FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____ to ____
Commission File Number 1-5212
TELEDYNE, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-2282626
- ---------------------------------------- ---------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1901 Avenue of the Stars
Los Angeles, California 90067-6046
- ----------------------------------------- ---------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number,
Including Area Code (310) 277-3311
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------------------------------- --------------------------
Common Stock, $1.00 Par Value New York Stock Exchange
Pacific Stock Exchange
7% Subordinated Debentures Due 1999 New York Stock Exchange
10% Subordinated Debentures Due 2004, Series A New York Stock Exchange
10% Subordinated Debentures Due 2004, Series C New York Stock Exchange
- ---------------------------------------------- --------------------------
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
At January 13, 1994, Registrant had outstanding 55,439,048 shares of its
Common Stock. The aggregate market value of the Registrant's voting stock held
by non-affiliates at this date was approximately $1.1 billion, based on the
closing price of $25 5/8 as reported on the Composite Tape. For purposes of the
foregoing calculation, all directors and officers of the Registrant have been
deemed to be affiliates, but the Registrant disclaims that any of such directors
or officers is an affiliate.
Document Incorporated By Reference
Teledyne, Inc. proxy statement for 1994 - Part III
<PAGE>
PART I
Item 1. Business
- -----------------
(a) Teledyne, Inc. (Registrant) was incorporated in the state of Delaware
in 1960. Registrant is a diversified corporation, the operations of which are
comprised of companies which manufacture a wide variety of products.
Realignment/Restructure
In July 1993, Teledyne undertook a major realignment for the company which
consolidated its operating companies to 21 from 65 and eliminated 1,200
management and support positions. The intent of the realignment was to
streamline operations in order to take full advantage of the opportunities
available to the Company, address the increasingly complex business environment
of the 1990's and beyond and better serve customers through more robust
operating units.
The intent of the 1991-1992 restructure plan was to focus on the Company's
technology-based businesses in which it has significant leadership roles.
Included in the plan for sale or closure were certain operations in energy
exploration, drilling and supply, engine manufacture or overhaul, aviation
related components, hydraulic devices and instrumentation, metal forming tools
and equipment, welding systems and equipment, metal, wood and paper businesses,
semiconductors and electrical equipment manufacturing. The restructure plan for
operations which were to be closed or sold has been substantially completed.
Distribution of Unitrin
In 1990, the Registrant distributed to its shareholders all of the
outstanding common stock of Unitrin, Inc. (Unitrin), the parent company of
Registrant's former insurance subsidiaries. The units involved were United
Insurance Company and subsidiaries, Trinity Universal Insurance Company and
subsidiaries and Fireside Securities Corporation and subsidiaries.
(b) and (c)(1)(i) Information regarding business segments is presented in
Note 10 on pages 13-20 through 13-22 in Exhibit 13 - Teledyne, Inc. annual
report to shareholders for the year ended December 31, 1993. Teledyne's
individual divisions are responsible for marketing their products. Additional
information regarding the Company's products and services is presented in the
Outline of Products and Activities on pages 13-43 through 13-48 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1993.
(c)(1)(ii) There has been no public announcement about a new product or
industry segment that would require the investment of a material amount of
assets of the Registrant or that otherwise is material.
1
<PAGE>
Item 1. Business (Continued)
- -----------------------------
(c)(1)(iii) Substantially all parts and materials required in the
manufacture of Registrant's products are available from more than one supplier
and, in Registrant's opinion, the sources and availability of raw materials
essential to its business are adequate.
(c)(1)(iv) Registrant owns a number of patents and trademarks and is a
party to numerous patent, trademark and technical information license
agreements. Although these have been and are expected to be of value, in the
opinion of Registrant the loss of any single such item or technically related
group of such items would not materially affect the conduct of its business.
(c)(1)(v) and (c)(1)(vi) Not applicable.
(c)(1)(vii) For the year ended December 31, 1993, approximately 39 percent
of Registrant's revenues was attributable to U.S. government business.
Registrant's sales to the U.S. government by the aviation and electronics
segment were $742.9 million in 1993, $772.8 million in 1992 and $859.6 million
in 1991. Companies engaged in supplying goods and services to the U.S.
government are dependent on congressional appropriations and administrative
allotment of funds, and may be affected by changes in U.S. government policies
resulting from various domestic and international military and political
developments. While Registrant's subsidiaries perform work on a substantial
number of defense contracts, spanning many defense programs, a material
reduction in U.S. government appropriations for defense may have an adverse
effect on the Registrant's business, depending upon the defense programs
affected.
In addition, U.S. government contracts are terminable at the convenience of
the government or for default. In the event of termination, the affected
contractor is entitled to payment for allowable costs incurred through the date
of termination and, in general, to a proportionate share of the profit or fee
for the work done. The U.S. government may terminate a contract for default if
the contractor materially breaches the contract. In the event of a material
breach, traditional contract remedies apply.
Additional information regarding business with the U.S. government is
included in Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 13-28 through 13-36 in Exhibit 13 - Teledyne,
Inc. annual report to shareholders for the year ended December 31, 1993.
(c)(1)(viii) Registrant's backlog of confirmed orders was approximately
$1.4 billion at December 31, 1993 and $1.6 billion at December 31, 1992.
During the year ending December 31, 1994, it is anticipated that approximately
78.5 percent of confirmed orders on hand at December 31, 1993 will be filled.
Backlog of confirmed orders of the aviation and electronics segment was $1.0
billion at December 31, 1993 and $1.1 billion at December 31, 1992. During
the year ending December 31, 1994, it is anticipated that approximately 74.2
percent of the confirmed orders on hand at December 31, 1993 for this segment
will be filled.
(c)(1)(ix) See (c)(1)(vii) above.
(c)(1)(x) Intense competition exists with respect to most of Registrant's
products and services in each of its principal business segments. During the
year ended December 31, 1993, there were no material changes in the competitive
conditions in the various industries in which Registrant competes. In view of
the number and variety of its products and services, Registrant believes that
it
2
<PAGE>
Item 1. Business (Continued)
- -----------------------------
is not meaningful to state its relative position with respect to the market for
any particular product or service, or group of products or services.
(c)(1)(xi) Research and development is conducted by Registrant at its
various operating locations both for its own account and for customers on a
contract basis. Estimates of the components of research and development for the
years ended December 31, 1993, 1992 and 1991 included the following in millions:
1993 1992 1991
------ ------ ------
Customer-Sponsored:
Aviation and electronics segment $291.6 $295.5 $293.1
Industrial segment 85.5 119.1 58.6
Other 1.9 2.1 1.5
------ ------ ------
379.0 416.7 353.2
------ ------ ------
Company-Sponsored:
Aviation and electronics segment 20.3 22.3 22.2
Other 18.9 26.2 28.7
------ ------ ------
39.2 48.5 50.9
------ ------ ------
Total Research and Development $418.2 $465.2 $404.1
====== ====== ======
(c)(1)(xii) In the opinion of Registrant, compliance with existing federal,
state and local provisions regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, will
not have a material effect on the capital expenditures, earnings or competitive
position of Registrant and its subsidiaries. Additional information regarding
laws and regulations concerning the environment is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations on
page 13-36 in Exhibit 13 - Teledyne, Inc. annual report to shareholders for the
year ended December 31, 1993.
(c)(1)(xiii) Registrant and its subsidiaries employ approximately 21,000
persons, 10,400 of whom are employed at companies in the aviation and
electronics segment.
(d)(1) During the years ended December 31, 1993, 1992, and 1991,
Registrant and its subsidiaries did not engage in material manufacturing
operations in foreign countries. Export sales by U.S. operations to customers
in foreign countries represented approximately 15 percent in 1993 and 17 percent
in 1992 and 1991 of Registrant's sales.
(d)(1)(i) and (d)(1)(ii) Not applicable.
(d)(2) In the opinion of Registrant, there is no significant risk attendant
to its foreign operations.
(d)(3) Not applicable.
3
<PAGE>
Item 2. Properties
- -------------------
Registrant owns manufacturing and research facilities at numerous locations
as follows: aviation and electronics segment (2.8 million square feet),
primarily in California and Alabama; specialty metals segment (4.0 million
square feet), primarily in Oregon, Indiana and Pennsylvania; industrial segment
(2.6 million square feet), primarily in Michigan and Pennsylvania; consumer
segment (1.2 million square feet), primarily in Colorado and California.
Registrant leases facilities as follows: aviation and electronics segment
(4.0 million square feet), primarily in Alabama and California; specialty metals
segment (0.8 million square feet), primarily in Massachusetts; industrial
segment (0.1 million square feet); consumer segment (0.2 million square feet).
The terms of these leases range from monthly tenancies to several years, and
many may be renewed for additional periods at the option of Registrant.
Registrant believes that its property and equipment, most of which is fully
utilized in its operations, are well maintained and in good operating condition.
Item 3. Legal Proceedings
- --------------------------
Registrant is subject to ongoing examination of its federal tax returns by
the Internal Revenue Service (IRS). The IRS has proposed the disallowance of
deductions claimed by Registrant of $48.7 million in 1984 and $38.2 million in
1985 for contributions to Registrant's pension plans. The IRS may take the same
position in its audit of tax years 1986 and 1987, where the claimed deductions
for contributions to the pension plans totaled $37.7 million. Registrant
believes the IRS position on this issue is without merit and will defend the
matter vigorously.
The IRS has also proposed the disallowance of deductions claimed by
Registrant on behalf of a former wholly-owned insurance subsidiary with respect
to insurance loss reserves of $269 million in 1984 and $115 million in 1985.
Registrant believes the proposed disallowances are unjustified and will contest
the matter vigorously. Moreover, any such reserve adjustments would be timing
adjustments which would result in the realization of offsetting tax benefits
subsequent to the tax years at issue. Accordingly, pursuant to the tax
agreement between Registrant and its former subsidiary, Registrant would bear
only the interim interest cost and any costs resulting from a difference in tax
rates with respect to the adjustments sustained, if any.
On October 29, 1992, Eugene J. Bass, a shareholder purporting to act
derivatively on behalf of Registrant, commenced an action in the United States
District Court for the Central District of California against certain of
Registrant's directors and executive officers, a former employee of Registrant's
Teledyne Relays unit, and the Registrant as a "nominal" defendant.
Subsequently, Herman and Lillian Krangel and Marshall Wolf joined the action as
plaintiffs. On February 26, 1993, plaintiffs filed a consolidated second
amended complaint in the action which alleged, among other things, violations of
RICO and the Securities Exchange Act of 1934, and breaches of fiduciary duty, in
connection with the management and administration of the affairs of Registrant
with respect to its Teledyne Controls, Teledyne Electro-Mechanisms, Teledyne
Electronics, Teledyne Firth Sterling, Teledyne Neosho, Teledyne Relays, Teledyne
Ryan Aeronautical, Teledyne Solid State, Teledyne Systems, Teledyne Thermatics
and Teledyne Wah Chang Albany units, and with respect to Registrant's foreign
military sales effort in Egypt and Saudi Arabia. The action seeks a declaratory
judgment, treble the damages allegedly sustained by Registrant as a result of
the alleged conduct, return of salaries and other remuneration received by the
4
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
defendants, a declaration that the election of directors at Registrant's annual
meetings in 1987 through 1992 is null and void, plaintiffs' costs and expenses,
including attorneys' fees, and other appropriate relief. On August 19, 1993,
the Court issued a memorandum decision dismissing plaintiffs' state law claims
without prejudice to refiling in state court, dismissing plaintiffs' RICO and
Securities Exchange Act claims without prejudice, and ordering plaintiffs to
show cause why their RICO and Securities Exchange Act claims should not be
dismissed with prejudice. After briefing by the parties, the Court entered an
order on September 30, 1993, dismissing plaintiffs' RICO and Securities
Exchange Act claims with prejudice. Plaintiffs filed a notice of appeal on
October 4, 1993. Registrant does not believe that the outcome of this action
will have a material adverse effect on its financial condition.
On December 7, 1993, following dismissal of their consolidated second
amended complaint in the above-described action, Eugene J. Bass, Herman Krangel,
Lillian Krangel and Marshall Wolf, shareholders purporting to act derivatively
on behalf of Registrant, commenced an action in the Superior Court of the State
of California, County of Los Angeles, against certain of Registrant's directors
and executive officers, a former employee of Teledyne Relays, and Registrant as
a "nominal" defendant. The complaint in this action alleges, among other
things, breaches of fiduciary duty and gross mismanagement in connection with
the management and administration of the affairs of Registrant with respect to
its Teledyne Controls, Teledyne Electro-Mechanisms, Teledyne Electronics,
Teledyne Firth Sterling, Teledyne Neosho, Teledyne Relays, Teledyne Ryan
Aeronautical, Teledyne Solid State, Teledyne Systems, Teledyne Thermatics and
Teledyne Wah Chang Albany units, and with respect to Registrant's foreign
military sales effort in Egypt and Saudi Arabia. The action seeks a declaratory
judgment, damages allegedly sustained by Registrant as a result of the alleged
conduct, return of salaries and other remuneration received by the defendants,
plaintiffs' costs and expenses, including attorneys' fees, and other appropriate
relief. Registrant does not believe that the outcome of this action will have a
material adverse effect on its financial condition.
On February 11, 1993, Moise Katz and Harry Lewis, shareholders purporting
to act derivatively on behalf of Registrant, commenced an action in the Superior
Court of the State of California, County of Los Angeles, against certain of
Registrant's directors and Registrant as a "nominal" defendant. The complaint
alleges, among other things, gross negligence and breaches of fiduciary duty in
connection with the management and administration of the affairs of Registrant
with respect to its Teledyne Controls, Teledyne Relays and Teledyne Systems
units, each of which has been subject to investigation by the U.S. government,
and with respect to Registrant's foreign military sales effort in Egypt and
Saudi Arabia. The complaint seeks damages sustained by Registrant as a result
of the alleged conduct, plaintiffs' costs and expenses, including attorneys'
fees, and other appropriate relief. Registrant does not believe that the
outcome of this action will have a material adverse effect on its financial
condition.
Registrant has been and is subject from time to time to various audits,
reviews and investigations relating to Registrant's compliance with federal and
state laws, including those discussed in Note 11 to the accompanying
consolidated financial statements. Should any unit involved be charged with
wrongdoing, or should the U.S. government determine that the unit is not a
"presently responsible contractor," that unit, and conceivably Registrant, could
be temporarily suspended or, in the event of a conviction, could be debarred for
up to three years from receiving new government contracts or government-approved
subcontracts. A suspension or debarment of Registrant would have a material
5
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
adverse effect on the future operating results and consolidated financial
condition of Registrant. However, except as otherwise discussed in Note 11 to
the accompanying consolidated financial statements, Registrant does not possess
sufficient information to determine whether it will sustain a loss as a result
of any of the investigations discussed in Note 11, or to reasonably estimate the
amount of any such loss, and has not been able to identify the existence of a
material loss contingency arising therefrom.
Registrant is defending a civil action filed on behalf of the U.S.
government pursuant to the False Claims Act in the United States District Court
for the Central District of California, entitled United States of America, ex
rel., Taxpayers Against Fraud, Klaus Kirchhoff and Max Killingsworth v. Teledyne
Industries, Inc. and Teledyne Systems Company, Inc., in which the government
intervened on November 28, 1990. The action alleges that Registrant's Teledyne
Systems unit violated the False Claims Act in connection with proposals for
twenty-seven sole source, fixed-price contracts, which the government
preliminarily estimated resulted in damages to the United States of
approximately $90 million. On June 24, 1993, Registrant's motion for partial
summary judgment was granted in part and denied in part, reducing the estimate
to approximately $70 million. Subsequently, on January 10, 1994, the government
filed its Memorandum of Contentions of Fact and Law, contending that damages to
the United States total $40.9 million. The government seeks treble the damages
allegedly sustained by the United States together with civil penalties of up to
$10,000 for any false claim made. Trial of this matter is presently scheduled
to commence March 8, 1994. The allegations of this suit were initially the
subject of a federal grand jury investigation, which to Registrant's knowledge
has been inactive for almost two years. Based on an internal review, and after
consultation with counsel, Registrant does not possess sufficient information to
determine whether it will sustain a loss in these matters, or to reasonably
estimate the amount of any such loss. Consequently, Registrant has not been
able to identify the existence of a material loss contingency arising therefrom.
