FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
OR
( ) 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)
2049 Century Park East
Los Angeles, California 90067-3101
________________________________________ ___________________________________
(Address of Principal Executive Offices) (Zip Code)
(310) 277-3311
____________________________________________________
(Registrant's Telephone Number, Including Area Code)
1901 Avenue of the Stars, Los Angeles, California 90067-6046
- ------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether Registrant (l) 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ----------
At April 14, 1995, Registrant had outstanding 55,525,298 shares of its
Common Stock.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In millions except share and per share amounts)
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
ASSETS
- ------
Current Assets:
Cash and marketable securities $ 33.8 $ 29.7
Receivables 372.3 409.8
Inventories 228.0 196.9
Deferred income taxes 93.8 104.9
Prepaid expenses 12.2 16.5
-------- --------
Total current assets 740.1 757.8
Property and Equipment 296.4 304.3
Prepaid Pension Cost 345.4 332.7
Other Assets 102.5 82.9
-------- --------
$1,484.4 $1,477.7
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 114.4 $ 162.0
Accrued liabilities 290.7 303.6
-------- --------
Total current liabilities 405.1 465.6
Long-Term Debt 359.4 356.6
Accrued Postretirement Benefits 275.8 275.9
Deferred Income Taxes 13.8 -
Other Long-Term Liabilities 92.7 106.6
-------- --------
1,146.8 1,204.7
-------- --------
Preferred Stock, $15.00 par value,
2,500,000 shares authorized, 550,620 shares
at March 31, 1995 issued and outstanding 8.3 -
-------- --------
Shareholders' Equity:
Common stock, $1.00 par value,
100,000,000 shares authorized,
55,521,048 shares at March 31, 1995
and 55,462,298 shares at
December 31, 1994 issued and outstanding 55.5 55.5
Additional paid-in capital 36.4 35.3
Retained earnings 228.7 178.3
Other 8.7 3.9
-------- --------
Total shareholders' equity 329.3 273.0
-------- --------
$1,484.4 $1,477.7
======== ========
The accompanying notes are an integral part of these statements.
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(In millions except per share amounts)
(Unaudited)
Three Months Ended
March 31,
------------------
1995 1994
-------- --------
Sales $ 625.5 $ 572.9
Costs and Expenses*:
Cost of sales 456.8 435.1
Selling and administrative expenses 109.4 222.7
Interest expense 10.6 10.5
-------- --------
576.8 668.3
-------- --------
Earnings (Loss) Before Other Income 48.7 (95.4)
Other Income, Net 54.2 4.3
-------- --------
Income (Loss) before Income Taxes 102.9 (91.1)
Provision (Credit) for Income Taxes 38.6 (36.0)
-------- --------
Net Income (Loss) $ 64.3 $ (55.1)
======== ========
Net Income (Loss) Per Share $ 1.16 $ (0.99)
======== ========
Dividends Per Share $ 0.25 $ -
======== ========
* Includes a credit of non-cash pension income of $21.1 million in 1995 and
$19.0 million in 1994.
The accompanying notes are an integral part of these statements.
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In millions)
(Unaudited)
Three Months Ended
March 31,
-------------------
1995 1994
-------- --------
Operating Activities:
Net income (loss) $ 64.3 $ (55.1)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Gain on sale of businesses (49.8) -
Increase in inventories (28.5) (22.0)
Decrease (increase) in deferred income taxes 22.4 (2.7)
Depreciation and amortization of property and equipment 17.8 19.2
Decrease (increase) in receivables 13.3 (68.5)
Increase in prepaid pension cost (12.7) (17.8)
Increase (decrease) in other long-term liabilities (8.4) 25.2
Increase in accounts payable and accrued liabilities 1.8 116.7
Other, net 0.6 4.0
-------- --------
Net cash provided by (used in) operating activities 20.8 (1.0)
-------- --------
Investing Activities:
Net decrease in short-term investments 0.5 25.0
Sale of marketable securities - 5.0
-------- --------
Net proceeds from sale of marketable securities 0.5 30.0
Proceeds from the sale of businesses 63.2 -
Purchases of property and equipment (15.1) (12.0)
Purchase of business (11.7) -
Other, net 0.4 0.6
-------- --------
Net cash provided by investing activities 37.3 18.6
-------- --------
Financing Activities:
Decrease in checks outstanding (62.2) (19.4)
Increase (reduction) of long-term debt 13.2 (2.2)
Cash dividends (5.6) -
Proceeds from issuance of common stock 1.1 -
Other, net - 0.1
-------- --------
Net cash used in financing activities (53.5) (21.5)
-------- --------
Increase (decrease) in cash $ 4.6 $ (3.9)
======== ========
Non cash transactions:
Preferred stock dividend $ 8.3 $ -
======== ========
Long-term debt assumed with the purchase of business $ 3.0 $ -
======== ========
The accompanying notes are an integral part of these statements.
