FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] FOR THE TRANSITION PERIOD FROM ____ TO ____
Commission File Number 1-5212
TELEDYNE, INC.
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(Exact Name of Registrant as Specified in its Charter)
95-2282626
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(I.R.S. Employer
Identification Number)
2049 Century Park East
Los Angeles, California 90067-3101
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (310) 277-3311
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Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1.00 Par Value New York Stock Exchange
Pacific Stock Exchange
Series E Cumulative Preferred 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
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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
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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 19, 1996, Registrant had outstanding 55,806,173 shares of its
Common Stock. The aggregate market value of the Registrant's voting stock held
by non-affiliates at this date was approximately $1.2 billion, based on the
closing price of $25 3/4 as reported on the Composite Tape. For purposes of the
foregoing calculation, all directors and executive officers of the Registrant
have been deemed to be affiliates, but the Registrant disclaims that any of such
directors or executive officers is an affiliate.
Documents Incorporated By Reference
Teledyne, Inc. proxy statement for 1996 - Part III
<PAGE>
PART I
ITEM 1. BUSINESS
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(a) Teledyne, Inc. (Teledyne, Company or Registrant) was incorporated in
the state of Delaware in 1960. Teledyne is a technology-based manufacturing
corporation serving worldwide customers with commercial and government-related
aviation and electronics products; specialty metals for consumer, industrial and
aerospace applications; and industrial and consumer products.
Company Overview
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During 1992-94, Teledyne divested over thirty businesses with total sales
of about $750 million. The decision to divest was based on whether the
businesses fit into Teledyne's model of technology-based, manufacturing
businesses with attractive futures and synergistic prospects with other Teledyne
businesses.
Beginning in mid-1993, and extending through 1994, Teledyne undertook a
major realignment of its continuing businesses, consolidating them into fewer
operating companies, eliminating an entire layer of corporate management and
1,200 overhead and support positions. The intent of the realignment was to
streamline operations to allow more successful exploitation of business
opportunities, enable the Company to compete more effectively in today's
increasingly complex business environment, give Teledyne greater concentration
and increased focus in the markets in which it competes, and better serve
customers through more robust operating units. The Company believes that the
resulting operating units provide Teledyne with a strong platform for
ProfitableGrowth.
The Company's strategy emphasizes building on its strongest market
positions, through both internal growth and acquisitions. The business plans of
the Company's operating units concentrate on four central themes: (1) business
renewal and growth through process improvement and new product development; (2)
expanded international business, requiring internationally competitive costs and
products; (3) developing commercial products from defense technologies, drawing
on Teledyne's expertise in devices and components which have direct commercial
application; and (4) acquisition of businesses highly complementary to
Teledyne's existing businesses that add market share or geographic reach to
operations where the Company already has a strong position.
The Company believes that its strategy is already bearing fruit. Sales and
earnings from continuing operations for 1995 increased significantly over 1994.
Three acquisitions completed in 1995 should deliver over $100 million in sales
in 1996. All three of these acquisitions add market share and international
reach to businesses where Teledyne already had strong positions in North
American markets. New products introduced during 1995 are expected to
contribute to 1996 performance. The Company sees long-term growth opportunities
across many of its businesses and seeks to increase market strength and focus
within fewer businesses through careful allocation of capital spending, selected
complementary acquisitions, and occasional divestitures of non-complementary
businesses.
Teledyne will continue to operate a diversified set of businesses, though
certainly fewer in number than in the past. These businesses provide multiple
opportunities to share resources, cross-fertilize ideas and technology, and
collaborate on initiatives that one business could not pursue alone, leading to
overall Teledyne performance greater than what the individual businesses would
produce on their own.
Finally, by the end of 1995, the Company had resolved numerous legal
matters, mostly disputes with the U.S. government over events that had occurred
in government contracting or government licensed businesses largely during the
1980's or earlier, including all issues believed to entail significant economic
threats to the Company. Over the past few years, Teledyne has developed and
implemented a comprehensive business ethics and compliance program, for both its
commercial and government businesses, designed to prevent or significantly
reduce the likelihood of a repetition of the circumstances that gave rise to
these prior legal matters.
In 1995, to facilitate compliance with rules and regulations governing
United States Government contracts, the Company distributed its Code of
Business Ethics to all employees and conducted live ethics awareness training
throughout Teledyne using the Company's training module. Also, the Company
trained several thousand Teledyne employees engaged in government contracting on
government contract compliance issues; conducted training on the Truth in
Negotiations Act, cost accounting, and procurement integrity for 390 senior
employees, using outside experts as instructors; issued a handbook entitled
TINA: Truth in Negotiations Act Handbook to relevant employees; and maintained
the Company's Government Contracting Guidelines, which set forth standard
practices to be followed by Teledyne companies engaged in government
contracting. Teledyne remains an active signatory to the Defense Industry
Initiative which commits the Company to a set of self-governance principles.
With its strategy showing results, Teledyne is positioned for
ProfitableGrowth in all four of its operating segments. These segments and the
products they produce for worldwide customers are detailed below in
Item 1-(c)(1)(i).
(b) Information regarding business segments is presented in Note 11 on
pages 13-21 through 13-24 in Exhibit 13 - Teledyne, Inc. annual report to
shareholders for the year ended December 31, 1995. Teledyne's respective
operating companies are responsible for marketing their products.
(c)(1)(i) The following describes Teledyne's products and services by
business segment:
AVIATION & ELECTRONICS SEGMENT
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Operating companies in Teledyne's Aviation & Electronic Segment provide the
following products and services:
Electronic Components and Devices
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A wide range of electronic chips, components and devices are designed,
manufactured and sold worldwide for a variety of aerospace, defense-related,
medical, industrial and consumer applications.
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.
Using advanced microcircuit technology and encryption algorithms, Teledyne
is developing equipment to provide cryptographic security for commercial
wideband telecommunications applications.
On a still larger scale are Teledyne's high power traveling wave tubes, used
to transmit thousands of telephone conversations or a dozen television channels
around the world simultaneously via satellite networks. Similar types of
traveling wave tubes are used in the latest airborne and ground-based electronic
countermeasure 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.
Other components include operational amplifiers, digital-analog converters,
miniature relays, hybrid switching devices, radar augmenters, lower power
microwave tubes, flexible printed-circuit interconnections, and switches.
Aviation Propulsion Systems
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Aviation propulsion systems, both piston and small gas turbine engines, are
designed, manufactured and sold domestically and internationally for general
aviation and defense-related purposes. The piston engine products, sold under
the Continental name, are used by several general aviation aircraft original
equipment manufacturers (OEMs) and after-market suppliers. Continental's piston
engines have been powering airplanes for 60 years, and today about half of the
general aviation piston engines produced in the United States are built by
Teledyne and used worldwide. The small gas turbine engines are used primarily
in aerial targets, drones and cruise missiles.
Engineering Services
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A wide range of engineering services are provided to government defense and
aerospace customers as well as commercial customers. These services include
equipment design and engineering support for scientific experiments flown on the
space shuttle and systems engineering support for ballistic missile defense
programs. In addition, computer software has been developed for simulations and
hardware performance evaluations. Recent broadening of the range of engineering
services include high-technology environmental cleanup, initially applied to the
aftereffects of long term storage of chemical munitions.
Sensing, Analysis and Instrumentation Systems and Instruments
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A diverse range of sensing, analysis and instrumentation systems and
instruments are designed, manufactured and sold to a number of customers,
including the Federal Aviation Administration, domestic and foreign airlines,
commercial aircraft OEMs, and a broad base of companies in different industrial
sectors.
Teledyne currently produces equipment for telemetering data from remote
sources, which is used by major airlines and helicopter fleets to record
in-flight performance and maintenance data on their aircraft.
Sensors, analyzers (on-line and portable), and custom-engineered systems
incorporate a broad range of principles of measurement, including
electrochemical, electrolytic diffusion, chemiluminescence, absorption
photometry, thermal conductivity, flame ionization, and catalytic oxidation.
Oxygen sensors from this line stand out due to their accuracy, sensitivity,
rugged reliability, and application versatility. Photometric detectors for
specific chemicals cover the complete spectrum of absorption analysis, from
ultraviolet to visible to infrared wave-lengths. Polarographic sensors for
carbon monoxide and hydrogen sulfide gas analysis also monitor
chlorine, fluorine, and reducing gases.
Teledyne's 3DQ Discovery ion trap mass spectrometer offers portability and
compactness along with a parts-per-trillion sensitivity for petrochemical,
industrial, pharmaceutical, biotechnical, and environmental applications.
Teledyne produces equipment which supports geophysical exploration and
analysis for oil and gas exploration surveys and the measurement of seismic
earth motion. Teledyne is a leading global manufacturer of a family of
hydrophones based on piezoelectric ceramics. For over a half century, precise
seismometers developed and manufactured by Teledyne have provided advanced
capabilities for detecting natural and man-made earth motion. The innovation
continues with smaller, more sensitive instruments and microprocessor-based,
portable systems which quickly extract and analyze seismic information.
Controlled Explosive Devices
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Controlled explosive devices are designed, manufactured and sold for
defense-related, aerospace and commercial purposes. These devices are used in
a wide range of pilot ejection systems, airframe separation and other similar
aerospace-related systems. Commercially, the devices are used in vehicle
airbags and petroleum industry drilling systems, among other uses.
Unmanned Aerial Vehicles and Targets
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Unmanned aerial vehicles and targets are designed, manufactured and sold for
defense-related purposes to the U. S. government and to the international
market. 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 25 types of
remotely piloted aircraft, usually called Unmanned Air Vehicles (UAVs), have
been built by Teledyne, in both supersonic and subsonic 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. Currently, the Company is developing the technically sophisticated
"Global Hawk" UAV for the U.S. Government under the Tier II+ program. 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
honey-comb materials.
Teledyne Ryan Aeronautical also builds the airframe for the U.S. Army's
Apache attack helicopter and manufactures airframe components and subassemblies
for commercial aircraft.
SPECIALTY METALS SEGMENT
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The products of this business segment derive from the practical application
of leading edge metallurgical science. Unique product characteristics relate to
the particular properties of the alloys melted and the various processing
techniques employed to add value for customers.
Operating companies in Teledyne's Specialty Metals Segment offer a number
of products including:
Superalloys and Specialty Steels
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High-purity and high-performance superalloys, and specialty steels are
refined and processed for worldwide customers in aerospace, biomedical, marine,
oil and gas, gas turbine, chemical processing, nuclear and transportation
industries. Advanced melting and refining capabilities are used by Teledyne to
produce alloys meeting ultra high purity requirements. Subsequent billet
forging and rod and bar rolling provide "long products" to meet exacting
standards of high temperature strength, corrosion resistance, and other special
properties.
Teledyne high-speed steels are used 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.
Thin-rolled Metals
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All types of metals processed to foil thinness over an extensive range of
widths and finishes meet the specialized needs of a diverse international
customer base. These customers use the thin-rolled metal to fabricate products
ranging from automobile components to photographic, medical, telecommunication,
aerospace, personal computer and consumer products. Of equal importance to the
dimensional precision of these products is Teledyne's ability to provide
engineered coatings of adhesives, vinyl, epoxies, polyurethanes, and acrylics.
