FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _______ to ______
Commission File Number 1-5212
TELEDYNE, INC.
______________________________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-2282626
________________________________________ ___________________________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2049 Century Park East
Los Angeles, California 90067-3101
________________________________________ ___________________________________
(Address of Principal Executive Offices) (Zip Code)
(310) 277-3311
____________________________________________________
(Registrant's Telephone Number, Including Area Code)
N/A
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(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether Registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ----------
At April 30, 1996, Registrant had outstanding 56,003,198 shares of its
Common Stock.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In millions except share and per share amounts)
March 31, December 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
- ------
Current Assets:
Cash and marketable securities $ 79.1 $ 41.7
Receivables 427.5 417.5
Inventories 235.9 229.4
Deferred income taxes 78.0 82.2
Prepaid expenses 12.8 17.3
-------- --------
Total current assets 833.3 788.1
Property and Equipment 301.1 304.3
Prepaid Pension Cost 400.6 386.6
Other Assets 117.9 127.2
-------- --------
$1,652.9 $1,606.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
====================================
Current Liabilities:
Accounts payable $ 123.2 $ 130.5
Accrued liabilities 285.2 273.2
-------- --------
Total current liabilities 408.4 403.7
Long-Term Debt 377.9 380.0
Accrued Postretirement Benefits 267.6 276.3
Deferred Income Taxes 27.7 21.6
Other Long-Term Liabilities 97.6 95.9
-------- --------
1,179.2 1,177.5
-------- --------
Preferred Stock, $1.00 par value, 5,000,000 shares
authorized, 2,763,722 shares at March 31, 1996
and 2,209,122 shares at December 31, 1995
issued and outstanding 41.5 33.1
-------- --------
Shareholders' Equity:
Preferred stock, $1.00 par value, 15,000,000 shares
authorized - -
Common stock, $1.00 par value, 100,000,000 shares
authorized, 55,930,573 shares at March 31, 1996
and 55,781,423 shares at December 31, 1995
issued and outstanding 55.9 55.8
Additional paid-in capital 44.0 41.4
Retained earnings 324.2 284.0
Other 8.1 14.4
-------- --------
Total shareholders' equity 432.2 395.6
-------- --------
$1,652.9 $1,606.2
======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In millions except per share amounts)
(Unaudited)
Three Months Ended
March 31,
-------------------
1996 1995
-------- --------
Sales $ 668.7 $ 625.5
Costs and Expenses*:
Cost of sales 490.9 456.8
Selling and administrative expenses 110.5 109.4
Interest expense 10.8 10.6
-------- --------
612.2 576.8
-------- --------
Earnings Before Other Income 56.5 48.7
Other Income 44.4 54.2
-------- --------
Income before Income Taxes 100.9 102.9
Provision for Income Taxes 38.4 38.6
-------- --------
Net Income 62.5 64.3
Preferred Stock Dividends 0.7 -
-------- --------
Net Income Applicable to Common Shareholders $ 61.8 $ 64.3
======== ========
Net Income Per Common Share $ 1.11 $ 1.16
======== ========
Dividends Per Common Share $ 0.375 $ 0.25
======== ========
* Includes a credit of pension income of $19.8 million in 1996 and $21.1 million
in 1995.
The accompanying notes are an integral part of these statements.