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1. Consolidated Financial Statements -
The interim consolidated financial statements of Teledyne, Inc. and
subsidiaries have not been examined by independent public accountants; however,
in the opinion of the Company, all adjustments (which include only recurring
normal adjustments and the adjustments discussed below) required for a fair
presentation of the financial position as of March 31, 1995, and the results of
operations and cash flows for the three months ended March 31, 1995 and 1994,
have been made. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's December 31, 1994 annual report to shareholders. The
results of operations for these interim periods are not necessarily indicative
of the operating results for a full year. Certain amounts for 1994 have been
reclassified to conform with the 1995 presentation.
Note 2. Inventories -
Inventories were as follows (in millions):
March 31, December 31,
1995 1994
------------- ------------
Raw materials and work-in-process $ 300.9 $ 301.9
Finished goods 49.4 47.2
------- -------
350.3 349.1
Progress payments (122.3) (152.2)
------- -------
$ 228.0 $ 196.9
======= =======
Note 3. Supplemental Balance Sheet Information -
Cash and marketable securities were as follows (in millions):
March 31, December 31,
1995 1994
------------- ------------
Cash $ 20.3 $ 15.7
Repurchase agreements, at cost, which
approximates market 13.5 14.0
------ ------
$ 33.8 $ 29.7
====== ======
Property and equipment is presented net of accumulated depreciation and
amortization of $532.0 million at March 31, 1995 and $551.6 million at
December 31, 1994.
Accounts payable included $11.6 million at March 31, 1995 and $73.8
million at December 31, 1994 for checks outstanding in excess of cash balances.
Note 4. Preferred Stock -
During the first quarter of 1995, a dividend of $0.25 per share for each
share of common stock outstanding, consisting of $0.10 in cash and $0.15 in face
value of redeemable preferred stock, was paid on March 8, 1995 to shareholders
of record on February 15, 1995. The redeemable preferred stock is a new issue
of Series E Cumulative Preferred Stock, $15 face value per share, callable by
the Company at any time at face value, with a mandatory call at $16.50 per share
on change of control, paying an annual 8 percent cumulative cash dividend
payable semi-annually. Shareholders received one share of the Series E
Cumulative Preferred Stock for each one hundred shares of common stock with cash
paid in lieu of fractional shares.
Note 5. Shareholders' Equity -
On January 4, 1995, the Company's Board of Directors adopted a Stockholders
Rights Plan (the Plan). In accordance with the Plan, the Board of Directors
declared a dividend of one purchase right for each outstanding common share.
These rights have no current value and their distribution is not taxable to
stockholders. If a person or group, without the prior approval of the Company's
Board of Directors, becomes the beneficial owner of 15 percent or more of the
Company's outstanding common stock, each right, except any such rights held by
the non-approved acquiror (or its affiliates or transferees), will entitle the
holder to purchase a number of shares of the Company's common stock that has a
then-current-market value of twice the exercise price of the right, which is $75
(subject to adjustment). In addition, if, after such an event, the Company is
involved in a business combination with, or sells 50 percent or more of its
assets or earning power to, the non-approved acquiror (or any other person if
the transaction does not treat all stockholders alike), each right, except any
such rights held by the non-approved acquiror (or its affiliates or
transferees), will entitle the holder to buy a number of shares of the voting
stock of the other party to the transaction that has a then-current market value
of twice the exercise price. The Plan and the rights will expire January 4,
2005. The rights may be redeemed by the Board of Directors for $0.01 per right
at any time prior to the occurrence of the first triggering event described
above or prior to the expiration of the rights.
Note 6. Income Taxes -
Provision for income taxes for the quarter ended March 31, 1995 included
a $2.1 million decrease in the Company's estimate of prior year's tax
liabilities.
Note 7. Dispositions -
On January 6, 1995, the Company sold substantially all of the business and
assets of Teledyne Electronic Systems. The transaction did not include the
Company's Lewisburg, Tennessee-based electronic contract manufacturing
operations, its commercial encryption business or any real estate. The
transaction resulted in a pretax gain of $50.7 million, included in other
income.
