Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (03-22-12 01:34 AM)

Description

Teledyne Tech. Chairman, Pres. & CEO ROBERT MEHRABIAN bought 10000 shares on 3-15-2012 at $ 58.77

BUSINESS OVERVIEW

Strategy

Our strategy continues to emphasize growth in our core markets of instrumentation, digital imaging, aerospace and defense electronics and engineered systems. Our core markets are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions and through product development. We aggressively pursue operational excellence to continually improve our margins and earnings. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and internal research and development, we seek to create new products to grow our company and expand our addressable markets. We continue to evaluate our businesses to ensure that they are aligned with our strategy.

Our Recent Acquisitions

Consistent with our strategy, on February l2, 2011, we completed Teledyne’s largest acquisition to date which broadened our digital imaging capabilities, markets and customers. We acquired Canadian-based DALSA Corporation (“DALSA”), a designer and manufacturer of digital image capture products, primarily consisting of high performance sensors, cameras and software for use in industrial, scientific, medical and professional applications products. DALSA also manufactures MEMS (micro electro mechanical systems) devices and specialty semiconductors.

In addition, in the first quarter of 2011, to further expand our digital imaging capabilities, we acquired a majority interest in Nova Sensors (“Nova”) located in Solvang, California, and a minority interest in Optech Incorporated (“Optech”) headquartered in Vaughan, Ontario, Canada. Nova produces compact short-wave and mid-wave infrared cameras. Optech is a laser-based survey and digital imaging company.

Teledyne spent $363.5 million on these 2011 acquisitions.

Our Recent Divestiture

In accordance with our strategy to evaluate and divest non-core businesses, on April 19, 2011, we completed the divestiture of our general aviation piston engine businesses, Teledyne Continental Motors, Inc. and Teledyne Mattituck Services, Inc., in a stock sale to Technify Motor (USA), Inc., a subsidiary of China-based AVIC International Holding Corporation, for $186 million in cash.

Available Information

Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K, and any amendments to these reports, are available on our website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission (the “SEC”). The SEC also maintains a website that contains these reports at www.sec.gov . In addition, our Corporate Governance Guidelines, our Corporate Objectives and Guidelines for Employee Conduct, our codes of ethics for financial executives, directors and service providers and the charters of the standing committees of our Board of Directors are available on our website. Our website address is www.teledyne.com.

You will be responsible for any costs normally associated with electronic access, such as usage and telephone charges. Alternatively, if you would like a paper copy of any such SEC report (without exhibits) or document, please write to John T. Kuelbs, Executive Vice President, General Counsel and Secretary, Teledyne Technologies Incorporated, 1049 Camino Dos Rios, Thousand Oaks, California 91360-2362, and a copy of such requested document will be provided to you, free-of-charge.

Our Business Segments

Our businesses are divided into four segments: Instrumentation; Digital Imaging; Aerospace and Defense Electronics; and Engineered Systems. Financial information about our business segments can be found in Note 13 to our Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

Instrumentation

Our Instrumentation segment provides measurement, monitoring and control instruments for marine, environmental, scientific and industrial applications. We also provide power and communications connectivity devices for distributed instrumentation systems and sensor networks deployed in mission critical, harsh environments.

Marine Instrumentation

We offer a variety of underwater acoustic and other monitoring products. We design and manufacture geophysical streamer cables, hydrophones and specialty products used in offshore hydrocarbon exploration to locate oil and gas reserves beneath the ocean floor. Our acoustic Doppler current profilers (“ADCPs”) precisely measure currents at varying depths in oceans and rivers, and our Doppler Velocity Logs (“DVLs”) are used for navigation by civilian and military surface ships, unmanned underwater vehicles and naval divers. Additionally, we design and manufacture hydrographic survey instrumentation used in port surveys, dredging, pre and post-installation of offshore energy infrastructure and other challenging underwater applications. We recently developed a commercial multibeam echo sounder that incorporates a unique 24-bit analog to digital conversion process. We have been working to develop permanent reservoir monitoring subsystems for deepwater applications. In addition to our DVLs, which are acoustic navigation devices, we design and manufacture inertial sensing and navigation products, as well as subsea pipe and cable detection systems for offshore energy, oceanographic and military marine markets.

We provide a broad range of end-to-end undersea interconnect solutions to the offshore oil and gas, naval defense, oceanographic and telecom markets. We manufacture subsea, wet-mateable electrical and fiber-optic interconnect systems and subsea pressure vessel penetrators and connector systems with glass-to-metal seals. Our water-proof and splash-proof neoprene and glass reinforced epoxy connectors and cable assemblies are used in underwater equipment and submerged monitoring systems. We also manufacture subsea and surface pipeline corrosion and erosion monitoring detectors as well as flow integrity monitoring solutions for the oil and gas industry. These flow assurance sensors and equipment rely on our wet-mateable interconnect systems and our sensor feed-through systems. Our Teledyne Oil & Gas group has collaborated with Teledyne Scientific Company in an effort to improve the reliability of materials exposed to ultra deep sea conditions. In September 2011, we were awarded a development contract to design and deliver a subsea high-power electrical interconnect system for a deepwater oil field in Brazil.

We offer a variety of marine instrumentation products used by the U.S. Navy and in energy exploration, oceanographic research and port and harbor security services. Our products include acoustic modems for networked underwater communication and sidescan and sub-bottom profiling sonar systems. Originally developed with our acoustic technology, we provide quality control and package integrity systems under the Taptone ® brand to the food and beverage, personal care and pharmaceutical industries. We also manufacture complete autonomous underwater vehicle systems. Our marine gliders use a silent buoyancy engine for propulsion that takes advantage of changes in buoyancy in conjunction with wings and tail steering to convert vertical motion to horizontal displacement, thereby propelling the system on a programmed route with very low power consumption. Glider applications range from oceanographic research to military persistent surveillance systems as part of a mobile underwater sensing and communication network. The modular design of our battery-powered, man-portable Gavia ™ autonomous underwater vehicle allows for rapid sensor bay reconfiguration and battery replacement capability. Our Slocum gliders, as well as our ADCPs, are being used as part of the National Science Foundation’s Ocean Observatories Initiative to collect physical, chemical, geological and biological data from the ocean and the seafloor on coastal, regional and global scales.

Environmental Instrumentation

We offer a wide range of products for environmental monitoring. Our instrumentation monitors trace levels of gases such as sulfur dioxide, carbon monoxide, carbon dioxide, nitrogen oxide, methane and ozone in order to measure the quality of the air we breathe. We also supply environmental monitoring systems for the detection, measurement and automated reporting of air pollutants from industrial stack emissions. We serve the process control and monitoring needs of industrial plants with instruments that include gas analyzers, vacuum and flow measurement devices, package integrity inspection systems and torque measurement sensors. While we were a pioneer in the development of precision trace oxygen analyzers, we now manufacture a wide range of process gas and liquid analysis products for the measurement of process contaminants, hydrocarbons, combustibles, oil-in-water, moisture, pH and many other parameters. Our instrumentation is also used to detect a variety of water quality parameters. Our custom analyzer systems provide turn-key solutions to complex process monitoring and/or control applications found in petrochemical and refinery facilities. Our broad line of instruments for precise measurement and control of vacuum and gas flow are used in varied applications such as semiconductor manufacturing, refrigeration, metallurgy and food processing.

We provide laboratory instrumentation that complements our process or field environmental instrumentation. We manufacture laboratory instrumentation that automates the preparation and concentration of organic samples for the analysis of trace levels of volatile organic compounds by a gas chromatograph and mass spectrometer. We also provide laboratory instrumentation for the detection of total organic carbon and total nitrogen in water and wastewater samples. In addition, we provide inductively coupled plasma laboratory spectrometers, atomic absorption spectrometers, mercury analyzers and calibration standards. The advanced elemental analysis products are used by environmental and quality control laboratories to detect trace levels of inorganic contaminants in water, foods, soils and other environmental and geological samples. Our high precision, high pressure syringe pumps measure process extraction rates of fluids ranging from liquefied gases to viscous tars. Plus, we manufacture liquid chromatography instruments and accessories for the purification of organic compounds. Our liquid chromatography customers include pharmaceutical laboratories involved in drug discovery and development.