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In millions)
(Unaudited)
Three Months Ended
March 31,
-------------------
1996 1995
-------- --------
Operating Activities:
Net income $ 62.5 $ 64.3
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Gain on sale of businesses (41.0) (49.8)
Decrease (increase) in receivables (25.0) 13.3
Increase in prepaid pension cost (20.5) (12.7)
Increase in inventories (19.3) (28.5)
Depreciation and amortization of property and equipment 18.0 17.8
Increase in accrued income taxes 14.7 2.5
Decrease in deferred income taxes 13.7 22.4
Increase (decrease) in accounts payable and
accrued liabilities (8.8) 1.8
Other, net 5.0 (10.3)
-------- --------
Net cash provided by (used in) operating activities (0.7) 20.8
-------- --------
Investing Activities:
Proceeds from the sale of businesses 59.9 63.2
Net decrease (increase) in short-term investments (38.6) 0.5
Purchases of property and equipment (10.8) (15.1)
Purchase of business - (11.7)
Other, net 0.4 0.4
-------- --------
Net cash provided by investing activities 10.9 37.3
-------- --------
Financing Activities:
Cash dividends (14.0) (5.6)
Increase (decrease) in checks outstanding 4.0 (62.2)
Reduction of long-term debt (1.8) (2.4)
Increase in long-term debt 0.8 15.6
Exercise of stock options 2.8 1.1
-------- --------
Net cash used in financing activities (8.2) (53.5)
-------- --------
Increase in cash $ 2.0 $ 4.6
======== ========
Non cash transactions:
Preferred stock dividend on common stock $ 8.3 $ 8.3
======== ========
Long-term debt assumed with the purchase of business $ - $ 3.0
======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1. Consolidated Financial Statements -
The interim consolidated financial statements of Teledyne, Inc. and
subsidiaries have not been examined by independent public accountants; however,
in the opinion of the Company, all adjustments (which include only recurring
normal adjustments) required for a fair presentation of the financial position
as of March 31, 1996, and the results of operations and cash flows for the three
months ended March 31, 1996 and 1995, have been made. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's December 31,
1995 annual report to shareholders. The results of operations for these interim
periods are not necessarily indicative of the operating results for a full year.
Certain amounts for prior periods have been reclassified to conform with the
1996 presentation.
Note 2. Accounting Changes -
In 1996, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, which establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets. This statement did not 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 maintain the current method of
accounting under Accounting Principles Board Opinion No. 25. The Company
intends to continue to use it's current method of accounting.
Note 3. Inventories -
Inventories were as follows (in millions):
March 31, December 31,
1996 1995
--------- ------------
Raw materials $ 50.4 $ 43.6
Work-in-process 136.6 168.8
Finished goods 73.1 61.3
------- -------
260.1 273.7
Progress payments (24.2) (44.3)
------- -------
$ 235.9 $ 229.4
======= =======
Note 4. Supplemental Balance Sheet Information -
Cash and marketable securities were as follows (in millions):
March 31, December 31,
1996 1995
-------------- ------------
Cash $ 24.1 $ 22.1
Repurchase agreements, at market, which
approximates cost 55.0 13.0
Other short-term investments, at market, which
approximates cost - 6.6
------- -------
$ 79.1 $ 41.7
======= =======
Property and equipment is presented net of accumulated depreciation and
amortization of $566.5 million at March 31, 1996 and $562.7 million at
December 31, 1995.
Accounts payable included $13.6 million at March 31, 1996 and $9.6 million
at December 31, 1995 for checks outstanding in excess of cash balances.
Note 5. Dispositions -
In March 1996, the Company sold Teledyne Vehicle Systems, a defense
supplier of combat vehicles, mobility systems, tactical wheeled vehicles and
vehicle modernization, at a pretax gain of $41.0 million, included in other
income. In January 1995, the Company sold substantially all of its defense
electronic systems business and related assets at a pretax gain of $50.7
million, included in other income.
Note 6. Merger with Allegheny Ludlum -
On April 1, 1996, the Company entered into a definitive merger agreement
with Allegheny Ludlum, a leading producer of a wide range of specialty materials
including stainless steels, tool steels, high technology alloys and grain-
oriented slicon steel. Under the terms of the definitive agreement, Allegheny
Ludlum shareholders will receive one share of the new company Allegheny Teledyne
Incorporated common stock for each share of Allegheny Ludlum common stock they
own, and Teledyne shareholders will receive 1.925 shares of common stock in the
new entity for each of their Teledyne shares. The transaction is expected to
be tax-free to shareholders and accounted for as a pooling of interests. In
addition, the transaction is conditioned on approval by the respective
companies' shareholders, as well as regulatory review and other closing
conditions.