Registrant is defending a civil action filed on behalf of the U.S.
government pursuant to the False Claims Act in the United States District Court
for the Central District of California, entitled United States of America, ex
rel., Marianne D. Gendron v. Teledyne Controls and Teledyne, Inc. The action
alleges defects in the procurement and quality control systems of Registrant's
Teledyne Controls unit. The U.S. government intervened in this matter on
June 18, 1991, but withdrew following Registrant's February 18, 1993, agreement
to pay $2.15 million in partial settlement of the matter without admission of
wrongdoing. The allegations of this suit gave rise to an investigation of
Teledyne Controls by a federal grand jury, the Defense Criminal Investigative
Service and other federal agencies. The settlement resolves all outstanding
investigations regarding the claims encompassed by the agreement. The plaintiff
was granted leave to pursue the remaining allegations in the case alone, and on
April 23, 1993, filed a second amended complaint. Plaintiff alleges that the
actual damages to the United States cannot be ascertained, but estimates that
the total damages to the United States exceed $120 million. Plaintiff seeks
treble the damages allegedly sustained by the United States together with civil
penalties of up to $10,000 for any false claim made. Based on an internal
review, and after consultation with counsel, Registrant does not possess
sufficient information to determine whether Registrant will sustain a further
loss in this matter, or to reasonably estimate the amount of any such loss.
Consequently, Registrant has not been able to identify the existence of a
material loss contingency arising from this matter.
6
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
Registrant is defending a civil action filed on behalf of the U.S.
government under the False Claims Act in the United States District Court for
the Central District of California, entitled United States of America, ex rel.,
Taxpayers Against Fraud, Almon Muelhausen II and Emil Stache v. Teledyne
Industries, Inc. Plaintiffs allege that Registrant's Teledyne Relays unit
falsified test certifications for relays supplied to the government. The
government intervened in the action on April 22, 1992, and the complaint and
first amended complaint were served on Registrant on August 19, 1992. In
addition to the claims alleged under the False Claims Act, the first amended
complaint alleges various statutory and common law causes of action, including
claims for trademark infringement, unfair competition, breach of contract and
fraud. The government seeks treble the damages allegedly sustained by the
United States (the government has preliminarily estimated such damages at $76.2
million), profits of not less than $41.6 million allegedly derived by Teledyne
Relays from the sales at issue, and civil penalties of up to $10,000 for any
false claim made. In November of 1992, Registrant pled guilty to making false
statements and paid a $17.5 million fine to resolve a related criminal
investigation. It is likely that resolution of this suit will result in the
recognition of a loss contingency which is not currently estimable.
On April 13, 1993, the Defense Logistics Agency (DLA) debarred Teledyne
Relays from receiving awards of new government contracts or government-approved
subcontracts for a period of one year. Thereafter, on April 16, 1993, the
Defense Electronics Supply Center (DESC) suspended Teledyne Relays from shipping
all products qualified to military specifications, and rescinded its October 30,
1992, authorization permitting Teledyne Relays to fill any orders for such
products accepted by Teledyne Relays as of October 30, 1992. On December 22,
1993, the DLA terminated the debarment, and on January 6, 1994, DESC approved
for sale certain product qualified to military specifications and manufactured
by Teledyne Relays prior to the debarment. Teledyne Relays is now eligible to
seek readmission to the Qualified Products List Program.
On May 26, 1993, a grand jury impaneled by the United States District Court
for the Southern District of Florida returned an indictment in connection with
a U.S. government investigation of alleged violations of the U.S. export control
laws. The indictment includes charges against Registrant's Teledyne Wah Chang
Albany unit and two of its employees relating to the sale of zirconium to a
South American industrialist. Registrant believes that the government's
evidence does not support the allegations contained in the indictment, and is
vigorously defending itself. At an arraignment on June 14, 1993, Registrant
entered a plea of not guilty. If Registrant were found guilty, it could face
fines of up to $1 million for each of the four alleged violations of the Arms
Export Control Act, five times the value of the export involved or $1 million,
whichever is greater ($1.55 million or $1 million) for each of the two
violations of the Export Administration Act, and $500,000 for each of the three
alleged violations of the False Statements Act.
As a result of the indictment, the United States Department of State
temporarily suspended Teledyne Wah Chang Albany, effective July 26, 1993, from
receiving licenses for export of products and services on the munitions list.
This suspension will not have a material adverse affect on the financial
condition of Registrant. However, in the event of a conviction, Teledyne Wah
Chang Albany and conceivably Registrant would be subject to debarment for a
period of up to three years from receiving such export licenses, and could be
suspended for up to ten years from eligibility for commercial export licenses.
In addition, should the U.S. government determine that Teledyne Wah Chang Albany
is not a "presently responsible contractor," Teledyne Wah Chang Albany and
7
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
conceivably Registrant could be temporarily suspended or, in the event of a
conviction, could be debarred for up to three years from receiving new
government contracts or government-approved subcontracts. Based on an ongoing
internal review, and after consultation with counsel, Registrant does not
possess sufficient information to determine whether Registrant will sustain a
loss in this matter, or to reasonably estimate the amount of any such loss.
Consequently, Registrant has not been able to identify the existence of a
material loss contingency arising therefrom.
Registrant is defending a civil action filed on behalf of the U.S.
government under the False Claims Act in the United States District Court for
the Central District of California, entitled United States of America, ex rel.,
Almon Muelhausen II and Emil Stache v. Teledyne, Inc., Teledyne Industries, Inc.
and Teledyne Solid State. The government declined to intervene in the action on
August 23, 1993, and the complaint was served on Registrant on October 29,
1993. Plaintiffs allege that Registrant's Teledyne Solid State unit falsified
test certifications for solid state relays supplied to the government.
Plaintiffs seek treble the damages allegedly sustained by the United States, and
civil penalties of up to $10,000 for any false claim made. Based on an internal
review, and after consultation with counsel, Registrant does not possess
sufficient information to determine whether Registrant will sustain a loss in
this matter, or to reasonably estimate the amount of any such loss.
Consequently, Registrant has not been able to identify the existence of a
material loss contingency arising therefrom.
Registrant is informed that it has been named as a defendant in three civil
actions filed pursuant to the False Claims Act in the U.S. District Court for
the Central District of California. Two of these cases concern Registrant's
Teledyne Electronics unit, of which one reportedly alleges damages in a material
amount. The third concerns Registrant's Teledyne Solid State and Teledyne
Relays units. Registrant is further informed that it has been named as a
defendant in a fourth action filed pursuant to the False Claims Act in the U.S.
District Court for the Western District of Missouri concerning Registrant's
former Teledyne Neosho unit. All of these cases remain under seal.
Registrant does not possess sufficient information to determine whether
Registrant will sustain a loss in these matters, or to reasonably estimate the
amount of any such loss. Consequently, Registrant has not been able to identify
the existence of a material loss contingency arising therefrom.
On August 3, 1993, the United States of America filed an action against
Registrant in the United States District Court for the Southern District of
California alleging that Registrant's Teledyne Ryan Aeronautical unit violated
its wastewater discharge permit by exceeding its discharge limitations from
August 1, 1988 to February 22, 1991, and by diluting its wastewater on numerous
occasions from 1988 through 1992. The government sought civil penalties of up
to $25,000 per day for each alleged violation. On November 24, 1993, Registrant
reached agreement with the government to settle this matter for $500,000,
subject to final government approvals and execution of a mutually acceptable
settlement agreement.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
8
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- --------------------------------------------------------------------------
Matters
- -------
This information is presented on pages 13-39 and 13-42 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1993.
Item 6. Selected Financial Data
- --------------------------------
This information is presented on pages 13-40 and 13-41 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1993.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operation
- --------------------
This information is presented on pages 13-28 through 13-36 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1993.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
This information is presented on pages 13-1 through 13-39 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1993.
Item 9. Changes in and Disagreements With Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
Not applicable.
9
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
This information will be included in the Teledyne, Inc. proxy statement for
1994 which will be filed within 120 days of Registrant's year end and is hereby
incorporated by reference to such proxy statement.
Item 11. Executive Compensation
- --------------------------------
This information will be included in the Teledyne, Inc. proxy statement for
1994 which will be filed within 120 days of Registrant's year end and is hereby
incorporated by reference to such proxy statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
This information will be included in the Teledyne, Inc. proxy statement for
1994 which will be filed within 120 days of Registrant's year end and is hereby
incorporated by reference to such proxy statement.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
This information will be included in the Teledyne, Inc. proxy statement for
1994 which will be filed within 120 days of Registrant's year end and is hereby
incorporated by reference to such proxy statement.
10
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a)(1) Consolidated Balance Sheets - December 31, 1993 and 1992
Consolidated Statements of Operations for the Years Ended December 31,
1993, 1992 and 1991
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1992 and 1991
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1993, 1992 and 1991
Report of Independent Public Accountants
Notes to Consolidated Financial Statements
(a)(2) See the index preceding the financial statement schedule.
Financial Statement Schedule A - schedule supporting the consolidated
financial statements of Teledyne, Inc. and subsidiaries.
(a)(3) See the exhibit index.
(b) Registrant did not file any reports on Form 8-K during the quarter
ended December 31, 1993
(c) Included in 14(a)(3) above.
(d) Included in 14(a)(2) above.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this annual report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TELEDYNE, INC.
(Registrant)
Date: January 26, 1994 By /S/ William P. Rutledge
_____________________________
William P. Rutledge
Director, Chairman of the
Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Registrant
and in the capacities and as of the date indicated.
Date: January 26, 1994 By /S/ William P. Rutledge
____________________________
William P. Rutledge
Director, Chairman of the
Board and Chief Executive
Officer
Date: January 26, 1994 By /S/ Donald B. Rice
____________________________
Donald B. Rice
Director, President and Chief
Operating Officer
Date: January 26, 1994 By /S/ George A. Roberts
____________________________
George A. Roberts
Director
Date: January 26, 1994 By /S/ Arthur Rock
____________________________
Arthur Rock
Director
Date: January 26, 1994 By /S/ Henry E. Singleton
____________________________
Henry E. Singleton
Director
Date: January 26, 1994 By /S/ Douglas J. Grant
____________________________
Douglas J. Grant
Treasurer
(Principal Financial and
Accounting Officer)
12
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
FINANCIAL STATEMENT SCHEDULE A
------------------------------
SCHEDULE SUPPORTING THE CONSOLIDATED FINANCIAL STATEMENTS OF
------------------------------------------------------------
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
INDEX
-----
Page
----
Report of Independent Public Accountants A-2
Schedule I - Marketable Securities - Other Investments A-3
All other schedules are not submitted because they are not applicable or
not required or because the required information is included in the consolidated
financial statements of Teledyne, Inc. and subsidiaries or notes thereto.
A-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO TELEDYNE, INC.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Teledyne, Inc.and subsidiaries included
in this Form 10-K, and have issued our report thereon dated January 12, 1994.
Our audit was made for the purpose of forming an opinion on those financial
statements taken as a whole. The schedule listed in the accompanying index is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN & CO.
Los Angeles, California
January 12, 1994
A-2
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
------------------------------------------------------
December 31, 1993
-----------------
(In millions except share amounts)
<TABLE>
<CAPTION>
Number of Market Value Amount at
Shares or of Each Issue Which Shown
Name of Issuer and Principal Amount Cost of at Balance in the
Title of Each Issue of Bonds and Notes Each Issue Sheet Date Balance Sheet
- ------------------------------------------ ------------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
Cash $ 14.7
United States Treasury notes, at amortized
cost $ 112.8 $116.7 $119.0 115.3
========== ====== ======
Repurchase agreements, at cost $ 25.0 $ 25.0 $ 25.0 25.0
========== ====== ====== -----
Total Cash and Marketable Securities $ 155.0
=======
</TABLE>
A-3
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
INDEX TO EXHIBITS
-----------------
Number
------
Restated Certificate of Incorporation of Teledyne, Inc. as amended and 3(i)
previously filed with Securities and Exchange Commission ("Commission")
as Exhibit 3 to the Company's Form 10-K Report for the year ended
December 31, 1991, File No. 1-5212, and incorporated herein by reference.
By-Laws of Teledyne, Inc., as restated and amended and previously filed 3(ii)
with the Commission as Exhibit 3 to the Company's Form 10-K Report for
the year ended December 31, 1991, File No. 1-5212, and incorporated
herein by reference.
Indenture dated as of June 1, 1969 between Continental Motors Corporation 4.1
and Bank of America National Trust and Savings Association, as
supplemented by First Supplemental Indenture dated as of October 31, 1969
between Continental Motors Corporation and Bank of America National Trust
and Savings Association and Second Supplemental Indenture dated as of
December 16, 1969 between Teledyne, Inc. and Continental Motors
Corporation and Security Pacific National Bank. Indenture was previously
filed with the Commission as Exhibit 4 to the Company's Form 10-K Report
for the year ended December 31, 1992, File No. 1-5212, and incorporated
herein by reference.
Indenture dated as of June 1, 1974 between Teledyne, Inc. and Union Bank, 4.2
as supplemented by Second Supplemental Indenture dated as of May 5, 1980
between Teledyne, Inc. and Union Bank, previously filed with the
Commission as Exhibit 4 to the Company's Form 10-K Report for the year
ended December 31, 1992, File No. 1-5212, and incorporated herein by
reference.
Teledyne, Inc. 1990 Stock Option Plan, previously filed with the 10.1
Commission as Exhibit 10 to the Form 10-K Report for the year ended
December 31, 1990, File No. 1-5212, and incorporated herein by
reference.
Summary of Teledyne, Inc. Deferred Compensation Plan, previously filed 10.2
with the Commission as Exhibit 10 to the Company's Form 10-K Report for
the year ended December 31, 1992, File No. 1-5212 and incorporated herein
by reference.
Financial information from the Teledyne, Inc. annual report to shareholders 13
for the year ended December 31, 1993.
Subsidiaries of registrant. 21
Consent of independent public accountants. 23
All other exhibits are not submitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements of Teledyne, Inc. and subsidiaries or notes thereto.
<PAGE>
EXHIBIT 13
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
December 31, 1993 and 1992
--------------------------
(In millions except share and per share amounts)
1993 1992
-------- --------
ASSETS
Current Assets:
Cash and marketable securities $ 155.0 $ 231.3
Receivables 332.4 369.9
Inventories 172.6 197.8
Deferred income taxes 123.0 145.7
Prepaid expenses 20.5 15.3
-------- --------
Total current assets 803.5 960.0
Property and Equipment 318.8 317.5
Prepaid Pension Cost 280.3 222.1
Deferred Income Taxes 24.0 -
Other Assets 51.2 36.3
-------- --------
$1,477.8 $1,535.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 106.9 $ 98.1
Accrued liabilities 341.4 373.7
-------- --------
Total current liabilities 448.3 471.8
Long-Term Debt 356.6 449.7
Accrued Postretirement Benefits 277.5 -
Deferred Income Taxes - 55.8
Other Long-Term Liabilities 114.9 117.5
-------- --------
1,197.3 1,094.8
-------- --------
Shareholders' Equity:
Common stock, $1.00 par value, 100,000,000 shares
authorized, 55,439,048 shares in 1993 and 55,412,845
shares in 1992 issued and outstanding 55.4 55.4
Additional paid-in capital 34.9 34.5
Retained earnings 186.7 347.5
Currency translation adjustment 3.5 3.7
-------- --------
Total shareholders' equity 280.5 441.1
-------- --------
$1,477.8 $1,535.9
======== ========
The accompanying notes are an integral part of these statements.