Note 8. Business Segments -
Information on the Company's business segments for the three months ended
March 31, 1995 and 1994 was as follows (in millions):
Three Months Ended
March 31,
-------------------
1995 1994
-------- --------
Sales:
Aviation and electronics:
Continuing $ 238.7 $ 216.2
Discontinued - 37.5
-------- --------
238.7 253.7
-------- --------
Specialty metals:
Continuing 207.2 163.0
Discontinued 0.4 0.3
-------- --------
207.6 163.3
-------- --------
Industrial:
Continuing 99.9 75.7
Discontinued 1.3 7.7
-------- --------
101.2 83.4
-------- --------
Consumer:
Continuing 78.0 72.5
Discontinued - -
-------- --------
78.0 72.5
-------- --------
Total:
Continuing 623.8 527.4
Discontinued 1.7 45.5
-------- --------
$ 625.5 $ 572.9
======== ========
Note 8. Business Segments - (Continued)
Income before Income Taxes:
Three Months Ended
March 31,
-------------------
1995 1994
-------- --------
Aviation and electronics:
Continuing $ 26.2 $ (73.2)
Discontinued - (28.9)
Pension Income 4.5 3.8
-------- --------
30.7 (98.3)
-------- --------
Specialty metals:
Continuing 23.6 13.1
Discontinued - 3.8
Pension Income 4.0 3.7
-------- --------
27.6 20.6
-------- --------
Industrial:
Continuing 5.8 1.0
Discontinued - 0.5
Pension Income 12.1 10.5
-------- --------
17.9 12.0
-------- --------
Consumer:
Continuing 2.3 3.7
Discontinued - (2.1)
Pension Income 0.1 0.1
-------- --------
2.4 1.7
-------- --------
Total:
Continuing 57.9 (55.4)
Discontinued - (26.7)
-------- --------
57.9 (82.1)
-------- --------
Corporate expense:
Salaries and benefits (7.0) (6.2)
Other (12.7) (13.3)
Interest expense (10.6) (10.5)
Pension income 21.1 19.0
Other income 54.2 2.0
-------- --------
$ 102.9 $ (91.1)
======== ========
Note 8. Business Segments - (Continued)
Discontinued results include the estimated realignment/restructure cost
before pension income and results of operations sold at a gain, as well as those
gains. As a result of the sale of Teledyne Electronic Systems, sales and
operating results for the unit have been reclassified and are presented in
discontinued results of the aviation and electronics segment.
Operating results from continuing operations for the first quarter of 1994
for the aviation and electronics segment were adversely impacted by charges of
$85.0 million included in continuing operations and $27.5 million included in
discontinued operations to resolve certain U.S. government contracting matters.
The charges are presented in selling and administrative expenses.
Teledyne's non-cash pension income recorded the amount by which the
amortization into income of pension surplus and estimated return on plan assets
exceeds the current year's cost of providing benefits.
Note 9. Net Income Per Share -
The weighted average number of shares of common stock used in the
computation of net income per share for the three months ended March 31, 1995
and 1994 was 55,500,626 and 55,441,455, respectively.
Note 10. Commitments and Contingencies -
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. As
previously reported, the Company is further informed that it has been named as
a defendant in a civil action filed pursuant to the False Claims Act in the U.S.
District Court for the Western District of Missouri concerning Teledyne Neosho.
The case remains under seal. The Company does not possess sufficient
information to determine whether the Company will sustain a material 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 alleging generally that the
Company's Teledyne Relays and Teledyne Solid State units falsified test
certifications for switching devices supplied to the government. The plaintiff
seeks treble the damages allegedly sustained by the United States together with
civil penalties of $5,000 to $10,000 for any false certification made. In
addition to the claims alleged under the False Claims Act, plaintiff alleges
three causes of action for wrongful termination under federal and state laws.
The government intervened in the action on March 4, 1994, and the matter was
unsealed on July 29, 1994. On October 4, 1994, plaintiff Charlie J. Hill and
the Company reached a partial settlement of the matter for $1.125 million. The
government approved the partial settlement and subsequently, on December 20,
1994, withdrew from the case. Based on an internal review, and after
consultation with counsel, the Company does not possess sufficient information
to determine whether it will sustain a material 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 has made voluntary disclosures to the U.S. government of
government contracting irregularities discovered in certain of its current or
former business units. The Company has cooperated with the government in the
investigation of these matters, and management does not believe that the outcome
of these matters is likely to have a material adverse effect on the financial
condition of the Company.
