal year 2006 includes the reversal of income tax contingency reserves of $3.3 million which were determined to be no longer needed due to the expiration of applicable statutes of limitations.
Our businesses are divided into and managed as four business segments; namely, Electronics and Communications, Engineered Systems, Aerospace Engines and Components and Energy and Power Systems. Our four business segments and their respective contributions to our total sales in 2008, 2007 and 2006 are summarized in the following table:
Percentage of Sales
Segment 2008 2007 2006
Electronics and Communications 68 % 66 % 63 %
Engineered Systems 19 % 19 % 20 %
Aerospace Engines and Components 9 % 11 % 12 %
Energy and Power Systems 4 % 4 % 5 %
100 % 100 % 100 %
|
Results of Operations
2008 Compared with 2007 (in millions)
%
Sales 2008 2007 Change
Electronics and Communications $ 1,276.6 $ 1,071.6 19.1 %
Engineered Systems 361.2 301.7 19.7 %
Aerospace Engines and Components 171.0 180.7 (5.4 )%
Energy and Power Systems 84.2 68.3 23.3 %
Total sales $ 1,893.0 $ 1,622.3 16.7 %
%
Operating Profit (Loss) and Other Segment Income 2008 2007 Change
Electronics and Communications $ 183.0 $ 143.2 27.8 %
Engineered Systems 35.0 26.2 33.6 %
Aerospace Engines and Components (9.7 ) 19.2 *
Energy and Power Systems 10.2 6.3 61.9 %
Segment operating profit and other segment income 218.5 194.9 12.1 %
Corporate expense (29.6 ) (32.6 ) (9.2 )%
Interest and debt expense, net (10.9 ) (12.5 ) (12.8 )%
Minority interest (2.3 ) (3.4 ) (32.4 )%
Other income, net 0.6 2.9 (79.3 )%
Income before taxes 176.3 149.3 18.1 %
Provision for income taxes(a) 65.0 50.8 28.0 %
Net income $ 111.3 $ 98.5 13.0 %
|
* not meaningful
(a) Fiscal year 2008 includes income tax credits of $2.5 million and the reversal of $0.8 million in income tax contingency reserves which were determined to be no longer needed due to the expiration of applicable statutes of limitations. Fiscal year 2007 includes income tax credits of $4.4 million and also reflects the reversal of $1.1 million in income tax contingency reserves which were determined to be no longer needed due to the completion of state tax audits and the expiration of applicable statutes of limitations.
We reported 2008 sales of $1,893.0 million, compared with sales of $1,622.3 million for 2007, an increase of 16.7%. Net income was $111.3 million ($3.05 per diluted share) for 2008, compared with $98.5 million ($2.72 per diluted share) for 2007, an increase of 13.0%.
The increase in sales in 2008, compared with 2007, reflected improvement in the Electronic and Communications, Engineered Systems and Energy and Power Systems segments. The largest increase in sales was in the Electronic and Communications segment which grew both organically and through strategic acquisitions made in 2008 and in 2007. The incremental increase in revenue in 2008 from businesses acquired since 2006 was $142.9 million (see "Recent Acquisitions" table).
The increase in segment operating profit and other segment income for 2008, compared with 2007, reflected the impact of higher sales. Operating profit and other segment income was higher in each operating segment except the Aerospace Engines and Components segment. The $39.8 million increase in operating profit in the Electronics and Communications segment included incremental operating profit from acquisitions and related synergies of $17.8 million. The Aerospace Engines and Components segment includes the impact of an $18.0 million estimated charge for a voluntary product recall and replacement program.
Cost of sales in total dollars was higher in 2008, compared with 2007, primarily due to higher sales which resulted from organic growth and acquisitions. Fiscal year 2008 included $0.9 million in LIFO expense, compared with $1.3 million in LIFO expense in 2007. Cost of sales as a percentage of sales for 2008 was 70.8%, compared with 70.0% for 2007. The higher cost of sales percentage reflects the impact of the estimated $18.0 million voluntary product recall and replacement charge for the Aerospace Engines and Components segment. Of the total $18.0 million charge, $15.8 million was related to the costs associated with the return and replacement of product and $1.4 million was related to the disposal and write-off of inventory which were recorded as cost of sales; $0.8 million was related to estimated customer returns and was recorded as a reduction to sales.