Note 7. Business Segments -
Information on the Company's business segments for the three months ended
March 31, 1996 and 1995 was as follows (in millions):
Three Months Ended
March 31,
------------------
1996 1995
------- -------
Sales:
Aviation and electronics:
Continuing $ 255.7 $ 235.1
------- -------
Specialty metals:
Continuing 246.2 224.0
------- -------
Consumer:
Continuing 82.3 75.0
------- -------
Industrial:
Continuing 56.1 46.4
Discontinued 28.4 45.0
------- -------
84.5 91.4
------- -------
Total:
Continuing 640.3 580.5
Discontinued 28.4 45.0
------- -------
$ 668.7 $ 625.5
======= =======
Income before Income Taxes:
Three Months Ended
March 31,
------------------
1996 1995
------- -------
Aviation and electronics:
Continuing $ 24.8 $ 27.7
Pension income 4.4 4.5
------- -------
29.2 32.2
------- -------
Specialty metals:
Continuing 30.3 24.8
Pension income 2.0 2.6
------- -------
32.3 27.4
------- -------
Consumer:
Continuing 5.0 2.7
Pension income - -
------- -------
5.0 2.7
------- -------
Industrial:
Continuing 5.1 5.4
Discontinued 0.4 0.1
Pension income 6.3 6.0
------- -------
11.8 11.5
------- -------
Total:
Continuing 65.2 60.6
Discontinued 0.4 0.1
------- -------
65.6 60.7
------- -------
Corporate expense:
Salaries and benefits (4.5) (5.8)
Closed businesses' expenses (2.8) (1.1)
Other (10.8) (15.6)
Interest expense (10.8) (10.6)
Pension income 19.8 21.1
Other income 44.4 54.2
------- -------
$ 100.9 $ 102.9
======= =======
Discontinued results include the estimated realignment and restructure cost,
before pension income and the results of operations divested. As a result of
the March 1996 sale of Teledyne Vehicle Systems, sales and operating results for
the unit have been reclassified and presented in discontinued results of the
industrial segment. Certain amounts for 1995 have been reclassified to conform
with the 1996 presentation.
Teledyne's pension income reflects 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.
Note 8. Net Income Per Share -
The weighted average number of shares of common stock used in the
computation of net income per share for the three ended March 31, 1996 and 1995
was 55,859,589 and 55,500,626, respectively.
Note 9. Commitments and Contingencies -
The Company is defending an action brought under the False Claims Act in
the U.S. District Court for the Western District of Missouri. The case was
first filed in 1991 and concerns the Company's former Teledyne Neosho unit,
divested in 1992. The U.S. government has elected to intervene and, on or about
May 7, 1996, filed an amended complaint alleging misappropriation of government-
owned aircraft parts and falsification of inventory control documents. Two
former Teledyne Neosho employees have pleaded guilty to related criminal
charges. The outcome of this matter could have a material adverse effect on the
Company's results of operations in the period in which the matter is resolved,
but management does not believe the outcome is likely to have a material adverse
effect on the Company's financial condition or liquidity.
On January 13, 1993, the Company's Teledyne Thermatics unit sought
admission into the Department of Defense Voluntary Disclosure Program with
respect to testing practices at variance from military specifications, and was
accepted into the program on April 2, 1993. On May 26, 1994, the Company
reached preliminary agreement with the U.S. government to settle the matter for
$3.8 million, subject to conclusion of the government's investigation at
Teledyne Thermatics. In connection therewith, the Company established a reserve
in the amount of $3.8 million. On March 28, 1996, the Company learned that the
government had concluded its investigation. By letter dated May 7, 1996, the
government advised the Company that it may seek substantially more in
settlement. While liability in this matter is probable, and resolution could
have a material adverse effect on the Company's results of operations in the
period in which the matter is resolved, management does not believe that the
outcome is likely to have a material adverse effect on the Company's financial
condition or liquidity.
The Company has also made voluntary disclosures to the U.S. government of
government contracting irregularities discovered in certain other of its current
or former business units, and has cooperated with the government in the
investigation of these matters. Management does not believe that the outcome
of any of these matters is likely to have a material adverse effect on the
Company's financial condition or liquidity, although the resolution in any
reporting period of one or more of these matters could have a material adverse
effect on the Company's results of operations for that period.
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.
The Company is subject to federal, state and local environmental laws and
regulations which require that it investigate and remediate the effects of the
release or disposal of materials at sites associated with past and present
operations, including sites at which the Company has been identified as a
potentially responsible party under the federal Superfund laws and comparable
state laws. The Company is currently involved in the investigation and
remediation of a number of sites under these laws.