Digital Imaging

Our Digital Imaging segment includes digital image capture products, primarily consisting of high performance sensors, cameras and software for use in industrial, scientific, medical and professional applications products, specialty semiconductors and MEMS, and infrared detectors, cameras and optomechanical assemblies. It also includes our sponsored and centralized research laboratories benefiting government programs and businesses, as well as major development efforts for innovative digital imaging products for government and space applications.

With the February 12, 2011 acquisition of DALSA, we have expanded our imaging products and solutions capabilities and customer base. We now design, develop and manufacture image capture products, primarily consisting of high performance image sensors and digital cameras for use in industrial, scientific, medical and professional applications. We also now design, develop and manufacture image processing products, primarily consisting of hardware and software for imaging processing in industrial and medical applications. Our high performance image sensors utilize both charge coupled device (“CCD”) and complementary metal-oxide semiconductor (“CMOS”) technology. Our image processing software allows original equipment manufacturers (“OEMs”) and systems integrators to develop vision applications using our image acquisition and processing hardware. Our smart camera products are user-friendly, cost-effective vision appliances for task-specific factory floor applications such as gauging, high-precision alignment, inspection, assembly verification and machine guidance. Unlike our OEM imaging products, this category of cameras is designed to be quickly deployed by technicians on the factory floor.

Additionally, with the DALSA acquisition, we produce and provide manufacturing services for MEMS, high voltage and mixed signal CMOS devices and complete integrated circuit (“IC”) products. The majority of our semiconductor manufacturing capacity is consumed by external customers with the remaining capacity applied towards supplying unique CCD fabrication services to our internal image sensor requirements.

We provide research and engineering services primarily in the areas of electronics, materials, optics and information science to military, aerospace and industrial customers, as well as to various businesses throughout Teledyne. We collaborate with the Defense Advanced Research Products Agency (“DARPA”), and researchers at universities and national laboratories to stay at the forefront of emerging technologies. We have developed high speed electronics, MEMS sensors and actuators, as well as compound semiconductors. We have developed functional materials, structural materials, liquid-crystal based optical devices and image processing algorithms.

We produce advanced focal plane arrays, sensors, and subsystems that cover a broad spectrum frequencies from x-ray wavelengths to 18 micron long-wave infrared wavelengths. We are a leader in the development and production of large format focal plane array sensors for both military and space science markets. We support the production of third generation dual band infrared imagers designed to enable members of the armed forces to identify threats on the battlefield before any enemy can detect their presence. Our space sensors are used on the Hubble Space Telescope and the Moon Mineralogy Mapper and are expected to be used in future NASA missions such as the James Webb Space Telescope. We have also developed new sensors, subassemblies and cameras for air- and ground-based applications. For example, we have recently developed indium antimonide cameras and hyperspectral sensors for unmanned aerial vehicles. We also design and manufacture advanced military laser protection eyewear.

Aerospace and Defense Electronics

Our Aerospace and Defense Electronics segment provides sophisticated electronic components and subsystems and communications products, including defense electronics, data acquisition and communications equipment for air transport and business aircraft, harsh environment interconnects, and components and subsystems for wireless and satellite communications, as well as general aviation batteries.

Over the years principally through focused acquisitions, we have expanded our microwave components and subsystems business with a goal of providing more highly integrated microwave subsystems and solutions to our customers. Historically, we designed and manufactured helix traveling wave tubes, commonly called TWTs, used to provide broadband power amplification of microwave signals. Military applications include radar, electronic warfare and satellite communication. We make TWTs for commercial applications as well, such as electromagnetic compatibility test equipment and satellite communication terminals. More recently, we have designed and delivered high power solid state TWT replacement amplifiers and complete amplifiers that incorporate a TWT and a power supply.

We now also design and manufacture solid state radio frequency (“RF”) and microwave components and subassemblies used in similar applications as our TWTs. We produce cascadable amplifiers, voltage-controlled oscillators and microwave mixers, as well as Instantaneous Frequency Measurement (IFM)-based systems and subsystems, including integrated frequency locked sources and set-on receiver jammers used for the U.S. Navy and Air Force training. Our solid state power amplifiers, RF converters, low noise amplifiers (LNAs) and modems are used in systems that provide communications links between ground stations and orbiting satellites. Such products are also used in mobile telephone, TV broadcast and commercial data communications networks.

We supply a variety of connectors and cable assemblies, including specialized high voltage connectors and subassemblies and coax microwave cable and interconnects, for defense, aerospace and industrial applications. We also provide custom, high-reliability bulk wire and cable assemblies to a number of marine, environmental and industrial markets. Additionally, we produce pilot helmet mounted display components and subsystems for the Joint Helmet Mounted Cueing System (“JHMCS”) used in the F-15, F-16 and F-18 aircrafts. The JHMCS system is a multi-role system designed to enhance pilot situational awareness and provides visual control of aircraft targeting systems and sensors. We manufacture microprocessor-controlled aircraft ejection seat sequencers and related support elements to military aircraft programs. We have been awarded several development contracts to furnish electronic safe and arm devices for use in a number of military applications.

We also provide specialty electronic manufacturing services. We develop and manufacture custom microelectronic modules that provide both high reliability and extremely dense packaging for military applications. We also develop custom tamper-resistant microcircuits designed to provide enhanced security in military communication. We serve the market for high-mix, low-volume manufacturing of sophisticated military electronics equipment. We manufacture advanced packaging solutions for military and commercial aircraft using rigid and rigid-flex printed circuit boards.

We supply electromechanical relays, solid-state power relays and coaxial switching devices to military, aerospace and other industrial markets. Applications include microwave and wireless communication infrastructure, RF and general broadband test equipment, test equipment used in semiconductor manufacturing, and industrial and commercial machinery and control equipment. On commercial aircraft, our solid state and electromechanical relays are used in a variety of applications, including jet engine fuel control, management of control surfaces and other on board applications.

We are a leading supplier of digital flight data acquisition and analysis systems to the civil aviation market. These systems acquire data for use by the aircraft’s flight data recorder as well as record additional data for the airline’s operation, such as aircraft and engine condition monitoring. We provide the means to transfer this data, using Teledyne’s patented wireless technology, from the aircraft to the airline operation center. We also design and manufacture airborne networking products, including servers, as well as aircraft data loading equipment, flight line maintenance terminals and data distribution software used by commercial airlines and the U.S. military. We also provide lead acid aircraft batteries for general aviation, and business and light jet applications.

Engineered Systems

Our Engineered Systems segment provides innovative systems engineering and integration, advanced technology development, and manufacturing solutions to space, military, environmental, energy, chemical, biological, nuclear systems and missile defense requirements. This segment also designs and manufactures hydrogen gas generators, thermoelectric and electrochemical energy solutions and small turbine engines.

Engineered Products and Services

Teledyne Brown Engineering, Inc. is a well-recognized full-service air and missile defense contractor. Our engineering and analytic capabilities include concept definition; systems design, development, integration and testing; and prototype manufacturing with specialization in Service Oriented Architecture applications and real-time distributed test and Command and Control (“C2”) systems. We lead and support air and missile defense programs, including the Extended Air Defense Simulation (“EADSIM”) and most recently the Objective Simulation Framework (“OSF”) programs. Associated engineering support tasks generally involve analysis, test and evaluation of air and ballistic missile defense system performance on a large number of major programs, including the Ground-based Midcourse Defense, Aegis Ballistic Missile Defense, the Patriot Advanced Capability 3, and the Terminal High Altitude Area Defense (“THAAD”) systems. As the Missile Defense Agency (“MDA”) prime contractor for the OSF contract, we will design, develop, test, implement and maintain the OSF. The OSF is being designed to support full scale simulations, ground tests and live fire events throughout the life cycle of the Ballistic Missile Defense System.

In addition to our missile defense activities, we support many other programs of the U.S. Department of Defense. We provide the Air Force with operational and systems expertise in the development, test, integration, and fielding of new Command and Control and Intelligence, Surveillance and Reconnaissance (“C4ISR”) capabilities for major Air Force systems. In July 2011, after developing a full-scale interior mockup and conducting functionality demonstrations, we were awarded a prime contract from the U.S. Special Operations Command to design, develop, test, manufacture and sustain the Shallow Water Command Submersible (“SWCS”) vehicle to replace the current SEAL Delivery Vehicle. At about the same time, we received approval from the U.S. Navy Program Executive Office – Command, Control, Computer and Intelligence (“PEO—C4I”) to move into full rate production of the Littoral Battlespace Sensing Glider (“LBS-G”) system. Teledyne Webb Research is the glider developer and manufacturer on the LBS-G program.