13-1
<PAGE>
EXHIBIT 13
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
For the Years Ended December 31, 1993, 1992 and 1991
----------------------------------------------------
(In millions except per share amounts)
1993 1992 1991
--------- --------- ---------
Sales $ 2,491.7 $ 2,887.6 $ 3,206.8
--------- --------- ---------
Costs and Expenses*:
Cost of sales 1,917.9 2,243.2 2,571.5
Selling and administrative expenses 466.4 528.8 508.6
Interest expense 45.1 56.2 61.9
Realignment/restructure 1.4 (24.4) 107.6
--------- --------- ---------
2,430.8 2,803.8 3,249.6
--------- --------- ---------
Earnings before Other Income 60.9 83.8 (42.8)
Other Income 52.4 3.2 11.0
--------- --------- ---------
Income (Loss) before Income Taxes,
Extraordinary Loss and Cumulative Effect
of Accounting Changes 113.3 87.0 (31.8)
Provision (Credit) for Income Taxes 40.5 41.1 (6.4)
--------- --------- ---------
Income (Loss) before Extraordinary Loss and
Cumulative Effect of Accounting Changes 72.8 45.9 (25.4)
Extraordinary Loss on Redemption of Debt (3.7) (2.7) -
Cumulative Effect of Accounting Changes (185.6) (10.0) -
--------- --------- ---------
Net Income (Loss) $ (116.5) $ 33.2 $ (25.4)
========= ========= =========
Income (Loss) Per Share:
Income (loss) before extraordinary loss
and cumulative effect of accounting
changes $ 1.32 $ 0.83 $ (0.46)
Extraordinary loss on redemption of debt (0.07) (0.05) -
Cumulative effect of accounting changes (3.35) (0.18) -
--------- --------- ---------
Net Income (Loss) Per Share $ (2.10) $ 0.60 $ (0.46)
========= ========= =========
*Includes a credit of non-cash pension income of $66.2 million in 1993, $37.9
million in 1992 and $28.2 million in 1991.
The accompanying notes are an integral part of these statements.
13-2
<PAGE>
EXHIBIT 13
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the Years Ended December 31, 1993, 1992 and 1991
----------------------------------------------------
(In millions)
1993 1992 1991
-------- -------- -------
Operating activities:
Net income (loss) $ (116.5) $ 33.2 $ (25.4)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Increase in accrued postretirement benefits 299.2 - -
Depreciation and amortization of
property and equipment 72.7 79.1 84.1
Increase in prepaid pension cost (58.2) (47.3) (38.6)
Decrease (increase) in deferred
income taxes (57.1) 59.0 (64.6)
Decrease in accounts payable and
accrued liabilities (46.0) (100.7) (20.3)
Gain on sale of Litton common stock (40.4) - -
Decrease in inventories 21.8 29.5 38.0
Decrease in receivables 17.4 77.9 32.2
Realignment/restructure 1.4 (4.0) 107.6
Increase (decrease) in accrued income taxes - (17.9) 12.9
Other, net (3.0) (2.2) 32.8
-------- -------- -------
Net cash provided by operating activities 91.3 106.6 158.7
-------- -------- -------
Investing activities:
Proceeds from the sale of marketable
securities 163.5 54.4 63.8
Purchases of marketable securities (70.4) (47.2) (85.0)
Net decrease (increase) in
short-term investments 28.5 (41.5) 8.0
-------- -------- -------
Net sale (purchase) of marketable securities 121.6 (34.3) (13.2)
Purchases of property and equipment (81.2) (69.6) (97.6)
Collection of notes receivable from the
sales of businesses 17.1 - -
Proceeds from the sales of businesses 9.2 95.8 -
Other, net (5.9) 7.3 10.5
-------- -------- -------
Net cash provided by (used in)
investing activities 60.8 (0.8) (100.3)
-------- -------- -------
Financing activities:
Reduction of long-term debt (101.6) (60.0) (17.2)
Cash dividends (44.3) (44.4) (44.3)
Other, net 0.4 0.3 1.6
-------- -------- -------
Net cash used in financing activities (145.5) (104.1) (59.9)
-------- -------- -------
Increase (decrease) in cash $ 6.6 $ 1.7 $ (1.5)
======== ======== =======
Noncash transactions:
Receivables from the sales of businesses $ 4.2 $ 19.0 $ -
======== ======== =======
Income taxes paid (received) $ (2.6) $ 26.5 $ 36.3
======== ======== =======
Interest paid on long-term debt $ 41.7 $ 50.7 $ 55.2
======== ======== =======
The accompanying notes are an integral part of these statements.
13-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 13
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
For the Years Ended December 31, 1993, 1992 and 1991
----------------------------------------------------
(In millions except per share amounts)
Additional Currency
Common Paid-In Retained Translation Shareholders'
Stock Capital Earnings Adjustment Equity
------ ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1990 $55.4 $34.5 $ 428.4 $ 5.2 $ 523.5
Net loss - - (25.4) - (25.4)
Cash dividends ($0.80 per share) - - (44.3) - (44.3)
Currency translation adjustment - - - 0.1 0.1
----- ----- ------- ----- -------
Balance, December 31, 1991 55.4 34.5 358.7 5.3 453.9
Net income - - 33.2 - 33.2
Cash dividends ($0.80 per share) - - (44.4) - (44.4)
Currency translation adjustment - - - (1.6) (1.6)
----- ----- ------- ----- -------
Balance, December 31, 1992 55.4 34.5 347.5 3.7 441.1
Net loss - - (116.5) - (116.5)
Cash dividends ($0.80 per share) - - (44.3) - (44.3)
Exercise of stock options - 0.4 - - 0.4
Currency translation adjustment - - - (0.2) (0.2)
----- ----- ------- ----- -------
Balance, December 31, 1993 $55.4 $34.9 $ 186.7 $ 3.5 $ 280.5
===== ===== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these statements.
13-4
<PAGE>
EXHIBIT 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholders and Board of Directors of Teledyne, Inc.:
We have audited the accompanying consolidated balance sheets of Teledyne, Inc.
(a Delaware corporation) and subsidiaries (the Company) as of December 31, 1993
and 1992 and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Teledyne, Inc.
and subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
As discussed further in Note 11 to the consolidated financial statements,
the Company is defending a suit filed under the False Claims Act at the
Company's Teledyne Relays unit. It is likely that resolution of the civil suit
will result in the recognition of a loss contingency which is not currently
estimable. Accordingly, no provision for any liability has been made in the
accompanying consolidated financial statements.
As explained in Notes 6 and 8 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 109 in
1992 and SFAS No. 106 in 1993.
Arthur Andersen & Co.
Los Angeles, California
January 12, 1994
13-5
<PAGE>
EXHIBIT 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1. Summary of Significant Accounting Policies -
Principles of Consolidation. The consolidated financial statements of Teledyne,
Inc. include the accounts of all its subsidiaries. All material intercompany
accounts and transactions have been eliminated. Certain amounts for 1992 and
1991 have been reclassified to conform with the 1993 presentation.
Receivables. Receivables are presented net of a reserve for doubtful accounts
of $9.2 million at December 31, 1993 and $8.0 million at December 31, 1992.
Inventories. Inventories are stated at the lower of cost (last-in, first-out
and first-in, first-out methods) or market, less progress payments. Costs
include direct material, direct labor and applicable manufacturing and
engineering overhead, and other direct costs. Any foreseeable losses are
charged to income when determined.
Cost in Excess of Net Assets of Purchased Businesses. Other assets include cost
in excess of net assets of purchased businesses of $25.6 million at December 31,
1993 and $22.8 million at December 31, 1992. Substantially all of this cost
relates to businesses purchased prior to November 1970 and is not being
amortized.
Financial Instruments. The fair value of financial instruments, except for
long-term debt, approximated their carrying values at December 31, 1993. Fair
values have been determined through information obtained from quoted market
sources and management estimates.
Revenue Recognition. Commercial sales and revenue from U.S. government fixed-
price type contracts are generally recorded as deliveries are made or as
services are rendered. For certain fixed-price type contracts that require
substantial performance over a long time period before deliveries begin, sales
are recorded based upon attainment of scheduled performance milestones. Sales
under cost-reimbursement contracts are recorded as costs are incurred and fees
are earned.
Depreciation and Amortization. Buildings and equipment are depreciated
primarily on declining balance methods over their estimated useful lives.
Leasehold improvements are amortized on a straight-line basis over the life of
the lease. Maintenance and repair costs ($60.1 million in 1993, $71.4 million
in 1992 and $83.1 million in 1991) are charged to income as incurred, and
betterments and major renewals are capitalized. Cost and accumulated
depreciation of property sold, retired or fully depreciated are removed from the
accounts, and any resultant gain or loss is included in income.
Research and Development. Company-funded research and development costs, which
excludes bid and proposal costs, ($39.2 million in 1993, $48.5 million in 1992
and $50.9 million in 1991) are expensed as incurred. Costs related to
customer-funded research and development contracts are charged to costs and
expenses as the related sales are recorded. A portion of the cost incurred for
company-funded research and development is recoverable through overhead cost
allowances on government contracts.
13-6
<PAGE>
EXHIBIT 13
Note 1. Summary of Significant Accounting Policies - (Continued)
Environmental. Costs that mitigate or prevent future environmental
contamination or extend the life, increase the capacity or improve the safety or
efficiency of property utilized in current operations are capitalized. Other
costs that relate to current operations or an existing condition caused by past
operations are expensed. Liabilities are recorded when the Company's liability
is probable and the costs are reasonably estimable. Liabilities are estimated
and evaluated independently of possible recoveries, if any, from insurance
carriers and other third parties. The measurement of environmental liabilities
by the Company is based on currently available facts, existing technology and
presently enacted laws and regulations taking into consideration the Company's
prior experience in site remediation and data concerning clean-up costs
available from other companies and regulatory authorities.
Income Taxes. In 1992, the Company changed its method of accounting for income
taxes to comply with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, as discussed in Note 6. Provision (credit) for income
taxes includes federal, state and foreign income taxes. Deferred income taxes
are provided for temporary differences (timing differences prior to 1992) in the
recognition of income and expenses. Deferred income taxes reflect enacted
income tax rates expected to be in effect rather than historical rates.
Net Income (Loss) Per Share. The weighted average number of shares of common
stock used in the computation of net income per share was 55,420,654 in 1993 and
55,412,845 in 1992 and 1991. The potential dilution of common stock equivalents
is not material and, therefore, is not included in the computation of per share
data.
13-7
<PAGE>
EXHIBIT 13
Note 2. Inventories -
Inventories at December 31, 1993 and 1992 were as follows (in millions):
1993 1992
------- -------
Raw materials and work-in-process $ 257.1 $ 277.1
Finished goods 49.0 47.6
------- -------
306.1 324.7
Progress payments (133.5) (126.9)
------- -------
$ 172.6 $ 197.8
======= =======
Inventories, before progress payments, determined on the last-in, first-out
method were $233.1 million at December 31, 1993 and $258.1 million at
December 31, 1992. The remainder of the inventories was determined using the
first-in, first-out method. Inventories stated on the last-in, first-out basis
were $184.0 million and $208.4 million less than their first-in, first-out
values at December 31, 1993 and 1992, respectively. These first-in, first-out
values do not differ materially from current cost.
During 1993, 1992 and 1991 inventory usage resulted in liquidations of
last-in, first-out inventory quantities. These inventories were carried at the
lower costs prevailing in prior years as compared with the cost of current
purchases. The effect of these last-in, first-out inventory liquidations was to
increase net income by $11.4 million in 1993, $11.5 million in 1992 and $7.5
million in 1991.
Inventories, before progress payments, related to long-term contracts were
$129.3 million and $132.6 million at December 31, 1993 and 1992, respectively.
Progress payments related to long-term contracts were $116.0 million and $116.7
million at December 31, 1993 and 1992, respectively.
13-8
<PAGE>
EXHIBIT 13
Note 3. Long-Term Debt -
Long-term debt at December 31, 1993 and 1992 was as follows (in millions):
1993 1992
------ ------
10% Subordinated Debentures, due 2004, Series A and C
(net of unamortized discount of $30.9 in 1993 and $40.1
in 1992) $329.1 $419.8
7% Subordinated Debentures, due 1999, $1.9 payable annually 26.7 26.7
Other 4.1 4.5
------ ------
359.9 451.0
Current portion (3.3) (1.3)
------ ------
$356.6 $449.7
====== ======
At December 31, 1993, the market value of the 10% Subordinated Debentures was
$370.7 million and the 7% Subordinated Debentures was $26.7 million.
In 1993, the Company redeemed at par $100 million of its 10% Subordinated
Debentures due 2004, Series C resulting in an extraordinary loss of $6.0 million
or $3.7 million, net of tax. In 1992, the Company redeemed at par $50 million
($46.7 million, net of treasury) of its 10% Subordinated Debentures due 2004,
Series A resulting in an extraordinary loss of $4.4 million, or $2.7 million,
net of tax.
Long-term debt payable is $3.3 million in 1994, $3.1 million in 1995, $2.7
million in 1996, $2.2 million in 1997 and $2.2 million in 1998.
The Company's pension and savings plans held Teledyne 10% Subordinated
Debentures with a par value of $86.6 million and $113.9 million at December 31,
1993 and 1992, respectively.
The Company has domestic credit lines with various banks totaling $125.0
million at December 31, 1993; no amounts were borrowed under these lines during
1993 or 1992. Commitments under standby letters of credit outstanding were
$105.9 million at December 31, 1993. Compensating balance arrangements of an
informal nature exist. Such arrangements had no material effect on the
Company's consolidated financial statements at December 31, 1993.
13-9
<PAGE>
EXHIBIT 13
Note 4. Supplemental Balance Sheet Information -
Cash and marketable securities at December 31, 1993 and 1992 were as follows (in
millions):
1993 1992
------- -------
Cash $ 14.7 $ 8.1
United States Treasury notes, at amortized cost
(market: 1993-$119.0; 1992-$124.4) 115.3 122.0
Repurchase agreements, at cost which approximates market 25.0 53.5
Litton common stock, at cost (market: 1992-$75.2) - 45.1
Other marketable securities, at amortized cost - 2.6
------- -------
$ 155.0 $ 231.3
======= =======
In 1993, the Company sold its investment in Litton common stock resulting in a
$40.4 million gain, included in other income.
Property and equipment at December 31, 1993 and 1992 were as follows (in
millions):
1993 1992
------- -------
Land $ 30.2 $ 29.5
Buildings 233.4 231.1
Equipment and leasehold improvements 563.7 529.8
------- -------
827.3 790.4
Accumulated depreciation and amortization (508.5) (472.9)
------- -------
$ 318.8 $ 317.5
======= =======
Accounts payable included $22.1 million at December 31, 1993 and $14.2 million
at December 31, 1992 for checks outstanding in excess of cash balances.
Accrued liabilities at December 31, 1993 and 1992 were as follows (in
millions):
1993 1992
------- -------
Salaries and wages $ 66.5 $ 64.3
Advances and billings in excess of costs 61.7 69.5
Other 213.2 239.9
------- -------
$ 341.4 $ 373.7
======= =======
13-10
<PAGE>
EXHIBIT 13
Note 5. Shareholders' Equity -
The Company is authorized to issue 15 million shares of preferred stock, $1 par
value. No preferred shares were issued or outstanding. In 1988, the Board of
Directors authorized the purchase of up to five million shares of the Company's
common stock. As of December 31, 1993, the Company had purchased 1,432,000
shares.
In 1990, the Company's Board of Directors adopted the 1990 Stock Option
Plan covering an aggregate of 2,500,000 shares of the Company's common stock.
Under the 1990 Stock Option Plan, options to purchase shares of the Company's
common stock may be granted to certain key employees. The options may be
incentive stock options, non-qualified stock options, or stock appreciation
rights. If incentive stock options are granted, the exercise price of the
options is the fair market value of the shares on the date of the grant.
Non-qualified stock options may be granted with an exercise price below the fair
market value of the shares on the date of the grant. Options are
nontransferable and are exercisable in installments.
Stock option activity for the year ended December 31, 1993 was as follows:
Number Exercise
Of Shares Price Per Share
--------- -----------------
Outstanding at December 31, 1992 1,450,000 $19.625 - $25.125
Granted 1,108,000 $20.250 - $26.875
Exercised (27,000) $19.625
Canceled (137,500) $19.625 - $26.875
Outstanding at December 31, 1993 2,393,500 $19.625 - $26.875
The options granted to date are exercisable in installments beginning two years
from the date of grant and expiring 10 years from the date of grant. As of
December 31, 1993, options for 79,500 common shares were available for future
grant and 331,200 of the stock options were exercisable.