As discussed in Note 1 to the Company's consolidated financial statements
in the December 31, 1995, annual report to shareholders, the Company accrues for
losses associated with environmental remediation obligations when the Company's
liability is probable and the costs are reasonably estimable. In many cases,
however, investigations are not yet at a stage where the Company has been able
to determine whether it is liable or, if liability is probable, to reasonably
estimate the loss or range of loss, or certain components thereof. Estimates
of the Company's liability are further subject to uncertainties regarding the
nature and extent of site contamination, the range of remediation alternatives
available, evolving remediation standards, imprecise engineering evaluations and
estimates of appropriate cleanup technology, methodology and cost, the extent
of corrective actions that may be required, and the number and financial
condition of other potentially responsible parties, as well as the extent of
their responsibility for the remediation. Accordingly, as investigation and
remediation of these sites proceeds, it is likely that adjustments in the
Company's accruals will be necessary to reflect new information. The amounts
of any such adjustments could have a material adverse effect on the Company's
results of operations in a given period, but are not reasonably estimable.
Based on currently available information, however, management does not believe
future environmental costs at sites with which the Company has been identified
in excess of those accrued are likely to have a material adverse effect on the
Company's financial condition or liquidity.
At March 31, 1996, the Company's reserves for environmental remediation
obligations totaled approximately $42 million, of which approximately $15
million was included in other current liabilities. The reserve includes
estimated probable future costs of $15 million for federal Superfund and
comparable state-managed sites; $9 million for formerly owned or operated sites
for which the Company has remediation or indemnification obligations; $10
million for owned or controlled sites at which Company operations have been
discontinued; and $8 million for sites utilized by the Company in its ongoing
operations. The Company has resolved claims against its insurance carriers for
recovery of environmental costs, and does not expect to recover a material
amount of future costs for environmental liabilities from its carriers or from
third parties other than participating potentially responsible parties.
The timing of expenditures depends on a number of factors that vary by
site, including the nature and extent of contamination, the number of
potentially responsible parties, the timing of regulatory approvals, the
complexity of the investigation and remediation, and the standards for
remediation. The Company expects that it will expend present accruals over many
years, and will complete remediation of all sites with which it has been
identified in up to thirty years.
A number of lawsuits, claims and proceedings have been or may be asserted
against the Company relating to the conduct of its business, including those
pertaining to product liability, patent infringement, commercial, employment,
employee benefits, shareholder, tax and government contract matters. While the
outcome of litigation cannot be predicted with certainty, and some of these
lawsuits, claims or proceedings may be determined adversely to the Company,
management does not believe that the disposition of any of these matters is
likely to have a material adverse effect on the Company's financial condition
or liquidity, although the resolution in any reporting period of one or more of
these matters could have a material adverse effect on the Company's results of
operations for that period.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
- ---------------------
Teledyne is a technology-based manufacturing company 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
discussed below.
Aviation and Electronics
- ------------------------
Sales from continuing operations increased to $255.7 million for the first
quarter of 1996 from $235.1 million for the same period of 1995. Sales improved
principally due to increased development work on the United States' new High
Altitude Endurance Unmanned Aerial Surveillance/Reconnaissance Vehicle ("Global
Hawk"). Sales also improved in electronic devices and electromechanical relays
for commercial customers, engineering services related to environmental clean-up
of chemical munitions, and avionics for the commercial aviation market. The
sales increase was partially offset by lower shipments of fabricated products
for the U.S. armed forces, airframe structures for the U.S. government,
electronic countermeasure equipment for the international market, and engines
and spare parts for the general aviation market.
Operating profit from continuing operations decreased to $24.8 million for
the first quarter of 1996 from $27.7 million for the same period of 1995.
Operating profit declined year over year primarily due to 1995 non-recurring
income of $3.2 million from the reversal of estimated losses on fixed-price
development and initial production contracts. The strong performance in 1996
of electronic devices and electromechanical relays was offset by reduced sales
and margins on engines and spare parts for the general aviation market.
Specialty Metals
- ----------------
Sales from continuing operations increased to $246.2 million for the first
quarter of 1996 from $224.0 million for the same period of 1995. The most
significant increase was for high precision milling, boring and drilling systems
sold by the European-based Stellram Group, acquired in December 1995. Sales also
increased for titanium-based alloys and specialty tool steels due to continued
improvement in worldwide commercial aerospace and other industrial markets, and
for carbide cutting tools and thin-rolled products due to new market
opportunities. Lower zirconium sales and decreased demand for forgings due to
softness in the truck market partially offset the sales increases.
Operating profit from continuing operations increased to $30.3 million for
the first quarter of 1996 from $24.8 million for the same period of 1995.
Operating profit for 1996 increased primarily due to higher sales and improved
margins. The improvement in operating profit was partially offset by lower
margins on thin-rolled products, lower productivity and increased energy costs
related to the severe winter weather.