We are active in U.S. space programs, having held various roles in the Space Shuttle program and continuing to play a vital role in the science operations area of the International Space Station (“ISS”) program. We provide 24-hour-per-day payload operations in the ISS Payload Operations and Integration Center located at NASA’s Marshall Space Flight Center. We also work on the ISS Cargo Mission Contract at the Johnson Space Center as a subcontractor to Lockheed Martin. We are the prime contractor on the Marshall Space Flight Center Systems Development and Operations Support Contract, which provides engineering services and hardware development support for a variety of space activities. We also have a prime Blanket Purchase Agreement with the Marshall Space Flight Center for specialized engineering and program support.

We support the U.S. Government’s efforts to clean up dangerous materials and waste. We apply sophisticated computer aided engineering, design, modeling and manufacturing skills to support the U.S. Army’s Edgewood Chemical and Biological Center. We also support the U.S. Government in the development of Engineered Systems (design, build, test and install), including the Whole System Live Agent Test (“WSLAT”) Chamber. The test chamber will be used at the Baker Lab in Dugway, Utah to exercise biological warfare agent detectors.

We operate a full service radiological analysis laboratory in Knoxville, Tennessee. This laboratory has received certification from the National Environmental Laboratory Accreditation Program in five states, including Utah and Texas where the largest commercial radiological waste disposal site resides. With its Nuclear Utilities Procurement Issues Committee certification, the laboratory also serves almost 50% of the nuclear power plants in United States. We also manage and operate a separation, purification and analysis of atmospheric samples laboratory for the U.S. Government. Additionally, we provide engineering and manufacturing for customers in the commercial nuclear market. Our contract with USEC, Inc. to manufacture gas centrifuge service modules for the American Centrifuge Project to support fuel production for commercial nuclear power plants has been suspended since 2009.

CEO BACKGROUND

Simon M. Lorne

Vice Chairman and Chief Legal

Officer of Millennium

Management LLC

Director since 2004

Age: 65
Simon M. Lorne is the Vice Chairman and Chief Legal Officer of Millennium Management LLC, a hedge fund management company. From March 1999 to March 2004, prior to the time he became a Teledyne Director, Mr. Lorne was a partner with Munger Tolles & Olson, LLP, a law firm whose services Teledyne has used from time to time. Mr. Lorne has also previously served as a Managing Director, with responsibility for Legal Compliance and Internal Audit of Citigroup/Salomon Brothers and as the General Counsel at the Securities and Exchange Commission in Washington, D.C. Mr. Lorne served as a director of Opsware, Inc., a provider of data center automation software, from 2000 to 2007. Since 1999, Mr. Lorne has been co-director of Stanford Law School’s Directors’ College. Since 2011, Mr. Lorne has served on the Advisory Council of the Public Company Accounting Oversight Board. Mr. Lorne is a member of our Audit Committee and our Nominating and Governance Committee.

The following experience, qualifications, attributes and/or skills led the Board to conclude that Mr. Lorne should serve as a director: his professional background and experience, current and previously held senior-executive level positions, senior level experience at a government regulator, his service on other public and private company boards, Teledyne board experience, board attendance and participation, and his expertise in finance, mergers and acquisitions, securities laws and corporate governance.


Paul D. Miller

Retired Chairman of Alliant

Techsystems, Inc. (ATK)

Director since 2001

Age: 70
Paul D. Miller was the Chairman of the Board of ATK (Alliant Techsystems, Inc.), an advanced weapon and space systems company, until April 2005. From January 1999 until October 2004, he had also been Chief Executive Officer of ATK. Prior to retirement from the U.S. Navy in 1994, Admiral Miller served as Commander-in-Chief, U.S. Atlantic Command and NATO Supreme Allied Commander — Atlantic. He is also a director of Donaldson Company, Inc., a manufacturer of filtration systems, and Huntington Ingalls Industries, Inc., a shipbuilding company. Mr. Miller is a member of our Audit Committee and our Nominating and Governance Committee.

The following experience, qualifications, attributes and/or skills led the Board to conclude that Admiral Miller should serve as a director: his executive, professional and military background and experience, current and previously held senior-executive level positions, his service on other public and private company boards, Teledyne board experience, board attendance and participation, his extensive experience with and leadership positions in the defense community, his knowledge of finance, manufacturing, human resources, corporate governance and audit functions and his extensive understanding of strategic planning, tactical business decision making and risk management.



Wesley W. von Schack

Chairman of AEGIS Insurance Company

and Retired Chairman, President and

Chief Executive Officer of

Energy East Corporation

Director since 2006

Age: 66
Wesley W. von Schack is Chairman of AEGIS Insurance Company, a position he has held since 2007. He currently serves as the lead director and Chairman of the Executive Committee of The Bank of New York Mellon Corporation and serves as the lead director of Edward Lifesciences Corporation. Dr. von Schack served as Chairman, President and Chief Executive Officer of Energy East Corporation, a diversified energy services company, from 1996 until his retirement in September 2009. Dr. von Schack served as a director of Mellon Financial Corporation from 1989 to 2007. Dr. von Schack is director emeritus of the Gettysburg Foundation, and is a member of the President’s Council — Peconic Land Trust. Dr. von Schack is a member of our Nominating and Governance Committee and our Personnel and Compensation Committee.

The following experience, qualifications, attributes and/or skills led the Board to conclude that Dr. von Schack should serve as a director: his professional background and experience, previously held senior-executive level positions, his service on other private and public company boards, his leadership positions at private foundations, his Teledyne board experience, board attendance and participation, and his extensive experience with companies in the energy sector and in regulated industries.

MANAGEMENT DISCUSSION FROM LATEST 10K

Strategy/Overview

Our strategy continues to emphasize growth in our core markets of instrumentation, digital imaging, aerospace and defense electronics and government engineered systems. Our core markets are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions and through product development. We aggressively pursue operational excellence to continually improve our margins and earnings. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and internal research and development, we seek to create new products to grow our company and expand our addressable markets. We continue to evaluate our businesses to ensure that they are aligned with our strategy.

Consistent with this strategy, we made two acquisitions and acquired a minority interest investment in the first quarter of 2011. On April 19, 2011, we completed the sale of our general aviation piston engine businesses, which comprised the former Aerospace Engines and Components segment. Accordingly, our consolidated financial statements have been restated to classify the Aerospace Engines and Components segment as a discontinued operation.

On February 12, 2011, the Company acquired the stock of DALSA Corporation (“DALSA”). DALSA designs and manufactures digital image capture products, primarily consisting of high performance sensors, cameras and software for use in industrial, scientific, medical and professional applications products, as well as specialty semiconductors and micro electro mechanical systems (“MEMS”). Among other things, our combined digital imaging technologies should allow us to develop new infrared and visible light products for our respective markets and customers. The Company acquired DALSA for an aggregate purchase price of $339.5 million in cash. Headquartered in Waterloo, Ontario, Canada, DALSA had annual revenues of CAD $212.3 million for its fiscal year ended December 2010. DALSA operates within the Digital Imaging segment.

In addition to the acquisition of DALSA in 2011, the Company completed the acquisition of a majority interest in Nova Sensors (“Nova”) for total consideration of $5.1 million in cash and a minority interest in Optech Incorporated (“Optech”) for $18.9 million. Nova produces compact short-wave and mid-wave infrared cameras and operates within the Digital Imaging segment. Optech is a laser-based survey and digital imaging company. Teledyne funded the purchases primarily from borrowings under its credit facility and cash on hand. We also bought the remaining minority interest in Energy Systems for $3.2 million in 2011.