The Company learns from time to time that it has been named as a defendant
in civil actions filed under seal pursuant to the False Claims Act. The Company
has been informed that it has been named as a defendant in one such suit filed
by a former employee in the U.S. District Court for the Central District of
California. Although the case remains under seal, the Company understands that
it concerns the Company's former Teledyne Electronics unit, and may seek damages
in a material amount. The Company does not possess sufficient information to
determine whether the Company will sustain a material loss in this matter, or in
any other lawsuit that may be filed under seal, or to reasonably estimate the
amount of any loss attributable to such case or cases. Consequently, the
Company has not been able to identify the existence of a material loss
contingency arising therefrom.
For further information concerning government contract matters, and for a
discussion of environmental matters, see Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
Teledyne is a diversified manufacturing corporation serving customers
worldwide through 18 operating companies focused in four business segments:
Aviation and Electronics; Specialty Metals; Industrial; and Consumer.
Results of Operations
Sales and operating profit for the Company's four business segments are
discussed below.
Aviation and Electronics
- ------------------------
Sales from continuing operations increased $22.5 million to $238.7 million
for the first quarter of 1995 compared to $216.2 million for the same period of
1994. Sales increases were the result of improved sales of engines and spare
parts for the general aviation market, electronic countermeasure equipment for
the international market, microwave devices and electromechanical relays for
government and commercial customers, avionics for the commercial aviation
market, and fabricated products for the U.S. armed forces, partially offset by a
decline in sales of ground power generators to the U.S. Air Force.
Operating profit from continuing operations increased $14.4 million to $26.2
million for the first quarter of 1995 compared to $11.8 million for the same
period of 1994, excluding charges of $85.0 million to resolve certain U.S.
government contracting matters in the first quarter of 1994. Operating profit
increased primarily due to the sales increases described above, reduced losses
on wire and cable products and the partial reversal of estimated losses as a
result of the negotiated termination of a U.S. government contract.
On January 6, 1995, the Company sold substantially all of the business and
assets of Teledyne Electronic Systems. The transaction did not include the
Company's Lewisburg, Tennessee-based electronic contract manufacturing
operations, its commercial encryption business or any real estate. The
transaction resulted in a pretax gain of $50.7 million, included in other
income.
Operating results for Teledyne Electronic Systems, including charges of
$27.5 million in the 1994 first quarter to resolve certain U.S. government
contracting issues, have been reclassified and are presented in discontinued
results.
Specialty Metals
- ----------------
Sales from continuing operations increased $44.2 million to $207.2 million
for the first quarter of 1995 compared to $163.0 million for the same period of
1994. Sales increased primarily due to the improvement in the worldwide markets
served by Teledyne's specialty metals businesses, particularly in the
automotive, commercial aerospace, power generation, cutting tool and other
industrial markets.
Operating profit from continuing operations increased $10.5 million to $23.6
million for the first quarter of 1995 compared to $13.1 million for the same
period of 1994. The improvement in operating profit was primarily the result of
increased sales in the areas listed above, improved margins in nickel and
titanium-based alloys and specialty steels, and the strong performance of thin
rolled and tungsten-based products, partially offset by lower margins on
zirconium products and increased legal costs associated with export license
cases.
Industrial
- ----------
Sales from continuing operations increased $24.2 million to $99.9 million
for the first quarter of 1995 compared to $75.7 million for the same period of
1994. Sales improved primarily due to increased sales of crash fire rescue
vehicles to the U.S. Air Force and higher sales of material handling equipment
primarily as a result of the January 1995 acquisition of Kooi Beheer B.V., a
Netherlands company that is Europe's largest supplier of truck-mountable,
self-propelled material handlers. A decline in sales related to land combat
vehicle development partially offset the overall sales increase.
Operating profit from continuing operations increased $4.8 million to $5.8
million for the first quarter of 1995 compared to $1.0 million for the same
period of 1994. The increase in operating profit was due primarily to the
strong performance of tank engines for the international market and metal
stamping dies, plastic compression molds and industrial valves for the
automotive and truck markets, partially offset by costs associated with the
Kooi acquisition and plant rationalization expenses.
Consumer
- --------
Sales from continuing operations increased $5.5 million to $78.0 million for
the first quarter of 1995 compared to $72.5 million for the same period of 1994.
International sales and sales related to metal tube products for the
pharmaceutical industry increased in 1995.