In 1993, the Company's Board of Directors approved, subject to shareholder
approval, a 2,500,000 increase in the number of shares of the Company's common
stock available under the 1990 Stock Option Plan.
13-11
<PAGE>
EXHIBIT 13
Note 6. Income Taxes -
Effective January 1, 1992, the Company changed its method of accounting for
income taxes to comply with the provisions of SFAS No. 109. As a result, net
income for 1992 included a charge of $10.0 million or $0.18 per share for
cumulative effect of accounting change. Prior year financial statements have
not been restated.
Under SFAS No. 109, deferred tax assets or liabilities are computed based
on the difference between the financial statement and income tax bases of assets
and liabilities using the enacted marginal tax rate in effect for the year in
which the differences are expected to reverse. Deferred income tax expenses or
credits are based on the changes in the asset or liability from period to
period. Prior to 1992, deferred taxes were provided on timing differences
between the income or loss determined for financial reporting and income tax
reporting at income tax rates in effect when the differences arose.
The components of the net deferred tax asset at December 31, 1993 and 1992
were as follows (in millions):
1993 1992
------- ------
Postretirement benefits $ 117.2 $ -
Pension income (100.3) (72.2)
Long-term contracts 38.7 65.3
Self-insurance reserves 16.9 16.1
Vacation benefits 12.0 11.2
Inventory valuations 10.3 12.1
Other deferred assets 72.8 79.9
Other deferred liabilities (20.6) (22.5)
------- ------
$ 147.0 $ 89.9
======= ======
13-12
<PAGE>
EXHIBIT 13
Note 6. Income Taxes (Continued) -
Provision (credit) for income taxes for the years ended December 31, 1993, 1992
and 1991 was as follows (in millions):
1993 1992 1991
------- ------ ------
Current - Federal $ (20.1) $ (6.3) $ 46.2
- State 0.4 4.2 9.2
- Foreign 1.5 0.8 2.8
------- ------ ------
- Total (18.2) (1.3) 58.2
------- ------ ------
Deferred - Federal 49.3 36.1 (53.5)
- State 9.4 6.3 (11.1)
------- ------ ------
- Total 58.7 42.4 (64.6)
------- ------ ------
Provision (credit) for income taxes $ 40.5 $ 41.1 $ (6.4)
======= ====== ======
Income (loss) before income taxes, extraordinary loss and cumulative effect of
accounting changes included income (loss) from domestic operations of $113.7
million in 1993, $86.7 million in 1992 and $(37.8) million in 1991.
Provision (credit) for deferred income taxes for the years ended
December 31, 1993, 1992 and 1991 was as follows (in millions):
1993 1992 1991
------- ------ ------
Pension income $ 28.1 $ 16.9 $ 11.4
Long-term contracts 26.6 11.9 (22.6)
Securities transactions 5.5 - 3.4
Realignment/restructure 1.4 31.7 (39.0)
Inventory valuation 1.8 7.7 (6.7)
Interest on income tax assessments (0.8) (2.7) (6.3)
Vacation benefits (0.8) 2.7 (4.1)
Other, net (3.1) (25.8) (0.7)
------- ------ ------
$ 58.7 $ 42.4 $(64.6)
======= ====== ======
Differences between the provision (credit) for income taxes and income taxes at
the statutory federal income tax rate for the years ended December 31, 1993,
1992 and 1991 were as follows (in millions):
1993 1992 1991
------- ------ ------
Income tax at statutory federal rate $ 39.6 $ 29.6 $(10.8)
State and local income taxes,
net of federal income tax effect 6.4 6.9 (1.3)
Effect of tax rate change (4.6) - -
Foreign sales corporation exemption (2.5) (2.4) (3.1)
Non-deductible expense 0.5 6.0 -
Revisions to prior years' estimated
income tax liabilities - 0.4 5.8
Goodwill write-offs - 0.2 1.9
Other, net 1.1 0.4 1.1
------- ------ ------
Provision (credit) for income taxes $ 40.5 $ 41.1 $ (6.4)
======= ====== ======
13-13
<PAGE>
EXHIBIT 13
Note 6. Income Taxes (Continued) -
The Omnibus Budget Reconciliation Act of 1993 increased the corporate federal
income tax rate to 35 percent in 1993 from 34 percent in 1992. The tax law
change resulted in the recognition of additional income by the Company due
primarily to revaluing the Company's net deferred tax asset.
13-14
<PAGE>
EXHIBIT 13
Note 7. Pension Benefits
The Company sponsors defined benefit pension plans covering substantially all of
its employees. Benefits are generally based on years of service and/or final
average pay. The Company funds the pension plans in accordance with the
requirements of the Employee Retirement Income Security Act of 1974, as
amended. The Company made cash contributions to the pension plans of $0.6
million in 1993, $1.8 million in 1992 and $1.2 million in 1991.
Components of pension expense (income) for the years ended December 31,
1993, 1992 and 1991 included the following (in millions):
Expense (Income)
----------------------------
1993 1992 1991
------ ------ ------
Service cost - benefits earned during the year $ 29.6 $ 42.6 $ 36.8
Interest cost on benefits earned in prior years 68.4 67.6 65.6
Expected return on plan assets (106.1) (102.6) (92.4)
Net amortization of unrecognized amounts (58.9) (41.8) (39.3)
------ ------ ------
Pension income for defined benefit plans (67.0) (34.2) (29.3)
Other 0.8 (3.7) 1.1
------ ------ ------
Pension income $(66.2) $(37.9) $(28.2)
====== ====== ======
Actual return on plan assets was $174.1 million in 1993, $136.3 million in 1992
and $230.5 million in 1991. Actuarial assumptions used to develop the
components of pension expense (income) for the years ended December 31, 1993,
1992 and 1991 were as follows:
1993 1992 1991
---- ---- ----
Discount rate 8.00% 6.75% 7.50%
Rate of increase in future compensation levels 4.50% 4.50% 4.50%
Expected long-term rate of return on assets 6.00% 6.00% 6.00%
13-15
<PAGE>
EXHIBIT 13
Note 7. Pension Benefits (Continued) -
Plan assets in excess of projected benefit obligation at December 31, 1993 and
1992 were as follows (in millions):
1993 1992
-------- --------
Plan assets at fair value $1,893.2 $1,798.8
-------- --------
Actuarial present value of benefit obligations:
Vested benefit obligation 893.8 799.3
Non-vested benefit obligation 8.6 12.6
-------- --------
Accumulated benefit obligation 902.4 811.9
Additional benefits related to future
compensation levels 133.6 115.3
-------- --------
Projected benefit obligation 1,036.0 927.2
-------- --------
Plan assets in excess of projected benefit obligation $ 857.2 $ 871.6
======== ========
Plan assets in excess of projected benefit obligation:
Included in balance sheet:
Prepaid pension cost $ 280.3 $ 222.1
Accrued pension liability (25.3) (34.2)
Not included in balance sheet:
Unrecognized net gain due to experience different from
that assumed and changes in the discount rate 353.4 395.4
Unrecognized net asset at adoption of SFAS No. 87,
net of amortization 273.5 312.5
Unrecognized prior service cost (24.7) (24.2)
-------- --------
Plan assets in excess of projected benefit obligation $ 857.2 $ 871.6
======== ========
Any reversion of pension plans' assets to the Company would be subject to
federal and state income taxes, substantial excise tax and other possible
claims.
At December 31, 1993 and 1992, the plans' assets, which consisted primarily
of fixed maturities, included debt obligations of the Company (primarily
Teledyne 10% Subordinated Debentures) with a market value of $81.0 million and
$101.6 million, respectively.
A discount rate of 7.00 percent at December 31, 1993 and 8.00 percent at
December 31, 1992 and a rate of increase in future compensation levels of 4.50
percent at December 31, 1993 and 1992 were used for the valuation of pension
obligations.
13-16
<PAGE>
EXHIBIT 13
Note 8. Postretirement and Postemployment Benefits -
The Company provides postretirement health care and life insurance
benefits, which are paid as incurred, to certain employees and their dependents
meeting eligibility requirements. Most of the plans are of a defined benefit
nature and are subject to deductibles, co-payment provisions and other
limitations. Retiree contributions to the premium cost are generally required
based on coverage type, plan and medicare eligibility. In many plans, company
contributions toward premiums are capped based on the cost as of a certain date
thereby creating a defined contribution. The Company generally reserves the
right to change or eliminate the plans. Non-represented employees who commenced
employment after January 1, 1986 and union represented employees who commence
employment after the most recently negotiated labor agreement are not eligible
for medical benefits upon retirement.
Effective January 1, 1993, the Company changed its method of accounting for
postretirement health care and life insurance benefits, as required by SFAS
No. 106. This statement requires that the expected cost of providing
postretirement health care and life insurance benefits be charged to expense
during the years that the employees render service. Prior to 1993, the Company
expensed the cost of these benefits as they were paid. The annual expense was
$23.0 million in 1992 and $20.2 million in 1991, which has not been restated.
As a result of adopting SFAS No. 106, the Company recorded a charge of $301.7
million or $185.6 million, net of tax, to recognize the accumulated
postretirement benefit obligation at the date of adoption. The new accounting
method will have no effect on the Company's cash outlays for postretirement
health care benefits.
Components of postretirement expense for the year ended December 31, 1993
included the following (in millions):
Expense
(Income)
--------
Service cost - benefits earned during the year $ 1.3
Interest cost on benefits earned in prior years 23.4
Other (1.8)
------
Postretirement expense $ 22.9
======
There were approximately 14,000 retirees and dependents associated with
postretirement benefit plans.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 11.5 percent in 1993, gradually declining
to 6.5 percent in the year 2011 and remaining at that level thereafter. A one
percentage point increase in the assumed health care cost trend rate for each
year would increase the accumulated postretirement benefit obligation by $33.9
million and the 1993 postretirement benefit expense by $3.1 million. A discount
rate of 8.0 percent was used in determining the postretirement expense. A
discount rate of 7.0 percent was used to determine the postretirement benefit
obligation at December 31, 1993.
13-17
<PAGE>
EXHIBIT 13
Note 8. Postretirement and Postemployment Benefits (Continued) -
Accumulated postretirement benefit obligation at December 31, 1993 was as
follows (in millions):
1993
-------
Accumulated present value of benefit obligations:
Retirees $ 278.1
Other fully eligible plan participants 30.2
Other active plan participants 27.7
-------
Accumulated benefit obligation $ 336.0
=======
Accumulated benefit obligation:
Included in balance sheet:
Current portion included in accrued liabilities $ 21.7
Accrued postretirement benefits 277.5
Not included in balance sheet:
Unrecognized net loss due to experience different from
that assumed and changes in the discount rate 36.8
-------
Accumulated benefit obligation $ 336.0
=======
In 1992, SFAS No. 112 was issued which requires a change in accounting for
postemployment benefits. This statement, effective in 1994, requires that the
expected cost of benefits provided to former or inactive employees and their
dependents before retirement, generally expensed when paid, be charged to
expense during the years that the employees render service, if certain
conditions are met. The adoption of the statement by the Company in 1993 did
not have a material effect on the consolidated financial statements.
13-18
<PAGE>
EXHIBIT 13
Note 9. Realignment/Restructure -
In 1993, Teledyne undertook a major realignment which consolidated its
operating companies to 21 from 65 and eliminated 1,200 management and support
positions at an estimated cost of $16.4 million. The realignment builds on the
1991-1992 restructure which focused the Company on those businesses in which it
has significant leadership roles. The 1991-1992 restructure consisted of the
sale, closure or transfer of certain operations. The cost of restructuring
included the estimated loss for those operations where the disposal or transfer
was expected to result in a loss. For those operations where the disposal was
expected to result in a gain, no gain was recognized until realized. For 1993,
the estimated restructure cost decreased $15.0 million. The net effect of
realignment/restructure was a charge of $1.4 million in 1993, income of $24.4
million in 1992 and a charge of $107.6 million in 1991.
13-19
<PAGE>
EXHIBIT 13
Note 10. Business Segments -
Teledyne is a diversified corporation comprised of companies which manufacture
a wide variety of products. The Company's major business segments include
aviation and electronics, specialty metals, industrial and consumer.
Companies in the aviation and electronics segment produce piston and
turbine engines for aircraft and land based vehicle applications, airframe
structures, unmanned aerial vehicles, target drone systems, and equipment and
subsystems for spacecraft and avionics. Other activities in this segment
include the manufacture of electronic equipment, aircraft-monitoring and control
systems for military and commercial applications, relays and other related
products and systems. Products in the specialty metals segment include
zirconium, titanium, high temperature nickel based alloys, high-speed and tool
steels, tungsten and molybdenum. Other operations in this segment consist of
processing, casting, rolling and forging metals. The industrial segment is
comprised of companies that are involved in the design and/or manufacture of
combat vehicles, diesel engines, material handling equipment, machine tools,
dies and consumable tooling. The consumer segment manufactures oral hygiene
products, shower massages, water and air purification systems, swimming pool and
spa heaters, and provides other products and services.
Information on the Company's business segments for the years ended
December 31, 1993, 1992 and 1991 was as follows (in millions):
1993 1992 1991
-------- -------- --------
Sales:
Aviation and electronics:
Continuing $1,138.7 $1,280.7 $1,306.4
Discontinued 18.3 76.3 105.1
-------- -------- --------
1,157.0 1,357.0 1,411.5
-------- -------- --------
Specialty metals:
Continuing 626.3 628.7 692.6
Discontinued 8.0 24.1 27.4
-------- -------- --------
634.3 652.8 720.0
-------- -------- --------
Industrial:
Continuing 338.7 311.7 277.7
Discontinued 48.6 243.1 463.9
-------- -------- --------
387.3 554.8 741.6
-------- -------- --------
Consumer:
Continuing 313.1 303.0 307.0
Discontinued - 20.0 26.7
-------- -------- --------
313.1 323.0 333.7
-------- -------- --------
Total:
Continuing 2,416.8 2,524.1 2,583.7
Discontinued 74.9 363.5 623.1
-------- -------- --------
$2,491.7 $2,887.6 $3,206.8
======== ======== ========
The Company's backlog of confirmed orders was approximately $1.4 billion at
December 31, 1993 and $1.6 billion at December 31, 1992. Backlog of the
aviation and electronics segment was $1.0 billion at December 31, 1993 and $1.1
billion at December 31, 1992.
13-20
<PAGE>
EXHIBIT 13
Note 10. Business Segments (Continued) -
The Company's sales to the U.S. government were $1.0 billion in 1993 and
1992 and $1.1 billion in 1991, including direct sales as prime contractor and
indirect sales as subcontractor. Most of these sales were in the aviation and
electronics segment. Sales by operations in the United States to customers in
other countries were $363.9 million in 1993, $481.4 million in 1992 and $535.6
million in 1991. Sales between business segments, which were not material,
generally were priced at prevailing market prices.
1993 1992 1991
-------- ------- --------
Income (Loss) before Taxes, Extraordinary Loss
and Cumulative Effect of Accounting Changes:
Aviation and electronics:
Continuing $ 43.5 $ 82.2 $ 43.7
Discontinued (7.6) 13.1 (48.5)
Pension income 14.0 (1.1) 0.1
-------- ------- --------
49.9 94.2 (4.7)
-------- ------- --------
Specialty metals:
Continuing 33.9 28.0 58.7
Discontinued 4.0 (6.9) (16.2)
Pension income 9.7 3.9 (2.5)
-------- ------- --------
47.6 25.0 40.0
-------- ------- --------
Industrial:
Continuing 15.1 11.6 17.8
Discontinued 1.6 9.5 (24.8)
Pension income 38.8 34.1 27.5
-------- ------- --------
55.5 55.2 20.5
-------- ------- --------
Consumer:
Continuing 21.5 27.3 26.8
Discontinued 2.0 4.0 (8.5)
Pension income 0.5 (0.6) 1.1
-------- ------- --------
24.0 30.7 19.4
-------- ------- --------
Total:
Continuing 114.0 149.1 147.0
Discontinued - 19.7 (98.0)
-------- ------- --------
114.0 168.8 49.0
-------- ------- --------
Corporate expense (74.3) (66.7) (58.1)
Interest expense (45.1) (56.2) (61.9)
Pension income 66.2 37.9 28.2
Other income 52.5 3.2 11.0
-------- ------- --------
$ 113.3 $ 87.0 $ (31.8)
======== ======= ========
Discontinued results include the estimated realignment/restructure cost before
pension income and results of operations sold at a gain, as well as those gains.