Custom roll forming, stretch forming and tube drawing capabilities round out the
thin metal product offerings. A significant portion of these products is
distributed through a network of seven service centers, some located in foreign
countries.
Refractory and Reactive Metals
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Teledyne is a 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. Other users of zirconium include the jewelry
and personal hygiene industries. Hafnium, derived as a by-product of zirconium,
is used for control rods in nuclear reactors due to its ability to absorb
neutrons.
Niobium, also known as columbium, 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
manufactured into superconducting wire for high-strength magnets used in MRI
machines for body-scanning, accelerators for high-energy physics, and fusion
energy projects for future generation of electricity.
Teledyne produces titanium alloys for medical, aerospace, chemical
processing, electronic and sporting goods applications. Tantalum, one of the
most corrosion resistant metals, is produced for medical implants, chemical
process equipment, and aerospace engine components.
Tungsten Products
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Teledyne is a major producer of tungsten and tungsten carbide powders and
mill products. Wrought or ductile tungsten products are used in diverse
applications including light bulb filaments, inert gas welding electrodes,
electrical contacts and aircraft counterweights.
Teledyne produces a line of sintered tungsten carbide products, some of
which approach the hardness of diamonds. 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.
Molybdenum, a sister metal to tungsten, which 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.
Forgings and Castings
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Teledyne also provides forging and casting services to customers across the
industrial spectrum. In addition to supplying the transportation, construction
and other basic industries, Teledyne can forge the more difficult alloys which
are used in aerospace, medical implants and other critical applications.
Teledyne casts a variety of metals into products ranging from diesel
locomotive engine blocks and paper rolls to lightweight aluminum and magnesium
aircraft parts. Housings and parts are made for power generation equipment,
tools and automobiles.
INDUSTRIAL SEGMENT
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Operating companies in Teledyne's Industrial Segment provide the following
products:
Nitrogen Gas Systems
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Nitrogen gas springs and pressure systems are designed, manufactured and
sold internationally to industries that, as part of their manufacturing
processes, must form metal. These industries include automobile, appliance and
can-making. These gas systems overcome manufacturing difficulties encountered
with mechanical and air or hydraulic pressure systems.
Dies and Molds
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Metal stamping dies and plastic compression molds are designed and
manufactured and sold primarily for the domestic automotive and truck parts
industries.
Valves, Pumps and Boosters
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Many different types of valves, pumps and boosters are designed,
manufactured and sold domestically and internationally to transportation,
chemical processing, pharmaceutical, and industrial customers.
Transportable Material Handlers
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Teledyne designs and manufactures, through domestic and foreign operations,
a series of specialty forklifts that ride as outriggers on delivery trucks.
This saves valuable cargo space, and the product's light weight transportability
makes it especially useful for the efficient on-site movement of cargo, such as
at construction sites.
Mining and Construction Equipment
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Rugged, high-performance equipment such as breakers, boom systems and
scalers, are designed and manufactured for the construction, quarry and mining
industries.
Military Vehicle Engines and Suspension Systems
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Teledyne produces air and liquid cooled, gasoline and diesel fueled engines.
The heavy-duty, turbo-charged, diesel engines approach 1,750 horsepower and are
used in tanks, mobile artillery and tank recovery vehicles.
In addition, Teledyne develops and manufactures suspension systems for
military and commercial heavy vehicles.
CONSUMER SEGMENT
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Operating companies in Teledyne's Consumer Segment manufacture a number of
specialty products including:
Pool Equipment and Heating Systems
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The Company manufactures under the Teledyne Laars brand name a variety of
heating and water treatment systems for residential and commercial swimming
pools and spas, including MAXX-PURE (TM), a sanitizing system for pools that
uses advanced ozone technology. The Hi-E line of swimming pool heaters is up to
97 percent efficient and produces very low environmental emissions.
The Company also produces a full line of water heating equipment that provides
hot water for commercial, residential and industrial space and water heating.
Oral Health Products
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A family of consumer and professional oral health products and devices are
designed, manufactured and sold primarily through retail merchandisers and
professional dental networks. These products include a high-speed,
electronically controlled toothbrush, other automatic toothbrush models, and
oral irrigation devices that are sold under the brand name of Teledyne Water
Pik (R). Teledyne also produces apparatus and products used in professional
dental practices.
Showerheads
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Also marketed under the Teledyne Water Pik brand name are pulsating shower
heads in a wide range of models. Teledyne designs and manufactures the
showerheads which sell through domestic and foreign mass merchandise and
specialty retail outlets.
Residential Water Filtration
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A family of residential water filtration devices are designed and
manufactured for domestic and foreign consumers and sold primarily through mass
merchandise and specialty retail outlets. The Instapure (TM) line includes
faucet-mounted, under-the-counter and whole house water filters for improving
the quality of water used in the home. The Pour-Thru Water Filter (TM) for home
water filtration removes chlorine, sediment, lead and pesticides from
residential water, employing a filter which is made of 100 percent natural
ingredients and is biodegradable. Teledyne's water filtration product line is
one of the few that can be adapted for most of the water delivery systems
throughout the world.
Collapsible Tubes
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Metal, laminate and plastic collapsible tubes are designed, manufactured and
sold to domestic and foreign companies that package pharmaceutical, dentifrice,
cosmetic, toiletries, food, household and industrial products.
(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 Company or that otherwise is material.
(c)(1)(iii) Substantially all parts and materials required in the
manufacture of the Company's products are available from more than one supplier
and, in the Company's opinion, the sources and availability of raw materials
essential to its business are adequate.
(c)(1)(iv) The Company 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 the Company 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, 1995, approximately 29 percent
of the Company's revenues was attributable to U.S. government business.
Information regarding sales to the U.S. government by business segment is
presented in Note 11 on page 13-22 in Exhibit 13 - Teledyne, Inc. annual report
to shareholders for the year ended December 31, 1995. 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 the Company'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 Company'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. If a contract is terminated for convenience by
the U.S. government, traditional contract remedies apply which, in general,
compensate the contractor for the contract price of completed supplies or
services accepted by the government; for costs incurred in the performance of
the work terminated, including associated profit or fee; and for other allowable
costs incurred by the contractor resulting from the termination. 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 13-30 through 13-37 in Exhibit 13 - Teledyne,
Inc. annual report to shareholders for the year ended December 31, 1995.
(c)(1)(viii) The Company's backlog of confirmed orders was approximately
$1.0 billion at December 31, 1995 and $1.4 billion at December 31, 1994. During
the year ending December 31, 1996, it is anticipated that approximately 85.7
percent of confirmed orders on hand at December 31, 1995 will be filled.
Backlog of confirmed orders of the aviation and electronics segment was $456.6
million at December 31, 1995 and $850.7 million at December 31, 1994. During
the year ending December 31, 1996, it is anticipated that approximately 83.9
percent of the confirmed orders on hand at December 31, 1995 for this segment
will be filled. Backlog of confirmed orders of the specialty metals segment was
$362.2 million at December 31, 1995 and $298.9 million at December 31, 1994.
During the year ending December 31, 1996, it is anticipated that approximately
83.1 percent of the confirmed orders on hand at December 31, 1995 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 the Company's
products and services in each of its principal business segments. During the
year ended December 31, 1995, any changes in competitive conditions were not
material to Teledyne as a whole. In view of the number and variety of its
products and services, the Company believes that it 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 the Company 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,
including bid and proposal costs, for the years ended December 31, 1995, 1994
and 1993 included the following in millions:
1995 1994 1993
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Customer-Sponsored:
Aviation and electronics segment $204.2 $173.9 $291.6
Industrial segment 26.0 51.1 85.5
Other 3.7 5.2 1.9
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233.9 230.2 379.0
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Company-Sponsored:
Aviation and electronics segment 30.0 39.7 40.6
Other 27.3 26.2 23.4
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57.3 65.9 64.0
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Total Research and Development $291.2 $296.1 $443.0
====== ====== ======
(c)(1)(xii) Information regarding laws and regulations concerning the
environment is included in Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 13-36 and 13-37 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1995.
(c)(1)(xiii) The Company and its subsidiaries employ approximately 18,000
persons, 7,000 of whom are employed at companies in the aviation and electronics
segment.
(d)(1) During the years ended December 31, 1995, 1994, and 1993, the
Company 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 17 percent in 1995, 16 percent in 1994 and
15 percent in 1993 of the Company's sales.
(d)(1)(i) and (d)(1)(ii) Not applicable.
(d)(2) In the opinion of the Company, there is no significant risk attendant
to its foreign operations.
(d)(3) Not applicable.
ITEM 2. PROPERTIES
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The Company owns manufacturing and research facilities at numerous locations
as follows: aviation and electronics segment (1.8 million square feet),
primarily in Alabama and California; specialty metals segment (4.0 million
square feet), primarily in Oregon, Indiana, North Carolina and Pennsylvania;
industrial segment (2.3 million square feet), primarily in Michigan and
Pennsylvania; consumer segment (1.4 million square feet), primarily in Colorado,
Oklahoma and California.
The Company leases facilities as follows: aviation and electronics segment
(4.0 million square feet), primarily in Alabama and California; specialty metals
segment (0.9 million square feet), primarily in Massachusetts, South Carolina
and Virginia; industrial segment (0.1 million square feet); consumer segment
(0.1 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 the Company.
The Company 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
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On August 15, 1990, federal agents executed a search warrant on and removed
a number of documents relating to government-furnished materials from
Registrant's former Teledyne Neosho unit. In addition, several Teledyne Neosho
employees received subpoenas to testify before a federal grand jury. As
previously reported, Registrant 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.
Though the case remains under seal, management does not believe that the outcome
of this action is likely to have a material adverse effect on Registrant's
financial condition.
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 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
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.
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, costs and expenses, including attorneys' fees, and other appropriate
relief.
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. On February 28, 1994, the Court entered an
order dismissing the complaint with prejudice; plaintiffs filed a notice of
appeal from the order on March 25, 1994.
The parties entered a stipulation settling the shareholder derivative
actions described above, and on January 22, 1996, the Court entered final
judgment approving the agreed settlement. Resolution of these matters did not
have an adverse effect on the financial condition of Registrant.
On March 31, 1995, a putative class of Registrant's shareholders filed a
complaint in the Court of Chancery, State of Delaware in and for New Castle
County, entitled Ruth Freeman v. Teledyne, Inc., William P. Rutledge, Donald B.
Rice, George Kozmetsky, George A. Roberts, Fayez Sarofim, Henry E. Singleton and
Diane Creel, which asserts a claim against Registrant and certain of its
directors for breach of fiduciary duty. Plaintiffs principally contend 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
complaint, plaintiffs seek declaratory relief certifying the case as a class
action and declaring that the director defendants have breached their fiduciary
duties. Plaintiffs also seek injunctive relief prohibiting any action that
might "diminish shareholder value" and requiring the director defendants "to
properly and adequately consider all bona fide offers or proposals to acquire
Teledyne and to negotiate in good faith with all person with bona fide
interested [sic] in acquiring Teledyne", and monetary damages. The complaint
does not specify the amount of monetary damages sought. The plaintiffs also
request reimbursement of costs and attorneys' fees. Registrant and the named
directors have substantial defenses, and will defend the matter vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- --------------------------------------------------------------------------
MATTERS
- -------
This information is presented on pages 13-27 and 13-38 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1995.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
This information is presented on pages 13-28 and 13-29 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
This information is presented on pages 13-30 through 13-37 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1995.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
- ----------------------------------------------------
This information is presented on pages 13-1 through 13-29 in Exhibit 13 -
Teledyne, Inc. annual report to shareholders for the year ended December 31,
1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
This information will be included in the Teledyne, Inc. proxy statement for
1996 which will be filed within 120 days of the Company'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
1996 which will be filed within 120 days of the Company'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
1996 which will be filed within 120 days of the Company'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
1996 which will be filed within 120 days of the Company's year end and is hereby
incorporated by reference to such proxy statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a)(1) Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Operations for the Years Ended December 31,
1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993
Report of Independent Public Accountants
Notes to Consolidated Financial Statements
(a)(2) Not applicable.