In 2011, sales totaled $1,941.9 million, compared with sales of $1,644.2 million for 2010. Our 2011 net income totaled $255.2 million or $6.84 per diluted share, compared to $120.5 million or $3.27 per diluted share in 2010. Net income for 2011, excluding our discontinued operations, was $142.1 million or $3.81 per diluted share, compared with $119.9 million or $3.25 per diluted share for 2010. The increase in revenue included incremental sales from acquisitions of $249.6 million. In addition, each business segment experienced higher organic growth except for the Engineered Systems segment. The revenue decrease for the Engineered Systems segment primarily reflected lower sales from space and defense programs. With the recent acquisition of DALSA, as well as growth in our commercial markets, our business mix has changed, and for 2011, Teledyne’s sales were split 64% commercial and 36% government. This has changed from an approximate 55% commercial and 45% government split ten years ago.

In addition to the above events, on February 25, 2011, we replaced our $590.0 million credit facility that was set to expire in July 2011, with a $550.0 million credit facility. The new facility, together with the $250.0 million in Senior Notes issued in September 2010 and operating cash flow, will provide Teledyne with the ability to fund working capital needs, capital expenditures, voluntary pension contributions, debt service requirements and acquisitions for 2012.

Recent Acquisitions

The Company spent $366.7 million, $67.9 million and $27.1 million on acquisitions in 2011, 2010 and 2009, respectively. The acquisitions made in 2011 are described above. In 2010, Teledyne acquired Intelek plc (“Intelek”) for $43.5 million. Intelek primarily designs and manufactures electronic systems for satellite and microwave communications and aerospace manufacturing. In 2010, Teledyne also acquired Optimum Optical Systems Inc. (“Optimum”), a designer and manufacturer of custom optics and optomechanical assemblies and Hafmynd ehf. (“Gavia”), a designer and manufacturer of the Gavia autonomous underwater vehicle. In 2009, the Company purchased all of the remaining 14.1% minority interest in Ocean Design, Inc., now known as Teledyne ODI (“ODI”) for $25.5 million. Also in 2009, the Company purchased the assets of a marine sensor product line for $1.4 million. See Note 3 to our Consolidated Financial Statements for additional information about our recent acquisitions. See also Note 18 to our Consolidated Financial Statements for information about our fiscal year 2012 acquisition of VariSystems Inc. (“VariSystems”).

We reported 2011 sales of $1,941.9 million, compared with sales of $1,644.2 million for 2010, an increase of 18.1%. Net income attributable to Teledyne Technologies was $255.2 million ($6.84 per diluted share) for 2011, compared with $120.5 million ($3.27 per diluted share) for 2010, an increase of 111.8%. Net income attributable to Teledyne Technologies, excluding discontinued operations, was $142.1 million ($3.81 per diluted share) for 2011, compared with $119.9 million ($3.25 per diluted share) for 2010, an increase of 18.4%.

The increase in sales in 2011, compared with 2010, reflected higher sales in each business segment except the Engineered Systems segment. Sales in the Instrumentation segment reflected higher sales of marine and environmental instrumentation products by over 5% and 10%, respectively. Sales of marine products included incremental sales of $3.7 million from the 2010 acquisition of Gavia. Sales in the Aerospace and Defense Electronics segment reflected higher sales of microwave devices and interconnects, as well as, incremental sales of $25.7 million from the 2010 acquisition of Intelek. The increase in the Digital Imaging segment included $214.0 million in revenue from recent acquisitions, primarily the February 2011 acquisition of DALSA, as well as higher organic sales. The decrease in the Engineered Systems segment revenue reflected lower sales of missile defense engineering services, lower sales from NASA programs, lower sales of gas centrifuge service modules and lower sales related to the Joint Air-to-Surface Standoff Missile (“JASSM”) turbine engine program partially offset by incremental sales of $6.2 million from a recent acquisition. The incremental increase in revenue in 2011 from businesses acquired in 2011 and in 2010 was $249.6 million.

The increase in segment operating profit and other segment income for 2011, compared with 2010, reflected improved results in each operating segment except for the Engineered Systems segment. The increase in earnings reflected the impact of acquisitions as well as improved margins in each operating segment. The increase in operating profit in the Instrumentation segment, Aerospace and Defense Electronics segment and the Digital Imaging segment reflected the impact of higher sales. Operating profit in the Aerospace and Defense Electronics segment in 2010 reflected charges of $8.2 million, primarily to correct inventory valuations incorrectly recorded in previous periods at a business unit. The decrease in operating profit in the Engineered Systems segment reflected the impact of lower sales, partially offset by lower pension expense and higher margins. Operating profit included incremental operating profit from acquisitions of $18.6 million, which included acquisition expenses of $2.0 million and intangible amortization of $10.3 million.

Cost of sales in total dollars was higher in 2011, compared with 2010, and primarily reflected the impact of higher sales. Cost of sales as a percentage of sales for 2011 was 66.5%, compared with 69.8% for 2010. The lower cost of sales percentage reflected the impact of the DALSA cost structure which has a lower cost of sales percentage than the overall Teledyne cost of sales percentage.

Selling, general and administrative expenses, including research and development and bid and proposal expense, in total dollars were higher in 2011 compared with 2010. The increase reflected the impact of higher sales, higher acquired intangible asset amortization of $9.7 million and higher research and development costs of $41.4 million. Corporate administrative expense in 2011 was higher by $4.9 million compared with 2010 and reflected higher employee compensation and professional fee expenses. For 2011, we recorded a total of $5.8 million in stock option expense, of which $2.1 million was recorded as corporate expense and $3.7 million was recorded in segment results. For 2010, we recorded a total of $4.7 million in stock option expense, of which $1.7 million was recorded as corporate expense and $3.0 million was recorded in segment results. Selling, general and administrative expenses for 2011, as a percentage of sales, increased to 21.8%, compared with 19.3% for 2010 and reflected the impact of acquisition related expenses, higher research and development costs and the DALSA cost structure which has a higher selling, general and administrative expense percentage than the overall Teledyne selling, general and administrative expense percentage.

Included in operating profit in 2011 was domestic pension expense of $6.7 million. In accordance with U.S. Government Cost Accounting Standards (“CAS”), $12.6 million was recoverable from certain government contracts. Included in operating profit in 2010 was domestic pension expense of $4.8 million. In accordance with CAS, $9.6 million was recoverable from certain government contracts. Pension expense determined under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government.

The Company’s effective tax rate for 2011 was 32.9%, compared with 30.9% for 2010. Fiscal years 2011 and 2010 included net tax credits of $2.4 million and $12.5 million, respectively, which were primarily research and development tax credits. Excluding the net tax credits, the effective tax rates for 2011 and 2010, would have been 34.0% and 38.1%, respectively.

We reported 2010 sales of $1,644.2 million, compared with sales of $1,652.1 million for 2009, a slight decrease of 0.5%. Net income attributable to Teledyne Technologies was $120.5 million ($3.27 per diluted share) for 2010, compared with $113.3 million ($3.10 per diluted share) for 2009, an increase of 6.4%. Net income attributable to Teledyne Technologies, excluding discontinued operations, was $119.9 million ($3.25 per diluted share) for 2010, compared with $115.9 million ($3.17 per diluted share) for 2009, an increase of 3.4%.

The decrease in sales in 2010, compared with 2009, reflected lower sales in the Engineered Systems segment and the Digital Imaging segment, partially offset by higher sales in both the Instrumentation segment and in the Aerospace and Defense Electronics segment. The decrease in the Engineered Systems segment reflected lower sales of missile defense engineering services, lower sales from NASA programs, lower sales of gas centrifuge service modules and lower sales related to the JASSM turbine engine program partially offset by sales of $6.3 million from a recent acquisition. Sales in the Instrumentation segment reflected higher sales of marine and environmental instrumentation products. Sales in the Aerospace and Defense Electronics segment reflected higher sales of microwave devices and interconnects and included sales of $15.9 million from recent acquisitions. The incremental increase in revenue in 2010 from businesses acquired since 2009 was $25.3 million.

The increase in segment operating profit and other segment income for 2010, compared with 2009, reflected higher operating profit in the Instrumentation segment, partially offset by lower operating profit in the Aerospace and Defense Electronics segment, the Engineered Systems segment and the Digital Imaging segment. The increase in operating profit in the Instrumentation segment was in line with higher sales. The decrease in operating profit in the Aerospace and Defense Electronics segment reflected the $8.2 million inventory charge, partially offset by the impact of higher sales. The decrease in operating profit in the Engineered Systems segment reflected the impact of lower sales, partially offset by lower pension expense and higher margins. Operating profit included an incremental operating loss from our 2010 acquisitions of $5.1 million, which included acquisition expenses of $5.5 million and intangible amortization of $1.5 million.