Operating profit in the aviation and electronics segment was adversely
affected by approximately $20.0 million in 1993, $25.0 million in 1992 and $55.0
million in 1991 due to losses on fixed-price development and initial production
contracts.
Aviation and electronics segment operating profit for 1993 included a
charge of $10.0 million for the settlement of certain issues raised by the
Company's
13-21
<PAGE>
EXHIBIT 13
Note 10. Business Segments (Continued) -
initial Voluntary Disclosure Report to the government relating to its Teledyne
Electronics unit and $6.6 million related to resolution of several other
matters. Operating profit for 1992 included a charge of $17.5 million recorded
in connection with the resolution of a criminal investigation of the Company's
Teledyne Relays unit.
Teledyne's non-cash pension income results from the amortization into
income of the excess of plan assets over the estimated obligation. The amount
recorded reflects the extent to which this non-cash income exceeds the current
year's net cost of providing benefits.
1993 1992 1991
-------- -------- --------
Depreciation and Amortization:
Aviation and electronics $ 22.0 $ 23.3 $ 24.7
Specialty metals 27.9 28.5 27.1
Industrial 9.0 12.8 18.1
Consumer 6.9 6.8 6.5
Corporate 6.9 7.7 7.7
-------- -------- --------
$ 72.7 $ 79.1 $ 84.1
======== ======== ========
Capital Expenditures:
Aviation and electronics $ 22.8 $ 20.5 $ 18.1
Specialty metals 35.0 29.3 41.3
Industrial 5.2 8.8 19.5
Consumer 9.9 7.8 8.0
Corporate 8.3 3.2 10.7
-------- -------- --------
$ 81.2 $ 69.6 $ 97.6
======== ======== ========
Identifiable Assets:
Aviation and electronics $ 284.6 $ 296.2 $ 389.1
Specialty metals 288.0 283.6 294.2
Industrial 113.1 145.3 265.7
Consumer 105.4 100.8 108.9
Corporate 686.7 710.0 661.5
-------- -------- --------
$1,477.8 $1,535.9 $1,719.4
======== ======== ========
13-22
<PAGE>
EXHIBIT 13
Note 11. Commitments and Contingencies -
Rental expense under operating leases was $27.0 million in 1993, $27.9 million
in 1992 and $29.9 million in 1991. Future minimum rental commitments under
operating leases with non-cancelable terms of more than one year as of
December 31, 1993, are as follows: $15.5 million in 1994 and in 1995, $12.4
million in 1996, $8.4 million in 1997, $7.0 million in 1998 and $26.7 million
thereafter.
The Company is subject to ongoing examination of its federal tax returns by
the Internal Revenue Service (IRS). The IRS has proposed the disallowance of
deductions claimed by the Company of $48.7 million in 1984 and $38.2 million in
1985 for contributions to the Company's pension plans. The IRS may take the
same position in its audit of tax years 1986 and 1987, where the claimed
deductions for contributions to the pension plans totaled $37.7 million. The
Company believes the IRS position on this issue is without merit and will defend
the matter vigorously.
The IRS has also proposed the disallowance of deductions claimed by the
Company on behalf of a former wholly-owned insurance subsidiary with respect to
insurance loss reserves of $269 million in 1984 and $115 million in 1985. The
Company believes the proposed disallowances are unjustified and will contest the
matter vigorously. Moreover, any such reserve adjustments would be timing
adjustments which would result in the realization of offsetting tax benefits
subsequent to the tax years at issue. Accordingly, pursuant to the tax
agreement between the Company and its former subsidiary, the Company would bear
only the interim interest cost and any costs resulting from a difference in tax
rates with respect to the adjustments sustained, if any.
The Company has been and is subject from time to time to various audits,
reviews and investigations relating to the Company's compliance with federal and
state laws. Should any unit involved be charged with wrongdoing, or should the
U.S. government determine that the unit is not a "presently responsible
contractor," that unit, and conceivably the Company, could be temporarily
suspended or, in the event of a conviction, could be debarred for up to three
years from receiving new government contracts or government-approved
subcontracts. A suspension or debarment of the Company would have a material
adverse effect on the future operating results and consolidated financial
condition of the Company. However, except as otherwise discussed below, the
Company does not possess sufficient information to determine whether it will
sustain a loss as a result of any of the investigations discussed below, or to
reasonably estimate the amount of any such loss, and has not been able to
identify the existence of a material loss contingency arising therefrom.
On August 15, 1990, federal agents executed a search warrant on and removed
a number of documents relating to government-furnished materials from the
Company's former Teledyne Neosho unit. In addition, several Teledyne
Neosho employees received subpoenas to testify before a federal grand jury.
On October 26, 1990, the Company's Teledyne Electronics unit sought
admission into the Department of Defense Voluntary Disclosure Program, and
was accepted into the program on March 5, 1991. Teledyne Electronics
subsequently filed a Voluntary Disclosure Report with the U.S. government
disclosing material handling practices at variance with military
13-23
<PAGE>
EXHIBIT 13
Note 11. Commitments and Contingencies (Continued) -
requirements in one of its military transponder programs. Teledyne
Electronics later filed an Ancillary Report to its Voluntary Disclosure
Report disclosing allegations relating to product quality in two other
transponder programs for the military. On February 14, 1992, Teledyne
Electronics received three grand jury subpoenas for production of documents
relating to Department of Defense programs for the supply of military
transponders, one of which was subsequently withdrawn. On October 5, 1992,
Teledyne Electronics received a fourth grand jury subpoena relating to a
military program for the supply of a transponder programming device. On
July 28, 1993, the Company concluded a settlement with the U.S. government
of claims arising out of the initial Voluntary Disclosure Report requiring
the Company to pay $5 million and to provide screening and repair service
of at least $5 million in value with respect to military transponder
equipment delivered to the military.
On June 18, 1992, the Company's Teledyne Firth Sterling unit sought
admission into the Department of Defense Voluntary Disclosure Program.
Teledyne Firth Sterling was accepted into the program on August 10, 1992,
and subsequently submitted a Voluntary Disclosure Report disclosing
failures to conform with contractual testing requirements on certain U.S.
government munitions programs. On December 15, 1993, the Company concluded
its agreement with the U.S. government to settle all claims arising from
this matter for $275,000.
By letters dated November 12 and November 30, 1992, the Company's Teledyne
Electro-Mechanisms unit sought admission into the Department of Defense
Voluntary Disclosure Program. Teledyne Electro-Mechanisms was accepted
into the program on January 28, 1993, and subsequently submitted a
Voluntary Disclosure Report disclosing design and test practices at
variance from military specifications. On December 13, 1993, the Company
reached agreement with the U.S. government to settle all claims arising
from this matter for $400,000, subject to final government approvals and
execution of a mutually acceptable settlement agreement.
On January 13, 1993, the Company's Teledyne Thermatics unit sought
admission into the Department of Defense Voluntary Disclosure Program.
Teledyne Thermatics was accepted into the program on April 2, 1993. On
April 5, 1993, the Company submitted an interim Voluntary Disclosure Report
which described a number of testing practices at variance from military
specifications.
On February 16, 1993, the Company received a subpoena from the National
Aeronautics and Space Administration, Office of Inspector General,
requesting documents relating to all aspects of the manufacture, test, sale
and reliability of solid state relays at the Company's Solid State unit.
On February 22, 1993, the Company's Teledyne Electronics unit received a
subpoena from the Department of Defense, Office of Inspector General, for
production of documents relating to contract pricing and labor charging
practices.
On March 19, 1993, the Company's Teledyne Wah Chang Albany unit received a
subpoena for documents from a federal grand jury impaneled in Washington,
D.C. investigating alleged violations of the U.S. export control laws. The
13-24
<PAGE>
EXHIBIT 13
Note 11. Commitments and Contingencies (Continued) -
subpoena relates to Teledyne Wah Chang Albany's sale of zirconium to a
Greek business entity. Should the U.S. government bring criminal charges
in this matter, Teledyne Wah Chang Albany and conceivably the Company could
be temporarily suspended from receiving licenses for export of products and
services on the munitions list. In the event of a conviction, Teledyne Wah
Chang Albany and conceivably the Company would be subject to debarment for
a period of up to three years from receiving such licenses, and could be
suspended for up to ten years from eligibility for commercial export
licenses.
On May 19, 1993, the Company and its Teledyne Electronics unit each
received a subpoena from the Air Force Office of Special Investigations.
One requested documents relating to military transponder contracts for the
governments of Egypt and Saudi Arabia, and the second requested documents
relating to a military transponder program for the Egyptian government.
The Company is defending a civil action filed on behalf of the U.S.
government pursuant to the False Claims Act, in which the government intervened
in November of 1990. The case concerns the cost estimating practices of the
Company's Teledyne Systems unit, which the government preliminarily estimated
resulted in damages to the United States of approximately $90 million. On June
24, 1993, the Company's motion for partial summary judgment was granted in part
and denied in part, reducing the estimate to approximately $70 million.
Subsequently, on January 10, 1994, the government filed its Memorandum of
Contentions of Fact and Law, contending that damages to the United States total
$40.9 million. The government seeks treble the damages allegedly sustained by
the United States, together with civil penalties of up to $10,000 for any false
claim made. Trial of this matter is presently scheduled to commence March 8,
1994. The allegations of this suit were initially the subject of a federal
grand jury investigation, which to the Company's knowledge has been inactive for
almost two years. Based on an internal review, and after consultation with
counsel, the Company does not possess sufficient information to determine
whether the Company will sustain a loss in these matters, or to reasonably
estimate the amount of any such loss. Consequently, the Company has not been
able to identify the existance of a material loss contingency arising therefrom.
The Company is defending a civil action filed on behalf of the U.S.
government pursuant to the False Claims Act concerning the procurement and
quality control systems of the Company's Teledyne Controls unit. The U.S.
government intervened in this matter on June 18, 1991, but withdrew following
the Company's February 18, 1993 agreement to pay $2.15 million in partial
settlement of the matter without admission of wrongdoing. The allegations of
this suit gave rise to an investigation of Teledyne Controls by a federal grand
jury, the Defense Criminal Investigative Service and other federal agencies.
The settlement resolves all outstanding investigations regarding the claims
encompassed by the agreement. The plaintiff was granted leave to pursue the
remaining allegations in the case alone, and on April 23, 1993, filed a second
amended complaint. Plaintiff alleges that the actual damages to the United
States cannot be ascertained, but estimates that the total damages to the United
States exceed $120 million. Plaintiff seeks treble the damages allegedly
sustained by the United States together with civil penalties of up to $10,000
13-25
<PAGE>
EXHIBIT 13
Note 11. Commitments and Contingencies (Continued) -
for any false claim made. Based on an internal review, and after consultation
with counsel, the Company does not possess sufficient information to determine
whether the Company will sustain a further loss in these matters, or to
reasonably estimate the amount of any such loss. Consequently, the Company has
not been able to identify the existence of a material loss contingency arising
from this matter.
The Company is defending a civil action filed on behalf of the U.S.
government under the False Claims Act charging that the Company's Teledyne
Relays unit falsified test certifications for relays supplied to the government.
The government intervened in the action on April 22, 1992, and the complaint and
first amended complaint were served on the Company on August 19, 1992. In
addition to the claims alleged under the False Claims Act, the first amended
complaint alleges various statutory and common law causes of action, including
claims for trademark infringement, unfair competition, breach of contract and
fraud. The government seeks treble the damages allegedly sustained by the
United States (the government has preliminarily estimated such damages at $76.2
million), profits of not less than $41.6 million allegedly derived by Teledyne
Relays from the sales at issue, and civil penalties of up to $10,000 for any
false claim made. In November of 1992, the Company pled guilty to making false
statements and paid a $17.5 million fine to resolve a related criminal
investigation. It is likely that resolution of this suit will result in the
recognition of a loss contingency which is not currently estimable.
On April 13, 1993, the Defense Logistics Agency (DLA) debarred Teledyne
Relays from receiving awards of new government contracts or government-approved
subcontracts for a period of one year. Thereafter, on April 16, 1993, the
Defense Electronics Supply Center (DESC) suspended Teledyne Relays from shipping
all products qualified to military specifications, and rescinded its October 30,
1992, authorization permitting Teledyne Relays to fill any orders for such
products accepted by Teledyne Relays as of October 30, 1992. On December 22,
1993, the DLA terminated the debarment, and on January 6, 1994, DESC approved
for sale certain product qualified to military specifications and manufactured
by Teledyne Relays prior to the debarment. Teledyne Relays is now eligible to
seek readmission to the Qualified Products List Program.
On May 26, 1993, a grand jury impaneled by the United States District Court
for the Southern District of Florida returned an indictment in connection with
a U.S. government investigation of alleged violations of the U.S. export control
laws. The indictment includes charges against the Company's Teledyne Wah Chang
Albany unit and two of its employees relating to the sale of zirconium to a
South American industrialist. The Company believes that the government's
evidence does not support the allegations contained in the indictment, and is
vigorously defending itself. At an arraignment on June 14, 1993, the Company
entered a plea of not guilty. If the Company were found guilty, it could face
fines of up to $1 million for each of the four alleged violations of the Arms
Export Control Act, five times the value of the export involved or $1 million,
whichever is greater ($1.55 million or $1 million) for each of the two alleged
violations of the Export Administration Act, and $500,000 for each of the three
alleged violations of the False Statements Act.
As a result of the indictment, the United States Department of State
temporarily suspended Teledyne Wah Chang Albany, effective July 26, 1993, from
13-26
<PAGE>
EXHIBIT 13
Note 11. Commitments and Contingencies (Continued) -
receiving licenses for export of products and services on the munitions list.
This suspension will not have a material adverse affect on the financial
condition of the Company. However, in the event of a conviction, Teledyne Wah
Chang Albany and conceivably the Company would be subject to debarment for a
period of up to three years from receiving such export licenses, and could be
suspended for up to ten years from eligibility for commercial export licenses.
In addition, should the U.S. government determine that Teledyne Wah Chang Albany
is not a "presently responsible contractor," Teledyne Wah Chang Albany and
conceivably the Company could be temporarily suspended or, in the event of a
conviction, could be debarred for up to three years from receiving new
government contracts or government-approved subcontracts. Based on an ongoing
internal review, and after consultation with counsel, the Company does not
possess sufficient information to determine whether the Company will sustain a
loss in this matter, or to reasonably estimate the amount of any such loss.
Consequently, the Company has not been able to identify the existence of a
material loss contingency arising therefrom.
The Company is defending a civil action filed on behalf of the U.S.
government under the False Claims Act charging that the Company's Teledyne Solid
State unit falsified test certifications for solid state relays supplied to the
government. The government declined to intervene in the action on August 23,
1993, and the complaint was served on the Company on October 29, 1993.
Plaintiffs seek treble the damages allegedly sustained by the United States, and
civil penalties of up to $10,000 for any false claim made. Based on an ongoing
internal review, and after consultation with counsel, the Company does not
possess sufficient information to determine whether the Company will sustain a
loss in this matter, or to reasonably estimate the amount of any such loss.
Consequently, the Company has not been able to identify the existence of a
material loss contingency arising therefrom.
The Company is informed that it has been named as a defendant in three
civil actions filed pursuant to the False Claims Act in the U.S. District Court
for the Central District of California. Two of these cases concern the
Company's Teledyne Electronics unit, of which one reportedly alleges damages in
a material amount. The third concerns the Company's Teledyne Solid State and
Teledyne Relays units. The Company is further informed that it has been named
as a defendant in a fourth action filed pursuant to the False Claims Act in the
U.S. District Court for the Western District of Missouri concerning the
Company's former Teledyne Neosho unit. All of these cases remain under seal.