(a)(3) See the exhibit index.
(b) The Company did not file any reports on Form 8-K during the quarter
ended December 31, 1995.
(c) Included in 14(a)(3) above.
(d) Not applicable.
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 30, 1996 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 30, 1996 By /S/ William P. Rutledge
____________________________
William P. Rutledge
Director, Chairman of the Board
and Chief Executive Officer
Date: January 30, 1996 By /S/ Donald B. Rice
____________________________
Donald B. Rice
Director, President and Chief
Operating Officer
Date: January 30, 1996 By /S/ George A. Roberts
____________________________
George A. Roberts
Director
Date: January 30, 1996 By /S/ Fayez Sarofim
____________________________
Fayez Sarofim
Director
Date: January 30, 1996 By /S/ Henry E. Singleton
____________________________
Henry E. Singleton
Director
Date: January 30, 1996 By /S/ Douglas J. Grant
____________________________
Douglas J. Grant
Treasurer
(Principal Financial Officer)
Date: January 30, 1996 By /S/ Dale G. Reid
____________________________
Dale G. Reid
Assistant Treasurer
(Principal Accounting Officer)
<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 1 to the Company's Form 8-K Report,
dated March 5, 1995, 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. Third Supplemental Indenture dated as
of July 12, 1994 between Teledyne, Inc., Bank of America National
Trust and Savings Association, and Harris Trust Company of California,
previously filed with the Commission as Exhibit 4.1 to the Company's
Form 10-K Report for the year ended December 31,1994, 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 4.2 to the Company's Form 10-K Report for the year
ended December 31, 1992, File No. 1-5212, and incorporated herein by
reference.
Rights Agreement, dated as of January 4, 1995, between Teledyne, Inc. 4.3
and Chemical Trust Company of California as Rights Agent, which
includes: as Exhibit A thereto, the Form of Certificate of Designation,
Preferences and Rights of Series D Preferred Stock of Teledyne, Inc.;
as Exhibit B thereto, the Form of Right Certificate; and, as Exhibit C
thereto, the Summary of Rights to Purchase Series D Preferred Stock,
previously filed as Exhibit 4 to the Company's Form 8-K, dated January 4,
1995, File No. 1-5212, and incorporated herein by reference.
Certificate of Designation, Preferences and Rights of Series E 4.4
Cumulative Preferred Stock of Teledyne, Inc., previously filed as
Exhibit 2 to the Company's Form 8-A Registration Statement dated
February 9, 1995, 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. Executive Deferred Compensation Plan as 10.2
restated effective September 1, 1994, previously filed with the
Commission as Exhibit 10.2 to the Company's Form 10-K Report for the
year ended December 31, 1994, File No. 1-5212, and incorporated
herein by reference. First amendment dated as of August 14, 1995, and
second amendment dated as of December 4, 1995, to the Summary of
Teledyne, Inc. Executive Deferred Compensation Plan.
Credit Agreement dated July 12, 1994, previously filed with the 10.3
Commission as Exhibit 10.1 to the Company's Form 10-Q Report for the
quarter ended September 30, 1994, File No. 1-5212 and incorporated
herein by reference.
Teledyne, Inc. 1994 Long-Term Incentive Plan, previously filed with the 10.4
Commission as Exhibit A to the Company's proxy statement for 1994 and
incorporated herein by reference.
A form of the severance agreement dated as of March 5, 1995 between the 10.5
Company and the following executive officers: William P. Rutledge
(Chairman of the Board and Chief Executive Officer), Donald B. Rice
(President and Chief Operating Officer), Hudson B. Drake (Senior Vice
President), Douglas J. Grant (Treasurer), Judith R. Nelson (Secretary and
General Counsel), and Gary L. Riley (Vice President), previously filed
with the Commission as Exhibit 10 to the Company's Form 10-Q Report
for the quarter ended June 30, 1995, File No. 1-5212 and incorporated
herein by reference. Each of the agreements is identical to the form
except that the severance compensation multiple is 2.5 for Messrs.
Rutledge and Rice and 2.25 for the other executive officers.
Teledyne, Inc. 1995 Non-Employee Director Stock Option Plan, previously 10.6
filed with the Commission as Exhibit A to the Company's proxy statement
for 1995 and incorporated herein by reference.
Statement re computation of earnings per share 11
Financial information from the Teledyne, Inc. annual report to 13
shareholders for the year ended December 31, 1995.
Subsidiaries of registrant 21
Consent of independent public accountants 23
Financial data schedule 27
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.
EXHIBIT 10.2
TELEDYNE, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
AMENDMENT 1995-1
WHEREAS, Teledyne, Inc. (the "Company") maintains the
Teledyne, Inc. Executive Deferred Compensation Plan (the "Plan");
WHEREAS, Section 10.5 of the Plan gives the Chief Operating
Officer of the Company the power to amend the Plan; and
WHEREAS, it has been determined that it is necessary to
amend the Plan;
NOW, THEREFORE:
1. Section 2.15 of the Plan is hereby amended in its
entirety to read as follows:
"2.15 Interest Rate' shall mean, for each Fund,
an amount equal to the net rate, expressed as a
percent, of gain or loss on the assets of such Fund
during a month reduced, with respect to Funds selected
by Insurable Participants, by .0833 percent. If a
Participant satisfies the definition of an Insurable
Participant (as set forth in Section 2.14) at the time
he becomes a Participant, but fails to satisfy such
definition thereafter, the .0833 percent reduction
described in the preceding sentence shall apply only to
that portion of the net rate of gain or loss credited
to the Participant's Account as:
(1) the Participant's Account balance on the
last day of the month in which such failure occurs
bears to
(2) the Participant's Account balance on the
last day of the month preceding the month for which
such gain or loss is allocated."
2. Section 8.2 of the Plan is hereby amended by the
addition of the following Section 8.2.5 at the end thereof:
"8.2.5 Failure to Remain Insurable.
Notwithstanding the foregoing provisions of this
Article 8, if a Participant satisfies the definition
of an Insurable Participant (as set forth in Section
2.14) at the time he becomes a Participant, but fails
to satisfy such definition thereafter, the pre-distribution
death benefit payable to the Participant's
Beneficiary shall equal the lesser of:
(1) the pre-distribution death benefit
determined under the foregoing provisions of this
Article 8; or
(2) the death benefit under the Policy
payable to the Participant's Beneficiary at the time
the Participant fails to satisfy the definition of an
Insurable Participant."
The foregoing shall become effective on the date of
execution of this amendment to the Plan.
IN WITNESS WHEREOF, the President and Chief Operating
Officer of the Company has executed this amendment this 14th day
of August, 1995.
______________________
Donald B. Rice
President and
Chief Operating Officer
TELEDYNE, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
AMENDMENT 1995-2
WHEREAS, Teledyne, Inc. (the "Company") maintains the
Teledyne, Inc. Executive Deferred Compensation Plan (the "Plan");
WHEREAS, Section 10.5 of the Plan gives the Chief Operating
Officer of the Company the power to amend the Plan; and
WHEREAS, it has been determined that it is necessary to
amend the Plan;
NOW, THEREFORE:
Section 4.1 of the Plan is hereby amended by the addition of
the following Section 4.1.7 at the end thereof:
"4.1.7 Extension of Election Deadline.
------------------------------
Notwithstanding the foregoing provisions of this
Section 4.1, the Committee may extend the deadline for
filing elections set forth in Sections 4.1.3, 4.1.4 and
4.1.5 from December 1 of a particular calendar year to
such later date in December of that calendar year as
the Committee shall determine. The Committee shall
give notice of such extension to all Eligible
Employees."
The foregoing shall become effective on the date of
execution of this amendment to the Plan.
IN WITNESS WHEREOF, the President and Chief Operating
Officer of the Company has executed this amendment this 4th day
of December, 1995.
______________________
Donald B. Rice
President and
Chief Operating Officer
EXHIBIT 11
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
----------------------------------------------
YEARS ENDING DECEMBER 31, 1995, 1994 AND 1993
---------------------------------------------
(In millions except per share and share amounts)
1995 1994 1993
---------- ---------- ----------
Shares Used in Computing Earnings
Per Share:
Weighted average number of
shares outstanding 55,656,827 55,446,296 55,420,654
Incremental shares attributed to
outstanding options 1,177,544 - -
---------- ---------- ----------
56,834,371 55,446,296 55,420,654
========== ========== ==========
Income (Loss) before Extraordinary
Loss and Cumulative Effect of
Accounting Change $ 162.0 $ (8.4) $ 72.8
Extraordinary Loss on Redemption
of Debt - - (3.7)
Cumulative Effect of Accounting
Change - - (185.6)
---------- ---------- ----------
Net Income (Loss) 162.0 (8.4) (116.5)
Dividends on Preferred Stock 1.6 - -
---------- ---------- ----------
Net income (loss) available to
common shareholders $ 160.4 $ (8.4) $ (116.5)
========== ========== ==========
Fully Diluted Net Income (Loss)
Per Common Share:
Income (loss) before extra-
ordinary loss and cumulative
effect of accounting change $ 2.82 $ (0.15) $ 1.32
Extraordinary loss on redemption
of debt - - (0.07)
Cumulative effect of accounting
change - - (3.35)
---------- ---------- ----------
Fully Diluted Net Income (Loss)
Per Common Share $ 2.82 $ (0.15) $ (2.10)
========== ========== ==========
Published Net Income (Loss) Per
Common Share $ 2.88 $ (0.15) $ (2.10)
========== ========== ==========
Note: This calculation is submitted in accordance with Regulation S-K
item 601(b)(11) although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
EXHIBIT 13
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
December 31, 1995 and 1994
--------------------------
(In millions except share and per share amounts)
1995 1994
---------- ----------
ASSETS
- ------
Current Assets:
Cash and marketable securities $ 41.7 $ 29.7
Receivables 417.5 409.8
Inventories 229.4 196.9
Deferred income taxes 82.2 104.9
Prepaid expenses 17.3 16.5
---------- ---------
Total current assets 788.1 757.8
Property and Equipment 304.3 304.3
Prepaid Pension Cost 386.6 332.7
Other Assets 127.2 82.9
---------- ---------
$ 1,606.2 $ 1,477.7
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 130.5 $ 162.0
Accrued liabilities 273.2 303.6
---------- ---------
Total current liabilities 403.7 465.6
Long-Term Debt 380.0 356.6
Accrued Postretirement Benefits 276.3 275.9
Other Long-Term Liabilities 117.5 106.6
----------- ---------
1,177.5 1,204.7
----------- ---------
Redeemable Preferred Stock, $1.00 par
value, 2,500,000 shares authorized,
2,209,122 shares issued and
outstanding in 1995 33.1 -
----------- ---------
Shareholders' Equity:
Common stock, $1.00 par value,
100,000,000 shares authorized,
55,781,423 shares in 1995 and 55,462,298
shares in 1994 issued and outstanding 55.8 55.5
Additional paid-in capital 41.4 35.3
Retained earnings 284.0 178.3
Other 14.4 3.9
----------- ---------
Total shareholders' equity 395.6 273.0
----------- ---------
$ 1,606.2 $ 1,477.7
=========== =========
The accompanying notes are an integral part of these statements.