Selling, general and administrative expenses, including research and development and bid and proposal expense, in total dollars were higher in 2008 compared with 2007. This $41.0 million increase was primarily due to higher sales which resulted from organic growth and acquisitions and also reflected higher acquired intangible asset amortization of $15.8 million in 2008, compared with $6.4 million in 2007. Corporate administrative expense in 2008 was lower by $3.0 million compared with 2007 and reflected lower employee compensation and relocation expense and lower professional fee expenses. For fiscal year 2008, we recorded a total of $7.5 million in stock option expense, of which $2.5 million was recorded as corporate expense and $5.0 million was recorded in the operating segment results. For fiscal year 2007, we recorded a total of $6.8 million in stock option expense, of which $2.3 million was recorded as corporate expense and $4.5 million was recorded in the operating segment results. Selling, general and administrative expenses for 2008, as a percentage of sales, were 19.3%, compared with 19.9% for 2007, which reflected the impact of higher sales while controlling general and administrative expenses.
Included in operating profit in 2008 was pension expense of $9.6 million, in accordance with the pension accounting requirements of SFAS No. 87, "Employers' Accounting for Pensions," ("SFAS No. 87") offset by $9.8 million recoverable in accordance with U.S. Government Cost Accounting Standards ("CAS") from certain government contracts. Included in operating profit in 2007 was pension expense of $11.9 million, of which $10.2 million was recoverable in accordance with CAS. Pension expense determined under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government.
The Company's effective tax rate for 2008 was 36.9%, compared with 34.1% for 2007. The effective tax rate for 2008 reflects the impact of expected research and development income tax credits of $2.5 million and also reflects the reversal of $0.8 million in income tax contingency reserves that were determined to be no longer needed due to the expiration of applicable statutes of limitations. Excluding these items the effective tax rate for 2008 would have been 38.7%. The effective tax rate for 2007 reflects the impact of expected research and development income tax credits of $4.4 million and also reflects the reversal of $1.1 million in income tax contingency reserves. The reserves were determined to be no longer needed due to the completion of state tax audits and the expiration of applicable statutes of limitations. Excluding these items the effective tax rate for 2007 would have been 37.7%.
Sales under contracts with the U.S. Government were approximately 40% of sales in 2008 and 41% of sales in 2007. Sales to international customers represented approximately 24% of sales in 2008, compared with 22% of sales in 2007.
Total interest expense, including credit facility fees and other bank charges, was $11.7 million in 2008 and $13.1 million in 2007. Interest income was $0.8 million in 2008 and $0.6 million in 2007. The decrease in interest expense in 2008 primarily reflected lower average interest rates, partially offset by higher outstanding debt levels due to acquisitions.
Minority interest reflects the minority ownership interests in Ocean Design, Inc. and Teledyne Energy Systems, Inc. The minority interest ownership percentage in ODI decreased to 14% at year-end 2008 since the initial 51% purchase of ODI in August 2006.
Fiscal years 2008 and 2007 include sublease rental income and royalty income in other income. Other income in 2007 included $0.8 million received for the early return of leased property.
2007 Compared with 2006 (in millions)
%
Sales 2007 2006 Change
Electronics and Communications $ 1,071.6 $ 899.4 19.1 %
Engineered Systems 301.7 283.0 6.6 %
Aerospace Engines and Components 180.7 181.6 (0.5 )%
Energy and Power Systems 68.3 69.2 (1.3 )%
Total sales $ 1,622.3 $ 1,433.2 13.2 %
%
Operating Profit (Loss) and Other Segment Income 2007 2006 Change
. . .
|
|
|