The Company does not possess sufficient information to determine whether the
Company will sustain a loss in these matters, or to reasonably estimate the
amount of any such loss. Consequently, the Company has not been able to
identify the existance of a material loss contingency arising therefrom.
13-27
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Teledyne is a diversified manufacturing corporation serving customers worldwide
through 21 operating companies focused in four business segments: Aviation and
Electronics; Specialty Metals; Industrial; and Consumer.
REALIGNMENT/RESTRUCTURE
In 1993, Teledyne undertook a major realignment which consolidated its operating
companies to 21 from 65 and eliminated 1,200 management and support positions at
an estimated cost of $16.4 million. The realignment builds on the 1991-1992
restructure which focused the Company on those businesses in which it has
significant leadership roles. The 1991-1992 restructure consisted of the sale,
closure or transfer of certain operations. The net effect of
realignment/restructure was a charge of $1.4 million in 1993, income of $24.4
million in 1992 and a charge of $107.6 million in 1991.
RESULTS OF OPERATIONS
Sales and operating profit for the Company's four business segments are
presented separately in the tables below for continuing results, discontinued
results and pension income (in millions):
Aviation and Electronics
- ------------------------
1993 1992 1991
---------- ---------- ----------
Sales:
Continuing $ 1,138.7 $ 1,280.7 $ 1,306.4
Discontinued 18.3 76.3 105.1
---------- ---------- ----------
$ 1,157.0 $ 1,357.0 $ 1,411.5
========== ========== ==========
Operating Profit (Loss):
Continuing $ 43.5 $ 82.2 $ 43.7
Discontinued (7.6) 13.1 (48.5)
Pension income 14.0 (1.1) 0.1
---------- ---------- ----------
$ 49.9 $ 94.2 $ (4.7)
========== ========== ==========
Sales from continuing operations decreased $142.0 million in 1993 and $25.7
million in 1992, primarily in electronic systems and components, as a result of
winding down of certain U.S. and foreign military programs, declining orders due
to reduced defense spending and softness in non-military markets.
Operating profit from continuing operations decreased $38.7 million in 1993
primarily due to the decrease in sales discussed above and higher costs related
to government contracting issues. The 1993 year included a charge of $10.0
million for the settlement of certain issues raised by the Company's initial
Voluntary Disclosure Report to the government relating to its Teledyne
Electronics unit and $6.6 million related to resolution of several other
matters. For 1992, operating profit increased $38.5 million despite the decline
in sales for the year due primarily to improved performance on fixed-price
development and initial production contracts and increased sales of unmanned
aerial vehicles and airframe structures. Operating profit and net income for
1992 included a charge of $17.5 million recorded in connection with the
resolution of a criminal investigation of the Company's Teledyne Relays unit.
Operating profit was adversely affected by approximately $20 million in 1993,
$25 million in 1992 and $55 million in 1991 due to losses on fixed-price
development and initial production contracts.
13-28
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
Specialty Metals
- ----------------
1993 1992 1991
---------- ---------- ----------
Sales:
Continuing $ 626.3 $ 628.7 $ 692.6
Discontinued 8.0 24.1 27.4
---------- ---------- ----------
$ 634.3 $ 652.8 $ 720.0
========== ========== ==========
Operating Profit (Loss):
Continuing $ 33.9 $ 28.0 $ 58.7
Discontinued 4.0 (6.9) (16.2)
Pension income 9.7 3.9 (2.5)
---------- ---------- ----------
$ 47.6 $ 25.0 $ 40.0
========== ========== ==========
Sales from continuing operations declined $2.4 million in 1993 primarily due to
reduced sales of nickel based products due to the depressed aerospace market
partially offset by improved sales of zirconium for a naval ship propulsion
program and increased sales at start-up facilities. For 1992, sales declined
$63.9 million primarily as a result of a decline in sales of tungsten carbide
products and the general economic slowdown.
Despite the decline in sales, operating profit from continuing operations
improved $5.9 million in 1993 primarily as a result of improved performance at
start-up facilities and increased sales of zirconium. Operating profit declined
$30.7 million in 1992 due primarily to the decline in sales discussed above and
increased start-up costs of new plants.
Industrial
- ----------
1993 1992 1991
---------- ---------- ----------
Sales:
Continuing $ 338.7 $ 311.7 $ 277.7
Discontinued 48.6 243.1 463.9
---------- ---------- ----------
$ 387.3 $ 554.8 $ 741.6
========== ========== ==========
Operating Profit (Loss):
Continuing $ 15.1 $ 11.6 $ 17.8
Discontinued 1.6 9.5 (24.8)
Pension income 38.8 34.1 27.5
---------- ---------- ----------
$ 55.5 $ 55.2 $ 20.5
========== ========== ==========
Sales from continuing operations increased $27.0 million in 1993 and $34.0
million in 1992. Sales of tank engines and sales related to military vehicle
development increased in 1993. In addition, both nitrogen cylinder systems for
the metal stamping industry and materials handling equipment for major retailers
and distributors provided strong performance in 1993. For 1992, the increase in
sales primarily resulted from increased sales related to military vehicle
development.
Operating profit from continuing operations increased $3.5 million in 1993
primarily as a result of the changes in sales discussed above. For 1992,
operating profit decreased $6.2 million due to the effects of the general
economic slowdown partially offset by increased sales of lower margin products.
13-29
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
Consumer
- --------
1993 1992 1991
---------- ---------- ----------
Sales:
Continuing $ 313.1 $ 303.0 $ 307.0
Discontinued - 20.0 26.7
---------- ---------- ----------
$ 313.1 $ 323.0 $ 333.7
========== ========== ==========
Operating Profit (Loss):
Continuing $ 21.5 $ 27.3 $ 26.8
Discontinued 2.0 4.0 (8.5)
Pension Income 0.5 (0.6) 1.1
---------- ---------- ----------
$ 24.0 $ 30.7 $ 19.4
========== ========== ==========
Sales from continuing operations increased $10.1 million in 1993 but decreased
$4.0 million in 1992. Sales improved in 1993 primarily due to increased sales
of pool heaters, residential and commercial heating systems, promotional
drinkware and filtration products. For 1992, sales declines were primarily
experienced in oral health and metal tube products.
Operating profit from continuing operations decreased $5.8 million for 1993
primarily due to new product start-up costs and increased promotional expenses.
Operating profit for 1992 was comparable with 1991.
Discontinued Results
- --------------------
Discontinued results include the estimated cost of realignment/restructure
before pension income and results of operations sold at a gain, as well as those
gains.
CORPORATE EXPENSE
Corporate expense increased $7.6 million in 1993 and $8.6 million in 1992. In
1993, increased insurance, legal, international marketing and contract
compliance audit expenses partially offset recoveries from insurance carriers
for environmental matters. For 1992, increased legal and international
marketing expenses were partially offset by a decline in insurance costs.
LITTON GAIN
In 1993, the Company sold its investment in Litton common stock resulting in a
$40.4 million gain, included in other income.
PENSION INCOME
Teledyne's non-cash pension income results from the amortization into income of
the excess of plan assets over the estimated obligation. The amount recorded
reflects the extent to which this non-cash income exceeds the current year's net
cost of providing benefits. Pension income before tax increased to $66.2
million in 1993 from $37.9 million for 1992 and $28.2 million for 1991. The
increase in 1993 was due primarily to a change in the discount rate used to
calculate the pension benefit obligation in accordance with Financial Accounting
Standards Board guidelines and to be consistent with the discount rate used for
computing the retiree medical obligation. Any reversion of pension plans'
assets to the Company would be subject to federal and state income taxes,
substantial excise tax and other possible claims.
13-30
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
PROVISION (CREDIT) FOR INCOME TAXES
The Omnibus Budget Reconciliation Act of 1993 increased the corporate federal
income tax rate to 35 percent in 1993 from 34 percent in 1992. The tax law
change resulted in the recognition of additional income of $4.6 million by the
Company due primarily to revaluing the Company's net deferred tax asset.
The Company's effective income tax rate increased in 1992 primarily as a
result of a payment, which was not deductible for tax purposes, made in
connection with the resolution of a criminal investigation of the Company's
Teledyne Relays unit. During 1992, the Company changed its method of accounting
for income taxes, effective January 1, 1992, to comply with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109. The effect of this
change for 1992 was the restatement of previously reported net income for the
quarter ended March 31, 1992 to include a charge of $10.0 million or $0.18 per
share for the cumulative effect of the accounting change. Prior year
consolidated financial statements were not restated. For 1991, the effective
tax rate included a $5.8 million increase in the Company's estimate of prior
years' tax liabilities.
The Company has determined, based on its history of operating earnings,
available carrybacks, expectations of future operating earnings and potential
tax planning strategies, as well as the extended period of time over which the
postretirement benefits obligation will be paid, that it is more likely than not
that the deferred tax assets at December 31, 1993 will be realized.
POSTRETIREMENT BENEFITS
Effective January 1, 1993, the Company changed its method of accounting for
postretirement health care and life insurance benefits, as required by SFAS No.
106. This statement requires that the expected cost of providing postretirement
health care and life insurance benefits be charged to expense during the years
that the employees render service. Prior to 1993, the Company expensed the cost
of these benefits as they were paid. As a result of adopting SFAS No. 106, the
Company recorded a charge of $301.7 million or $185.6 million, net of tax, to
recognize the accumulated postretirement benefit obligation at the date of
adoption. The new accounting method will have no effect on the Company's cash
outlays for postretirement health care and life insurance benefits.
MARKETABLE SECURITIES
In 1993, SFAS No. 115 was issued which will require companies in 1994 to change
their accounting for marketable securities. The statement requires certain
investments in debt and equity securities be classified as either held-to-
maturity, trading or available-for-sale. Securities classified as held-to-
maturity are to be reported at amortized cost. Securities classified as trading
securities are to be reported at fair value, with unrealized gains and losses
included in earnings. Securities classified as available-for-sale are to be
reported at fair value, with unrealized gains and losses excluded from earnings
and reported as a separate component of shareholders' equity. The adoption of
this statement by the Company is not expected to have a material effect on the
consolidated financial statements.
13-31
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
FINANCIAL CONDITION
Shareholders' equity decreased $160.6 million in 1993 as a result of the net
loss of $116.5 million and cash dividends of $44.3 million. Shareholders'
equity decreased in 1992 primarily as a result of cash dividends in excess of
net income. The Company has been able to meet all cash requirements during the
past five years with cash generated from operations, and except for the
potential effects of the matters discussed below, is not aware of any impending
cash requirements or capital commitments which could not be met by internally
generated funds. The Company has domestic credit lines with various banks
totaling $125.0 million at December 31, 1993; no amounts were borrowed under
these lines during 1993 or 1992. The Company redeemed at par $100 million in
1993 and $50 million in 1992 of its 10% Subordinated Debentures.
OTHER MATTERS
The Company is subject to ongoing examination of its federal tax returns by the
Internal Revenue Service (IRS). The IRS has proposed the disallowance of
deductions claimed by the Company of $48.7 million in 1984 and $38.2 million in
1985 for contributions to the Company's pension plans. The IRS may take the
same position in its audit of tax years 1986 and 1987, where the claimed
deductions for contributions to the pension plans totaled $37.7 million. The
Company believes the IRS position on this issue is without merit and will defend
the matter vigorously.
The IRS has also proposed the disallowance of deductions claimed by the
Company on behalf of a former wholly-owned insurance subsidiary with respect to
insurance loss reserves of $269 million in 1984 and $115 million in 1985. The
Company believes the proposed disallowances are unjustified and will contest the
matter vigorously. Moreover, any such reserve adjustments would be timing
adjustments which would result in the realization of offsetting tax benefits
subsequent to the tax years at issue. Accordingly, pursuant to the tax
agreement between the Company and its former subsidiary, the Company would bear
only the interim interest cost and any costs resulting from a difference in tax
rates with respect to the adjustments sustained, if any.
Company subsidiaries perform work on a substantial number of defense
contracts with the U.S. government. Many of these contracts include price
redetermination clauses, and most are terminable at the convenience of the
government. Certain of these contracts are fixed-price or fixed-price incentive
development contracts. There is substantial risk on such contracts that costs
may exceed those expected when the contracts were negotiated. Absent
modification of these contracts, any costs incurred in excess of the fixed or
ceiling prices must be borne by the Company. In addition, virtually all defense
programs are subject to curtailment or cancellation due to the annual nature of
the government appropriations and allocations process. A material reduction in
U.S. government appropriations for defense programs may have an adverse effect
on the Company's business, depending upon the specific defense programs affected
by any such reduction.
13-32
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
The Company has been and is subject from time to time to various audits,
reviews and investigations relating to the Company's compliance with federal and
state laws, including those discussed in Note 11 to the accompanying
consolidated financial statements. Should any unit involved be charged with
wrongdoing, or should the U.S. government determine that the unit is not a
"presently responsible contractor," that unit, and conceivably the Company,
could be temporarily suspended or, in the event of a conviction, could be
debarred for up to three years from receiving new government contracts or
government-approved subcontracts. A suspension or debarment of the Company
would have a material adverse effect on the future operating results and
consolidated financial condition of the Company. However, except as otherwise
discussed in Note 11 to the accompanying consolidated financial statements, the
Company does not possess sufficient information to determine whether it will
sustain a loss as a result of any of the investigations discussed in Note 11,
or to reasonably estimate the amount of any such loss, and has not been able to
identify the existence of a material loss contingency arising therefrom.
The Company is defending a civil action filed on behalf of the U.S.
government pursuant to the False Claims Act, in which the government intervened
in November of 1990. The case concerns the cost estimating practices of the
Company's Teledyne Systems unit, which the government preliminarily estimated
resulted in damages to the United States of approximately $90 million. On June
24, 1993, the Company's motion for partial summary judgment was granted in part
and denied in part, reducing the estimate to approximately $70 million.
Subsequently, on January 10, 1994, the government filed its Memorandum of
Contentions of Fact and Law, contending that damages to the United States total
$40.9 million. The government seeks treble the damages allegedly sustained by
the United States, together with civil penalties of up to $10,000 for any false
claim made. Trial of this matter is presently scheduled to commence March 8,
1994. The allegations of this suit were initially the subject of a federal
grand jury investigation, which to the Company's knowledge has been inactive for
almost two years. Based on an internal review, and after consultation with
counsel, the Company does not possess sufficient information to determine
whether the Company will sustain a loss in these matters, or to reasonably
estimate the amount of any such loss. Consequently, the Company has not been
able to identify the existence of a material loss contingency arising therefrom.
The Company is defending a civil action filed on behalf of the U.S.
government pursuant to the False Claims Act concerning the procurement and
quality control systems of the Company's Teledyne Controls unit. The U.S.
government intervened in this matter on June 18, 1991, but withdrew following
the Company's February 18, 1993 agreement to pay $2.15 million in partial
settlement of the matter without admission of wrongdoing. The allegations of
this suit gave rise to an investigation of Teledyne Controls by a federal grand
jury, the Defense Criminal Investigative Service and other federal agencies.
The settlement resolves all outstanding investigations regarding the claims
encompassed by the agreement. The plaintiff was granted leave to pursue the
remaining allegations in the case alone, and on April 23, 1993, filed a second
amended complaint. Plaintiff alleges that the actual damages to the United
States cannot be ascertained, but estimates that the total damages to the United
States exceed $120 million. Plaintiff seeks treble the damages allegedly
sustained by the United States together with civil penalties of up to $10,000
13-33
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
for any false claim made. Based on an internal review, and after consultation
with counsel, the Company does not possess sufficient information to determine
whether the Company will sustain a loss in these matters, or to reasonably
estimate the amount of any such loss. Consequently, the Company has not been
able to identify the existence of a material loss contingency arising from this
matter.
The Company is defending a civil action filed on behalf of the U.S.
government under the False Claims Act charging that the Company's Teledyne
Relays unit falsified test certifications for relays supplied to the government.