13-1
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
----------------------------------------------------
(In millions except per share amounts)
1995 1994 1993
---------- ---------- ----------
Sales $ 2,567.8 $ 2,391.2 $ 2,491.7
Costs and Expenses:
Cost of sales 1,912.8 1,787.8 1,917.9
Selling and administrative expenses 430.1 576.3 468.5
Interest expense 42.3 43.5 45.1
---------- ---------- ----------
2,385.2 2,407.6 2,431.5
---------- ---------- ----------
Earnings (Loss) before Other Income 182.6 (16.4) 60.2
Other Income, Net 67.6 12.7 53.1
---------- ---------- ----------
Income (Loss) before Income Taxes,
Extraordinary Loss and Cumulative
Effect of Accounting Change* 250.2 (3.7) 113.3
Provision for Income Taxes 88.2 4.7 40.5
---------- ---------- ----------
Income (Loss) before Extraordinary
Loss and Cumulative Effect of
Accounting Change 162.0 (8.4) 72.8
Extraordinary Loss on Redemption
of Debt - - (3.7)
Cumulative Effect of Accounting
Change - - (185.6)
---------- ---------- -----------
Net Income (Loss) 162.0 (8.4) (116.5)
Dividends on Preferred Stock 1.6 - -
---------- ---------- -----------
Net Income (Loss) Available to
Common Shareholders $ 160.4 $ (8.4) $ (116.5)
========== =========== ===========
Income (Loss) Per Common Share:
Income (loss) before extraordinary
loss and cumulative effect of
accounting change $ 2.88 $ (0.15) $ 1.32
Extraordinary loss on redemption
of debt - - (0.07)
Cumulative effect of accounting
change - - (3.35)
----------- ------------ ------------
Net Income (Loss) Per Common Share $ 2.88 $ (0.15) $ (2.10)
=========== ============ ============
*Includes non-cash pension income of $80.7 million in 1995, $79.1 million in
1994 and $66.2 million in 1993.
The accompanying notes are an integral part of these statements.
13-2
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
-----------------------------------------------------
(In millions)
1995 1994 1993
---------- ---------- ----------
Operating activities:
Net income (loss) $ 162.0 $ (8.4) $ (116.5)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 70.4 70.2 72.7
Increase in prepaid pension cost (53.9) (52.4) (58.2)
Gain on sale of businesses (51.1) - -
Decrease (increase) in deferred
income taxes 38.8 41.0 (57.1)
Decrease in accounts payable and
accrued liabilities (20.4) (29.9) (53.9)
Decrease (increase) in receivables (11.5) (82.3) 17.4
Decrease (increase) in inventories (8.9) (26.8) 21.8
Increase in accrued income taxes 8.9 - -
Increase (decrease) in accrued
postretirement benefits 0.4 (1.6) 299.2
Gain on sale of Litton common stock - - (40.4)
Other, net (12.5) (28.3) (1.7)
---------- ---------- ----------
Net cash provided by (used in)
operating activities 122.2 (118.5) 83.3
---------- ---------- ----------
Investing activities:
Net decrease (increase) in short-term
investments (5.6) 11.0 28.5
Sale of marketable securities - 121.4 163.5
Purchases of marketable securities - (8.0) (70.4)
---------- ---------- ----------
Net sales (purchases) of marketable
securities (5.6) 124.4 121.6
Proceeds from the sales of businesses 69.0 7.2 9.2
Purchases of property and equipment (62.9) (64.5) (81.2)
Purchase of businesses (43.2) - (4.0)
Proceeds from the sales of property and
equipment 13.5 10.9 9.7
Collection of notes receivable from the
sales of businesses 0.3 2.9 17.1
Other, net (14.4) (9.3) (11.6)
----------- ---------- ----------
Net cash provided by (used in)
investing activities (43.3) 71.6 60.8
----------- ---------- ----------
Financing activities:
Increase (decrease) in checks
outstanding (64.2) 51.7 7.9
Cash dividends (23.2) - (44.3)
Increase (decrease) in long-term debt 8.5 (4.2) (101.6)
Other, net 6.4 0.4 0.5
----------- ---------- ----------
Net cash provided by (used in)
financing activities (72.5) 47.9 (137.5)
----------- ---------- ----------
Increase in cash $ 6.4 $ 1.0 $ 6.6
=========== ========== ==========
Non cash transactions:
Preferred stock dividend on common
stock $ 33.1 $ - $ -
========== ========== ==========
Interest paid on long-term debt $ 38.3 $ 40.1 $ 41.7
========== ========== ==========
Income taxes paid (received) $ (14.6) $ 0.9 $ (2.6)
========== ========== ==========
The accompanying notes are an integral part of these statements.
13-3
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
----------------------------------------------------
(In millions except per share amounts)
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Shareholders'
Stock Capital Earnings Other Equity
------ ---------- -------- ----- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ 55.4 $ 34.5 $ 347.5 $ 3.7 $ 441.1
Net loss - - (116.5) - (116.5)
Cash dividends on common
stock ($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
Net loss - - (8.4) - (8.4)
Exercise of stock options 0.1 0.4 - - 0.5
Net unrealized appreciation - - - 0.5 0.5
Currency translation adjustment - - - (0.1) (0.1)
------ ------- ------- ------ -----------
Balance, December 31, 1994 55.5 35.3 178.3 3.9 273.0
Net income - - 162.0 - 162.0
Preferred stock dividends on
common stock ($0.60 per share) - - (33.1) - (33.1)
Cash dividends on common
stock ($0.40 per share) - - (22.6) - (22.6)
Cash dividends on preferred
stock ($0.60 per share) - - (0.6) - (0.6)
Exercise of stock options 0.3 6.1 - - 6.4
Net unrealized appreciation - - - 9.8 9.8
Currency translation adjustment - - - 0.7 0.7
------ ------- ------- ------ -----------
Balance, December 31, 1995 $ 55.8 $ 41.4 $ 284.0 $ 14.4 $ 395.6
====== ======= ======= ====== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
13-4
<PAGE>
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, 1995
and 1994 and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. 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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
As explained in Note 9 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 106 in 1993.
Arthur Andersen LLP
Los Angeles, California
January 13, 1996
13-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1. Summary of Significant Accounting Policies -
Principles of Consolidation. The consolidated financial statements include the
accounts of Teledyne, Inc. and subsidiaries. All material intercompany accounts
and transactions have been eliminated. Certain amounts for 1994 and 1993 have
been reclassified to conform with the 1995 presentation.
Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the related reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Management
believes that the estimates are reasonable.
Receivables. Receivables are presented net of a reserve for doubtful accounts
of $7.1 million at December 31, 1995 and $6.3 million at December 31, 1994.
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 $30.9 million at December 31,
1995 and $24.7 million at December 31, 1994. Costs related to businesses
purchased after November 1970 are being amortized on a straight-line basis over
periods not exceeding 20 years.
Financial Instruments. The fair value of financial instruments, except for
long-term debt, approximated their carrying values at December 31, 1995. Fair
values have been determined through information obtained from quoted market
sources and management estimates.
In 1994, the Company changed its accounting for investments in debt and
equity securities to comply with the provisions of Statement of Financial
Accounting Standards No. 115. The statement requires that these investments be
classified as either held-to-maturity, trading or available-for-sale. The
Company's investments in debt and equity securities are classified as available-
for-sale and are reported at fair value, with net unrealized appreciation and
depreciation on investments reported as a separate component of shareholders'
equity.
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.
13-6
<PAGE>
Note 1. Summary of Significant Accounting Policies - (Continued)
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 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
include bid and proposal costs, ($57.3 million in 1995, $65.9 million in 1994
and $64.0 million in 1993) 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 costs incurred for
company-funded research and development is recoverable through overhead cost
allowances on government contracts.
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, but generally not later than
completion of the remedial feasibility study. Such accruals are adjusted as
further information develops or circumstances change. 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, 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. Costs of future
expenditures for environmental remediation obligations are not discounted to
present value.
Income Taxes. Provision for income taxes includes federal, state and foreign
income taxes. Deferred income taxes are provided for temporary differences in
the recognition of income and expenses. 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 financial statement and
tax bases of assets and liabilities and tax rates, if any, from period to
period.
Net Income (Loss) Per Share. The weighted average number of shares of common
stock used in the computation of net income per share was 55,656,827 in 1995,
55,446,296 in 1994 and 55,420,654 in 1993. 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>
Note 2. Inventories -
Inventories at December 31, 1995 and 1994 were as follows (in millions):
1995 1994
-------- -------
Raw materials and work-in-process $ 212.4 $ 301.9
Finished goods 61.3 47.2
-------- -------
273.7 349.1
Progress payments (44.3) (152.2)
-------- -------
$ 229.4 $ 196.9
======== =======
Inventories, before progress payments, determined on the last-in, first-out
method were $199.6 million at December 31, 1995 and $234.8 million at
December 31, 1994. The remainder of the inventories was determined using the
first-in, first-out method. Inventories stated on the last-in, first-out basis
were $179.8 million and $189.2 million less than their first-in, first-out
values at December 31, 1995 and 1994, respectively. These first-in, first-out
values do not differ materially from current cost.
During 1995, 1994 and 1993, 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 $8.0 million in 1995 and 1994, and $11.4 million in 1993.
Inventories, before progress payments, related to long-term contracts were
$25.3 million and $163.4 million at December 31, 1995 and 1994, respectively.
Progress payments related to long-term contracts were $24.1 million and $136.9
million at December 31, 1995 and 1994, respectively.
13-8
<PAGE>
Note 3. Long-Term Debt -
Long-term debt at December 31, 1995 and 1994 was as follows (in millions):
1995 1994
-------- --------
10% Subordinated Debentures, due 2004, Series A and C
(net of unamortized discount of $24.6 in 1995 and $27.8
in 1994) $ 332.4 $ 332.2
7% Subordinated Debentures, due 1999, $1.9 payable
annually 22.4 23.9
Variable Rate Note, due 1997 14.2 -
Other 17.7 2.6
-------- --------
386.7 358.7
Current portion (6.7) (2.1)
-------- --------
$ 380.0 $ 356.6
======== ========
At December 31, 1995, the estimated fair value of the Company's long-term debt
was $421.9 million.
Long-term debt is payable $6.7 million in 1996, $27.6 million in 1997, $2.6
million in 1998 and $17.4 million in 1999. No amount is due in 2000.