Operating profit from continuing operations decreased $1.4 million to $2.3
million for the first quarter of 1995 compared to $3.7 million for the same
period of 1994. The 1995 results were adversely affected by new product startup
costs for the SenSonic(TM) Plaque Removal Instrument, the Pour-Thru Water
Filter(TM) device for producing high quality drinking water in the home from tap
water, and the new line of MAXX-PURE(TM) sanitizing systems utilizing advanced
ozone technology for the swimming pool industry. The decrease in operating
profit was partially offset by the strong performance of metal tube products for
the pharmaceutical industry.
Corporate Expense
Corporate expense increased $0.2 million for the first quarter of 1995 over
the same period of 1994 primarily due to higher salaries and benefits and
increased legal and advisory fees associated with an unsolicited merger proposal
and ensuing proxy contest, offset by a reduction in insurance costs.
Provision for Income Taxes
Provision for income taxes for the quarter ended March 31, 1995 included a
$2.1 million decrease in the Company's estimate of prior year's tax liabilities.
Pension Income
Teledyne's non-cash pension income recorded the amount by which the
amortization into income of pension surplus and estimated return on plan assets
exceeds the current year's cost of providing benefits. Pension income before
tax increased to $21.1 million in the first quarter of 1995 from $19.0 million
for the same period of 1994. This increase in pension income was a result of a
higher expected return on pension assets and a change in discount rate used to
calculate the pension benefit obligation partially offset by a change in
mortality assumptions.
Financial Condition
The Company has been able to meet all cash requirements for the quarter
ended March 31, 1995 and 1994 with cash generated from operations, proceeds from
the sale of businesses and its credit lines and is not aware of any impending
cash requirement or capital commitments which could not be met by internally
generated funds or, if needed, the utilization of its committed lines of credit.
During the quarter ended March 31, 1995, the Company utilized a portion of its
lines of credit in the acquisition of Kooi Beheer, B.V. At March 31, 1995,
the Company's unused lines of credit with various banks totalled $135.0 million.
Other Matters
Government Contracts
- --------------------
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.
The Company, like other government contractors, 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. Generally, claims arising out
of these government inquiries are resolved without resort to litigation.
However, should the 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. Given
the extent of the Company's business with the U.S. government, a suspension or
debarment of the Company could have a material adverse effect on the future
operating results and consolidated financial condition of the Company. However,
although the outcome of government inquiries cannot be predicted with
certainty, management does not believe there is any audit, review or
investigation currently pending against the Company that is likely to result in
suspension or debarment of the Company, or that is otherwise likely to have a
material adverse effect on the Company's financial condition.
For additional discussion of government contract matters, see Note 10 to the
accompanying consolidated financial statements.
Environmental
- -------------
The Company is subject to various federal, state and local laws and
regulations concerning the environment, and is currently involved in the
investigation and remediation of a number of sites under these laws. It is
difficult to estimate the timing and ultimate amount of environmental costs
which may be incurred by the Company in connection with these proceedings due to
uncertainties with respect to the availability of information concerning each
site and the status of the law, regulations and technology. Accordingly,
estimates of probable and reasonably possible remediation costs to be incurred
by the Company are based on currently available facts, present laws and
regulations, and current technology. Such estimates take into consideration the
Company's prior experience in site investigation and remediation, the data
concerning cleanup costs available from other companies and regulatory
authorities, and the professional judgment of the Company's environmental
experts in consultation with outside environmental specialists, when necessary.
The estimates also reflect an assessment of the likelihood that other companies
which have been designated potentially responsible parties will have the
financial resources to fulfill their obligations at Superfund sites where they
and the Company may be jointly and severally liable.
As discussed in Note 1 to the Company's consolidated financial statements
in the December 31, 1994 annual report to shareholders, the Company accrues
for losses associated with environmental remediation obligations when such
losses are probable and reasonably estimable, but generally not later than
completion of the remedial feasibility study. The accruals are reviewed
quarterly and, as the investigation and remediation of each site progresses,
adjustments are made as necessary. Many of the investigations are in a
preliminary stage, and future adjustments may be substantial as more
information, such as the nature and extent of site contamination and the scope
of required remediation, becomes available. Accruals for losses from
environmental remediation obligations do not consider the effects of inflation,
and the costs of future expenditures are not discounted to their present value.
Recoveries of environmental remediation costs from other parties are recorded as
assets when their receipt is deemed probable and the amounts are reasonably
estimable.