Consumer
- --------
Sales from continuing operations increased to $82.3 million for the first
quarter of 1996 from $75.0 million for the same period of 1995. Sales increases
primarily occurred in oral health products, commercial and residential heating
systems, and in specialty packaging for pharmaceutical and food companies due
to sales by a Costa Rican manufacturer, Envases Comerciales, S.A., acquired in
December 1995. In addition, sales improved for Teledyne Water Pik products
introduced in 1995, the SenSonic Plaque Removal Instrument(tm) and the Pour-Thru
Water Filter device. The continuing sluggishness in spending on consumer
durables negatively effected sales of pool products and heating elements to
original equipment manufacturers.
Operating profit from continuing operations increased to $5.0 million the
first quarter of 1996 from $2.7 million for the same period of 1995. The
increase in operating profit was due primarily to higher sales and lower start-
up costs incurred on product introductions.
Industrial
- ----------
Sales from continuing operations increased to $56.1 million for the first
quarter of 1996 from $46.4 million for the same period of 1995 due to improved
sales of nitrogen cylinder systems and metal stamping dies and compression molds
for automotive and truck markets, partially offset by lower sales of vehicle
control valves to the trucking industry.
Operating profit from continuing operations was $5.1 million for the first
quarter of 1996 compared to $5.4 million for the same period of 1995. A decline
in margins of material handling equipment offset the increased profits related
to the sales increases discussed above.
In March 1996, the Company sold Teledyne Vehicle Systems, a defense
supplier of combat vehicles, mobility systems, tactical wheeled vehicles and
vehicle modernization, at a pretax gain of $41.0 million, included in other
income. Sales and operating profit for Teledyne Vehicle Systems have been
reclassified and are presented in discontinued operations.
Corporate Expense
Corporate expense decreased to $18.1 million for the first quarter of 1996
from $22.5 million for the same period of 1995 primarily due to lower salaries
and benefits, and to decreased legal and advisory fees associated with
unsolicited merger proposals and ensuing proxy contests.
Pension Income
Teledyne's pension income reflects 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 was $19.8
million in the first quarter of 1996 compared to $21.1 million for the same
period of 1995. The decrease in pension income was a result of reduced
amortization of actuarial pension gains and a decrease in the discount rate, to
7.5% from 8.5%, used to calculate the pension benefit obligation, partially
offset by a higher expected return on pension assets.
Income Taxes
The Company's lower effective tax rate for 1995 was the result of a $2.1
million reduction in 1995 of prior's years estimated tax liabilities not
repeated in 1996.
Financial Condition
The Company has been able to meet all cash requirements for the three
months ended March 31, 1996 and 1995 with cash generated from operations,
proceeds from the sale of businesses and its credit lines and is not aware of
any impending cash requirement or capital commitments which could not be met by
internally generated funds or, if needed, the utilization of its committed lines
of credit. Cash used in operations was $0.7 million for the first quarter of
1996 and cash from operations was $20.8 million for the same period of 1995.
The Company received $59.9 million in 1996 and $63.2 million in 1995 from the
sale of businesses. Capital expenditures were $10.8 million for the first
quarter of 1996 and $15.1 million for the same period of 1995. The Company paid
cash dividends of $14.0 million during the first quarter of 1996 and $5.6
million during the same period of 1995. At March 31, 1996, the Company's unused
lines of credit with various banks totaled $135.0 million.
Other Matters
Merger with Allegheny Ludlum
- ----------------------------
On April 1, 1996, the Company entered into a definitive merger agreement
with Allegheny Ludlum, a leading producer of a wide range of specialty materials
including stainless steels, tool steels, high technology alloys and grain-
oriented slicon steel. Under the terms of the definitive agreement, Allegheny
Ludlum shareholders will receive one share of the new company Allegheny Teledyne
Incorporated common stock for each share of Allegheny Ludlum common stock they
own, and Teledyne shareholders will receive 1.925 shares of common stock in the
new entity for each of their Teledyne shares. The transaction is expected to
be tax-free to shareholders and accounted for as a pooling of interests. In
addition, the transaction is conditioned on approval by the respective
companies' shareholders, as well as regulatory review and other closing
conditions.