The Company had available credit facilities at December 31, 1995, with
various U.S. and foreign banks, totaling $151.0 million ($135.0 million expiring
in July 1997, and $16.0 million expiring in December 1997) for which there is a
$75.0 million letters of credit sublimit. Borrowings under the credit
agreements, at the Company's election, bear interest at a floating rate
generally based on either a defined prime rate or a fixed rate based on an
interbank offered rate. A fee is charged on the amount of the unused
commitment. The agreements contain restrictive covenants including those
relating to net worth, investments, asset sales and material changes in lines of
business. During 1995, the Company utilized $14.2 million of its lines of
credit in the acquisition of the material handling business of Kooi B.V. At
December 31, 1995, the interest rate on this borrowing was 4.4 percent.
Commitments under separate standby letters of credit outstanding were $51.1
million at December 31, 1995 and $86.2 million at December 31, 1994.
In 1994, the Company settled with the U.S. government two civil cases
relating to its Teledyne Relays and Systems units. In connection with the
settlement, the Company paid the U.S. government $112.5 million and related
interest of $2.1 million in 1994.
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.
13-9
<PAGE>
Note 4. Supplemental Balance Sheet Information -
Cash and marketable securities at December 31, 1995 and 1994 were as follows (in
millions):
1995 1994
------- -------
Cash $ 22.1 $ 15.7
Repurchase agreements, at cost which approximates market 13.0 14.0
Other short-term investments, at cost which
approximates market 6.6 -
------- -------
$ 41.7 $ 29.7
======= =======
Property and equipment at December 31, 1995 and 1994 were as follows (in
millions):
1995 1994
------- -------
Land $ 28.3 $ 28.9
Buildings 224.4 229.8
Equipment and leasehold improvements 614.3 597.2
------- -------
867.0 855.9
Accumulated depreciation and amortization (562.7) (551.6)
------- -------
$ 304.3 $ 304.3
======= =======
In 1995, Statement of Financial Accounting Standards No. 121 was issued which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets. This
statement, which will be effective in 1996, addresses when impairment losses
should be recognized and how impairment losses should be measured. The
adoption of this statement by the Company is not expected to have a material
effect on the consolidated financial statements.
Accounts payable included $9.6 million at December 31, 1995 and $73.8 million
at December 31, 1994 for checks outstanding in excess of cash balances.
Accrued liabilities at December 31, 1995 and 1994 were as follows (in
millions):
1995 1994
------- -------
Salaries and wages $ 69.0 $ 68.6
Accrued postretirement benefits 22.0 22.5
Advances and billings in excess of costs 17.2 34.4
Other 165.0 178.1
------- -------
$ 273.2 $ 303.6
======= =======
13-10
<PAGE>
Note 5. Redeemable Preferred Stock -
During 1995, dividends consisting in part of cash and in part of redeemable
preferred stock were paid to common shareholders. The redeemable preferred
stock is a new issue of Series E Cumulative Preferred Stock, $15.00 stated
value per share, callable by the Company at any time at $15.00 per share,
with a mandatory call at $16.50 per share on change of control, paying an
annual cumulative cash dividend of $1.20 per share payable semi-annually.
For each dividend on the common stock, 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.
13-11
<PAGE>
Note 6. Shareholders' Equity -
The Company is authorized to issue 15 million shares of preferred stock, $1 par
value. 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, 1995, the
Company had purchased and subsequently retired 1,432,000 shares.
The Company has compensation plans which allow for issuance of restricted
stock, stock options and stock appreciation rights covering an aggregate of
5,200,000 shares of the Company's common stock. Under the plans, options to
purchase shares of the Company's common stock may be granted to certain key
employees and non-employee directors and may be incentive stock options or
non-qualified stock options. 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 generally nontransferable and are exercisable in
installments.
In 1995, the 1995 Non-Employee Director Stock Option Plan was approved by
the Company's shareholders. This plan, which is available only to non-
employee directors of the Company who first became directors after January 1,
1994, allows for the issuance of stock options covering 200,000 shares of the
Company's common stock.
Stock option activity for the year ended December 31, 1995 was as follows:
Number Exercise
of Shares Price per Share
--------- -----------------
Outstanding at December 31, 1994 3,276,375 $16.375 - $25.125
Granted 548,528 $15.330 - $24.750
Exercised (319,125) $16.375 - $20.250
Canceled (76,625) $16.375 - $25.125
---------
Outstanding at December 31, 1995 3,429,153 $15.330 - $24.750
=========
The options granted to date are exercisable in installments beginning one and
two years from the date of grant and expiring 10 or 11 years from the date of
grant. As of December 31, 1995, options for 1,401,472 common shares were
available for future grant and 1,518,891 of the stock options were exercisable.
In 1995, SFAS No. 123 was issued which requires certain disclosures about
stock-based employee compensation arrangements using the fair value based method
of accounting. This statement, effective in 1996, allows for companies to
either adopt the new method of accounting or to continue using the intrinsic
value based method of accounting but make pro forma disclosures of net income
and earnings per share as if the fair value based method of accounting had
been applied. The Company has not yet determined the method it will use or
the impact of SFAS No. 123 on the the consolidated financial statements.
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
shareholders. 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
13-12
<PAGE>
Note 6. Shareholders' Equity - (Continued)
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 shareholders 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.
13-13
<PAGE>
Note 7. Income Taxes -
The components of the net deferred tax asset at December 31, 1995 and 1994, were
as follows (in millions):
1995 1994
------- -------
Pension income $(148.9) $(124.0)
Postretirement benefits 115.0 116.1
Inventory valuations 17.6 21.7
Long-term contracts 13.6 29.0
Self-insurance reserves 12.1 14.3
Vacation benefits 9.7 10.1
Other deferred assets 59.0 66.9
Other deferred liabilities (17.5) (28.4)
------- -------
$ 60.6 $ 105.7
======= =======
Provision (credit) for income taxes for the years ended December 31, 1995, 1994
and 1993 was as follows (in millions):
1995 1994 1993
------- ------- -------
Current - Federal $ 40.2 $ (41.1) $ (20.1)
- State 5.0 2.9 0.4
- Foreign 4.1 2.0 1.5
------- ------- -------
- Total 49.3 (36.2) (18.2)
------- ------- -------
Deferred - Federal 28.4 40.3 49.3
- State 10.5 0.6 9.4
------- ------- -------
- Total 38.9 40.9 58.7
------- ------- -------
Provision for income taxes $ 88.2 $ 4.7 $ 40.5
======= ======= =======
Income (loss) before income taxes, extraordinary loss and cumulative effect of
accounting changes included income (loss) from domestic operations of $246.4
million in 1995, $(9.3) million in 1994 and $113.7 million in 1993.
13-14
<PAGE>
Note 7. Income Taxes - (Continued)
Differences between the provision for income taxes and income taxes at the
statutory federal income tax rate for the years ended December 31, 1995, 1994
and 1993 were as follows (in millions):
1995 1994 1993
------ ------ ------
Income tax at statutory federal rate $ 87.4 $ (1.3) $ 39.6
State and local income taxes,
net of federal income tax effect 10.1 2.3 6.4
Revisions to prior years' estimated
income tax liabilites (9.3) - -
Foreign sales corporation exemption (1.2) (1.9) (2.5)
Non-deductible settlement expenses - 4.7 0.5
Effect of tax rate change - - (4.6)
Other, net 1.2 0.9 1.1
------ ------ ------
Provision for income taxes $ 88.2 $ 4.7 $ 40.5
====== ====== ======
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.
13-15
<PAGE>
Note 8. 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.
Components of pension expense (income) for the years ended December 31, 1995,
1994 and 1993 included the following (in millions):
Expense (Income)
-----------------------------
1995 1994 1993
------- ------- -------
Service cost - benefits earned during the year $ 21.0 $ 31.2 $ 29.6
Interest cost on benefits earned in prior years 74.8 64.2 68.4
Expected return on plan assets (129.6) (111.8) (106.1)
Net amortization of unrecognized amounts (50.0) (59.8) (58.9)
------- ------- -------
Pension income for defined benefit plans (83.8) (76.2) (67.0)
Other 3.1 (2.9) 0.8
------- ------- -------
Pension income $ (80.7) $ (79.1) $ (66.2)
======= ======= =======
Actual return on plan assets was income of $264.6 million in 1995, loss of $44.8
million in 1994 and income of $174.1 million in 1993. Actuarial assumptions
used to develop the components of pension expense (income) for the years ended
December 31, 1995, 1994 and 1993 were as follows:
1995 1994 1993
---- ---- ----
Discount rate 8.5% 7.0% 8.0%
Rate of increase in future compensation levels 4.5% 4.5% 4.5%
Expected long-term rate of return on assets 7.5% 6.0% 6.0%
13-16
<PAGE>
Note 8. Pension Benefits (Continued) -
Plan assets in excess of projected benefit obligation at December 31, 1995 and
1994 were as follows (in millions):
1995 1994
-------- --------
Plan assets at fair value $1,910.8 $1,761.8
-------- --------
Actuarial present value of benefit obligations:
Vested benefit obligation 959.5 750.8
Non-vested benefit obligation 3.3 5.0
-------- --------
Accumulated benefit obligation 962.8 755.8
Additional benefits related to future
compensation levels 96.6 78.1
-------- --------
Projected benefit obligation 1,059.4 833.9
-------- --------
Plan assets in excess of projected benefit obligation $ 851.4 $ 927.9
======== ========
Plan assets in excess of projected benefit obligation:
Included in balance sheet:
Prepaid pension cost $ 386.6 $ 332.7
Other long-term liabilities (0.1) (12.5)
Not included in balance sheet:
Unrecognized net gain due to experience different from
that assumed and changes in the discount rate 299.9 400.5
Unrecognized net asset at adoption of SFAS No. 87,
net of amortization 195.6 234.5
Unrecognized prior service cost (30.6) (27.3)
-------- --------
Plan assets in excess of projected benefit obligation $ 851.4 $ 927.9
======== ========
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, 1995 and 1994, 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 $79.1 million
and $76.7 million, respectively.
A discount rate of 7.5 percent at December 31, 1995 and 8.5 percent at
December 31, 1994 and a rate of increase in future compensation levels of 4.5
percent at December 31, 1995 and 1994 were used for the valuation of pension
obligations.
13-17
<PAGE>
Note 9. Postretirement 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. 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 has no effect on the Company's cash outlays
for postretirement health care benefits.
Cash from excess pension assets of $17.5 million in 1995 and $15.0 million
in 1994 was transferred pre-tax under Section 420 of the Internal Revenue Code
from the Company's defined benefit pension plans to the Company. The Internal
Revenue Code permits transfers annually of an amount not to exceed the Company's
actual expenditures on retiree health care benefits. While not affecting
reported operating profit, cash flow increased by the after-tax effect of the
transferred amount.
Components of postretirement expense for the years ended December 31, 1995,
1994 and 1993 included the following (in millions):
Expense (Income)
--------------------
1995 1994 1993
----- ----- ----
Service cost - benefits earned during the year $ 0.8 $ 0.9 $ 1.3
Interest cost on benefits earned in prior years 23.1 21.3 23.4
Net amortization of unrecognized amounts (2.1) (2.1) -
Other - - (1.8)
----- ----- -----
Postretirement expense $21.8 $20.1 $22.9
===== ===== =====
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 10.5 percent in 1995, gradually declining
to 6.5 percent in the year 2012 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 $22.2
million and the 1995 postretirement benefit expense by $2.0 million. A discount
rate of 8.5 percent in 1995, 7.0 percent in 1994 and 8.0 percent in 1993 was
used in determining the postretirement expense. A discount rate of 7.5
percent at December 31, 1995 and 8.5 percent at December 31, 1994 was used to
determine the postretirement benefit obligation.