The government intervened in the action on April 22, 1992, and the complaint and
first amended complaint were served on the Company on August 19, 1992. In
addition to the claims alleged under the False Claims Act, the first amended
complaint alleges various statutory and common law causes of action, including
claims for trademark infringement, unfair competition, breach of contract and
fraud. The government seeks treble the damages allegedly sustained by the
United States (the government has preliminarily estimated such damages at $76.2
million), profits of not less than $41.6 million allegedly derived by Teledyne
Relays from the sales at issue, and civil penalties of up to $10,000 for any
false claim made. In November of 1992, the Company pled guilty to making false
statements and paid a $17.5 million fine to resolve a related criminal
investigation. It is likely that resolution of this suit will result in the
recognition of a loss contingency which is not currently estimable.
On April 13, 1993, the Defense Logistics Agency (DLA) debarred Teledyne
Relays from receiving awards of new government contracts or government-approved
subcontracts for a period of one year. Thereafter, on April 16, 1993, the
Defense Electronics Supply Center (DESC) suspended Teledyne Relays from shipping
all products qualified to military specifications, and rescinded its October 30,
1992, authorization permitting Teledyne Relays to fill any orders for such
products accepted by Teledyne Relays as of October 30, 1992. On December 22,
1993, the DLA terminated the debarment, and on January 6, 1994, DESC approved
for sale certain product qualified to military specifications and manufactured
by Teledyne Relays prior to the debarment. Teledyne Relays is now eligible to
seek readmission to the Qualified Products List Program.
On May 26, 1993, a grand jury impaneled by the United States District Court
for the Southern District of Florida returned an indictment in connection with
a U.S. government investigation of alleged violations of the U.S. export control
laws. The indictment includes charges against the Company's Teledyne Wah Chang
Albany unit and two of its employees relating to the sale of zirconium to a
South American industrialist. The Company believes that the government's
evidence does not support the allegations contained in the indictment, and is
vigorously defending itself. At an arraignment on June 14, 1993, the Company
entered a plea of not guilty. If the Company were found guilty, it could face
fines of up to $1 million for each of the four alleged violations of the Arms
Export Control Act, five times the value of the export involved or $1 million,
whichever is greater ($1.55 million or $1 million) for each of the two alleged
violations of the Export Administration Act, and $500,000 for each of the three
alleged violations of the False Statements Act.
13-34
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
As a result of the indictment, the United States Department of State
temporarily suspended Teledyne Wah Chang Albany, effective July 26, 1993, from
receiving licenses for export of products and services on the munitions list.
This suspension will not have a material adverse affect on the financial
condition of the Company. However, in the event of a conviction, Teledyne Wah
Chang Albany and conceivably the Company would be subject to debarment for a
period of up to three years from receiving such export licenses, and could be
suspended for up to ten years from eligibility for commercial export licenses.
In addition, should the U.S. government determine that Teledyne Wah Chang Albany
is not a "presently responsible contractor," Teledyne Wah Chang Albany and
conceivably the Company could be temporarily suspended or, in the event of a
conviction, could be debarred for up to three years from receiving new
government contracts or government-approved subcontracts. Based on an
ongoing internal review, and after consultation with counsel, the Company
does not possess sufficient information to determine whether the Company will
sustain a loss in this matter, or to reasonably estimate the amount of any such
loss. Consequently, the Company has not been able to identify the existence of
a material loss contingency arising therefrom.
The Company is defending a civil action filed on behalf of the U.S.
government under the False Claims Act charging that the Company's Teledyne Solid
State unit falsified test certifications for solid state relays supplied to the
government. The government declined to intervene in the action on August 23,
1993, and the complaint was served on the Company on October 29, 1993.
Plaintiffs seek treble the damages allegedly sustained by the United States, and
civil penalties of up to $10,000 for any false claim made. Based on an ongoing
internal review, and after consultation with counsel, the Company does not
possess sufficient information to determine whether the Company will sustain a
loss in this matter, or to reasonably estimate the amount of any such loss.
Consequently, the Company has not been able to identify the existence of a
material loss contingency arising therefrom.
The Company is informed that it has been named as a defendant in three
civil actions filed pursuant to the False Claims Act in the U.S. District
Court for the Central District of California. Two of these cases concern the
Company's Teledyne Electronics unit, of which one reportedly alleges damages
in a material amount. The third concerns the Company's Teledyne Solid State and
Teledyne Relays units. The Company is further informed that it has been named
as a defendant in a fourth action filed pursuant to the False Claims Act in the
U.S. District Court for the Western District of Missouri concerning the
Company's former Teledyne Neosho unit. All of these cases remain under seal.
The Company does not possess sufficient information to determine whether the
Company will sustain a loss in these matters, or to reasonably estimate the
amount of any such loss. Consequently, the Company has not been able to
identify the existence of a material loss contingency arising therefrom.
13-35
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
The Company is subject to federal, state and local laws and regulations
concerning the environment, and is currently participating in administrative
proceedings at a number of sites under these laws. Many of these proceedings
are at a preliminary stage, and it is difficult to estimate with any certainty
the total cost of remediation, the timing and extent of remedial actions
required by governmental authorities, and the amount of the Company's liability,
if any, in proportion to that of any other responsible parties. As further
discussed in Note 1 to the accompanying consolidated financial statements, when
it is possible to reasonably estimate the Company's liability with respect to
these matters, provisions are made as appropriate. Based on facts presently
known to it, the Company does not believe that the outcome of any one of these
administrative proceedings will have a material adverse effect on its financial
condition.
13-36
<PAGE>
EXHIBIT 13
SELECTED QUARTERLY FINANCIAL DATA
---------------------------------
(In millions except per share and share amounts)
Quarterly financial data for 1993 and 1992 were as follows:
Quarter Ended
----------------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------
1993 -
Sales $ 636.5 $ 624.4 $ 597.9 $ 632.9
========== ========== ========== ==========
Gross profit $ 144.6 $ 146.2 $ 138.4 $ 144.6
========== ========== ========== ==========
Income, after tax, before
extraordinary loss and
cumulative effect
of accounting change $ 33.8 $ 8.1 $ 15.2 $ 15.7
Extraordinary loss on
redemption of debt (3.7) - - -
Cumulative effect of
accounting change (185.6) - - -
---------- ---------- ---------- ----------
Net income (loss) $ (155.5) $ 8.1 $ 15.2 $ 15.7
========== ========== ========== ==========
Income (loss) per share:
Income, after tax, before
extraordinary loss and
cumulative effect of
accounting change $ 0.61 $ 0.15 $ 0.27 $ 0.28
Extraordinary loss on
redemption of debt (0.07) - - -
Cumulative effect of
accounting change (3.35) - - -
---------- ---------- ---------- ----------
Net income (loss)
per share $ (2.81) $ 0.15 $ 0.27 $ 0.28
========== ========== ========== ==========
Average shares
outstanding 55,412,889 55,413,845 55,418,265 55,437,619
========== ========== ========== ==========
13-37
<PAGE>
EXHIBIT 13
SELECTED QUARTERLY FINANCIAL DATA (Continued)
---------------------------------
Quarter Ended
---------------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ------------ ------------
1992 -
Sales $ 718.5 $ 744.8 $ 708.6 $ 715.7
========== ========== ========== ==========
Gross profit $ 153.9 $ 165.0 $ 164.2 $ 161.3
========== ========== ========== ==========
Income, after tax, before
extraordinary loss and
cumulative effect
of accounting change $ 11.8 $ 7.4 $ 16.3 $ 10.4
Extraordinary loss on
redemption of debt (2.7) - - -
Cumulative effect of
accounting change (10.0) - - -
---------- ---------- ---------- ----------
Net income (loss) $ (0.9) $ 7.4 $ 16.3 $ 10.4
========== ========== ========== ==========
Income (loss) per share:
Income, after tax, before
extraordinary loss and
cumulative effect of
accounting change $ 0.21 $ 0.14 $ 0.29 $ 0.19
Extraordinary loss on
redemption of debt (0.05) - - -
Cumulative effect of
accounting change (0.18) - - -
---------- ---------- ---------- ----------
Net income (loss)
per share $ (0.02) $ 0.14 $ 0.29 $ 0.19
========== ========== ========== ==========
Average shares
outstanding 55,412,845 55,412,845 55,412,845 55,412,845
========== ========== ========== ==========
13-38
<PAGE>
EXHIBIT 13
SELECTED QUARTERLY FINANCIAL DATA (Continued)
---------------------------------
The Company paid cash dividends of $0.20 per share for each quarter in 1993 and
1992.
Operating profit before tax for 1993 included a realignment/restructure
charge of $8.2 million in the second quarter and income of $6.8 million in the
fourth quarter. For 1992, operating profit before tax included income related
to gains on sales of operations and adjustments to the estimated cost of
restructure as follows: first quarter $2.9 million, second quarter $5.6
million, third quarter $7.5 million and fourth quarter $8.4 million.
Non-cash pension income before tax increased to $16.7 million in the 1993
first quarter from $8.7 million in 1992, $16.1 million in the 1993 second
quarter from $8.4 million in 1992, $16.7 million in the 1993 third quarter from
$9.3 million in 1992, and $16.7 million in the 1993 fourth quarter from $11.5
million in 1992 due primarily to a change in the discount rate used to calculate
the pension benefit obligation.
Operating profit before tax included provisions for losses on fixed-priced
development and initial production contracts of approximately $20 million in
1993, of which $15 million was recorded in the fourth quarter, and approximately
$25 million in 1992, of which $20 million was recorded in the fourth quarter.
Operating profit before tax for the second quarter of 1993 was reduced by
a charge of $10.0 million for the settlement of certain issues raised by the
Company's initial Voluntary Disclosure Report to the government relating to its
Teledyne Electronics unit. Operating profit before tax for the fourth quarter
of 1993 included a charge of $5.1 million related to resolution of several other
matters. For 1992, operating profit before tax and net income included a charge
of $12.0 million in the second quarter and $5.5 million in the third quarter
recorded in connection with the resolution of a criminal investigation of the
Company's Teledyne Relays unit.
Net loss for the first quarter of 1993 includes a gain on sale of Litton
common stock of $24.2 million or $0.44 per share.
The Omnibus Budget Reconciliation Act of 1993, enacted in the third quarter
retroactive to January 1, 1993, increased the corporate federal income tax rate
to 35 percent from 34 percent. The tax law change resulted in the recognition
in the third quarter of $3.9 million of additional income by the Company due
primarily to revaluing the Company's net deferred tax asset.
During the first quarter of 1993, the Company redeemed at par $100 million
of its 10% Subordinated Debentures resulting in an extraordinary loss of $3.7
million. In the 1992 first quarter, the Company redeemed at par $50 million
($46.7 net of treasury) of its 10% Subordinated Debentures resulting in an
extraordinary loss of $2.7 million.
During the first quarter of 1993, the Company changed its method of
accounting for post-retirement health care and life insurance benefits to comply
with the provisions of SFAS No. 106. The cumulative effect of the accounting
change resulted in a charge to net income of $185.6 million, or $3.35 per share.
Effective January 1, 1992, the Company changed its method of accounting for
income taxes to comply with SFAS No. 109. The cumulative effect of the
accounting change was to restate the previously reported net income for the
quarter ended March 31, 1992 to include a charge of $10.0 million, or $0.18 per
share.
13-39
<PAGE>
EXHIBIT 13
SELECTED FINANCIAL DATA
-----------------------
For the Five Years Ended December 31, 1993
------------------------------------------
(In millions except per share amounts)
1993 1992 1991 1990 1989
-------- --------- -------- -------- --------
Sales:
Continuing $2,416.8 $ 2,524.1 $2,583.7 $2,665.8 $2,681.7
Discontinued 74.9 363.5 623.1 780.0 849.5
-------- --------- -------- -------- --------
$2,491.7 $ 2,887.6 $3,206.8 $3,445.8 $3,531.2
======== ========= ======== ======== ========
Income (loss), after tax,
before extraordinary loss,
cumulative effect of
accounting changes and
discontinued insurance
operations $ 72.8 $ 45.9 $ (25.4) $ 69.2 $ 150.3
Extraordinary loss on
redemption of debt (3.7) (2.7) - - -
Cumulative effect of
accounting changes (185.6) (10.0) - - -
Income of discontinued
insurance operations - - - 25.6 108.6
-------- --------- -------- -------- --------
Net income (loss) $ (116.5) $ 33.2 $ (25.4) $ 94.8 $ 258.9
======== ========= ======== ======== ========
Income (loss) per share:
Income (loss), after tax,
before extraordinary
loss, cumulative effect
of accounting changes
and discontinued
insurance operations $ 1.32 $ 0.83 $ (0.46) $ 1.25 $ 2.71
Extraordinary loss on
redemption of debt (0.07) (0.05) - - -
Cumulative effect of
accounting changes (3.35) (0.18) - - -
Discontinued insurance
operations - - - 0.46 1.95
-------- --------- -------- -------- --------
Net income (loss)
per share $ (2.10) $ 0.60 $ (0.46) $ 1.71 $ 4.66
======== ========= ======== ======== ========
Working capital $ 355.2 $ 488.2 $ 505.0 $ 601.8 $ 629.5
======== ========= ======== ======== ========
Long-term debt $ 356.6 $ 449.7 $ 497.1 $ 510.6 $ 571.3
======== ========= ======== ======== ========
Assets $1,477.8 $ 1,535.9 $1,719.4 $1,676.3 $3,468.2
======== ========= ======== ======== ========
Net assets of discontinued
insurance operations $ - $ - $ - $ - $1,880.8
======== ========= ======== ======== ========
Shareholders' equity $ 280.5 $ 441.1 $ 453.9 $ 523.5 $2,326.9
======== ========= ======== ======== ========
13-40
<PAGE>
EXHIBIT 13
SELECTED FINANCIAL DATA (Continued)
-----------------------
In 1993, Teledyne undertook a major realignment which consolidated its operating
companies to 21 from 65. The restructure plan announced by the Company in the
third quarter of 1991 included the sale, closure or transfer of certain
operations. Income before tax included a charge of $1.4 million in 1993, income
of $24.4 million in 1992 and a charge of $107.6 million in 1991 for the effect
of realignment/restructure.
Net income (loss) included non-cash pension income after tax of $40.1
million in 1993, $23.3 million in 1992, $17.3 million in 1991, $14.3 million in
1990 and $14.1 million in 1989.
Net loss for 1993 included a charge of $185.6 million or $3.35 per share
for the cumulative effect of a change in accounting for postretirement health
care and life insurance benefits and a gain on sale of Litton common stock of
$24.2 million or $0.44 per share.
During 1993, the Company redeemed at par $100 million of its 10%
Subordinated Debentures resulting in an extraordinary loss of $3.7 million. In
1992, the Company redeemed at par $50 million ($46.7 million net of treasury) of
its 10% Subordinated Debentures resulting in an extraordinary loss of $2.7
million.
Effective January 1, 1992, the Company changed its method of accounting for
income taxes to comply with the provisions of SFAS No. 109. The cumulative
effect of the accounting change was a charge of $10.0 million or $0.18 per
share.
In 1990, Teledyne distributed to its shareholders all of the outstanding
common stock of Unitrin, Inc., the parent company of Teledyne's former insurance
and finance subsidiaries.
The Company has paid cash dividends of $0.80 per share for all years
presented.
13-41
<PAGE>
EXHIBIT 13
Common Stock Price
1993
- --------------------------------------------------------------------------------
Quarters 1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
High $23 1/8 $22 3/4 $27 3/4 $27 3/8
Low $18 1/8 $18 1/2 $20 1/2 $24 3/8
- --------------------------------------------------------------------------------
1992
- --------------------------------------------------------------------------------
Quarters 1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
High $28 3/4 $28 3/8 $20 1/2 $20 1/2
Low $19 3/8 $18 1/2 $17 3/8 $17
- --------------------------------------------------------------------------------
Teledyne, Inc. common stock is listed on the New York and Pacific Stock
Exchanges. As of December 31, 1993, there were approximately 14,000 record
holders of common stock.
- --------------------------------------------------------------------------------
13-42
<PAGE>
EXHIBIT 13
OUTLINE OF PRODUCTS AND ACTIVITIES
Aviation and Electronics: Products in the closely related fields of aviation and
electronics range from the microscopic world of semiconductor devices to full-
scale air frames and complete aircraft.