Cost of sales in total dollars was lower in 2010, compared with 2009, and reflected the impact of lower pension expense and cost reductions, partially offset by the $8.2 million inventory charge. Cost of sales in 2010 included $0.8 million in LIFO expense, compared with $2.2 million of LIFO income in 2009. Cost of sales as a percentage of sales for 2010 was 69.8%, compared with 71.3% for 2009. The lower cost of sales percentage reflected the impact of cost reductions, product mix and lower pension expense, partially offset by the impact of the $8.2 million inventory write-down.

Selling, general and administrative expenses, including research and development and bid and proposal expense, in total dollars were higher in 2010 compared with 2009. The $14.2 million increase was primarily due to higher general and administrative expense. The higher general and administrative expense included $6.7 million in acquisition and disposition related expenses, as well as $1.5 million in intangible asset amortization for recent acquisitions. Corporate administrative expense in 2010 was higher by $1.5 million compared with 2009 and reflected higher employee compensation expenses. For 2010, we recorded a total of $4.7 million in stock option expense, of which $1.7 million was recorded as corporate expense and $3.0 million was recorded in segment results. For 2009, we recorded a total of $5.2 million in stock option expense, of which $1.8 million was recorded as corporate expense and $3.4 million was recorded in segment results. Selling, general and administrative expenses for 2010, as a percentage of sales, increased to 19.3%, compared with 18.4% for 2009 and reflected the impact of acquisition related expenses.

Included in operating profit in 2010 was domestic pension expense of $4.8 million. In accordance with CAS, $9.6 million was recoverable from certain government contracts. Included in operating profit in 2009 was domestic pension expense of $21.4 million, of which $12.4 million was recoverable in accordance with CAS. Pension expense determined under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government. These amounts do not include pension expense of $0.4 million in 2010 and $1.1 million in 2009 now included as part of discontinued operations. In addition to the above amounts, the Company recorded $0.1 million in pension expense for 2010 related to the foreign pension plan.


Pension Plans

Teledyne has a defined benefit pension plan covering substantially all U.S. employees hired before January 1, 2004, or approximately 27% of Teledyne’s employees. As of January 1, 2004, non-union new hires participate in an enhanced defined contribution plan as opposed to the Company’s existing defined benefit plan. The plan was closed to all union new hires as of February 2007. Teledyne made a voluntary pretax contribution to its domestic qualified pension plan of $50.0 million on January 9, 2012 and expects to make an additional $42.8 million pretax contribution in the third quarter of 2012, before recovery from the U.S. Government. In 2011, Teledyne made pretax cash contributions of approximately $69.0 million to its domestic pension plan before recovery from the U.S. Government. In connection with the 2010 acquisition of Intelek, the Company assumed responsibility for a defined benefit pension plan based in the United Kingdom covering certain employees of Intelek. In 2010, Teledyne made pretax cash contributions of approximately $8.1 million to the Intelek pension plan. The plan was closed to new members in January 2000 and ceased further service accruals to members in September 2002.

Other Matters

Income Taxes

The Company’s effective tax rate for 2011 was 32.9%, compared with 30.9% for 2010 and 30.0% for 2009. Fiscal years 2011, 2010 and 2009 included net tax credits of $2.4 million, $12.5 million and $15.0 million, respectively, primarily research and development tax credits. Excluding these items the company’s effective tax rates for fiscal years 2011, 2010 and 2009 would have been 34.0%, 38.1% and 39.1%, respectively. The lower 2011 effective tax rate, compared with the 2010 effective tax rate, excluding tax credits, primarily reflected a change in the proportion of domestic and international income and foreign research and development tax credits. Based on the Company’s history of operating earnings, expectations of future operating earnings and potential tax planning strategies, it is more likely than not that the deferred income tax assets at January 1, 2012 will be realized.

Costs and Pricing

Inflationary trends in recent years have been moderate. Current inventory costs, the increasing costs of equipment and other costs are considered in establishing sales pricing policies. The Company emphasizes cost containment in all aspects of its business.

Hedging Activities; Market Risk Disclosures

Teledyne transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. The Company’s primary objective is to protect the United States dollar value of future cash flows and minimize the volatility of reported earnings. Due to the February 2011 acquisition of DALSA, the Company began to utilize foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars. In addition, from time to time, the Company may utilize foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign-currency-denomina ted monetary assets and liabilities, including intercompany receivables and payables and as of January 1, 2012, Teledyne had foreign currency contracts of this type to buy Canadian dollars and to sell U.S. dollars totaling $16.5 million and these contracts had a fair value of $0.5 million. The gains and losses on these derivatives which are not designated as hedging instruments under ASC 815, Derivatives and Hedging (“ASC 815”), are intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings. Under ASC 815, all derivatives are recorded on the balance sheet at fair value. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. Teledyne Technologies does not use foreign currency forward contracts for speculative or trading purposes.

In February 2011, Teledyne Technologies began utilizing foreign currency forward contracts which were designated and qualify as cash flow hedges. The effectiveness of the cash flow hedge contracts, excluding time value, is assessed prospectively and retrospectively on a monthly basis using regression analysis, as well as using other timing and probability criteria. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedges and must be highly effective in offsetting changes to future cash flows on hedged transactions. The effective portion of the cash flow hedge contracts’ gains or losses resulting from changes in the fair value of these hedges is initially reported, net of tax, as a component of accumulated other comprehensive income in stockholders’ equity until the underlying hedged item is reflected in our consolidated statements of income, at which time the effective amount in accumulated other comprehensive income is reclassified to cost of sales in our consolidated statements of income. The Company expects to reclassify a loss of approximately $2.3 million over the next 12 months based on the year end 2011 exchange rate.

In the event that the gains or losses in accumulated other comprehensive income (“OCI”) are deemed to be ineffective, the ineffective portion of gains or losses resulting from changes in fair value, if any, is reclassified to other income and expense. In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or losses on the related cash flow hedges will be reclassified from accumulated other comprehensive income to other income and expense. During the current reporting period, all forecasted transactions occurred and, therefore, there were no such gains or losses reclassified to other income and expense. As of January 1, 2012, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling $60.7 million and these contracts had a fair value of $2.0 million. These foreign currency forward contracts have maturities ranging from January 2012 to February 2013.

Notwithstanding our efforts to mitigate portions of our foreign currency exchange rate risks, there can be no assurance that our hedging activities will adequately protect us against the risks associated with foreign currency fluctuations. A hypothetical 10 percent appreciation of the U.S. dollar from its value at January 1, 2012 would decrease the fair value of our foreign currency forward contracts associated with our cash flow hedging activities by $7.2 million. A hypothetical 10 percent depreciation of the U.S. dollar from its value at January 1, 2012 would increase the fair value of our foreign currency forward contracts associated with our cash flow hedging activities by $7.2 million.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Strategy/Overview

Our strategy continues to emphasize growth in our core markets of instrumentation, digital imaging, aerospace and defense electronics and engineered systems. Our core markets are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions. We aggressively pursue operational excellence to continually improve our margins and earnings. At Teledyne, operational excellence includes the rapid integration of the businesses we acquire. Using complementary technology across our businesses and internal research and development, we seek to create new products to grow our company and expand our addressable markets.

Consistent with this strategy, we made two acquisitions and acquired a minority interest investment in the first quarter of 2011. We also continue to evaluate our businesses to ensure that they are aligned with our strategy. On April 19, 2011, we completed the sale of our general aviation piston engines businesses, which comprised the former Aerospace Engines and Components segment. Accordingly, our consolidated financial statements have been restated to classify the Aerospace Engines and Components segment as a discontinued operation.

In addition, in the fourth quarter of 2010, we realigned and changed the reporting structure of some of our businesses. Our former Electronics and Communications segment is now reported as three separate segments, Instrumentation, Digital Imaging and Aerospace and Defense Electronics. The businesses that comprised the Energy and Power Systems segment are now reported as part of the Aerospace and Defense Electronics and the Engineered Systems segments. We have restated our previously reported segment data to reflect this revised segment reporting structure.