The Company is party to a number of proceedings brought under the
Comprehensive Environmental Response, Compensation and Liability Act, commonly
known as Superfund, or similar state statutes. The Company has been identified
as a potentially responsible party (PRP) at approximately 55 Superfund sites,
including those at which it believes it has no future liability. The Company's
involvement is very limited or de minimus at approximately 45 of these sites.
In addition, the Company is remediating, or has begun environmental engineering
studies to determine cleanup requirements at certain of its current and former
operating sites. The Company has accrued approximately $50 million in connection
with environmental investigation and remediation liabilities at Superfund sites
and at the Company's current and former operating sites. These costs will
likely be incurred over a period of several years. Based on currently available
information and analyses, management does not believe that costs in excess of
those accrued for these matters will have a material adverse effect on the
Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
On December 22, 1994, a putative class of Registrant's shareholders filed
a complaint in the Superior Court of the State of California, County of Los
Angeles, entitled Dominic Pignetti and Irene Pignetti v. William P. Rutledge,
Donald B. Rice, Henry E. Singleton, George Kozmetsky, George A. Roberts, Fayez
Sarofim and Teledyne, Inc., which asserted a claim against Registrant and
certain of its directors for breach of fiduciary duty. On January 9, 1995, a
second putative class of Registrant's shareholders filed a virtually identical
complaint in the Superior Court of the State of California, County of Los
Angeles, entitled Michael Shores and Inga Kune v. William P. Rutledge,
Donald B. Rice, Henry E. Singleton, George Kozmetsky, George A. Roberts,
Fayez Sarofim and Teledyne, Inc. Plaintiffs in both actions contended that
Registrant and its Board of Directors inappropriately rejected an unsolicited
acquisition proposal from WHX Corporation ("WHX"), failed to negotiate with WHX
for a higher price, and failed to engage in an auction of Registrant. By their
complaints, plaintiffs sought declaratory relief certifying each of their
respective cases as class actions, injunctive relief requiring the directors to
announce their intentions, among other things, to take all steps necessary to
enhance the value of Registrant, to auction Registrant to the highest bidder,
and to facilitate an acquisition of Registrant, and unspecified monetary damages
against the directors. The plaintiffs in both actions also requested
reimbursement of their respective costs and attorneys'fees. On December 29,
1994, one of the individual defendants removed the Pignetti case to the United
States District Court for the Central District of California. Plaintiffs
voluntarily dismissed without prejudice the Pignetti and Shores cases on
January 26 and 25, 1995, respectively.
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 included 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. On January 26, 1995, Registrant reached agreement
to resolve all charges pending against Registrant in this matter upon entry of a
guilty plea and payment of approximately $4 million in fines and assessments.
On July 13, 1994, a grand jury impaneled by the United States District Court
for the District of Columbia returned an indictment against four corporations
and two individuals, including Registrant's Teledyne Wah Chang Albany unit and
one of its employees. The indictment stemmed from a U.S. government
investigation of alleged violations of the U.S. export control laws relating to
a 1988 sale of zirconium to Extraco, Ltd., a Greek company. On January 27,
1995, Registrant reached agreement to resolve all charges pending against
Registrant in this matter upon entry of a guilty plea and payment of
approximately $5.5 million in fines and assessments.
Concurrently with the resolution of the charges against Teledyne Wah Chang
Albany, Registrant entered into consent agreements with the Departments of State
and Commerce. The agreement with the Department of State provides for payment
of $1.5 million to the U.S. government and a three year debarment of Teledyne
Wah Chang Albany from receiving licenses for export of products and services
on the munitions list, the last two years of which have been suspended. The
agreement with the Department of Commerce provides among other things for
payment of $2 million to the U.S. government and a three year denial order
affecting all Teledyne Wah Chang Albany exports of commodities regulated by the
Department of Commerce, all but three months of which has been suspended.
Management does not believe that these agreements will have a material
adverse effect on Registrant.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
3 By-Laws of Teledyne, Inc., as restated and amended and filed with
the Commission as Exhibit 1 to the Company's Form 8-K Report,
dated March 5, 1995, File No. 1-5212, and incorporated herein by
reference.
27 Financial Data Schedule
(b) Registrant filed the following reports on Form 8-K relating to items
5 and 7: January 4, 1995, February 9, 1995, and March 5, 1995.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELEDYNE, INC.
---------------------------------------
(Registrant)
Date: April 19, 1995 By /S/ Donald B. Rice
---------------------------------------
Donald B. Rice
President and
Chief Operating Officer
Date: April 19, 1995 By /S/ Douglas J. Grant
---------------------------------------
Douglas J. Grant
Treasurer
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