Teledyne's hybrid microcircuits are widely used in military, space,
industrial and medical applications. These compact and complex electronic
building blocks combine multiple transistors and integrated circuits in multi-
chip modules where small packaging sizes, reliability and light weight are of
paramount importance. Thousands of these microcircuits, the size of postage
stamps, have been produced, and are providing the precise control required for
heart pacemakers and interplanetary missions, as well as many other uses.
On a still larger scale are Teledyne's high power traveling wave tubes,
used to simultaneously transmit thousands of telephone conversations--or a dozen
television channels--around the world via satellite networks.
Similar types of traveling wave tubes are used in the latest airborne and
groundbased electronic counter measure equipment.
In the microwave industry, Teledyne is a leading supplier of ferrite
components and switching devices, as well as filters, oscillators and integrated
subsystems. Monolithic microwave integrated circuits are provided for both
commercial and military applications. A wireless local area network is being
produced for commercial applications.
Other components include operational amplifiers, digital-analog converters,
miniature relays, hybrid switching devices, radar augmenters, lower power
microwave tubes, flexible printed-circuit interconnections, high reliability
wire and cable, switches, terminals and a line of aircraft, military tank and
truck batteries.
At the systems level, Teledyne produces equipment for telemetering data
from remote sources, for electronic counter measures, and for information
processing, as well as the aircraft integrated data systems used by dozens of
major airlines to record in-flight performance and maintenance data on their
jumbo jets.
Teledyne also performs systems engineering and integration for ballistic
missile defense, space defense, shuttle payloads, computer software, and designs
and produces military airborne training and evaluation systems. Cargo tracking
software has been developed for use by freight forwarders.
Computing and inertial systems are also produced for the control and
guidance of aircraft and space vehicles. Teledyne on-board computers have
successfully controlled the launching of dozens of spacecraft, including both
Viking missions to Mars.
Teledyne is heavily involved in electronic navigation systems. Doppler
radar systems produced by Teledyne were used on 24 successful space landings and
guided each Apollo lander to the surface of the moon. Doppler, aided by inertial
and/or Global Positioning Satellite (GPS) receivers is used in military aircraft
for antisubmarine warfare and search-and-rescue missions.
13-43
<PAGE>
EXHIBIT 13
OUTLINE OF PRODUCTS AND ACTIVITIES - (Continued)
Teledyne avionic instruments and electronic systems contribute
substantially to flight safety on both military and general aviation aircraft.
The use of the latest microcircuit technology and modern cryptographic
algorithms permit Teledyne to supply very advanced identification equipment
(IFF) used on military and commercial aircraft for peacetime air traffic control
and for safe operation in a wartime environment. Commercial products providing
data security are being developed.
Among Teledyne's many non-electronic products for aviation are controlled
explosive devices that precisely time, sequence and actuate aircraft escape
systems, and similar pyrotechnic devices used to separate the stages of space
vehicles and to eject or deploy instrument packages. This technology is being
used in automobile airbag deployment systems. Teledyne also produces parachute
delivery systems for accurate airdrop of military cargo or emergency supplies.
Continental's piston engines have been powering airplanes for sixty years,
and today about half of the general aviation piston engines produced in the
United States are built by Teledyne and used worldwide. Teledyne turbine
engines also power remotely piloted aircraft, military trainers and, in small,
expendable versions, provide power for the Harpoon and other cruise missiles.
The Company's expertise in airframe manufacture goes back to Charles
Lindbergh's Spirit of St. Louis which was built by Ryan Airlines, Inc.,
forerunner of today's Teledyne Ryan Aeronautical. More than twenty-five types
of remotely piloted aircraft--usually called Unmanned Air Vehicles (UAVs)--have
been built by Teledyne, in both supersonic and sub-sonic versions. These
recoverable and reusable vehicles are used for sophisticated military missions,
such as reconnaissance, with the pilots safely flying them from remote control
centers. Through the production of sophisticated UAVs, Teledyne has also
developed broad expertise in the use of advanced materials such as graphite
composites, and has facilities for the numerically-controlled machining of
airfoils from honeycomb materials.
Teledyne also builds the airframe for the Army's Apache attack helicopter
and has produced thousands of feet of tapered, roll-formed stringers used in
wide-body aircraft. Teledyne's participation in all these diverse areas of
aviation, space and electronics has given the Company highly developed expertise
in some of the most advanced technologies of our time.
13-44
<PAGE>
EXHIBIT 13
OUTLINE OF PRODUCTS AND ACTIVITIES - (Continued)
Specialty Metals: The products of this business segment are representative of
the practical application of metallurgical science and technology as it is known
and practiced throughout the world. Their unique characteristics are derived
from the nature of the metals produced, the particular properties of the alloys
melted, and the various processes, methods, forms, shapes and end products
manufactured.
In specialty metals, Teledyne is the most diversified producer of reactive
and refractory metals in the United States. Teledyne produces all of the larger
volume, commercially important metals and their alloys. Reactive metals
production includes titanium, zirconium and hafnium; refractory metals consist
of tungsten, molybdenum, niobium, tantalum and vanadium.
Teledyne is the leading U.S. producer of zirconium, a highly corrosion-
resistant metal that is transparent to neutrons. It is used for fuel tubes and
structural parts in nuclear power reactors and for corrosion-resistant chemical
industry applications. Hafnium, derived as a by-product of zirconium, is used
for control rods in nuclear reactors due to its ability to absorb neutrons.
Teledyne is a producer of tungsten, starting from a large number of
different tungsten bearing raw materials resulting in tungsten and tungsten
carbide powders and mill products. Previously used cemented carbide parts are
also recycled into tungsten carbide powder. Wrought or ductile tungsten
products are used in diverse applications including light bulb filaments, inert
gas welding electrodes, electrical contacts and aircraft counterweights.
Molybdenum, a sister metal to tungsten that also has a very high melting
point, is produced by Teledyne in powder form and then shaped into solid forms
through powder metallurgy techniques. It is an important alloying element for
steels and is used for plasma arc spraying of piston rings, for electrodes in
glass melting and for structural parts in high temperature furnaces.
Niobium, also known as columbium, is a high technology metal produced by
Teledyne in various forms and alloys. It is used as an alloying element in the
manufacture of many steels. The higher quality grades produced by Teledyne are
used in superalloys for jet engines and special alloys for aerospace
applications such as rocket nozzles. When alloyed with titanium, niobium is
used in applications requiring superconducting characteristics for high-strength
magnets. This area includes medical devices for bodyscanning, accelerators for
high-energy physics and fusion energy projects for future generation of
electricity.
Tantalum, one of the most corrosion resistant metals, is produced by
Teledyne for medical implants, chemical process equipment, and aerospace engine
components.
Specialty metals also include the special alloys that are central to the
production of virtually every modern metal product available today.
13-45
<PAGE>
EXHIBIT 13
OUTLINE OF PRODUCTS AND ACTIVITIES - (Continued)
Teledyne high-speed steels provide the high temperature hardness required
for lathe bits, drills, milling cutters, taps and dies and other cutting tools.
Related alloy steels, including a cobalt-free maraging grade, are produced for
bearings, gears, special aerospace hardware and high-strength applications.
For the metalworking, mining and other industries requiring tools with
extra hardness, Teledyne produces a line of sintered tungsten carbide products,
made from tungsten carbide and various other metals under heat, to produce a
material that approaches diamond in hardness. These cemented carbide products
are used as super-hard cutters in the high-speed machining and cutting of steel
and other applications where hardness and wear resistance are important.
Technical developments related to ceramics, coatings and other disciplines are
incorporated in these products.
With a state-of-the-art computer-controlled bar and rod rolling mill,
Teledyne is able to produce a wide range of premium grade, nickel-base, cobalt-
base and titanium alloys that are used worldwide to meet the high performance
requirements of the aircraft, aerospace, gas turbine, nuclear energy and
chemical process industries. These products, in various forms, are engineered
to retain exceptional strength and corrosion resistance at temperatures through
2,000 degrees F and are used in critical, high-stress applications. Notably,
this manufacturing facility installed one of the largest high precision rotary
forging presses in the U.S. for more efficient working of these products.
Teledyne also processes metals by a variety of methods, including casting,
forging, rolling, drawing and extruding, into finished forms used in a diverse
number of industries. With the latest screw-type forging presses, the company
is a major U.S. producer of carbon and alloy steel forgings in sizes ranging
from one pound to more than 200 pounds. The company has the ability to forge
the more difficult alloys which are used in aerospace and other critical
applications.
For example, Teledyne is a specialist in the cold rolling of thin and
ultra-thin metal strip in over 60 different metals and alloys for applications
ranging from watch springs to aerospace honeycomb materials and camera products.
Teledyne also casts a variety of metals into forms ranging from diesel
locomotive engine blocks to light-weight aluminum and magnesium aircraft parts.
Housings and parts are made for business machines, tools and automobiles. Cold-
drawn stainless and custom fabricated tubing is also produced.
Other Teledyne companies are involved in roll-forming metals, forging heavy
parts for construction and earth moving machinery and precision investment
casting of difficult to produce parts.
13-46
<PAGE>
EXHIBIT 13
OUTLINE OF PRODUCTS AND ACTIVITIES - (Continued)
Industrial Products: Engines of many sorts--air and liquid cooled, gasoline and
diesel fueled--are products in this category. Teledyne engines include
heavy-duty turbo-charged diesel engines approaching 1,750 horsepower for use in
military tanks, and engines for aircraft ground support.
Another category of industrial products includes machine tools, dies and
consumable tooling of all types. These include a great variety of machines
designed for the high speed production of precision machine threads by cutting,
grinding and roll-forming methods, and a variety of similar equipment for the
production of precision roll-formed gears.
Teledyne also produces automated bakery production equipment and mixing and
processing equipment for a variety of chemical, food and pharmaceutical
products.
Included in the industrial product category are nitrogen pressure systems
which are resistant force components used in the metal forming industry and a
series of valve products. Hydraulic and pneumatic valves and pumps serve the
transportation and aerospace industries, and pressure relief valves are used in
process industries such as the petrochemical and pharmaceutical industries.
Teledyne pressure relief valves are being used in some international offshore
oil exploration projects such as the Hibernia Project off the coast of
Newfoundland.
Material handling is another industrial category with a number of Teledyne
products. Teledyne has developed a series of specialty forklifts that ride as
outriggers on delivery trucks. This saves valuable cargo space and the
product's stability makes it an asset at rough construction sites. A version of
this same product line also has applications in agriculture. Another series of
products within the material handling category provide protective structures
such as cabs, ROPS and FOPS for off highway equipment. We also build components
for and install structures for service vehicle outfitting.
13-47
<PAGE>
EXHIBIT 13
OUTLINE OF PRODUCTS AND ACTIVITIES - (Continued)
Consumer: The Teledyne name is widely represented through its consumer products.
Teledyne's best known consumer products are sold under the brand name of
Teledyne Water Pik. The Water Pik oral hygiene appliance line includes a family
of dental hygiene devices for use in the home, including oral irrigators,
electric toothbrushes and an oral hygiene center combining both products.
Teledyne Water Pik also manufactures and markets a complete line of
showerheads, including the Shower Massage line of invigorating, pulsating
showerheads and the Super Saver line of water saving, multi-mode spray
showerheads.
The Instapure line includes both faucet mounted and under-the-counter water
filters for improving the quality of water used in the home, as well as a line
of air filtration appliances for the home and office that utilize a patented,
low-temperature catalyst material to remove carbon monoxide and other noxious
gases from the air. Teledyne is also developing large-scale water purification
systems for operation in remote, unregulated areas.
In an entirely different consumer area are Teledyne Laars swimming pool and
spa heaters. The company also produces a full line of water heating equipment
that provides hot water for commercial, residential and industrial space
heating.
Teledyne also makes supplies and equipment for dentists and dental
laboratories. Among these are dental cements, impression compounds, filling
materials, air and electric drills, and articulators.
Teledyne produces collapsible metal tubes, injection molded closures and
laminate tubes.
Products often sold directly to consumers are plastic cups and containers.
13-48
<PAGE>
EXHIBIT 21
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
SUBSIDIARIES OF REGISTRANT
--------------------------
December 31, 1993
-----------------
The following table shows the name and place of incorporation of each
subsidiary, except those subsidiaries which, when considered in the aggregate,
would not constitute a significant subsidiary. Unless otherwise indicated, each
subsidiary is wholly-owned as to voting securities. Also shown are the names
under which each subsidiary does business.
Name and Place of Incorporation Names Under Which Subsidiaries
Do Business
- ----------------------------------------- ----------------------------------
Teledyne Industries, Inc. (California) Teledyne Air Centers
subsidiary of Teledyne, Inc. Teledyne Advanced Materials
Teledyne Firth Sterling
Teledyne Powder Alloys
Teledyne Wah Chang Huntsville
Teledyne Aircraft Products
Teledyne Battery Products
Teledyne Cast Products
Teledyne Picco
Teledyne Thermatics
Teledyne Allvac/Vasco
Teledyne Brown Engineering
Teledyne Analytical
Instruments
Teledyne Geotech
Teledyne Hastings-Raydist
Teledyne Casting Service
Teledyne Continental Motors
Teledyne Continental Motors -
General Products
Teledyne Controls
Teledyne Coordinators
Teledyne Economic Development
Teledyne Electronic Systems
Teledyne Electronics
Teledyne Ryan Electronics
Teledyne Electronic Technologies
Teledyne Electro-Mechanisms
Teledyne Kinetics
Teledyne MEC
Teledyne Microelectronics
Teledyne Microwave
Teledyne Relays
Teledyne Solid State
Teledyne Fluid Systems
Teledyne Farris Engineering
Teledyne Hyson
Teledyne Republic/Sprague
21-1
<PAGE>
EXHIBIT 21
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
SUBSIDIARIES OF REGISTRANT
--------------------------
December 31, 1993
-----------------
Name and Place of Incorporation Names Under Which Subsidiaries
Do Business
- --------------------------------------- --------------------------------
Teledyne Industries, Inc. - Continued Teledyne International Offices
Teledyne Laars
Teledyne Still-Man
Teledyne Minerals
Teledyne Packaging
Teledyne Pittsburgh Tool Steel
Teledyne Portland Forge
Teledyne Power Systems
Teledyne Rodney Metals
Teledyne Metal Forming
Teledyne Summerill Tube
Teledyne Ryan Aeronautical
Teledyne CAE
Teledyne McCormick Selph
Teledyne Specialty Equipment
Teledyne Efficient Industries
Teledyne Howell Penncraft
Teledyne Landis Machine
Teledyne Penn-Union
Teledyne Readco
Teledyne Wah Chang Albany
Teledyne SC
Teledyne Water Pik
Teledyne Getz
Teledyne Hanau
Teledyne Mecca
21-2
<PAGE>
EXHIBIT 21
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
SUBSIDIARIES OF REGISTRANT
--------------------------
December 31, 1993
-----------------
Name and Place of Incorporation Names Under Which Subsidiaries
Do Business
- --------------------------------------- --------------------------------
Teledyne Canada, Limited (Ontario) Teledyne Canada Firth Sterling
subsidiary of Teledyne, Industries Canada Teledyne Canada Harfac
Limited (Ontario) Teledyne Canada Metal Products
Teledyne Canada Mining Products
Teledyne Industries Canada Limited (Ontario) Farris Industries Canada
subsidiary of Teledyne, Inc. Teledyne Industries Canada Ltd.
Teledyne Still-Man Canada
Teledyne Water Pik Canada
Teledyne Isotopes, Inc. (California) Teledyne Energy Systems
subsidiary of Teledyne, Inc. Teledyne Isotopes
Teledyne Princeton Inc. Teledyne Princeton
subsidiary of Teledyne Canada, Limited
Teledyne Systems Company, Inc. Teledyne Systems Company
subsidiary of Teledyne
Industries, Inc.
Teledyne Transport Limited Teledyne Canada Transport Group
subsidiary of Teledyne
Canada, Limited
21-3
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statements File No.'s 2-52617, 33-41372 and 33-47219.
ARTHUR ANDERSEN & CO.
Los Angeles, California
January 26, 1994
23-1
<PAGE>