Government Contracts
- --------------------
Company subsidiaries perform work on a substantial number of defense
contracts with the U.S. government. Many of these contracts include price
redetermination clauses, and most are terminable at the convenience of the
government. Certain of these contracts are fixed-price or fixed-price incentive
development contracts. There is 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 9 to the
consolidated financial statements of the Company.
Environmental
- -------------
The Company is subject to federal, state and local environmental laws and
regulations which require that it investigate and remediate the effects of the
release or disposal of materials at sites associated with past and present
operations, including sites at which the Company has been identified as a
potentially responsible party under the federal Superfund laws and comparable
state laws. The Company is currently involved in the investigation and
remediation of a number of sites under these laws.
The Company's reserves for environmental investigation and remediation
totaled approximately $42 million at March 31, 1996, of which approximately $15
million was included in other current liabilities. The total reserve amount
relates to four categories of sites with which the Company has been associated:
federal Superfund and comparable state-managed sites, formerly owned or operated
sites for which the Company has remediation or indemnification obligations,
owned or controlled sites at which Company operations have been discontinued,
and sites utilized by the Company in its on-going operations.
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 at approximately 60 such 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.
Reserves of $15 million have been established for future remediation and
settlement costs at sites in this category.
With respect to the remaining three categories, reserves of $9 million have
been established with respect to formerly owned or operated sites for which the
Company has remediation or indemnification obligations; reserves of $10 million
have been established for remediation of owned or controlled sites at which
Company operations have been discontinued; and reserves of $8 million have been
accrued for sites utilized by the Company in its ongoing operations.
The measurement of environmental liabilities by the Company is based on
currently available facts, present laws and regulations, and current technology.
As investigation and remediation of these sites proceeds, it is likely that
adjustments in the Company's accruals will be necessary to reflect new
information. The amounts of any such adjustments could have a material adverse
effect on the Company's results of operations in any one period, but are not
reasonably estimable. Based on currently available information, however,
management does not believe future environmental costs at sites with which the
Company has been identified in excess of those accrued are likely to have a
material adverse effect on the Company's financial condition or liquidity.
For additional discussion of environmental matters, see Note 9 to the
consolidated financial statements of the Company.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
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. On March 20, 1996, an objecting
shareholder appealed the Court's approval of the settlement to the California
Court of Appeal.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits -
11 Statement re the calculation of earnings per share.
27 Financial Data Schedule
(b) Registrant did not file any reports on Form 8-K during the quarter
ended March 31, 1996.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELEDYNE, INC.
(Registrant)
Date: May 14, 1996 By /S/ Donald B. Rice
-------------------------------
Donald B. Rice
President and
Chief Operating Officer
Date: May 14, 1996 By /S/ Douglas J. Grant
-------------------------------
Douglas J. Grant
Treasurer
EXHIBIT 11
TELEDYNE, INC. AND SUBSIDIARIES
-------------------------------
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
----------------------------------------------
THREE MONTHS ENDING MARCH 31, 1996 AND 1995
-------------------------------------------
(In millions except per share and share amounts)
1996 1995
----------- -----------
Shares Used in Computing Earnings Per Share:
Weighted average number of shares outstanding 55,859,589 55,500,626
Incremental shares attributed to outstanding
options 1,106,766 1,035,904
----------- -----------
56,966,355 56,536,530
=========== ===========
Net Income $ 62.5 $ 64.3
Dividends on Preferred Stock 0.7 -
----------- -----------
Net Income Available to Common Shareholders $ 61.8 $ 64.3
=========== ===========
Fully Diluted Net Income Per Common Share $ 1.08 $ 1.14
=========== ===========
Published Net Income Per Common Share $ 1.11 $ 1.16
=========== ===========
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%.
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 24,100
<SECURITIES> 55,000
<RECEIVABLES> 427,500
<ALLOWANCES> 0
<INVENTORY> 235,900
<CURRENT-ASSETS> 833,300
<PP&E> 867,600
<DEPRECIATION> 566,500
<TOTAL-ASSETS> 1,652,900
<CURRENT-LIABILITIES> 408,400
<BONDS> 377,900
41,500
0
<COMMON> 55,900
<OTHER-SE> 376,300
<TOTAL-LIABILITY-AND-EQUITY> 1,652,900
<SALES> 668,700
<TOTAL-REVENUES> 668,700
<CGS> 490,900
<TOTAL-COSTS> 490,900
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<INCOME-PRETAX> 100,900
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