13-18
<PAGE>
Note 9. Postretirement Benefits - (Continue)
Accumulated postretirement benefit obligations at December 31, 1995 and 1994
were as follows (in millions):
1995 1994
------ ------
Accumulated present value of benefit obligations:
Retirees $280.0 $248.7
Other fully eligible plan participants 17.0 13.2
Other active plan participants 14.8 11.6
------ ------
Accumulated benefit obligation $311.8 $273.5
====== ======
Accumulated benefit obligation:
Included in balance sheet:
Current portion included in accrued liabilities $ 22.0 $ 22.5
Accrued postretirement benefits 276.3 275.9
Not included in balance sheet:
Unrecognized net loss (gain) due to experience different
from that assumed and changes in the discount rate 13.5 (24.9)
------ -------
Accumulated benefit obligation $311.8 $273.5
====== ======
13-19
<PAGE>
Note 10. Acquisitions -
In January 1995, the Company acquired the material handling business of Kooi
B.V., a Netherlands company that is Europe's largest supplier of truck-
mountable, self-propelled material handlers. In December 1995, the Company
acquired two businesses complementing existing operations: Stellram Group, based
in Europe, manufacturers of high precision milling, boring and drilling systems
primarily for the European market; and Envases Comerciales, S.A., a Costa Rican
manufacturer of specialty packaging for pharmaceutical and food companies
throughout Central America and Mexico. These three businesses were purchased
for $59.5 million, consisting of $43.2 million in cash and the assumption of
$16.3 million in debt. In connection with these purchases, the Company acquired
operating assets with a fair value of $87.9 million and assumed operating
liabilities of $28.4 million.
13-20
<PAGE>
Note 11. Business Segments -
Teledyne, Inc. is a technology-based manufacturing corporation serving worldwide
customers with commercial and government-related aviation and electronics
products; specialty metals for consumer, industrial and aerospace applications;
and industrial and consumer 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, specialty 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 military vehicles,
diesel engines, material handling equipment, machine tools, dies and molds,
nitrogen cylinders, specialty valves, pumps and boosters. The consumer
segment manufactures oral hygiene, shower and water purification systems,
swimming pool and spa heaters, residential and commercial heating systems,
and specialty packaging for consumer products.
Information on the Company's business segments for the years ended
December 31, 1995, 1994 and 1993 was as follows (in millions):
1995 1994 1993
-------- -------- --------
Sales:
Aviation and electronics:
Continuing $1,015.4 $ 882.0 $ 951.9
Discontinued - 148.5 180.6
-------- -------- --------
1,015.4 1,030.5 1,132.5
-------- -------- --------
Specialty metals:
Continuing 867.6 709.7 650.8
Discontinued 1.5 1.7 8.0
-------- -------- --------
869.1 711.4 658.8
-------- -------- --------
Industrial:
Continuing 346.8 318.1 333.5
Discontinued 9.9 23.6 53.8
-------- -------- --------
356.7 341.7 387.3
-------- -------- --------
Consumer:
Continuing 326.6 307.6 313.1
Discontinued - - -
-------- -------- --------
326.6 307.6 313.1
-------- -------- --------
Total:
Continuing 2,556.4 2,217.4 2,249.3
Discontinued 11.4 173.8 242.4
-------- -------- --------
$2,567.8 $2,391.2 $2,491.7
======== ======== ========
The Company's backlog of confirmed orders was approximately $1.0 billion at
December 31, 1995 and $1.4 billion at December 31, 1994. Backlog of the
aviation and electronics segment was $456.6 million at December 31, 1995 and
$850.7 million at December 31, 1994.
13-21
<PAGE>
Note 11. Business Segments - (Continued)
1995 1994 1993
------- ------- -------
Sales to the U.S. government including direct
sales as prime contractor and indirect
sales as subcontractor or supplier:
Aviation and electronics $ 582.2 $ 595.6 $ 729.4
Specialty metals 38.7 41.8 59.2
Industrial 93.5 99.4 134.7
Consumer 38.8 38.4 37.7
------- ------- -------
$ 753.2 $ 775.2 $ 961.0
======= ======= =======
Sales to the U.S. government include sales to the department of defense of
$613.4 million in 1995, $599.5 million in 1994 and $791.3 million in 1993.
Total foreign sales were $548.6 million in 1995, $519.4 million in 1994 and
$505.5 million in 1993. Of these amounts, sales by operations in the United
States to customers in other countries were $439.5 million in 1995, $381.3
million in 1994 and $371.3 million in 1993. Sales between business segments,
which were not material, generally were priced at prevailing market prices.
1995 1994 1993
------- ------- -------
Income (Loss) before Taxes, Extraordinary Loss
and Cumulative Effect of Accounting Change:
Aviation and electronics:
Continuing $ 102.7 $ (4.2) $ 41.3
Discontinued - (35.8) (13.6)
Pension income 18.1 12.8 13.8
------- ------- -------
120.8 (27.2) 41.5
------- ------- -------
Specialty metals:
Continuing 85.3 27.1 29.9
Discontinued - 1.4 4.0
Pension income 8.3 8.7 9.9
------- ------- -------
93.6 37.2 43.8
------- ------- -------
Industrial:
Continuing 18.7 13.0 13.2
Discontinued 0.6 (1.3) 1.3
Pension income 25.9 25.8 38.8
------- ------- -------
45.2 37.5 53.3
------- ------- -------
Consumer:
Continuing 18.7 21.5 19.6
Discontinued - (2.8) 2.0
Pension income 0.2 (0.1) 0.5
------- ------- -------
18.9 18.6 22.1
------- ------- -------
Total:
Continuing 225.4 57.4 104.0
Discontinued 0.6 (38.5) (6.3)
------- ------- -------
226.0 18.9 97.7
------- ------- -------
Corporate expense:
Salaries and benefits (23.0) (18.7) (17.8)
Closed businesses' expenses (11.9) (8.4) (6.6)
Other (47.2) (41.3) (35.6)
Interest expense (42.3) (43.5) (45.1)
Pension income 80.7 79.1 66.2
Other income 67.9 10.2 54.5
------- ------- -------
$ 250.2 $ (3.7) $ 113.3
======= ======= =======
13-22
<PAGE>
Note 11. Business Segments - (Continued)
In 1993, Teledyne undertook a major realignment which consolidated its operating
companies. The realignment built on the 1992-1993 restructure which focused the
Company on those businesses in which it has significant leadership roles. The
restructure consisted of the sale, closure or transfer of certain operations.
Discontinued results include the estimated realignment and restructure cost,
before pension income, and the results of operations divested. As a result of
the January 1995 sale of substantially all of the Company's defense electronic
systems business and related assets at a gain of $50.7 million (included in
other income), sales and operating results for the business have been
reclassified and are presented in discontinued results of the aviation and
electronics segment.
Operating results of continuing operations for the aviation and electronics
segment included income of $8.4 million in 1995 and $7.0 million in 1994 and
charges of $15.1 million in 1993 related to adjustment of loss reserves on
fixed-price development and initial production contracts. Discontinued results
included provision for losses on fixed-price development and initial production
contracts of approximately $11.5 million in 1994 and $4.4 million in 1993.
Operating results of continuing operations for the aviation and electronics
segment were adversely impacted by charges of $88.8 million in 1994 and $3.6
million in 1993 to resolve certain U.S. government contracting matters.
Discontinued results for the aviation and electronics segment included charges
of $35.0 million in 1994 and $13.0 million in 1993 to resolve certain U.S.
government contracting matters. Operating results of continuing operations for
the specialty metals segment included a charge of $13.0 million in 1994 to
resolve a U.S. government export investigation matter.
In 1995, the New Piper Aircraft Company emerged from bankruptcy with
Teledyne having exchanged its major creditor position for 24.2 percent ownership
and an option to purchase an additional 24.2 percent. As a result, Teledyne
recognized a gain for the year 1995 of $5.9 million, included in other income.
In 1993, the Company sold its investment in Litton common stock resulting in a
$40.4 million gain, included in other 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
exceeded the current year's cost of providing benefits.
13-23
<PAGE>
Note 11. Business Segments - (Continued)
1995 1994 1993
-------- -------- --------
Depreciation and Amortization:
Aviation and electronics $ 15.6 $ 19.1 $ 22.0
Specialty metals 32.0 28.3 27.9
Industrial 7.8 8.1 9.0
Consumer 7.8 7.7 6.9
Corporate 7.2 7.0 6.9
-------- -------- --------
$ 70.4 $ 70.2 $ 72.7
======== ======== ========
Capital Expenditures:
Aviation and electronics $ 12.8 $ 15.8 $ 22.8
Specialty metals 31.6 26.6 35.0
Industrial 9.2 6.2 5.2
Consumer 6.4 11.1 9.9
Corporate 2.9 4.8 8.3
-------- -------- --------
$ 62.9 $ 64.5 $ 81.2
======== ======== ========
Identifiable Assets:
Aviation and electronics $ 257.7 $ 299.7 $ 284.6
Specialty metals 420.7 315.6 288.0
Industrial 158.9 114.1 113.1
Consumer 135.3 117.1 105.4
Corporate 633.6 631.2 686.7
-------- -------- --------
$1,606.2 $1,477.7 $1,477.8
======== ======== ========
13-24
<PAGE>
Note 12. Commitments and Contingencies -
Rental expense under operating leases was $22.9 million in 1995, $26.8 million
in 1994, and $27.0 million in 1993. Future minimum rental commitments under
operating leases with non-cancelable terms of more than one year as of
December 31, 1995, are as follows: $15.8 million in 1996, $11.2 million in
1997, $9.9 million in 1998, $8.7 million in 1999, $6.8 million in 2000 and $37.7
million thereafter.
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. Generally,
as these cases are under seal, the Company does not possess sufficient
information to determine whether the Company will sustain a material loss in
such matters, 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.
13-25
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
---------------------------------
(In millions except per share and share amounts)
Quarterly financial data for 1995 and 1994 were as follows:
Quarter Ended
---------------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------
1995 -
Sales $ 625.5 $ 706.7 $ 593.0 $ 642.6
========== ========== ========== ==========
Gross profit $ 168.7 $ 167.2 $ 154.0 $ 165.1
========== ========== ========== =========
Net income $ 64.3 $ 32.6 $ 34.5 $ 30.6
========== ========== ========== ==========
Net income per
common share $ 1.16 $ 0.59 $ 0.61 $ 0.54
========== ========== ========== ==========
Average shares
outstanding 55,500,626 55,627,166 55,699,922 55,778,014
========== ========== ========== ==========
1994 -
Sales $ 572.9 $ 595.8 $ 578.1 $ 644.4
========== ========== ========== ==========
Gross profit $ 137.8 $ 144.3 $ 146.3 $ 175.0
========== ========== ========== ==========
Net income (loss) $ (55.1) $ 11.0 $ 19.3 $ 16.4
========== ========== ========== ==========
Net income (loss)
per common share $ (0.99) $ 0.19 $ 0.35 $ 0.30
========== ========== ========== ==========
Average shares
outstanding 55,441,455 55,442,048 55,446,334 55,455,347
========== ========== ========== ==========
13-26
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
---------------------------------
Non-cash pension income before tax for 1995 was $21.1 million in the first
quarter, $21.1 million in the second quarter, $18.3 million in the third quarter
and $20.2 million in the fourth quarter. Non-cash pension income before tax for
1994 was $19.0 million in the first quarter, $18.7 million in the second
quarter, $18.9 million in the third quarter and $22.5 million in the fourth
quarter.