Our Recent Acquisitions

The following briefly describes the Company’s acquisition activity for the nine months ended October 2, 2011. For a description of the Company’s acquisition and divestiture activity for the year ended January 2, 2011, please refer to Notes 3 and 16 of our Annual Report on Form 10-K for the fiscal year ended January 2, 2011 (“2010 Form 10-K”).

On February 12, 2011, the Company acquired the stock of DALSA Corporation (“DALSA”). DALSA designs and manufactures digital image capture products, primarily consisting of high performance sensors, cameras and software for use in industrial, scientific, medical and professional applications products, as well as specialty semiconductors and micro electro mechanical systems (“MEMS”). The Company acquired DALSA for an aggregate purchase price of $339.5 million in cash. Headquartered in Waterloo, Ontario, Canada, DALSA had annual revenues of CAD $212.3 million for its fiscal year ended December 2010. DALSA operates within the Digital Imaging segment.

In addition to the acquisition of DALSA, during the first nine months of 2011, the Company completed the acquisition of a majority interest in Nova Sensors (“Nova”) for total consideration of $5.1 million in cash and a minority interest in Optech Incorporated (“Optech”) for $18.9 million. Nova produces compact short-wave and mid-wave infrared cameras and operates within the Digital Imaging segment. Optech is a laser-based survey and digital imaging company. Teledyne Technologies funded the purchases primarily from borrowings under its credit facility and cash on hand.

Results of Operations

Third quarter of 2011 compared with the third quarter of 2010

Teledyne’s third quarter 2011 sales were $496.4 million, compared with sales of $409.8 million for the same period of 2010, an increase of 21.1%. Net income from continuing operations was $34.1 million ($0.91 per diluted share) for the third quarter of 2011, compared with $29.9 million ($0.81 per diluted share) for the third quarter of 2010, an increase of 14.0%. Net income including discontinued operations was $34.1 million ($0.91 per diluted share) for the third quarter of 2011, compared with $30.3 million ($0.82 per diluted share) for the third quarter of 2010.

The third quarter of 2011, compared with the same period in 2010, reflected higher sales in each business segment except the Engineered Systems segment. Incremental revenue in the third quarter of 2011 from recent acquisitions was $65.5 million.

The increase in earnings for the third quarter of 2011, compared with the same period of 2010, reflected improved results in each operating segment except the Engineered Systems segment. The increase in earnings reflected the impact of acquisitions as well as improved margins in the Instrumentation and Aerospace and Defense segments. The incremental operating profit included in the results for the third quarter of 2011 from recent acquisitions was $5.6 million and included $2.5 million in acquired intangible asset amortization from the recent acquisitions.

The third quarter of 2011 included pension expense of $1.5 million, compared with $1.2 million in the third quarter of 2010. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $2.9 million in the third quarter of 2011, compared with $2.4 million in the third quarter of 2010.

In the third quarter of 2011 and 2010, we recorded a total of $1.5 million and $1.2 million, respectively, in stock option compensation expense. Employee stock option grants are expensed evenly over the three year vesting period.

Cost of sales in total dollars was higher in the third quarter of 2011, compared with the third quarter of 2010, which reflected the impact of higher sales. Cost of sales as a percentage of sales for the third quarter of 2011 decreased to 66.7% from 69.5% for the third quarter of 2010 and reflected the impact of the DALSA cost structure which has a lower cost of sales percentage than the overall Teledyne cost of sales percentage. In addition, the lower cost of sales percentage reflects the benefit of the increase in sales while certain fixed costs remained flat.

Selling, general and administrative expenses, including research and development and bid and proposal expense, in total dollars were higher in the third quarter of 2011, compared with the third quarter of 2010, and reflected the impact of higher sales, higher acquired intangible asset amortization and higher research and development costs. Selling, general and administrative expenses for the third quarter of 2011, as a percentage of sales, increased to 21.8%, compared with 19.3% in the third quarter of 2010 and reflected the impact of higher research and development costs and the DALSA cost structure which has a higher selling, general and administrative expense percentage than the overall Teledyne selling, general and administrative expense percentage.

Other income and expense, included a $4.5 million pretax charge to write off the company’s minority investment in a private company. The write off was necessary since the company’s actual and expected financial performance has significantly deteriorated resulting in lower actual and projected future cash flow. Corporate expense was higher in the third quarter of 2011 compared with the third quarter of 2010, and primarily reflected higher compensation expenses.

Interest expense, net of interest income, was $3.7 million in the third quarter of 2011, compared with $1.6 million for the third quarter of 2010. The increase in interest expense primarily reflected the impact of higher outstanding debt levels and higher overall average interest rates from our new credit facility and our senior notes.

The Company’s effective income tax rate for the third quarter of 2011 was 30.9% compared with 31.8% for the third quarter of 2010. The third quarters of 2011 and 2010 included the re-measurement of unrecognized tax benefits for prior years, primarily research and development tax credits, of $2.4 million and $2.9 million, respectively. Excluding these amounts, the effective tax rates for the third quarters of 2011 and 2010, would have been 35.3% and 38.4%, respectively. The decrease primarily reflected a change in the proportion of domestic and international income.

First nine months of 2011 compared with the first nine months of 2010

Teledyne’s first nine months 2011 sales were $1,467.4 million, compared with sales of $1,222.7 million for the same period of 2010, an increase of 20.0%. Net income from continuing operations was $105.3 million ($2.82 per diluted share) for the first nine months of 2011, compared with $82.9 million ($2.25 per diluted share) for the first nine months of 2010, an increase of 27.0%. Net income including discontinued operations, was $218.4 million ($5.85 per diluted share) for the first nine months of 2011, compared with $83.9 million ($2.28 per diluted share) for the first nine months of 2010. The first nine months of 2011 includes income from discontinued operations of $113.1 million.

The first nine months of 2011, compared with the same period in 2010, reflected higher sales in each business segment except for the Engineered Systems segment. Incremental revenue in the first nine months of 2011 from recent acquisitions was $190.4 million.

The increase in earnings for the first nine months of 2011, compared with the same period of 2010, reflected improved results in each operating segment except for the Engineered Systems segment. The increase in earnings reflected the impact of acquisitions as well as improved margins in each operating segment except for the Digital Imaging segment. The incremental operating profit included in the results for the first nine months of 2011 from recent acquisitions was $12.2 million and included charges of $2.0 million, related to acquisition activity, as well as, $7.8 million in acquired intangible asset amortization from recent acquisitions.

The first nine months of 2011 included pension expense of $5.2 million, compared with $3.6 million in the first nine months of 2010. Pension expense allocated to contracts pursuant to U.S. Government Cost Accounting Standards (“CAS”) was $8.9 million in the first nine months of 2011, compared with $7.2 million in the first nine months of 2010. The increase in 2011 pension expense reflects the impact of a reduction in the discount rate used to calculate pension liabilities from 6.25% for 2010 to 5.90% through April 19, 2011 and 6.15% for the remainder of 2011, partially offset by favorable returns on pension assets in 2010.

In the first nine months of 2011 and 2010, we recorded a total of $4.3 million and $3.6 million, respectively, in stock option compensation expense. Employee stock option grants are expensed evenly over the three year vesting period.

Cost of sales in total dollars was higher in the first nine months of 2011, compared with the first nine months of 2010, which reflected the impact of higher sales. Cost of sales as a percentage of sales for the first nine months of 2011 decreased to 66.4% from 70.3% for the first nine months of 2010 and reflected the impact of the DALSA cost structure which has a lower cost of sales percentage than the overall Teledyne cost of sales percentage. In addition, the lower cost of sales percentage reflects the benefit of the increase in sales while certain fixed costs remained flat.

Selling, general and administrative expenses, including research and development and bid and proposal expense, in total dollars were higher in the first nine months of 2011, compared with the first nine months of 2010, and reflected the impact of higher sales, higher acquired intangible asset amortization and higher research and development costs. Selling, general and administrative expenses for the first nine months of 2011, as a percentage of sales, increased to 21.7%, compared with 19.1% in the first nine months of 2010 and reflected the impact of higher research and development costs and the DALSA cost structure which has a higher selling, general and administrative expense percentage than the overall Teledyne selling, general and administrative expense percentage.

Other income and expense, included a $4.5 million pretax charge to write off the company’s minority investment in a private company. Corporate expense was higher in the first nine months of 2011, compared with the first nine months of 2010, and primarily reflected higher compensation and professional fees expenses.