Net income for the first quarter of 1995 included a gain of $30.3 million
on the sale of substantially all of its defense electronic systems business and
related assets.
Net income for 1995 included a reduction in provision for taxes of $2.1
million in the first quarter, $4.7 million in the third quarter and $2.5 million
in the fourth quarter as a result of revisions to prior years' estimated income
tax liabilities.
The results for 1994 were adversely affected by pre-tax charges of $112.5
million in the first quarter, $11.3 million in the second quarter and $13.0
million in the fourth quarter, to resolve certain U.S. government
investigations.
Operating profit before tax included income (expense) related to adjustment
of loss reserves on fixed-priced development and initial production contracts of
$3.2 million in the first quarter and $7.3 million for the second quarter of
1995, and $(6.2) million for the second quarter, $(8.1) million for the third
quarter and $8.7 million for the fourth quarter of 1994.
The Company paid dividends on its common stock consisting of $0.10 per share
in cash and $0.15 per share in face amount of the Company's Series E Preferred
Stock, for each quarter in 1995.
13-27
<PAGE>
SELECTED FINANCIAL DATA
-----------------------
For the Years Ended December 31,
--------------------------------
(In millions except per share amounts)
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
Sales:
Continuing $2,556.4 $2,217.4 $2,249.3 $2,280.5 $2,290.1
Discontinued 11.4 173.8 242.4 607.1 916.7
-------- -------- -------- -------- --------
$2,567.8 $2,391.2 $2,491.7 $2,887.6 $3,206.8
======== ======== ======== ======== ========
Income (loss), after tax,
before extraordinary loss
and cumulative effect of
accounting changes $ 162.0 $ (8.4) $ 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) $ 162.0 $ (8.4) $ (116.5) $ 33.2 $ (25.4)
======== ======== ======== ======== ========
Income (loss) per common share:
Income (loss), after tax,
before extraordinary
loss and cumulative
effect of accounting
changes $ 2.88 $ (0.15) $ 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 common share $ 2.88 $ (0.15) $ (2.10) $ 0.60 $ (0.46)
======== ======== ======== ======== ========
Working capital $ 384.4 $ 292.2 $ 355.2 $ 488.2 $ 505.0
======== ======== ======== ======== ========
Total assets $1,606.2 $1,477.7 $1,477.8 $1,535.9 $1,719.4
======== ======== ======== ======== ========
Long-term debt $ 380.0 $ 356.6 $ 356.6 $ 449.7 $ 497.1
======== ======== ======== ======== ========
Redeemable preferred stock $ 33.1 $ - $ - $ - $ -
======== ======== ======== ======== ========
Shareholders' equity $ 395.6 $ 273.0 $ 280.5 $ 441.1 $ 453.9
======== ======== ======== ======== ========
13-28
<PAGE>
SELECTED FINANCIAL DATA (Continued)
-----------------------
Net income (loss) included non-cash pension income of $48.8 million in 1995,
$47.9 million in 1994, $40.1 million in 1993, $23.3 million in 1992 and $17.3
million in 1991.
Net income for 1995 included a gain of $30.3 million on the sale of
substantially all of its defense electronic systems business and related assets.
Net income for 1995 included a reduction in provision for taxes of $9.3
million as a result of revisions to prior years' estimated income tax
liabilities.
Net loss for 1994 included charges of $88.0 million in 1994, $10.7 million
in 1993 and $19.0 million in 1992 to resolve certain U.S. government
investigations.
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.
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.
In 1991, the Company announced a restructuring plan that included the sale,
closure or transfer of certain operations. Income before tax included income of
$24.4 million in 1992 and a charge of $107.6 million in 1991 for the effect of
restructuring.
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. Prior year financial statements have not been restated.
The Company paid cash dividends on its common stock of $0.40 per share in
1995 and $0.80 per share for 1993, 1992 and 1991. In addition, in 1995 the
Company paid dividends on its common stock of $0.60 per share in face amount of
the Company's Series E Preferred Stock in 1995.
13-29
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Teledyne, Inc. is a technology-based manufacturing corporation serving worldwide
customers with commercial and government-related aviation and electronics
products; specialty metals for consumer, industrial and aerospace applications;
and industrial and consumer products.
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
- ------------------------
1995 1994 1993
-------- -------- --------
Sales:
Continuing $1,015.4 $ 882.0 $ 951.9
Discontinued - 148.5 180.6
-------- -------- --------
$1,015.4 $1,030.5 $1,132.5
======== ======== ========
Operating Profit (Loss):
Continuing $ 102.7 $ (4.2) $ 41.3
Discontinued - (35.8) (13.6)
Pension income 18.1 12.8 13.8
-------- -------- --------
$ 120.8 $ (27.2) $ 41.5
======== ======== ========
Sales from continuing operations increased $133.4 million in 1995 but decreased
$69.9 million in 1994 and $61.5 million in 1993. Sales improvements in 1995
occurred in development work on the United States' new High Altitude Endurance
Unmanned Aerial Surveillance/Reconnaissance Vehicle (the Tier II Plus program),
electromechanical relays for commercial customers, airframe structures for the
U.S. government, marine seismic cables for the oil exploration industry,
fabricated products for the U.S. armed forces, and avionics for the commercial
aviation market. In addition, completion of a contract to provide ground power
generators to the U.S. Air Force increased sales $80 million for 1995 over 1994.
Decreased sales of piston engine rebuilds for the general aviation market and
lower shipments of aerial targets and certain other military unmanned aerial
vehicles partially offset the 1995 increases. In 1994, sales decreased as a
result of declining orders due to reduced government spending for defense, and
the winding down and restructuring of certain military programs. These 1994
sales declines primarily affected systems engineering contracts, airframe
structures, ground power generators, unmanned aerial vehicles and other military
hardware. Increased sales of aircraft engines for the general aviation market,
fabricated products for the U.S. armed forces and electronic countermeasure
equipment for the international market partially offset the 1994 sales declines.
Sales declined in 1993 primarily 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 increased $18.1 million in 1995
and $39.7 million in 1994 but decreased $22.4 million in 1993, excluding charges
of $88.8 million in 1994, $3.6 million in 1993 and $19.7 million in 1992 to
resolve certain U.S. government contracting matters. Increased sales and
margins of electromechanical relays and airframe structures, reduced losses on
wire and cable products, and reversal of estimated losses of $8.4 million
related to fixed-priced development and initial production contracts contributed
to 1995 operating profit from continuing operations. Operating profit for 1995
was adversely affected by lower sales and margins on piston engines for the
13-30
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
general aviation industry and turbine engines for the U.S. government, and by
increased development costs for certain scientific instrument products. For
1994, operating results from continuing operations were positively affected by
increased earnings on general aviation engine rebuilds and electronic components
and subsystems, and a reversal of estimated losses of $7.0 million related to
fixed-priced development and initial production contracts. The increase in 1994
profit was partially offset by the decline in sales. In 1993, operating profit
from continuing operations decreased primarily due to the decrease in sales
discussed above and higher costs related to U.S. government contracting issues.
Operating profit from continuing operations in 1993 included charges of $15.1
million for estimated losses on fixed-price development and initial production
contracts.
In January 1995, the Company sold substantially all of its defense
electronic systems business and related assets. Sales and operating results for
the business, including charges to resolve government contracting issues, have
been reclassified and are presented in discontinued results of the aviation and
electronics segment. Discontinued results for 1994 and 1993 included charges of
$35.0 million and $13.0 million, respectively, to resolve certain U.S.
government contracting matters. Discontinued results included charges for
estimated losses on fixed-price development and initial production contracts of
$11.5 million in 1994 and $4.4 million in 1993.
Specialty Metals
- ----------------
1995 1994 1993
-------- -------- --------
Sales:
Continuing $ 867.6 $ 709.7 $ 650.8
Discontinued 1.5 1.7 8.0
-------- -------- --------
$ 869.1 $ 711.4 $ 658.8
======== ======== ========
Operating Profit (Loss):
Continuing $ 85.3 $ 27.1 $ 29.9
Discontinued - 1.4 4.0
Pension income 8.3 8.7 9.9
-------- -------- --------
$ 93.6 $ 37.2 $ 43.8
======== ======== ========
Sales from continuing operations increased $157.9 million in 1995. The sales
increase was due to both improvement in worldwide automotive, commercial
aerospace, and other industrial markets, and to increased market penetration in
such areas as thin-rolled products, carbide cutting tools, specialty shapes and
tubes, and titanium alloys. In addition, zirconium sales increased for the
international power generation market due to a major customer's three year buy
in 1995. Sales from continuing operations increased $58.9 million in 1994. The
improvement in sales was primarily due to the general recovery in the economy
particularly in the land-based transportation, aerospace and power generation
markets. Sales declined $9.9 million in 1993 primarily 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.
Operating profit from continuing operations increased $45.2 million in 1995
and $10.2 million in 1994, excluding a charge of $13.0 million in 1994 to
resolve a U.S. government export investigation matter. Operating profit from
continuing operations in 1995 increased primarily due to higher sales and
improved margins and was enhanced by strong performances in nickel-based alloys,
specialty shape and tube, thin rolled, and tungsten-based products. The
increase in operating profit in 1995 was reduced by costs associated with new
13-31
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
facilities for the manufacturing and distribution of thin-rolled products.
These included a new high capacity mill at New Bedford, Mass., and an
international service center in Taiwan. Decreased productivity in zirconium
products related to protracted labor negotiations (now settled) also reduced
operating profit. In addition, increased raw material costs and their effect on
last-in, first-out inventory valuations, and research and development costs
related to an automated real-time inspection system for hot-rolled rod and bar
products negatively affected operating profit. In 1994, operating profit from
continuing operations increased due primarily to the improved sales performance
discussed above, improved margins for high speed and tool steels and strong
performance of tungsten-based and thin rolled products. Improved operating
profit for 1994 was reduced by approximately $4 million due to increased
environmental costs. In addition, lower margins on zirconium and nickel-based
products, and costs associated with increasing titanium production capacity
adversely affected operating profit. Despite the overall sales decline,
operating profit from continuing operations in 1993 was comparable to 1992 and
included improved performance at start-up facilities and increased shipments of
zirconium.
In December 1995, the Company acquired the business of Stellram Group, a
European-based manufacturer of high precision milling, boring and drilling
systems.
Industrial
- ----------
1995 1994 1993
-------- -------- --------
Sales:
Continuing $ 346.8 $ 318.1 $ 333.5
Discontinued 9.9 23.6 53.8
-------- -------- -------
$ 356.7 $ 341.7 $ 387.3
======== ======== ========
Operating Profit (Loss):
Continuing $ 18.7 $ 13.0 $ 13.2
Discontinued 0.6 (1.3) 1.3
Pension income 25.9 25.8 38.8
-------- -------- --------
$ 45.2 $ 37.5 $ 53.3
======== ======== ========
Sales from continuing operations increased $28.7 million in 1995. Sales
improved in nitrogen cylinder systems, metal stamping dies and plastic
compression molds for automotive and truck markets, crash fire rescue vehicles
for the U.S. Air Force, and material handling equipment. Sales of material
handling equipment increased as a result of increased market penetration and the
January 1995 acquisition of the material handling business of Kooi B.V. Kooi is
a Netherlands company that is Europe's largest supplier of truck-mountable,
self-propelled material handlers. These 1995 increases were partially offset by
declining tank engine and land combat vehicle development sales. In 1994, sales
from continuing operations decreased $15.4 million primarily due to lower sales
related to military vehicle development and pressure relief valves. However,
sales related to crash fire rescue vehicles, nitrogen cylinder systems for the
metal stamping industry, material handling equipment for major retailers and
distributors, and tank engines increased in 1994. In 1993, sales increased
$30.2 million due primarily to increased sales of tank engines and sales related
to military vehicle development. In addition, both nitrogen cylinder systems and
materials handling equipment provided strong performance in 1993.
Operating profit from continuing operations increased $5.7 million in 1995
primarily due to a gain on sale of an industrial valve product line, improved
performances in metal stamping dies and plastic compression molds, and improved
13-32
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
operating results of crash fire rescue vehicles. Operating profit was reduced
by lower sales of tank engines, costs associated with the integration and
rationalization of Kooi product lines, plant rationalization expenses, and
decreased margins on certain machine tools as a result of a labor dispute. In
1994, operating profit from continuing operations was impacted by declining
sales of pressure relief valves, bid and proposal costs on a new land vehicle
program, cost overruns on the crash fire rescue vehicle program and plant
rationalization expenses. Operating profit related to nitrogen cylinder systems
and tank engines increased in 1994. In 1993, operating profit from continuing
operations increased $3.0 million primarily as a result of the changes in sales
discussed above.
Consumer
- --------
1995 1994 1993
-------- -------- --------
Sales:
Continuing $ 326.6 $ 307.6 $ 313.1
Discontinued - - -
-------- -------- --------
$ 326.6 $ 307.6 $ 313.1
======== ======== ========
Operating Profit (Loss):
Continuing $ 18.7 $ 21.5 $ 19.6
Discontinued - (2.8) 2.0
Pension income 0.2 (0.1) 0.5
-------- -------- --------
$ 18.9 $ 18.6 $ 22.1
======== ======== ========
Sales from continuing operations increased $19.0 million in 1995. Sales
increased for commercial and residential heating systems, and for three new
products; Teledyne Water Pik's SenSonic(TM) Plaque Removal Instrument and its
Pour-Thru Water Filter(TM) device, and Teledyne Laars' MAXX-PURE(TM) ozone
sanitizing system for swimming pools, while sales for pool heaters decreased as
a result of poor weather conditions and a slowdown in spending on consumer
durables. In 1994, sales from continuing operations decreased $5.5 million due
primarily to a decline in heating elements sold to original equipment
manufacturers and the completion in 1993 of a distribution arrangement to sell
engines for an operation sold in 1992. The 1994 sales decline was partially
offset by improved sales of shower, pool heater and commercial heating systems
products. In 1993, sales from continuing operations increased $10.0 million
primarily due to increased sales of pool heaters, residential and commercial
heating systems, promotional drinkware and filtration products.
Operating profit from continuing operations decreased $2.8 million in 1995
due to advertising and start-up costs for the three new products and the sales
declines discussed above. Operating profit from continuing operations for 1994
was impacted by the sales variances discussed above. In addition, operating
profit for 1994 was adversely impacted by new product development costs on oral
health and water filtration products and plant rationalization expenses. In
1993, operating profit from continuing operations decreased $6.6 million
primarily due to new product start-up costs and increased promotional expenses.
In December 1995, the Company acquired the business of Envases Comerciales,
S.A., a Costa Rican manufacturer of specialty packaging for pharmaceutical and
food companies throughout Central America and Mexico.
13-33
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Discontinued Results
- --------------------
In 1993, Teledyne undertook a major realignment which consolidated its operating
companies. The realignment built on the 1992-1993 restructure which focused the
Company on those businesses in which it has significant leadership roles. The
restructure consisted of the sale, closure or transfer of certain operations.
Discontinued results include the estimated realignment and restructure cost,
before pension income, and the results of operations divested.
Corporate Expense
Corporate expense increased to $82.1 million in 1995 from $68.4 million in
1994 and from $60.0 million in 1993. Corporate expense increased for 1995
primarily due to legal and advisory fees associated with an unsolicited merger
proposal and ensuing proxy contest and increased warranty expenses for closed
businesses. The increase in corporate expense in 1994 was due primarily to
insurance recoveries related to environmental matters received in 1993 not
repeated in 1994, offset by reduced costs for legal, contract compliance audits
and insurance.
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 exceeded the
current year's cost of providing benefits. Pension income before tax increased
to $80.7 million in 1995 from $79.1 million in 1994 and $66.2 million for 1993.
The increase in 1994 was a result of a reduction in the number of employees
during 1993 and an increased expected return on pension assets, partially offset
by a decrease in the discount rate, to seven from eight percent, used to
calculate the pension benefit 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.
Cash from excess pension assets of $17.5 million in 1995 and $15.0 million
in 1994 was transferred pre-tax under Section 420 of the Internal Revenue Code
from the Company's defined benefit pension plans to the Company. The Internal
Revenue Code permits transfers annually of an amount not to exceed the Company's
actual expenditures on retiree health care benefits. While not affecting
reported operating profit, cash flow increased by the after-tax effect of the
transferred amount.
Other Income
In 1995, the New Piper Aircraft Company emerged from bankruptcy with Teledyne
having exchanged its major creditor position for 24.2 percent ownership and an
option to purchase an additional 24.2 percent. As a result, Teledyne recognized
a gain for 1995 of $5.9 million. Also in 1995, the Company sold substantially
all of its defense electronic systems business and related assets at a pretax
gain of $50.7 million. In 1993, the Company sold its investment in Litton
common stock resulting in a $40.4 million gain. In addition, other income
included gains, primarily from sale of excess real estate, of $5.1 million for
1995, $6.0 million for 1994 and $2.1 million for 1993.
13-34
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Provision for Income Taxes
The Company's effective income tax rate decreased in 1995 primarily as a result
of revisions to prior years' estimated income tax liabilities of $9.3 million.
In 1994, the Company's effective income tax rate increased primarily as a result
of government settlement expenses, part of which were not deductible for tax
purposes.
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 rate
change resulted in the recognition of additional income of $4.6 million in
1993 due primarily to revaluing the Company's net deferred tax asset.
The Company has determined, based on its history of operating earnings,
available carrybacks, expectations of future operating earnings and potential
tax planning strategies, that it is more likely than not that the deferred tax
assets at December 31, 1995 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 required 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 in 1993 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 has no effect on the Company's cash
outlays for postretirement health care and life insurance benefits.
New Accounting Standards
In 1995, SFAS No. 121 was issued which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets. This statement, which will be effective in 1996,
addresses when impairment losses should be recognized and how impairment losses
should be measured. The adoption of this statement by the Company is not
expected to have a material effect on the consolidated financial statements.
In 1995, SFAS No. 123 was issued which requires certain disclosures about
stock-based employee compensation arrangements using the fair value based method
of accounting. This statement, effective in 1996, allows for companies to
either adopt the new method of accounting or to continue using the intrinsic
value based method of accounting but make pro forma disclosures of net income
and earnings per share as if the fair value based method of accounting had been
applied. The Company has not yet determined the method it will use or the
impact of SFAS No. 123 on the the consolidated financial statements.
Financial Condition
Shareholders' equity increased $122.6 million in 1995 as a result of net income
of $162.0 million offset by dividends of $56.3 milliion, decreased $7.5 million
in 1994 as a result of the net loss of $8.4 million, and decreased $160.6
million in 1993 as a result of the net loss of $116.5 million and cash dividends
13-35
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
of $44.3 million. The Company has been able to meet all cash requirements
during the past five years with cash generated from operations, proceeds from
the sale of businesses and credit lines, and is not aware of any impending cash
requirements or capital commitments which could not be met by internally
generated funds or the utilization of its committed lines of credit. The
Company had available credit facilities at December 31, 1995, with various U.S.
and foreign banks, totaling $151.0 million ($135.0 million expiring in
July 1997, and $16.0 million expiring in December 1997) for which there is a
$75.0 million letters of credit sublimit. During 1995, the Company utilized
$14.2 million of its lines of credit in the acquisition of the material handling
business of Kooi B.V.
Other Matters
Government Contracts
- --------------------
Company subsidiaries perform work on a 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 contracts. There is 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 12 to the
consolidated financial statements of the Company.
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
13-36
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
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,
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 60 Superfund sites,
excluding those at which it believes it has no future liability. The Company's
involvement is very limited or de minimus at approximately 50 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 $40 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.
13-37
<PAGE>
Common Stock Price
1995
- -------------------------------------------------------------------------
Quarters 1st 2nd 3rd 4th
- -------------------------------------------------------------------------
High $27 3/8 $26 1/2 $27 3/8 $27 5/8
Low $20 $23 3/8 $22 1/8 $23 1/8
- -------------------------------------------------------------------------
1994
- -------------------------------------------------------------------------
Quarters 1st 2nd 3rd 4th
- -------------------------------------------------------------------------
High $26 5/8 $18 5/8 $18 7/8 $21 1/8
Low $16 5/8 $14 1/4 $15 3/8 $15 1/2
- -------------------------------------------------------------------------
Teledyne, Inc. common stock is listed on the New York and Pacific Stock
Exchanges. As of December 31, 1995, there were approximately 13,000 record
holders of common stock.
- -------------------------------------------------------------------------
13-38
<PAGE>
EXHIBIT 21
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
SUBSIDIARIES OF REGISTRANT
--------------------------
December 31, 1995
-----------------
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 Allvac
Teledyne Brown Engineering
Teledyne Casting Service
Teledyne Continental Motors
Teledyne Controls
Teledyne Coordinators
Teledyne Economic Development
Teledyne Electronic Technologies
Teledyne Fluid Systems
Teledyne International Offices
Teledyne Laars
Teledyne Minerals
Teledyne Packaging
Teledyne Portland Forge
Teledyne Rodney Metals
Teledyne Ryan Aeronautical
Teledyne Specialty Equipment
Teledyne Thermatics
Teledyne Vehicle Systems
Teledyne Wah Chang
Teledyne Water Pik
Teledyne Canada, Limited (Ontario) Teledyne Advanced Materials-
subsidiary of Teledyne, Firth Sterling Canada
Industries Canada Limited Teledyne Harfac Welding Products
(Ontario) Teledyne Specialty Equipment
Teledyne Industries Canada Teledyne Fluid Systems- Farris Enginnering
Limited (Ontario) Teledyne Laars-Still Man Products
subsidiary of Teledyne, Inc. Teledyne Water Pik Canada
Teledyne Princeton Inc. Teledyne Specialty Equipment-
subsidiary of Teledyne Material Handling U.S.
Canada, Limited
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
report, included in this Form 10-K, into the Company's previously filed
Registration Statements File No.'s 2-52617, 33-41372, 33-47219, 33-58583 and
33-60577.
ARTHUR ANDERSEN LLP
Los Angeles, California
January 30, 1996
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