Interest expense, net of interest income, was $12.4 million in the first nine months of 2011, compared with $3.2 million for the first nine months of 2010. The increase in interest expense primarily reflected the impact of higher outstanding debt levels and higher overall average interest rates from our new credit facility and our senior notes.

The Company’s effective income tax rate for the first nine months of 2011 was 33.5% compared with 34.8% for the first nine months of 2010. The first nine months of 2011 and 2010 included the re-measurement of unrecognized tax benefits for prior years, primarily research and development tax credits, of $2.4 million and $3.5 million, respectively. Excluding these amounts, the effective tax rates for the first nine months of 2011 and 2010, would have been 35.0% and 37.5%, respectively. The decrease primarily reflected a change in the proportion of domestic and international income.

Digital Imaging

Third quarter of 2011 compared with the third quarter of 2010

The Digital Imaging segment’s third quarter 2011 sales were $95.0 million, compared with $30.9 million the third quarter of 2010, an increase of 207.4%. Operating profit increased to $2.3 million for the third quarter of 2011, compared with operating profit of $1.9 million for the third quarter of 2010, an increase of 21.1%.

The third quarter 2011 sales increase included $59.1 million in revenue from recent acquisitions, primarily the February 2011, acquisition of DALSA, as well as higher organic sales. The increase in operating profit reflected the impact of higher sales, partially offset by increased intangible asset amortization of $2.8 million and $7.7 million in higher research and development and bid and proposal spending, primarily from recent acquisitions. The incremental operating profit from recent acquisitions was $1.1 million. Increased research and development and bid and proposal spending is expected to continue in the fourth quarter. In the remainder of 2011, lower sales of cameras for semiconductor and electronics inspection is expected to be partially offset by increased sales of custom imaging sensors.

First nine months of 2011 compared with the first nine months of 2010

The Digital Imaging segment’s first nine months 2011 sales were $257.4 million, compared with $90.3 million for the first nine months of 2011, an increase of 185.0%. Operating profit increased to $13.8 million for the first nine months of 2011, compared with operating profit of $5.6 million for the first nine months of 2011, an increase of 146.4%.

The first nine months 2011 sales increase included $156.5 million in revenue from recent acquisitions, primarily the February 2011, acquisition of DALSA, as well as higher organic sales. The increase in operating profit reflected the impact of higher sales, partially offset by increased intangible asset amortization of $7.2 million and $17.5 million in higher research and development and bid and proposal spending, primarily from recent acquisitions. The incremental operating profit from recent acquisitions was $8.9 million.

Aerospace and Defense Electronics

Third quarter of 2011 compared with the third quarter of 2010

The Aerospace and Defense Electronics segment’s third quarter 2011 sales were $171.2 million, compared with $155.5 million for the third quarter of 2010, an increase of 10.1%. Operating profit was $24.8 million for the third quarter of 2011, compared with operating profit of $13.5 million for the third quarter of 2010, an increase of 83.7%.

The third quarter 2011 sales increase resulted from $7.3 million of higher sales of microwave devices and interconnects, increased sales of $6.9 million from avionics products and electronic relays and higher sales of $1.5 million from electronic manufacturing services. The increased sales of microwave devices and interconnects included sales of $3.4 million from acquisitions as well as higher organic sales. The increase in operating profit reflected the impact of higher sales and product mix differences.

First nine months of 2011 compared with the first nine months of 2010

The Aerospace and Defense Electronics segment’s first nine months 2011 sales were $507.7 million, compared with $455.8 million for the first nine months of 2011, an increase of 11.4%. Operating profit increased to $70.8 million for the first nine months of 2011, compared with operating profit of $39.0 million for the first nine months of 2011, an increase of 81.5%.

The first nine months 2011 sales increase resulted from $39.6 million of higher sales of microwave devices and interconnects, as well as increased sales of $20.1 million from avionics products and electronic relays, partially offset by a reduction of $7.8 million in sales of electronic manufacturing services. The increased sales of microwave devices and interconnects included sales of $23.7 million from acquisitions as well as higher organic sales. The increase in operating profit reflected the impact of higher sales and product mix differences. The first nine months of 2010 included charges of $8.2 million, primarily to correct inventory valuations incorrectly recorded in previous periods at a business unit.

Engineered Systems

Third quarter of 2011 compared with the third quarter of 2010

The Engineered Systems segment’s third quarter 2011 sales were $73.1 million, compared with $80.9 million for the third quarter of 2010, a decrease of 9.6%. Operating profit was $6.4 million for the third quarter 2011, compared with operating profit of $8.2 million for the third quarter of 2010, a decrease of 22.0%.

The third quarter 2011 sales decrease reflected lower sales of $8.0 million from engineered products and services and lower energy systems sales of $2.4 million, partially offset by higher sales of $2.6 million from turbine engines resulting from increased sales for the Joint Air-to-Surface Standoff Missile (“JASSM”) program. The lower third quarter 2011 sales for engineered products and services primarily reflected higher sales for nuclear and other manufacturing programs, more than offset by lower sales for space and defense programs. Operating profit in the third quarter of 2011 reflected the impact of lower sales and lower margins for engineered products and services, partially offset by higher margins for turbine engines. Operating profit included pension expense of $0.4 million in the third quarter of 2011, compared with $0.4 million. Pension expense allocated to contracts pursuant to CAS was $2.2 million in the third quarter of 2011, compared with $1.7 million. Pension expense determined allowable under CAS can generally be recovered through the pricing of products and services sold to the U.S. Government.

First nine months of 2011 compared with the first nine months of 2010

The Engineered Systems segment’s first nine months 2011 sales were $234.6 million, compared with $251.5 million for the first nine months of 2010, a decrease of 6.7%. Operating profit was $21.6 million for the first nine months 2011, compared with operating profit of $22.3 million for the first nine months of 2010, a decrease of 3.1%.

The first nine months 2011 sales decrease reflected lower sales of $21.7 million from engineered products and services and lower energy systems sales of $4.6 million, partially offset by higher sales of $9.4 million of turbine engines resulting from increased sales for the JASSM program. The sales decrease from engineered products and services, primarily reflected lower sales of space and defense programs, partially offset by $6.8 million in sales from acquisitions. The lower operating profit in the first nine months of 2011 primarily reflected the impact of lower sales, partially offset by the impact of higher margins for turbine engines. Operating profit included pension expense of $2.1 million in the first nine months of 2011, compared with $1.2 million in the first nine months of 2010. Pension expense allocated to contracts pursuant to CAS was $6.6 million in the first nine months of 2011, compared with $5.3 million in the first nine months of 2010.

CONF CALL

Jason VanWees

This is Jason VanWees, Vice President, Corporate Development and Investor Relations at Teledyne Technologies. I would like to welcome everyone to Teledyne Technologies third quarter 2010 earnings release conference call. We released our earnings earlier this morning before the market open.

Joining me today are Teledyne Technologies’ Chairman, President and CEO, Robert Mehrabian, Senior Vice President and CFO, Dale Schnittjer and Executive Vice President, General Counsel and Secretary, John Kuelbs.

After remarks by Robert and Dale we will ask for your questions. However, before we get started our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks and caveats as noted in the earnings release and our periodic SEC filings and of course actual results may differ materially.

In order to avoid potential selective disclosures this call is also simultaneously being webcast and a replay both via webcast and dial-in will be available for approximately one month.

Here’s Robert.

Robert Mehrabian

Before commenting on the specific results within our segment, I have some general comments about our businesses and about our performance in the third quarter.

First our businesses performed strongly in the quarter, driven by growth in our commercial markets. Total sales increased 3.4% with 10.2% sales growth in the Electronics and Communications segment led by 17% growth in our commercial instrumentation businesses.

Operating margin increased 39 basis points to 10.6% despite $3 million of pretax acquisition relative cost, which negatively affect that margin by 68 basis points. While earnings per share were lowered than the third quarter of last year, please note our last year’s earnings included $0.25 of tax credit versus just positive $0.03 of net operating items this quarter, i.e., $0.08 of tax credit offset by $0.05 of acquisition-related cost.

Also total orders were strong in the quarter exceeding sales by almost 9.5%. In fact quarter funded backlog was $884 million just high of record level of $891 million in the second quarter of 2008, that’s before of course the global financial crisis.

Second, during the quarter we want some significant contracts. As example, Teledyne Scientific or research laboratory was awarded the single largest contract in the businesses history at $25 million DARPA contract known as EXACTO.

The purpose of the program is to develop and demonstrate an actively-guided maneuverable 50-caliber bullet capable of addressing moving targets at extreme ranges in high winds. Also in the marine domain last week our Engineered Systems segment assisted by Marine Instrumentation businesses was awarded with contract by the US Navy Special Operations Command for phase 1 of the design and development of Shallow Water Combat Submersible a replacement vehicle for the current naval sea delivery system.

The additional contract is just value at $1.2 million, but is awarded to Teledyne, the entire contract including engineering, development and production phases could be worth up to $400 million over five years. Third, we closed two acquisitions during the quarter. The acquisitions of Intelek Plc further expanded our capabilities and microwave systems, especially for commercial customers.

We also recently acquired the manufacturer of Gavia Autonomous Underwater Vehicle or AUV. The Gavia AUV system broadens our portfolio of autonomous marine vehicle system as the detection and surveying capabilities of this AUV complements our current marine glider systems used for long-term sensing and observation including the Littoral Battlespace Sensing-Gliders for the US Navy.

Finally, in September we funded $250 million private placement of senior notes at a weighted average interest rate of 4.8% ad our current $590 million bank line is virtually undrawn. We freed our bank line not only because fixed rate are low at the present time, but because our current pipeline of complementary potential acquisition is nearly the largest in the company’ history.

Now turn to our business segment and the third quarter performance. Third quarter sales in our Electronics and Communications segment as I noted increased by 10.2% and segments operating profit increased 9.1%. On a GAAP basis segment operating margin decreased 13 basis points. However, the quarter’s margin was negatively impacted by 92 basis points due to the $3 million pre-tax acquisition-related costs that I mentioned earlier.

In the third quarter, sales of Defense Electronics increased 5.7% primarily driven by acquisition and as I mentioned earlier sales for our electronic instrumentation businesses increased 17% to approximately $150 million mainly due to 22.7% increase in sales of marine instrumentation primarily resulting from strong sales of geophysical sensors, our oil exploration as well as subsea interconnect system.

Global subsea oil production capital expenditures remain stable especially in West Africa, South America and Asia. In addition, in our environmental monitoring instrument and industrial instrumentation businesses, sales increased 10% and 5% respectively in the quarter.

Finally, sales for our Avionic and Other Commercial Electronics businesses increased for the first time in two-and-half years led by growth in our electronic relays and avionics businesses.

Turning to our Engineered System segment, in the third quarter the expected revenue decreased of about 18%, reflected lower sales from nuclear manufacturing, missile defense engineering and NASA programs partially offset by our growing capabilities in real-time distributed testing and other software programs.

While operating profit decreased 10.3%, operating margin increased 292 basis points to near record level. Currently, most of our nuclear manufacture in relates to USEC’s American Centrifuge Project. In late July 2010 USEC updated this application for a long guarantee to the partner of energy.

In anticipation of favorable judgment by the DOE USEC began the mobilization of project in early September. As a consequence, we anticipate some additional sales in the fourth quarter of this year. Should the long guarantee be approved, this could result in $25 million of additional revenue for Teledyne in 2011.

Turning to our Engineered, Aerospace Engines and Components segment sales increased 11.8% compared to last year. We reported an operating income of $1 million versus an operating income of $1.2 million in third quarter of 2009. The 2009 $1.2 million was primarily due to reduction in certain insurance reserves.

In the general aviation market, demand for less expensive OEM piston aircraft typically beat recoveries. While still only half of the 2008 volume, quarter sales of engines to aircraft OEMs increased for the third consecutive quarter and improved 80% over the third quarter of 2009.

In addition, we continue to invest in new product development such as the Turbo Diesel Engine in order to increase overseas sales particularly in Asia. For your reference, there are less than 1,000 general aviation aircraft in China at the moment, compared to over 200,000 in North America.

Finally, in our Energy and Power Systems segments sales decreased about 18.4% compared to last year, as a result of reduced revenue from turbine engines for the Joint Air-to-Surface Standoff Missile or JASSM. JASSM engine sales are expected to resume late this year and to continue through 2011.

The long-term outlook for military turbine engines improved recently, when the government announced the potential sale of 84 F-15 Aircraft, which also included 400 Harpoon Cruise missiles with our engines to Saudi Arabia.

In conclusion, business in each of our major commercial market continued to recover nicely in 2010. In the third quarter, sales related to energy exploration and production, power generation, air and water quality monitoring and commercial aviation all increased compared to last year.

Going forward, we intend to continue investing in our instrumentation businesses, especially in the marine, electro-optical and infrared imaging domain, as well as perhaps expand our nuclear manufacturing capabilities.

I will now turn the call over to Dale Schnittjer.

Dale Schnittjer

I will first discuss some additional financials for the quarter not covered by Robert and then I will discuss our 2010 outlook. On cash flow in the third quarter, cash provided from operating activities was $23.7 million compared with $46.9 million with the same period of 2009.

The lower operating cash flow reflects a tough comparison with last year and increased working capital requirements including higher deferred accounts receivable. Free cash flow for the third quarter of 2010 was $16.8 million compared with $37.6 million for 2009.

We made voluntary pension contributions of $37 million in each of the third quarters of the 2010 and 2009. Adjusting for pension contributions net of taxes, free cash flow was $39.3 million in the third quarter of 2010, and was 30% greater than net income.

Capital expenditures were $6.9 million in the third quarter compared with $9.3 million for the same period of 2009. Depreciation and amortization expense was $12.6 million in the quarter compared with $10.2 million last year. We ended the quarter with $242 million of net debt. Our balance sheet remains strong with net debt-to-capital ratio of 24.2%.

Our credit facility has $590 million of bank commitments and expires in July of 2011. We recently began the process to renew the credit facility. As Robert mentioned in September, we funded a private placement of $250 million of senior unsecured debt. The notes have a weighted average interest rate of 4.8% and consisted $75 million with 5-year maturity, $100 million with 7-year maturity and $75 million with 10-year maturity.

The proceeds were used to pay down the existing revolving credit facility, because the borrowing cost of our floating rate bank debt was roughly 75 basis points and the senior fixed rate notes are at 4.8%. We expect higher interest expense in the fourth quarter of 2010 and the full year of 2011.

On pension, in the third quarter of 2010 gross pension expense was $1.3 million compared with gross pension expense of $5.7 million in the same period of 2009. Net pension income after recovery of allowable cost pursuant to the Government Cost Accounting Standards or CAS was $1.1 million in the third quarter of 2010 compared with $2.6 million of net pension expense in the third quarter of 2009.

On stock option, stock option compensation expense was $1.2 million in the third quarter of 2010 compared with $1.3 million in the third quarter of 2009.

Now let me turn to the 2010 outlook. Management currently believes that GAAP earnings per share in the fourth quarter of 2010 will be in the range of $0.78 to $0.81. We expect full year 2010 earnings per share of approximately $3.06 to $3.09, an increase from our previous outlook of $2.95 to $3.0.

Regarding our pension for the full year 2010, we anticipated approximately $5.2 million of gross pension expense under FAS 87 and FAS 158. However, given recovery of allowable pension costs from our CAS covered government contracts, we expect net pension income of $4.4 million or $0.07 per share in 2010, compared to $0.17 per share of net pension expense in 2009.

The decrease in full year 2010 pension expense reflects higher investment returns and the impact of pension contributions made since 2007. In addition, as many other companies have mentioned this earnings season as a result of the current low interest rate environment, we could face a fairly substantial reduction in our discount rate used for pension accounting. A potential 100% basis point reduction from our current discount rate of 6.25% could result in a $0.20 negative earning per share impact in 2011.

Finally, as a reminder full year 2009 earning per share included $0.42 of tax credits mostly related to non-recurring prior period research and development tax credits. For the full year of 2010, we expect capital expenditures of approximately $30 million and depreciation and amortization expense of approximately $46 million.

I will now pass the call back to Robert.

Robert Mehrabian

We would like to now take your questions, operator if you are ready to proceed with questions-and-answers, please go ahead.

SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

21267 Views